Ending coal-generated power
What is the goal?
The Act to Reduce and End Coal-Fired Power Generation (Gesetz zur Reduzierung und zur Beendigung der Kohleverstromung) translates into law the energy-policy recommendations made by the Commission on Growth, Structural Change and Employment, colloquially known as the Coal Commission. What this means in practice is that coal-fired power generation is to be phased out gradually, ending completely no later than the end of 2038. The Act supplements the Structural Development Act (Strukturstärkungsgesetz) adopted by the Cabinet in August 2019.
How is coal-fired power generation to be gradually phased out?
The draft legislation lays down the interim objectives to be achieved along the road to a complete phase-out of the use of coal to generate electricity, following the recommendations of the Coal Commission.
In practice this means that by 2022, the power generated from anthracite and lignite will each be reduced to around 15 GW.
By 2030, this figure is to be reduced further, to an output of about 8 GW for anthracite-fired power stations and 9 GW for lignite-fired power stations.
By 2038 at the latest, the use of coal-fired power stations is to be completely ended.
The steady reduction is to be ensured by closing more anthracite-fired power stations in years in which fewer lignite-fired power stations are decommissioned.
What legal provisions are planned for ending lignite-fired power generation?
Lignite-fired power stations will be closed in line with contractual agreements concluded with operators. Basic agreement has been reached with the affected federal states regarding a roadmap for the phase-out and the compensation payable. To enable the federal government to enter into the pertinent contract, authority is to be delegated to it. In the contract, operators are to renounce all legal action. If no contract is agreed by the end of June 2020, the German government will be entitled to issue a decree to reduce and end lignite-fired power generation.
What legal provisions are planned for ending anthracite-fired power generation?
Between now and 2026, anthracite-fired power stations are to be closed using a tendering system, with financial compensation going to the operators. To provide an incentive to decommission power stations earlier rather than later, the top prices will decrease over time. If the planned phase-out level is not achieved by 2024, however, the power stations will also be decommissioned by law. The same will apply to decommissioning between 2027 and the cut-off date, but no financial compensation will be paid.
How can this be reconciled with the start-up of the Datteln IV anthracite-fired station?
Since the permit for the start-up of Datteln IV had already been issued before the plans were produced for phasing out coal-fired power generation, any subsequent decision to ban the start-up would have entailed paying massive compensation. Against the background of the overarching goal of reducing CO2 emissions, the focus is not on individual power plants, but on the total emissions of all coal-fired power plants in Germany. This being the case, it makes sense to decommission the older, less efficient anthracite-powered stations first, rather than not starting up the extremely modern Datteln IV power station and paying compensation on top. However, to offset the additional emissions caused by starting up Datteln IV, tenders will be raised to close down an additional 1 GW anthracite-fired capacity a year in 2023, 2024 and 2025.
How will the energy supply be assured in future?
One major goal of the new Act is to ensure the sustainable supply of energy at as low a cost as possible as the use of coal to generate power is phased out and ended – against the background that parallel to the coal phase-out, Germany is also ending the use of nuclear power. The Act lays out special provisions to this end:
- The impact of the gradual closing down of coal-fired power stations on the reliability of supplies will be reviewed at regular intervals. In 2026, 2029 and 2032 the German government will ascertain whether it is possible to move forward the planned dates for closing down power stations as of 2030 by three years in each case. If this is possible, Germany could completely phase out the use of coal to generate power by 2035. In the medium term, coal is to be completely replaced by renewables, which will be regulated separately.
- The impact on electricity prices will also be reviewed at regular intervals. Depending on the findings, there are plans to authorise steps to relieve the burden on private and commercial electricity consumers. To alleviate hardships caused by higher electricity prices, as of 2023 an annual grid subsidy can be paid from budget funds. Energy-intensive businesses facing international competition may receive a subsidy as of 2023 for increases in the traded electricity price in the wake of the coal phase-out that are not compensated by this.
What will happen to the emission rights liberated as power plants close down?
The German government undertakes to eliminate the CO2 certificates that will no longer be needed for the power plants as they close down.
Will there be compensation for the workers affected by the phase-out?
Yes. Workers aged 58 and over who lose their jobs in a power station or open cast mine as a result of the phase-out can be granted transitional payments, for a maximum of five years until they reach pensionable age. Any reduction to their pension caused by taking early retirement can be offset.
Where should heating be generated in future, when combined heat and power (CHP) plants are closed down?
To this end, the Combined Heat and Power Act (Kraft-Wärme-Kopplungsgesetz) is to be extended until the end of 2029 and further developed. Incentives are to be put in place to integrate heat generated from renewables in combined heat and power (CHP) systems. And, the bonus for replacing coal in coal-based CHP systems is to be reworked and increased.