Electricity

Germany awards EUR 317 million in coal capacity closure tender

Germany awards EUR 317 million in coal capacity closure tender

Photo: Iwona Olczyk from Pixabay

Published

December 7, 2020

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Published:

December 7, 2020

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Owners of 11 German coal-fired power plants with installed capacity of 4.8 GW will receive money to shut down the highly polluting facilities.

German market regulator Bundesnetzagentur (Bnetza) has awarded EUR 317 million to power utilities RWE, Steag, Uniper and Vattenfall in the country’s first tender for the closure of coal power plants.

The country plans to terminates power generation from coal by 2038

The procedure is conducted in accordance with the Act to Reduce and End Coal-Fired Power Generation. In July, the German parliament adopted the law based on the recommendation from the Commission on Growth, Structural Change and Employment to phase out coal-fired power generation by 2038.

Auctions are only for power plants fueled by hard coal. Next year will see three auctions for shutting down coal-fired power plants.

Germany earmarked EUR 40 billion for funding the coal phaseout

In 2019 Germany produced 29% of electricity in lignite and hard coal power plants, with an overall capacity of 44 GW.

Operators of lignite power plants will also receive compensation payments agreed in the negotiations with the government. Germany plans to spend EUR 40 billion on coal phaseout, including compensations for operators, payments for workers and investments in coal regions.

The average price awarded is well below the maximum price set of EUR 165,000

According to the Bnetza, the volume put out to tendering of 4 GW was significantly oversubscribed. Eleven bids with a total volume of 4,788 MW have been awarded.

The youngest are the Moorburg A and Moorburg B, commissioned in 2015, and also the ones with the highest efficiency – 46.5%.

The largest power plant is Uniper’s Heyden – 875 MW while the youngest are the Moorburg A and Moorburg B coal-fired power plants, of 800 MW each. They were commissioned in 2015 and have the highest efficiency  – 46.5%.

Winning bids range from EUR 6,047 per MW to EUR 150,000 per MW. Strong competition has thus pushed the prices of the successful bids well below the maximum price set of EUR 165,000 per MW, Bnetza said.

The reduction of CO2 emissions is one of the criteria

Whether or not a bid is selected depends not only on the price bid, but on the ratio of the price to the expected reduction in carbon dioxide (CO2) emissions.

The fact that the tendering process was oversubscribed means the bids were awarded using an indicator that is calculated for each bid by dividing the price bid by the average annual historical CO2 emissions per MW of the coal plant’s net rated capacity.

According to the procedure, if bidders bid the same price, the coal plant with a higher level of CO2 emissions is selected, the regulator said.

Possibility to be used as a grid reserve

The selected plants may no longer offer their capacity or energy on the electricity market as from January 1, 2021.

Transmission system operators (TSOs) will now examine whether the selected plants are important for the transmission system. If Bnetza grants a TSO’s request to designate a plant as important for the system, the unit will be available for grid reserve, the regulator said.

If chosen, they can be in reserve only until July 8 and won’t be able to operate at all after that.

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