Germany launches first auction of coal-exit compensation payments

From pv magazine Germany.

“Coal power generation in Germany is coming to an end,” said Jochen Homann.

The president of federal network agency the Bundesnetzagentur made the statement while announcing the first auction to determine compensation payments to coal plant operators under pending legislation designed to drive a national exit from the polluting fuel.

The agency said 4 GW of coal-fired generation capacity would be decommissioned as a result of the tender, which has a bidding date of September 1. Under the auction rules, the owners of hard coal plants and small-scale, brown-coal-fired power sites will bid a sum per megawatt-hour of electricity generated by their facilities which reflects a compensation payment they will accept in return for not burning the fossil fuel.

Carbon savings

The Bundesnetzagentur – which has excluded southern German facilities from the first round of the tender program to focus on more damaging hard coal plants – will also consider CO₂ emission benefits from each bidding plant in the event of over-subscription of the tender. Coal plant operators who lodge successful bids will receive a one-off payment of the amount of their bid multiplied by the historic production level of their facilities.

A delay in implementing the legislation behind the tender, however, could put a fly in the ointment. Although the Coal-fired Power Generation Termination Act – the Kohleverstromungsbeendigungsgesetz, or KVBG – has been approved by the Bundestag, it has yet to be greenlit by the European Commission state aid authorities.

If the KVBG does not enter the statute books by September 1, the first round of the tender will not take place, the Bundesnetzagentur confirmed. The legislation could face an additional hurdle from the Federal Constitutional Court, as Essen-based power company Steag has said it is planning to register a constitutional complaint in a bid to raise the volume of coal capacity decommissioned under the tender round and to make the compensation figures agreed provisional.

Tender rounds

The law would enact several bidding rounds up to 2027 with all hard coal plants eligible to take part, together with small brown-coal plants, with a generation capacity of up to 150 MW.

The Bundesnetzagentur’s Homann said: “The tenders create an incentive to quickly remove the most climate-damaging hard coal power plants. At the same time, security of [energy] supply remains guaranteed.”

The maximum level of compensation plant operators can bid for in the opening round of the auction program is €165/MWh. Payment would be made once the KVBG enters force and no coal or lignite could be burnt at the appropriate facilities after that point.