Germany: Germany Takes The First Steps Towards The End Of Coal-Fired Power

Last Updated: 8 February 2019
Article by Thomas Schubert

Co-authored by David Hauser

In 2018, the German government appointed a Commission on Growth, Structural Change and Employment, known as the Kohlekommission or Coal Commission with the task of evaluating a roadmap for the phase-out of coal-fired power production in Germany. The Coal Commission's conclusions have now been published, setting the agenda for the next stage of the German energy transition (Energiewende).

Germany has been a pioneer of the mass deployment of wind and solar power generation. In 2018, its share of electricity generated from renewables (40.3 percent) exceeded that generated from coal (37.5 percent) for the first time. But 37.5 percent is still a lot of coal-fired power. On 26 January 2019, the Coal Commission passed its final (non-binding) resolution accompanied by a 336 page report. We summarise the effect of implementing its recommendations below.

1. Phase-out of coal-fired power production by 2038

The Coal Commission recommends the end of 2038 as the deadline for the phase-out of coal-fired power production in Germany. An integrated "opening clause" enables the phase-out date to be brought forward to 2035 in consultation with the operators if the electricity market, labor market and economic situation allow. This will be reviewed in 2032. In 2023, 2026 and 2029, the phase-out plan will also be evaluated in terms of security of supply, electricity prices, jobs and climate targets.

2. Gradual shutdown of coal power plants

At the end of 2017, Germany had operational coal power plants with a net capacity of 42.6 gigawatts (GW). They are gradually being taken off the grid anyway, however, the phase-out is supposed to be implemented earlier. 12.5 GW are expected to be taken off the grid by 2022, of which 3.1 GW are fed-in by lignite power plants that are particularly harmful to the climate. By 2030, no more than 17.0 GW may remain on the market. By 2038, all coal-fired power plants are to be shut down.

3. Compensation for (potentially) increasing electricity prices for consumers

To compensate for any increase in electricity prices triggered by the phase-out, the Coal Commission recommends reducing grid charges for private households from 2023 on. These grid charges can account for about a fifth of private households' electricity bills, and the Coal Commission even goes so far as to suggest a subsidy for these network charges. The compensation would amount to approximately EUR 2 billion per year. But there shall be no new levies or taxes.

4. Compensation for (potentially) increasing electricity prices for companies

Energy-intensive industries are to be permanently relieved of costs arising from the price of CO2 pollution rights that coal and gas-fired power plants have to buy under the EU Emissions Trading Scheme (EU allowances). The current relief scheme for these indirect costs will expire in 2020. The government wants to apply to the EU (under state aid rules) for an extension of this compensation. Most recently, the relief amounted to almost EUR 300 million per year. Since EU allowances have become significantly more expensive, the sum will be higher in the future. The so-called electricity price compensation is to be extended until 2030.

5. Financial support for coal mining regions

Coal mining regions affected by the coal phase-out are to receive structural aids (Strukturhilfen) amounting to approximately EUR 40 billion by 2040. In addition to numerous transport projects, the establishment of federal authorities is being encouraged, which could create around 5,000 new jobs within the next ten years. Also, an investment subsidy for entrepreneurs is proposed.

According to the Coal Commission's proposal, the aid could follow the Berlin/Bonn Act, which mitigated the impact of relocating the capital from Bonn to Berlin. By the end of April 2019, the cornerstones for a law of measures shall be in place that specifies how the German government will precisely promote structural change. Future federal governments of the individual German states are to be bound to it. The Coal Commission estimates the individual costs at EUR 1.3 billion per year over 20 years. In addition, EUR 0.7 billion is to be provided to the federal states that are not tied to specific projects. Furthermore, a special financing programme as well as an immediate programme amounting to EUR 1.5 billion in total will be set to improve the transport system. These expenses are already included in the federal budget until 2021.

6. Compensation for lignite power plants

The Coal Commission recommends contractual arrangements with power plant operators and compensation for decommissioning up to 2030, which should include both compensation for operators and socially acceptable arrangements. The older a lignite power plant is, the less compensation will be paid. If there is no contractual agreement with the operators by July 2020, the exit shall be subject to regulatory law also including compensation.

The Coal Commission also suggests that the amount of compensation should be based on amounts already paid in the past. Lignite power plants have already been taken off the grid and transferred to a reserve for climate protection purposes in the past. At that time, around EUR 600 million were paid per GW output. Of the currently more than 40 GW of coal-fired power plants still connected to the grid, about 21.8 GW are fuelled with lignite.

7. Compensation for hard coal power plants

There shall also be compensation here. However, since these power plants yield less return, a decommissioning premium shall be obtained by a series of tenders. In simple terms, this could work as follows. The German government specifies how much capacity is to be decommissioned. Power plant operators apply for this with bids for compensation. In each tender, whoever demands the lowest compensation or saves the most CO2 by shutting down the power plant will win the contract.

8. Support of coal workers and symbolic preservation of Hambacher Forst

For employees in the coal industry aged 58 and over who have to bridge the time until retirement, there will be an adjustment allowance and compensation for pension losses. Estimated costs amount to up to EUR 5 billion which employers and the state could jointly bear. Terminations of employment for operational reasons are excluded. There should be training and further education for younger employees, placement in other jobs and help with wage losses.

A piece of forest at the Hambach open-cast mine has become a symbol of the anti-coal movement. The report states that the Coal Commission considers it desirable that the Hambach Forest should remain. RWE wants to cut down the forest for brown-coal mining which was stopped by court order. Other villages and areas are also affected by opencast mining. The Coal Commission recommends a dialogue with the affected areas on the resettlements in order to avoid social and economic hardship.

9. Hedge of power supply

In order to avert the risk of blackouts due to a lack of electricity generation, the security of supply should be monitored more closely. The approval of more environmentally friendly gas-fired power plants is to be accelerated. Besides, investment incentives shall be created.

Conclusion

The publication of the Coal Commission's report is only the start of the process of coal phase-out. In order to implement the recommendations into national and therefore binding law, many details will have to be worked out, and both the German government and parliament have to agree on their adoption. Nevertheless, it marks a hugely important step in the Energiewende, as Germany moves from merely being a champion of renewable power generation to pointing the way towards the kind of net zero carbon economy that climate science shows that we need to achieve sooner rather than later.

Dentons is the world's first polycentric global law firm. A top 20 firm on the Acritas 2015 Global Elite Brand Index, the Firm is committed to challenging the status quo in delivering consistent and uncompromising quality and value in new and inventive ways. Driven to provide clients a competitive edge, and connected to the communities where its clients want to do business, Dentons knows that understanding local cultures is crucial to successfully completing a deal, resolving a dispute or solving a business challenge. Now the world's largest law firm, Dentons' global team builds agile, tailored solutions to meet the local, national and global needs of private and public clients of any size in more than 125 locations serving 50-plus countries. www.dentons.com.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Events from this Firm
6 Jun 2019, Seminar, Prague, Czech Republic

We cordially invite you to attend a breakfast seminar focusing on issues of bid rigging and private enforcement of competition law.

 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions