Germany Puts Coal-Fired Plants on 'Standby'

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Written by Martin Lynch, European News Editor for Industrial Info (Galway, Ireland)--Three utilities in Germany have started to place a combined 2.7 gigawatts (GW) of coal-fired power in reserve as part of a deal with the government to avoid the introduction of a new coal tax.

Germany's second-largest utility, RWE AG (OTC:RWEOY) (Essen, Germany), Sweden's state-owned Vattenfall AB (Stockholm, Sweden) and Mibrag (Zeitz) have agreed to move the brown coal-fired plants into becoming "facilities of last resort," starting this winter. In July, the Germany's coalition government abandoned controversial plans to impose a levy on coal-fired power plants in order to meet its ambitious climate goals by 2020. The compromise with the coal sector was an agreement to place the plants in reserve over four years to be used only in emergency power situations. For additional information, see July 10, 2015, article - Germany Abandons Levy on Coal-Fired Plants.

The three utilities will be compensated to the tune of about 1.6 billion euros ($1.76 billion) to keep the plants offline except in emergencies.

Germany's economy minister, Sigmar Gabriel, said: "The measure is important for reaching our climate goals and at the same time ensuring that the affected regions don't suffer structural damage".

RWE will transfer five power plant units with a total capacity of approximately 1.5 GW into "standby" mode. The plants affected are Frimmersdorf, Niederaussem and Neurath. The company currently operates 20 coal-fired units with a total capacity of just over 10 GW.

"This solution will enable our lignite-fired power plants to make a major contribution to the additional CO2-reduction of 12.5 million tons," said Peter Terium, chief executive officer of RWE AG. "This is positive. However, it hits the company hard and means a huge burden for our employees. After all, our power generation from Rhenish lignite will decline by 15%. There is no doubt that we will play a constructive part in shaping the energy transition. This transformation has to happen without any structural disruptions. It must not demand too much of the companies, their employees and the affected regions involved."

Vattenfall has agreed to phase out 1 GW of lignite power capacity by putting two units of its Jaenschwalde power plant in reserve in October 2018 and October 2019, respectively. They will be closed for good in 2022 and 2023.

Magnus Hall, Vattenfall's President and chief executive officer, commented: "Closing down the plants will be a clear contribution to Germany achieving its climate target. The agreement also addresses the concern for security of supply and provides more certainty for the conditions of the remaining lignite business in Lusatia. This is important also for the divestment process".

Mibrag will shut its Buschhaus plant in Lower Saxony.

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