A German plan to provide coal-fired power plant operators with money to offset financial losses, part of the country’s plan to incentivize the closure of coal plants as part of Germany’s plan to exit the fuel, has led energy giant Vattenfall to say it could close its 1.6-GW Moorburg coal plant in Hamburg by the middle of next year.
The plant, Vattenfall’s largest in Germany, came online in 2015 amid opposition from environmental and other groups, who questioned among other things the facility’s viability at a time when coal plants were struggling economically. Vattenfall admits the plant (Figure 1) is unprofitable, and has put it up in Germany’s first tender to provide what’s called a shutdown premium for hard coal-fired plants. Results of the tender will be announced in December, and Vattenfall’s chief executive on Sept. 4 said if Moorburg is chosen, the plant in whole or in part would shut down within months.
Whether or not Vattenfall is awarded a tender, Germany’s Federal Network Agency (BNetzA, or Bundesnetzagentur) could say the Moorburg plant’s output is what is called “systemically relevant,” which means the government wants the plant to continue operating, in part because local manufacturing industries rely on its electricity. But Vattenfall could still retire the plant if its economic situation is untenable for the utility. Vattenfall already has said it plans to close all its fossil fuel-powered units regardless of location by 2030.
Vattenfall CEO Magnus Hall, speaking about the decision to include Moorburg in the tender process, told the Süddeutsche Zeitung newspaper, “If we get the contract, we would close the corresponding capacities in the middle of next year.” The two-unit plant originally was planned to operate until at least 2038.
A 2019 plan to connect the Moorburg plant to a local heating network did not materialize, in large part because it didn’t align with Hamburg’s target of phasing out coal use for heat production by 2030.
“It is a difficult decision because it is a young and highly efficient power plant,” said Hall of the move to close Moorburg. “On the other hand, if you are losing money with it, you have to do something.” Part of the problem for German coal plants is a system that requires the purchase of so-called carbon dioxide (CO2) emissions credits for facilities that emit CO2. Vattenfall has said that the Moorburg plant in 2019 emitted 4.7 million tons of CO2. The cost of those credits, coupled with ongoing low prices for electricity, is exacerbating a difficult economic environment for the country’s remaining coal plants.
Martin Kaiser, the head of Greenpeace Germany, in a statement said Hall’s comments are an admission that coal-fired power in Germany is “economically and politically dead.” The country already plans to close all its nuclear power plants by the end of 2022.
Germany’s parliament in July approved legislation that set a shutdown schedule for individual lignite power plants. It also established compensation payments for plant operators, and auctions for hard coal plant operators to take generation capacity off the grid. Germany is phasing out coal as the country attempts to become carbon-neutral by 2050, although one last coal-fired plant came online in May. The Federal Environment Agency has said that CO2 emissions from the German power sector have dropped by more than 40% over the past 30 years, but lawmakers have said the pace of reductions is still too slow to meet the mid-century target.
The auction plan awards decommissioning contracts for hard coal power plants. Power plant operators enter the auction with an offer to shut down their plants, and the operator willing to retire a plant for the least amount of compensation is awarded the contract. The first auction ended last week, with tenders for about 4 GW of generation to be retired. The BNetzA said it would announce the contract winners in December.
The BNetzA, which organizes the auctions, has said that successful bidders in this first round will have to cease selling power on the market beginning in January 2021, and would be prohibited from burning coal beginning in July of next year. The group has said, though, that to ensure grid stability and security, transmission grid operators will determine which units that could be closed due to the auction are considered critical for the grid. The BNetzA has said that such a plant would not need to be fully decommissioned, but could be moved into grid reserve status to provide power if needed.