Heading for the exit

6 June 2019

But how to get there? By Julian Wettengel & Benjamin Wehrmann, Clean Energy Wire, Berlin*

In late January 2019, Germany’s coal exit commission (official title Commission on Growth, Structural Change and Employment) agreed on its highly anticipated phase-out proposal and recommended an end to coal-fired power generation by 2038 at the latest. In its report of around 300 pages, the commission provided detailed suggestions on a wide range of aspects, but at the same time also omitted crucial questions – such as which power plants have to be switched off when. It is now up to policymakers to flesh out the details.

From the outset, the commission’s final report was meant to serve as a general blueprint for political decision-making rather than a detailed manual on how to proceed. However, according to the commission’s leadership, its proposals aim to take the interests of all main stakeholders into account, which is why it urges the government to follow its recommendations as closely as possible.

Germany’s political system means that both the federal parliament (Bundestag) and the council of state governments (Bundesrat) have to give their consent to many legislative aspects of a coal phase-out.

Ultimately, state governments will have to implement the coal exit at the regional level, for example through licensing future lignite mining projects or deciding which infrastructure investments are most pressing.

Before parliamentarians get involved, however, the federal government first has to decide which details of the process it will adopt and draft relevant legislation for. Chancellor Angela Merkel’s government has started to “closely and constructively review” the final report. This process that was still ongoing as of April 2019 and would “still take some time” but eventually result in a set of energy laws before the end of the year, the government said. However, Merkel also signalled her readiness to move ahead with the deal. “The fact that a commission made up from such different societal groups has found an agreement and created a framework is an important message for us. We will handle this very carefully,” she said. The deal showed “responsibility for society as a whole and we want to live up to it.”

Also, the government coalition partner of Merkel’s conservative CDU/CSU alliance, the Social Democrats (SPD), said they are ready to implement the deal. SPD party leader Andrea Nahles in late March called for initiating the legislative process soon. “My expectation is that the (...) commission’s results will be implemented exactly as proposed,” Nahles said, adding that this meant laws for the structural economic development of affected coal regions would be introduced before summer.

The coal exit is likely to also play an important role in the upcoming deliberations of Germany’s so-called climate cabinet, an intra-government panel announced in March that is supposed to bring all ministries relevant for climate action as well as the chancellor and government party leaders together in order to achieve progress on emissions reduction. It is also meant to serve as a platform to prepare the introduction of Germany’s highly anticipated Climate Action Law, which according to Merkel will be adopted before the end of 2019.

No cakewalk

German politicians have called the coal exit’s implementation “a very complex and unstable process” and warned that it “will surely not be a cakewalk”. Within the government coalition, conservatives from CDU/CSU have to agree with the SPD on the details of a phase-out. But state governments across the country are made up of much more varied coalitions, including many with Green Party participation.

In addition, several eastern German states head to the polls this autumn, including lignite mining states Saxony and Brandenburg. Both Merkel’s conservative CDU/CSU alliance and the SPD have slumped in the polls and in last year’s regional elections. Concerns that voters may perceive the deal proposed by the coal commission as a burden had made both parties nervous as the right-wing populist and anti- energy transition AfD party is polling strongly in eastern Germany. News of individual power plant closures in the economically weak eastern mining regions ahead of the autumn elections are feared to strengthen this trend.

Moreover, the state premiers of the three eastern German coal mining states, Saxony, Saxony-Anhalt and Brandenburg announced that they are not going to pay for any structural economic adjustment measures associated with the coal exit from their own state budget. “By all means we want to avoid the impression that the coal mining areas end up bearing the brunt” of a coal phase-out, the state premiers from the CDU and the SPD told chancellor Merkel in an open letter in early April.

Twofold process

A few aspects have become clearer since the coal commission presented its deal in late January, one being that the future process of implementing phase-out will be split up into two fields of action:

  • structural economic change, ie, support for lignite mining regions;
  • energyandclimatepolicylegislation.

Economy and energy minister Peter Altmaier said Germany will need two major laws to implement the phase-out plan, one dealing with support for mining regions, the other setting out the timetable for coal-fired power plant shutdowns. However, several additional laws, amendments to existing legislation or regulatory changes, are also likely to be necessary.

From the outset, the economic future of lignite mining regions was seen as key task of the coal exit commission, as reflected in its official title. 

Against the backdrop of the autumn elections in eastern Germany, coal state premiers want to act quickly to present tangible negotiation achievements to their mining regions.

The coal exit commission agreed that coal regions should receive a total of 40 billions euros, 26 billion of which will be used to finance measures to be laid out in an upcoming law.

The timetable for shutting down coal-fired power plants will be among the more contentious pieces of legislation, as individual regions, companies and jobs are immediately affected. One key issue is whether or not the embattled Hambach Forest, which has become a symbol for climate activists, can remain intact or will be cut down by RWE to expand a nearby lignite mine. The coal exit commission recommends settling questions related to compensation for operators of power plants as well as for employees via “mutual agreements.” RWE has said it estimates costs of 1.2 to 1.5 billion euros for each GW of power plant capacity permanently switched off.

Should mutual agreements not be reached by a 30 June 2020 deadline, the commission recommends settling the dispute “by regulatory law,” which would mean that the government decides which plant has to shut down when to provide planning security and ensure uninterrupted power supply. 

Coal compromise

The coal exit commission, with a membership representing industry, environmental NGOs, citizen initiatives and policymakers, deliberated for over six months, from June 2018 to January 2019, to achieve a carefully balanced consensus on a range of issues, including emissions reduction, power prices, supply security, and the future of the Energiewende and economic development of the lignite mining regions (mining of hard coal ceased in Germany in 2018).

The commission’s final report recommends a phase out of coal by 2038 at the latest, but with a review in 2032 to assess whether the exit date could be brought forward to 2035.

As a first step, the commission recommends that by 2022, lignite and coal generating capacity should both fall to 15 GW, ie to 30 GW from a current total of about 43 GW, roughly corresponding to a 5 GW drop in lignite capacity, and a 7.7 GW decrease in hard coal generating capacity. The fall in total lignite plus hard coal capacity, of at least 12.5 GW, includes closures already planned.

The commission also recommends that Germany’s grid reserve capacity (about 2.3 GW) should be switched from coal to gas.

Looking to 2023-2030, the commission says that lignite and hard coal generating capacities should be no more than 9 GW and 8 GW, respectively. It also calls for progress reviews every three years, in 2023, 2026 and 2029. 

*This is an edited version of an article first published on Clean Energy Wire (Creative Commons Attribution 4.0 International Licence (CC BY 4.0)) 

Power generated in Germany, 2018, by fuel type. This shows only net generation in the public power supply system, ie self generation in industrial facilities (eg, in manufacturing and mining), is not included. Source: Bruno Burger, Fraunhofer ISE, www.energy-charts.de
Installed generating capacity in Germany, by fuel type (source: Fraunhofer ISE, www.energy-charts.de, data from AGEE, BMWi, Bundesnetzagentur) Percentage of total German lignite generating capacity owned: RWE, 47%; EPH, 43%; Uniper, 5%; EnBW, 4%; other, 1% (source: Scope, Bundesnetzagentur) Percentage of total German hard coal generating capacity owned: municipal utilities, STEAG, Trianel, 30%; EnBW, 19%; Uniper, 14%; Vattenfall, 13%; other, 11%; RWE, 10%; Engie, 3% (source: Scope, Bundesnetzagentur)

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