The end game for coal

24 June 2020

Exit plan takes shape.

Above: Datteln 4, currently undergoing acceptance testing


While some of the phase out details have still to be finalised and the coal exit bill is yet to be passed by parliament (a process currently liable to be delayed by Covid-19), one thing can be said with certainty: there will be no hard coal or lignite power generation in Germany after 2038, and it might well end sooner, with reviews to be held in 2026, 2029 and 2032 to determine whether the phase-out can be completed a little earlier, by 2035.

The exit is envisaged to happen in basically three stages: hard coal capacity to be reduced to 15 GW and lignite capacity reduced to 15 GW by the end of 2022, down from 22.8 GW of hard coal and 21.1 GW of lignite capacity in 2019; 8 GW
of hard coal and some 9 GW of lignite to remain in operation by 2030; by the end of 2038 at the latest, no coal or lignite capacity in operation.

Lignite exit path

A schedule for the closure of lignite plants and agreements on compensation for lignite plant operators (notably RWE, LEAG (EPH), Uniper and EnBW) are in place.

Closure dates for the lignite plants are shown in the table on p18 (source: draft coal exit law).

Not surprisingly for a company founded on Rhenish lignite, RWE will bear the brunt of capacity closures. The closure timetable “stretches to the limits of what is possible”, said Dr Rolf Martin Schmitz, CEO of RWE AG. “We were well aware that a consensus solution was needed in order to contribute to solve a social and political conflict, to achieve the climate protection goals and, last but not least, to regain planning security for our company. The consequences for our employees and our company are tremendous. But this is the price we will have to pay to enable a solution where the recommendations of the Commission for Growth, Structural Change and Employment [aka Coal Exit Commission] set up by the federal government can be implemented.”

The exit path envisages that the first RWE 300 MW lignite unit will be taken off the grid in 2020. Another three 300 MW RWE lignite units will follow in 2021, and RWE will then shut down another 300 MW lignite unit and two 600 MW lignite units in 2022. This will mainly affect 

the Neurath and Niederaussem sites; at the Weisweiler site, one 300 MW unit will be taken off the grid. Briquetting at the Frechen site will also be discontinued in 2022.

The second stage of the lignite exit path, up to 2030, also envisages a further significant reduction in capacity for RWE. A 300 MW lignite unit in Weisweiler will be decommissioned “as early as 2025”, says the company. The two 600 MW lignite fuelled units at this site will follow in 2028 and 2029. At the end of 2029, RWE will also shut down another 600 MW lignite unit.

The company’s last 600 MW lignite unit will be transferred to “security reserve” status for four years, from 1 January 2030. This means that from this date, RWE will only have its three “youngest and most modern” lignite-fired units, the 1000 MW BoA 1, 2 & 3 power plants, producing electricity and participating in the market.

The Inden and Hambach opencast mines will be closed much earlier than RWE had originally planned and (thankfully) the Hambach Forest will be preserved.

Compensation will be paid for lignite shutdowns up to 2030, with RWE receiving up to 2.6 billion euros (Rhineland closures) and LEAG up to 1.75 billion euros (closures in the Lusatia region). There will also be payments to older workers in lignite mines and power plants who lose their jobs. By 2030, RWE says it “plans to reduce headcount by about 6000 within the scope of a redundancy scheme that is socially acceptable.”

End of hard coal

The planned exit path for hard coal is somewhat different, with capacity reductions to be implemented via auctions to be organised by BNetzA (Federal Network Agency). Hard coal plant operators will tender MW of capacity to be taken offline and how much compensation they require. The schedule is now uncertain due to Covid-19, but the first auction had been expected to take place in 2020 two months after exit legislation entered into force, with 4 GW to be taken offline, maximum remuneration 165 000 euros/MW. Further auctions anticipated are as follows: 1.5 GW offline, four months after first auction, maximum remuneration 155 000 euros/MW; auction in 2021 with the volume offline necessary to reach the target of having
15 GW of capacity remaining by the end of 2022, max remuneration 155 000 euros/MW; another auction in 2021 for capacity to be taken offline by 2023, max remuneration 116 000 euros/MW; three more auctions in 2022/23 for capacity to be taken offline in 2024-2026; max remuneration 87 000/65 000/49 000 euros/MW, respectively.

Hard coal plants in southern Germany are not eligible to participate in the first auction as these might be needed to maintain grid stability should transmission line construction prove insufficient.

Should the auctions not result in sufficient hard coal capacity being decommissioned, the draft coal exit bill entertains forced shutdowns, largely depending on plant age.

The draft exit law is framed in such a way that Uniper’s long-delayed 1100 MW Datteln 4 hard coal power plant (the last remaining coal power construction project in Germany) can be started up. The Coal Exit Commission had initially proposed that the German federal government and Uniper should reach an agreement for Datteln 4 not to enter service in return for a compensation payment. However, the federal government decided that, on environmental, economic and energy policy grounds, it made sense for such a technologically advanced power plant to enter service. Whether this idea survives the parliamentary phase of the coal exit bill remains to be seen.

Datteln 4 is grid connected and currently in the commissioning phase, undergoing acceptance testing, with commercial operation scheduled for early summer 2020 (Covid-19 permitting, although as of May 2020 Uniper said it did not see the schedule being likely to be affected by the pandemic).

Perhaps somewhat paradoxically for a new coal plant, the start up of Datteln 4 is perceived by Uniper (now 73.4% owned by Fortum) to be a key part of its decarbonisation roadmap. This is because the Datteln 4 start up needs to considered in conjunction with Uniper’s plans to voluntarily decommission old and inefficient hard coal fired power plants, closing down 2.9 GW of its hard coal capacity by the end of 2025. As a result of these voluntary shutdowns and the operation of Datteln 4, Uniper plans “to further reduce its CO2 emissions by up to 40% whilst still maintaining security of supply to the customers and communities that it serves.”

At the end January 2020, Uniper announced its hard coal shutdown plans, saying it had decided to “lead by example”, in the context of Germany’s public debate about phasing out coal.

Uniper intends to shut down about 1500 MW of hard coal capacity – three generating units at Scholven power station in Gelsenkirchen plus Wilhelmshaven power station – by year-end 2022 and plans to shut down another 1400 MW, at Staudinger and Heyden power stations, by 2025 at the latest. This would be in addition to 2400 MW already closed, at Datteln, Scholven, Knepper, Veltheim, and Shamrock.

As of 2025, assuming the start up goes ahead, Datteln 4 would be the last remaining coal-fired power plant in the Uniper portfolio in Germany.

Uniper says it is “developing forward-looking schemes for the power stations slated for closure”, with the schemes “geared toward tomorrow’s energy world” and “offering long- term employment prospects.” They include datacentre development (eg, at Staudinger) and the building and operating of new gas fired combined heat and power facilities, supplying district heating and offering innovative solutions for providing nearby industrial customers with steam, heat, cooling, and electricity, as well as developing “solutions that produce hydrogen on an industrial scale.”

Announcing the phase out plan, Andreas Schierenbeck, Uniper CEO, said: “Our objective is to make a proactive and constructive contribution to the achievement of carbon reduction targets and to the swift and sustainable phaseout of coal-fired power generation in Germany. We want to send a signal that the discussions of recent years have now led to action. With our voluntary, ambitious plan, we also want to contribute to increasing social acceptance of the “how” of the coal phase-out in Germany. At the same time, we’re setting Uniper on a decisive course for the future: our actions will provide planning security to our employees at the facilities affected and give our company the financial and structural flexibility to focus on important, sustainable projects for the future.”

Aiming to be climate-neutral

In March 2020, Uniper, describing itself as a “pacesetter in the use of power-to-gas technology to produce green gas” announced its intention of “making its power generation portfolio in Europe climate-neutral by 2035”, part of “a fundamental strategic reorientation.”

Uniper points out that, thanks to hydro and nuclear power stations in Germany and Sweden, about 40% of its European generation is already zero-carbon. And in the years ahead it plans to significantly increase the zero-carbon percentage, for example “by means of long-term power purchase agreements for wind and solar power”, seeing the era of subsidy free solar and wind in Europe as providing interesting business opportunities.

Also, “because gas plays a pivotal role in decarbonisation as well as energy security, it will be a key focus of Uniper’s future strategy” and the company “plans to further expand its broadly diversified gas business and progressively decarbonise it as well.

Uniper says it is “forging ahead with conversion to gas-based systems both at its own facilities and its customers’”, for example at Gelsenkirchen-Scholven, where gas fired combined cycle cogeneration will replace a coal fuelled CHP facility.

With Europe’s gas production declining while demand rises, “the need for imports will increase”, says Uniper, and “as one of Europe’s largest gas importers and operators of gas storage facilities”, it will continue to help secure Europe’s energy supply with both pipeline gas (eg, via Nord Stream 2) and the expansion of LNG infrastructure (as at Wilhelmshaven).

Looking beyond that, Uniper “plans to gradually replace conventional gas with green gas or green hydrogen in both energy generation and energy trading.”

It installed its first power-to-gas unit, in Falkenhagen, back in 2013, followed by another in 2015, in Hamburg. Falkenhagen was supplemented with methanisation equipment in 2018.

Uniper is in addition involved in plans for a “living laboratory” at Bad Lauchsta¨dt to explore the concept of shaping a hydrogen economy in the Chemical Triangle of central Germany, and is also looking at the scope for hydrogen combustion retrofits in its existing gas turbine fleet.

Coal replacement at CHP plants

Germany’s draft coal exit legislation also aims to reward CHP plants that eliminate coal as a fuel – for example switching to gas or biomass – with a one-off payment of 180 euros per kW of capacity, in addition to existing subsidies for cogeneration.

In recent months there have been a number of projects that will see gas replacing coal as the fuel for cogeneration in Germany. For example at Evonik’s Marl Chemical Park, a new 180 MW gas fired combined cycle CHP facility will end hard-coal-based power and steam generation after more than 80 years.

A new gas fuelled combined cycle CHP plant, Kessel 13 – employing an MHPS supplied HRSG – is being built for the municipal utility of Flensburg, replacing two coal boilers, while MHPS is also working on a new combined cycle cogeneration facility for Volkswagen’s Wolfsburg facility, replacing coal units. The new 288 MW Heizkraftwerk Wolfsburg-West plant will employ two MHPS H-100 gas turbines with waste heat recovery boilers and two Doosan Skoda Power steam turbines.

Further reading: Julian Wettengel, Spelling out the coal exit – Germany’s phase-out plan, Clean Energy Wire Factsheet

Uniper’s exit from coal

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