German municipal utilities fear coal closures without compensation

London — Germany's municipal utilities have called for adequate compensation for hard-coal closures after the government's coal exit draft law that plans to offset longer lignite runtimes with more aggressive hard-coal closures, lobby group VKU said Friday.

The group that represents the so-called Stadtwerke estimates that over 7 GW of hard coal capacity commissioned after 2013 would be at risk of enforced closures without compensation from 2027.

"It is devoid of any logic in terms of energy and climate policy that hard coal should serve as a stopgap for the delayed phase-out of lignite," VKU chief Michael Wuebbels said adding that this especially affects municipal power plant operators.

Germany's Stadtwerke, which account for around 60% of retail power consumers, have invested heavily in new generation capacity during the past few years bringing total capacity owned by municipal utilities to 28.5 GW, making them a key player in the German power market.

"Without adequate compensation for their economic damage, there is a risk that the Stadtwerke affected will lack the money for the local energy transition," the VKU said.

The Stadtwerke lobby also called for a boost to the proposed coal-to-gas switching CHP support in the draft law.

The energy ministry on Thursday circulated another coal exit draft law with cabinet expected to pass the law January 29.

The latest draft called for accelerated hard-coal closure across six auctions.

An initial 4 GW auction is planned this year with closure compensation awarded to bidders offering the lowest cost of avoided CO2 emissions.

Grid regulator BNetzA is set to run the auctions and determine the exact closure volumes in line with certain target dates with a final auction in 2023 for 2026 closure.

From 2027, no compensation is to be awarded for hard-coal closures.

German hard-coal capacity is set to rise to 21 GW this year with Uniper's Datteln 4 coming online.

At least 6 GW of closures are required to reduced capacity to the 15 GW ceiling allowed by 2022 and 8 GW by 2030.

In many cases, the municipal coal plants also provide heat in cities like Hamburg or Munich.