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Highlights

Annual auctions for closure compensation planned until 2026

More closures needed if 1 GW Datteln 4 comes online

Hard coal capacity to be capped at 15 GW by end-2022

London — Germany plans to close 4 GW of hard coal-fired plants via a first annual compensation auction in June 2020, an energy ministry spokeswoman told S&P Global Platts Tuesday.

Compensation for closures is to be awarded to bidders offering the lowest cost of avoided CO2 emissions with winning plants set to close after winter 2020/21.

The federal grid regulator BNetzA is set to run the auctions, according to a second draft leaked Tuesday.

The ministry is finalizing a hard coal exit law to cap hard coal capacity at 15 GW by end-2022.

Assuming Datteln 4 comes on line, Germany will have around 22 GW of hard coal capacity in operation as the compensation auctions get underway.

The draft does not specify a bid ceiling in the auction, with details yet to be established across ministries before reaching cabinet later this month, the spokeswoman said.

Bids for a second wave of closures are to be submitted by March 2021, 22 months before the end-2022 target date.

The BNetzA is to establish exact volumes required to hit the 15 GW target depending on other closure applications, the outcome of various capacity reserve auctions and startup of Uniper's 1.1 GW Datteln 4 plant. Commissioning of Datteln 4 is foreseen for summer 2020.

Closure auctions thereafter are set to run annually until 2026, with hard coal capacity declining to 8 GW by end-2030.

Details on 3 GW of lignite closures are expected at a later stage, with Eur40 billion ($44 billion) of support for lignite mining regions already approved.

Germany plans to completely phase out coal by 2038.

The draft includes reviews of planned coal closures to ensure power prices remain affordable after nuclear is phased out.

This would also include a review into whether Germany would cancel new EUA carbon allowances linked to the coal closures.

The draft rejects the option of a national carbon floor price to achieve the closure targets.

Reduced coal burn will see the power sector achieve its 2022 targets this year. German hard coal output is averaging 5.4 GW this year, down 23% on the year.

-- Andreas Franke, andreas.franke@spglobal.com

-- Edited by James Burgess, newsdesk@spglobal.com