December 1, 2020 Read More →

First German coal closure auction oversubscribed as utilities look to exit uneconomic sector

S&P Global Market Intelligence ($):

RWE AG was the major winner in Germany’s first tender for shutting down hard coal-fired power plants, taking two-thirds of the compensation handed out by the government, as strong competition elsewhere drove average prices down to well below the maximum available.

RWE and Vattenfall AB both secured contracts for closing two power plants each, while Uniper SE successfully bid one of its assets, according to results published Dec. 1 by Germany’s grid regulator, BNetzA.

The auction was meant to secure the shutdown of 4,000 MW of hard coal capacity, but ended up awarding contracts to 4,788 MW, spread across 11 power plants. It was the first in a series of seven rounds that are supposed to whittle down a fleet of about 23,000 MW of hard coal plants still online in Germany. The country wants to phase out all coal generation by 2038.

The first tender was significantly oversubscribed, BNetzA said, resulting in a volume-weighted average of just €66,259/MW — significantly below the €165,000/MW ceiling. Individual awards ranged from €6,047/MW to €150,000/MW.

Overall, the low compensation bids are a sign of the unattractive economics of running coal power plants in Germany, after a year that saw production idled amid low demand caused by the lockdown. Coal operators have also had to contend with competition from cheap gas and high CO2 prices under the EU’s Emissions Trading System.

In the first round, RWE was successful with its 764-MW Westfalen and 794-MW Ibbenbüren plants, while Vattenfall successfully bid the two blocks of its Hamburg Moorburg plant, which have a combined capacity of 1,600 MW. Although the mechanism is designed to prioritize the shutdown of plants with higher emissions, the awards include some of Germany’s most modern hard coal units: Moorburg has only been online since 2015 and RWE’s Westfalen went into operation in 2014.

[Yannic Rack]

More ($): RWE nets bulk of compensation in Germany’s first tender for coal plant closures

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