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Lignite retreat: RWE's short-term pain, long-term gain

October 01, 2018
Gerard Wynn and Paolo Coghe
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Key Findings

Closing these ageing units would avoid capital expenditure (capex) to meet pollution limits that come into force in 2021. All but one of RWE’s 11 local generation units presently exceed those limits.

Halving lignite output could supercharge benefits from the strategic repositioning that RWE is already embarking on through acquisition of E.ON’s renewable infrastructure assets.

Executive Summary

Coal phaseout discussions are hot topics in Germany. Chancellor Angela Merkel’s government has created a panel, dubbed the Coal Exit Commission, to propose a phaseout pathway before the end of the year, including an end-date for coal generation. RWE will be one of the company’s most affected by this coming transition—60% of its installed generating capacity in Germany uses lignite or hard coal. Its Hambach opencast lignite mine in Nordrhein-Westfalen (North-Rhine Westphalia), lying within the world’s largest lignite deposit, has become a lightning rod for the debate. RWE had planned to expand the mine, beginning in mid-October. However, the Münster Higher Administrative Court put those plans on hold over concerns about the neighbouring Hambach Forest. The mine’s future is now in limbo, pending this legal process, and the proposals of the Coal Exit Commission.

RWE’s CEO has stated that immediate closure of the Hambach mine would cost €4-5 billion, calculated as a combination of foregone profits from the related power plants, plus impacts on mine recultivation. Capital markets appear to agree that near-term closure would be bad for RWE; the company’s share price fell sharply in the aftermath of the court ruling.

In this report, we explore the impact of halving RWE’s lignite output at Hambach and the neighbouring Garzweiler mine. This stylised scenario is assumed to be in line with ambitious action both to protect the Hambach Forest and avoid further village relocations around Garzweiler. We note RWE’s view that the Hambach Forest cannot be saved, regardless, because soil and rubble (“overburden”) beneath the forest is required for mine recultivation. Under our scenario, we agree that RWE would post a loss on foregone lignite generation in the short term, but we find RWE benefits in the longer term.

Please view full report PDF for references and sources.

Press release: IEEFA Germany: Halving RWE’s lignite output could spur low-carbon shift, avoid $100 million expense of saving aging plants

Gerard Wynn

Former IEEFA Energy Finance Consultant Gerard Wynn is a U.K.-based 10-year veteran of energy and economics reporting at the Thomson Reuters News Agency and has authored numerous papers on energy issues ranging from solar power in Great Britain to coal-burning in China and India. He blogs at

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Paolo Coghe

Paolo Coghe is president of Acousmatics.

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