“Coal Commission’s” proposals on coal phase-out take shape

The plans of the Commission on “Growth, Structural Change and Employment” drawn up by the German Government for the planned phase-out of coal-based power generation are taking shape. In a final report, the Commission is to present proposals both for the actual structuring of the coal phase-out itself and for the political measures intended to support it. The submission of a final report was originally planned for the end of November 2018, but had to be postponed until the end of January or early February 2019 due to political pressure from the prime ministers of the three eastern German states of Saxony-Anhalt, Saxony and Brandenburg, which are particularly affected by a withdrawal from coal-fired power generation. Reports indicate that compromises are now being found in key areas of dispute.

It is likely that the Commission will make proposals, in the form of a step-by-step plan, on the extent to which coal-fired power generation is to be reduced by 2022 and 2030. There are rumours of a shutdown in the order of 7,000 megawatts (MW) by 2022. By 2030 the current capacities of around 20,000 MW brown coal-fired and 23,000 MW hard coal-fired power generation are to be more than halved to a total of approximately 20,000 MW. The Commission will have to bear in mind the impact of the phasing-out of nuclear energy in its proposals. In order to ensure stable supplies, an investment framework for the construction of new gas-fired power stations is under discussion.

As far as the practical aspects of implementing the phase-out of coal-fired power generation in legal terms are concerned, the Commission seems to favour a mixed model: the Federal Government is to negotiate with two operators, RWE and Leag, on the shutdown of power stations fired using brown coal. The aim is to reach an amicable solution in which the two operators are compensated for the decommissioning of their power stations. In contrast, the permitted operating terms of hard coal-fired power stations are to be put out to tender. The longest permitted operating terms will be granted to the operators demanding the lowest compensation premiums for decommissioning their power plants. This model would have the benefit that existing power station infrastructure would be used effectively, whereas obsolete and expensive plants would be shut down earlier.

With regard to the political measures intended to support the phase-out of coal-fired power generation, the call by the affected States concerned for a “suitable framework” to guarantee the financial support for the structural changes associated with the phase-out has been heard. The establishment of a foundation to manage and distribute the financial resources made available from the federal budget on a long-term basis is being discussed. The legislator has already successfully set up a similar foundation model in connection with the financing of nuclear waste management: the Government foundation “Nuclear Waste Disposal Fund” administers the €24 billion made available by the operators of the German nuclear power plants in order to ensure the financing for the interim and final storage of radioactive waste on a long-term basis (see our press release of 15.12.2016). As was the case for the financing of nuclear waste disposal, the establishment of a foundation and other associated structural measures (investment in regional infrastructure, establishment of (government) authorities and army bases) would have to be set down in a (federal) act to which the federal and state governments would have to give their consent.

The Commission’s final report will form the basis for further considerations by the Federal Government and the government coalition on how they should structure the departure from coal-based power generation. The final report will simply serve as a political signpost – neither government nor the Bundestag are not legally bound by it. The political controversy on how to structure the phase-out of coal-fired power generation is therefore set to continue after the final report has been submitted.