German utility RWE predicts the government’s planned coal penalties will lead to emission reductions of 70 million tonnes of CO2, well above the 22 million intended, it said in a scathing attack on the proposal over the weekend.
In the plan announced last week, the economy and energy ministry said it wants to force ageing coal-fired power plants to buy extra EU Allowances for breaching emission limits from 2017.
RWE is Germany’s biggest producer of power from carbon-intensive lignite, or brown coal, and operates many of the 20+ year-old plants targeted by the programme.
It said the proposal would lead to no climate benefit because plants would have to close rather than buy the EUAs, weakening carbon prices and enabling extra emissions to take place elsewhere in Europe.
Joining members of coalition partner CDU in attacking the plan, RWE said it would threaten at least 30,000 jobs in the mining and power sectors as well as damaging the North Rhine-Westphalia region as an industrial powerhouse due to the resulting €5/MWh hike in power prices.
In contrast, energy market analysts at ICIS Tschach and Thomson Reuters Point Carbon have said they expect many of the affected plants to stay open, albeit for fewer operating hours.
Energy Aspects on Monday agreed and said RWE’s response seemed to be exaggerated.
“The starting numbers do not seem onerous … the rule makes sure old plants are no longer able to run baseload,” said Energy Aspects’ Trevor Sikorski, referring to a generator’s ability to operate around the clock.
He said that under the current proposals, a 1GW coal-fired plant with an emissions intensity of 0.8 tonnes/MWh would be restricte to operating 45% of the time, which “would be good for a 40-year old power plant”.
The RWE statement said:
- “Old” power plants will lose so many operating hours and gross margins as a result of the proposals of the Federal Ministry for Economic Affairs and Energy that there can be no talk of “reduced operations” – it will in fact mean shutting down plants. They will not be able to cover their costs via the utilisation hours that remain to them or they would be pushed out of the market due to the additional fees of €18-20 per tonne of CO2.
- The proposals of the Federal Ministry for Economic Affairs and Energy will lead to CO2 reductions of around 70 million tonnes (not 22 million tonnes, as stated in the proposals) due to the economically necessary shutting down of the power stations in question. This CO2 reduction burden will be too much for the companies affected to absorb.
- The proposals would not lead to a CO2 reduction in absolute terms. Companies would be forced in many cases to shut down power plants instead of continuing operations and purchasing expensive emissions certificates which the government would then take off the market. Due to decommissioning of plants, the desired effect would thus not occur, the certification volume in the ETS would remain unchanged and as a result emissions would simply be shifted abroad.
- A much higher percentage of the German fossil-fuelled power station fleet would be affected than the 10% claimed in the proposal. Operation of around 40% of power plants would be either constrained or even shut down. Capacity of over 10 GW would be taken off the grid. In combination with the completion of the nuclear exit, Germany would lose over 20 GW of secured capacity due to power plant decommissioning by 2025. It would not be possible to close this gap through new-builds no through importing power. And as a result, there would have to be additional reserves to secure supply.
- At least 30,000 jobs would be threatened in the lignite industry alone, as well as much more than 70,000 jobs at suppliers and partner SMEs in the region as well as in energy-intensive industries. In addition, value would be lost to the tune of up to €8 billion per year.
- Especially highly energy-intensive industries would be at a competitive disadvantage as the wholesale price would increase by at least €5 per megawatt hour (MWh) as a result of this proposal. There would also be an effect from the nuclear exit of around €4 per MWh by 2022. Overall the electricity price would increase by at least 30% compared to current prices.
- It is questionable whether such models, which discriminate against power plant operators comply with European legislation and constitution.