German utilities welcome improved deal for hard coal-fired generators

FRANKFURT, June 30 (Reuters) - Germany’s local utility organisation VKU said on Tuesday that compensation measures thrashed out by the ruling coalition government brought improved incentives to switch to gas from coal in the provision of heat and electricity.

Final details emerged after overnight news of the package that had held up the passage of a wider coal exit bill up to 2038, aimed at meeting climate targets.

The bill is now due to be passed in parliament on Friday.

It gives operators an extra year up to 2027 to compete in auctions for closure compensation payments and promises more money for switching to gas from coal, which emits less CO2.

“The lengthening of closure auctions for hard coal-fired plants is appropriate,” said VKU managing director Ingbert Liebing in a statement.

“Also, the requests by members of parliament have helped improve the direct consequences of the bill for young plants that joined the grid after 2010, and would not have had a chance to refinance their investments at the time of shutdown.”

VKU groups 1,500 local utilities, many of which co-own or operate hard coal-fired plants in a sector led by RWE and Uniper.

Brown coal supplied 19% of German power production last year and hard coal 9%.

Both lost 4 percentage points each year-on-year amid an ongoing expansion of renewables, which has been enhanced by the wider role of green power in the coronavirus crisis this year, which shrank demand.

The deal also stipulates that hard coal plants built less than 10 years ago can ask for direct payments or a transition into a network reserve in exchange for compensation payments.

These decisions will be made at the point of closure.

They must be in line with state aid regulations and will depend on fuel and carbon prices at that time. (Reporting by Vera Eckert and Markus Wacket; Editing by Andrew Cawthorne)