FRANKFURT/DUESSELDORF (Reuters) - Operators of Germany’s coal-fired power plans will have to negotiate compensation with the authorities for accelerating moves to phase out use of the fuel, a report said on Saturday, with the prospect that payouts could run into billions of euros.
A commission has set out proposals for ending the use of coal as a power source by 2038 in Europe's biggest economy, affecting operators RWE RWEG.DE, Uniper UN01.DE, EnBW EBKG.DE, Vattenfall [VATN.UL], Steag and LEAG.
The fuel now generates 38 percent of Germany’s electricity.
The government-appointed body’s proposals will serve as the basis for turning the phase-out into law and means several coal-fired power stations will close earlier than expected.
“The commission recommends a mutual agreement with the operators on a contractual basis with regard to the shutdown,” the commission’s final report seen by Reuters said, adding this would include agreeing on the size of any compensation.
Shareholders and utility investors have been waiting for months for details about what payments would be offered.
The report said ways to determine compensation could include capacity tenders or keeping plants on standby, similar to existing reserve payments for operators that have totaled as much as 150 million euros ($171 million) per gigawatt per year in the past.
Of Germany’s total installed power generation capacity, which stood at 218 GW at the end of 2017, hard-coal and lignite plants accounted for 46 GW, or more than a fifth, suggesting billions of euros in overall compensation payments.
RWE, Germany’s biggest power producer and the largest operator of coal-fired plants at 13.3 GW of capacity, said 2038 was too soon, urging lawmakers to consider extending this during a review in 2032.
“We are obliged to protect the interests of our employees as well as our shareholders,” RWE Chief Executive Rolf Martin Schmitz said in a statement.
The 336-page report by the commission said: “If there are auctions, avoiding forced layoffs as well as unfair social and economic disadvantages for the affected employees is a necessary precondition.”
Compensation should apply to plants in operation and those that have not yet entered service or were still being built, which includes Uniper’s Datteln 4 plant, the report said. The older the plants, the lower the compensation, it added.
Eckhardt Ruemmler, chief operating officer of Uniper, which operates 3.8 GW of coal-fired capacity in Germany, said the report suggested the Datteln 4, a 1.05 GW coal plant that has so far cost 1.2 billion euros, would never enter service.
“In light of the enormous investment and contractual obligations related to the project this requires substantial talks - including with our clients of the plant,” Ruemmler said. “The plant is central to our corporate planning.”
Swedish state-owned utility Vattenfall and EnBW, which is almost entirely in the hands of one of Germany’s federal states and local municipalities, welcomed the decision to phase-out coal plants by 2038.
Vattenfall has sold most of its coal-fired power stations, but still runs a plant in Hamburg.
Editing by Edmund Blair
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