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June 24, 2020

Germany approves $4.9bn brown coal phase-out; wind auction suffers

The leadership of Germany has approved a compensation package for brown coal power station operators, but onshore wind markets are suffering.

By Matthew Farmer

The leadership of Germany has approved a $4.9bn (€4.3bn) compensation package for brown coal (lignite) power station operators. The funds have yet to be approved by other branches of government, where Angela Merkel’s leadership maintains a majority. If approved, the funds will support businesses as the country aims to phase out brown coal use by 2038.

In 2019, Germany generated 9.1% of its electricity from brown coal, according to data from AG Energiebilanzen.

The package aims to offset the wind-down of the brown coal mining, transportation and generation markets. It was agreed with companies including RWE, Uniper, EnBW, Vattenfall, Steag and LEAg. Separate to this, Germany’s leadership will soon decide on the structure of compensation for generators using black coal.

At the same time, a German wind generation auction has failed to secure bids up to its allowed threshold.

Onshore wind generation contracts totalling 826MW are on offer, but submitted bids came to a total of 468MW, according to the country’s federal grids agency. Additionally, the price of power has increased from the previous auction. The average price of successful bids was $69.20/MWh (€61.40/MWh), up from $68.41/MWh (€60.70/MWh).

German onshore wind investment has reportedly fallen to its lowest levels in 20 years. Problems with licensing and lawsuits from groups near turbine sites have caused confidence in the industry to fall. In September 2019, ministers presented several reforms to strengthen the onshore wind market, but the most recent auction was again criticised by opposition parliament members.

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A simultaneous solar power auction secured bids over its 96MW allowance. The average successful price rose to $59.38/MWh (€52.70/MWh), up from $68.41/MWh (€58.36/MWh) in the previous round.

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