Germany's Coal/Lignite Power Plant Phase Out

Germany's Coal/Lignite Power Plant Phase Out
Blog March 14, 2019

In January 2019, the Kommission für Wachstum, Strukturwandel und Beschäftigung (WSB) published a detailed report on outlining a preliminary plan for phasing out coal and lignite plants in Germany. This commission actively supports structural change in regions with energy production and is tasked with the development of an action program for sustainable economic development in these regions.

The commission’s settlement plans provide the affected states and regions with coal and lignite-fueled power plants with a compensation of 40 billion Euros over a 20-year period to help drive a successful phase-out. The commission also recommended a compensation mechanism for grid expansion, the amount of which will not be determined until a review period in 2023. With the federal government already providing billions of euros to subsidize the development of renewables in Germany and giving additional funds to subsidize coal/lignite plant closures, consumers should expect increased energy costs across the country.

Glance at the Past

Over the last two decades, the German energy landscape evolved significantly. Today, the country’s electricity system is constantly advancing towards a sustainable power system, in line with EU policies and regulations. Figure 1 shows the changing share of renewable power generation technologies as compared to the coal/lignite-based power generation technologies. One notable fact is the share of lignite remained somewhat constant in the power mix whereas the share of coal dropped to 35 percent by 2018.

Net Electricity Generation
Figure 1: Energy mix in Germany (source: Fraunhofer Institute ISE)

Over the last few years, the German government tried to push ahead with plans for a complete coal/lignite phase-out and asked the Kommission WSB to come up with first recommendations in the second quarter of 2018. The delay in discussions, coupled with a lack of consensus, did not lead to any substantial results. It was widely perceived that such a phase-out would have widespread repercussions for power producers.

In 2018, lignite-based power generation had the largest share in the electricity system at around 22 percent or 130 terawatt hours (TWh). An additional 2.7 gigawatts (GW) of lignite-based generation capacity was put under the “lignite reserve” for potential scarcity events.


Lignite Plants Germany
Figure 2: Age distribution of lignite plants in Germany (source: EPSI Genscape)

Figure 2 shows the age range age of lignite-based capacity in Germany and what their closure would mean based on their lifetime. Data from our EPSI platform shows around 4 GW of generation capacity is going to be older than 50 years or more by 2022. This is beyond their technical lifetime, so they are bound to close regardless. The age of an additional 5 GW of installed capacity is between 20 to 30 years. These power plants could potentially shut down if carbon emission targets must be met. Another 9 GWs of capacity younger than 20 years can be allowed to run till 2030, but that would mean missing the carbon emission targets.

In January 2019, the Kommission WSB presented recommendations to close 5 GWs of lignite capacity by 2022, which includes the capacity in cold reserves. By 2030, another 10.9 GW of lignite capacity are to be closed. Any remaining lignite capacity will be closed on or before 2035.


Coal plants have a similar situation where some plants can be closed earlier than scheduled since they are already close to completing their technical lifetime, however many units are still younger than 25 years. On the other hand, Bundesnetzagentur (Transmission System Operator (TSO) regulatory body) raised many concerns about generation adequacy and the reliability of the technology mix after coal/lignite is phased-out, since both fuels help serve the majority of the baseload.

The commission shed some light on this issue as well by recommending that 2.3 GWs of coal capacity currently placed under grid reserve convert from coal to gas. Furthermore, a significant share of coal capacity will also convert to either gas or biomass, specifically to deal with the phase-out of nuclear plants by 2022 and lignite plants by 2030. However, free market influences, such as increasing carbon price, additional regulation, and adverse public attitude towards carbon intensive technologies, are also forcing German utilities to re-think their strategy and move toward renewables.

Coal German Plants
Figure 3: Age distribution of coal plants in Germany (source: EPSI Genscape)

As shown in Figure 3, the age of the coal fleet in Germany is also diverse. The government rolled out plan for a complete coal phase-out, and almost half of the fleet will retire prematurely. The plan calls for compensating power producers for the recovery of their investment costs. However, the rest of the fleet is well aligned with coal phase-out policy due to the completion of the plants’ technical lifetimes. Nevertheless, when all these plants are phased out, they are likely to be converted to gas or replaced by intermittent renewables.

Our analysts continue to observe the evolution of the German coal/lignite phase-out plans, providing key market insights to our customers. Learn how our EPSI platform can assist with aftermath of the closure of coal-lignite plants, forecasting electricity prices, analyzing CO2 price impact and learning about the evolving technology mix to stay on top of the market. To learn more, or to request a demo of the platform, please click here.