The dispute over coal is far from over: like the end of nuclear energy, the end of coal will also occupy the Federal Constitutional Court. Electricity producer Steag, one of the largest operators of hard coal-fired power plants in Germany, is preparing a constitutional complaint, according to information from the Handelsblatt newspaper, and submits an urgent application in advance. The company does not want to stop the coal phase-out, but demands better compensation for the shutdown of its plants.
Steag sees in the regulations of the law on the reduction and termination of coal-fired power generation (KVBG) an “unauthorized interference in her protected by the Basic Law and the Charter of Fundamental Rights of the EU right to property”, it was said in the circles for justification. At the same time, however, it was also emphasized that the aim was not to prevent the law from entering into force or to delay its implementation. The federal government’s climate protection goals are expressly supported.
Steag operates eight blocks in hard coal-fired power plants in Germany with a total of 4,000 megawatts of net output. Like other operators of hard coal-fired power plants, the Essen-based company had repeatedly complained in advance about the modalities of the coal phase-out. The operators of hard coal-fired power plants feel disadvantaged compared to the lignite companies, for which lavish compensation for the coal phase-out was fixed at an early stage.
The law that passed the Bundestag and the federal government on July 3 provides legal certainty for companies that operate and promote lignite. Production in the opencast mines will gradually decrease, and the lignite-fired power plants will go offline accordingly. At the same time, it regulates what compensation the lignite companies should receive. In total, their compensation will add up to 4.3 billion euros.
Hard displacement competition
The operators of hard coal power plants will probably only get half of the sum. Above all, they have to face tough predatory competition. The plants are to be gradually pushed out of the market. In auctions, operators can apply for the decommissioning with appropriate compensation.
Anyone who does not get a chance, however, must expect to be decommissioned from 2024 without compensation, because then old systems can be forced out of the network by law. A total of eight auctions are planned. The first is planned for September.
The modalities were improved shortly before the law was passed in favor of the coal industry. But Steag is not yet satisfied. “The maximum prices that can be achieved are inappropriately low,” is criticized in the corporate circles. In addition, the auction conditions are “unclear and illegal” in numerous points.
Since the highest prices to be achieved in the first auction, which is already scheduled for September 1, are still the most attractive, the volume in this auction should be expanded by around 20 percent. A corresponding request was made in the urgent application. At the same time, the Federal Constitutional Court should determine that the surcharges are only provisional in terms of the amount and their appropriateness can be checked in the main proceedings, was demanded in the corporate circles. A company spokesman declined to comment on request.
This threatens a similar legal aftermath to the coal phase-out as it had already burdened the nuclear phase-out. After the federal government canceled the recently agreed extension of the operating times for German nuclear power plants in 2011 and sealed the final end for nuclear energy in Germany in 2022, the operators of the reactors filed numerous complaints. Among other things, Eon, RWE and Vattenfall lodged constitutional complaints asking for compensation.
In fact, the Federal Constitutional Court in 2016 partially agreed with the companies. It did not question the exit law. After the decision of the constitutional judges, the federal government had the right to accelerate the nuclear phase-out again. However, the federal government had to compensate the operators for investments already made and for expired electricity production rights.
The coal phase-out should actually be regulated by consensus. In mid-2018, the federal government set up a commission that included representatives from business and politics as well as environmentalists. At the beginning of 2019, she submitted a proposal on how the coal phase-out should be accomplished quickly, but also in a way that is acceptable to companies, employees and the regions affected. But even the road map that the Commission presented in early 2019 met with criticism. The coal phase-out did not go quickly enough for environmentalists, and the economy feared for security of supply.
Subsequently, the modalities were discussed with the lignite companies RWE, Leag and Mibrag, because the exit from the lignite is particularly difficult to organize. When it comes to lignite, it is not just a matter of taking the power plants off the grid, it is also a question of gradually reducing the production in the open-cast mines in the Rheinische Revier, the Lausitz and the Central German district and at the same time organizing the recultivation. In addition, the politicians in the affected eastern German states in particular insisted on structural aid because the lignite mining is an important employer there.
Lignite versus hard coal
At the beginning of 2019, there was a comprehensive concept of how the lignite exit should be organized, the companies should be compensated and the regions supported. In contrast, the operators of hard coal power plants felt neglected for a long time. The operators of older hard coal-fired power plants feared that their plants could be forced out of the market by regulatory law if they did not come into play at one of the planned auctions in good time. Operators of younger hard coal-fired power plants feared that they would no longer be able to make their investments due to the limited term.
In fact, they made significant improvements shortly before the law was passed. The government factions once again significantly amended the bill in favor of the operators of hard coal-fired power plants. They granted the operators higher compensation for the shutdown of their plants – and at the same time offered them high incentives to convert coal-fired power plants to highly efficient gas and thermal power plants.
The bonus that companies receive for the conversion was increased from 180 euros per kilowatt to 390 euros if a coal-fired power plant was not older than 25 years. With each passing year, the bonus drops by 25 euros. Power plants that are older than 25 years and younger than 35 years should initially get 225 euros per kilowatt. Here, too, the total decreases with a later change.
But this is particularly important for younger plants. And the concessions on decommissioning also benefit the operators of younger plants. The tender rounds, in which the tenderer receives the least compensation, should actually run until 2026. The coal-fired power plants should then be gradually shut down by 2033, depending on their age – and without compensation. The last call for tenders is now planned for 2027.
In addition, the already planned evaluations of the coal phase-out in 2022, 2026 and 2029, in which the schedule for the phase-out from lignite should be checked, now also include the younger coal plants that have only been in operation since 2010. It should be checked whether an adjustment of the legal framework is necessary. A hardship case regulation should be possible for young hard coal plants that had not received any compensation through the tender process up to the time of the evaluations and could not use support programs for retrofitting.
Old systems should be out of the market
Operators like Steag, who have some old systems in their portfolios, don’t do anything. Admittedly, the amount of the maximum possible compensation was significantly increased when the law was amended. Steag would also benefit from this. The company does not yet have enough compensation.
Steag welcomed the fact that it was possible to negotiate appropriate compensation regulations and a decommissioning path with the operators of lignite-fired power plants and to agree them in contracts, it said in the corporate circles. “However, it is incomprehensible that no such talks were held with the operators of hard coal-fired power plants and that inappropriate compensation regulations were imposed on them.”
It was also not understandable that the law largely curtailed legal protection before the civil and administrative courts, forcing Steag into a constitutional complaint that remained her only legal protection option.
The company also complains about the passage of time in the legislative process. Although the law was passed on July 3, it has not yet been published. The first auction should start on September 1st.
Steag was struggling with plans to take legal action against the law. The constitutional complaint is only possible once the law has entered into force. Therefore, the electricity producer, which belongs to a consortium of municipal utilities from the Ruhr area, decided to apply for urgent legal protection before the Federal Constitutional Court before the law came into force in order to be able to obtain legal protection before the first decommissioning auction on September 1, 2020. “At a later stage, Steag’s constitutional complaint will shake,” was also emphasized in the circles.
More: EnBW faces the coal exit.