Pondering why the Czech-based companies EPH and PPF Investments have recently acquired all of Vattenfall’s former lignite power plant assets in eastern Germany, IEEFA data analyst Gerard Wynn suggests that the buyers don’t believe Germany will meet its 2030 emissions target. They think that another sector, not lignite, will bear this burden or they expect to be compensated for any forced early retirements of power plants.
To reach Germany’s 2030 emissions goal, total national greenhouse gases would have to fall to 547 million tonnes, or by nearly 40% from today’s levels. Pro-rata adjustments are unlikely given that lignite-fired plants are significantly more carbon-intensive than modern combined-cycle gas power stations.
Attempting to model necessary cuts, Mr Wynn took Germany’s emissions in 2014 and reduced each sector (except for transport) equally to meet the 2030 goal. Then, he cut lignite by any remaining shortfall to meet the 2030 target. The result shows how lignite emissions must fall under this very reasonable scenario by 87% from today’s levels.
High-stakes game
It all comes down to a “high-stakes game between the Czech interests and the German government,” Wynn said, suggesting the latter will want a gradual phase-out of lignite to meet its emissions targets, and one that occurs as the least cost to the energy consumer.
“To secure government compensation, e.g. capacity payments, the Czech owners may threaten to abruptly shut down the power plants,” he said, warning they may “play up the energy security these plants provide in the near term” or threaten to sue the government, similar as some operators of nuclear power plants did.
There is, however, no need for the German government to subsidize EPH and PPF. In fact, the IEEFA’s report “Foundation-based framework for phasing out German lignite in Lausitz” rules out a taxpayer-funded lignite bailout. It lays a sustainable path forward for Germany to meet its climate goals, and it allows the Lausitz asset owners to operate their power plants profitably through the phase-out period while meeting their clean-up commitments.