GERMANY Germany has decided to not go ahead with the plans of a CO2 levy. Instead some 2.7 gigawatts of lignite power production will be taken out of the regular electricity market, corresponding to 11 million tons of CO2. These power plants will then be kept as a reserve for extreme situations when extra power is needed. After four years in the reserve the power plants will be shut down permanently in 2020.

Abandoning the plans on a levy is positive in the sense that it takes away a lot of uncertainty around how much capacity would finally become uneconomic and would need to be shut down. When the details of the new legislation are ready, we will have a firm plan for the future operations of our lignite assets,” says Vattenfall CEO Magnus Hall.

The now abandoned levy on lignite power production has been strongly criticized by the affected Federal States as well as by energy and industry unions fearing losses of up to 100.000 jobs.

“If the parliament confirms the key elements of the compromise conveyed by media, this is also a good message for our 8.000 employees in Lusatia and Lippendorf,” says Tuomo Hatakka, head of BA Heat and the Mining and Generation operations.

Affects for Vattenfall’s power plants
It is still unclear exactly which power plants that will be taken out of the market by the new legislation, but it is probable that one or more of Vattenfall’s plants in Jänschwalde, Boxberg or Schwarze Pumpe will be affected. It is also not clear what the compensation for having a power plant in the reserve will look like, although it is said to be cost based. Despite this uncertainty stock shares in the German energy utilities E.ON and RWE went up after the announcement of the decision. All in all, the new legislation means that selling of Vattenfall’s Mining & Generation business can continue.

“The agreement provides also more clarity for potential buyers and the selling process can be continued. I am convinced that we have an attractive asset portfolio to offer, “ says Magnus Hall.

Other measures taken to reduce emissions
According to the German government, the phase out of lignite will account for half of the country’s greenhouse gas reduction gap which needed to be filled to reach the target for 2020.  The rest will be achieved by other measures such as financial support for gas fired CHP, energy efficiency measures and strengthening of the national power grid needed for transporting more energy produced by renewables in the north to the industrial south.

"We are sending an international signal to show we are achieving the switch to renewables in a highly industrialised country," Social Democrat (SPD) Economy Minister Sigmar Gabriel said to Reuters.

Related content