Auctions in German Coal Exit Law

The German cabinet approved the draft law for the coal exit yesterday.

That law wants to use an auction model for deciding which coal plants are switched off at what time.

The shift to an auction model in German renewable policy over the last couple of years was one of the main reasons for development going down, for on-shore wind by 80 percent compared to 2017 in 2019. So I think that change needs to be undone.

On the other hand, I have no idea if auctions may work the way this law intends them to work. We will have to wait and see.

But I do have two comments.

While it is necessary to phase out coal and lignite power plants to achieve Germany’s climate goal, it may not be necessary to actually tear them down. There is nothing wrong with a coal power plant if it uses synthetic fuel made with present day CO2, as opposed to coal that time shifts CO2 stored millions of year before to now.

And actually this may be a chance to enact a feed-in tariff for electricity from former coal power plants running on synthetic fuel.

The first feed-in tariff for solar power was around 50 cents a kWh. That did not matter much to the big picture as long as the share of solar power was low. Exactly in the same way, one could start paying whatever it takes to make a profit for synthetic fuel powered electricity generated in former coal plants. And just like in the case of solar and wind, that may help to bring the whole thing to scale and boot-strap a faster transition.

And it would be a good alternative to just tearing down perfectly well working power plants. If you already have the power plant and need only to make the synfuel, costs per kWh obviously will be lower than if you need to factor in both sides.

Published by kflenz

Professor at Aoyama Gakuin University, Tokyo. Author of Lenz Blog (since 2003, lenzblog.com).

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