This year, Germany’s energy regulator Bundesnetzagentur did not issue any prohibitions on the operation of coal-fired power plants under the Coal Phase-Out Act (KVBG). The reason is that many coal plants have already exited the market, leaving the remaining capacity below the legally defined target level for 2028.
The target level represents the net nominal capacity of hard coal plants and small lignite-fired plants that are permitted by law to remain in the market for a given milestone year. For the second time since the coal phase-out process began under KVBG, no shutdown orders are issued to ensure compliance with the statutory targets.
Security of Supply Remains Safeguarded
Transmission system operators assess the closure of each power plant to determine whether it is essential for the system and under which circumstances it may be added to the grid reserve. Plants included in the grid reserve must remain available to safeguard the system in crisis situations. In practice, this ensures that security of supply is maintained at all times.
More details about the process of reduction coal plants is available here.
Background
Since 2024, Bundesnetzagentur has been authorized to issue mandatory shutdown orders for coal-fired power plants without auctions and without compensation. These shutdown orders take effect 30 months after issuance (in September each year). The objective is to reduce and ultimately end coal-based electricity generation after 2027. Orders are issued based on plant age, starting with older units, until the annual emission reduction targets are met. Operators of hard coal and small lignite-fired plants will no longer receive financial compensation for ceasing coal use.
German legislation provides two mechanisms to phase out hard coal power plants:
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Voluntary shutdowns through auctions, which were held in seven bidding rounds until 2023.
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Regulatory shutdown orders (“statutory reduction”) for meeting the targets for the period 2027 and 2038
For auctions signed with a target date of 2024, the statutory reduction has already been applied to the missing volumes.
Electricity generation from lignite typically takes place in large power plants located close to open-pit mines. In Germany, there are three lignite mining regions: Rhineland, Lusatia, and Central Germany. The large plants in these areas are to be phased out step by step. In some cases, plants must be taken offline temporarily before being permanently decommissioned. KVBG specifies each lignite plant and its final closure date, with details set out in public law contracts. Further information on the gradual phase-out of lignite power generation is available on the BMWK website.
Small lignite plants with a net nominal capacity of up to 150 MW are excluded from this system. They are largely treated in the same way as hard coal plants—eligible to participate in auctions run by the Federal Network Agency and subject to statutory reductions (Section 43 of KVBG).
