German ministry considers change to climate levy plan

Source: Heren

2015/04/30

The German ministry of economics is now minded to place a levy on inefficient coal-fired power plants from 2017 based on wholesale power prices, rather than the initially proposed fixed rate, a spokeswoman said on Wednesday.

According to the original proposal the ministry published in March, fossil fuel-fired power plants more than 20 years of age would have to buy additional carbon certificates on top of EU compliance needs above a certain threshold of emitted CO2 per gigawatt of produced electricity.

The proposal was to help Germany reach 2020 climate targets.

The amount of carbon credits a firm would have to buy would grow until the plant reached 41 years of age. At the end of the 2017-2020 phase-in period, the amount of additional certificates required would correspond to a cost of €18-20 per tonne of CO2 equivalent (tCO2e), the ministry proposed.

“It would be too big a cost [for fossil fuel power plant owners],” said a spokeswoman for the ministry of economics on Wednesday about the fixed levy proposed.

Weak prices

She said the proposal was based on a forecast of German wholesale power prices reaching €42.00/MWh by 2020. However, the power price outlook has become more bearish in recent months. According to ICIS data, Calendar Year Baseload 2020 has traded below €33.00/MWh this year.

The ministry is now considering a levy that is dependent on wholesale power prices rather than being fixed at €18-20.00/tCO2e. The levy would be lower in case of lower power prices and higher in case of higher power prices, the spokeswoman said. The ministry has not yet decided what levy levels would correspond to different power prices, she added.

Reaction

Some have said that the ministry’s expectations about the impact the levy would have on power prices were unrealistic. Based on modelling analysis by consultancies Prognos and Oeko-Institut, the ministry said in its original proposal that the levy would increase 2020 power prices by about €2/MWh.

Oliver Schuh, director in the energy, utilities and regulation team at the rating agency FitchRatings said “the increase [in power prices] would clearly be higher” given the proposed levy.

The utility RWE has said that wholesale power prices would increase at least €5.00/MWh in case the original proposal would be implemented.

The economics ministry expects the government to approve the revised climate levy proposal in the beginning of June. laura.raus@icis.com