How (not) to auction the phase-out of coal

COM HOW (NOT) TO AUCTION THE PHASE-OUT OF COAL New insights on the results of the German coal phase-out auctions 30 JANUARY 2023 CONTENTS The results of the first six rounds are in 4 Does the German auction design really deliver against its objectives? 6 A more flexible auction design 8 HOW (NOT) TO AUCTION THE PHASE-OUT OF COAL Germany is gradually phasing out coal-fired electricity generation. [...] frontier economics | Confidential 3 HOW (NOT) TO AUCTION THE PHASE-OUT OF COAL The results of the first six rounds are in The German Coal Phase-out Act adopted on 3rd July 2020 provides for the gradual phase-out of coal-fired electricity generation in Germany by 2038 at the latest. [...] Results of the first six auction rounds are in – three out of the four last auctions were undersubscribed and several plants had to return to the market to secure supply: ■ Since 2020, the German regulator BNetzA has tendered a total of 10,454 megawatt (MW) of hard coal-fired capacity in six auction rounds – the awarded plants have been either decommissioned already or must be taken off the grid w. [...] The German government annually determines CO2 emissions avoided by coal closures for the previous year and reduces the auction volumes of ETS by the amount of surplus certificates that have not been taken out of the market by the Market Stability Reserve.6 However, the re-entering of several plants into the market which were supposed to be decommissioned has at least increased CO2 emissions tempor. [...] frontier economics | Confidential 8 HOW (NOT) TO AUCTION THE PHASE-OUT OF COAL balance.8 In the light of the issues we have raised regarding the design of the auctions, the German phase-out auctions certainly provide an interesting experiment for other countries that plan to phase-out fossil fuels and we will continue to monitor how this takes shape across Europe.