Cabinet boosts crisis-preparedness for the coming winter: lignite-fired power plants to come back to the market as planned on 1 October 2022 – grid reserve to be extended until 31 March 2024

The federal cabinet has adopted two important ordinances to strengthen the crisis-preparedness for the coming winter.

Firstly, the cabinet adopted the ordinance on the so-called “supply reserve” today. This enables lignite-fired power plants which were previously placed on security standby to return to the market on 1 October 2022 as planned and as envisaged by the Act on the Maintenance of Substitute Power Stations. Also, the cabinet has adapted the Ordinance on the Return of the Power Stations from the Grid Reserve and extended the period in which power stations can be called out of the grid reserve.

If the gas alert level remains in place, or if the emergency level is declared, the power stations in the grid reserve can now remain on the market until 31 March 2024; the grid reserve had previously been due to end on 30 April 2023. The grid reserve mainly consists of hard coal-fired power plants. The aim of the supply reserve and of the grid reserve is to temporarily have more coal-fired power plants generating electricity in order to reduce the generation of electricity from gas and thus to save gas.

Both ordinances are based on authorisations to issue ordinances contained in the Energy Industry Act, and are adopted via the Act on the Maintenance of Substitute Power Stations. They are government ordinances which have to be adopted by the cabinet and which enter into force as soon as they are promulgated in the Federal Gazette.

The supply reserve and the grid reserve are two important mechanisms to bolster supply in the coming winter. The additional deployment of coal in the electricity sector is to cut gas consumption in the sector, and thus save gas. The call on the first reserve, the “grid reserve”, was adopted by the cabinet on 13 July 2022, and entered into force the following day. It chiefly permitted hard coal-fired power stations to return to the market. Since then, the Mehrum (690 MWel) and Heyden 4 (875 MW) power stations have returned to the market. Further power stations are preparing to come back on stream. Some of the installations addressed by the grid reserve are still on the market, and therefore are not registered as returning.

The extension of the duration of the grid reserve until 31 March 2024 is intended to make it easier and thus more attractive for power stations to return to the market. However, the extension depends on the gas alert level or emergency level remaining in place.

A further change to the ordinance increases the level of planning security when it comes to marketing the output on the futures market. Alterations to the ordinance mean that the power stations returning from the grid reserve can now take part in the electricity market until the last day of the quarter following the ending of the gas alert/emergency level, but at most until 31 March 2024. This enables the power stations to plan further ahead and sell their electricity on the futures market.

The amendments to the Grid Reserve Ordinance can be found (in German) here.

The statutory instrument adopted on the lignite supply reserve covers various lignite-fired power plant units which are currently placed on security standby. The Act on the Maintenance of Substitute Power Stations has moved them into a new regime: the supply reserve. This affects LEAG’s power plant units Jänschwalde E & F in the Lausitz District and RWE’s power plant units Niederaußem E & F and Neurath C in the Rhineland District. They are to be able to return to the market, initially until 30 June 2023.
Overall, the ordinance permits 1.9 GW of lignite-fired capacity to come back on stream. The Economic Affairs and Climate Ministry has been engaged in discussions with the operators for several months now so that the necessary preparatory measures can be taken. According to information available to the Economic Affairs and Climate Ministry, the operators are preparing for all the power stations to return to the market – but the decision on the timing of the return is a matter for the power plant operators. The specific timing of the return to the market also depends on when the maintenance work, some of which is still ongoing, can be finalised.

According to section 50d of the Energy Industry Act, the statutory precondition for these lignite-fired power stations to participate on the electricity market is that the alert or emergency level is in force under the Emergency Plan for Gas. The alert level, the second of three possible levels, has been in force since 23 June 2022. Should the alert level be revoked before 30 June 2023, the ordinance provides that the installations can remain on the market until the last day of the quarter following the end of the alert or emergency level, but at most until 30 June 2023. This is to make it possible for electricity to be marketed on the futures market, even though the power plants will only be generating electricity for a limited period.

The ordinance on the supply reserve can be found (in German) here.