German Renewables, Capacity Markets May Burden Coal

Germany’s renewables and hydrogen targets as well as the implementation of a capacity market by 2028 are likely to disadvantage coal, specialists say, cited by Montel.

• There is concern that introducing a capacity mechanism might lead to continued financing of coal-powered plants, according to Thema Consulting Group.
  
• Negative dark spreads are likely to be ensured as “We are expecting EUAs to take a pretty strong upward trajectory,” analyst at Icis Ellie Chambers said.
• Despite this, nothing will stop coal from continuing to operate in the regular market, regardless of capacity mechanisms or hydrogen power plants, but prices could be influenced by capacity markets amid a change in bidding behaviour, Thema Consulting added.
• Germany’s coal and lignite capacity is at 26.6GW, with hydrogen plants taking at least 4-6 years to be operational.
• The government plans to finalise key aspects of the capacity mechanism by October and submit the plan to the European Commission in 1H25.