H1 18 saw several developments in the European power sector that will impact on both the future of coal-fired power and how European utilities respond to the Best Available Techniques Reference (BREF) document, which is part of supporting legislation for the EU’s Industrial Emissions Directive (IED). BREF was revised in Q2 17 and, since then, most market focus has been on the downward revision in NOx emissions limits to 175 mg/nm3 (see Europe Insight: Fresh BREF – pushing limits?, June 1, 2017), with which almost no operating coal plants can currently comply.
In Spain, the combination of BREF limits and the ending of domestic coal subsidies has brought forward, to 2020, the closure of up to 5.2 GW of coal plant, around half the country’s installed coal capacity. Some 0.9 GW is already set to be closed by the start of Q4 18 and there appears to be little appetite to keep the rest open given current regulations in Spain. Of the 5.4 GW that is currently set to stay open, around 4 GW is receiving investments to make them BREF compliant, with uncertainty over the status of the remaining 1.4 GW plants.
In Germany, little investment has thus far been made to its power plants to make them BREF compliant, with utilities taking a wait-and-see approach. For instance, RWE argues that the EU has given member states some flexibility around BREF to set their own thresholds, and the company hopes German policymakers will set new limits that reflect the capabilities of current plants. The company has said that it will only estimate the consequences for its plants once the domestic rules have been amended. RWE’s approach is common across German plant owners.
In Poland, there is a need to modernise the existing power plant fleet and investment is being influenced by BREF considerations. Compliance strategies include: replacing existing coal-fired units with brand new, highly efficient coal-fired units (5.3 GW); replacing existing coal-fired units with brand new gas-fired units (2.0 GW); and undertaking standalone investment in flue gas desulphurisation and denoxification plant (around 1 GW). With Poland having some 30 GW of coal-fired generation capacity, there is still significant uncertainty over most of its plants.
In France, a question continues to hang over the future of nuclear power and how much capacity will be closed in the coming decade. While existing legislation suggests a 17-20 GW drop in nuclear capacity, the Macron government signalled last year that it would soften that target. Since then, it has undertaken a consultation that has increasingly focused on two scenarios that suggest the likely range of the reduction in nuclear capacity in France by 2025 will be 2-6 GW.
Across the EU, gas-fired power generation will benefit from the coal and nuclear closures, though there remains a lot of political uncertainty over how big that impact will be in the coming years.