Funding for CHP in Germany’s Coal Phase-out Law

The document critiques the Coal Replacement Bonus and the South Bonus introduced in Germany's Coal Phase-out Law, arguing that they overcompensate gas-based CHP plants, risk creating a carbon lock-in effect, and may delay the phase-out of hard coal by offering more attractive financial incentives than closure auctions.

• The Coal Phase-out Law introduces two primary financial incentives for CHP plants: the Coal Replacement Bonus, which provides a one-time payment to operators switching coal plants to other energy sources, and the South Bonus, a one-time payment of EUR 60 per kilowatt for plants in southern Germany built between 31 December 2019 and 31 December 2026.
• The Coal Replacement Bonus is calculated based on plant capacity and age rather than energy output, with payments ranging from EUR 5 to EUR 390 per kilowatt depending on the operation dates of the old and new plants.
• There is a risk of overcompensation for gas plants because the funding does not account for actual costs and may exceed the 100% maximum aid intensity threshold set by EU guidelines. Total subsidies, including premiums and BEHG regulations, are estimated between EUR 1,235 and 1,880 per kilowatt, while conversion costs are approximately EUR 1,000-1,500 per kilowatt.
• The funding mechanisms may lead to a 'lock-in effect' by incentivizing the expansion of fossil gas infrastructure, which the document notes is the second most important primary source in Germany's energy mix and relies on 92% imports.
• The CHP bonuses may delay the hard coal phase-out because they are more financially attractive than the closure compensation auctions, which are capped at EUR 165 per MW.
• The document argues that the law fails to prioritize renewable heating, noting that the target to increase the share of renewable heat to 30% by 2030 was omitted despite recommendations from the CHP evaluation report.

APA

Klein, F. M. (2020). Funding for CHP in Germany’s Coal Phase-out Law. ClientEarth. https://www.clientearth.org/media/mn2p4was/2020-10-01-funding-for-chp-in-germany-s-coal-phase-out-law-ce-en.pdf

Chicago

Klein, Francesca Mascha. Funding for CHP in Germany’s Coal Phase-out Law. ClientEarth, 2020. https://www.clientearth.org/media/mn2p4was/2020-10-01-funding-for-chp-in-germany-s-coal-phase-out-law-ce-en.pdf.

Wikipedia

{{cite report |last1=Klein |first1=Francesca Mascha |title=Funding for CHP in Germany’s Coal Phase-out Law |publisher=ClientEarth |date=October 2020 |url=https://www.clientearth.org/media/mn2p4was/2020-10-01-funding-for-chp-in-germany-s-coal-phase-out-law-ce-en.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{klein2020funding, author = {Klein, Francesca Mascha}, title = {{Funding for CHP in Germany’s Coal Phase-out Law}}, institution = {ClientEarth}, year = {2020}, month = oct, url = {https://www.clientearth.org/media/mn2p4was/2020-10-01-funding-for-chp-in-germany-s-coal-phase-out-law-ce-en.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }