Stranded Asset Risk and Political Uncertainty: The Impact of the Coal Phase-Out on the German Coal Industry

We assess the value of stranded coal-fired power plants in Germany in the light of the critical decision to phase them out by 2038. In a Monte Carlo simulation, the scenarios under consideration (slow decommissioning at the end of the technical lifetime in 2061, the highly probable phase-out by 2038, and an accelerated phase-out by 2030) are additionally assigned distributions to display the uncertainty of future developments. The results show an overall stranded asset value of (sic)2.6 billion given the phase-out by 2038 and an additional (sic)11.6 billion if the phase-out is brought forward by 8 years. This study also describes the impacts of carbon pricing and the feed-in from renewable energy sources on the merit order and eventually the deterioration in economic conditions for hard coal and lignite power plants. Lastly, we discuss the immediate concerns for the share prices of the affected companies and help to close the research gap regarding stranded physical and financial assets.

Automated summary

This study assesses the value of stranded coal-fired power plants in Germany and considers the decision to phase them out by 2038. The results show that the stranded asset value would be €2.6 billion if phased out by 2038, and an additional €11.6 billion if brought forward by 8 years. The study also examines the impact of carbon pricing and renewable energy feed-in on the economic conditions of coal-fired power plants, and addresses the research gap regarding stranded physical and financial assets.