To convert coal power plants to biomass power plants, Germany requires contracts for difference (CfDs) to make them profitable under current market conditions.
Fuel costs hinder German power plants from being profitable when switching to biomass based raw material. In order to make the conversion profitable, Germany needs to introduce CfDs, as used in UK. CfDs have the advantage of minimising profitability risks and increasing the probability of investments.
“Enervis estimates electricity production costs at €105-120/MWh for a 10-year funding period if a plant is commissioned in 2026. Annual funding for plant is estimated at €33-46/MWh, depending on several factors, such as the location and capacity of the plant, fixed costs and others. The average annual funding is estimated at €37/MWh.
In addition, the development of wholesale power prices is a factor in determining funding needs. Power prices will depend on the development of CO2 prices. Under this scenario, CO2 prices are estimated at €44/t CO2e in 2030.” Argus Media
Implementing a coal-to-biomass strategy would increase the base load capacities of renewable energy in Germany.
Enervis Study in German.