By Andreas Franke

July 3, 2019 - EnBW's 900-MW lignite-fired Lippendorf S power plant may remain in standby mode for "a longer time" after economic pressure prompted the operator to halt the unit June 15, a spokesman for the German utility told S&P Global Platts Tuesday.

"The current standstill of unit S at the Lippendorf power plant is exclusively market-driven. Current framework conditions do not permit economic operation," EnBW said.

"The relevant framework conditions will probably last longer," the spokesman said in an email adding that this relates market prices for power and EUA carbon allowances as well as demand, operating and fuel supply costs.

"At the present time, this evaluation leads us to the business decision not to operate the block in Lippendorf on the market. If conditions change, operations can be resumed at short notice," the spokesman said.

Neither EnBW nor plant operator LEAG were able to comment on the specific timeframe of the current halt.

"Evaluations can differ from operator to operator," he added.

EnBW jointly owns the 1.8-GW Lippendorf power plant near Leipzig in eastern Germany with lignite-miner and operator LEAG.

EPH-owned LEAG operates both units, while lignite coal is supplied by EPH-owned Mibrag, the operator of Germany's smallest lignite mining area, Mitteldeutsches Revier.

"Block R at Lippendorf is fully available to the market and can be operated economically under current framework conditions," a spokesman for LEAG told Platts.

The two-unit plant, which generated 12 TWh in 2018, has an efficiency of 42% and was commissioned in 1990 and 2000 respectively, it said. It also supplies up to 80% of district heating to the nearby city of Leipzig.

Lignite coal, which has been Germany's single biggest source of electricity in 2018 with a 22% share of the power mix, has seen an erosion of its market share in the first half of 2019 with wind now the biggest single source of power.

Lignite-fired generation in H1 at 53 TWh was over 13 TWh lower on the year, with the hourly average of 12.3 GW down 3 GW.

This reflects 1 GW of plant closures in October 2018 as well as mining restrictions at RWE's Hambach mine translating into a linear average reduction of 1.5 GW.

For the remainder, Platts Analytics sees first indications of market-driven lignite-to-gas-switching with "lignite output particularly sensitive to power prices with sharp downturn from Eur35/MWh this year," it said in its European Electricity Monthly Outlook for July.

Germany plans to phase-out lignite coal by 2038 the latest with a government-appointed commission recommending to cap lignite capacity at 15 GW by 2022.

This would require 3 GW of additional closures. The commission's report in January did not specify any plants for closure, but favored voluntary arrangements with plant operators for compensation with a first wave of lignite closures expected to focus on RWE's mining area in western Germany.

Talks between the government and operators are progressing slowly, with energy minister Peter Altmaier expecting a first draft of the coal closure law this autumn.

The government already approved a Eur40-billion support package for the next two decades for the mining regions affected.

Carbon prices are one of the biggest cost factors for lignite operators with EUA carbon allowance prices more than doubling since last summer, currently trading above Eur27/mt.

Rising carbon prices have already meant hard-coal units falling behind most gas units in the merit order as gas prices this summer fell faster than coal.

Lignite mining operating costs are another big factor with EnBW's Lippendorf S the only major unit supplied by an external mining company.

Germany's two biggest lignite miners (RWE and LEAG) operate the near-by power plants with over 15 GW of combined capacity.