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

Utrecht School of Economics Working Paper Series nr: 20-02

65 Pages Posted: 10 Jun 2020 Last revised: 15 Jun 2020

See all articles by Miriam Breitenstein

Miriam Breitenstein

Dresden University of Technology - Chair of Finance and Financial Services

Carl-Philipp Anke

Dresden University of Technology - Faculty of Economics and Business Management

Duc Khuong Nguyen

IPAG Business School

Thomas Walther

Utrecht University - School of Economics

Date Written: February 18, 2020

Abstract

We assess the value of stranded coal-fired power plants in Germany due to the critical phase-out by 2038. Within a Monte Carlo simulation, the scenarios under consideration (a 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 €0.4 billion given the phase-out by 2038 and additional €14.3 billion if the phase-out is brought forward by eight years. This study also depicts 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 illustrate immediate concerns for share prices of affected companies and contributes to closing the research gap between stranded physical and financial assets.

Keywords: Coal Phase-out, Energy transition, Germany, Stranded Assets

JEL Classification: C53, L13, L94, Q38

Suggested Citation

Breitenstein, Miriam and Anke, Carl-Philipp and Nguyen, Duc Khuong and Walther, Thomas, Stranded Asset Risk and Political Uncertainty: The Impact of the Coal Phase-out on the German Coal Industry (February 18, 2020). Utrecht School of Economics Working Paper Series nr: 20-02, Available at SSRN: https://ssrn.com/abstract=3604984 or http://dx.doi.org/10.2139/ssrn.3604984

Miriam Breitenstein

Dresden University of Technology - Chair of Finance and Financial Services ( email )

Dresden
Germany

Carl-Philipp Anke

Dresden University of Technology - Faculty of Economics and Business Management ( email )

Mommsenstrasse 13
Dresden, D-01062
Germany

Duc Khuong Nguyen

IPAG Business School ( email )

184 BD Saint Germain
Paris, 75006
France

HOME PAGE: http://www.ipag.fr/en/

Thomas Walther (Contact Author)

Utrecht University - School of Economics ( email )

Kriekenpitplein 21-22
Adam Smith Building
Utrecht, +31 30 253 7373 3584 EC
Netherlands

HOME PAGE: http://www.thomas-walther.info

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
33
Abstract Views
299
PlumX Metrics