The mining curse haunts lignite towns

On this site we have often explored what comes after coal. Here, Jeffrey Michel offers a look at the German mining communities being hard hit by the financial and environmental consequences. In particular, towns in Lusatia are suffering.

Lignite can no longer ensure regional prosperity – which is bad news for eastern Germany (Photo via Wikipedia Commons, edited, CC BY-SA 3.0)


Lignite mining output in Germany has declined since 1990 by almost two-thirds. However, most remaining generation plants will still be needed until 13.1% nuclear power has been finally phased out in 2022. Renewable technologies are dedicated to filling this supply gap. For the time being, therefore, lignite will continue to provide nearly one-quarter of grid electricity.

Once nuclear generation has been fully superseded, however, lignite power stations can be successively retired to meet greenhouse gas reduction goals. That should not be difficult, because many plants are already unprofitable.

Germany’s largest lignite producer, RWE AG in the Rhine Valley, has fired 10,000 employees (14% of total staffing) over the last three years in order to reduce costs. Regular dividends have been fully eliminated to local cities and banks that own nearly one-fourth of corporate stock. RWE’s municipal shareholders are legally required to write down losses below the original purchase price. For this reason, the city of Essen lost €680 million of stock valuation in 2013 alone. Bochum recently divested its 6.6 million RWE shares at a unit price below €15, compared with €100 a decade ago. Most recently, RWE posted a loss of €5.7 billion for the year 2016.

Lignite mines and power plants therefore no longer insure regional prosperity. The situation in eastern Germany is particularly dramatic.

The town of Neukieritzsch with less than 7,000 residents formerly benefited from the highest corporate tax proceeds in western Saxony. When Vattenfall put its 934 MW Lippendorf power plant up for sale in 2015, however, it simultaneously reclaimed trade taxes paid as early as 2006. Revenues of over €1,600 per inhabitant have since been returned by Neukieritzsch to the Swedish corporation.

Vattenfall sold three additional power stations and four mines in Lusatia in 2016, where widespread communal insolvency was already emerging. Boxberg, once Saxony’s most prosperous town in relation to 4,675 residents, has been obliged to refund millions of euros previously received for its 2,575 MW power station.

State and local taxes of €40 million also been defaulted in Brandenburg for the 2 x 800 MW Schwarze Pumpe CHP plant along with the local Welzow South surface mine. At the 3,000 MW Jänschwalde power station near the Polish border, trade taxes totaling more than €29 million have been refunded by the communities of Teichland, Peitz, and the corporate headquarter city of Cottbus.

In 2013, Vattenfall affirmed that its profits were sufficient to avoid selling its lignite assets. By the time the new successor corporation LEAG had been announced in 2016, however, many communities had already been issued revised tax notifications with increased refund obligations. While government secrecy regulations preclude public information on the actual figures, retroactive payments of well over €100 million have been reported by local newspapers. The total trade taxes returned to Vattenfall are likely much greater.

With intransparent taxation practices and the uncertain profitability of individual lignite operations, cities and towns continue to provide potential opportunities for energy corporations to multiply their capital assets. The state interest rate of 6% applies to all tax debt repayments, amounting to high-yield lignite industry loans financed at public expense.

The communities are simultaneously confronted with environmentally detrimental mining legacies. Reclaimed land is agriculturally less productive than native soil. Buildings cannot be erected before the ground has firmly settled. Subsurface water rising in former mining sites can contaminate local rivers and endanger drinking water supplies.

In overcoming these obstacles, the lignite regions have begun developing their own post-carbon strategies. A great number of renewable power installations have already been located on the same plots formerly used by the lignite industry.

Jeffrey Michel (jeffrey.michel@gmx.net) is an independent energy expert based in Hamburg. See his author’s archive on Energy Post.

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8 Comments

  1. S. Herb says

    I don’t understand the reason for the refund of the trade taxes. Please explain!

    • Vattenfall recalculated its overall corporate balances back to 2002 and applied for refunds of proportionately overpaid taxes at presumably all mining and power plant sites in Germany. The quoted figures have been quoted in statements made by particular communal representatives in the lignite regions on incurred payment obligations. The information has not been published officially. Affected municipalities in western Germany have not made any comparable disclosures in adherence to confidentiality provisions of the tax law.

  2. heinbloed says

    There are a few misconceptions within the assumptions the author makes.

    ” However, most remaining generation plants will still be needed until 13.1% nuclear power has been finally phased out in 2022. ”

    One does not have to replace power demand of the power plants going to be retired.
    Only the grid-fed power needs to replaced – if at all.

    Fraunhofer ISE points that out ( https://www.energy-charts.de/explanation.htm )

    ” Uranium

    ….. In 2013 the gross production was 5.6% higher than the net production. The self consumption of the power stations counted 5.3% of the gross production.”

    This replacement isn’t to be done with the self-consumed power by lignite plants, as Fraunhofer poitns out they fare even worse, see again Fraunhofer ISE:

    ” Brown coal

    …..In 2014 the gross production was 7.7% higher than the net production. The self consumption of the power stations counted 7.1% of the gross production.”

    The power demand of the lignite mining activities incl. transport is enormous, it so big the miners aren’t publishing figures being ashamed.
    At least 10% of the lignite dug-up is consumed for electricity driving trains, elevators, screening and crushing,drying, pumping water, for the gigantic diggers …. and last not but least for re-cultivation.

    Germany exports about 9% of the net-generated power, see again Fraunhofer.
    That is the entire grid-fed atom power being exported.
    One does not has to replace something that is surplus already.

    Both, atom power and lignite mining, are therefore completely useless for the national economy, they are both a burden for the local and global society.

    • The MIBRAG mining corporation has realized annual profits of up to 19% despite the factors you name. If the lignite industry consistently exhibited a lower market efficiency compared with renewable energies, RWE would presumably have already lost many of the 600 customers it presently serves throughout Europe with a variety of lignite products. That includes the crude lignite shipped to MIBRAG that is pressed into briquettes at Deuben and delivered to the Czech Republic for the domestic heating market. Lignite is the main source of thermal energy at many cement plants and sugar refineries. It is even used to manufacture bioethanol. Note that all of Germany’s lignite mines were opened before the advent of the Energiewende, and that termination of their operation leaves behind enduring landscaping and hydrological obligations. Turning off a power plant does not create an equal number of subsequent employment opportunities in local communities. Rather than penetrating into these issues any further, perhaps someone would care to analyze the grounds for heating Czech living rooms with Rhineland lignite within sight of North Bohemian surface mines.

  3. In addition to heinbloed’s points, there is no logical reason to delay the phaseout of lignite till after the closure of the last nuclear plants. I do get the point (which Craig has to explain time after time to American Besserwissers) the for historical reasons the nuclear phaseout had to start first, and was the political springboard for the whole Energiewende, but there is now much wider awareness of just how bad coal and lignite really are.

    Any data on local and regional air pollution?

    • Are you aware of any compendium listing American Besserwissers? Perhaps they would be interested in reading the article I wrote in 1990 on the environmental detriments of lignite usage in East Germany. http://www.volksmeter.de/Abhandlungen/Michel-DeutschlandArchiv-41990.pdf

      Regarding current local and regional air pollution data, two methods may be employed. The one requiring the least effort requires only sitting at a computer in some distant city to evaluate all of the pertinent information available on the Internet, supplemented by additional insights from phone calls and emails with various government agencies.

      The more intricate method entails living within sight of a lignite power station as I did for two decades, watching the smokestacks and cooling towers for signs of abnormal operation, measuring local air quality, having lignite samples from the local mine analyzed by private laboratories, and chatting with employees and their relatives on various operational procedures. Adding such evaluations to the official assessments indicated above will enable you to judge their dependability.

  4. heinbloed says

    Historical April 2017

    REs have overtaken coal in Germany by large, for April RE produced 42.7% of the German net-demand versus 40.2 % coal power:

    https://www.energy-charts.de/energy_pie.htm

    Young May looks even better, REs stand at 46.6% versus coal with 35.9% (lignite and hard coal combined) 🙂

    Atom power stands in May so far at 11.9%, that means RE are only sharply behind atom and coal combined

  5. heinbloed says

    ” RWE coal business collapsing, eco-daughter Innogy helping out ”

    (in German)
    http://www.manager-magazin.de/finanzen/artikel/rwe-kohle-geschaeft-im-ersten-quartal-q1-halbiert-tochter-innogy-hilft-a-1147708.html

    The hedging prices are collapsing:

    http://www.dailymail.co.uk/wires/reuters/article-4506372/RWE-details-forward-power-hedges-German-plants.html

    Imagine a bright government who sends the profitable gamer Innogy home and keeps the cripple in the ring, nailed down, immobile …:

    http://dailytimes.com.pk/business/16-May-17/uk-energy-price-cap-could-mean-job-cuts-deutsche-bank

    Fearing for Western-German power prices they introduce Eastern-German ‘uniform people prices’.
    Ah well, the Tories making bucks with foot-shot …..;)

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