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Money for coal exit? EU is examining Germany's compensation

Money for coal exit EU examines state aid from Germany

In order for the operators of coal-fired power plants to shut down their plants prematurely, Germany, among others, promises high compensation payments. The European Commission has now launched an investigation to see if this is in line with EU state aid rules. The principle of competition is particularly important here.

“The gradual withdrawal from lignite-based power generation is contributing to the transition to a climate-neutral economy, in line with the goals of the European Green Deal. In this context, it is our job to protect competition by ensuring that the compensation granted to plant operators for early exit is kept to the minimum necessary. The information available to us so far does not allow us to confirm this with certainty. We are therefore initiating this review process, ”says the Commission's Executive Vice-President Margrethe Vestager, who is responsible for competition policy.

According to the German Coal Phase-Out Act, the generation of electricity from coal in Germany is to be reduced to zero by the end of 2038. Germany has decided to conclude agreements with the main operators of lignite power plants, RWE and LEAG, to promote the early closure of lignite power plants. So money for the coal exit.

Germany has notified the Commission of plans to allow these operators to launch a Compensation of EUR 4,35 billion is to be granted, firstly for lost profits, since the operators can no longer sell the electricity on the market, and secondly for additional follow-up mining costs that arise from the earlier closure. Of the total of EUR 4,35 billion, EUR 2,6 billion are earmarked for the RWE systems in the Rhineland and EUR 1,75 billion for the LEAG systems in Lusatia.

However, the European Commission has doubts - whether the measure is compatible with EU state aid rules. Two points should be clarified in the EU examination:

  • With regard to compensation for lost profits: Lignite-fired power plant operators receive compensation for profits that they can no longer make due to the premature shutdown of the plants. The Commission has doubts whether compensation to operators for lost profits that extend very far into the future can be considered the minimum necessary. She also expresses concerns about some of the input parameters of the model used by Germany to calculate lost profits, such as the fuel and CO2 prices applied. Furthermore, no information was provided to the Commission at the level of the individual installations.
  • With regard to compensation for additional follow-up mining costs: The Commission admits that additional costs resulting from the premature closure of the lignite plants could also justify compensation for RWE and LEAG, but has doubts about the information provided, and especially that for LEAG based counterfactual scenario.

RWE is suing the Netherlands for billions in compensation

The coal-fired power plant operators are already sharpening their knives - and demanding compensation, most recently RWE in the form of a lawsuit against the Netherlands. Money for coal exit. That becomes a big factor in this Becoming an Energy Charter Treaty (ECT): A new international research by the journalists' network Investigate Europe shows the enormous danger this poses for climate protection and the urgently needed energy transition. In the EU, Great Britain and Switzerland alone, fossil energy companies can sue for a reduction in the profit of their infrastructure worth 344,6 billion euros, according to the research.

Money for coal exit: resistance from NGOs

Civil society organizations have now started a Europe-wide campaign to withdraw from the ECT: "Save the energy transition - stop the energy charter." The undersigned call on the EU Commission, the European Parliament and the EU governments to withdraw from the Energy Charter Treaty and to stop its expansion to other countries. 24 hours after the start, more than 170.000 people have already signed the petition.

Im European Green Deal acknowledged that further decarbonisation of the energy system is crucial to achieve the climate goals in 2030 and 2050. 75 percent of the EU's greenhouse gas emissions result from the generation and consumption of energy in all branches of the economy. Therefore, an energy sector needs to be developed that is largely based on renewable energy sources; this must be complemented by the rapid phase-out of coal and the decarbonization of gas.

Photo / Video: Shutterstock.

Written by Helmut Melzer

As a longtime journalist I have long asked myself the question, which would actually make sense from a journalistic point of view. My answer to that you can see here: Option. To show alternatives in an idealistic way - for positive developments of our society.

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