The European Commission has launched an in-depth investigation to examine whether German plans to compensate lignite-fired power plants for an earlier phase-out are in line with EU state aid rules, the EU antitrust chief said on March 2.
“The phase-out of lignite-fired power plants contributes to the transition to a climate-neutral economy, in line with the objectives of the European Green Deal,” said the Executive Vice-President of the Commission Margrethe Vestager, responsible for competition policy. “In this regard, our job is to ensure competition by ensuring that compensation to facility operators for an earlier phase-out than intended is kept to a minimum. The information currently available to us does not allow us to confirm this with certainty and we will now investigate further, ”she added.
According to the German coal phase-out law, the use of coal for electricity generation must expire by 2038, the commission said in a press release.
Germany has decided to enter into agreements with the main producers of lignite power, RWE and LEAG, to encourage the early closure of lignite power plants.
Germany informed the Commission of its plan to compensate these operators with EUR 4.35 billion for lost profits because they can no longer sell electricity on the market and additional costs for the rehabilitation of mines resulting from the expected closure EUR 4.35 billion, EUR 2.6 billion are earmarked for the RWE lignite plants in the Rhineland and EUR 1.75 billion for the LEAG plants in Lusatia.
At the moment, the Commission is of the opinion that the German measure in favor of the abovementioned lignite operators is likely to constitute State aid. In addition, the Commission has doubts as to whether the measure is in line with EU state aid rules as read in the press release.
The Commission’s doubts concern the proportionality of the compensation payments, particularly with regard to compensation for lost profits, the press release said. Lignite operators receive compensation for profits that they can no longer make due to their early closure. The Commission doubts that compensation to operators for lost profits that extend very far into the future is the minimum required.
The Commission also expressed doubts about certain input parameters of the model used by Germany to calculate lost profits, including fuel and CO2. In addition, the commission said it had not received any operational-level information, the press release said.
The Commission’s doubts also concern the proportionality of the compensation payments with regard to compensation for additional costs of mine remediation. While the Commission admitted that additional mine remediation costs resulting from the early closure of the lignite power plants could also justify compensation for RWE and LEAG, it expressed doubts about the information received, in particular that in the case of LEAG.
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