EU probes compensation for early closure of lignite-fired energy crops in Germany

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The European Commission has opened an in-depth investigation to evaluate whether or not German plans to compensate lignite-fired energy crops for phasing out sooner than foreseen are consistent with EU State assist rules, the EU’s antitrust chief stated on March 2.

“The phase-out of lignite-fired power plants contributes to the transition to a climate-neutral economy, in line with the European Green Deal objectives, said Commission Executive Vice-President Margrethe Vestager, in charge of competition policy. “In this respect, our role is to safeguard competition by making sure that the compensation granted to the operators of the plants for phasing out earlier than foreseen is kept to the minimum necessary. The information currently at our disposal does not allow us to confirm this with certainty, and we will now investigate this further,” she added.

According to the German coal section out legislation, using coal for the manufacturing of electrical energy should phase-out by 2038, the Commission stated in a press launch.

Germany has determined to enter into agreements with the primary producers of lignite-fired electrical energy, RWE and LEAG, to encourage the early closure of lignite-fired energy crops.

Germany notified the Commission of its plan to compensate these operators with €4.35 billion for foregone earnings, as they can not proceed to promote electrical energy in the marketplace, and extra mine rehabilitation prices ensuing from the anticipated closure, the Commission stated, noting that of the whole €4.35 billion, €2.6 billion are earmarked for the RWE lignite installations positioned within the Rheinland and €1.75 billion for the LEAG installations within the Lausitz.

At this stage, the Commission’s preliminary view is that the German measure in favor of the lignite operators talked about above is prone to represent State assist. Furthermore, the Commission has doubts that the measure is consistent with EU State assist rules the press launch learn.

The Commission’s doubts concern the proportionality of the compensation funds, specifically with regard to compensation for forgone earnings, the press launch learn. Lignite operators are compensated for earnings they will not make because of their early closure. The Commission stated it doubts that compensating operators for foregone earnings reaching very far into the longer term corresponds to the minimal required.

The Commission additionally expressed doubts relating to sure enter parameters of the mannequin utilized by Germany to calculate the foregone earnings, together with gas and CO2. Moreover, the Commission stated it didn’t obtain data at plant stage, the press launch learn.

The Commission’s doubts additionally concern the proportionality of the compensation funds with regard to compensation for extra mine rehabilitation prices. Whilst the Commission acknowledged that extra mine rehabilitation prices that outcome from the early closure of the lignite crops may additionally justify a compensation for RWE and LEAG, it expressed doubts with regard to the knowledge acquired, specifically on the counterfactual situation used within the case of LEAG.