The European Commission has found a €2.6 billion German support measure in favour of RWE Power AG (‘RWE') to be in line with EU State aid rules.
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The aid will compensate RWE for the early phase out of its lignite fired power plants in the Rhenish mining area.
According to the German coal phase out law, the use of coal for the production of electricity will have to phase out by 2038. Germany decided to enter into agreements with the main producers of lignite fired electricity, RWE and Lausitz Energie Kraftwerke AG (‘LEAG'), to encourage the early closure of lignite fired power plants.
In 2021, it notified the Commission of its plan to compensate these operators with €4.35 billion: €2.6 billion were earmarked for the RWE lignite installations located in the Rheinland and €1.75 billion for the LEAG installations in the Lausitz.
Based on its in depth assessment, the Commission has concluded that the measure in favour of RWE constitutes State aid, as it grants an advantage to the power plant operator.
However, the Commission concluded that the aid is:
necessary for RWE to phase out its lignite fired power plants, which are currently profitable.
The Commission found that RWE needed to be incentivised and compensated to exit the market, in order to achieve Germany's environmental protection objectives and to reduce its greenhouse gas emissions by 2030.
appropriate, as alternative policy measures would not allow for such a well targeted and predictable phase out as well as a consensus between Germany and the power plants operators.
proportionate, as it is limited to the minimum necessary and does not lead to overcompensation, given that the current net value of RWE's forgone profits is measurably higher than the current net value of the compensation.
The Commission concluded that the contribution to EU environmental and climate goals of the measure outweighs any potential distortion of competition brought about by the support. On this basis, the Commission approved the German measure under EU State aid rules.
According to the German coal phase out law, the use of coal for the production of electricity will have to phase out by 2038.
Germany decided to enter into agreements with the main producers of lignite fired electricity, RWE and Lausitz Energie Kraftwerke AG (‘LEAG'), to encourage the early closure of lignite fired power plants.
In 2021, it notified the Commission of its plan to compensate these operators with €4.35 billion: €2.6 billion were earmarked for the RWE lignite installations located in the Rheinland and €1.75 billion for the LEAG installations in the Lausitz. ■