Brussels investigates German compensation plan for coal power

The European Commission has said that it has begun an investigation into Germany's plans to pay-off coal power plants for their early closure.

Germany plans to phase out coal from its energy mix by 2038. A part of the plan, it was proposed to offer a total of €4.35 billion to coal plant operators as compensation for loss of earnings as a result of the early closures.

However, Brussels has said that it believes that Berlin's proposed fund may be in violation of EU rules as it technically constitutes state aid.

Read more: German President receives nation's last piece of black coal

"The phase-out of lignite-fired power plants contributes to the transition to a climate-neutral economy, in line with European Green Deal objectives. 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," Competition Commissioner Margrethe Vestager said in a statement.

"This information currently at our disposal does not allow us to confirm this with certainty, and we will now investigate this further, " she added.

The Commission also said that it has uncertainties about whether "compensating operators for foregone profits so far into the future corresponds to the minimum required". Concerns were also raised about how the sum of €4.35 billion was reached.

Environmental NGO Client Earth welcomed the investigation, with the group's lawyer, Juliette Delarue, releasing a statement which said: "We find it hard to see how the German government can justify paying barely believable sums to an industry that has long been able to see its demise on the horizon and should have planned accordingly."

"The timeline for phase-out is far beyond the timeframe that would ensure adequate climate protection across the EU. Market forces also make it clear that many plants will become unprofitable and even loss-making before that date.

"That means that if the EU approves this State aid, billions of taxpayers’ euros risk being used to line the pockets of short-sighted coal executives, rather than building a genuinely clean, future-facing energy system that guarantees German people jobs and power," she added.

Read more: European Commission outlines €1tn Green Deal ambitions

The Commission announced its European Green Deal just over a year ago, and then in September, it was announced that the targets would be higher. Emissions are now to be cut by 55% from 1990 levels by 2030 with an aim to be carbon neutral by 2050. 

At present, around 75% of the bloc's emissions come from energy production and use across economic and industrial sectors.

Last year, just over half of Germany's energy came from renewable sources, according to data from the Fraunhofer Institute for Solar Energy Systems (ISE).

In total, wind accounted for 27% and solar at 10.5%. Lignite, or brown coal, generated 16.8% of German energy, with hard coal totalling 7.3%

The ISE underlined that the high share of renewables last year can be explained by the massive drop in demand due to coronavirus lockdown measures.

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