Billion-euro payment for RWE coal phase-out permitted

The German government may compensate the energy company RWE for its coal phase-out with several billion euros. The EU Commission published a decision to this effect on Monday, stating that the 2.6 billion euro subsidy does not violate EU state aid rules. It remains to be seen whether the energy company Leag in the eastern German coal-mining region will also be allowed to receive its billion-euro payment.

"The aid will compensate RWE for the premature closure of its lignite-fired power plants in the Rhenish coal-mining region," the EU Commission announced in Brussels. Although the compensation payment constitutes state aid, it is necessary for RWE to be able to phase out its lignite-fired power plants. The current net value of the lost profits is higher than the value of the compensation.

Opencast mining and power plant units shut down

RWE welcomed the decision - and pointed to the costs of the earlier phase-out. Among other things, the Group has shut down five lignite-fired power plant units since 2020, it said in a statement. In addition, the Hambach open-cast mine was shut down, along with the preservation of the Hambach Forest. Following the commission's decision, the way is now clear for the compensation to be paid out in stages until 2030 as planned.

According to the German Coal Phase-out Act, no more coal will be used to generate electricity from 2038 onwards in order to protect the climate. However, the government partners SPD, Greens and FDP had agreed in their coalition agreement to "ideally" bring forward the coal phase-out from 2038 to 2030. According to the Federal Ministry of Economics, the compensation amount for RWE was negotiated for a phase-out in 2038. Last year, the end of lignite mining in the Rhenish mining area was brought forward to 2030 by law without increasing the amount of compensation for RWE.

RWE wants to build hydrogen-capable gas-fired power plants with a capacity of at least three gigawatts in Germany by the end of 2030. According to earlier statements, the plants are to be built primarily at existing coal-fired power plant sites. They will supply electricity when wind and solar power generation is insufficient. The company has not ruled out operating the coal-fired power plants in reserve on behalf of the federal government after 2030.

Decision for eastern Germany still open

Germany had already notified the planned compensation to the Commission in 2021, with a total of 4.35 billion euros at stake for two operators. 2.6 billion euros were earmarked for the RWE lignite plants in the Rhineland and 1.75 billion euros for the Leag plants in Lusatia. The EU has yet to vote on the latter.

On Monday, Leag CEO Thorsten Kramer emphasized the need for planning security for the restructuring of his company. "The prompt and positive decision in the state aid proceedings is therefore of the utmost importance for LEAG." His company is an important employer in Lusatia and is working on structural change.

Saxony's Minister President Michael Kretschmer Kretschmer (CDU) reacted with disappointment to the decision on the western German coalfield only. "One gets the impression that the federal government is not doing enough for the lignite companies in eastern Germany, Leag and Mibrag." He now expects a quick solution for the 1.75 billion euros that the federal government has promised.