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State Aid: European Commission clears Closure of lignite-fired Power Plants in Germany

The European Commission has found German plans to grant €1.6 billion public financing for mothballing and subsequently closing eight lignite-fired power plants to be in line with EU state aid rules.


The Commission concluded that the measure promotes EU environmental objectives, as it helps Germany to achieve its CO2 emission target, without unduly distorting competition in the Single Market. Under the plans notified by Germany in November 2015 eight lignite-fired power plants in Germany would be mothballed and closed, with the first plant scheduled to stop operating in October 2016 and the last in October 2019. The operators of these power plants would be compensated for foregone profits as they cannot continue to sell electricity on the market.

Burning lignite is one of the most polluting and CO2-intensive means of electricity generation. In Germany, where the electricity market is currently characterised by overcapacity, lignite is still the main technology and 24% of the total electricity generated in 2015 was produced from lignite. The eight plants concerned represent 13% of the total capacity of German lignite-fired power plants.

With the mothballing and closure of the eight power plants the German Government aims to reduce CO2-emissions by 11 - 12.5 million tons per year as of the year 2020, when all eight plants will have stopped operating. This constitutes more than half of the additional contribution that the German energy sector still needs to make in order to meet the national emission target for 2020. In December 2014, the German Government had announced that it will reduce Germany's CO2-emissions by 40% by 2020.

Whilst the costs for closing the plants will be borne by the operators themselves, Germany plans to compensate the operators for their foregone profits. The Commission has assessed this support in light of the significant contribution to Germany reaching its emission target. It has also assessed the remuneration paid to the operators concerned to make sure that they receive no undue advantage over their competitors. The Commission found that the remuneration is primarily based on the foregone profits that the operators of the eight plants would have earned, had they continued operating in the electricity market for four more years, which is less than the average expected lifetime of the plants.

On this basis, the Commission concluded that the effects of the measure on the electricity market are expected to be limited and that potential distortions of competition created by the aid are largely offset by the environmental benefits.

Background

The eight lignite-fired power plants concerned are Buschhaus (operated by Mibrag), Frimmersdorf P, Frimmersdorf Q, Niederaußem E, Niederaußem F, Neurath C (all operated by RWE), Jänschwalde F and Jänschwalde E (both operated by Vattenfall).

Source: European Commission

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