Republished with full copyright permissions from The San Francisco Press.

The European Commission has recently approved a €2.6 billion German support measure in favor of RWE Power AG (‘RWE’), with the aim of compensating RWE for the early phase-out of its lignite-fired power plants in the Rhenish mining area. This measure is aligned with the German coal phase-out law, which mandates the cessation of coal usage for electricity production by 2038.

Germany’s strategic decision to engage in agreements with key producers of lignite-fired electricity, namely RWE and Lausitz Energie Kraftwerke AG (‘LEAG’), underscores its commitment to fostering the early closure of lignite-fired power plants. Notably, Germany had notified the Commission of its plan to provide compensation amounting to €4.35 billion, of which €2.6 billion was allocated for the RWE lignite installations in the Rheinland.

Following an in-depth investigation, the Commission has concluded that the measure in favor of RWE constitutes State aid, as it confers an advantage to the power plant operator. However, it also determined that the aid is necessary, appropriate, and proportionate, taking into account the broader contribution to EU environmental and climate goals. This approval of the German measure under EU state aid rules reflects the Commission’s commitment to advancing the objectives of the European Green Deal.

Executive Vice President Margrethe Vestager, responsible for competition policy, expressed confidence in the Commission’s decision, stating, “Our in-depth investigation has confirmed that this €2.6 billion compensation to RWE is in line with our EU state aid rules. The measure will support the phase-out of lignite-fired power plants, thereby contributing to the decarbonization of the economy in line with the European Green Deal objectives.”