State aid: the Commission approves tender mechanism to compensate for the early closure of hard coal fired generation in Germany
Daily News 26 / 11 / 2020
Source: European Commission Spokesperson's Service
The European Commission found that a competitive tender mechanism introduced by Germany to compensate hard coal-fired power plants for phasing out earlier than foreseen promotes European Union climate objectives and is in line with 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 has decided to encourage the early closure of hard coal-fired power plants via a shutdown premium awarded through a competitive tender mechanism. This mechanism will also ensure an orderly closure of coal fired-plants, in order to guarantee the energy security of supply in Germany. The German energy regulator will publish seven tenders between 2020 and 2023, for closures of hard coal-fired and small lignite-fired (below 150 MW) power plants that will take place annually until 2026. The winners of the tenders will be determined by the energy regulator on the basis of transparent selection criteria. The design of the tender mechanism should allow Germany to eliminate the highest amount of CO2 emissions from the market at the lowest cost, whilst avoiding the closure of those power plants that are essential for network stability. In its decision, the Commission does not take a final position on whether the measure provides the operator with an advantage over its competitors, and whether it thus constitutes State aid. At the same time, the Commission assessed the compatibility of the measure under Article 107(3)(c) TFEU and concluded that the measure would in any event be compatible with the EU's Single Market. The Commission concluded that the contribution to EU environmental and climate goals of the measure outweighs any potential distortion of competition and trade brought about by the support. On this basis, the Commission approved the measure under EU State aid rules. Executive Vice-President Margrethe Vestager, in charge of competition policy, said: “Phasing out hard coal-fired power plants contributes in a crucial way to the transformation to a climate-neutral economy, in line with the European Green Deal objectives. Germany's plans to provide incentives for the early closure of such plants and to compensate the businesses that leave the market early via competitive tenders are in line with EU State aid rules. That's because competitive tenders are an effective tool to ensure that the compensation is kept to the minimum needed and ultimately to avoid an undue distortion of competition in the EU's Single Market”. The full press release is available online.