On Wednesday 25 November, the European Commission validated a competitive tendering mechanism introduced by Germany to compensate coal-fired power stations that close down faster than planned. This support supports the EU’s climate objectives and is in line with State Aid rules.
Margrethe Vestager, Executive Vice-President of the Commission responsible for Competition Policy, stressed that the phasing out of 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 plan “is to provide incentives for the early closure of such plants and to compensate the businesses that leave the market early via competitive tenders”, Ms Vestager said.
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. (Original version in French by Lionel Changeur)