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Commission approves €2.6 billion state aid to RWE for early closure of lignite-fired power plants in Germany

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The European Commission has found a €2.6 billion German support measure in favour of RWE Power AG (‘RWE') to be in line with EU state aid rules. The aid will compensate RWE for the early phase-out of its lignite-fired power plants in the Rhenish mining area.

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 decided to enter into agreements with the main producers of lignite-fired electricity, RWE and Lausitz Energie Kraftwerke AG (‘LEAG'), to encourage the early closure of lignite-fired power plants. In 2021, it notified the Commission of its plan to compensate these operators with €4.35bn: €2.6bn was earmarked for the RWE lignite installations located in the Rheinland and €1.75bn for the LEAG installations in the Lausitz. In March 2021, the Commission opened an in-depth investigation to assess whether Germany's plans amounted to state aid. In December 2022, Germany notified to the Commission an amendment to its agreement with RWE, including a revised method of calculation of RWE's forgone profits to demonstrate that the €2.6bn compensation was justified and proportionate. In March 2023, the Commission extended the scope of its ongoing in-depth inquiry to cover the new elements notified by Germany.

Based on its in-depth assessment, the Commission has concluded that the measure in favour of RWE constitutes State aid, as it grants an advantage to the power plant operator. However, the Commission found that the aid is necessary, appropriate and proportionate.  The Commission concluded that the contribution to EU environmental and climate goals of the measure outweighs any potential distortion of competition brought about by the support. On this basis, the Commission approved the German measure under EU state aid rules.

Executive Vice President Margrethe Vestager, in charge of competition policy, said: “Our in-depth investigation has confirmed that this €2.6bn 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 decarbonisation of the economy in line with the European Green Deal objectives.”

A press release is available online.

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