Power Sources Reimagined: New Developments Shape the Future of Energy - Nr. 1billion in compensation for stopping coal use in the eastern region
The East German mining company Leag will receive a billion-dollar compensation for its planned gradual exit from coal by 2038. The European Union Commission has given a tentative approval of up to 1.75 billion euros.
Economy and Climate Protection Minister Robert Habeck (Greens) referred to this as a significant step, especially for the people in the region. These compensation funds will ensure the employees' social security throughout the transition and cover the closure costs for the mines.
The EU Commission should approve the state funds, and the competition authorities in Brussels must give a green light for the termination of coal-fired power plants to continue. Currently, the EU Commission has confirmed the regulation in a preliminary subsidy evaluation, as per the Economy Ministry.
The funds consist of 1.2 billion euros for fixed costs like reclamation costs and social agreements. This will ensure a socially sensitive reduction in jobs, regardless of when the Leag actually leaves the coal-fired power generation. The remaining 550 million euros are tied to specific conditions.
The potential compensation of up to 550 million euros involves possible lost profits for the Leag due to their exit. This will depend on whether the power plants would have been profitable after 2038. Habeck spoke about top-notch accounting, such as future electricity and CO2 prices.
In 2021, the EU Commission began investigating if the German compensation plan is in line with EU competition rules. This preliminary agreement should provide a sturdy foundation for Germany to clear up the questions prompted by the Commission in 2021, according to the authority. Habeck stated technical implementation will take time.
Leag plans to heavily invest in renewable energies during its exit from coal. They aim to achieve a 7-gigawatt capacity for photovoltaic and wind power plants in the Lausitz region and run power plants with hydrogen. Leag CEO Thorsten Kramer said the compensation is a crucial step for their successful transformation into a "green powerhouse."
Coal exit in the east preliminarily agreed upon until 2038
The Rhineland region has reached a consensus with the energy company RWE for an early coal exit by 2030. An earlier exit in the eastern brown coal regions remains a topic of debate. The federal coalition consisting of SPD, Greens, and FDP had agreed in their coalition deal to expedite their coal phase-out.
Habeck mentioned previously a pre-2030 exit in the east can only be agreed upon by consensus. "This won't be decided by a religious leader, but needs to be a good plan," the minister added.
The Ministry's document specifies that the legally mandated coal exit from coal-fired power generation by 2038 in the eastern German coal mines is not being changed. "The federal government will not initiate any political efforts to alter this legal deadline," Habeck noted.
Kramer, Leag's board chairman, expressed his belief that the set timeline for the Leag would be adhered to. The power plants will shut down if alternative energy sources are adequately available. "We don't have a protective dome," Kramer shared. So, it challenges to control wind turbines and solar power plants like coal-fired power plants.
Habeck believes in a sooner exit in the eastern German regions. This could happen with a reform of the European ETS, given the increasing economic impracticality of coal-fired power generation.
The ministry also wants to intensify state funding programs in the former coal regions. This will speed up the structural change. Direct investments in company settlements are now possible.
Michael Vassiliadis, chairman of the energy union IGBCE, projected "The compensation payments prevent anyone from falling into the chasm of the structural change. They also offer secure planning and new, good jobs in the transition." Now, the federal government, states, and companies are working together to take advantage of these opportunities.
Spontaneous reactions in Saxony
"This sends a strong message of safety from Europe to the people in the area, as well as for the Lusatia region and a successful shift to renewable energy and climate management. The message assures: neither the EU, the federal government nor the local states will leave individuals and businesses on their own during this transformation. We'll ensure their security," stated Martin Dulig, Economic Minister of Saxony (SPD). In the Lusatia area, coal-fired power generation is slated to end by the latest in 2028. Saxony feels assured that agreements for reclamation will be financed, and the entire system for the coal exit will function smoothly.
The Greens in the Saxon parliament labeled this a "sensible compromise." Nonetheless, a clear plan for the use of the remaining safety funds is still in the making. "The funds for the reclamation also need to be safeguarded in the event of internal restructuring or company bankruptcy," they demanded. The environmental activist group Green League criticized the federal government for giving away billions of taxpayer money to oligarchs.
RWE's compensation payments are already guaranteed.
In December, the EU Commission agreed to a billion-euro payment in compensation for RWE's early exit from brown coal mining and power generation in North Rhine-Westphalia. By 2030, RWE will receive a total of approximately 2.6 billion euros in installments for this transition.
The compensation payment, categorized as state aid by the EU Commission in Brussels, is necessary for RWE to shut down its brown coal power plants. By the end of March 2030, RWE intends to end its brown coal power plant operations, but admits it's possible for the federal government to keep running them as a backup.
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- The compensation for Leag, a Saxony-based mining company, is part of the EU Commission's efforts to support the federal states in their coal phase-out plans.
- Brandenburg, a neighboring federal state to Saxony, is also planning a coal phase-out, with potential support from the EU Commission.
- The EU Commission is closely monitoring the compensation plans of mining companies like Leag and RWE to ensure they comply with EU competition rules.
- The compensation funds for Leag will not only secure the employees' social security but also contribute to the development of renewable energy sources in Lusatia.
- Germany's Coal Commission, which includes representatives from the mining industry, environmental organizations, and the Federal Government, is working on a national coal phase-out plan.
- The SPD, one of the coalition partners in the German Federal Government, has emphasized the importance of a just transition for workers and communities affected by the coal phase-out.
- The BMWi (Federal Ministry for Economic Affairs and Climate Action) has announced plans to invest in the energy transition and support the electrification of the auto industry.
- The EU Commission's Climate Action Plan includes measures to phase out coal and increase the use of renewable energy sources across Europe.
- Germany's coal phase-out is not only affecting traditional mining companies but also leading to opportunities in the increasing demand for green energy solutions and electric vehicles.
- The EU Commission and the Federal Government are working closely to ensure that Germany's coal phase-out aligns with EU-wide climate targets and is fair for all member states.
- The RWE compensation payment is expected to stimulate investments in renewable energy and create new jobs in North Rhine-Westphalia, one of Europe's most industrialized regions.
