State aid: EU Commission approves compensation for early closure of coal fired power plant in the Netherlands
The European Commission has concluded that the compensation of €52.5 million granted to coal fired power plant Hemweg by the Netherlands for the early closure imposed on the plant is in line with EU State aid rules. The measure will contribute to reducing CO2 without unduly distorting competition in the EU’s Single Market.
Executive Vice-President Margrethe Vestager, in charge of competition policy, said: “In the context of the European Green Deal the phasing-out of coal fired power plants can crucially contribute to the transformation to a climate-neutral economy which is good. At the same time, Member States may need to compensate these companies in line with the national and EU State aid rules. Our assessment concluded that the Dutch compensation measure to the coal fired power plant Hemweg due to its early closure, does not unduly distort the competition in the EU’s Single Market.”
On 11 December 2019, the Netherlands adopted a law prohibiting the use of coal for the production of electricity as of 1 January 2030 at the latest. Whilst four coal fired power plants were granted a transition period of five to ten years, the Hemweg plant had to close before 1 January 2020, which resulted in commercial losses for the company running the plant. The law gave Hemweg the possibility to request a compensation for its early closure and the government agreed with the company to limit this compensation to €52.5 million.
While 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, the Commission concluded that the measure would in any event be compatible with the EU’s Single Market. In particular, the Commission found that:
(i) the measure will contribute to the reduction of CO2 emissions, since Hemweg emitted around 3.6 megatons of CO2 annually; and
(ii) the payment adequately compensates Hemweg for the profits it would have been able to make if it would have continued operating.
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.
The European Green Deal has recognised that further decarbonising of the energy system is critical to reach climate objectives in 2030 and 2050.
The production and use of energy across economic sectors account for more than 75% of the EU’s greenhouse gas emissions. Therefore, a power sector must be developed that is based largely on renewable sources, complemented by the rapid phasing out of coal and decarbonising gas.