The German coalition government has approved a €40bn compensation package for power utilities, which operate hard coal-fired power plants in the country and should shut them down by 2038 at the latest. Under the agreement, power utilities will benefit from compensations for switching their coal-fired power plants to gas, depending on the power plant's age and the conversion date, or for shutting them down by 2033.
Power companies that switch hard coal plants no older than 25 years (commissioned as from 1995) to gas will get a conversion bonus of €390/kW until the end of 2022; after 2022, that bonus will be cut by €25/kW each year, in order to incite to early closure. Power plants that are 25 to 35 years old (commissioned between 1985 and 1994) will be eligible for a conversion bonus of €225/kW that will also decline over years. Power plants older than 35 years (commissioned between 1975 and 1984) will receive no conversion bonus. Power utilities that don't switch their coal-fired power capacities to gas will have to shut them down. They may receive shutdown compensation through tenders running until 2026 (the lowest bids will be compensated). After 2026, coal-fired power plants will be decommissioned without compensation. The government intends to make German power generation free of hard coal by 2033.
In January 2020, the government approved a draft law aiming at ending coal-fired power generation by 2038 and reached a €40bn agreement with 4 Länder (Brandenburg, Saxony, North Rhine-Westphalia and Saxony-Anhalt) on financial compensation and structural aid for coal and lignite producing regions, deriving from the closure power plants and related mines. Earlier in June 2020, the government endorsed a €4.3bn compensation package for RWE, Uniper, EnBW, Vattenfall, Steag and LEAG, which operate lignite-fired power plants in the country. Before the contracting parties can sign, the Bundestag (lower house of the Parliament) must pass the coal exit law and approve the compensation package. Aid approval from the European Commission is also required.
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