European Commission approves Dutch state aid in favour of early closure of coal fired power plant

On 12 May 2020, the European Commission has announced having approved the financial compensation envisaged by the government of the Netherlands in favour of the early closure of the Hemweg coal fired power plant. The compensation of EUR52.5 million has been deemed to be in line with the EU state aid rules, as the closure will contribute to reducing CO2 emissions and there will not be undue distortion of competition in the EU single market, according to the Commission. 

The full non-confidential version of the Commission decision is not yet available, by the related press release (IP/20/863) gives some interesting elements of the reasoning of the Commission. 

First, the decision to proceed to the early closure of the Hemweg plant was a consequence of the adoption of the Dutch law of 11 December 2019 prohibiting the use of coal for the production of electricty as of 1 January 2030 at the latest. Four coal fired power plants have been granted a transition period of five to ten years, while the Hemweg plant had to close before 1 January 2020. This very rapid closure of the Hemweg plant resulted in a direct commercial loss for the operator of the plant, which is, according to the Dutch law, eligible to financial compensation due to its early closure. Negotiations between the Dutch government and the company resulted in an agreement on the amount of the compensation. This case should be related to previous experience for early phase out of plants, as experienced in Germany, as already covered in a previous post on this blog. In December 2016, the German Constitutional Court ruled that energy companies affected negatively by the accelerated phase-out of nuclear plants were entitled to "appropriate" compensation.

Second, in its decision on the Hemweg plant, and still according to the Commission, the latter has not taken "a final position" on whether the measure provides the operator with an advantage over its competitors, and whether it thus constitutes State aid. This is quite unusual for a state aid decision, and the choice of legal basis for approving the aid is not either indicated in the press release.

Finally, much emphasis is put on the objective of the measure and its contribution ot EU environmental and climate goals, which "outweights any potential distortion of competition and trade brought by the support." A close link is made with the European Green Deal, although still a strategy document, and the need to proceed to a rapid phasing out of coal and of the decarbonisation of gas.

Without doubt, the full decision of the Commission will give rise to a carefull scrutiny. A full comment of the Commission decision will be available on this blog once the full non-confidential version is made available.

Reference: "State aid: Commission approves compensation for early closure of coal fired power plant in the Netherlands", IP/20/863, 12 May 2020.

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