Sigmar Gabriel

Germany’s economy ministry is confident that its decision to pay companies to shift power capacity to a coal-fired power reserve will not be derailed by a legal challenge.

However environmental law experts Client Earth told PEi that Germany has its work cut out to successfully make its case.

Independent legal experts at the German parliament found that the law may breach EU rules, however a spokesperson for the ministry said, “This is a normal process which we have successfully gone through in the past several times.”
Sigmar Gabriel
The ministry, headed by Sigmar Gabriel (right) is currently drawing up a draft law providing for the reserve as part of a policy mix aimed at helping Germany meet its 2020 climate targets.

The legal experts, who provide independent views on policies and other issues, concluded that the plans to shift about 2.7 GW of power generation capacity into a reserve could be seen as a subsidy that would need approval from Brussels, according to a leaked document.

It could be difficult to justify the plans to the European Commission because the government has not said that such a reserve is needed, said the report.

Proponents of the move say it is a way to reduce emissions by shuttering brown coal plants and the plants in reserve will only be activated when shortage occurs.

Susan Shaw of non-profit environmental law firm Client Earth said the proposals are likely to require clearance from the European Commission. 

She told Power Engineering International, “That would require Germany to make the case to Brussels for the need for such a reserve and an assessment of whether the proposal is compatible with regulations that limit state aid to failing companies.  It seems to us that Germany has its work cut out to successfully make that case.”

“These developments send a clear message to other EU countries of the importance of taking proactive action on climate change and the risks of failing to do so.  Companies with a consistent record of economic mismanagement and opposition to climate policy cannot be rewarded for their failures through sizeable tax-payer bailouts.  Through proactive management and investment, the sums which have been discussed (up to €230m a year) could surely make a key contribution to investment in the transition to a low carbon economy.  We are looking forward to the draft findings of the Vestager inquiry later this year, which is currently reviewing existing arrangements for capacity mechanisms and aims to better understand and clarify how their design features might have negative effects.”