Germany To Compensate RWE & Vattenfall Over Nuclear Phase-Out
The German Government has passed a bill that gives the country the legal right to proceed with its phase-out of nuclear power but will open the door to companies like Vattenfall and RWE to receive compensation for their investment into nuclear power plants.
Following the 2011 Fukushima nuclear disaster in Japan, Germany made the unprecedented decision to close down all its nuclear power plants — the oldest eight power plants were closed immediately, while the remaining nine are scheduled to be turned off by 2022.
“A decision has been taken to shut down eight plants before the end of this year and they definitely won’t be reactivated. And the remaining nine will be shut down by the end of the decade,” Juergen Becker, deputy environment minister at the time, told Reuters. “Japan has shown that even if there is a minuscule occurrence, the residual risk is too high to justify the continuation of nuclear power (…) It is better to go for other energy services in a civilized country.”
In response, German utility RWE and Swedish power company Vattenfall sued the German government, arguing that they were due financial compensation for investing in a technology that, at the time, the German government was supporting, and that in suddenly reversing direction, the companies would suffer significant financial losses.
In December of 2016, the German Federal Constitutional Court confirmed that the government’s decision to phase-out nuclear power was “essentially constitutional.” This week, the German Federal Government approved a bill which implemented the findings of the Court, giving the country the right to proceed with its phase-out but also allowing utilities to seek “adequate financial compensation for so-called frustrated investments they made in nuclear power plants between 28 October 2010 and 16 March 2011.”
“The bill passed today ensures that the accelerated phasing out of nuclear power plants, which was initiated in 2011, will be continued consistently and in accordance with the provisions of the Basic Law,” said Federal Environment Minister Svenja Schulze. “Each nuclear power plant will retain its current statutory cut-off date by 31 December 2022 at the latest of nuclear energy in Germany.”
The news comes as no real surprise, but it will be interesting to see how this impacts future decisions to be made by companies like RWE, specifically as it concerns similar actions taken by governments to U-turn on various technologies. RWE recently was faced with news that the Netherlands was going to ban the use of coal by 2030, and that it was closing two coal-fired power plants by 2024 — one of which belongs to RWE.
While any competent observer should have seen a move like this coming — and we will likely see several similar moves in the near future across Europe — RWE nevertheless has something of a case to make, considering that its investment in coal-fired power was done at the behest and with the support of the Netherlands Government. RWE explained that it now “foresees significant impact on its business by today’s announcement,” adding:
“Currently no compensation is planned for the ban on operating the plants according to the granted permits. This is despite the fact that RWE built the Eemshaven power plant at the specific request of the Dutch government, investing €3.2 billion going into operation in 2015. RWE will now analyse the proposed law carefully. If the law is imposed as proposed, the company will assess the possibility of taking legal action.”
In the end it will likely come down to the courts in the Netherlands, but this decision by Germany’s courts certainly seems to provide companies like RWE with the precedent necessary to secure compensation for ill-advised coal investments.
When reached for comment, RWE explained that they “are happy that this issue is now being addressed. We expect that we will receive compensation for our stranded investments and that our electricity quota for Mülheim-Kärlich can either be sold to a competitor or reimbursed by the government. After deducting the volumes we wish to transfer to the Emsland and Gundremmingen plants, which we will own in full following the transaction with E.ON, this quota still amounts to 27 terawatt hours. We anticipate that we may receive up to a medium triple-digit million euro sum based on these regulations in the years ahead.”
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