`Card Blanche´ for Germany´s Dirty Coal ?

By the end of 2017 / beginning of 2018 a sequence of state aid decisions on capacity mechanisms made headlines. Countries like France, Poland, Italy, Belgium and Germany received approval for their respective capacity mechanisms by the European Commission. However, it now emerged that Germany gained more favorable treatment than all other Member States concerning its highly polluting lignite power plants in these decisions.


Capacity mechanisms are a highly controversial topic. The idea that coal fired power plants should obtain remuneration by states as `back up´ for easing out the intermittent production patterns of renewables raised high tensions. Opponents to these schemes, which by now almost all of the 28 EU Member States have in place, objected to them, inter alia on grounds that they would constitute disguised state aid for coal fired power plants. In February 2018 the European Commission slashed these arguments and approved of a variety of capacity mechanisms, inter alia the German mechanism.

The German government likes to portray its mechanism as capacity reserve or emergency power generation, but not as a capacity mechanism, properly speaking. German energy law knows three different types of mechanisms that are relevant in this respect: Netzreserve, Kapazitätsreserve, Sicherheitsbereitschaft. The Commission ruled in February 2018 that one of these three German mechanisms (Kapazitätsreserve) is in line with European rules on state aid.

After the delayed publication of the decision, criticism arose. Footnote 14 in the official text of the decision reads: `The European Commission points to the fact that a proposal for a new Regulation on the internal market on electricity (COM(2016)861 final of 30 November 2016) is currently being negotiated; however, the present measure remains uninfluenced by the future rules on the design of the electricity market.´

This detail now led to accusations by Poland that the Commission is treating Germany more favorable than other Member States.  A  comparison with the other decisions, indeed, shows that in those decisions the formulation was  along the lines that state aid for back-up power generation `will need to be interpreted in the light of (…) legislation that has not been adopted yet at the time of this decision.´ 

This is relevant because discussions about changes on the allowable carbon dioxide emissions are rife in Europe. The controversial footnote could be interpreted as shielding Germany from tougher standards in the future. However, a spokesperson of the European Commission admits this to be a `mistake´, according to reporting by Euractiv. He told the news website that `on the German decision, indeed, it’s a mistake which is in the process of being corrected (...) the state aid decisions will not shelter member states or companies from any future changes in legislation´.

Despite these re-assurances, five European Member States still insist on unfair treatment and accused the Commission of maintaining double standards on 7 September. In a joint statement for the European Council  France, Poland, Italy, Hungary, Greece, Ireland and the UK alleged favorable treatment for ´strategic reserves´ by regulators. This has been interpreted as indirect criticism of  Germany`s activities. The European Council has not yet formulated a position on this.