German nuclear operators to receive €2.4B compensation for closures

After pressing the button on its exit from nuclear power generation, Germany has agreed a compensation package March 5 for affected plant operators RWE AG, Vattenfall AB, E.ON SE and EnBW Energie Baden-Württemberg AG.

The companies will receive a total of €2.4 billion in payouts for the early closures of their nuclear reactors in the country, which is set to complete in 2022 when the final plants are taken offline. The agreement between the operators and the ministries for environment and nuclear safety, finance, and economy and energy, puts an end to many years of legal disputes over entitlements.

Swedish state-owned utility Vattenfall will be allocated the largest sum at €1.4 billion. The company had led a lawsuit over compensation levels in November 2020 which forced lawmakers to revisit compensations.

"This is a conservative implementation of the court decisions in Germany that in the end is acceptable to us. We welcome the envisaged agreement as it puts an end to many years of costly and time-consuming disputes around the German nuclear phase-out," said Anna Borg, the company's president and CEO, reacting to the March 5 agreement.

Compensation is also awarded to three German utilities: RWE will receive €880 million, EnBW is allocated €80 million, and E.ON, via its nuclear unit PreussenElektra GmbH, will get €42.5 million.

RWE said the agreement brings important legal certainty for all parties involved, adding that it will help strengthen the market's confidence in Germany as a place to do business and thus promote the investments that must now be made in reshaping the country's energy system.

All companies receiving payouts will have to commit to cease any further legal action. The agreement will be finalized with a law in the German Parliament and will also be subject to assessment by the European Commission over state aid rules.

The nuclear exit, to a large extent a political decision in Germany where the technology is unpopular due to safety concerns, makes Germany's decarbonization targets more challenging to reach. The country is phasing out coal-fired generation by 2038 and growth in renewables, particularly onshore wind, is plateauing. New renewables capacity additions could come from offshore wind, with Germany recently launching a 958-MW tender.