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Report: €1B to be spent on German coal phaseout compensation by 2023

The German government will allocate €1 billion to a compensation fund for utilities phasing out coal, a fraction of the amount anticipated by the owners of the power plants, according to a report by Bloomberg News.

The compensation will be paid out for a total of 5 GW of coal capacity to be closed by 2023, Bloomberg said on Oct. 2, citing an unidentified government official.

The German energy ministry told S&P Global Market Intelligence that "work on the topic of coal exit is ongoing" and that it does not comment on the interim status of the related legislation. "The decisions made by the Commission on Growth, Structural Change and Employment are crucial" in informing the final draft law, the ministry said. "We are implementing them step by step."

The plan laid out by the commission in January would see roughly one-third of Germany's remaining hard coal and lignite-fired power stations shuttered by 2022 and the remainder closed down by 2038 at the latest.

Utility RWE AG has asked for up to €1.5 billion in compensation for each gigawatt of lignite capacity it will have to close as part of Germany's planned coal exit.

In a July framework report for the legislation of the coal phaseout, the government said hard coal power plant operators should be able to participate in auctions to determine the price of the closures. The bidder willing to close their plant at the lowest price would win the auction.

A draft for the hard coal legislation is expected to be published this autumn, the government said, and will then pass through parliamentary procedure. "At the same time, conversations will be had with lignite operators."

Final legislation will be passed at the end of this year, the government said in the outline.