Germany agrees compensation for nuclear phaseout

Following the accident at the Fukushima Daiichi plant in Japan in March 2011, the government of Chancellor Angela Merkel decided it would phase out its use of nuclear power by the end of 2022 at the latest. Prior to the accident, Germany was obtaining around a quarter of its electricity from 17 nuclear reactors operated by the four utilites.

In August 2011, the 13th amendment of the Nuclear Power Act came into effect, which underlined the political will to phase out nuclear power in Germany. As a result, eight units were closed down immediately: EnBW’s Phillipsburg 1 and Neckarwestheim 1; EOn's Isar 1 and Unterweser; RWE's Biblis A and B and Vattenfall's Brunsbüttel and Krümmel. The utilities were able to retain some of their nuclear power plants until 2022, allowing them to use up remaining quotas, but Vattenfall argued it was unable to do the same.

Since then, numerous lawsuits have been filed by the utilities against the German government calling for compensation for the early closure of their plants.

The Federal Constitutional Court, Bundesverfassungsgericht, in Karlsruhe ruled in December 2016 that the 2011 decision to withdraw all of Germany's nuclear power plants by the end of 2022 violated some property rights, enabling the possibility of compensation for the utilities affected. That ruling forced the government to amend the Atomic Energy Act in 2018, agreeing to pay compensation of up to EUR1 billion.

However, in September last year, the court said the changes were inadequate and called on the government to revise a 2018 draft law covering compensation for the early closure of nuclear plants because this did not meet the guidelines the court had laid out in 2016. The 2018 legislation, which required European Commission approval, meant the power companies would only find out the exact amount of compensation in 2023.

Today, the federal government announced it had reached an agreement with the utilities for the payment of financial compensation and the settlement of all related legal disputes. Vattenfall will receive EUR1.425 billion, RWE EUR880 million, EnBW EUR80 million and EOn EUR42.5 million. This is to compensate them for residual electricity volumes that they can no longer generate from their plants (at a rate of EUR33.22/MWh), as well as for investments they had made to extend the operating lives of their plants prior to the phaseout decision. In addition, the agreement also provides for EOn/PreussenElektra to freely dispose of the electricity quantities from the Brunsbüttel and Krümmel plants that correspond to their ownership shares.

"The agreement has no consequences for the nuclear phaseout," the government said. "The fact remains that the last German nuclear power plant will go offline by the end of 2022 at the latest."

It noted the key points to the agreement are still subject to the approval of the boards of each utility, but they will be set out in detail in a contract "in the coming days". The final regulation, it said, will be made into law by parliament. It is also subject to a review by the European Commission to confirm the compensation does not include state aid.

"This is a conservative implementation of the court decisions in Germany that in the end is acceptable to us," said Vattenfall President and CEO Anna Borg. "We welcome the envisaged agreement as it puts an end to many years of costly and time-consuming disputes around the German nuclear phaseout."