EU approves nearly €2 billion in compensation for LEAG over early closure of German coal plants

The European Commission has approved German compensation of up to 1.75 billion euros for energy group LEAG, which will shut down its power plants early as part of Germany’s coal phase-out. The compensation will cover lost profits and social costs associated with restructuring the region, and help stabilise areas of eastern Germany that have long depended on lignite mining.

The European Commission has authorised Germany to provide state aid worth up to 1.75 billion euros to Lausitz Energie Kraftwerke AG (LEAG) as compensation for the early closure of its lignite power plants. The compensation covers the company’s lost profits and the social costs of supporting employees as they move to new jobs.

Germany has committed to phasing out coal mining by 2038 at the latest. While the coal phase-out is progressing faster than originally planned in western Germany, where it is now expected to be completed by 2030, progress is slower in the east, where LEAG operates power plants and mines. LEAG’s power plants are to be permanently shut down between 2028 and 2038.

The European Commission assessed the plan under state aid rules and concluded that the aid is necessary to phase out coal in line with climate targets, and is appropriate and proportionate, “as it is limited to the minimum necessary and does not result in overcompensation”. At the end of 2023, the EU also approved compensation of 2.6 billion euros for energy company RWE.

The European Commission must approve state aid measures to ensure fair competition in the Union. EU guidelines allow member states to support certain measures to reduce or eliminate CO₂ emissions, even at the risk of distorting competition.

Economy and Energy Minister Katherina Reiche welcomed the decision, saying the compensation would provide planning certainty for the region. Part of the compensation will be paid according to how the profits of individual power plants develop in the coming years.

LEAG also announced plans to invest in new energy infrastructure, including a battery storage facility with a capacity of 1.6 GWh, which is to be built at one of its former lignite sites.

The approval of the compensation is part of Germany’s broader coal phase-out strategy, under which electricity generation from lignite is to end by 2038 at the latest. The move nevertheless remains controversial: environmental organisations criticise the compensation as too high, while regional politicians argue that the coal phase-out must be fair and economically manageable, particularly in structurally weaker areas such as Lusatia.

LEAG is owned by Daniel Křetínský’s EP Group. Its subsidiary EP Energy Transition bought the remaining 30% of shares from PPF in March, becoming LEAG’s sole owner.