Analysis of German lignite compensation

Ember analyzed the formula used by Germany's Ministry of Economics (BMWi) to calculate €4.35 billion in compensation payments for utilities RWE and LEAG for the early closure of lignite power plants. The analysis concludes that the government's assumptions systematically overvalue the payments, suggesting that adjusting these assumptions could reduce the total compensation to as little as €343 million.

• The German government's proposed compensation payments of €4.35 billion for utilities RWE and LEAG are based on a formula that Ember claims contains three key assumptions leading to a "systematic overvaluation". If all three assumptions were adjusted, the total compensation would drop from €4.4 billion to €343 million.
• The BMWi used average forward power and CO2 prices from January 2017 to December 2019 to determine foregone profits, which Ember argues is arbitrary because power prices have declined while CO2 prices have risen. Using forward prices from 2020 would reduce payments to €2.6 billion, and using prices from 5 May 2021 would reduce them to €143 million.
• The BMWi formula assumes that no fixed costs are saved through early closure. Ember, citing Oeko Institut, argues that saving all plant fixed costs and approximately 20% of mine fixed costs (related to avoidable personnel costs) would reduce the compensation to €2.14 billion.
• The government assumed a compensation period of four to five years for lost profitability, providing no justification for this timeframe. Reducing this period to three years, as proposed by Oeko Institut, would decrease payments by 36% to €2.8 billion.
• Ember's recreation of the BMWi formula resulted in compensation totals of €2.67 billion for RWE's Rheinish area and €1.73 billion for LEAG's Lusatian mining area, closely matching the figures in the German phase-out law.

APA

Jones, D., & Brown, S. (2021). Analysis of German lignite compensation. Ember. https://ember-energy.org/app/uploads/2024/12/German-lignite-compensation.pdf

Chicago

Jones, Dave, and Sarah Brown. Analysis of German lignite compensation. Ember, 2021. https://ember-energy.org/app/uploads/2024/12/German-lignite-compensation.pdf.

Wikipedia

{{cite report |last1=Jones |first1=Dave |last2=Brown |first2=Sarah |title=Analysis of German lignite compensation |publisher=Ember |date=May 2021 |url=https://ember-energy.org/app/uploads/2024/12/German-lignite-compensation.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{jones2021analysis, author = {Jones, Dave and Brown, Sarah}, title = {{Analysis of German lignite compensation}}, institution = {Ember}, year = {2021}, month = may, url = {https://ember-energy.org/app/uploads/2024/12/German-lignite-compensation.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }