November 13, 2020

Top court sends Germany back to drawing board on nuclear compensation

Top court sends Germany back to drawing board on nuclear compensation

Financial compensation for energy firms hit by the German government’s plan to phase out nuclear power must be completely reworked after the Constitutional Court ruled in favour of a legal challenge by Vattenfall on Thursday.

Germany’s energy transition policy came as a reaction to Japan’s devastating Fukushima nuclear disaster in 2011.

In the wake of the disaster, the German government decided to revoke extensions to the contracts of 17 nuclear power plants in the country, which had been granted just months earlier. Nuclear energy providers were given an end date of late 2022 for their facilities.

In 2016, the Constitutional Court in the south-western city of Karlsruhe ruled in favour of challenges by energy providers Eon, RWE and Vattenfall, finding that the legislation setting out the transition was not in line with the constitution.

Its judges said that the companies were due compensation for lost business and investments made pointless by the policy shift.

But a 2018 amendment seeking to solve those issues was found to have been insufficient and never actually came into effect due to flaws in due process, the top court said in a statement on Thursday.

As a result, the government remains obligated to delivering “an immediate reorganization” of the legislation, it added.

Vattenfall is a Swedish company and a major player in the German energy market. It lodged the challenge after being hit hard by the decommissioning dates it was assigned for two nuclear plants.

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Under the current legislation, the company is expected to be able to claim millions of euros in compensation in the year 2023. The German Environment Ministry has said an exact figure will be decided at that time.

However, the Karlsruhe court found this process to be in part “unreasonable,” the statement said.

The 2018 amendment was dependent on approval from the European Commission, which the court said was never formally granted.

The German government’s legal woes do not end there.

Vattenfall is suing the state of Germany at the International Centre for Settlement of Investment Disputes (ICSID) in Washington for billions of euros in lost revenue from the premature closure of its two German plants, Kruemmel and Brunsbuettel.

Thursday’s ruling is focused on the financial compensation element of the transition and is therefore not expected to delay the target end date of 2022.

Vattenfall’s two plants in Germany, both located in the country’s north, were taken down from the grid shortly after the government announced the turnaround almost a decade ago.

Vattenfall said it “unreservedly welcomes” the Constitutional Court’s latest ruling.

In a statement, the company pointed to the constitutional issues flagged back in 2016 and said the subsequent legislative amendment “did not even begin to meet the requirements” set out by the judges.

German energy provider RWE also welcomed the ruling, which chief financial officer Markus Krebber said will “definitely not deteriorate” the company’s legal position.

RWE expects to receive hundreds of millions of euros in compensation for residual electricity from its nuclear power plants that can no longer be used, Krebber said, adding: “This has not changed today.”

The government does not plan to make any payouts to impacted companies until the nuclear phase-out is complete.

Responding to the setback, Environment Minister Svenja Schulze said, “We will thoroughly analyse the ruling and swiftly bring about legislative changes that meet the demands of the Constitutional Court.”

She stressed that the nuclear phase-out would not be hindered by Thursday’s development, which she called “a side issue.”

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