EU Examining Germany's Coal Funding Plan

Coal most polluting of the fossil fuels; Germany already included in EU-wide capacity mechanism enquiry.

The European Commission is in the early stages of examining Germany's plans to provide funding to keep brown coal generation in reserve to ensure security of supply, a Commission spokesman said on Monday, adding they must conform with EU rules.

Germany in July announced it would reduce generation from brown coal, a particularly polluting type of coal, to ensure it meets emissions reduction targets.

But it said it would set aside some 2.7 gigawatts of brown coal generation, equivalent to the output from five power plants, as a reserve in case of power shortages.

"The Commission is currently in touch with the German authorities on the measures they are considering to ensure security of supply of electricity," spokesman Ricardo Cardoso told reporters.

The aim was, he said, to ensure Germany's plan was compatible with EU guidelines on state aid.

Already, Germany is one of 11 member states included in an enquiry on capacity mechanisms used to fund electricity generation that may not be cost-effective but can guarantee supply during peak demand.

Earlier this month, German Economy Minister Sigmar Gabriel dismissed concerns the coal-fired reserve would breach EU rules.

The Commission has repeatedly voiced reservations about capacity mechanisms, saying they should only be a last resort, while environment campaigners say they are thinly disguised subsidies for fossil fuels.

Reporting by Barbara Lewis and Tom Koerkemeier