The German government has agreed to a multibillion-euro compensation deal with major utility firms on Friday over its ongoing nuclear energy phaseout.

The majority of the €2.4 billion ($2.9 billion) compensation package will be awarded to RWE and Swedish firm Vattenfall. This is largely to make up for lost revenue from the electricity they could otherwise have sold. Vattenfall will receive €1.425 billion and RWE €880 million. Smaller payouts of €80 million and €42.5 million were made to EnBW and EON/PreussenElektra to make up for investments made at plants when their licenses were renewed in 2010. Part of RWE’s compensation also covers some investments made.

In the wake of the Fukushima disaster in 2011, the German government closed down eight reactors and announced all the nation’s nuclear power would close by 2022. This was earlier than then planned but in line with the previous government’s schedule, as agreed to in 2002.

Since then, cases in various German courts, as well as arbitration at the International Centre for Settlement of Investment Disputes (ICSID), have been underway. In 2016 and 2020, the Federal Constitutional Court in Germany indicated compensation for lost power generation was fair. The scale of that compensation was the remaining stumbling block.

All pending cases will be resolved under the new agreement. The deal requires approval from the German parliament and the European Commission’s state aid watchdog.

Utilities glad to see conclusion of decade-long legal tussle

Despite the figures involved, the compensation announced is far below utilities’ initial expectations. Vattenfall’s case at the ICSID was reportedly just shy of €4.7 billion.

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

RWE said the agreement means nuclear operators will receive €33.22 per megawatt-hour for curtailed generation.

“RWE sees the agreement as an important step to create legal certainty for all parties involved. This is a strong signal to strengthen Germany as an industrial business location and to stimulate the extensive investments needed to transform the German energy landscape,” the company said in a statement.

There are currently around 8 GW of operational nuclear power in Germany. Half of that capacity will close this year.

Germany has a rather unique relationship with nuclear energy. While the U.K., Poland, France, Finland and others plan to build new reactors, it’s now more than 30 years since Germany last connected a new plant. Public opposition to the technology has always been high in the country.

The only party to vote against the 2011 accelerated nuclear phaseout did so because they wanted an even shorter timeline.