Renewables

EU greenlights state aid regulations including CfDs, partly allows gas projects

EU-state-aid-regulations-CfDs-gas-projects

Photo: Lukasz Kobus / EC - Audiovisual Service

Published

December 22, 2021

Country

Comments

0

Share

Published:

December 22, 2021

Country:

Comments:

0

Share

The European Commission accepted the new Guidelines on State Aid for Climate, Environmental Protection and Energy. Projects with government support need to be aligned with the decarbonization goals, with some exceptions for gas. The document enables member states to introduce contracts for difference through auctions including for CO2 emissions.

Public support will play a role in ensuring that the green transition happens fast, the European Commission’s Executive Vice-President Margrethe Vestager, in charge of competition policy, said after the body endorsed the new Guidelines on State Aid for Climate, Environmental Protection and Energy (CEEAG).

The document will be formally adopted in January, according to the announcement. The rules involve an alignment with the European Green Deal and other regulatory changes in the energy and environmental areas.

European Union member states are “not likely” to get approval for financial support to projects if they are not compatible with the decarbonization goals, Vestager added. The 27-member bloc aims to drive down net carbon emissions to zero by mid-century.

Projects must minimize cost for taxpayers, can’t distort competition

The guidelines cover environmental and climate protection and green energy generation. They include sections to support the decarbonization of the economy in a broad and flexible manner open to all technologies that can contribute to the European Green Deal, including renewables, energy efficiency measures, aid for clean mobility, infrastructure, circular economy, pollution reduction, protection and restoration of biodiversity as well as measures to ensure security of energy supply, the document shows.

The cost for taxpayers must be minimized and the measures can’t distort competition. The guidelines also aim at facilitating the participation of renewable energy communities and small and medium-sized enterprises (SMEs), as important drivers for the green transition, the commissioners said.

Entry point for carbon contracts for difference

The revised rules generally allow for aid amounts up to 100% of the funding gap, especially where aid is granted following a competitive bidding process, and introduce new aid instruments, such as contracts for difference (CfDs) to help member states respond to the greening needs of industry, according to the announcement.

CCfDs are aimed at bringing breakthrough technologies to industrial production

A contract for difference entitles the beneficiary to a payment equal to the difference between a fixed strike price and a reference price – such as a market price per unit of output. They have been used for electricity generation measures in recent years but could also involve a reference price linked to the Emissions Trading System (EU ETS).

It means companies that receive state aid in an auction would pay back the difference between the fixed carbon price that they agreed on and the market price if the emissions price in the ETS tops the strike price, and vice versa, the document reveals. Carbon contracts for difference, CCfDs, may be a useful tool for bringing breakthrough technologies to market, the European Commission said.

Exemption for gas projects with options for clean hydrogen, biogas

The guidelines are ending subsidies for the most polluting fossil fuels. Measures involving new investments in natural gas are unlikely to be approved unless it is demonstrated that the investments are compatible with the EU’s climate targets. Gas is “a special case because for now, it acts as a bridge towards our path to more renewables,” Vestager explained.

Gas projects need to provide an option to add green hydrogen or biogas. The CEEAG includes a section on aid for the closure of coal, peat and oil shale plants to facilitate decarbonization in the power sector.

Prosumer-led energy transition

CEEAG, when formally adopted, will replace the existing Energy and Environmental State Aid Guidelines (EEAG). Member states will be required to align existing schemes to the new rules as of 2024.

SolarPower Europe praised the exception of rooftop photovoltaic projects of up to 1 MW and 100% renewable energy community- or SME-owned projects of up to 6 MW from auctions. The organization said it empowers more European citizens and businesses to invest in solar and accelerates the prosumer-led energy transition.

The new state aid rules encourage tenders specific to certain renewable applications, such as agri-solar and floating solar, ensuring Europe maintains its competitive global lead in innovative solar power technologies, the statement adds.

WindEurope: Pioneering projects can receive direct aid aside of auctions

WindEurope said technology-specific auctions are necessary, arguing that complementary technologies such as wind and solar need to scale up in parallel and that having them compete in the same auctions would be counterproductive.

“Pilot and demonstration projects are essential to innovation in wind turbine technology. With the new state aid guidelines, they can receive direct aid aside of auctions, if member states can prove that there is not sufficient competition for those very specific projects. This now also applies to wind energy projects with turbine sizes of more than 6 MW, crucially allowing for the latest turbine technology to be used,” WindEurope stressed.

Comments (0)

Be the first one to comment on this article.

Enter Your Comment
Please wait... Please fill in the required fields. There seems to be an error, please refresh the page and try again. Your comment has been sent.

Related Articles

Carbon capture projects failing still to play role energy transition

Carbon capture projects failing but still to play role in energy transition

14 January 2022 - The carbon capture technology is still experimental, but it may have a shot with a proper funding scheme and a functional market

New German government announced ambitious decarbonization plan

Germany’s new government announces ambitious decarbonization plan

13 January 2022 - Germany published a climate plan for the 2030 emissions target, decarbonization of industry, electrification of transport, and heating

Carbon border tax indirect emissions from electricity european parliament report

EU should roll out CO2 border tax earlier, apply it to indirect emissions from electricity

12 January 2022 - The draft report is part of the legislative procedure for the adoption of the carbon border adjustment mechanism (CBAM)

The summer of 2021 in Europe was warmest ever

Summer of 2021 in Europe was warmest ever

12 January 2022 - The last seven years were the warmest on record globally by a clear margin, and 2021 was the fifth-hottest year ever recorded