Updated: December 2014

The EU Commission has the authority to set guidelines for state aid to safeguard the internal energy market. It has set guidelines for renewable energy and other environmental investments, for state support for energy intensive companies, and for coal mining.

State Aid for Evironmental Protection and Energy
These guidelines were updated in July 2014. Now they cover support for renewable energy, energy infrastructure projects, back-up power capacity, energy intensive industrial energy users, and others. With the guidelines:
- The EU countries should gradually replace the more effective feed-in tariffs with the less cost-effective competitive bidding processes (open tenders). From 2017 countries shall set up tenders for support to all new installations.
- Countries can avoid the the tenders if they can prove that the outcome might not be optimal, i.e. leading to higher costs, or if the installations are small. They can support without bidding smaller renewable energy installations, below 6 MW for windpower and 1 MW power for other renewables. For installations below 3-MW windpower or 500-kW other power they can maintain feed-in tariffs.
- From 2016 renewable energy producers shall have electricity balancing responsibilities and pay the related costs

- Countries can allow lower renewable energy levies (PSO payments on the electricity bills) for energy intensive sectors, such as metal and ceramic producers, that are subject to strong international competition. In general companies can get reduced levies for renewable energy if at least 20% of their expenses are electricity costs and the sector trades at least 4% of its turnover outside EU. The levies cannot be set to zero.
- The countries can support energy infrastructure, such as power lines, and elements of smart grids, when these investments cannot be realised on market basis.
- It it is not possible to maintain enough peak-power and back-up power capacity, countries can support the establishment or maintaining of capacity. This support must be available for both new and existing/retrofitted power plants, as well as to interconnectors to other countries, to electricity storages, and to demand side management (reduction of demand of certain consumers). The support shall also be open to generators from other countries.
- Under certain conditions countries can also support the development of district heating and of increased energy efficiency of houses.

Support mechanisms will have to be notified to the EU Commission that will approve or reject them in a lengthy process, typically lasting 1-2 years. Some mechanisms, covered by a General Block Exemption Regulation, does not need to be notified, such as support for renewable energy provided via an open tender process.

State Aid in the Context of the EU Emissions Trading Scheme

The EU Commission issued guidelines in 2012 for state support for companies that have electricity costs as a major expense. The state support can cover up to 85% of the eventual increase of electricity costs because of the CO2 costs of electricity generation introduced with the EU Emission Trading Scheme (EU-ETS).

State Aid to the Coal Sector
The EU allows support to uncompetitive coal mines on certain conditions. The EU Commission issued new guidelines for this in 2010, following a decision by the EU countries. The countries can support uncompetitive coal mines with a gradually reduced support. They can also support the closure of coal mines and related costs.

INFORSE-Europe Opinion
The 2014 EU guideline for state aid for environmental protection and energy is going against the use of the most effective support mechanism for renewable energy, the feed-in tariff. This leads to less effective and more expensive support for renewable energy, making it more difficult and costly for the EU countries to reach their renewable energy targets and ambitions. The proposed alternative in the form of tenders (competitive bidding) reduces the number of possible investors, thus increasing the profit expectations of the investors. Linking the support with electricity market prices increases an uncertainty in the economy of renewable energy development, which increase the risk premium they require to do the investments. This together pushes up the costs of renewable and thus the support that the tax payers or power uses have to pay. Further, limiting the feed-in tariffs will reduce the possibility for small investors to participate in local investments, reducing the public participation in renewable energy developments. This will, in turn, reduce public support for renewable energy.

The requirement of notification of state aid is becoming another barrier for the support of renewable energy because of the long procedure and long response time from the EU Commission. The process should be speeded up and last a maximum of 3 months.

Regarding the state of for coal mining, INFORSE-Europe finds that it should be phased out as soon as possible.

Read the EU Commission page on Eenvironmental State Aid

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