State Aid rules regarding highly efficient power plants, including new power plants that are carbon capture and storage (CCS)-ready

 

The rules described here apply only to the specific aid measures provided for in the context of implementation of the ETS Directive (2003/87/EC).

 

The key legal instrument addressing the aid regarding highly efficient power plants, including new power plants that are carbon capture and storage (CCS)-ready is European Commission Communication on Guidelines on Certain State Aid Measures in the Context of the Greenhouse Gas Emission Allowance Trading Scheme Post 2012 C(2012) 3230 final {SWD(2012) 130 final} {SWD(2012) 131 final} of 22 May 2012 (Guidelines) – see box.

 

 

General Requirements

 

State aid may be declared compatible with the internal market within the meaning of Article 107(3)(c) of the Treaty on the Functioning of the European Union (Treaty) if it leads to increased environmental protection (reduction of greenhouse gas emissions) without adversely affecting trading conditions to an extent contrary to the common interest.

In assessing the compatibility of an aid measure, the European Commission is obliged to balance the positive impact of the aid measure in reaching an objective in the common interest against its potentially negative side effects, such as distortion of trade and competition.

 

Member State must demonstrate that the aid amount to the beneficiary is limited to the minimum necessary.

 

The aid ceilings set out must not be exceeded regardless of whether the support is financed entirely from State resources or is partly financed by the Union.

 

Aid deemed to be compatible under the Guidelines may not be combined with other State aid within the meaning of Article 107(1) of the Treaty or with other forms of financing from the Union if such overlapping results in aid intensity higher than that laid down below. However, where the expenditure eligible for aid for measures covered by Guidelines is eligible in whole or in part for aid for other purposes, the common portion will be subject to the most favourable aid ceiling under the applicable rules.

 

Period of Application

 

The European Commission will apply the Guidelines from 6 July 2012. The rules in question will be applicable until 31 December 2020 (if not amended before that date).

 

The Commission will apply Guidelines to all notified aid measures in respect of which it is called upon to take a decision after 5 June 2012, even where the projects were notified prior to their publication. Duration of aid schemes must not be longer than the duration of Guidelines.

The Commission will apply the rules set out in the Commission Notice on the determination of the applicable rules for the assessment of unlawful State aid to all unlawful aid.

 

Specific rules regarding highly efficient power plants, including new power plants that are carbon capture and storage (CCS)-ready

 

Member States may use revenues generated from the auctioning of allowances, between 2013 and 2016, to support the construction of highly efficient power plants, including new power plants that are carbon capture and storage (CCS)-ready.

 

Under Article 33 of Council Directive 2009/31/EC of 23 April 2009 on the geological storage of carbon dioxide, Member States must ensure that operators of combustion plants with a rated electrical output exceeding 300 MW have assessed certain conditions, namely, whether suitable storage sites are available, whether transport facilities are technically and economically feasible, and whether it is technically and economically feasible to retrofit for CO2 capture. Where the assessment is positive, suitable space on the installation site for the equipment necessary to capture and compress CO2 has to be set aside.

 

That aid must seek to increase the protection of the environment resulting in lower CO2 emissions compared to the state-of-the-art technology and target a market failure by having a substantial impact on environmental protection. The aid must be necessary, have an incentive effect and be proportional.

However, aid for CCS implementation does not fall within the scope of the Guidelines and is already assessed under other existing State aid rules, in particular, the Guidelines on State aid for environmental protection (OJ C 82, 1.4.2008, p. 1.).

 

In order to ensure proportionality of the aid, the maximum aid intensities must vary depending on the contribution to the increase of environmental protection and reduction of CO2 emissions of the new power plant. Therefore, pursuant to the Guidelines start of implementation of the full CCS chain (i.e. construction and effective start of capture, transport and storage of CO2) by new power plants before 2020 must be rewarded as compared to new power plants with CCS-readiness, but without start of CCS implementation before 2020.

In addition, when considering two similar projects for new CCS-ready power plants, the permissible maximum aid intensities should be higher for projects chosen in a genuinely competitive bidding process based on clear, transparent and non-discriminatory criteria, which will effectively ensure that the aid is limited to the minimum necessary and promotes competition in the electricity generation market. Under such circumstances, it can be assumed that the respective bids reflect all possible benefits that might flow from the additional investment.

 

Requirements for investment aid granted between 1 January 2013 and 31 December 2016 for new highly efficient power plants

 

Investment aid granted between 1 January 2013 and 31 December 2016 for new highly efficient power plants will be considered compatible with the internal market within the meaning of Article 107(3)(c) of the Treaty provided the conditions set out below are met.

 

Investment aid to new highly efficient power plants may be granted only if each of the following conditions is met:

 

(a) the new highly efficient power plant exceeds the harmonised efficiency reference value of the power plants set out in Annex I to Commission Implementing Decision 2011/877/EU of 19 December 2011 establishing harmonised efficiency reference values for separate production of electricity and heat in application of Directive 2004/8/EC of the European Parliament and of the Council or the relevant efficiency reference value in force when the aid is granted. New highly efficient power plants which merely comply with those efficiency reference values shall not be eligible for aid; and

 

(b) the aid granting authority's approval decision is taken between 1 January 2013 and 31 December 2016.

 

Objective and necessity of the aid

 

Member States must demonstrate that the aid targets a market failure by having a substantial impact on the environmental protection. Aid must have an incentive effect in that it results in a change in the behaviour of the aid beneficiary; that incentive effect shall be demonstrated through a counterfactual scenario providing evidence that without the aid the beneficiary would not have undertaken the investment. In addition, the aided project must not start before the submission of the aid application. Finally, Member States must demonstrate that the aid does not adversely affect trading conditions to an extent contrary to the common interest, in particular where aid is concentrated on a limited number of beneficiaries or where the aid is likely to reinforce the beneficiaries’ market position (at the level of company group).

Eligible costs


The eligible costs will be limited to the total costs of investment in the new installation (tangible and intangible assets) which are strictly necessary for the construction of the new power plant. In addition, in the case of construction of a CCS-ready power plant, the costs of demonstrating the overall economic and technical feasibility of implementing a full CCS chain will be eligible. The costs of installing capture, transport and storage equipment will not be eligible costs under the Guidelines, since aid for CCS implementation is already assessed under the Guidelines on State aid for environmental protection (OJ C 82, 1.4.2008, p. 1).


Maximum aid intensities

 

1. For new highly efficient power plants that are CCS-ready and start implementation of the full CCS chain before 2020, the aid must not exceed 15 % of the eligible costs.

 

2. For new highly efficient power plants which are CCS-ready but do not start implementing the full CCS chain before 2020 and for which aid is granted after a genuinely competitive bidding process that promotes (i) the most environmentally-friendly power generation technologies in the new plant resulting in lower CO 2 emissions compared to the state-of-the-art technology and (ii) competition on the electricity generation market, the aid must not exceed 10 % of the eligible costs. Such a bidding process must be based on clear, transparent and non-discriminatory criteria and provide for the participation of a sufficient number of undertakings. In addition, the budget related to the bidding process must be a binding constraint, in the sense that not all participants can receive aid.

 

3. For new highly efficient power plants that do not meet the conditions indicated in point 1 and 2 above, the aid must not exceed 5 % of the eligible costs.

 

4. In case of non-start of implementation of the full CCS chain before 2020, the aid will be reduced to 5 % of the eligible costs of the investment, or to 10 % if the conditions set in point 2 above are met. In case of upfront payment of the aid, Member States shall claw-back the exceeding aid amount.


Last Updated on Monday, 09 July 2012 09:46
 

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