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State aid: environmental protection and energy

State aid: environmental protection and energy

 

SUMMARY OF:

Communication on Guidelines on State aid for environmental protection and energy 2014-2020

WHAT IS THE AIM OF THE GUIDELINES?

These European Commission guidelines are new rules on public support for environmental protection and energy to help renewable sources of energy enter the marketplace. Their aim is to support EU countries in reaching their 2020 climate targets while addressing the market distortions that may result from subsidies granted to renewable energy sources.

KEY POINTS

The EU’s 2020 targets include 3 climate targets, which are as follows:

  • greenhouse gas emissions 20% (or even 30%, if the conditions are right) lower than 1990 levels;
  • 20% of energy from renewables; and
  • 20% increase in energy efficiency.

Moving towards market signals

In recent years, renewable energy sources have been heavily supported with fixed tariffs. This has encouraged the growth of renewables in the energy mix* and has put the EU on track to meeting its 20% renewables target.

However, this type of support has also sheltered the renewables sector from price signals (which, under normal circumstances, reflect supply-and-demand conditions) and has thus led to market distortions. In particular, electricity from renewable energy sources has been generated irrespective of the actual market demand. In fact, it has out-competed other forms of generation which have to rely solely on the market price to operate economically.

As renewable energy technologies mature and their production achieves a substantial market share, the sector will need to adapt to market signals (i.e. interpret market trends) and aid amounts should respond to falling production costs.

Limits

The new guidelines therefore aim to limit State aid support to what is truly necessary. This will be done partly by gradually moving from feed-in tariffs* to competitive bidding processes* for the allocation of public support. A pilot phase in 2015 and 2016 will allow EU countries to test competitive bidding procedures in a small share of their new electricity capacity.

Infrastructure

The new guidelines also include criteria for supporting energy infrastructure, focusing on projects that improve cross-border energy flows and promote infrastructure in EU’s less developed regions.

FROM WHEN DO THE GUIDELINES APPLY?

The guidelines have applied since 1 July 2014 and remain valid until the end of 2020.

BACKGROUND

For more information, see:

KEY TERMS

Energy mix: the range of energy sources available.
Feed-in tariffs: tariffs under which those who generate electricity are paid a cost-based price for the renewable electricity they supply to the energy grid — the energy distribution system (comprising cables, substations, etc.) — which is independent of the market price.
Competitive bidding processes: normal public procurement procedures for the energy sector.

MAIN DOCUMENT

Communication from the Commission — Guidelines on State aid for environmental protection and energy 2014-2020 (OJ C 200, 28.6.2014, pp. 1-55)

last update 06.09.2019

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