State aid: Commission approves close to €94 million support for waste-to-energy high-efficient cogeneration plant in Bulgaria

Sofia

Sofia, Bulgaria (Georgi Kalaydzhiev, Unsplash)

This article is brought to you in association with the European Commission.


The European Commission has approved, under EU State aid rules, Bulgarian plans to support the construction and operation of a high-efficient cogeneration plant to produce heat and electricity using fuel derived from unrecyclable municipal waste to be in line with EU State aid rules.

Commissioner Margrethe Vestager, in charge of competition policy, said: “The support measure will help Bulgaria achieving its energy-efficiency targets and will contribute to the reduction of CO2 emissions in line with the EU environmental objectives, without unduly distorting competition.”

On 8 October 2019, Bulgaria notified the Commission of its plans to support the construction and operation of a high-efficient cogeneration plant in Sofia, Bulgaria. The plant will produce heat and electricity with a capacity of approximately 55 megawatts (MW) of heat and 19 MW of electricity. Around 180 000 tonnes per year of unrecyclable municipal waste will be used to fuel the plant. The installation, set up by Toplofikacia EAD, a company fully-owned by the Sofia municipality, will be connected to the Sofia district heating network. The construction will be finalised by the end of 2023.

The support will consist of two distinct measures:

  • a direct grant of approximately €90.8 million (around 177.6 million BGN) financed by EU Structural Funds managed by Bulgaria;
  • a loan granted by the Sofia municipality to Toplofikacia EAD at a preferential rate, amounting to approximately € 3 million (around 5.8 million BGN).

Commission’s assessment

The Commission assessed these support measures under EU State aid rules, in particular its 2014 Guidelines on State Aid for Environmental Protection and Energy, which allow Member States to support the production of electricity from renewable energy sources as well as energy-efficiency measures, subject to certain conditions.

The Guidelines notably provide that, in order to ensure that aid contributes to a higher level of environmental protection, support for cogeneration of heat and electricity must meet the “high-efficient cogeneration” criteria set out in the 2012 Energy Efficiency Directive. In this respect, the Commission found that the combined production of heat and electricity by the new plant will enable a primary energy saving of 46.5% compared to a scenario in which heat and electricity would be produced separately, thus meeting the criteria set out in the Energy Efficiency Directive.

Furthermore, the Commission found that the measures are necessary, as the project would not be carried out without the public support and proportionate, as the project will deliver a reasonable rate of return.

On this basis, the Commission concluded that the measures will contribute to key strategic objectives of the EU, in particular the improvement of energy efficiency through combined electricity and heat production, without unduly distorting competition, in line with EU State aid rules.

Background

The construction and operation of the high-efficient cogeneration plant in Sofia for which the Commission approved public support today is the third phase of a long-standing environmental project financed through EU structural funds (ESIF/ERDF) aimed at improving waste treatment in the Sofia Region of Bulgaria.

The first phase, which was completed in 2014, involved, amongst other actions, the construction of a new landfill, a new anaerobic digestion with energy production and composting installation and other minor project components. The second phase, completed in 2015, included the improvement of recycling and the establishment of a mechanical biological treatment facility producing unrecyclable municipal waste as a main product, as well as secondary materials for recycling.

The construction and operation of the Sofia cogeneration plant also complies with the Waste Directive. Notably, the waste that will be subject to energy recovery in the cogeneration plant has already been subject to preliminary treatment and cannot be recycled any further. If the waste was not used for energy recovery, it would go to landfill.

The non-confidential version of the decision will be made available under the case numbers SA.54042 in the State Aid Registeron the Commission’s competition website, once any confidentiality issues have been resolved. New publications of state aid decisions on the internet and in the Official Journal are listed in the State Aid Weekly e-News.

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