State aid: Commission approves over €1 billion support for high-efficient cogeneration of electricity and heat in Slovakia

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

The European Commission has approved, under EU State aid rules, Slovak plans to support the production of electricity from high-efficient cogeneration installations connected to district heating networks in Slovakia.

Executive Vice-President Margrethe Vestager, in charge of competition policy, said: “This over 1 billion Slovak measure will provide an important contribution to EU energy and climate objectives, without unduly distorting competition.”

The Slovak support measure

Slovakia notified the Commission of its plan to support combined heat and power (CHP) installations connected to district heating networks in Slovakia.

The scheme aims to: (i) increase or maintain high efficiency of existing high-efficient cogeneration installations; (ii) incentivise their switch from coal to natural gas or renewable sources; and (iii) stimulate investments in new high-efficient cogeneration facilities.

Slovakia will select the beneficiaries based on:

  • a multi-technology tender procedure for new installations with a capacity of 1 megawatt (MW) or higher;
  • an administrative procedure for small installations and existing installations. In this case the aid will be calculated based on the costs of producing electricity from those installations (levelised cost of energy – LCOE).

All selected installations above 250 kilowatt (kW) will receive aid in the form of a feed-in premium (i.e. the installation sells its output on the market and receives a top-up payment over the market price).

Installations below 250 kilowatts will receive a fixed feed-in tariff (i.e. a guaranteed price for the electricity produced).

The support will be granted for a maximum period of 15 years, and the overall budget of the scheme amounts to €1050 million (€70 million/year).

Coal-fired installations are not eligible to receive the support under the scheme.

The Commission’s assessment

The Commission assessed the measure under EU State aid rules, in particular, its 2014 Guidelines on State Aid for environmental protection and energy, which allow Member States to support high-efficient cogeneration under certain conditions, in order to stimulate energy savings.

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 Energy Efficiency Directive. Slovakia demonstrated that the scheme is necessary to promote investments in high efficient cogeneration, which are not viable under current market conditions. Therefore, the Commission found that the measure is necessary, as the investments would not be carried out without the public support, and that the level of the support is proportionate to achieve that objective: it is set through an open competitive process for new large installations and does not exceed the LCOE for small installations and existing installations.

The Commission concluded that the scheme will support the production of electricity from high-efficiency cogeneration, in line with the EU energy and climate objectives, without unduly distorting competition in the Single Market. On this basis, the Commission concluded that the measure is in line with EU State aid rules.

For More Information

The non-confidential version of the decision will be made available under the case numbers SA.54318 in the State Aid Register on 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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