State aid: Commission approves prolongation and modification of German scheme to support electricity production from renewable energy sources

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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, the prolongation and modification of a German scheme to support the production of electricity from renewable energy sources and from mine gas, as well as reductions of charges to fund support for electricity from renewable sources. The reduction of charges will be available to (i) energy-intensive companies and (ii) shore-side electricity supply to ships while at berth in ports. The scheme is part of the German Renewable Energy Act (“Erneuerbare Energien Gesetz” – ‘EEG 2021′). The scheme will help Germany reach its renewable energy targets without unduly distorting competition and will contribute to the EU objective of achieving climate neutrality by 2050. Payments under the scheme for 2021 have been estimated to amount to around €33.1 billion.

Executive Vice-President Margrethe Vestager, in charge of competition policy, said: “The German EEG 2021 scheme will provide important support to the environmentally-friendly production of electricity, in line with EU rules. Thanks to this measure, a higher share of electricity in Germany will be produced through renewable energy sources, contributing to further reductions in greenhouse gas emissions and supporting the objectives of the Green Deal. The scheme introduces new features to ensure that aid is kept to the minimum and electricity production occurs in line with market signals, while at the same time ensuring the competitiveness of energy-intensive companies and reducing pollution caused by ships in harbour. In this way, the scheme provides the best value for taxpayers’ money, while minimising possible distortions of competition.”

The German scheme

Germany notified the Commission of its plans to prolong and modify its support scheme for renewable energy, replacing the support for renewable energy currently available under an existing scheme that the Commission approved as part of its decisions on the EEG 2017 (SA.45461) and EEG 2014 (SA.38632). The new measure will be applicable until end 2026.

The EEG 2021 scheme aims at a share of 65% of electricity produced from renewable energy sources by 2030 (compared to 40% in 2019).

Beneficiaries will generally receive support via a sliding premium on top of the electricity market price, with the exception of very small installations, which will be eligible to receive feed-in tariffs. Moreover, in the majority of cases, beneficiaries will be selected through competitive bidding processes.

In particular, tenders are organised per technology, including a newly introduced separation of rooftop and ground based solar photovoltaic, and separate tenders for biomethane. Moreover, innovation tenders for projects spanning several technologies will also be organised, allowing for a certain degree of technological neutrality and to gather experience on how to make electricity production from RES installations less intermittent. Finally, as biomass and onshore wind tenders have been regularly undersubscribed in the past, the EEG 2021 contains clear safeguards for tenders to be competitive, therefore unfolding their full potential to avoid overcompensation and to keep costs to a minimum for consumers and taxpayers. Rules to sell electricity in line with market signals have also been further improved in the EEG 2021.

The scheme also introduces small modifications to the EEG surcharge reductions for energy intensive companies, a dedicated rule for surcharge reductions for hydrogen for energy intensive companies, as well as EEG surcharge reductions to promote the use of shore-side electricity by ships while at berth in ports.

The Commission’s assessment

The Commission assessed the scheme under EU State aid rules, in particular the 2014 Guidelines on State aid for environmental protection and energy.

The Commission has found that the aid is necessary to further develop the renewable and mine gas energy generation to meet Germany’s environmental goals. Furthermore, the aid is proportionate and limited to the minimum necessary, as the level of aid will be set through competitive tenders. Where remuneration is set administratively, the aid is limited to the production costs which cannot be recuperated through market revenue. Finally, the Commission found that the positive effects of the measure, in particular the positive environmental effects, outweigh its negative effects in terms of distortions to competition.

In line with the evaluation requirement envisaged by the Guidelines on State aid for environmental protection and energy, Germany has developed a detailed plan for the independent economic evaluation of the EEG 2021, and has committed to improve the data gathering and the use of empirical methodologies in this respect. Germany will assess the new features of the scheme covering for instance the innovation tenders and the efficiency of the scheme in achieving greenhouse gas emissions reductions. The results of the evaluation will be published by Germany.

On this basis, the Commission concluded that the German scheme EEG 2021 is in line with EU State aid rules, as it supports projects promoting the use of renewable energy sources and reducing greenhouse gas emissions, in line with the European Green Deal, without unduly distorting competition.

Background

The Commission’s 2014 Guidelines on State Aid for Environmental Protection and Energy allow Member States to support the production of electricity from renewable energy sources, subject to certain conditions. These rules aim to help Member States meet the EU’s ambitious energy and climate targets at the least possible cost for taxpayers and without undue distortions of competition in the Single Market.

The Renewable Energy Directive of 2018 established an EU-wide binding renewable energy target of 32% by 2030. With the European Green Deal Communication in 2019, the Commission reinforced its climate ambitions, setting an objective of no net emissions of greenhouse gases in 2050. In April 2021, the European Council and the Parliament reached a provisional agreement on the net 55% target for 2030, which sets the ground for the ‘fit for 55′ legislative proposals scheduled for June 2021.

The decision adopted today does not cover the South quotas and tenders, the follow-up support to waste wood, follow-up support to small manure installations, follow-up support to large onshore wind installations, the ex-post increase of remuneration to hydropower installations and support to non-independent parts of companies receiving surcharge reductions for energy intensive users (EIUs) in the hydrogen sector, support to green hydrogen in the form of EIU reductions, as well as support to railways and busses in the form of energy EIU reductions. Where the aforementioned measures constitute State aid, they have to be notified separately before being implemented. The decision also does not cover certain categories of surcharge reductions, which are covered by the existing State aid decisions in cases SA.46526 and SA.49522.

The non-confidential version of the decision will be made available under the case numbers SA.57779 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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