State aid: Commission approves €800 million Czech scheme to support companies facing increased energy costs in the context of Russia’s war against Ukraine

The European Commission has approved an approximately €800 million (CZK 19 billion) Czech scheme to support companies affected by increased energy costs in the context of Russia’s war against Ukraine. The scheme was approved under the State aid Temporary Crisis and Transition Framework, adopted by the Commission on 9 March 2023 to support measures in sectors which are key to accelerate the green transition and reduce fuel dependencies. The new Framework amends and prolongs in part the Temporary Crisis Framework, adopted on 23 March 2022 to enable Member States to support the economy in the context of the current geopolitical crisis, already amended on 20 July 2022 and on 28 October 2022.

The Czech measure

Czechia notified to the Commission, under the Temporary Crisis and Transition Framework, an approximately €800 million (CZK 19 billion) scheme to support companies facing increased energy costs in the context of Russia’s war against Ukraine.

The measure will be open to large companies in all sectors. Under the scheme, the aid will take the form of direct grants to cover the additional costs due to exceptional price increases of natural gas and electricity recorded in the eligible period, specifically from 1 January 2023 to 31 December 2023, compared to the period from 1 January 2021 to 31 December 2021.

The beneficiaries will be entitled to aid as soon as the market prices for natural gas and electricity go above the maximum prices set by the scheme (approximately €210/MWH (CZK 5,000/MWh) for natural gas and €105/MWH (CZK 2,500/MWh) for electricity). The aid amount will correspond to the difference between the maximum prices set by the scheme and the market prices during the year 2023, subject to the application of the  maximum aid amounts laid down in the Temporary Crisis and Transition Framework.

The support will be channelled to eligible beneficiaries through energy suppliers, who will have to sell natural gas and electricity at the maximum price set under the scheme and will be subsequently compensated in full by Czechia.

The Commission found that the Czech scheme is in line with the conditions set out in the Temporary Crisis and Transition Framework. In particular, the overall aid per beneficiary will not exceed 50% of the eligible costs, up to a maximum of €4 million. The beneficiaries may receive further aid, not exceeding 40% of the eligible costs and up to a maximum of €100 million. Energy-intensive companies may receive aid up to 65% of the eligible costs for the maximum aid ceiling of €50 million. Furthermore, those energy-intensive companies that are active in particularly affected sectors, will be entitled to receive aid up to 80% of the eligible costs for the maximum aid ceiling of €150 million. In addition, the aid will be granted before 31 December 2023.

The Commission concluded that the Czech scheme is necessary, appropriate and proportionate to remedy a serious disturbance in the economy of a Member State, in line with Article 107(3)(b) TFEU and the conditions set out in the Temporary Crisis and Transition Framework.

On this basis, the Commission approved the aid measure under EU State aid rules.

Background

On 9 March 2023, the Commission adopted a new Temporary Crisis and Transition Framework to foster support measures in sectors which are key for the transition to a net-zero economy, in line with the Green Deal Industrial Plan. Together with the amendment to the General Block Exemption Regulation (‘GBER’) that the Commission endorsed on the same day, the Temporary Crisis and Transition Framework will help speeding up investment and financing for clean tech production in Europe. It will also assist Member States in delivering on specific projects under National Recovery and Resilience Plans which fall within their scope.

The new Framework amends and prolongs in part the Temporary Crisis Framework, adopted on 23 March 2022, to enable Member States to use the flexibility foreseen under State aid rules to support the economy in the context of Russia’s war against Ukraine. The Temporary Crisis Framework has been amended on 20 July 2022, to complement the Safe gas for a Safe Winter Package and in line with the REPowerEU Plan objectives. The Temporary Crisis Framework has been further amended on 28 October 2022 in line with the Regulation on an emergency intervention to address high energy prices and the Regulation enhancing solidarity through better coordination of gas purchases, reliable price benchmarks and exchanges of gas across borders.

The Temporary Crisis and Transition Framework provides for the following types of aid, which can be granted by Member States:

• Limited amounts of aid, in any form, for companies affected by the current crisis or by the subsequent sanctions and countersanctions up to the increased amount of €250,000 and €300,000 in the agriculture, and fisheries and aquaculture sectors respectively, and up to €2 million in all other sectors;
• Liquidity support in form of State guarantees and subsidised loans. In exceptional cases and subject to strict safeguards, Member States may provide to energy utilities for their trading activities public guarantees exceeding 90% coverage, where they are provided as unfunded financial collateral to central counterparties or clearing members.
• Aid to compensate for high energy prices. The aid, which can be granted in any form, will partially compensate companies, in particular intensive energy users, for additional costs due to exceptional gas and electricity price increases. The individual aid amount may be calculated based on either past or present consumption, taking into account the need to keep market incentives to reduce energy consumption and to ensure the continuity of economic activities. In addition, Member States may provide support flexibly, including to particularly affected energy-intensive sectors, subject to safeguards to avoid overcompensation and to incentivise the reduction of the carbon footprint in case of aid amounts above €50 million. Member States are also invited to consider, in a non-discriminatory way, setting up requirements related to environmental protection or security of supply. Further details on the support possibilities for high energy prices, including on the methodology to calculate individual aid amounts, are available here;
• Measures accelerating the rollout of renewable energy. Member States can set up schemes for investments in all renewable energy sources, including renewable hydrogen, biogas and biomethane, storage and renewable heat, including through heat pumps, with simplified tender procedures that can be quickly implemented, while including sufficient safeguards to protect the level playing field. In particular, Member States can devise schemes for a specific technology, requiring support in view of the particular national energy mix. The conditions for the granting of aid to small projects and less mature technologies, such as renewable hydrogen, have been simplified by lifting the need for a competitive bidding process, subject to certain safeguards;
• Measures facilitating the decarbonisation of industrial processes. To further accelerate the diversification of energy supplies, Member States can support investments to phase out from fossil fuels, in particular through electrification, energy efficiency and the switch to the use of renewable and electricity-based hydrogen which complies with certain conditions, with expanded possibilities to support the decarbonisation of industrial processes switching to hydrogen-derived fuels. Member States can either (i) set up new tender-based schemes, or (ii) directly support projects, without tenders, with certain limits on the share of public support per investment. Specific top-up bonuses would be foreseen for small and medium-sized enterprises as well as for particularly energy efficient solutions. In the absence of tenders, a further simpler method has been introduced to determine the level of maximum support; and
• Measures aimed at supporting electricity demand reduction, in line with the Regulation on an emergency intervention to address high energy prices.
• Measures to further accelerate investments in key sectors for the transition towards a net-zero economy, enabling investment support for the manufacturing of strategic equipment, namely batteries, solar panels, wind turbines, heat-pumps, electrolysers and carbon capture usage and storage as well as for production of key components and for production and recycling of related critical raw materials. More specifically, Member States may design simple and effective schemes, providing support capped at a certain percentage of the investment costs up to specific nominal amounts, depending on the location of the investment and the size of the beneficiary, with higher support possible for small and medium-sized enterprises (‘SMEs’) as well as companies located in disadvantaged regions, to ensure that cohesion objectives are duly taken into account. Furthermore, in exceptional cases, Member States may provide higher support to individual companies, where there is a real risk of investments being diverted away from Europe, subject to a number of safeguards. More information on the support possibilities for measures to accelerate the transition to a net-zero economy can be found here.

Sanctioned Russian-controlled entities will be excluded from the scope of these measures.

Measures particularly important to accelerate the green transition and reduce fuel dependencies will be in place until 31 December 2025. This concerns in particular measures accelerating the rollout of renewable energy and energy storage, measures facilitating the decarbonisation of industrial processes and measures to further accelerate investments in key sectors for the transition towards a net-zero economy.

The remaining provisions of the Temporary Crisis Framework aimed at providing a more immediate crisis response (limited amounts of aid, liquidity support in form of State guarantees and subsidised loans, aid to compensate for high energy prices, measures aimed at supporting electricity demand reduction), remain applicable until 31 December 2023. With a view to ensuring legal certainty, the Commission will assess at a later stage the potential need for an extension.

The Temporary Crisis and Transition Framework complements the ample possibilities for Member States to design measures in line with existing EU State aid rules. For example, EU State aid rules enable Member States to help companies cope with liquidity shortages and needing urgent rescue aid. Furthermore, Article 107(2)(b) of the Treaty on the Functioning of the European Union enables Member States to compensate companies for the damage directly caused by an exceptional occurrence, such as those caused by the current crisis.

The non-confidential version of the decision will be made available under the case number SA.107138 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 Competition Weekly e-News.

More information on the Temporary Crisis and Transition Framework and other actions taken by the Commission to address the economic impact of Russia’s war against Ukraine and foster the transition towards a