Commission approves €3.2 billion Czech State aid scheme to support high-efficiency combined heat and power generation

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The European Commission has approved, under EU State aid rules, a €3.2 billion (CZK 75 billion) Czech scheme to support the production of electricity from new and modernised high-efficiency combined heat and power (‘CHP’) plants. The measure will contribute to the implementation of Czechia’s National Energy and Climate Plan, the European Green Deal and the EU’s energy efficiency targets.

The Czech scheme

Czechia notified to the Commission its intention to support the production of electricity in high-efficiency CHP plants. The scheme will run until 31 December 2025. The estimated budget of the scheme is €3.2billion (CZK 75 billion).

The beneficiaries are operators of new or modernised CHP installations in Czechia that meet the definition of high-efficiency cogeneration as set out in the Energy Efficiency Directive. All technologies and projects that enable the production of electricity from high-efficiency CHP installations are eligible, except for those powered by solid fossil fuels, diesel and oil. Projects involving natural gas will be required to either close the aided installations or enable switch to renewable and low-carbon gases by 2050, to avoid lock-in of natural gas.

Under the scheme, the aid will take the form of a feed-in premium (bonus) for each MWh of produced electricity for a duration of 15 years. The amount of bonus is set through tenders, except for small installations (up to 1 MW_e) where the amount is set administratively by the Czech Energy Regulatory Office on an annual basis and limited to the funding gap.

The scheme is expected to bring around 9.3 million tonnes of CO2 savings per year.

The Commission’s assessment

The Commission assessed the scheme under EU State aid rules, in particular Article 107(3)(c) of the Treaty on the Functioning of the EU (‘TFEU’), which enables Member States to support the development of certain economic activities subject to certain conditions, as well as under the 2022 Guidelines on State aid for climate, environmental protection and energy. Under the Guidelines, Member States can support energy efficiency through production of electricity in high-efficiency cogeneration, subject to certain conditions. Aid can be granted to small projects without a competitive bidding process.

The Commission found that:

• The scheme facilitates the development of certain economic activities, in particular the production of electricity in high-efficiency CHP plants
• The scheme has an ‘incentive effect’, as the beneficiaries would not carry out the investments in production of electricity in high-efficient CHP plants to the same extent without the public support.
• The scheme is necessary and appropriate to increase energy efficiency and accelerate the green transition. In addition, the aid is proportionate as it is limited to the minimum necessary. The aid will be granted through open and transparent competitive tenders. In case of small installations, the level of aid is based on the funding gap quantification for reference projects, which will be subject to annual monitoring by the national authorities and adjusted to ensure that the funding gap is not exceeded.
• The positive effects of the aid outweigh any potential negative effects on competition and trade between Member States. The scheme will support decarbonisation in Czechia, in particular increasing energy efficiency through production of electricity in high-efficiency CHP plants, in line with the European Green Deal, without unduly distorting competition in the Single Market.

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

Background

The Commission’s 2022 Guidelines on State aid for climate, environmental protection and energy provide guidance on how the Commission will assess the compatibility of environmental protection, including climate protection, and energy aid measures which are subject to the notification requirement under Article 107(3)(c) TFEU.

The Guidelines create a flexible, fit-for-purpose enabling framework to help Member States provide the necessary support to reach the Green Deal objectives in a targeted and cost-effective manner. The rules involve an alignment with the important EU’s objectives and targets set out in the European Green Deal and with other recent regulatory changes in the energy and environmental areas and will cater for the increased importance of climate protection.

The Guidelines allow Member States to support the production of electricity from cogeneration plants, 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 revised Energy Efficiency Directive of 2023 significantly raised the EU’s ambitions on energy efficiency. It established an EU-wide binding energy efficiency target of reducing EU final energy consumption by 11.7% by 2030, compared to the projected energy use for 2030. With the European Green Deal Communication in 2019, the Commission reinforced its climate ambitions, setting an objective of net zero emissions of greenhouse gases in 2050. The European Climate Law in force since July 2021, which enshrines the 2050 climate neutrality objective and introduces the intermediate target of reducing net greenhouse gas emissions by at least 55% by 2030, sets the ground for the ‘Fit for 55‘ legislative proposals presented by the Commission on 14 July 2021. As a result of these proposals, the Commission revised also the Renewable Energy Directive with more ambitious binding annual targets to increase the production of energy from renewable sources at EU level.

For More Information

The non-confidential version of the decision will be made available under the case number SA.108368 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.

Quote(s)

This €3.2 billion Czech scheme will promote energy efficiency and help Czechia meet its CO2 emission reduction targets. Granting support through competitive tenders will limit the aid to the minimum and keep electricity prices low for consumers, at the same time ensuring that possible distortions of competition are limited.

Margrethe Vestager, Executive Vice-President in charge of competition policy