New European Guidelines on State Aid for Environmental Protection and Energy 2014-2020 Allow Burden Reduction for Energy Intensive Sectors

The European Commission has today released its state aid guidelines for assessing public support projects in the field of energy and the environment for the period 2014 to 2020. Under the new regime the German government shall be able to largely uphold reductions on the EEG surcharge, though reductions will have to be scaled back and can only be granted to a more limited group of companies.

The Commission’s communication points out that the Guidelines have (only) been adopted in principle on 9 April 2014, and that the formal adoption will follow. The currently published version therefore is technically speaking for information purposes only and without prejudice to the authentic texts that will be published in the Official Journal later.

The Commission summed up the aim and content of the guidelines in its press release as follows:

“The guidelines will support Member States in reaching their 2020 climate targets, while addressing the market distortions that may result from subsidies granted to renewable energy sources. To this end, the guidelines promote a gradual move to market-based support for renewable energy. They also provide criteria on how Member States can relieve energy intensive companies that are particularly exposed to international competition from charges levied for the support of renewables. Furthermore, the guidelines include new provisions on aid to energy infrastructure and generation capacity to strengthen the internal energy market and ensure security of supply.”

The provisions on relief of energy-intensive companies from charges levied for the support of renewables are of particular importance for Germany, as the EEG supports energy-intensive companies by granting material reductions on the renewables surcharge (EEG surcharge) paid by electricity consumers. Based on data from the Federal Office of Economics and Export Control (BAFA), 2098 companies have been granted EEG surcharge reductions for 2014, totalling presumably EUR 5.1 billion (2013: EUR 4.0 billion).

In December 2013 the Commission launched a formal state aid investigation into the present EEG surcharge reduction regime and the so-called “green power privilege” (for more information, please see here). While Germany defended the reductions, it entered into talks with the Commission as it was planning an overhaul of the Renewable Energy Sources Act (EEG) anyway.

Yesterday the German government adopted a draft EEG reform bill that did not yet contain the provisions on the EEG surcharge reductions for energy-intensive companies, but informed that an agreement with the Commission had been found late on 7 April 2014.

In its press release on the new state aid guidelines in the field of energy and the environment the Commission recognizes that

“Charges levied for the funding of renewable energy support make up an increasing proportion of the energy bill for industry. This constitutes a very high burden for some energy intensive companies, in particular those exposed to strong international competition.”

The press release continues to say:

“The guidelines therefore allow reducing the burden for a limited number of energy intensive sectors defined for the whole EU. Member States will also be allowed to reduce the burden on highly energy intensive companies in other sectors.”

Further details of admissible reductions can be found in Section 3.7.2 of the new Guidelines under the heading “Aid in the form of reductions in the funding of support for energy from renewable sources”.

According to information provided by German Economics and Energy Minister Sigmar Gabriel at a press conference yesterday it seems that in future there will be 3 groups that can benefit from EEG surcharge reductions in Germany:

  1. Companies from 65 industry sectors that the Commission accepts as requiring support, e.g. the manufacturing of chemicals, paper, ceramics or metals. They shall reportedly pay 15% of the EEG surcharge (currently 15% of 6.24 cents, i.e. 0.936 cents);
  2. Special energy intensive companies of which the EEG surcharge will be capped at between 0.5 and 4% of gross value added (Bruttowertschöpfung);
  3. About 500 companies will in principle no longer be covered by the exemption. There shall be a grandfathering rule until 2018, and they shall pay 20%.

[Updated]

Sources: europe.eu, RP-Online

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