New State Aid Guidelines allow technology specific auctions, endorse Contracts for Difference to deploy more wind

Today the European Commission published its new EU Guidelines on State Aid for Climate, Environmental Protection and Energy (CEEAG). The new Guidelines allow National Governments to hold technology specific auctions and endorse revenue stabilisation mechanisms notably 2-sided CfDs. These are pre-conditions for the accelerated deployment of wind energy towards climate neutrality.

The EU Guidelines on State Aid for Climate, Environmental Protection and Energy (CEEAG) define the measures National Governments can take to grant state aid in line with internal market rules notably when it comes to renewables.

The revised State Aid Guidelines allow National Governments to hold competitive auctions for renewable energy projects. Importantly they offer Member States the flexibility to hold technology-specific auctions. The energy transition can only be delivered with a mix of different renewable technologies. Complementary technologies essential to Europe’s future energy system, such as wind and solar, need to scale up in parallel. Having them compete in the same auctions is therefore counterproductive.

The Guidelines specifically mention revenue stabilisation mechanisms in the form of two-sided Contracts for Difference (CfD) as a good model to support the further expansion of renewables.

“National Governments can continue with technology-specific auctions: good. They’re critical to the visibility of the industry and preserving and expanding the European wind supply chain”, says Pierre Tardieu, Chief Policy Officer at WindEurope.

Price will continue to be the lead criterion for allocating public support to wind energy projects, but not the only one. The European Commission decided to allow for up to 30% of non-price-based criteria to be introduced to national auctions.

“The European Commission allows for qualitative criteria in competitive wind energy auctions. That’s good. It will continue to ensure that the energy transition is delivered at the lowest cost for society. At the same time, it allows National Governments to consider whether they want to factor in sustainability, system integration or activation of the economy in their auctions”, says Tardieu.

The State Aid Guidelines are broadening the scope of State aid to allow for different decarbonisation technologies to be supported. This includes that storage and renewable hydrogen projects are eligible for State support. WindEurope welcomes this aspect. The EU Hydrogen Strategy defines renewable hydrogen as the form of hydrogen most compatible with the EU’s climate neutrality target. It is now important that the European Commission works within these guidelines and approves support that will help close the cost gap between fossil and renewable hydrogen and accelerate the scaling up of electrolysers.

Pilot and demonstration projects are essential to innovation in wind turbine technology. With the new State Aid Guidelines, they can receive direct aid aside of auctions, if Member States can prove that there is not sufficient competition for those very specific projects. This now also applies to wind energy projects with turbine sizes of more than 6 MW, crucially allowing for the latest turbine technology to be used.

Current State aid schemes already approved by the European Commission will not be subject to retroactive modifications. The new State Aid Guidelines will enter into force in the first quarter 2022. Member States will have a two-year transition period to adjust their national support frameworks to the new Guidelines.

During the press conference on the new CEEAG, European Commissioner for Competition Margrethe Vestager reiterated the European Commission’s position on the need to rapidly ramp up the share of renewables in the EU energy mix: “The faster we get to renewables, the less reliant we are on price spikes of imported fossil fuels”, the Commissioner said.

WindEurope’s response to the European Commission’s State Aid Guideline consultation

Source: WindEurope asbl/vzw, 21 December 2021
www.windeurope.org