the eeag 2014 – one and a half years on - energi norge · the eeag 2014 –one and a half years...
TRANSCRIPT
Overview
• Background to EEAG
• Some statistics
• Notion of ‘aid’
• Compatibility
• Art 106(2)
• Conclusions
Background to EEAG
• SAM exercise May 2012 -> objectives
• EAG 2008 expiry: Issues paper
• Energy and Climate Change Framework
• Leaked draft EEAG July 2013 – extends to nuclear
• December 2013 – official draft
• Opening decision on Hinkley Point
Background to EEAG
• 5000 submissions received in consultation
• EAAG adopted April 2014 – enters into force July 2014
• Transitional regimes
EEAG 2014
• INVESTMENT AID
• Notification threshold for individual measures under a scheme: €15 million per
company
• Assessment based on general compatibility criteria and common assessment
principles
• OPERATING AID TO RES electricity
• Notification threshold for individual measures under a scheme: generation
capacity per site above 250 MW
• Duration of approval for scheme: 10 years
• Schemes preferably open to EEA / Energy Community
• a) Integration in the market:
• From 2016: (for all new aid schemes and measures) Renewable electricity
installations:
• sell the electricity they produce on the market, receiving a
• premium in addition to the market price.
• must compensate for short-term deviations from their
• scheduled generation plan
• Receive no incentives to generate when prices are negative
EEAG/2
• b) Introduction of competitive bidding
• Transitional phase 2015-2016
• Aid granted through competitive processes for at least 5%
• of the planned RES capacity From 2017
• Aid granted through competitive processes for 100% of the
• planned RES capacity, except if a Member State demonstrates that
the result would be suboptimal (e.g. limited number of eligible
projects/sites, risk of overcompensation or of underbidding)
• Process open to all generators and technologies. (Reasons for
exceptions include: grid stability, long-term potential of a new
technology, need to achieve diversification of sources)
• c) Special regime for small installations
• 3. OPERATING AID TO RES OTHER THAN ELECTRICITY
• Aid per unit of energy should not exceed the levelised costs of
producing energy (LCOE7) minus the market price of the form of
energy concerned.
The LCOE may include a normal return on capital. Investment aid is
deducted.
EEAG/3
• Infrastructure – certain market failures presumed so justified to use State aid to finance those investments. Examples are "projects of common interest” and projects in assisted areas.
• all users must benefit from the new infrastructure, so aided projects must provide open access to third parties and subject to tariff regulation.
• aid to infrastructure may not have any distortive effects.
• standard for examining aid should be the same for unregulated and regulated sectors
Some Statistics
• State Aid Scoreboard Feb 2016:
• Large increase in EEAG aid (28.5 billion) in year to Dec 2014 due to increased awareness that measures = state aid
• 9 out of 10 measures registered under GBER
• 47 decisions under EEAG to date
• [of which 20 relate to German offshore wind parks over 250 MW]
Notion of state aid
• From Preussen Elektra via Vent de Colere to Elcogas
• Virtually any intervention in setting additional charges on transmission tariffs = state aid
• Role of intermediary fund? How important?
• Selectivity test as an escape route?
• Increasing confusion in case law on this concept
Notion of aid/2
• Distinction between application of test to tax measures v the rest
If ad hoc measure= economic advantage -> presumption of selective advantage
If general measure -> is there advantage? Is it selective? 3 part test as applied to tax measures?
RES Projects in the UK
– CfD scheme, 5 offshore windfarm projects and Capacity Market scheme approved in July 2014 under Article 107(3)(c) and EEAG
– 1 further project (Teeside biomass CHP) approved in January 2015
– 2 biomass conversion projects (Lynemouth and Drax) : formal proceedings opened in February 2015 into Lynemouth
RES projects under EEAG
– EEAG framework – under Article 107(3)(c)– Key requirements for aid for electricity from renewable
energy sources:• Beneficiaries need to sell electricity directly into market
and be subject to market obligations. • From 1 January 2016 – aid must be premium to market
price, standard balancing responsibilities and no incentive to generate under negative prices
• From 1 January 2017 – generally need competitive transparent bidding processes (could be technology specific if justified), duration of aid only up to period when plant fully depreciated
– CfD mechanism accepted by Commission as meeting EEAG objectives
Hinkley Point - 2014
• Two European Pressurised Reactor units, representing approximately 7% of UK electricity generation
– initially intended to be delivered in 2017 but later planned for 2023
– final investment decision is pending and EDF may not go ahead
• The UK government proposed, and the Commission approved, an extensive package of support measures for the beneficiary, NNBG:
• 35 year contract for difference (CfD), with a £92.5/MWh index-linked strike price
• UK government credit guarantee
• ‘Secretary of State agreement’ in case of ‘political shutdown’
Hinkley /2
• the support package was considered as single (investment) aid measure
– link between the pricing of the guarantee, NNBG’s rating, and the CfD provisions
• UK government -> guarantee would be offered on commercial terms in line with the market economy operator principle (MEOP) : CfD = SGEI compensation – Altmark applies
– Commission - guarantee fee cannot be considered at market price, since the market does not provide a similar facility (see also Paks II opening decision)
– No entrustment so no SGEI/Altmark not met
Art 107(3)c) Market failure and nuclear
• market failures for low-carbon generation more broadly, and nuclear, in particular
– low-carbon generation• no long-term price signals for carbon and lack of stable regulatory framework
for carbon reductions• security of electricity supply is not adequately priced in
– nuclear• lack of financial instruments to hedge against significant risk of nuclear
construction• risk of political ‘hold-up’ and lack of credible commitment by policymakers
• concerns raised by the Commission:– potential overcompensation given the variable risk profile over the life of the
project– refinancing gains after construction are not automatically shared with customers
Biomass – Lynemouth
• Commission concerns:
• Lynemouth’s expected returns sensitive to assumptions for thermal efficiency, the load factor and fuel costs
• overcompensation cannot be excluded; Lynemouthcould be overcompensated if the plant achieves higher thermal efficiency and load factor and if fuel costs decline
• no safeguards in place to correct potential overcompensation
• concerns about the appropriateness of assumptions on thermal efficiency, load factor and fuel costs
Art 106(2) as compatibility test
• Commission refused to apply in Hinkley – no entrustment of a genuine SGEI
• Commission indicates it cannot apply in French ‘Plan Bretagne’ – no security threat?
• Could apply to achieve diversity of supply –Lithuanian LNG (Gazprom was super dominant)
• Black hole on costs – Case T- 57/11 Castelnou(Spanish coal)
Conclusions
• Does the Commission stick to its own guidelines?
• Can MS claim national energy policy trumps (Art 194(2))?
• Can national systems still be designed to escape Art 107(1)?
• Are EEAG objectives realistic – is technological neutrality possible?
• On RES – test is transition to auctions and FIPs after 2017