State aid Registry - Directorate-General for CompetitionEuropean Commission 1049 Bruxelles, BELGIQUERef.: "HT 359 - Consultation on Community Guidelines on State Aid for Environmental Protection"

Questions and proposed additions to the Commission draft on Environmental and energy

guidelines for state aid 2014-2020

1.3 Definitions

(18)(b)The definition should be: “energy-efficiency means an amount of savedprimaryenergydetermined…” EU’s targets in the Energy Efficiency Directive are expressed in primary energyconsumption, which should be reflected here.

5.1 General compatibility provisions

(104)It is stated in the draft, that selection processes should be conducted in a non-discriminatory,transparent and open manner.Will it only be possible to have aid schemes in applications rounds in the future, or will it still bepossible to have aid schemes where it is more voluntary when applicants can apply for investmentaid for projects?If an aid scheme is notified according to the general block exemption regulation, but an individualproject have to be notified according to these guidelines, should such a project go through theseselection processes as well?

5.2. Aid to energy from renewable energy sources

Danish offshore wind farms are erected in accordance with EU legislation on public procurement.The Danish authorities assume, that tenders of offshore wind following the general EU legislationon public procurement, continues not to constitute state aid and is therefore not covered by theseguidelines.

(118)It is stated in the draft, that the Commission will not require that schemes are open to other EEA orEnergy Community countries as long as Member States duly explain the reasons for the absence ofa cooperation mechanism.The Danish authorities support these cooperation mechanisms in the RES-Directive, as they canserve as a useful tool for Member States that may not have the same potential to meet their RES-obligations within their borders.Operating aid for RES projects should not be mandatorily linked to the use of the RES-directive'scooperation mechanisms, as it would weaken the economic impact and political commitment in all

State aid Registry - Directorate-General for CompetitionEuropean Commission 1049 Bruxelles, BELGIQUERef.: "HT 359 - Consultation on Community Guidelines on State Aid for Environmental Protection"Member States to obtain the necessary funding for the green transition, if funds are channeled toprojects outside the country's borders.The Danish authorities must therefore give high priority that operating aid for RES projects notbeing linked to the use of the RES-Directive's cooperation mechanisms and that the cooperationmechanisms remains a fully voluntary scheme which Member States may choose to make use of ifappropriate.On the multilateral meeting 10 February 2014, the Commission stated, that the Commissionconsidered the cooperation mechanisms a fully voluntary instrument. The Danish authorities areproposing, that this will be more clearly reflected in the draft.(119)The draft is differentiating between aid for deployed and less deployed technologies. The criterionis depending on the technology share in electricity production reached, and it is suggested in thedraft that a deployed technology should at least cover [1-3] % of the gross electricity production atEU level, before it is considered “deployed”.The Danish position is that this threshold should be as high as possible and at least 3 %, consideringthe concerns on technology neutral bidding processes.(120)The Danish authorities cannot support the approach of the draft, that aid for developed technologiesshall be based on technology neutral bidding processes.The requirements for technology neutrality for mature or immature technologies will set up severebarriers for Member States to implement strategic support schemes effectively as they cannot betargeted at certain technologies. It is therefore of crucial importance for the EU’s transition towardsgreen energy systems and a low carbon economy that Member States are allowed to pre-define thetechnologies that can be granted technology specific operating aid for mature RES technologies in abidding process.If aid for developed technologies however anyway is decided to be based on a technology neutralbidding process, only technologies covering the same energy products (electricity, heat, cooling)can be included in the same bidding process. E.g. renewable technologies generating only electricityand renewable technologies generating combined heat and electricity must be separated in differentbidding processes. Further, bidding processes including renewable technologies, which aresupplying a certain heat market, must secure that there will be established a CHP-plant or a heatplant, based on renewables, when there is a local need for replacement of an outdated existing plant.It is stated in litra f, that any investment aid previously received must be deducted from theoperating aid.Does this refer to investment aid to the installation in general, meaning that it should not be possibleto give operating aid to a plant, if it has previously received investment aid? Or does it only mean,that it should not be possible to support the same costs twice through investment aid as well as

State aid Registry - Directorate-General for CompetitionEuropean Commission 1049 Bruxelles, BELGIQUERef.: "HT 359 - Consultation on Community Guidelines on State Aid for Environmental Protection"operating costs? In this way an investment aid would not exclude applying for operating aid lateron.(121)The Danish authorities are assuming that the criteria for achieving aid as “less deployed technology”will cover all technologies, which are using renewable sources to produce electricity, includingtechnologies, which are producing electricity and heat.It is a condition for aid for less deployed technologies, that production costs are updated regularly,at least every [6 months] or each [1 GW] of installed new capacity.It would decrease investors trust if there would be a risk of adjusting the support every 6 months.Besides it will be a large administrative burden for the authorities to carry out such an update every6 months. Thus the Danish authorities are proposing, that the updating will only be every 5 years orrare.

5.3 Energy efficiency measures, including cogeneration and district heating and district

cooling

(139)The definition in 139 seems to have as an implication that renovation of district heating networkcannot be supported. The Danish District Heating Association has noticed in their letter to theDanish authorities that in particular in Eastern Europe support to renovation of network should bepossible from an energy – and climate perspective as well as from a green growth perspective.(150) – (152)According to the draft, operating aid for new CHP may be granted on the basis of the conditionsapplying to operating aid for energy from deployed renewable technologies (151), and aid tosupport existing CHP may be granted on the basis of the conditions applying to operating aid toexisting biomass plants (152).If a new CHP plant is fulfilling the conditions for achieving aid as a less deployed renewabletechnology, operating aid for such a new CHP should be qualified to be granted aid on the basis ofthe conditions applying to operating aid for energy from less deployed renewable technologies(121). The Danish authorities would propose a clarification of this in the guidelines.According to the conditions laid down on aid for deployed technologies in (120), litra (b), and forexisting biomass plants in (125), litra (a), it is a condition, that the plant is producingelectricity/energy from renewable sources. Therefore it seems as a condition for supporting CHP,that the plants are only producing energy from renewable sources.The Danish authorities would like a confirmation on whether this is the right interpretation of theconditions for support to CHP?(151)

State aid Registry - Directorate-General for CompetitionEuropean Commission 1049 Bruxelles, BELGIQUERef.: "HT 359 - Consultation on Community Guidelines on State Aid for Environmental Protection"The Danish authorities assume, that it will be possible to make site specific bidding processescorresponding to a given district heating market, if found feasible to do so. It is proposed, that theguidelines would clarify this.

5.7 Aid in the form of reductions in funding support for electricity from renewable sources

(180)Will the Commission confirm, that the draft guidelines – provided that they stand – will cover allkinds of funding support for electricity from renewable sources, i.e. both PSO-costs, use of greencertificates etc.? The Danish authorities propose a clarification of the text on this issue.(184)The paragraph introduces environmental considerations. In order to ensure that the aid has anenvironmental effect, the draft guidelines should introduce the opportunity to condition aid on theentering of agreements between the member state and the beneficiaries or associations ofbeneficiaries, along the same lines as those introduced in paragraph 179(b). On the multilateralmeeting on 10 February 2014, the Commission confirmed this interpretation of the draft. TheDanish authorities propose a clarification of the text on this issue.

(184)The aid should be limited to electricity intensive sectors. However, the carbon leakage criteria isnot a fitting criterion to apply when it comes to national regulations as opposed to Europan-wideregulations (eg. the ETS). Using the carbon leakage criteria means distorting competition betweenmember states, as member states have chosen different paths to finance the expansion of RE. Thismeans that the Commission’s current draft gives de facto preferential treatment to electricityintensive enterprises in countries, where the expansion of RE is financed over the fiscal budget.Will the Commission elaborate on the logic behind this criterion?(184)How will the draft guidelines – provided that they stand – apply the carbon leakage requirements?On a very detailed (national?) enterprise-level or by applying the ETS? If a certain company fulfillsthe requirements, but the sector is not recognized as being in risk of carbon leakage by the EU, howwill it be treated? Denmark believes, that – as funding support for electricity from renewablesources is a purely national field of responsibility - the carbon leakage requirements should beapplied on a national level.

State aid Registry - Directorate-General for CompetitionEuropean Commission 1049 Bruxelles, BELGIQUERef.: "HT 359 - Consultation on Community Guidelines on State Aid for Environmental Protection"mentioned in 186(b), but is aiding companies with an increasing amount of money. How does theCommission intend to interpret and apply this paragraph?

6. Evaluation

If a Member state is having an aid scheme according to the general block exemption regulation, butan individual project is notified according to these guidelines, should such a project be subject to anevaluation as well?(223)The draft states, that there should be a time limitation on the support schemes of normally 4 years orless. It is the Danish position, that it should be possible with longer durations, i.e. at least 10 years,as investments in the green transition are often expensive and investors trust on the aid schemes areimportant.

7. Applicability of the Environmental and Energy Aid Guidelines

(230)The understanding of the draft is that all schemes concerning operating aid for energy productionfrom renewable energy sources will be able to stay in force until they expire according to theapproval from the Commission. Besides beneficiariesfrom all kind of schemes concerningoperating aid,will be granted aid under the entire period, if the beneficiary has received such aconfirmation? On the multilateral meeting on 10 February 2014, the Commission confirmed thisinterpretation of the draft. The Danish authorities propose a clarification of the text on this issue.

Annex 1, Aid intensities

The level of aid intensities is lower in the draft compared to the maximum aid intensities in thecurrent guidelines.It is the Danish position that this level of maximum aid intensities should continue in the newguidelines.