KEF, Alm.del - 2020-21 - Bilag 137: Høringssvar om statsstøtteretningslinjerne for miljøbeskyttelse og energi

Klima-, Energi- og Forsyningsudvalget 2020-21
KEF Alm.del Bilag 137
Offentligt

Danish comments to the public consultation for the revision of the Guidelines

on State aid for Environmental protection and Energy 2014-2020

Date

7 January 2021

The Danish Government welcomes the opportunity to comment on the European

Commission’s

public consultation for the revision of the guidelines on State aid for

Environmental protection and Energy.

The Guidelines on State aid for Environmental protection and Energy (EEAG) has

played and will continue to play an important role, not only in relation to the regulation

of the internal market and ensuring fair competition, but also in relation to supporting

the European Union’s

energy and climate targets and objectives.

It is therefore especially important that the upcoming revision of the EEAG and GBER

take into consideration that the European Union as a whole has set a target to reach

climate neutrality by 2050 and has adopted ambitious energy and climate targets for

2030. The European Council agreed as late as in December 2020 to increase

EU’s

climate target for 2030 to at least 55 percent. It is therefore necessary to supplement

the European Green Deal and the upcoming

“fit-for-55-package”,

which will focus on

implementing the new climate target into relevant sector legislation, by a

strengthened, modernized and future proof state aid legislation that can support the

green transition in the Member States and ensure the necessary investments in

renewable energy, including new renewable energy technologies.

The Danish Government would also like to refer to its previous comments from

September 2019 to the revision of the guidelines as part of the fitness check-

exercise.

The current EEAG

The Danish Government is of the opinion that the key principle of the EEAG

concerning aid for energy from renewable sources should be maintained, thus

establishing that aid as a main rule only can be granted

in a competitive bidding

process on the basis of clear, transparent and non-discriminatory criteria, unless certain

explicitly described circumstances are in place, cf. Article 126. Technology-neutral

bidding processes are future proof and key in the green transition of the energy sector.

The existing option to limit a bidding process to specific technologies should only be

maintained as long as an open process, which includes all technologies, would lead to a

suboptimal result.

Cross-border opening of aid schemes

Even though cross-border opening of aid schemes could increase e.g. the

competition and minimize the risk of competitive advantages to firms located in

Member States with greater financial resources, the disadvantages would be even

larger. Not least, the complexity of constructing such aid schemes, the challenges

attached to monitoring, enforcement etc., but also

–

and most importantly

–

the risk

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KEF, Alm.del - 2020-21 - Bilag 137: Høringssvar om statsstøtteretningslinjerne for miljøbeskyttelse og energi

this could cause for the green transition and future deployment of renewable energy

in Member States, if Member States where forced to open aid schemes and not was

able to decide on a fully voluntary basis where new renewable energy should be

deployed.

The Danish Government will strongly recommend that the cross-border opening of

aid schemes will continue to be voluntary, just as it is already stated in the Directive

on Renewable Energy (2018/2001/EU). It will be possible to ensure the competition

and minimize any risks attached hereto with other measures, e.g. by public tenders

and competitive bidding processes.

Alignment with the revised Renewable Energy Directive

With the revised Renewable Energy, which enters into force in 2021, the legislation

concerning renewable energy has been brought up to date, and a number of new

requirements to renewable energy technologies, criteria etc. have now been included

in the EU legislation. This “modernisation” of the directive can raise questions

whether the EEAG and GBER still are satisfactory aligned with the rules on

renewable energy.



The sustainable criteria:

Denmark would appreciate further guidance on possible

connections between the sustainability criteria in the Renewable Energy

Directive (RED II) and state aid regulation. There is a need to clarify that it will

be possible for Member States to make use of additional national sustainability

criteria for e.g. biomass and biogas used for electricity, heating and cooling,

industrial purposes, upgrading for injection in gas grid, and link the compliance

of the national sustainability criteria to existing aid schemes.

Guarantees of origin:

The extensive use of guarantees of origin in RED II raises

questions about how to implement these in connection with state aid regulations.

According to RED II Article 19 (Guarantees of Origin), Member States shall

ensure that when a producer receives financial support from a support scheme,

the market value of the guarantee of origin for the same production is taken into

account appropriately in the relevant support scheme. It is foreseen in the

implementation of RED II, including Article 19, into Danish law that most of the

future financial support to new renewable energy production capacity will be

granted through a tender procedure. Therefore, the market value of the

guarantee of origin will be taken into account. We expect that the future state aid

framework will embrace this approach.

Biofuels:

The current scope and definitions in the guidelines should be

considered in order to accommodate e.g. renewable liquid and gaseous

transport fuels of non-biological origin and recycled carbon fuels. In connection

with these fuels, it should be considered to include not only production, but also

conversion of energy. In general, it is from a Danish point of view still necessary,

to carry on the absolute ban on aid for food-based biofuels, which enters into



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KEF, Alm.del - 2020-21 - Bilag 137: Høringssvar om statsstøtteretningslinjerne for miljøbeskyttelse og energi

force from 2021. However, when it comes to supporting the use of instruments

as CO2 taxes which have shown to be a valuable

supplement to reach the EU’s

renewables energy targets for the transport sector, the rules should be made

more flexible, e.g. by, to a larger extent, allowing for aid for biofuels covered by

a supply or blending obligation.

Future proof guidelines

The speed at which technologies develop underlines the need to try to future proof

and include further technologies, not only in the EEAG, but also in the GBER, as the

time factor is very important in relation to the development of new schemes. In this

respect, Denmark would especially highlight the following:



Power-to-X (PtX)

The rules on state aid to PtX based on electricity from

renewable energy sources are not sufficiently clear in the EEAG. However, in

the 2020 hydrogen strategy for a climate-neutral Europe, the European

Commission highlights the need for a revision of the state aid framework as well

as the current RED II. It is important that PtX (based on renewable hydrogen) is

handled by EEAG, and not only by the rules relating to IPCEI-projects. Producing

fuels by converting renewable electricity require large amounts of renewable

electricity from e.g. wind turbines or solar panels. The consumption of electricity

for production of hydrogen and other fuels is considered flexible and can help

provide flexibility on the consumption of electricity that better matches the volatile

nature of electricity production on wind and solar. A clarification in the EEAG on

the method to document that electricity provided through the grid qualify as

renewable would be most helpful and could enable to ensure that the rapid

growth in renewable capacity is met by the needed flexible demand.

Methodology on calculation of renewable energy:

In RED II Article 27, the

Directive stipulates forthcoming detailed rules by which economic operators are

to comply with the proportion of renewable energy for electricity in producing PtX.

The guidelines should include this methodology in how to calculate the

renewable energy part of aid to PtX.

Conversion and storage facilities for renewable energy:

There is an increasing

need to demonstrate and promote the market penetration of industrial scale

solutions to convert and store “excess” electricity produced from natural

fluctuating renewable energy sources as wind and solar in order to balance - or

“bridge the gap”

- between electricity production and consumption/end-use. The



Hydrogen PtX technologies:

PtX is a general term for a wide range of fuels and other

products produced by electricity. Common for all of the PtX products are that they include

hydrogen produced by electrolysis. Renewable hydrogen can be used directly for industrial

processes, transport etc., or be used for production of synthetic fuels and gasses, methanol

ammonia for shipping as mentioned in the European Commission’s hydrogen strategy for

a climate neutral Europe, production of jet fuel, electro-methane for the gas system or products

as fertilizers for agriculture.

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KEF, Alm.del - 2020-21 - Bilag 137: Høringssvar om statsstøtteretningslinjerne for miljøbeskyttelse og energi

development of flexible and cross-sectorial solutions to handle this challenge is

crucial as a

prerequisite for

the green transition of the electricity supply both in

physical and - not least - economical terms. The use of PtX-technologies as the

production and storage of hydrogen is one example. As the market failure is the

risk associated with testing and applying of new and innovative conversion and

storage solutions in the sector, this challenge should be embraced by the future

state aid framework by allowing investment grants inter alia. Some articles in the

present GBER seems to contain conditions that are not fully compatible with the

aim to promote the mentioned technologies especially when they have reached

a state of maturity that is beyond the coverage of Article 25 regarding R&D and

Innovation.



The GBER is a very useful instrument to designing and implementing aid

schemes within a reasonable period. In order to make the regulation even more

applicable to the needs of the green transition it would be useful to supplement

the current regulation with possibilities that can accommodate new technological

developments even better. The possibility of higher aid intensity to micro and

small companies

–

including marketing expenses

–

would be highly relevant in

order to support the development of innovative energy technology. Furthermore,

it should be considered to raise the notification thresholds in order to alleviate

administrative burdens.

Other important aspects

Besides, the general viewpoints concerning key principles in the EEAG that should

continue, the alignment with RED II and ensuring a future proof legislation the

following modernisation aspects

–

which are important to take into consideration

when the EEAG and GBER are revised

–

should be highlighted as well.



Coherence with the Clean Energy for All package and the European Green Deal:

The Clean Energy for All package contain articles that could have implications

for state aid, e.g. capacity mechanisms and the more general need to ensure

provision of flexibility from a security of supply perspective and measures to

underpin electrification across various sectors. A more general clarification of the

relationship between the EEAG and the legislation covered by the

Clean Energy

for All

package as well as measures covered by the

European Green Deal

recommended.

EEAG and GBER’s coherence with the sector regulation on energy:

It is

suggested to align the state aid rules with other sector regulation on energy,

including the Energy Efficiency Directive, the Directive of Energy Performance of

Buildings, and the Renewable Energy Directive, to support the principle of

energy efficiency first.

Bidding process for biogas:

Guidance in the new EEAG with regard to promoting

biogas and methane produced by electrolysis and based on renewable energy



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KEF, Alm.del - 2020-21 - Bilag 137: Høringssvar om statsstøtteretningslinjerne for miljøbeskyttelse og energi

sources in a tender scheme for renewable gases would be appreciated.



GBER Article 41:

The article covers investment aid for the promotion of energy

from renewable sources. However, the article seems only to be applicable to

production

of renewable energy. The conversion and storage technologies do

not concern the energy production itself, but support the general deployment of

renewable energy. In this way, these technologies also promote the production

of primary energy from renewable energy sources. If this interpretation is correct,

it is proposed to include aid for conversion and storage technologies in the future

within

GBER section 7 “Aid for environmental protection” or directly in

Article 41.

GBER Article 48:

The above mentioned projects might fall within the scope of

energy infrastructure as defined

in Article 48(2): “Electricity

storage, defined as

facilities used for storing electricity on a permanent or temporary basis in above-

ground or underground infrastructure or geological sites, provided they are

directly connected to high-voltage transmission lines for a voltage of 110 kV or

more”.

However, as the relevant projects will not in all cases be directly

connected to high-voltage transmission lines the present definition might be a

“bottleneck”. It is in general recognised by the Commission that a more “local”

approach to match electricity production versus end-use can be to the benefit of

the overall electricity system as well as to the rural development. In addition,

there might also be a challenge in fulfilling the condition set in Article 48 (3),

which states that:

“The infrastructure shall be subject to full

tariff and access

regulation according to internal energy market legislation”.

The different

regulations should therefore be aligned to promote the market penetration of the

appropriate storage and conversion technologies.

Conversion from renewable sources to renewable sources:

It would be highly

appreciated if possibilities for Member States to provide state aid within the

scope of EEAG and GBER for conversions from one renewable energy source

to another renewable energy source that is considered more beneficial to the

environment or climate e.g. with regard to CO2 reductions is clarified.

Energy Efficiency Directives Article 7 and CO

reductions:

It seems unclear

whether-and-how Member States are to reduce the reported savings coming

from planned subsidy schemes for free-rider effect, when these subsidy

schemes constitute state aid, and therefore comply with the provisions of GBER

regarding incentive effect. There is possible a conflict between a correction for

free-rider effect, and meeting the provisions of the GBER regarding incentive

effect of the aid. Further guidance within the GBER would therefore be

appreciate on how to operate safely in accordance with both sets of rules.

Inserting a transition period for already approved aid schemes:

It is important

that the revised guidelines contain a proper transition period as regards aid

schemes that has been approved on the basis of the present guidelines and



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KEF, Alm.del - 2020-21 - Bilag 137: Høringssvar om statsstøtteretningslinjerne for miljøbeskyttelse og energi

requirements. The purpose behind this will be to ensure that already approved

aid schemes which still fulfil the general criteria for what constitutes legal state

aid and which still is considered important for the green transition and the

continued efforts for reducing greenhouse gas emissions could be prolonged

despite the approval has been made according to the “old” requirements.

Concluding remarks

In conclusion, the Danish Government finds it of great importance to make sure that

the EEAG and GBER in the future are not only strengthen, modernised and able to

handle new technologies as long as they are developed, but also continue as the

main purpose to support

the European Union’s ambitious climate and energy policy.

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