The European Commission has approved, under EU State aid rules, a €2.4 billion Czech scheme to support the construction and operation of new or converted sustainable biomethane production plants. The measure will contribute to the implementation of Czechia’s National Energy and Climate Plan and to the European Green Deal targets, while helping end dependence on Russian fossil fuels in line with the REPowerEU Plan.
The Czech scheme
Czechia notified to the Commission its intention to support the production of sustainable biomethane to be either (i) injected into the natural gas grid or (ii) delivered to a filling station or dispensing unit, for use in applications ranging from transportation to heating. The scheme will run until 31 December 2025.
The scheme will support the construction and the operation of new or converted biomethane production plants in Czechia. The scheme will be open to biomethane producers holding a gas production license in the Czech Republic. In order to qualify for aid under the scheme, their biomethane production must comply with the requirements set out in the EU Renewable Energy Directive. The measure is expected to benefit mostly small and medium-sized enterprises (‘SMEs’) or renewable energy communities with projects of up to 6 MW installed capacity.
Under the scheme, the aid will take the form of a green bonus to biomethane producers for each MWh of biomethane produced for a duration of 20 years. The amount of the bonus will be set administratively by the Energy Regulatory Office on an annual basis and will be limited to the funding gap.
The scheme is expected to support installations with a total output of approximately 337 million standard cubic meters of sustainable biomethane.
The Commission’s assessment
The Commission assessed the scheme under EU State aid rules, in particular Article 107(3)(c) of the Treaty on the Functioning of the EU (‘TFEU’), which enables Member States to support the development of certain economic activities subject to certain conditions, as well as under the 2022 Guidelines on State aid for climate, environmental protection and energy. Under the Guidelines, Member States can support the production of biomethane, subject to certain conditions. Small projects can be granted aid without a competitive tender.
The Commission found that:
- The scheme facilitates the development of certain economic activities, in particular the production of sustainable biomethane to be used for multiple applications from from transportation to heating.
- The scheme has an ‘incentive effect’, as the beneficiaries would not carry out the investments in sustainable biomethane production to the same extent without the public support.
- The scheme is necessary and appropriate to end dependence on Russian fossil fuels and accelerate the green transition. In addition, the aid is proportionate as it is limited to the minimum necessary. The level of aid is based on the funding gap quantification for a reference project. In addition, the support for production of biomethane will be subject to annual monitoring by the national authorities and adjusted to ensure that the funding gap is not exceeded. Furthermore, the exemption from the requirement to grant the aid through competitive tenders was justified by the fact that beneficiaries will be for the large majority small projects 100% owned by SMEs or renewable energy communities.
- The positive effects of the aid outweigh any potential negative effects on competition and trade between Member States. The scheme will support the production of sustainable biomethane in Czechia reducing dependency from fossil fuels, in line with the European Green Deal and the REPowerEU Plan, without unduly distorting competition in the Single Market.
On this basis, the Commission approved the Czech scheme under EU State aid rules.
Background
The Commission’s 2022 Guidelines on State aid for climate, environmental protection and energy provide guidance on how the Commission will assess the compatibility of environmental protection, including climate protection, and energy aid measures which are subject to the notification requirement under Article 107(3)(c) TFEU.
The Guidelines create a flexible, fit-for-purpose enabling framework to help Member States provide the necessary support to reach the Green Deal objectives in a targeted and cost-effective manner. The rules involve an alignment with the important EU’s objectives and targets set out in the European Green Deal and with other recent regulatory changes in the energy and environmental areas and will cater for the increased importance of climate protection.
The Guidelines allow Member States to support the production of biomethane, subject to certain conditions. These rules aim to help Member States meet the EU’s ambitious energy and climate targets at the least possible cost for taxpayers and without undue distortions of competition in the Single Market.
The Renewable Energy Directive of 2018 established an EU-wide binding renewable energy target of at least 32% by 2030. With the European Green Deal Communication in 2019, the Commission reinforced its climate ambitions, setting an objective of net zero emissions of greenhouse gases in 2050. The European Climate Law in force since July 2021, which enshrines the 2050 climate neutrality objective and introduces the intermediate target of reducing net greenhouse gas emissions by at least 55% by 2030, sets the ground for the ‘Fit for 55‘ legislative proposals presented by the Commission on 14 July 2021. Among these proposals, the Commission has presented amendments of the Renewable Energy Directive and the Energy Efficiency Directive with more ambitious binding annual targets to increase the production of energy from renewable sources and reduce energy use at EU level.
For more information
The non-confidential version of the decision will be made available under the case number SA.104686 in the State aid register on the Commission’s Competition website once any confidentiality issues have been resolved. New publications of State aid decisions on the internet and in the Official Journal are listed in the Competition Weekly e-News.
Quotes
This €2.4 billion scheme will boost the EU’s production of sustainable biomethane for the transport and heating sectors. It will help Czechia meet its emission reduction targets. And end the dependence on Russian fossil fuel whilst improving security of gas supply. At the same time, the measure ensures that possible distortions of competition are limited.