Fri. Feb 7th, 2025
German LNG Terminal in Brunsbüttel. Source German LNG Terminal GmbH
German LNG Terminal in Brunsbüttel. Source German LNG Terminal GmbH

Brussels, 20 December 2024

The European Commission has approved, under EU State aid rules, an estimated €4.06 billion German measure to support the operation of four storage and regassification units (‘FSRUs’) for the import of Liquefied Natural Gas (‘LNG’) by Deutsche Energy Terminal (‘DET’). The measure contributes to the achievement of the objectives of the REPowerEU Plan, by enabling the diversification of energy supplies and ensuring security of gas supply.

The German measure

In December 2022, Germany had chartered four FSRUs and created the State-owned company DET, tasked with operating the terminals. The FSRUs are located in Brunsbüttel, Wilhelmshaven (two locations) and Stade.

The measure aims to address energy market disruptions caused by Russia’s invasion of Ukraine and the halt of pipeline gas supplies from Russia to Germany. The FSRUs, two of which started operating quickly, provide an additional import route to replace part of the lost Russian gas. The FSRUs are a temporary solution until permanent on-shore LNG terminals are completed in Germany to ensure long-term gas supply.

The aid, in form of a direct grant, covers the losses incurred by DET for operating the FSRUs until the end of their charter period. As they were chartered at the peak of the energy crisis when demand and costs were very high and their limited operating time frame does not allow for full cost recovery, these terminals were expected to operate at a loss from the outset. The total net contribution between 2023 and 2033 is expected to amount to €4.06 billion. In case of higher losses than expected, the total net contribution could amount to €4.96 billion.

Germany has committed to stop operating the Brunsbüttel and Stade terminals once the planned on-shore LNG terminal at those locations become operational, preventing market overlap. Once the on-shore LNG terminals are active, the FSRUs will be sub-let at market rates, following worldwide calls for interest open to all bidders and locations, until the lease contracts expire.

Going forward, the capacity of the terminals will be auctioned in three different products: (i) a minimum technical capacity, subject to a delivery obligation, needed to ensure that the terminals remain operational in steady regime, therefore available at all times to ensure gas security of supply; (ii) medium term (3-4 years); and (iii) short term (1 year). Germany has also introduced safeguards to address possible undue distortions to competition.

The Commission’s assessment

The Commission assessed the scheme under EU State aid rules, in particular  Article 107 (3)(b) of the Treaty on the Functioning of the EU (‘TFEU’), which enables Member States remedy a serious disturbance in the economy.

In particular, the Commission concluded that:

  • The measure is necessary and appropriate to remedy a serious disturbance in the economy of the Member State. It aims at ensuring security of gas supply in the exceptional situation caused by Russia’s aggression against Ukraine and the subsequent disruption of gas deliveries.
  • The aid is proportionate since it is limited to the minimum needed for DET to operate in view of the objective of the measure.
  • To limit distortions to competition, Germany has committed to (i) stop operating the FSRUs once the corresponding on-shore LNG terminals become operational, and (ii) to market capacity subject to restrictions.

On this basis, the Commission approved the German measure under EU State aid rules.

Background

EU State Aid rules allow Member States to grant aid to remedy a serious disturbance in the economy of a Member State.

In May 2022, the Commission published the REPowerEU plan, which sets out a series of measures to rapidly reduce EU’s dependence on Russian fossil fuels by accelerating the clean energy transition. The REPowerEU plan is based on three pillars: saving energy, producing clean energy and diversifying the EU’s energy supplies.

A functioning internal energy market is also critical for ensuring security of supply and that energy flows to where it is needed. In this regard, the Commission also welcomes the steps being taken by the German Parliament to adopt the legislative amendment to stop the gas storage fee at cross-border points as from 1 January 2025.

The non-confidential version of the decision will be made available under the case number SA.105137 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.

Quote

The German measure approved today significantly contributes to ensuring continuity of gas supply to Germany and neighbouring countries following the end of Russian pipeline gas imports. The measure contributes to reducing the dependency on Russian fossil fuels and enables the diversification of energy supplies, in line with the REPowerEU Plan.

Teresa Ribera, Executive Vice-President for Clean, Just and Competitive Transition

Source – EU Commission

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