In December 2014 the UK notified plans to subsidise the conversion of the coal-fired Lynemouth power plant to biomass. The plant would be able to generate 420 MW of electricity running exclusively on wood pellets. The UK Government intends to support the project in the form of a premium paid on top of the market price of the electricity generated (a so-called "Contract for Difference"). The project will receive aid until 2027 and, according to UK estimates, will generate about 2.3 TWh of low-carbon electricity per year. The plant is due to use approximately 1.5 million tonnes of wood pellets per year, mainly sourced from the United States, Canada and Europe.
The Commission opened an in-depth investigation in February 2015 to assess whether the terms and conditions of the UK support, and in particular the financial calculations and estimates regarding key cost parameters, would avoid overcompensation. In light of the comments received from interested third parties as well as detailed technical information submitted by the UK, the Commission is now satisfied that the submitted parameters are robust and present no risk of overcompensation.
The Commission's investigation also did not find any evidence of market distortion in the global wood pellets market. Finally, it is satisfied that the measures will not lead to undue distortions of competition in the market for other wood-based products.
On the basis of this analysis the Commission concluded that the project's contribution to the European renewable energy and CO2 emissions reduction targets clearly outweighs any potential distortions of competition that could be triggered by the state support.
The Lynemouth plant is one of several projects selected under the Final Investment Decision Enabling for Renewables (FIDeR), a UK support measure for renewable energy projects. In July 2014, the Commission already approved five FIDeR projects to develop offshore wind farms. In January 2015, the Commission also approved construction of the Teesside combined heat and power biomass plant.
The non-confidential version of the decision will be published in the State aid register on the competition website under the case number SA.38762 once eventual confidentiality issues have been resolved. The State Aid Weekly e-News lists new publications of state aid decisions on the internet and in the EU Official Journal.