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Vice President of the European Commission responsible for Competition policy
Introductory remarks on new guidelines on state aid for environmental protection and energy for the period 2014-2020.
Brussels, 9 April 2014
Today the Commission has adopted new guidelines on state aid for environmental protection and energy for the period 2014-2020.
The new rules –one of the most important pieces of the State Aid Modernisation strategy- will support Member States in their efforts to achieve the EU's ambitious energy and climate objectives in 2020 and to ensure a high level of environmental protection.
Indeed, these Guidelines are fully in line with the recent European Council conclusions regarding our energy and climate change strategies.
Let me tell you a bit more about their contents.
The guidelines will allow for a smooth transition towards modern and more efficient mechanisms to support renewables.
The high amounts of subsidies granted in Member States until now have helped make significant progress towards achieving EU objectives in the field of renewables.
But the way that renewables have received public funding so far has had a profound impact on electricity markets.
Support mechanisms have led to significant cost increases for electricity users – both consumers and businesses. They have sheltered renewables producers from risk, allowing the production of electricity irrespective of actual demand.
This has affected wholesale electricity prices and weakened price signals for investment in electricity generation from other sources.
Finally, they have led to distortions of competition both within and between Member States.
So today, we need to look again at what are the most appropriate instruments to achieve our goals.
Our objective now is to ensure renewables support is sustainable by gradually integrating renewables into the market.
Many renewable energy sources have reached a scale and a level of maturity that allows them to compete with other sources. As a result, it is time that these technologies respond to market signals and that public support is allocated through a competitive process.
This way, EU Member States will continue to promote renewable energy sources, but they will do so in a smarter, less costly and less distortive manner.
This need not happen overnight. The guidelines allow for a progressive shift. From 2016, operating support to renewable energy sources will be granted through feed-in premiums, which preserve market signals, instead of feed-in tariffs, and renewable producers will have to sell on the market.
During two years, EU countries will test the allocation of public support through competitive bidding procedures - such as tenders or auctions – for a small share of their planned renewables energy capacity.
From 2017 on, operational aid to all new renewable energy installations will be granted through competitive bidding processes.
To allow for a smooth transition, these provisions will apply to the new schemes that Member States will put in place, not to existing schemes.
The rules are also flexible when Member States need to deviate from competitive bidding for legitimate reasons. Moreover they allow Member States to support specific technologies at an early stage of development or small installations that may still need to be sheltered from the market forces through fixed tariffs.
The guidelines also introduce the possibility to grant reductions from renewables financing to energy intensive companies.
Energy costs borne by industry are higher in Europe than elsewhere. This can seriously affect our competitiveness, particularly in those sectors that are heavy energy users and are largely exposed to international competition. In March the European Council has stressed the need to promote industrial competitiveness across all EU policies.
To relieve these industries from some of the burden and to avoid the risk of relocation of activities outside Europe, the guidelines allow reductions from renewable charges and environmental taxes. This is done under clearly defined conditions to ensure support is granted only to those who really need it.
The existence of an EU-wide framework for such reductions will avoid harmful subsidy races between Member States.
Another new element of the guidelines is the inclusion of criteria for state aid to build energy infrastructure and to secure electricity supply by means of so-called "capacity mechanisms".
Better interconnection between national markets is paramount to complete the internal energy market. The European Council was very clear in this respect. Such interconnections generate economies of scale, reduce the risk of variable energy supply and secure the supply of energy at a lower cost for society. The guidelines encourage aid to cross-border infrastructure projects.
Similarly, the Guidelines facilitate the granting of support to infrastructure in assisted regions with under-developed energy networks and to Smart Grids which promote energy savings across the entire energy system.
Finally, the guidelines include assessment criteria for so-called "capacity mechanisms". Despite the growth of renewables and the progress made in energy efficiency, there is a risk of under-supply in the future. Some Member States are considering investing in so-called “capacity mechanisms”, to encourage producers to build new generation capacity or prevent them from shutting down existing plants.
Such support will be allowed only after exploring alternative solutions to aid, such as greater energy savings or better interconnections.
In addition to these new aspects, the guidelines include improved rules for a number of additional areas in the environmental and energy field, for example covering Carbon Capture and Storage, waste management and energy efficiency. In all these areas State aid can be used to respond to market failures to enable companies adopt more environmental behaviour or invest in greener technologies.
These revised rules will help Member States invest better in their energy choices for the next few years, making a good use of public money through efficient instruments and supporting a more integrated internal market. This will contribute to making energy more affordable for European citizens and companies.