EFTA Surveillance Authority Decision No 125/06/COL of 3 May 2006 regarding the Norwegian Energy Fund (Norway)
Date: 2006-05-03
Institutions: EFTA Surveillance Authority
Subjects: EFTA, Norway, State aid, aid system, control of State aid, energy policy, energy saving, investment aid, renewable energy

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IV

(Other acts)

EUROPEAN ECONOMIC AREA

EFTA SURVEILLANCE AUTHORITY

EFTA SURVEILLANCE AUTHORITY DECISION

No 125/06/COL

of 3 May 2006

regarding the Norwegian Energy Fund (Norway)

THE EFTA SURVEILLANCE AUTHORITY (1),

Agreement, and in particular Chapter 15 on Environmental Aid
thereof,

Having regard to the Agreement on the European Economic
Area (2),
in particular to Articles 61 to 63 and Protocol 26
thereof,

Having regard to the Authority's Decision of 14 July 2004 on
the implementing provisions referred to under Article 27 of Part
II of Protocol 3 to the Surveillance and Court Agreement,

Having regard to the Agreement between the EFTA States on
the establishment of a Surveillance Authority and a Court of
Justice (3), in particular to Article 24 thereof,

Having called on interested parties to submit their comments
to those provisions (5) and having regard to their
pursuant
comments,

Having regard to Article 1(2) of Part I and Articles 4(4), 6, 7(2),
7(3), 7(4), 7(5) and 14 of Part
II of Protocol 3 to the
Surveillance and Court Agreement,

Whereas:

I. FACTS

1. Procedure

Having regard to the Authority's Guidelines (4) on the appli­
cation and interpretation of Articles 61 and 62 of the EEA

(1) Hereinafter referred to as the Authority.
(2) Hereinafter referred to as the EEA Agreement.
(3) Hereinafter referred to as the Surveillance and Court Agreement.
(4) Guidelines on the application and interpretation of Articles 61 and
62 of
the EEA Agreement and Article 1 of Protocol 3 to the
Surveillance and Court Agreement, adopted and issued by the
EFTA Surveillance Authority on 19 January 1994, published in OJ
L 231, 3.9.1994, p. 1; EEA Supplements No 32, p. 1. The
Guidelines were last amended on 19 April 2006. Hereinafter
referred to as the State Aid Guidelines.

By letter of 5 June 2003 from the Norwegian Mission to the
European Union,
forwarding a letter from the Ministry of
Petroleum and Energy dated 4 June 2003, both received and
registered by the Authority on 10 June 2003 (Doc. No 03-
3705-A,
the
Norwegian authorities notified alterations of two existing aid
schemes, namely ‘Grant programme for introduction of new
energy technology’ and ‘Information and educational measures
in the field of energy efficiency’, pursuant to Article 1(3) of
Part I of Protocol 3 to the Surveillance and Court Agreement.

SAM 030.03006),

registered

under

case

(5) OJ C 196, 11.8.2005, p. 5.

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By letter dated 16 June 2003 (Doc. No 03-3789-D), the EFTA
Surveillance Authority (hereinafter ‘the Authority’) informed the
Norwegian authorities that due to the fact that the scheme had
already been put into effect on 1 January 2002, i.e. before the
notification, the measure would be assessed as ‘unlawful aid’ in
accordance with Chapter 6 of the Authority's Procedural and
Substantive Rules in the Field of State Aid (6).

After various exchanges of correspondence (7), by letter dated
18 May 2005 the Authority informed the Norwegian authorities
it had decided to initiate the procedure laid down in
that
Article 1(2) of Part I of Protocol 3 to the Surveillance and
Court Agreement in respect of the Norwegian Energy Fund.

2. Description of the support measures under the Energy
Fund

since 1978/79 under

With its notification, the Norwegian Government announced
alterations of
two existing schemes in the field of energy
the
which have been operating
competence of the NVE, the Norwegian Water Resources and
Energy Directorate. The first scheme was the ‘Grant program for
technology’ by which the
introduction of new energy
Norwegian Government gave investment support for the intro­
duction of renewable energy technology. The second scheme,
‘Information and education measures in the field of energy
efficiency’, concerned support for campaigns and courses on
energy efficiency for the industry, commercial and household
sectors. The schemes were funded by budgetary allocations. The
most important notified alterations to the schemes concerned:

The Authority's Decision No 122/05/COL to initiate the
procedure was published in the Official Journal of the European
Union and the EEA Supplement thereto (8). The Authority called
on interested parties to submit their comments thereon. The
Authority
dated
By
27 September 2005 (Event No 335569)
the Authority
forwarded the observation to the Norwegian authorities for
comments.

observation.

received

letter

one

2.1.

the merger of
mechanism, the Energy Fund;

the

schemes under

a new funding

2.2. a different way of

financing the schemes by now also
making — for all measures supported by Enova — use
of a levy on the electricity distribution tariffs (9) in addition
to continued grants over the state budget; and

By letter from the Norwegian Mission to the European Union
dated 15 July 2005, forwarding a letter from the Ministry of
Modernisation dated 12 July 2005 and a letter
from the
Ministry of Petroleum and Energy dated 11 July 2005, the
Norwegian authorities submitted comments to the Authority's
decision to open the formal investigation procedure. The letters
were received and registered by the Authority on 19 July 2005
(Event No 327172).

2.3.

the administration of the Energy Fund by the newly estab­
lished administrative body Enova. Likewise, new provisions
and an agreement between the Norwegian State and Enova
have been adopted. These new provisions should ensure
that the support measures attain certain newly identified
energy policy objectives.

Further information, in particular a report by the expert First
Securities, was submitted by the Norwegian authorities on
6 October 2005 (Event No 345642). A meeting between the
and the Authority took place on
Norwegian authorities
the
11 October 2005. By email of 18 November 2005,
Norwegian authorities submitted further
information (Event
No 350637). A meeting with the Norwegian authorities took
place on 13 February 2006. Further information was submitted
by the Norwegian authorities on 8 March 2006 (Event No
365788).

(6) Chapter 6 was subsequently deleted by Authority Decision No
195/04/COL of 14 July 2004. The definition of unlawful aid is
in Part II of Protocol 3 to the
now to be found in Article 1(f)
Surveillance and Court Agreement.

(7) For more detailed information on the various correspondence
between the Norwegian authorities and the Authority, reference is
made to the Authority's Decision to open the formal investigation
procedure, Decision No 122/05/COL, see above fn. 5.

(8) See above, fn. 5.

ad 2.1 Merger of the two support schemes

On 1 January 2002 the Energy Fund was established and the
two schemes mentioned above were merged under that Fund.
The Energy Fund serves as a financing mechanism for support
measures, which continue under the new regime.

ad 2.2 The new mode of financing the Energy Fund

Whereas the existing schemes were funded by grants from the
state budget, the newly established Energy Fund is financed by
grants from the state budget, as well as by means of a levy on
the electricity distribution tariffs (not a levy on the energy
production itself).

(9) According to the Norwegian authorities, this levy was introduced in
1990 in the course of the deregulation of the electricity market.
Before 2002, the grid companies managed the levy to cover their
own costs connected to information on energy efficiency.

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This levy is provided for by the Energy Fund Regulation of the
Ministry of Petroleum and Energy of 10 December 2001 (10).
According to section 3 in conjunction with section 2a) of the
Energy Fund Regulation, any company which has been granted
a license according to section 4-1 of the Energy Act (11) (‘omset­
ningskonsesjoner’) shall, when it charges the end user for the
withdrawal of electrical energy from the grid, combine the
invoice with a 1 øre/kWh (increased as of 1 July 2004 from
former 0,3 øre/KWh) supplement for each withdrawal (see also
section 4-4 Energy Act).

3. National legal basis for the support measures

The national
legal basis for the support measures is a Parlia­
mentary Decision of 5 April 2001 (15) on the basis of a propo­
sition by the Ministry of Petroleum and Energy of 21 December
2000 (16). The Parliamentary Decision amends the Energy Act of
29 June 1990 No 50 (Energiloven). The principal tasks of Enova
are specified in the above mentioned Agreement between the
Ministry and Enova.

The licensee shall then pay a contribution to the Energy Fund of
1 øre/kWh multiplied by the amount of energy for which the
end user in the distribution network is invoiced. As can be seen
from the table under section I.7 of this Decision, the Energy
Fund has been increasingly financed by the levy alone. However,
that does not rule out the possibility that the Energy Fund
in future years.
might receive budgetary appropriations again,

ad 2.3 The administration of the Energy Fund by Enova

On 22 June 2001, Enova SF was established (12). Enova is a new
administrative body, organised as a state enterprise (statsforetak,
SF) (13). It is owned by the Norwegian State via the Ministry of
Petroleum and Energy. Enova has been operating since
1 January 2002, i.e. the date when the Energy Fund was estab­
lished.

Enova's principal task is to implement the support schemes,
administer
the Energy Fund and reach the energy policy
objectives which the Norwegian Parliament approved in 2000.
These principal
tasks are further specified in an Agreement
between the Norwegian State (the Ministry of Petroleum and
‘the Agreement’) (14).
Energy)
According to Enova's own description,
establishment of
Enova SF signals a shift in Norway's organization and implementation
of its energy efficiency and renewable energy policy’.

and Enova SF

(hereinafter

‘the

(10) ‘Forskrift om innbetaling av påslag på nettariffen til Energifondet’ (regu­
lation relating to the payment of a levy on the electricity distri­
bution tariff to the Energy Fund, hereinafter ‘Energy Fund Regu­
lation’).

(11) Lov av 29 Juni 1990 nr. 50 om produksjon, omforming, overføring,

omsetning og fordeling av energi m.m, energiloven.

(12) Initial thoughts on the establishment of a central body dealing with
energy efficiency measures were already presented by an expert
committee in 1998, NOU 1998:11. The Norwegian Government
took up this idea in the White paper St.meld.nr.29 (1998-99). The
change from NVE to the Energy Fund was then finally presented in
the fiscal budget for 2001, St.prp.nr.1 (2000-2001).

(13) Lov av 30 August 1991 om statsforetak.
(14) Revised Agreement of 22 September 2004, ‘Avtale mellom den norske
stat v/Olje- og energidepartementet og Enova SF om forvaltningen av
midlene fa Energifondet i perioden 2002-2005’.

Of further relevance is the newly adopted Regulation No 1377
of 10 December 2001, concerning the levy on the electricity
distribution tariff (Forskrift om innbetaling av påslag på nettariffen
til Energifondet). A regulation on the Energy Fund (Vedteker for
energifondet) places the Energy Fund under the Ministry of
Petroleum and Energy and stipulates its administration by
Enova.

4. The objective of the aid measure

the merged schemes under the newly
The establishment of
established Energy Fund and the administrative body Enova
was done with a view to achieve a more cost-effective use of
public funding for energy saving measures and the production
of environmentally sound energy. Enova and the Energy Fund
adopted by
should achieve
Parliament (17).

the new energy objectives

According to the Agreement mentioned above, energy savings
and new environmentally sound energy shall make up together
a minimum of 12 TWh by the end of 2010, of which:

— a minimum of 4 TWh shall be from increased access to
energy

water-borne heating based on new renewable
sources, heating pumps and thermal heating, and

— a minimum of 3 TWh shall be from increased use of wind

energy.

The Agreement stipulates as a secondary objective that
the
Fund's resources shall contribute to the saving of energy and
to new, environmentally sound energy, which together shall
make up a minimum of 5,5 TWh (originally 4,5 TWh) by
the end of 2005. By supporting new renewable energy forms
and contributing to more energy saving, Norway also wishes to
become less dependent on the predominant source for elec­
figures below,
tricity production used, hydropower. The
communicated by the Norwegian authorities, show Norway's
ongoing reliance on hydropower, despite the increasing use of
wind energy and thermal electricity in recent years.

(15) Odelstingets vedtak til lov om endringar i lov 29. juni 1990 nr. 50 om
produksjon, omforming, overføring, omsetning og fordeling av energi m.m.
(energilova). (Besl.O.nr.75 (2000-2001), jf. Innst.O.nr.59 (2000-2001)
og Ot.prp.nr.35 (2000-2001)).

(16) Ot.prp.nr.35 (2000-2001).
(17) See above fn. 15.

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Production, consumption, import and export of electricity, Norway, in GWh, 2000-2005

Table 1

2000

2001

2002

2003

2004

Jan-May 2005

Total production

Hydro

Wind

Thermal electricity

142 816

121 608

142 289

121 026

130 473

129 837

107 273

106 101

110 427

109 280

31

496

27

555

75

561

220

952

260

887

60 976

na

na

na

Consumption

123 761

125 206

120 762

115 157

121 919

56 665

Import

Export

Net import

Net import/consumption

Net export/consumption

1 474

20 529

– 19 055

0,0 %

15,4 %

10 760

7 162

3 598

2,9 %

0,0 %

5 334

15 045

– 9 711

0,0 %

8,0 %

13 471

5 587

15 334

3 842

7 884

11 492

6,8 %

0,0 %

9,4 %

0,0 %

1 923

6 234

– 4 311

0,0 %

7,6 %

5. The Energy Fund system as notified

5.1. General remarks on the Energy Fund

Enova can give investment support for energy saving systems
and for production and use of renewable energy sources as well
as initial investment aid for new energy technologies.

energy, wave energy, tidal energy and hydroelectric installations
with a capacity below 10 MW as well as biomass). Hydropower,
which is — as explained — the traditional source for electricity
production used in Norway, has so far not been given any
support (19). Funds for the introduction of natural gas are not
part of the Energy Fund (20).

The level of subsidy is determined by a technical and financial
evaluation of each project. Priority is given to those projects
which give the highest kilowatt-hour (kWh), saved or produced,
per subsidised NOK. This leads to a competition of projects for
the receipt of public funds with the goal being to choose the
most efficient projects.

Enova regards the following projects as qualifying for support in
general terms: wind energy, bioenergy, tidal energy, geothermal
energy, ocean wave energy. Solar energy comprises passive solar
building integrated solutions, solar heating systems and PV
(photovoltaic) production.

Calls for project proposals are announced in major national and
regional newspapers
and for most
programmes four times a year.

least biannually

at

5.2. Renewable energy

The eligible projects

As regards the investment support for the production and use
of renewable energy, Norway supports energy projects which are
defined in Article 2 of Directive 2001/77/EC (18) as renewable
the Authority's State Aid
energy sources (see point 7 of
Guidelines on Environmental Aid, hereinafter ‘the Environmen­
tal Guidelines’, which covers wind and solar energy, geothermal

(18) OJ L 283, 27.10.2001, p. 33. The Directive as such has not yet

been incorporated into the EEA Agreement.

When it comes to the notion of ‘bioenergy’, the Norwegian
authorities have clarified that this term is used for renewable
energy (electricity or heat) based on biomass as defined by
Directive 2001/77/EC. Bioenergy is a wider notion than
biomass and covers e.g. projects which convert biomass to
electricity and/or heat in contrast to biomass projects which
only concern the production and processing of biomass itself.
Such projects are dependent on extra investment in back-up
and peak load capacity based on other sources of energy.
Therefore,
investments in these projects might
not only cover biomass, but also other sources of energy
besides biomass. The Authority understands that there could
be situations
in which the bioenergy consists only of a
fraction of biomass.

the costs of

(19) The Regulation for the Energy Fund (Vedteker for Energifondet, § 4)
states that the Energy Fund should be used for energy saving,
production of new renewable energy and other environmentally
friendly energy.

(20) See Authority's Decision 302/05/COL, which approved a research

and development aid scheme for gas technology.

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The Norwegian authorities have specified that the notion of ‘use’
of renewable energy sources will cover situations in which the
investment
internal production, whereby the
producer and the user is the same entity (which is often the
case for heat production).

is made for

The calculation of the support — the net present value calcu­
lation method

Enova calculates the support that can be given to a project as
the discounted present value of the difference between current
production costs of the project and current revenues based on
the market price of the relevant energy source. In other words,
it uses a net present value calculation (hereinafter referred to as
NPV calculation).

The market price for the relevant energy

In order to choose the market price, the Norwegian authorities
distinguish between three different situations:

solar,

Firstly, they consider the case of renewable energy production
which is fed into the transmission grid and, therefore, competes
with traditional generation of electricity as quoted on the
Nordpool power exchange. This is the case for wind, bio,
waste,
tidal and ocean wave energy and the price
quoted in Nordpool serves as a reference. On the Nordpool
power exchange, both spot prices and forward prices up to
three years can be observed. As investments are based on the
expectations of future electricity prices, Enova refers to forward
contracts which are traded on a daily basis. To cancel out
random price fluctuations, a six-month average of the latest
tradable future contracts is used. The price is quoted on the
submission date of the project application, which occurs four
times a year.

The second case is that of district heat, which is distributed on a
local distribution net and competes with heat from fossil fuels
or from electricity. In this situation, Enova refers to the actual
contract price (21) paid by the consumer (the price of
the
ordinary energy — from fossil fuels and electricity).

The third scenario covers energy production which is not fed
into any distribution net (e.g. on-site power generation based on
residual steam not fed into the power grid). In this case, the
including
price the end user is facing in the market is used,
taxes.

(21) Large customers profit often from discounts because of their large
delivery contracts. This is taken into account by Enova when
comparing prices of competing energy sources.

The ‘triggering off’ effect

The objective of the aid scheme is to encourage investment into
renewable energies which would otherwise not take place, due
to the fact that the energy price obtainable in the market does
not cover the costs and thus makes the net present value
negative. For that reason, according to the Norwegian authori­
ties, the subsidy shall only compensate the extra costs of the
production of renewable energy. Moreover, the support granted
by Enova shall not exceed the amount deemed necessary in
order
to encourage a positive
investment decision.

the project,

to trigger

i.e.

However, when the Energy Fund and Enova were established,
there were, according to the Authority's information, no precise
to when the triggering effect would be
specifications as
considered to have been reached.
It was e.g. not specified
when the project would reach — with the support from the
Energy Fund included — a zero net present value. Admittedly,
analyses were made to establish when the project would break
even. Still, there were no explicit limitations which prevented
State support above that point. As further illustrated in the
Authority's
investigation
open
the
procedure,
in some instances the support granted by Enova
might have led to project support which resulted in a calculated
positive net present value (22).

decision

formal

to

When projects are granted support, Enova and the aid recipient
enter into an aid contract, which regulates the terms on which
take place. The disbursements might be
disbursement will
adjusted in accordance with any cost reduction during the
construction period. After the investment is realised, there is a
follow-up on the realised costs against costs estimated in the
the
If
application.
applicant, Enova may adjust
the financial aid downward to
reflect the actual cost structure (23).

these factors differ to the advantage of

The fair return on capital

The basis for the trigger off requirement includes a fair return
on capital. The discount rate used was set at a rate of 7 % per
annum (nominal, pre-tax rate) for all projects to which certain
risk premium. The
added as
percentage points were
its
stated that Enova will base
Norwegian Government
analysis on theoretical values suggested in public reports from
acknowledged government institutions in Norway, whereby the
risk premium would vary between 2,5 to 4,5 %, depending on
the type of energy and project.

a

(22) See the example on page 7 of the Authority's decision to open the
investigation procedure (Decision 122/05/COL) as well as

formal
page 9 thereof, in particular fn. 17.

(23) In the Authority's understanding, there is no upwards adjustment in

case of a disadvantage to the applicant.

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5.3. Energy saving measures

According to the system as notified (24),
the
investment in energy saving measures is calculated according
to the same net present value calculation method used for
renewable energy projects.

support

for

above equally for the support of new technology projects. The
income of the projects is based on the generation of electricity
and heat for sale, which, according to the Norwegian authori­
ties, constitutes an income which makes the projects viable for
the net present value calculation approach.

5.4. New energy technology

5.5. Energy audits

In this category, Enova supports technologies which still need
some development and which need to be further tested before
they are economically viable, although they are past the stage of
research and development projects covered by Chapter 14 on
research and development aid of
the Authority's State Aid
Guidelines. Examples of such technologies are tidal or wave
energy installations. The projects might be linked to achieve
energy efficiency or foster renewable energy production.

investigation,

During the formal
the Norwegian authorities
clarified that this category could be considered as a subcategory
of the investment support for renewable energy production and
energy saving described above.
the
supported projects under this category concerned renewable
energy production, 4,3 % concerned energy saving measures (25).

In the past, 95,3 % of

to

authorities,

the Norwegian

to the Norwegian authorities,

Enova has signed an agreement with the Norwegian Research
Council on the ‘introduction of innovative energy solutions’ for
energy saving and heat production from solar energy and
this
biomass. According
agreement does not constitute a new aid scheme, but only an
enhanced focus on an area where the cooperation between
is expected to give synergy
Enova and the Research Council
effects. According
this
mechanism functions as a common entry door for projects
which might either be in a pre-competitive stage (and thus
might receive support from the Research Council) or generate
revenues (and might receive support from Enova). The project
will not receive funding from both support agencies. However,
the
the Norwegian authorities underline that,
cumulation rules guarantee that section G (66) of the Environ­
mental Guidelines are to be respected. This section of the Envi­
ronmental Guidelines states that support under these guidelines
may not be combined with other forms of State aid within the
meaning of Article 61(1) of the EEA Agreement, if such over­
lapping produces an aid intensity higher than that laid down in
the Environmental Guidelines.

in any event,

Since only projects generating revenues are to be supported by
Enova, Enova uses the net present value calculation mentioned

(24) See, however, the Norwegian authorities' suggestion for the future
handling of energy saving measures, section I.9.2 of this Decision.
they
for managing such

the Norwegian authorities specified that

(25) As to the 0,4 %,

concern Enova's own administrative costs
project applications.

Enova also offers advisory and consultancy services to
achieve energy efficiency free of charge to undertakings.
The purpose of the support is to increase the number of enter­
prises that perform energy audits and analyses and help them to
reduce the respective costs. As notified,
these services were
legally neither limited to aid below the de minimis threshold
nor aid to small and medium-sized enterprises. They were
In the programme text for
targeted to certain undertakings.
2003, the target groups were described as owners of private
and public buildings with a total surface area over 5 000 square
metres and industrial enterprises, as well as tenants of large
areas. As of 2003, Enova has granted money to firms to
purchase such advisory and consultancy services, rather than
rendering the service itself.

The Norwegian authorities stress that support under
these
programmes should be distinguished from the teaching and
educational measures. This is so as the funding goes directly
to companies for performing energy audits and energy analyses
and to identify either energy saving investments or behavioural
changes within the enterprises. The Authority will, therefore,
consider this support separately in the present decision. The
Norwegian authorities further argue that the programmes are
similar to energy audits under a Finnish scheme, approved by
the Commission (26).

In the past, grants might have been handed out which covered
up to 50 % of eligible costs. According to the Norwegian auth­
orities, as of 1 January 2004, only 40 % of the eligible costs
have been supported.

5.6. Information and educational programmes in the field of energy

efficiency

Enova operates an energy information helpline, whereby infor­
mation and advice are provided free of charge to anyone
interested in achieving more energy efficiency.
In as far as
Enova does not have the capacity to undertake these activities
itself, the Norwegian authorities state that services have been
bought in line with the public procurement rules. Enova does
not exercise any discretion regarding to whom such advice and
information is provided.

(26) N 75/2002 — Finland, Modification of aid scheme for the energy sector.

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Until 1 January 2003, Enova offered a widely publicised
programme by which queries regarded energy efficiency which
required concrete follow-up in households and undertakings on-
site were handled by twenty regional efficiency centres which
represented Enova in this field. The support was provided free
of charge and approximately two hours were reserved for each
request. The Norwegian authorities state that Enova did not
enjoy any discretion regarding the recipients to whom to
provide this service.

new programmes would be notified to the Authority. Alto­
gether, some 33 projects have received support under the
programme. The Norwegian authorities state that some of the
projects might fall under the de minimis threshold. Moreover,
some of the support went to public sector entities, universities
and other educational entities and to non-profit organisations.
The Norwegian authorities claim that
the
support given by Enova did not concern an economic activity
carried out by an undertaking falling within the ambit of
Article 61(1) of the EEA Agreement, but rather the support
of an educational activity.

for these entities,

For educational measures, the following programmes are to be
mentioned. The Norwegian authorities stress that competition
among bidders and cost-effectiveness of
the projects are
essential.

concerning

and preserve knowledge

Until 1 January 2005, Enova provided a programme (27) for the
development of teaching material and learning concepts to
stimulate
renewable
energies,
in companies. The programme was organised as a
tendering process, and Enova paid 50 % of the total develop­
ment costs of the project. The objective of the programme was
to stimulate the development of teaching material on energy
efficiency (books, software, etc.), as well as to support the deve­
lopment of energy related courses, e.g. at colleges/universities or
developed by trade unions, etc. The programme was open to
public, private and non-profit entities. The programme texts for
2003 and 2004 contained a prioritisation list (e.g. projects for
the construction business, projects involving public/private part­
nerships and projects to be marketed until 1 August 2003). For
the 2003 programme, the supplementary education was partic­
ularly geared towards universities, unions, trade organisations
and private educational operators (phase 1) and architects,
suppliers, entrepreneurs and other personnel working with
energy systems in commercial buildings (phase 2) or aimed at
the construction business (programme text 2004).

In order to promote the 2004 education programme, Enova
offered a programme on developing education courses in
energy for technical personnel and engineers. This was
organised by a tendering process. Only the first 50 persons
to have completed the course got
the course paid for by
Enova. According to the Norwegian authorities, this support
was given directly to individuals and not to undertakings.

The above mentioned teaching material programmes ended on
31 December 2004. According to the Norwegian authorities,

(27) The programme was named ‘teaching material and education
to ‘education

in 2003 and

its name

changed

concepts’
programme’ in 2004.

The scheme as such did not contain any limitation specifying
that the aid should only be given to certain types of entities or
activities. Nor did it state that the support should not exceed the
de minimis threshold as stipulated in the Act referred to under
point 1(e) of Annex XV to the EEA Agreement (28). The support
was neither
and medium-sized under­
takings (29), as mentioned in the Act referred to under point
1(f) of Annex XV to the EEA Agreement, nor was it structured
to meet the requirements of the Act referred to in point 1(d) in
Annex XV to the EEA Agreement (30) (training aid).

limited to small

In addition, Enova runs a programme to improve energy
planning skills in local municipalities,
in particular public
planning and area planning according to the Norwegian
Planning and Building Act. The programme, which is offered
free of charge,
is aimed at high level decision makers and
technical personnel in the municipalities. The Norwegian auth­
orities state that Enova carries out an assessment as to whether
the municipality is performing a service in competition with
other operators in the market. If so, such an activity will not
be supported.

6. Recipients/aid intensities for investment support

for

renewable energy production

The Authority's investigation concerns an ongoing aid scheme.
Thus, the indication of potential aid recipients cannot be finally
established with this Decision and is only indicative. In their
letter dated 15 July 2005, the Norwegian authorities identified
until the end of 2004; 236 recipients of energy audit and

(28) Incorporating Commission Regulation (EC) No 69/2001 of
12 January 2001 on the application of Articles 87 and 88 of the
EC Treaty to de minimis aid, OJ L 10, 13.1.2001, p. 30, into the
EEA Agreement.

(29) Incorporating Commission Regulation (EC) No 70/2001 of
12 January 2001 on aid to small and medium-sized undertakings,
OJ L 10, 13.1.2001, p. 33, as amended by Commission Regulation
(EC) No 364/2004 of 25 February 2004, OJ L 63, 28.2.2004,
p. 22, into the EEA Agreement.

(30) Incorporating Commission Regulation (EC) No 68/2001 of
12 January 2001 on the application of Articles 87 and 88 of the
EC Treaty to training aid, OJ L 10, 13.1.2001, p. 20, as amended
by Commission Regulation (EC) No 363/2004 of 25 February
2004, OJ L 63, 28.2.2004, p. 20, into the EEA Agreement.

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investment aid support (the latter both for renewable energy
production and energy saving measures), which received State
support exceeding the de minimis threshold and which was not
support given to public entities for carrying out their public
identified 33
functions. The Norwegian authorities
projects
the educational/teaching material
programme.

supported under

further

The Norwegian authorities claim that another estimated 875
projects either concern support to public entities or support
for the purchase by Enova of a certain service according to
the public procurement rules.

renewable energy projects,

For
the Norwegian authorities
submitted the following table showing aid intensities, based
on total
investment costs, for the renewable energy projects
granted between 2002-2004:

Renewable energy

Aid intensity in % of total investment
costs, support calculated according to
the net present value approach

Number of
projects

Average

Maximum

Wind

District heating

Bio

New renewable

10

19

31

1

23 %

20 %

20 %

25 %

68 %

31 %

50 %

25 %

8. Cumulation

that,

support,

the Authority notes

As to the cumulation of the support granted by Enova with
other government
in
principle, the projects might receive aid from other sources.
The Norwegian authorities stated in the notification that they
would ensure that
the aid granted would never exceed the
thresholds of section G. (66) of the Environmental Guidelines.
As already mentioned, this section stipulates that aid authorised
under the Environmental Guidelines may not be combined with
other forms of State aid,
if such overlapping leads to an aid
intensity which is higher than laid down in the Environmental
Guidelines. Applicants have to notify Enova if applications for
additional government aid have been submitted.

9. Suggested amendments by the Norwegian authorities

With a view to making the system compatible with the Envi­
ronmental Guidelines, the Norwegian authorities have suggested
certain amendments to its system, which are described below.
During the Authority's investigation, the Norwegian authorities
started implementing these amendments.

9.1. Amendments for the investment support relating to renewable

energy production

1. Norway will limit the support to projects falling within the
definition of renewable energy sources in Article 2a and b
(for biomass) of Directive 2001/77/EC. Moreover, no
support will be given for existing hydropower plants.

2. The amount of aid will be calculated according to a net
present value calculation to be based on the difference
between the production costs and the market price. The
aid will be given as a lump sum. The calculation method
applied is as follows (demonstrated with the example of an
actual wind energy project, amounts expressed in NOK):

7. Budget and duration

Eligible investment cost (1)

this
The Agreement 2002-2005 (see above section I.2.3 of
Decision) was prolonged until the end of 2006. It is foreseen
until
that
31 December
have
submitted the following overview of the scheme's budget:

be
further
The Norwegian

the Agreement will

prolonged
authorities

2010.

State budget
million NOK

Levy on tariff
million NOK

Total budget
million NOK

Total budget
million euro (1)

2002

2003

2004

2005

270

259

60

0

161

192

470

650

431

451

530

650

57,3

56,4

63,3

79,3

Production kWh/year

Price NOK/kWh

Annual Income (2)

Operating cost NOK/kWh

Annual operating cost

Annual net income

Economic lifetime Years

Return on capital

NPV

Investment aid

123 000 000

45 700 000

0,25

11 425 000

0,10

4 570 000

6 855 000

25

6,33 %

– 38 000 000

38 000 000

(1) Exchange rates (NOK/Euro) used by the Norwegian authorities: 2002:7.51,

2003:8.00, 2004:8.37, 2005:8.20.

(1) The investment cost occurs at the beginning of year 0.
(2) The income occurs first time at the end of year 1.

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Compared to the system as notified, the model calculation
above will be based on the ‘eligible’ investment costs and
not on full costs. As stated by the Norwegian authorities,
financial costs, miscellaneous costs and indemnity costs are
since
not
1 January 2004.

included in the eligible costs, at

least not

3. The market price for electricity used in the above calcu­
lation will be taken from the relevant Nordpool prices. In
the case of district heating, it will be the relevant price that
the end user of oil or electricity (whichever is lowest) faces
when the decision about the State support is made. If the
project economy is based on large customer contracts with
prices deviating from the observable end user price of elec­
tricity and oil, the contract prices will be the relevant price.
Regarding electricity production not fed into the grid, the
end user price including taxes will be used.

if there is reason to believe that the change is of permanent
character.

5. The eligible investment costs

shall be those listed in
Commission Decision N 75/2002 — Finland (34). The
Norwegian authorities state that since 1 January 2005
Enova has accepted only such costs as being eligible.

6. No aid in excess of the amount necessary to trigger the
project will be given. This means that in case of a negative
net present value, resulting from a net present value calcu­
lation which is calculated according to the parameters
stipulated in number (2) above, State support will only
be given to ensure that the project breaks even,
i.e. to
bring the net present value up to zero.

4. The aid may cover a fair return on capital. However, the
discount rate and the risk premium will be established for
Enova by an external expert for each renewable industry
concerned.

7. A project with a calculated zero rate or a positive net
present value without aid will not be entitled to any aid.

should be noted that

It
the Norwegian authorities
submitted a report by the appointed independent expert,
First Securities ASA (31), to the Authority. The expert uses a
Capital Asset Pricing Model (32) and calculated discount
rates of 7 % for wind energy, 6 % for distant heating, bio
energy and energy use respectively. The calculation is
understood to be a framework which enables Enova to
discuss the use of equity discount rates for individual
projects. In particular, the so-called beta value might be
higher depending on the project's risk (33) and lead to
higher discount rates.

The interest rate and the risk premium will be reviewed and
updated annually by the Norwegian authorities. If there are
unexpected changes that significantly affect the discount
rate which occur between annual updates the Norwegian
authorities will carry out an extraordinary adjustment of
the discount rate accordingly. However, this applies only

(31) First Securities is an important player in the Norwegian securities

market.

(32) A method which shows the risk adjusted return on capital as a
function of the risk of the market portfolio and the risk of the asset
(project) in question.

(33) The formula used by First Securities is RE = RF + β (RM

–RF), RF
being Norwegian long bonds, β constituting the individual project
–RF) is the
risk, RM is the expected return on market portfolio, (RM
equity risk premium). RE is the required return on capital invested.

this

shall never

8. With the exception of support for biomass, the support
granted under
exceed the
scheme
threshold stipulated under section D.3.3.1 (54) of the Envi­
ronmental Guidelines. Section D.3.3.1 (54) of the Environ­
mental Guidelines limits the support
to the difference
between market price and production costs, capped at
plant depreciation, whereby plant depreciation is to be
understood as investment costs only. The aid may also
cover a fair rate of return, where Norway can show that
this is indispensable given the poor competitiveness of
certain renewable energy sources.

costs

incurred for

installation costs or

(34) (A) Preparation and design costs, (B) costs of buildings, machinery
the
and equipment,
adjustment and repair work of existing buildings, machinery and
equipment (C) Up to the limit of 10 % of the projects' eligible
expenditure, costs arising from the purchase of
land directly
related to the investment and from the construction of electric
(D) Costs ensuing from the construction of a pipe to be
lines.
connected to a district heating network. Costs incurred by the
construction of a heat distribution network are eligible only in
network projects involving new technology, (E) Costs of civil engi­
neering work and supervision of construction work, (F) Costs of
clearance and earth works,
(G) Commissioning costs and costs
arising from training of operating personnel required for commis­
sioning.
to the act of
operating, testing and adjusting a system of unit for the first time
to ensure that it functions according to the specified performance,
(H) Costs of project-related information dissemination, (I) Costs of
monitoring the investment, (J) Costs related to feasibility studies for
the various types of projects (salaries of the participants in the
project and indirect labour costs, equipment, accessories, software,
travel,
information dissemination, other direct or overhead
expenses). The aid recipient's overhead costs, interests paid during
construction, adherence fees and deductible taxes will not be
eligible. See above fn. 26.

In this context, commissioning refers

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9. Within Enova's methodology for calculating aid levels, the
maximum amount of aid granted from Enova will be
limited to the investment cost. Projects generating a
negative EBITDA (35) under normal operating conditions,
at the time of investment, will not be in a position to
receive any aid at all. The discount rate used for that
purpose will be the discount
rate used by Enova, as
mentioned in number 4 of section 9.I of this Decision.

10. For biomass, operating aid exceeding the investment costs
might be granted. However, under no circumstances will
more operating aid be granted than foreseen in section
D.3.3.1 (55) (36) of the Environmental Guidelines.

from agriculture (including vegetal and animal substances),
forestry and related industries, as well as the biodegradable
fraction of industrial and municipal waste’ (see Article 2(b)
of Directive 2001/77/EC). In case of support of bioenergy
which contains sources other than biomass, operating aid
as stipulated above in number 10 shall only be given for
that part which contains biomass. The support of the other
parts was limited to investment support as defined under
number 5.

12. The scheme will be limited until 1 January 2011.

11. For support under the system, biomass will be defined as
the ‘biodegradable fraction of products, waste and residues

The Norwegian authorities have also submitted the following
operating cost data for renewable and conventional energy
production data:

Total running costs, NOK/kWh

Technology

Operating and maintenance
costs

Fuel

Total running costs

Figures from the IEA report: Projected costs of generating Electricity 2005 update

Coal

Gas

Combined heat and
power production

0,034-0,068

0,023-0,031

0,076-0,152

0,187-0,249

Figures from NVE report: Costs of the production of energy and heat in 2002

Wind

0,05

Figures from the Enova project portfolio (examples)

Wind

Bio

New renewable

District heating

0,05-0,10

0,07-0,15

0

0,2-0,3

0,11-0,22

0,21-0,28

0,17-0,44

0,05

0,05-0,10

0,27-0,45

0,05

0,05-0,10

9.2. Energy saving measures

As for the system notified, the Norwegian authorities argue that
the net present value calculation should also be accepted for the
calculation of support for energy saving measures. However, the
Norwegian authorities proposed changes to the future appli­
cation of the support measures for energy saving, as follows:

(35) EBITDA is Earnings Before Interest, Taxes, Depreciation and Amor­
tization. This comprises net cash inflow from operating activities,
before working capital movements.

(36) According to section D.3.3.1 (55) of the Environmental Guidelines,
biomass — which has higher operating costs — may receive
operating aid which exceeds the amount of
the
EFTA State can show that the aggregate costs borne by the firms
after plant depreciation are still higher than the market prices of the
energy.

investment,

if

The Norwegian authorities will calculate the investment aid for
energy saving measures according to section D.1.3 (25) (37) of
the Environmental Guidelines in combination with section
D.1.7 (32) of the Environmental Guidelines, i.e. the investment
the project will be strictly confined to the extra
costs of
the
to meet
investment
environmental
costs necessary
objectives. This means that
the energy saving
the costs of
investment will be compared to the costs of a technically
comparable investment that does not provide the same degree

(37) According to section D.1.3 (25) of the Environmental Guidelines,
energy saving measures can be supported at the basic rate of 40 %
of eligible costs. According to section D.1.7 (32) of the Environ­
mental Guidelines
the support must be limited to the extra
investment costs. Eligible costs are calculated net of the benefits
accruing from any increase in capacity, cost savings engendered
during the first five years of the life of the investment and addi­
tional ancillary production during that five-year period.

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of environmental protection. In cases of investment in addi­
tional equipment and procedures with no other function than
energy saving, where no alternative comparable investment
exists, the comparable investment costs are set at zero. Repla­
to meet Norwegian required
costs of machines
cement
standards are not eligible for support.

vidually. Projects which are an upgrading of existing products or
production line will not be supported. The same goes for
projects which have already started or for which the start up
decision has been made.

1. The costs will be calculated net of the benefits accruing from
any increase in capacity, costs savings engendered during the
first five years of the life of the investment and additional
ancillary production during that five-year period.

2. The eligible costs will be confined to investment costs. In
that respect, eligible costs will be the same as those listed by
the European Commission in its Decision N 75/2002 —
Finland (38). As of 1 January 2005, the Norwegian authorities
have only considered such costs as eligible.

3. The amount of aid will be limited to 40 % of the extra costs,
calculated according to the above parameters and no
operating aid will be given under that scheme. According
to section D.1.5 (30) of the Environmental Guidelines, for
small and medium-sized enterprises
the aid might be
increased by 10 percentage points. For that purpose, small
and medium-sized enterprises will be defined according
Chapter 10.2 of
the Authority's Guidelines on aid to
micro, small and medium-sized enterprises.

4. The Norwegian Government will ensure that,

if combined
with other public subsidies, the total aid will not exceed
the above mentioned limits.

5. The scheme will be limited until 1 January 2011.

9.3. Support for new energy technologies

The Norwegian authorities state that new technologies projects,
as far as renewable energy projects are concerned, are to be
supported according to the rules for supporting the production
and use of renewable energy production (NPV approach). As far
as energy efficiency technologies are concerned, the calculation
mechanisms for energy saving mechanisms will be applied. The
support will, inter alia, include projects which earlier have only
been tested in laboratories, have limited exploitation or are
developed for conditions different from that in Norway and
need adaptation.

9.4. Information and education measures in the field of energy effi­

ciency

The Norwegian authorities confirmed that the programmes for
teaching material and learning concepts, education courses for
technical personnel and on-site follow-up ended on 1 January
2005. If these or similar projects are to be taken up in the
future, they will be notified in advance to the Authority.

The Norwegian authorities further confirmed that the training
programme for public entities only relates
to the public
function of the local municipalities (see also section I.5.6 of
this Decision).

9.5. Miscellaneous

The Norwegian authorities further confirmed that the support is
applied in a non-discriminatory manner also to foreign
investors and that they will regularly report to the Authority
on the application of the scheme. The Norwegian authorities
submitted a list to the Authority showing eight examples of
foreign operators having received support under the Energy
Fund.

10. Grounds

for

initiating

the
procedure

formal

investigation

In its decision to open the formal investigation procedure, the
Authority took the view that the measures concerning energy
saving, the support of new energy technologies and the support
for the investment in renewable energy production constituted
the EEA
State aid within the meaning of Article 61(1) of
Agreement. As for the information and educational measures
(including advisory and consultancy services)
the Authority
noted that with the exception of the information helpline and
possibly the on-site visits, the Fund enjoyed ample discretion. It,
this discretion turned the support
moreover,
measures into selective, rather than general, measures. All the
measures were found to distort or threaten to distort compe­
tition and affect trade between the Contracting Parties. Since the
aid in relation to the Energy Fund was not notified in time to
the Authority, it constituted unlawful aid within the meaning of
Article 1(f) in Part II of Protocol 3 to the Surveillance and Court
Agreement.

found that

Pre-competitive projects, falling under the Authority's State Aid
Guidelines for Research and Development, will be notified indi­

(38) See section I 9.1. number 5 and fn. 35 of this Decision.

As to the compatibility assessment,
the Authority made a
distinction between the Energy Fund as notified and a system
with the amendments suggested by the Norwegian authorities.

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The system as notified

In particular,

Environmental Guidelines.

The Authority expressed doubts in the decision to open the
investigation procedure as to whether the investment
formal
for renewable energy production could be justified
support
the
the
under
Authority noted that the support was not based on the ‘extra
cost’ methodology of section D 1.3 (27) and section D.1.7 (32)
of the Environmental Guidelines. Rather, it identified the need
for aid by carrying out a net present value calculation of the
project. The Authority found that there were no sufficient guar­
antees that only costs related to the investment would be
supported. Further, there was no mechanism to preclude any
overcompensation. For energy saving measures, the Authority
noted that contrary to renewable energy projects, the Environ­
mental Guidelines stuck strictly to a support of 40 % of eligible
investment costs. With the net present value calculation applied
by the Norwegian authorities it was not certain that
this
threshold would be respected. For energy technology projects
as well as for energy audits, the Authority required more infor­
mation. On the information and educational support measures,
the Authority noted that the aid scheme in this respect was not
limited to de minimis support (although support for some of the
projects might have stayed below the threshold) or limited to
small or medium-sized enterprises. On that basis, the Authority
came to the initial conclusion in the decision to open the
formal investigation procedure that the system as notified was
not compatible with the EEA State aid provisions.

The system with the amendments suggested by the Norwegian
authorities

Nature Conservation and Nuclear safety states that there is no
possibility of clearly identifying the relevant market and estab­
lishing whether the supported undertakings would indeed be in
competition with non supported undertakings and would
receive an advantage. Further, the German Ministry states that
the principle of establishing the extra costs of renewable energy
production is not very suitable for determining the aid amount,
as long as there is no general applicable and clearly defined
definition of the concept of extra costs. With regard to the
40 % threshold for aid intensities, the German Ministry finds
that this will often not give a sufficient incentive for a private
investor to act, as he would have to take over 60 % of the costs.
One might therefore consider whether the support should be
based rather on a proportion of the total investment costs. The
German Ministry states that some shortcomings of the Environ­
mental Guidelines in this respect have been overcome by the
Commission's case practice.

12. Comments by the Norwegian authorities

As to the existence of State aid, in their reply of 15 July 2006,
the Norwegian authorities take the view that
the Authority
applies a too strict selectivity test, which does not leave an
any discretion for programmes which are
opening for
basically open for all companies. As
for
teaching material, Enova enjoyed discretion to dismiss only
such projects which did not meet
the
programme or could ensure sufficient quality. These minimum
criteria were therefore of an objective character.

the objectives of

to the support

if

It

stated that

In the decision to open the formal investigation procedure, the
Authority also dealt with the amendments suggested by the
Norwegian authorities.
it would investigate
further whether the Norwegian approach to base the support
on a net present value calculation of the project concerned
could be accepted,
the Norwegian authorities decided to
limit the support to the difference between the market price
and the production costs, see section D.3.3.1 (54) of the Envi­
ronmental Guidelines. The Authority was also concerned about
how the requirement of section D.3.3.1 (54), third sentence of
the Environmental Guidelines was going to be applied in
practice by the Norwegian authorities. This section prescribes
that once supported, any further energy produced by the plant
would no longer qualify for any further assistance. The
Authority also expressed doubts about the support of projects
whose net present value would still be negative, due to high
operating costs, after having received support from Enova.

The Norwegian authorities further claim in the above letter that
the Authority should have made a compatibility assessment of
the Energy Fund directly under Article 61(3)(c) of the EEA
Agreement, as the Commission did in the UK WRAP lease
fund scheme (39).

The Authority could not form a final view on the support for
new energy technologies and on educational measures, as well
as on the advisory and consultancy services (energy audits).

11. Comments from third parties

The Authority received one comment from third parties to its
opening decision. The German Ministry for the Environment,

for renewable energy production as notified,

As to the compatibility assessment of the investment support
the Norwegian authorities
for renewable energy production,
state that
the
system's element of competition between different projects
agreement
excludes
between Enova and the Ministry states that any aid given has
to be compatible with the EEA Agreement. As to the inclusion
of costs which might not have been eligible, the Norwegian
authorities state that this would only concern a small fraction
of the costs.

any overcompensation.

Further,

the

(39) Commission Decision of 11 November 2003 on the State aid
which the United Kingdom is planning to provide under the
WRAP
Lease
and
Guarantee Fund (OJ L 102, 7.4.2004, p. 59).

Environmental Grant

the WRAP

Fund

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Throughout the preliminary investigation phase and in their
reply of 15 July 2006, the Norwegian authorities point out
that Norway faces a different energy situation than most
European states as more than 99 % of its domestic electricity
production stems from hydropower. Hydropower has a different
cost structure and different cost
levels than the traditional
energy production in the rest of Europe based on coal, gas
and nuclear energy. A comparison with hydropower for calcu­
lating the extra costs of new renewable energy production
in the Norwegian authorities’ view,
under the Guidelines is,
advantages
not
in
further
are
feasible. There
applying the chosen methodology. Firstly,
the net present
value method is the commonly used methodology in the
energy sector as well as
sectors. By
referring to the market price, objective and easily available
criteria
all projects
chosen. Using this method for
applying for support, Enova can compare different projects
competing for State support on an equal basis and grant
support to those projects which have the best aid/environmental
benefit ratio. Secondly, the method will ensure that a project
will only be granted the amount necessary to enable the project
to get to the market.

important

industrial

in other

are

Norway states that if one were to follow verbatim the Environ­
mental Guidelines, the Norwegian authorities would have to
supplement the investment aid scheme with an operating aid
scheme, for which the aid would also be decided, in the end, on
the basis of a net present value calculation. The operating aid so
given would de facto be an investment aid scheme where the
grant would be paid in instalments rather than in a lump sum,
without any significant difference in the possibility of support,
a more
administratively,
and,
but with less
complicated system (40).
In the system as notified, Enova
would only be involved in the investment phase of the project.

transparent

The Norwegian authorities agree in their reply of 15 July 2006
with the Authority's finding in the opening decision that
Enova's method in general results in investment aid which is
below or equal to the extra investment costs of the renewable
energy plant. However, the Norwegian authorities object to a
ceiling of plant depreciation. This would ignore the fact that the
projects are also entitled to a fair rate of return, as stipulated in
the Authority's Environmental Guidelines (section D.3.3.1 (54))
and applied in the Commission's Decision regarding the Q7
offshore wind project (41). As the appropriate level of the rate
of return will be established on the basis of the findings of an
independent expert, the Norwegian authorities argue that there
is no danger of overcompensation resulting from rates of return
being too generous.

(40) See also section ‘information submitted by Norway’ in Authority's

Decision 122/05/COL, page 12 seq.

(41) State aid N 707/2002 — the Netherlands, MEP Stimulating

Renewable Energy.

As to the requirement that a supported project should not
receive any further assistance, see section D.3.3.1 (54) of the
Environmental Guidelines, the Norwegian authorities agree that
there should a limitation of the support given by the Energy
Fund. The Norwegian authorities state that two mechanism will
ensure such a limitation. Firstly when Enova assesses a project,
all known income (cash flow) will be taken into account,
regardless of e.g. other government support being qualified as
State aid. These elements will be taken into account on the
income or cost side, where relevant, and will consequently
reduce the need for further support by Enova. Secondly, with
regard to the possible introduction of a green certificate system,
the Norwegian authorities refer to a clause in the contract to be
concluded with the aid recipient that he has to pay back, with
interest, any aid received by the Energy Fund, if he enters the
certificate market.

The Norwegian authorities have suggested — during the formal
investigation of the scheme — an amendment with regard to
projects which, even with the support received from the Energy
Fund, would have a negative net present value. This amendment
is now contained in section I.9.1 number 9 of this Decision and
states that projects generating a negative EBIDTA, under normal
operating conditions at the time of investment, are not in a
position to receive any aid at all.

II. APPRECIATION

1. State aid within the meaning of Article 61(1) EEA
Agreement

Article 61(1) of the EEA Agreement reads as follows:

‘Save as otherwise provided in this Agreement, any aid granted
by EC Member States, EFTA States or through State resources in
any form whatsoever which distorts or threatens to distort
competition
the
production of certain goods shall, in so far as it affects trade
between Contracting Parties, be incompatible with the func­
tioning of this Agreement.’

undertakings

favouring

certain

by

or

1.1. Presence of State resources

According to Article 61 of the EEA Agreement, the measure
must be granted by the State or through State resources. In the
present case, the support of the various investment projects is
done by way of grants, which are financed from the State
budget and from the levy on the distribution tariff. The
financing via direct budgetary allocations fulfils the criterion
of ‘State resources’.

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With regard to the proceeds of the levy on the distribution
tariff, the Authority notes that according to established case
law and European Commission practice, State resources are
involved where money is transferred by a fund and when the
fund is established by the State and the fund is fed by contri­
butions imposed or managed by the State (42). In this regard it
will have to be established, whether the State exercised control
over the money in question (43). In order to be considered as
State resources, it is sufficient that the assets are permanently
under the control of public authorities (44).

The Energy Fund was established by the Norwegian State. The
Energy Fund is administered by a public body, Enova, which is
owned by the Norwegian State via the Ministry of Petroleum
and Energy. The Fund was established in order to fulfil a policy
the
objective by the Norwegian State and to help meet
Norwegian States’ energy targets in relation to the Kyoto
the Norwegian State imposes a
Protocol. For that purpose,
compulsory levy by way of
this
Decision) which shall finance the Fund. The level of the levy
is equally determined by the State. The proceeds of the levy are
poured directly into the Energy Fund which allocates them to
the chosen projects. The Authority, therefore, considers that the
Norwegian State exercises permanent control over the levy and
that
in the meaning of
Article 61(1) of the EEA Agreement.

regulation (see

it qualifies

resources

as State

I.3 of

1.2. Favouring certain undertakings or the production of certain goods

In order to qualify as aid within the meaning of Article 61(1) of
the EEA Agreement,
firstly,
the measure must
confer on the recipient advantages that relieve it of charges
that are normally borne from its budget. Secondly,
the aid
measure must be selective in that it favours ‘certain undertakings
or the production of certain goods’. In the following, a distinction
will be made between the investment aid schemes,
including
energy audits, and the educational/teaching measures.

in addition,

1.2.1. G e n e r a l

r e m a r k :

A s s e s s m e n t

E n e r g y
s c h e m e
i n d i v i d u a l g r a n t s u n d e r t h e s c h e m e

F u n d

a s

o f
t h e
s u c h , n o t o f

In the present case,
might,

the support measures described below
in some situations, have been given to individuals

(42) Case 173/73 Italy v Commission [1974] ECR 709, Case 78/76
Steinike v Germany [1977] ECR 595, Commission Decision N
707/2002 — the Netherlands, see above, fn. 42; N 490/2000 —
Italy, Stranded costs of the electricity sector.

(43) Advocate General

Jacobs in Case C-379/98 Preussen Elektra v

Schleswag AG [2001] ECR I-2099 paragraph 165.

(44) See Case T-67/94 Ladbroke Racing Ltd v Commission of the European
Communities [1998] ECR II-1, paragraph 105 seq. In that respect
there is no doubt that the measure can be imputed to the State,
who introduced the levy. This is a different situation from the
system discussed in Case C-345/02 Pearle BV, Hans Prijs Optiek
Franchise BV and Rinck Opticiëns BV v Hoofdbedrijfschap Ambachten
[2004] ECR I-7139, which concerned a charge decided by a board
of professionals.

rather than to undertakings (e.g. for some of the teaching and
educational measures) or might concern an educational rather
than an economic activity. However, none of
the various
administrative
formally
support measures were
of
types
individuals
guidelines)
activities (45). Support could e.g. be given to e.g. private educa­
tional operators, which might carry out economic activities or
be
the
towards
construction business).

certain industrial

(law or
or

limited

sectors

certain

geared

(e.g.

to

The current notification and assessment deals with the Energy
Fund as such, not with individual grants under it. Therefore,
there is no need for the Authority to assess– for its evaluation
of the Energy Fund scheme as such (46) — e.g. whether the
support in individual cases given to non-profit organisations
and educational entities concerned the (economic) activity of
an undertaking. As the Energy Fund scheme did not contain
any limitations in that regard, the findings of the Authority,
therefore, is that — with the exception below — the support
under the scheme went to undertakings.

Support granted to the public sector for carrying out energy
efficiency measures as part of the public function of that entity
does not constitute State aid. This concerns, in particular, the
programme on energy efficiency measures for municipalities.
This support does not contain State aid within the meaning
is
of Article 61(1) of
limited, as confirmed by the Norwegian authorities,
to the
public entity function of the supported recipient.

the EEA Agreement, as long as it

1.2.2. I n v e s t m e n t
p r o d u c t i o n ,
n e w
e n e r g y
a u d i t s )

s u p p o r t
e n e r g y

( r e n e w a b l e
e n e r g y
s a v i n g m e a s u r e s ,
e n e r g y

a n d

t e c h n o l o g y

The grants for the above-mentioned investments give the reci­
pients an advantage in the sense of Article 61(1) of the EEA
Agreement by either enabling them to invest
in renewable
energy production or to invest
in measures which reduce
their energy consumption or enable the company (in the case
of audits via increased competence and energy analysis) to use
energy more efficiently, thereby further reducing the company's
ordinary running costs.

(45) The Authority would, however,

that

like to point out

for the
finding whether the support went to an ‘undertaking’ one does
not consider the entity's legal status or organisational form, but
decides the quality of an undertaking according to the activity
which is supported, Case C-41/90 Höfner and Elser v Macotron
[1991] ECR,
I-979; e.g. also non-profit organisations can carry
out economic activities and compete with others, see e.g. Case
78/76 Steinike & Weinlig, see above fn. 43, and Case C-67/96
Albany, International BV v Stichting Bedrijfspensionfonds Textielindustrie,
[1999] ECR I-5751.

(46) If the support constitutes aid, which will be established below, the
Energy Fund will constitute an aid scheme. See the definition of an
aid scheme in Article 1(d)
II of Protocol 3 to the
Surveillance and Court Agreement.

in Part

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The support is also selective. As for the investment support for
renewable energy production, the support refers to a particular
category of energy producers.

the EEA Agreement. Moreover, even for
Article 61(1) of
efficient use of energy in commercial buildings, the Authority
does not find State aid in the meaning of Article 61(1) EEA
Agreement
involved, as the measure was open to anyone
interested in it, without granting Enova and its efficiency
centres any discretion. In other words, the measure does not
fulfil the condition relating to selectivity.

it

its

Selectivity also exists for the other measures, as the grants are
allocated to only certain companies chosen by Enova after
comparing the projects during the application process and
deciding which is the most efficient project of the application
round to be supported. As established by case law (47),
in a
situation in which a fund enjoys ‘a degree of
latitude which
financial assistance having regard to a
to adjust
enables
number of considerations such as,
the
beneficiaries, the amount of
financial assistance and the conditions
under which it is provided, (…) the system is liable to place certain
undertakings in a more favourable situation than others’ (48). Each
project fulfilling the application criteria can not be certain to be
granted support, as
this depends on the other projects
competing with it in the application process and the amount
of money Enova is willing to allocate within the concrete round
of project evaluations. As Enova is free to choose how often
and which kinds of calls for submitting project proposals it
organises,
the system gives Enova a sufficient margin of
discretion to make the support measures selective (49).

the choice of

in particular,

In addition, for energy audits, there is an additional element of
selectivity in that the programme (programme text 2003, see
above section I. 5.6 of this Decision) was targeted at owners of
private and public buildings with a total surface of over 5 000
square metres and at industrial enterprises.

exists

advantage

in relation to the

A selective
support
programme for the development of teaching material and
educational courses, as it reduces the developer's costs of
creating such material or programme, compared to others
who do not receive such support. The Authority does not
agree with the Norwegian authorities that it applies too strict
a selectivity test for the teaching/educational programmes. The
support is, firstly, targeted towards certain sectors, e.g. in the
2003 programme inter alia to private providers of educational
services or
in the 2004 programme to the construction
business. The programme texts underline that offers of study
the needs of business, partially with private
should meet
financing. This
industry participating in the programme's
leaves
solutions.
the development of
Secondly, the respective programmes still leave Enova a great
margin of discretion. The Norwegian authorities themselves
stress that the competition of projects is essential. Consequently,
some projects might not be guaranteed support even though
they fulfil certain objective criteria, as they might lose out if
other projects in the respective assessment round score better.
There is also no guarantee that a rejected project would be
supported in the next round. Further, the programme texts of
2003 and 2004 contain a priority list, which further demon­
strates that certain projects, in particular those which are not
among the projects to be prioritised, will have a lesser chance of
being supported. The Authority, therefore, considers the support
to be selective.

room for

sectoral

1.2.3. I n f o r m a t i o n a n d e d u c a t i o n a l p r o g r a m -
m e s i n t h e f i e l d o f e n e r g y e f f i c i e n c y

The Authority takes the view that no selectivity is involved for
Enova's information helpline where advice on energy effi­
ciency would be granted to anyone interested in advice on
energy efficiency, without Enova being able to exercise any
discretion to that end.

1.3. Distortion of competition and effect on trade between Contracting

Parties

To be aid in the meaning of Article 61(1) of
the EEA
Agreement, the measures must distort or threaten to distort
competition and affect trade between the Contracting Parties.

No State aid is further involved for the on-site visits as far as
in these
private households are concerned, as the support
situation are not granted to undertakings in the sense of

(47) Case C-241/94 Commission

v

France

[1996]

ECR I-4551,

paragraph 23.

(48) See also Advocate General Jacobs in Case C-256/97 DM Transport

S.A [1999] ECR I-3913, paragraphs 39 and 40.

(49) This is supported by Enova's own assessment of its role on its
‘Enova SF enjoys considerable freedom
webpage, where it is stated:
with regard to the choice and composition of its strategic foci and policy
measures’.

In the present case, the measures are strengthening the compe­
titive situation of the supported enterprises within the energy
and electricity markets in the European Economic Area, where
they actually or potentially compete with other
energy
producers (50).

(50) E.g. in relation to electricity producers relying on traditional sources
or — currently — in relation to hydropower producers or other
renewable energy producers which are not supported by Enova; or
companies which are not supported for applying energy efficiency
measures.

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Official Journal of the European Union

L 189/51

Quite a number of projects supported in the past (see section
I.6 of this Decision) might have fallen under the Act mentioned
in point 1(e) of Annex XV to the EEA Agreement (Commission
Regulation (EC) No 69/2001 of 12 January 2001 on the appli­
cation of Articles 87 and 88 of the EC Treaty to de minimis aid),
because the allocated grants are below the de minimis threshold.
However, not all of the supported projects had the character of
de minimis aid. Nor was it a condition of the scheme that this
should be so.

As the electricity market is largely liberalised and there is trade
flow in energy products and electricity between the EEA States
(e.g. Norway imports and exports a certain percentage of its
electricity), the described (potential) distortion of competition
takes place in relation to other EEA undertakings. This is
further demonstrated by the fact that various types of electricity
are traded in Nordpool, a common framework between the
Nordic
therefore,
distorting or
threatening to distort competition and affect
trade between the Contracting Parties.

countries. The Energy Fund system is,

2. New aid

(ii) the new administration of the support with the creation of
the new administrative body Enova, thereby replacing the
formerly responsible Norwegian Water Resources and
Energy Directorate;

(iii) the development of new energy objectives by Parliament,
which means that the measures under the schemes should
now achieve measurable energy efficiency and production
goals;

(iv) and finally a new financing mechanism (levy on the distri­

bution tariff).

legal
These changes were accompanied by a new set of
provisions on Enova, which have an impact on the support
granted in that the measures should now achieve new policy
objectives agreed in 2002 between the Norwegian State and
Enova.

the EEA Agreement.

As shown above in section II.1 of this Decision, the system
provided by the Energy Fund entails aid within the meaning
to be
of Article 61(1) of
determined whether it also constitutes new aid, which should
have been notified in sufficient time for the Authority to make
an assessment, see Article 2 in Part II of Protocol 3 to the
Surveillance and Court Agreement. New aid is defined as all
‘which is not existing aid, including alterations to existing
aid (…),
aid’, see Article 1(c) in Part II of Protocol 3 to the Surveillance
and Court Agreement.

It needs

The Norwegian Government states that the programmes merged
under the Energy Fund mechanism existed before the entry of
Norway into the European Economic Area. Therefore,
the
schemes originally constituted existing aid within the meaning
of Article 1(b)(ii) in Part II of Protocol 3 to the Surveillance and
Court Agreement.

With the notification, the Norwegian authorities notified the
Authority of alterations to the existing aid schemes. These
consist mainly of:

judgment

Les Assurances (52),

These alterations were not purely of a technical or administra­
tive nature [see Article 4(1)
in the Authority's Decision of
14 July 2004 (51)], but significantly changed the previously
in line with
existing system and its legal framework. Firstly,
the
the Court's
in Namur
existence of new aid must be determined by reference to the
provisions providing for it. In this regard, it should be noted
that with the establishment of the Energy Fund and Enova, a
whole new set of rules governing the support under the Energy
Fund and its financing was adopted. Firstly, there was a Parlia­
mentary decision of 5 April 2001, by which the Energy Act of
29 June 1990 was amended. The decision authorised the
Government to oblige the distributor of energy (by a licence,
‘omsetningskonsesjoner’) to add a levy to the electricity distribution
tariff paid by the end consumer. This levy shall then contribute
to the financing of the Energy Fund. A then newly adopted
Government regulation of 10 December 2001 lays down the
details of how this levy should be collected and transferred to
the Energy Fund. In the propositions leading up to the parlia­
the Government had defined new and
mentary decision,
concrete energy objectives (see I.4 of
this Decision), whose
fulfilment should be achieved within a given time frame by
the establishment of the Energy Fund and Enova. The objectives
and their achievements were further specified in the Agreement
between the Ministry and Enova. A new regulation on the
Energy Fund placed the Fund under the Ministry of Petroleum
and Energy and stipulated its administration by Enova. This
demonstrates that in the years 2000/2001 the legal provisions
governing the support of energy efficiency measures were signif­
icantly altered and supplemented.

(i) the 2002 merger of the existing schemes under the newly

established Energy Fund;

(51) Decision 195/04/COL.
(52) Case C-44/93 Namur-Les Assurances du Crédit v Office National du

Duccroire and the Belgian State [1994] ECR I-3829.

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These legislative and administrative changes were done with the
intention to substantially alter the current support regime and
create a completely new way to fund energy saving measures
and renewable energy production (53). The merger of the two
new schemes was more than a mere technical formality as their
combination under one heading was effectuated in order to
provide for better targeted State support and achieve more
tangible
energy policies.
Support decisions for projects will now have to take into
the projects can contribute to the new
account whether
objectives defined by Parliament
in 2000/2001, which is a
substantive alteration to the previous support mechanisms.

in terms of

sustainable

results

(NVE)

competence with that of

A completely new administrative structure substitutes
the
formerly responsible Norwegian Water Resources and Energy
the newly
Directorate's
founded administrative body Enova. Enova is bound by an
Agreement with the Ministry to administer the Energy Fund
to achieve Parliament's newly defined energy objective and to
manage the Fund according to the newly adopted legislation. It
further is called upon to promote — through the administration
of the funds — competition in the market. This shows that
Enova does not simply continue the NVE's work, but
is
entrusted with new tasks and obligations, which is a substantial
alteration of the previous schemes.

Finally, it is of importance that a new financing mechanism has
been set up.
the support
Instead of budgetary allocations,
measures are (increasingly) financed via the means of a levy
on the distribution tariff, which is used for financing the
Energy Fund. While Norway pointed out that the levy as such
has been introduced prior to the entry into force of the EEA
Agreement, this does not alter the Authority's finding that the
introduction of the new financing mechanism resulted in a
substantial change. Before 2002, the levy was managed by the
to mainly finance their own information
grid companies
activities on energy efficiency. Now the levy is set up and
controlled by the Norwegian State, which earmarks it
for
financing the Energy Fund. The Fund can apply the finances
to all different kind of support measures, not limited to infor­
mation activities (54).
the Authority
concludes that the alterations to the funding system are of a
substantial nature.

In light of

the above,

(53) See in this respect the interpretation by Advocate General Fennelly
in Cases C-15/98 and C-105/99 in Italian Republic v Commission of
the European Communities [2000] ECR II-8855, paragraphs 61 seq,
who claims that the legislative changes must alter the system signif­
icantly, i.e. represent more than just a formal change.

(54) In the respective Government proposals, the Norwegian authorities

themselves labelled the financing mechanism as ‘new’.

The described changes alter the aid scheme as such, without
being a severable part from the existing schemes (55). The new
financing and administrative mechanism as well as Enova's obli­
gation to achieve newly defined energy objectives concern the
the support programme and apply to all
very structure of
measures supported under the Energy Fund. The alterations
were undertaken with a view to make better use of public
resources
energy efficiency
results, which made it necessary to introduce new structures
and new objectives. These new structures and objectives
determine each support decision and cannot be considered as
severable from the formerly existing aid measures.

and achieve more

sustainable

Consequently, the notified alterations are to be classified as new
aid within the meaning of Article 1(c) in Part II to Protocol 3 of
the Surveillance and Court Agreement.

The Energy Fund became operational on 1 January 2002, i.e.
before June 2003, when the scheme was notified to the
Authority. The Energy Fund system was therefore belatedly
notified to the Authority and thereby infringed the standstill
obligation in Article 1(3)
I of Protocol 3 to the
in Part
Surveillance and Court Agreement. The aid is thus to be clas­
sified as ‘unlawful aid’ within the meaning of Article 1 (f) in Part
II of Protocol 3 to the Surveillance and Court Agreement. Any
unlawful
compatible with
not
Article 61(3)(c) of the EEA Agreement is subject to recovery.

aid which

declared

is

3. Compatibility of the aid

assess whether

In the Authority's view, the aid measures do not comply with
any of the exemptions provided for under Article 61(2) or
(3)(a), (b) and (d) of the EEA Agreement. Therefore, one has
to
under
aid
Article 61(3)(c) of the EEA Agreement. Under this provision
aid may be declared compatible if ‘it facilitates the development
of certain economic activities or of certain economic areas, where such
aid does not adversely affect trading conditions to an extent contrary to
the common interest’.

justified

could

the

be

the Energy Fund according to
The Authority will assess
Article 61(3)(c) of
in conjunction with
the EEA Agreement
the Authority's Environmental Guidelines. These Guidelines
required the EFTA States to bring their environmental aid
schemes into line with these Environmental Guidelines by
1 January 2002.

(55) Cases T-195/01 and T-207/01 Government of Gibraltar and Kingdom
of Spain v. European Commission [2001] ECR II-3915, paragraph
111.

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Official Journal of the European Union

L 189/53

the Authority will make a
In the following assessment,
distinction between the Energy Fund system as notified to the
Authority and as applied since 1 January 2002 (see section II
3.1 of this Decision) and the future changes envisaged by the
Norwegian authorities which intend to make the support
compatible with the EEA State aid provisions (see section II
3.2 of this Decision).

3.1. Assessment of the Energy Fund as notified to the Authority

3.1.1. T h e

i n v e s t m e n t

s u p p o r t

e n e r g y
i n v e s t m e n t ,
e n e r g y a u d i t s )

p r o d u c t i o n ,

e n e r g y

n e w e n e r g y

( r e n e w a b l e
s a v i n g
t e c h n o l o g y ,

In its decision of 18 May 2005 to open the formal investigation
procedure, the Authority expressed doubts as to whether the
investment support granted by the Energy Fund could be
declared compatible under the Environmental Guidelines.

(c) of

In their comments of 15 July 2005 to the opening decision, the
the system should be
Norwegian authorities argued that
authorised directly under Article 61(3)
the EEA
Agreement. The Authority does not follow the view, at least
as far as the support concerned is covered by the Environmental
Guidelines. In the Authority's opinion, the European Commis­
sion's WRAP decision (56) is not relevant in this regard. The
difference between the two cases
in the case of
recycling, the Guidelines do not provide for any provision on
investment aid, whereas renewable energy investment support is
covered by the Environmental Guidelines. The Authority is
bound by its own guidelines (57).
it
cannot
ignore the investment aid chapter of the Guidelines
(section D.1.3, in particular point (27) and section D.1.7 (32)
or the operating aid chapter (section D.3.3.1 (54)), which cover
the situation of renewable energy sources) and the aid intensities
contained therein.

finds that

therefore,

that

is

It

1. Investment support for renewable energy production

Investment for renewable energy production can be supported
up to an aid intensity of 40 % or, where necessary, of 100 % of
eligible costs, see section D.1.3 (27) of
the Environmental
Guidelines. Section D.1.6 (31) clarifies what constitutes the
eligible investment, namely investment
in land, buildings,
plants and equipment, and, under certain conditions, intangible
assets. Section D.1.7 (32) establishes that eligible costs are the
difference between the investment costs of a renewable energy
production plant and the investment costs of a conventional
power plant (hereinafter ‘extra cost approach’).

(56) See above, fn. 40.
(57) Case C-351/98 Kingdom of Spain v. the European Commission [2002]

ECR I-8031, paragraph 76.

the Guidelines.

furthermore, no guarantee that

there would be no guarantee that

The Authority noted in its Decision to open the formal inves­
tigation procedure (58) that the support for renewable energy
sources was not based on an extra cost approach as laid
down in D.1.7 (32) of
It also found that
the amendments later suggested by the Norwegian
without
authorities,
the support
the 40 % threshold.
would stay within the boundaries of
There was,
it would stay
within the higher threshold of 100 % of extra costs nor that
the scheme would not lead to overcompensation. There were,
e.g., no guarantees that only eligible investment costs would be
supported and that no more aid than necessary to trigger the
project would be given to an undertaking. Hence, the Authority
took the preliminary view that the Energy Fund, as notified,
could not be justified according to the investment aid chapter
(section D.1.3 of the Environmental Guidelines) and constituted
incompatible State aid.

the Norwegian authorities

The comments by the Norwegian authorities have not removed
these doubts. As to the support of costs, which might not have
been eligible,
state that as of
1 January 2005, Enova has only accepted the support of
costs listed in the Commission's Decision regarding Finland N
75/2002, whereas in the past, other costs (e.g financial costs)
have been supported, even if this might constitute only a small
fraction of the total costs. Since the Energy Fund, as notified,
did not contain any clear rules on which costs are eligible, the
danger to include non eligible costs has indeed materialised.
the aid scheme's
Likewise,
element of competition restricts the possibilities of over-compen­
sation, cannot alter the Authority's findings that the scheme did
not have any functioning legal restrictions in place which would
guarantee that the support stays within the threshold of the
investment aid chapter of the Guidelines. Without any such
rules in place, it would be a matter of chance for overcompen­
sation to be avoided.

the Norwegian argument

that

The Authority upholds its view expressed in the Decision to
open the formal investigation procedure that also the conditions
of section D.3.3.1 (54) are not met for the system as notified.
The Authority could not establish that there were parameters in
place which would ensure that the threshold of section D.3.3.1
(54) would never be exceeded. There was neither a guarantee
that only investment costs would be included in the calculation
(section D.3.3.1 (54) is limited to plant depreciation), nor was
there sufficient certainty on how the discount rate should be
established and that the aid would never exceed the amount
necessary to reach a zero net present value.

In conclusion, the Energy Fund system as notified does not
meet
the Environmental
the
Guidelines.

standards of

compatibility

(58) Section II 3.1.1 of Authority's Decision 122/05/COL.

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2. Energy saving support

to section D.1.3 (25) of

Investment for energy saving (the notion of energy saving is
defined in section B(7) of the Environmental Guidelines), can be
supported up to an aid intensity of 40 % of eligible costs
the Environmental
according
Guidelines. Section D.1.6 (31) of the Environmental Guidelines
defines the investment concerned, i.e. land, buildings, plants and
equipment and, under certain conditions,
intangible assets.
Section D.1.7 (32) of the Environmental Guidelines limits the
support
the extra
to eligible costs, which are defined as
investment
environmental
objectives. No aid can be given for an adaptation to a
European Community standard (59), if the undertaking is not a
small or medium-sized undertaking.

costs necessary

to meet

the

In its Decision to open the formal investigation procedure, the
Authority found that the support is not calculated according to
the extra cost method as laid down in section D.1.7 (32) of the
Environmental Guidelines. In particular, it does not stay within
the 40 % threshold of section D.1.3 (25) of the Environmental
Guidelines. Contrary to the investment support for renewable
energy production, the 40 % threshold cannot be exceeded for
energy saving measures (60).

The Norwegian authorities state that
in practice they have
followed the approach of the Guidelines. The Authority would
the Energy Fund
individual grants under
not dispute that
scheme might in themselves have been compatible with the
Environmental Guidelines. However, that does not make the
Energy Fund scheme as such — which did not contain any
thresholds as to the aid intensities nor did it follow the extra
Environmental
cost
Guidelines.

approach — compatible with

the

the Authority was not certain whether the projects concerned
research and development projects, which should have been
assessed according to Chapter 14 on aid for research and deve­
lopment of the Authority's State Aid Guidelines.

During the formal investigation procedure, the Norwegian auth­
orities clarified that support under this category would not
concern projects at
the stage of research and development,
but mainly renewable energy production projects and to a
lesser extent energy saving measures. The data demonstrated
by the Norwegian authorities of projects grouped under this
heading showed that so far only these categories have been
supported. The project of ‘new energy technology support’ is,
therefore, to be considered as a subgroup of the investment
support
renewable energy
production.

for energy saving measures or

subgroups of

However, for the Energy Fund, as notified, the Authority finds
that the system did firstly not establish clearly that the new
energy technology projects
the other
are
support categories and should therefore be assessed according
to the same rules.
In any event, as for the other support
measures, the Authority finds that the system as notified did
the
not
contain any restrictions which guaranteed that
respective thresholds for
renewable
energy production and energy saving measures would be
respected, or that only the eligible investment costs would be
supported. The Authority, therefore, comes to the conclusion
that the support as notified does not fulfil the requirements of
the Environmental Guidelines.

investment support

for

Consequently, as there were no mechanisms in place which
would exclude that aid granted under that support measure
would exceed the 40 % threshold of support, whereby the
costs would be compared with the costs of traditional power
production,
is to be
the Energy Fund scheme, as notified,
considered as incompatible aid.

4. Energy audits

In the Decision to open the formal investigation procedure, the
Authority found that it did not have sufficient information to
assess whether support under this heading would be compatible
with the Environmental Guidelines, in particular under section
D.2 (36) of the Environmental Guidelines (support for small
and medium-sized enterprises).

3. New energy technology

In its decision to open the formal investigation procedure, the
Authority found that it did not have sufficient information in
order to assess whether the projects in this category would be
projects relating to renewable energy production (61). Likewise,

(59) The reference to a Community standard in the context of the EEA
explicitly provided for by the Environmental

is

Agreement
Guidelines, see section A(5) thereof.

(60) Section II 3.1.2 of Authority's Decision to open the formal inves­

tigation procedure, Decision 122/05/COL.

(61) Section II 3.1.3 of the Authority's decision to open the formal

investigation procedure, Decision 122/05/COL.

investigation procedure,

Regarding this support category,
the Norwegian authorities
to a
referred, during the formal
Finnish scheme, which allows for costs of energy audits to be
taken into account for state support (i.e. not limited to small
and medium-sized companies). The Norwegian authorities stress
that, like the Finnish system, the Norwegian Energy Fund allows
firms to receive financial support to perform energy audits and
analyses, either to help achieve feasible energy efficiency or for
energy saving investments or behavioural changes. The Finish
scheme had allowed for aid covering 40 % of the eligible costs.
The Norwegian scheme granted up to 50 % of eligible costs.

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contain any

The Authority, firstly, finds that the Energy Fund scheme as
notified did not
limitations which would
guarantee that the support of such measures does not exceed
the 40 % threshold for energy saving measures as laid down in
In
section D.1.3 (25) of
particular, a support of up to 50 % of eligible costs is not
compatible with the Environmental Guidelines.

the Environmental Guidelines.

Secondly, the Authority does not find that a support of energy
audits in relation to purely behavioural changes, without any
envisaged investment, can be based on section D.1.3 of the
Environmental Guidelines, which aims at investment support
only. The Commission's authorisation in relation to a Finnish
support scheme was limited to such investment support (62). It
might be that further support for advisory and consultancy
services would be considered compatible with section D.2
(36) of the Environmental Guidelines, in conjunction with the
Act referred to under point 1(f) of Annex XV to the EEA
Agreement (63)
(aid to small and medium-sized enterprises).
However, this is not decisive for the compatibility of the aid
scheme as the Energy Fund as notified did not contain any
limitations to that end.
therefore, not be declared
compatible with the Environmental Guidelines.

It can,

3.1.2. T e a c h i n g
m e a s u r e s

m a t e r i a l

a n d

e d u c a t i o n a l

The Authority notes that the teaching material and educational
programmes as notified were not limited to small and medium-
sized companies, as stipulated in the Act mentioned in point
1(f)
in Annex XV to the EEA Agreement (aid to small and
medium-sized enterprises) (64). Neither was the support limited
to support falling under the Act referred to in point 1(d) in
(training aid) (65). The
Annex XV to the EEA Agreement
the
Authority,
support measures
these block
exemptions. This type of support is also not covered by the
Environmental Guidelines.

therefore, does not have to assess whether

justified under

could be

The Norwegian authorities argue that
Fund,
under Article 61(3)(c) of the EEA Agreement.

the aid under Energy
for parts, should be assessed directly

in general or

Authority has to establish whether the support is necessary for
and proportionate to fulfilling its objective.

the

support measure was

The objective of
to enhance
knowledge and competence about energy saving possibilities
although
and energy efficiency. Energy saving measures,
related to investment, are explicitly laid down in the Environ­
mental Guidelines as an objective open for State support. In
general, energy efficiency measures contribute to achieving the
Kyoto goals to reduce greenhouse gases, and knowledge and
competence play an important role in the introduction and
implementation of energy efficiency measures. As regards the
necessity of the support at hand, the programme was aimed at
the development of new material and courses and has excluded
maintenance and revision of existing courses, as these costs
were meant to be covered by course fees. The support under
the programme was meant to give an incentive for the creation
of new material, for which there was a need, as the Norwegian
authorities argued that there was a lack of up-to-date teaching
materials and learning courses in Norway.

it

is important

to universities and colleges,

for the Authority's finding that

The aid can be considered proportionate and not distorting
trade to an extent contrary to the common interest. In this
respect
the
scheme has been terminated and only covered 33 projects
(one went to individuals), each with a limited amount of aid
being granted. For 12 of the projects, dealing with support to
entities which are registered as non-profit organisations, the
support ranged between NOK 50 000 and 918 000, i.e. EUR
6 900 and 126 970 (66), with only two projects
receiving
support of around NOK 1 300 000 (EUR 180 555). For
support
ranged
between NOK 200 000 and 450 000 (EUR 27 662 and
62 240), with only one supported project
receiving NOK
875 000 (EUR 121 023). Enova, moreover, never assumed the
total project costs, but limited its contribution to 50 % thereof.
Further, an open ‘aid’ tender procedure was used to select the
beneficiaries and determine the amount of aid. The tendering
procedure also guaranteed that the aid would be limited to the
necessary amount and would be proportionate. The aid was also
project related and did, thus not constitute operating aid to
reduce the operator's ordinary running costs. It can, therefore,
be concluded that the aid did not distort competition to an
extent contrary to the common interest. Consequently, the aid
was compatible with Article 61(3)(c) of the EEA Agreement.

support

the

In order to establish whether such a measure can be authorised
by directly applying Article 61(3)(c) of the EEA Agreement, the

(62) State aid N 75/2002 — Finland, see above fn. 26 of this Decision.
(63) See fn. 29 of this Decision.
(64) See fn. 29 of this Decision.
(65) See fn. 30 of this Decision.

3.1.3. C o n c l u s i o n f o r t h e s y s t e m a s n o t i f i e d

that

The Authority finds
the Norwegian authorities have
unlawfully implemented the Energy Fund scheme in breach of
Article 1(3) of Part I to Protocol 3 to the Surveillance and Court
Agreement.

(66) Exchange rate as published on the Authority's webpage, set at 7.23

for 2003.

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Enova's information helpline and the on-site visits do not
constitute aid within the meaning of Article 61(1) of the EEA
Agreement.

generally lower than for conventional technology. On a day-to-
day basis, renewable energy production is, therefore, expected to
generate a positive cash flow, i.e. not be in need of any aid to
relieve them of operating costs.

investment

support measures

The
energy
production, energy savings, energy audits) as notified are not
compatible with Article 61(3)(c) of
in
conjunction with the Environmental Guidelines.

the EEA Agreement

(renewable

The support granted for the development of teaching material
courses between 1 January 2002 until
and educational
31 December 2003 is compatible under direct application of
Article 61(3)(c) of the EEA Agreement.

3.2. The Energy Fund with the
Norwegian authorities

envisaged amendments by the

3.2.1. I n v e s t m e n t s u p p o r t

1. Investment support for renewable energy production

The aid intensities stipulated by the Environmental Guidelines

As a starting point for assessing the Norwegian investment aid
scheme, the maximum aid available to a project, as stipulated in
the Guidelines, will have to be determined. Section D.1.3 (27) of
the threshold for
the Environmental Guidelines
investment aid, which is to be limited to 40 % of the extra
costs necessary
investment
environmental
to meet
objectives.
If necessary, 100 % of eligible costs may be
supported.

sets out

the

In addition, sections D.3.3.1 (53) and (54) of the Environmental
Guidelines also allow for operating aid, in order to compensate
for higher unit investment costs. Point (54) allows support to
compensate for the difference between the production cost of
renewable energy and the market price of the power concerned.
However, the aid must be limited to plant depreciation, which is
to be understood as investment depreciation. If the EFTA state
can show that the aid is indispensable given the poor competi­
tiveness of certain renewable energy sources, a fair return on
capital may also be included.

(54)

investment). What

for plant depreciation (i.e.

in effect, are the higher unit

Section D.3.3.1 (54) of the Environmental Guidelines limits the
support
is
compensated for,
investment
costs, rather than ordinary running costs. Consequently, aid
granted under point
in effect, given to support an
undertaking's investment. If the aid would cover a fair rate of
return on capital in addition to depreciation of the capital, all
capital costs would be covered, and the aid would in present
value terms amount to the full investment. Future capital depre­
ciations augmented by the required rate of return would in
present value terms be discounted by the same rate. The
discounted costs would be the upper ceiling for the aid.

is,

The Environmental Guidelines allow for a combination of
investment and operating aid. When calculating the operating
aid available, account should be taken of any investment aid
granted to the firm in question, see D.3.3.1 (54) of the Envi­
ronmental Guidelines. Thus, any investment aid granted will be
deducted from the eligible amount for operating aid. This shows
that the threshold in section D.3.3.1 (54) of the Environmental
Guidelines functions as the maximum threshold for giving
investment aid to a renewable energy project.

Aid granted under the NPV approach applied by Enova

As described in section I 9.1, points (4) and (7) of this Decision,
the NPV approach used by Enova calculates the aid amount so
that projects reach an NPV of zero, which,
for a rational
investor, would be the triggering off point for when a project
is realized in the market. No aid will be given in excess of the
amount necessary to reach the zero net present value. The aid
element can thus be expressed as:

(Discounted Cash Flows (DCF)) – (Investment costs) +
(Aid) = 0

Operating aid is normally understood as aid intended to relieve
an undertaking of the expenses which it would normally have
had to bear in its day-to-day management or its usual activities.
for renewable energy sources, operating costs are
However,

As expressed above, the cash flows from the operations of the
renewable project are used to pay off the original investment
costs. Renewable energy projects generally have higher unit
investment costs than traditional technology. Hence, the net
income generated (the DCF component above) will,
in many
cases, not be high enough to pay off the necessary investment.
These projects are then eligible for an aid component, in order
to bring the NPV to 0.

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The Authority has had, however, one concern with the use of
this method for calculating aid. The reason for that has been
that projects that do not generate a positive cash flow may also
be considered eligible for aid. Such projects will generate a
aid component
negative DCF, which will
exceeding
the
investment
the
maximum aid intensities.

lead to the
costs,

consequently

and

However, as long as the DCF component remains positive, the
aid given to any project will never exceed the investment costs.
To address this concern, the Norwegian authorities have agreed
to amend the scheme, as expressed in number section I.9.1
number 9 of
this Decision, so that projects which have a
negative DCF are not eligible for any aid from Enova. This
ensures that the maximum ceiling is not exceeded, by limiting
aid to investment costs.

However, for projects which generate a relatively low DCF, the
aid component will be relatively large, resulting in high aid
intensities. For this to be justifiable,
it must be demonstrated
that the aid given is ‘indispensable’ for the realization of the
projects.

No rational investor can be expected to launch a project with a
negative NPV. For that reason, the Authority is of the view that
a NPV calculation, preformed on the basis of the best available
information when granting the aid, will serve as a sufficient
demonstration of the indispensability of the aid given. When
applying the NPV method, due account must be taken of the
individual
risk involved in each project when setting the
discount rates for an investment. Following discussions with
the Authority, Norway commissioned an independent analysis
from First Securities (67) in order to determine the discount rates
to be used when assessing project applications under
the
scheme. In this report, the method for arriving at the correct
discount rates is set out, based on best practice financial meth­
odologies.

Special provisions for biomass

An exception to the above is biomass projects. For such
projects, the provisions of D.3.3.1 (55) of the Environmental
Guidelines allow for a higher total ceiling than investment costs.
The reason for that is that these projects typically have low
investment, but high running costs.
these
projects, the Authority is of the view that aid may be distributed
according to the NPV calculations, without the investment costs
as a limit.

In the case of

Likely aid intensities

The above discussion has dealt with the maximum aid inten­
sities. However, for most of the projects eligible for aid from
Enova, the actual aid intensities will be considerably lower. This
is due to the fact that renewable energy projects in general have
low operating costs, which will lead to DCFs which are higher
than for conventional technology. Given that Enova allocates
aid to the most cost effective projects based on internal compe­
tition, the majority of projects can be expected to result in aid
components within the threshold of 100 % of extra investment
costs as stipulated in section D.1.3 (27), with the ceiling
resulting from the application of section D.3.3.1 (54) rarely
the
being reached. This is confirmed by an assessment of
renewable energy production projects supported so far. On
the aid intensities for the supported wind, district
average,
heating and bio energy projects was around 24 % of
total
investment costs, with a maximum aid intensity for one wind
project of 68 % and for a bio energy project of 50 % of the
total investment costs (68). However, as it can be demonstrated
that the NPV method in any case does not lead to overcom­
pensation with respect to the guidelines, there is no need to
demonstrate this in detail.

In conclusion, the Authority is of the view that following the
amendments by the Norwegian authorities, the NPV method of
distribution aid respects the thresholds laid down in the Envi­
ronmental Guidelines, in particular section D.3.3.1 (54).

No further assistance

Further, the Norwegian authorities have underlined that Enova
would only be involved in the investment phase of the projects.
Projects which have received investment aid from Enova will
not be eligible for any further support under the Environmental
Guidelines once the lump sum payment has been made.
Another positive element is that the aid is ‘tendered out’, i.e.
that different projects compete for support and that only the
most efficient projects which provide the best aid/energy effi­
ciency ratio will be supported. This approach will contribute to
support only projects which are promising and give support
only to the extent necessary.

In its Decision to open the formal investigation procedure, the
Authority was also concerned about whether the projects which
were financed by the Energy Fund would receive further
assistance by the State, regardless of whether this support
would qualify as State aid in the meaning of Article 61(1) of
the EEA Agreement or not, see section D.3.3.1 (54) of the
Environmental Guidelines. The Authority was concerned that
such further assistance could result in unnecessary funding, as
the projects support by Enova would already lead to a zero net
present value, including a fair rate of return, and should thus be
sufficient to trigger the project realisation.

(67) Letter from First Securities to Enova dated 16 December 2004.

(68) See above section I.6 of this Decision.

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The Norwegian authorities stressed that Enova would only be
involved in the investment phase of the project and that the
project would only receive the minimal lump sum to trigger off
the investment, but not more. During the formal investigation
procedure, the Norwegian authorities further clarified that in the
cash flow calculation of the project, all income would be taken
into account. This would include income from other types of
state intervention, even if not qualified as State aid. If the State
support qualifies as State aid, this would have to be notified to
the Authority in order to establish the project's financial needs.

With regard to the possible introduction of a Norwegian green
certificates market (69),
the contract with the aid beneficiary
explicitly contains a repayment clause for the support granted
by the Energy Fund in order to avoid support from two sources.
The project's support is further paid out in instalments which
can be adjusted if the project has lower costs than expected.
Upon the closure of
(i.e. when the last
the aid contract
instalment is paid), Enova will make a final assessment and a
possible adjustment can be made, either if Enova finds out that
the aid recipient provided misleading information or that the
project
the
foregoing, the Authority considers section D.3.3.1 (54) of the
Environmental Guidelines to be fulfilled.

received other state support. On the basis of

this approach is in line with the
The Authority notes that
Environmental Guidelines and thus compatible with the func­
tioning of the EEA Agreement.

3. New energy technologies

The Norwegian authorities confirm that the support under this
category is just a subgroup under the investment support in
renewable energy production and energy saving measures re­
spectively.

As long as the respective calculation criteria used for the
investment support for renewable energy production (section
I.9.1) and energy saving measures (see I.9.2 of this Decision)
are to be used for this support category, the support under this
category is to be assessed according to the same criteria. It will
thus be compatible with the Environmental Guidelines.

No support of projects with a negative net present value

In the Decision to open the formal investigation procedure, the
Authority was concerned that
the Energy Fund would also
support projects which still have a negative net present value,
even with the support granted by the Energy Fund. The
Norwegian authorities have now stated (see number 9 in
section I.9.1 of
that projects generating a
negative EBITDA, under normal operating conditions at the
time of investment, are not in a position to receive any aid at
all. The Authority's concerns have, consequently, been taken
into consideration.

this Decision)

4. Energy audits

The Authority finds that costs for energy audits and energy
analyses can be supported according to section D.1.3 (25) in
conjunction with section D.1.6 (31) and section D.1.7 (32) of
the Environmental Guidelines. The Authority accepts
that
energy audits, feasibility studies and energy analyses are often
necessary assessments for finding out which energy saving
measures merit an investment and which do not (70). As long
as directly linked to an energy saving investment, the Authority
accepts that costs for energy audits are eligible. Aid granted on
this basis cannot exceed a threshold of 40 % of the eligible costs
concerned, with the possibility of a top up of 10 percentage
points for small and medium-sized undertakings, see section
D.1.5 (30) of the Environmental Guidelines.

2. Energy saving measures

suggest amending the notified
The Norwegian authorities
system (see section I.9.2 of
this Decision) and intend to
apply, for the support of energy saving measures, the ‘extra
cost approach’ as stipulated in section D.1.3 (25), section
D.1.6 (30), (31), and section D.1.7 (32) of the Environmental
Guidelines. The aid intensities of 40 % of eligible costs with the
possibility of a top up of 10 percentage points for small and
medium-sized enterprises are equally respected.

(69) A green certificate is normally understood to be a minimum price
fixed by the State which a producer of ‘green energy’ obtains from
the distributor. Such green certificates, may, depending on the indi­
vidual case, not constitute State aid within the meaning of
Article 61(1) of the EEA Agreement. The Norwegian authorities
gave up on a joint green certificate market with Sweden in
February 2006.

When it comes to energy audits, which are made in order to
put a behavioural or system change into place, the Authority
does not find that there is any possibility for authorising such a
support, which is not directly linked with energy saving
investments. Such a possibility can only be envisaged for
small and medium-sized companies. Section D.2 (36) of the
Environmental Guidelines allows for support of advisory and
consultancy services for small and medium-sized enterprises
in conjunction with Article 5 of the Act referred to in point
1(e) of Annex XV to the EEA Agreement (aid to small and
medium-sized companies) (71).

(70) Such costs were also accepted by the European Commission in

State aid N 75/2002 — Finland, see above fn. 26.

(71) See above, fn. 29 of this Decision.

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3.2.2. T e a c h i n g a n d e d u c a t i o n a l m e a s u r e s

The Authority notes that, for the time being, no such support
scheme is in place and that any new scheme would be notified
to the Authority, so that there is no need to outline the accept­
ability of such future and, for the moment hypothetical, support
measures under the EEA State aid provisions.

currently with the exclusion of hydropower. For the energy
saving measures and energy audits, every undertaking might
profit from these support measures. It can not, therefore, be
established that imported energy pays for the advantages of
levy paid by the
domestic producers and that as a result
domestic (hydro) power producers is offset by corresponding
advantages.

3.2.3. T h e f i n a n c i n g m e c h a n i s m

According to established case law, one cannot separate an aid
measure from the method by which it
is financed. As the
European Court of Justice has held, the financing mechanism
of a support scheme might render the whole aid incompatible
with the common market (72), in particular if it entails discrimi­
natory aspects. The need to consider the financing mechanism
together with the aid scheme is, in particular, required when a
levy has been explicitly created for the financing of the aid
scheme, as it is the case for the Energy Fund. Such a charge
might be considered a measure having equivalent effect to a
if it totally offsets the burden on the
quantitative restriction,
domestic product
the case here) or it might
constitute a discriminatory internal tax if it partly offsets this
burden (73). When it comes to assessing such an offsetting
effect,
charge and
advantages afforded to domestic products must be estab­
lished (74). In some cases, the Court has not only analysed the
levying of the charge, but also its use (75). As the Energy Fund is
financed via a levy on the distribution tariff which also affects
imported energy, the financing of the aid scheme by way of a
parafiscal charge needs to be assessed in this case.

equivalence between the

(which is not

financial

the

The Energy Fund does not discriminate between foreign and
national producers of renewable energy or undertakings which
would like to invest in energy saving measures, new energy
technology or carrying out energy audits. The Norwegian auth­
orities have demonstrated that so far eight projects by other
EEA producers have received support from the Energy Fund.
Further, there is no automatic equivalence between the activity
charged with the levy (energy production stemming from
hydropower and imports) and the projects aided under the
Energy Fund. The levy is charged on the distribution level of
i.e. not directly on the production (76). However,
the energy,
even if one argued that
indirectly affects the costs of
production, the aid paid out by Enova does not automatically
favour those producers whose energy is indirectly charged with
the fee. The aid goes mainly to new renewable energies,

it

(72) Cases C-261/01 and C-262/0, Belgische Staat v Calster, Cleeren,
Openbaar Slachthuis NV, [2003] ECR I-12249, paragraph 46, Case
C-47/69 France v Commission [1970] ECR 487, paragraph 4.
(73) Case C-72/92 Firma Herbert Scharbatke GmbH v Federal Republic of
Germany [1993] ECR I-5509, referring to Article 95, now 90 of the
EC Treaty. Article 14 of
to
Article 90 of the EC Treaty.

the EEA Agreement

is identical

(74) Case C-266/91 Celulose Beira Industrial SA v Fazenda Pública [1993]

ECR I-4337.

(75) Cases C-78/90 to C-83/90 Compagnie Commerciale de l'Ouest and

Others [1992] ECR I-1847.

(76) The European Commission authorised a similar
Commission Decision N 707/2002, above fn. 42.

structure in

The use of
the levy's proceeds is linked to aid which the
Authority considers compatible, as can be seen from the
above section II 3.2 of this Decision.
It has been accepted
that a levy based on volume is in line with the polluter pays
principle and can, therefore, be accepted under Article 61(3)(c)
of
together with the Environmental
Guidelines, which lay down that principle. The Authority conse­
quently does not find any fault with a system which is volume
based (77).

the EEA Agreement

3.2.4. C o n c l u s i o n o n t h e E n e r g y F u n d w i t h t h e
t h e

s u g g e s t e d

b y

a m e n d m e n t s
N o r w e g i a n a u t h o r i t i e s

The Authority finds that the investment support for renewable
energy production, energy saving measures and for new energy
technologies as well as for the support of energy audits,
is
compatible with the functioning of
the EEA Agreement,
subject to the condition that the Norwegian authorities apply
the Energy Fund scheme as outlined:

— in section I.9.1, number

(1)-(12) of

this Decision for

investment support for renewable energy production;

— in section I.9.2, number (1)-(5) of this Decision for energy

saving measures;

— in section I.9.3 of this Decision for new energy technology;

— in section II.3.2.1 (4) of this Decision for energy audits.

4. Recovery

the investment

this
As the Authority has found, under section II.3.1.3 of
Decision,
renewable
energy production, energy savings and new energy technologies,
as well as the support for energy audits, as notified, are not
compatible with the functioning of the EEA Agreement.

support measures

for

(77) See the comments in Commission Decision N 707/2002, above fn.
42 and N 533/01 — Ireland, aid to promote renewable energy sources in
Ireland.

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II of Protocol 3 to the
According to Article 14 in Part
Surveillance and Court Agreement,
in cases of unlawful aid,
should it be found incompatible, the Authority orders, as a
rule,
the EFTA State concerned to reclaim aid from the
recipient.

notified support measures in this Decision (see below Article 4
of this Decision), they are compatible with the functioning of
the EEA Agreement and are then not subject to the recovery
order.

the opinion that no general principles
The Authority is of
preclude repayment in the present case. According to settled
case-law, abolishing unlawful aid by means of recovery is the
logical consequence of a finding that it is unlawful. Conse­
quently, the recovery of State aid unlawfully granted, for the
purpose of restoring the previously existing situation, cannot in
principle be regarded as disproportionate to the objectives of
the EEA Agreement in regard to State aid. By repaying the aid,
the recipient forfeits the advantage which it had enjoyed over its
competitors on the market, and the situation prior to payment
of the aid is restored (78). It also follows from that function of
repayment of aid that, as a general rule, save in exceptional
circumstances, the Authority will not exceed the bounds of its
discretion, recognised by the case-law of the Court, if it asks the
EFTA State concerned to recover the sums granted by way of
unlawful aid since it is only restoring the previous situation (79).
Moreover, in view of the mandatory nature of the supervision
of State aid by the Authority under Protocol 3 of
the
Surveillance and Court Agreement, undertakings to which aid
in principle, entertain a legitimate
has been granted cannot,
expectation that the aid is lawful unless it has been granted
in compliance with the procedure laid down in the provisions
of that Protocol (80). There are no exceptional circumstances
visible in this case, which would have led to legitimate expec­
tations on the side of the aid beneficiaries.

5. Annual Reporting obligation/Energy Fund Guidelines

The Norwegian authorities should submit annual reports to the
Authority according to Article 21(1) in Part II of Protocol 3 to
the Surveillance and Court Agreement and Article 5(1)
in
combination with Annex III of
the Authority's Procedural
Decision 195/04/COL of 14 July 2004.

The Norwegian authorities should further provide information,
according to Article 5(2) of the Authority's Procedural Decision
195/04/COL of 14 July 2004 on each of
the five biggest
supported projects for:

(a) investment support for renewable energy production;

(b) energy saving investment;

(c) new energy technology; and

The recovery should include compound interests, in line with
Article 14(2) in Part II of Protocol 3 to the Surveillance and
Court Agreement and Article 9 and 11 of
the Authority's
Decision 195/04/COL of 14 July 2004.

(d) energy audits.

The Authority would also point out that the recovery order of
this Decision is without prejudice as to whether individual
grants awarded under the above mentioned four measures do
not constitute State aid or may be considered, in full or in part,
as compatible with the functioning of the EEA Agreement on
their own merits, either in a subsequent Authority Decision or
under block exemption regulations.

If individual grants awarded under the above mentioned four
measures, as notified by the letter of 5 June 2003, already
respected the conditions, which the Authority imposes on the

(78) Case C-350/93 Commission v Italy [1995] ECR I-699, paragraph 22.
(79) Case C-75/97 Belgium v Commission [1999] ECR I-3671, paragraph
66, and Case C-310/99 Italy v Commission [2002] ECR I-2289,
paragraph 99.
(80) Case C-169/95
paragraph 51.

ECR I-135,

Commission

[1997]

Spain

v

The report should,
in particular, contain the respective net
present value calculation and demonstrate how the market
price of that energy has been established. In addition, a list of
investment costs for the projects should be provided.

for biomass projects is concerned,

As far as support
the
reporting should also contain information which demonstrates
that the aggregate costs borne by the firms after plant depre­
ciation are still higher than the market price of the energy.

Guidelines for the support by Enova/Energy Fund

The Authority further finds that the conditions stipulated by the
Authority in this Decision should enter Enova's/the Energy
Fund's aid book, which sets out
the rules for granting the
support or be put in any other appropriate form of guidelines
on the application of the support measures. A version of these
guidelines should be submitted to the Authority no later than
six months after the adoption of this Decision,

17.7.2008

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Official Journal of the European Union

L 189/61

HAS ADOPTED THIS DECISION:

Article 1

The following measures under the Energy Fund, as notified by
the Norwegian authorities by letter dated 5 June 2003 (Doc. No
03-3705-A, registered under case SAM 030.03006), constitute
State aid within the meaning of Article 61(1) of
the EEA
Agreement:

(a) the investment support for renewable energy production;

(b) the investment support for energy saving measures;

The aid must cumulatively fulfil the criteria as laid down in
section I.9.1, number (1)-(12) of this Decision in order to be
in line with section D.3.3.1 (54) of
the Environmental
Guidelines.

(b) Support for energy saving investment

The aid must cumulatively fulfil the criteria as laid down in
section I.9.2, number (1)-(5) of this Decision in order to be
line with sections D.1.3 (25), D.1.6. (30), (31) and D.1.7
(32) of the Environmental Guidelines.

(c) the investment support for new energy technologies;

(c) Support for new energy technology

(d) the support for energy audits; and

(e) the support

for

teaching material and education from

1 January 2002 until 31 December 2003.

Article 2

(a) The information helpline and the on-site visit programme
under the Energy Fund scheme, as notified by letter dated
5 June 2003 (Doc. No 03-3705-A), do not constitute State
aid within the meaning of Article 61(1) of
the EEA
Agreement.

(b) The programme for energy efficiency in municipalities does
not constitute State aid, as long as the support is limited to
the public entity function of the municipality.

Article 3

The measure referred to under Article 1, point
Decision is compatible with the functioning of
Agreement.

(e) of

this
the EEA

Article 4

investment

support measures

The
energy
production, energy saving, new energy technology and energy
audits are
the EEA
Agreement within the meaning of Article 61(1) of the EEA
Agreement, subject to the conditions set out in this Article.

compatible with the

functioning of

renewable

for

(a) Support for renewable energy production investment

Aid for the support
for new energy technology can be
granted according to the criteria set out in Article 4(a) of
this Decision, as far as the technology involving investment
support for renewable energy production is concerned and
Article 4(b) of this Decision, as far as the aid support for
new energy technology relates to energy saving investment.

(d) Support for energy audits/energy analyses

Aid for energy audits must be directly linked to an
investment relating to energy saving and not exceed 40 %
of eligible costs, with the possibility of a top up of 10
percentage points for small and medium-sized undertakings.
Eligible costs are the costs described in section I. 9.1, fn. 35
of this Decision.

Support given for energy audits, which are not linked to
energy saving investment and e.g. concern behavioural or
system changes, can only be supported according to the
conditions stipulated in section D.2. (36) of the Environ­
mental Guidelines in conjunction with the Act referred to
under point 1(e) of Annex XV to the EEA Agreement.

Article 5

(a) The Norwegian authorities should submit annual reports to
the Authority according to Article 21(1)
II of
Protocol 3 to the Surveillance and Court Agreement and
Article 5(1)
the
Authority's Procedural Decision 195/04/COL of 14 July
2004.

in combination with Annex III of

in Part

L 189/62

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17.7.2008

(b) The Norwegian authorities should further provide infor­
mation,
the Authority's
Procedural Decision 195/04/COL of 14 July 2004, on
each of the five biggest supported projects for:

according to Article 5(2) of

1.

investment support for renewable energy production;

2. energy saving investment;

3. new energy technology; and

4. energy audits.

The report should, in particular, contain the respective net
present value calculation, including the discount rate applied
by the Energy Fund, and demonstrate how the market price
of that energy has been established. In addition, a list of
investment costs for the projects under Article 5(b) of this
Decision should be provided.

As
the
far as biomass projects are receiving support,
reporting should also contain information which demon­
strates that the aggregate costs borne by the firms after
plant depreciation are still higher than the market price of
the energy.

Article 7

Where it has not already done so, Norway shall repeal the
measures referred to in Article 6(a) of
this Decision with
immediate effect and replace them with measures which fulfil
the conditions set out in Article 4 of this Decision.

Article 8

The Norwegian authorities shall take all necessary measures to
recover from the beneficiaries the aid referred to in Article 6(a)
of this Decision and unlawfully made available to the benefi­
ciaries, deducting any repayment already made.

Recovery shall be affected without delay and in accordance with
the procedures of national
law provided that they allow the
immediate and effective execution of the decision. The aid to
be recovered shall include interest and compound interest from
the date on which it was at the disposal of the aid beneficiary
until the date of its recovery. Interest shall be calculated on the
basis of Articles 9 and 11 in the EFTA Surveillance Authority
Decision No 195/04/COL.

Article 9

The Norwegian authorities shall inform the EFTA Surveillance
Authority, within two months of notification of this Decision,
of the measures taken to comply with it.

(c) The Norwegian authorities should further submit a new
version of the guidelines for the application of the Energy
Fund support to the Authority, within six months from
adoption of this Decision.

Article 10

This Decision is addressed to the Kingdom of Norway.

Article 6

(a) The measures referred to under Article 1(a)(d) of

this
Decision as notified by letter dated 5 June 2003 (Doc. No
03-3705-A) are not compatible with the functioning of the
EEA Agreement.

Article 11

Only the English version is authentic.

Done at Brussels, 3 May 2006.

(b) Individual grants awarded under the above measures, which
already fulfil
this
Decision, are compatible with the functioning of the EEA
Agreement.

the criteria laid down in Article 4 of

For the EFTA Surveillance Authority

Bjørn T. GRYDELAND
President

Kurt JÄGER
College Member