Opinion of the Committee of the Regions — New Guidelines for State aid for Energy
Date: 2014-04-02
Institutions: European Committee of the Regions, Provisional data
Subjects: State aid, climate change, energy consumption, renewable energy








C_2014174EN.01001901.xml










7.6.2014   


EN


Official Journal of the European Union


C 174/19





Opinion of the Committee of the Regions — New Guidelines for State aid for Energy
2014/C 174/05







Rapporteur



Mr Gusty Graas, member of Bettembourg municipal council (LU/ALDE)





Reference document



Own-initiative opinion




I.   POLICY RECOMMENDATIONS

THE COMMITTEE OF THE REGIONS,


General comments on European energy








1.


points out that the International Energy Agency is forecasting a one third increase in global energy consumption by 2035, primarily as a result of heightened demand from the newly industrialised countries;










2.


stresses that the energy market is undergoing a major change because new natural gas-producers are entering the market and renewable energy production is increasing substantially in many Member States. The guidelines for granting state aid thus need to be adjusted, so that EU Member States will have clear rules governing their energy subsidy policy as of 2014. This clarity is essential for enabling investors to set up their projects;










3.


draws attention to the fact that, in the European Union, the objectives proposed by the Commission in the Policy framework for climate and energy in the period from 2020 to 2030 have to be reconciled with differing resources and with Member States' sometimes divergent interests;










4.


points out that competition and the existence of a free market in energy are not ends in themselves, but are means of achieving the higher objectives of the European Union as defined in Article 3 of the Treaty on European Union;










5.


suggests, in the light of the conclusions by the Advocate General of 28 January 2014 in the Ålands Vindkraft Case C-573/12, that the European Commission postpone the presentation of its new guidelines until after the judgment of the Court of Justice. In fact, the Advocate General is proposing that the Court declare invalid Article 3(3) of Directive 2009/28 which, in the framework of a national scheme for producing energy from renewable resources, allows electricity certificates to be granted to green electricity producers established in the Member State concerned. If this provision were to be declared invalid, it would call into question the design of aid schemes for developing renewable energy sources in a large number of Member States and would probably make the guidelines obsolete if they were to be submitted before the judgment, thus creating legal uncertainty;










6.


supports the EU's climate and energy policy goals, which are enshrined in the renewable energy directive 2009/28/EC and elsewhere. The Member States and local and regional authorities have developed regulations and measures aimed at achieving these climate and energy policy goals by 2020. New guidelines on state aid in the area of energy and the environment must not stand in the way of these bindingly agreed targets or of the regulations and measures introduced to achieve these objectives;










7.


underlines in this context the need to achieve a balance between the diversity of energy sources and support mechanisms for renewable energy on the one hand, and the common EU-level rules to avoid market distortion, on the other; is therefore concerned that the proposals by the European Commission in the consultation paper could too much curtail the possibilities to differentiate, in particular as far as the possibility to support the sustainable production of energy from renewables is concerned;






Comments on the trend in current European energy policies








8.


takes note of the consultation document on the December 2013 new draft guidelines on state aid for the environment and energy for the 2014-2020 period; deplores the fact that the document in question has only been issued in one official language of the EU and that the deadline for responding to the consultation has in practice been reduced to six weeks instead of the usual eight; fears that such conditions are likely to make the responses less representative;










9.


regrets that the Commission's consultation document contains no reference to the European Charter on the Rights of Energy Consumers










10.


emphasises that an integrated approach to energy and environmental policies needs to be adopted at EU level;










11.


believes that climate change and energy policy cannot be considered and dealt with separately;










12.


underlines that the EU emission trading scheme (ETS) was set up by Directive 2003/87/EC of 13 October 2003 to ‘promote reduction of greenhouse gas emissions in a cost-effective and economically efficient manner’. Phase 3 (2013-2020) should further develop the scheme with a view to achieving a 20% reduction in greenhouse gases by 2020 (compared with 1990). The CoR notes, however, that the excessive number of emission quotas allocated makes this mechanism less effective;










13.


hopes that the guidelines for state aid for energy will also take account of the goals established for 2030 and of the aim of striving to reach a majority share of renewable energy by 2050;










14.


is convinced that combating climate change, improved energy efficiency, boosting production of renewables and reducing the environmental footprint are objectives of common interest in themselves;










15.


believes that expanding the production of renewables offers real opportunities for stimulating green growth and creating new stable jobs;










16.


is pleased that the European structural and investment funds are paying growing attention to energy, climate and environmental goals;










17.


points out that the European Commission wants 20% of the European regional development funds in the developed regions, and 6% of those funds in the less developed regions, to be invested in energy efficiency and renewables;










18.


supports the European Union's efforts at international level to maintain the lead in fighting climate change;






Comments on the appropriateness of state aid in energy








19.


approves the principle whereby state aid is justified if the market alone is unable to make substantial improvements in environmental protection; and shares the Commission's opinion that state aid can be an appropriate instrument for attaining ambitious goals in CO2 reduction;










20.


since the high cost of producing some types of renewable energy does not allow undertakings to charge competitive prices on the market, feels that state aid is justified in these cases provided that the technology can be expected to mature and be market-ready in the foreseeable future; however, this aid should, if possible, be coordinated at the European Union level and between the Member States and take account of the specificities of different regions;










21.


in principle supports the Commission in its attempts to introduce more market mechanisms in granting aid, and urges it to make use of local and regional energy agencies for this purpose;










22.


considers that state aid for energy should be considered as also having economic and social repercussions at regional and local levels. The positive and negative, short-, medium- and long-term external factors should be internalised as far as possible in the real cost of energy to minimise distortions of competition;










23.


points out that, so as to ensure cutting-edge innovative capacity, the European Union must facilitate establishment of a scheme where different technologies compete on the energy market;










24.


considers that the granting of state aid must be made transparent so that the Member States, the Commission, economic operators, local and regional authorities and the public have access to the necessary information;






Practical proposals: general trend in European energy policies








25.


points out that subsidies for fossil fuels should be axed in the short term as they result in distorted competition and considerable environmental costs;










26.


bearing in mind that shale gas and oil extraction by fracking is a controversial technique, but that some countries will begin commercial development in the course of this year, considers that discussions about state aid at this level cannot be avoided;










27.


believes that the guidelines for state aid for energy should not include specific provisions enabling state aid for nuclear energy; at the same time, market principles should also apply to nuclear technology;










28.


wishes to point out that all sources of renewable energy such as wind, solar, geothermal and hydroelectric power, biomass, landfill gas, sewage treatment plant gas and biogas used by local and regional authorities call for particular attention. The production of biofuels may be supported as long as they meet environmental sustainability criteria as laid down by EU provisions;










29.


stresses that electricity produced by hydroelectric power stations can contribute to storage and to network balance, and that it can therefore also be supported if it is ensured that the relevant sustainability criteria are met;










30.


wonders whether the specific reference to CCS (carbon capture and storage) technology is compatible with the principle of being technology neutral which the Commission espouses elsewhere;










31.


believes that the EU should set a common legal framework for a more rational use of energy and support for renewable energies;










32.


calls for greater energy efficiency at EU level, a larger share of renewable energy, a better energy mix and a regulatory framework that offers stakeholders fairer conditions;










33.


draws attention to the difficulty of reconciling the competition framework at EU level, for which the EU has exclusive competence, with the fundamental principles of EU energy policy, such as those laid down in Article 194 TFEU, which provide for shared competence between the EU and its Member States, whilst taking account of the subsidiarity principle and the important role of local and regional authorities, especially local and regional energy agencies;










34.


is aware that the risks of power cuts still remain. The CoR can therefore not overlook the fact that in order to guarantee continuity of electricity supply, some types of public aid should be allowed, firstly for the establishment of smart energy networks that encourage flexible production and consumption of energy on a decentralised basis, secondly for setting up energy-efficient storage, and finally for the building of flexible environment and climate-friendly plants to play a balancing role. These so-called ‘back-up’ power stations, for which state aid in the form of compensation payments may be necessary, should nevertheless not compete with renewables and should use the most modern technologies so that their CO2 production is kept to a minimum. By contrast, the CoR believes that the construction of new coal-fired power stations should no longer receive state aid. Before considering reserve capacities, the CoR recommends giving consumers greater encouragement to use electricity outside peak periods. The Commission believes that there is a 10% margin of manoeuvre;










35.


introducing smart meters and connecting terminals to the internet would make it possible to further synchronise supply and demand on the electricity market, while the resulting fall in storage costs for suppliers could help to reduce electricity costs for customers;






Practical proposals: energy support methods








36.


notes that environmental taxes are in principle a suitable instrument for reducing CO2 emissions, but accepts that they could in some cases affect the competitiveness of businesses, and that therefore exemption from such taxes can strengthen their position. Exemptions that could lead to distortions between states or regions must be avoided, especially if they lead to a higher burden on certain consumer groups or society in general. As an alternative to taxes or tax exemptions, rules or limits are needed that apply to all market participants and could help to raise environmental awareness while in the long term reducing the environmental footprint;










37.


acknowledges that introducing environmental taxes on specific products is particularly appropriate if alternative products with a less negative impact on the environment are available on the market, so that consumers have a certain choice;










38.


asks Member States, when granting state aid, to pay greater attention to the specific characteristics of their regions, including climatic, demographic and cultural features, especially where the least developed are concerned, so as not to hold back their energy development. Comprehensive retention of acquired rights for projects that have already been completed must be ensured. Moreover, the specific conditions of local energy cooperatives and small private investors must be taken into consideration for the purposes of tenders and direct marketing. To this end, the Member States must be given sufficient room for manoeuvre;










39.


is therefore concerned that the Commission's proposals would restrict the system of fixed feed-in tariffs for renewable energy, which is applied in many Member States to promote renewable energy and to achieve climate goals, to very small plants and/or quantities of energy, and that it uses an inflexible definition of ‘market-ready’ technologies based on their Europe-wide market share; this definition does not do justice to the different situations in the Member States and the regions and jeopardises the development of their potential for sustainable energy;






Practical proposals: future direction regarding the appropriateness of state aid for energy


—   Market mechanisms







40.


notes that it is essential to guarantee a range of energy providers in order to establish a properly functioning market, given that diversification not only ensures continuity in energy production and consumption, but also promotes the use of new technologies, thanks to market-based competition;










41.


supports the Commission in its approach whereby, before contemplating any public aid mechanism, governments should analyse the reasons for the energy production shortfall and, where necessary, remove the distortions preventing the market from providing incentives for investment in generation capacity;










42.


points out that, regardless of the method selected, the principle of technological neutrality must under no circumstances jeopardise achieving the long-term environmental and energy goals;




—   Regional and local initiatives







43.


feels that municipalities and regions should enjoy a certain latitude for financially supporting projects whose marketing potential is not clear in the short term, but which offer a promising technology that could lead to more efficient energy use and a higher level of environmental protection in the future;










44.


believes that local and regional citizen cooperatives for further promoting renewable energy need special attention, firstly so that they create additional energy providers and secondly to play a significant educational role in consolidating awareness of rational energy use. This incentive effect should thus be considered as a positive externality to be taken into account by the market. The new guidelines on state aid must therefore leave open the prospects for development of plants organised along cooperative lines;










45.


proposes respecting the specific socio-economic characteristics of small networks for which calls for tender issued by the Member States are inappropriate, as this method does not guarantee a level playing field for participants;










46.


notes with satisfaction the proposed extension of exemptions (GBER) for aid in support of district heating initiatives and improved energy efficiency in buildings;










47.


also calls for special conditions for aid for the training of staff providing technical support and advice to local and regional authorities;










48.


encourages civic participation not only in the environmental and energy debate, but also in practical production initiatives, especially through cooperatives;










49.


has reservations about the Commission's intention to replace the feed-in tariff for energy from renewables, whereby green energy producers receive a fixed price per kWh, with feed-in premiums. Investors' legitimate confidence concerning the profitability of existing investments must be respected in order to guarantee their long-term commitment. The CoR therefore supports the option of keeping the feed-in tariffs that has been tried and tested in 19 Member States;










50.


asks that the eligibility ceiling for aid for alternative energy production installations starting commercial production for the first time and for small plants be increased to 5MW, and to 15MW for wind power plants;










51.


warns that a cumbersome administrative process for assessing the appropriateness of state aid could lead to additional costs, particularly for small-scale initiatives;










52.


welcomes the Commission's intention of also supporting the use of biomass in the future, particularly as a number of local and regional authorities are operating such plants and in view of the jobs created per MW installed. It also suggests considering legal and financial support for public- and private-sector initiatives for the sustainable exploitation of existing forests in order to provide high-quality biomass;




—   Infrastructure







53.


endorses the CEDEC (European Federation of Local Energy Companies) opinion as regards facilitating investments in smart distribution technologies for electricity networks, as they encourage efficient energy use by the end consumer. At the same time, these investments in the energy infrastructure guarantee security of supply;










54.


believes that Member States, municipalities and regions should set up or improve a scheme to facilitate investment in energy efficiency, for example by providing subsidies for insulating the external walls of dwellings, providing heat insulation for walls backed by earth or adjacent to unheated areas of dwellings, installing thermal insulation for sloping or flat roofs of dwellings, providing thermal insulation for the floor under unheated lofts, replacing the doors and windows of dwellings, installing solar and photovoltaic heat collectors, installing wood-pellet or log-fired central heating, installing controlled ventilation with heat retrieval, installing geothermal energy based solutions and installing heat exchangers;










55.


points out that cogenerating heat and electricity is the most efficient way of producing electricity and heat simultaneously. The CoR thus calls for municipalities to set up cogeneration plants. Local authorities investing in highly efficient cogeneration installations should be able to receive aid;










56.


welcomes the idea that guidelines will henceforth promote the use of public subsidies for cross-border energy infrastructure or for projects that contribute to regional cohesion;




—   Research and development







57.


considers that aid should also be granted for environmental studies undertaken by local and regional authorities in the following areas: improving on EU standards or increasing the level of environmental protection in the absence of such standards; asks that, in certain cases, aid for studies not directly linked to investments, such as studies on support for eco-construction or eco-design, could be granted under the de minimis system. The European Commission should also introduce specific programmes to promote applied research and technological development, bringing together energy sector businesses, universities and research centres;










58.


points to the considerable role universities and research institutes, technology centres and energy agencies must assume as regards applying new technologies in the energy sphere. Adequate funding should thus be made available to achieve these objectives;










59.


considers that a high proportion of research and development costs for relatively young renewable energy and energy efficiency technologies, together with a lack of internalisation of external costs of energy production from fossil fuels as a consequence of the current prices for greenhouse gas emission certificates, make a pay-as-you-go scheme to support investment in such technologies necessary.






Practical proposals: procedure for granting state aid for energy








60.


calls for local and regional beneficiaries to be included in drafting aid schemes;










61.


is in favour of simplifying administrative procedures for granting state subsidies;










62.


advocates a guarantee of transparency in all decisions to be taken concerning state aid for energy and assessing the many benefits to be derived from using measures drawn up for providing state aid. Moreover, checks should be made to ensure there is no overlapping of actions funded in various contexts.





Brussels, 2 April 2014


The President of the Committee of the Regions

Ramón Luis VALCÁRCEL SISO