EU states try to bury energy state aid guidelines


EXCLUSIVE / A proposal to limit the state aid that EU governments can offer their energy sectors would do “massive harm” to industry and needs to be “thoroughly revised,” according to a position paper signed by Germany, and several other countries.

The policy document, which EURACTIV has seen, is a ‘living paper’ that was submitted to the European Commission two weeks ago, and may be updated soon.

Its strong language reflects alarm in some European capitals that the proposed guidelines could barricade planned transitions by states such as Germany and the UK towards renewable and nuclear energy-based systems, respectively.

“Many of the Commission’s proposals are too detailed, too narrow or, given the lack of experience in a complex, dynamically developing field, quite simply premature,” the paper says.  

“The detailed rules on the funding mechanism for renewable energy and the opening up of the funding systems for other countries are too restrictive,” it adds.

Criticism is also leveled at “unacceptable” exemptions for electricity-intensive industries, and rules on capacity mechanisms for which, the states say, it is “too early”.  

The paper lists Germany, the UK, Denmark, Sweden, the Netherlands, France, Austria and Luxembourg as like-minded supporters. But Swedish officials have since dissociated themselves from the paper while British diplomats are sceptically weighing its effectiveness.

Some analysts say an assumption in the document that “the EU only has limited competence in the field of energy policy” is mistaken and that, for once, the continent’s most powerful member states could anyway be over-ruled.

The nub of the issue involves investigations heralded by the new guidelines into two apparently contradictory cases: Germany’s renewable energy subsidies, which were intended to help shut down its nuclear industry after the Fukushima disaster, and the UK’s guaranteed price for nuclear energy from Hinkley Point. 

“We need a diverse energy sector with traditional fossil fuels, notably gas, but also new nuclear and renewables,” the UK business minister Vince Cable said in Brussels earlier this week. Yesterday (13 February), Britain's energy minister Ed Davey said that "by encouraging home-grown energy – including renewables and nuclear – we can influence some of the (wholesale electricity) costs over time."

Rising energy bills are a key election issue in the UK, but the long-term neglect of new energy infrastructure which partly underwrites them, poses more structural problems 

Commentators say that the UK has staked the future of its energy policy on the new Hinkley reactor, which the French company EDF would run, despite concerns about its costs, a proposed 35-year subsidy regime, and the safe disposal of its waste. The EU's state aid probe merely adds another layer of uncertainty to the project. 

Renewable sector disquiet

But British energy companies are also increasingly alarmed that flagship renewable projects in the UK could be hit by the new guidelines, as they have in many cases required subsidies to get off the ground.

A wider disquiet in Europe’s renewables sector was reflected at a press conference in Brussels on 12 February that brought together the leaders of six energy firms to call for tougher EU renewable energy goals for 2030 – and more supportive subsidy regimes.

Dennis Cochet, the Vice President of Alstom said that “we have committed to build four factories in France to support offshore wind and if that is not supported properly, we will think twice about putting them elsewhere.”

Other executives at the meeting told EURACTIV that they had already moved some production out of Europe because of retroactive changes to subsidy policies, and that more could follow, in the absence of binding national targets for 2030. 

Speakers pointed to new data from Germany’s Fraunhofer Institute indicating that subsidies for wind and solar energy would be completely offset by cost savings from reduced fossil fuels imports before 2030. Without them, the entire Energiewende scheme could be jeapordised. 

As such, the new state aid rules are an existential battlefield in Berlin as well as London.

Existential battlefield

“Germany insists that the guidelines should neither impose tight constraints on national support schemes, nor should they erect obstacles for Europe’s industry,” a diplomat told EURACTIV.

Germany is known to strongly support the paper and attaches “utmost importance” to the new energy funding rules, because of its Energiewende project for transition to renewables.

But Mark Johnston, an external adviser to the European Policy Centre think-tank argued that neither Berlin nor London had the power to stop the guidelines.

“They could push it back on the calendar but I don’t think even that group of states could kill this,” he told EURACTIV. “They have no hand to play in the card game. The guidelines are decided exclusively by the commission”

This is not the view from Berlin. “Of course there are decisions to deal with at the EU level but in our view energy is primarily a member state competence,” a diplomat said.  

However, Cable appeared to take a more nuanced view at his joint Brussels press conference with the competition commissioner, Joaquín Almunia. “We accept that energy is a competitive industry and has to satisfy the state aid requirements,” he said. “We don’t dispute the necessity to have the over-riding governance of the commission in this area.”

In response, Commissioner Almunia noted that the nuclear issue was “emotional” and posed “enormous difficulties” but pledged to respond with reason, based on the treaty’s criteria.  The new guidelines would be “adopted, probably in April,” he added.  

In practice though, Johnston said the commission could decide to delay the new guidelines until the year’s end or even longer to give time for the rules to be softened.

On 8 May 2012, the Commission set out a state aid reform programme in the Communication on State aid modernisation. This had three objectives:

  • Fostering sustainable growth in a strengthened internal market
  • Focusing enforcement on cases with the greatest market impact
  • Streamlining rules and coming to faster decisions

On 17 January 2013, the European Parliament adopted a Resolution on State Aid Modernisation, broadly supporting the initiative and its objectives.

As well as identifying common principles, the Commission proposed revising and streamlining its state aid guidelines, including those covering the environment, and opened consultations to this end.

  • April: Commission to announce new energy state aid guidelines

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