The European Commission has approved, under EU State aid rules, a €3.1 billion Spanish scheme to support the production of electricity from new or substantially refurbished highly efficient combined heat and power (‘CHP’) plants. The measure will contribute to the implementation of Spain’s National Energy and Climate Plan, the Clean Industrial Deal and the EU’s energy efficiency targets, the European Commission said in a press release.
Spain notified the Commission its intention to support the production of electricity in highly efficient CHP plants. The scheme has a budget of €3.1 billion and will run for 10 years.
The beneficiaries are operators of new or substantially refurbished CHP installations that meet the definition of high-efficiency cogeneration as set out in the Energy Efficiency Directive and are located in Spain. The scheme will support technologies and projects that enable the production of electricity from high-efficiency CHP installations powered by natural gas, bioliquids, biogas and solid biomass. Projects involving natural gas will be required to include the necessary elements and equipment that enable them to use at least 10% renewable hydrogen in volume, to avoid the lock-in of natural gas.
Under the scheme, the aid will take the form of a remuneration premium that consists of two components, mainly compensation for investments, which is determined through competitive auctions; and compensation for operations, which is calculated and updated quarterly based on market variables (electricity prices, fuel costs, CO₂ prices) according to a transparent methodology.
The Commission assessed the scheme under EU State aid rules, in particular Article 107(3)(c) of the Treaty on the Functioning of the EU (‘TFEU’), which enables Member States to support the development of certain economic activities subject to certain conditions, as well as under the 2022 Guidelines on State aid for climate, environmental protection and energy. Under the Guidelines, Member States can support energy efficiency through production of electricity in high-efficiency cogeneration, subject to certain conditions.
The Commission found that the scheme supports the development of electricity production and provides a clear incentive, as companies would not invest to the same extent in high-efficiency combined heat and power generation without public support. It said the scheme is needed and suitable to improve energy efficiency and speed up the shift to cleaner energy, and that the support is limited to what is strictly necessary. Investment aid will be awarded through open and transparent competitive bidding, while operating support, set by the authorities, will be monitored and adjusted every three months. The Commission also concluded that the benefits of the aid outweigh any possible negative impact on competition and trade between EU member states, and that the scheme will help reduce emissions in Spain by boosting energy efficiency through high-efficiency power generation, in line with the Clean Industrial Deal, without unfairly affecting competition in the EU. Based on these findings, the Commission approved the Spanish scheme under EU state aid rules.
