CEEAG 2022 Guidelines: new state aid rules for energy and climate — what they mean for biogas and biomass

CEEAG, that is the European Commission guidelines on State aid for climate, environmental protection and energy, is the document by which Brussels assesses schemes supporting, among others, biogas plants, biomass power plants and cogeneration. The Commission adopted them on 27 January 2022 to replace the 2014 guidelines (EEAG).

What they replace and from when

The guidelines apply to aid granted or planned to be granted from 27 January 2022. Member States must adapt existing schemes approved under the EEAG to the new rules within the period indicated in the guidelines. For Poland this means that auction programmes and premiums for renewables will be assessed under a new set of rules. The CEEAG reflect the goals of the Green Deal: a 55% emissions reduction by 2030 relative to 1990 and climate neutrality by 2050.

Scope

The guidelines cover a broader set of objectives than before: the reduction and removal of greenhouse gas emissions (including renewable energy and energy efficiency), buildings, the circular economy, heating and cooling with high-efficiency cogeneration, security of electricity supply, clean mobility and the protection of biodiversity. Nuclear energy is outside the scope of the guidelines. Reliefs and parafiscal levies are no longer limited to support for renewables.

Rules for renewable energy

Support for renewables falls under category 4.1 (reduction and removal of greenhouse gases), which the Commission treats as a general clause. According to CMS, the guidelines no longer favour predetermined thresholds, but a more flexible system of competitive tenders, with an incentive for open, technology-neutral tenders (the tendering obligation itself was already known from the EEAG guidelines). Tenders for a selected technology are permitted in situations from an open list, and energy communities and SMEs may be exempt from tendering if the installed capacity is below 6 MW.

Aid is to cover the funding gap, that is the net cost needed to achieve the aim of the aid compared with the situation without aid. This is the principle from which it follows that support should not provide excessive profits: if a project is viable without subsidies, a premium is not justified.

Biogas and biomass

According to descriptions by the law firms Covington and CMS, the guidelines cover support for renewable energy. Energy from biogas and biomass is defined and conditioned by RED II, so installations receiving aid should meet the sustainability criteria of Article 29 of the directive (see the article on the Article 29 criteria).

Why tenders rather than fixed prices

The shift to tenders has an economic rationale: the price of support is set by competition, not by an official, so the state runs a lower risk of overpaying. For agricultural biogas plants, which have higher fuel (feedstock) costs than wind or photovoltaics, this means that without a separate technology basket it is hard to win in a tender open to everyone. That is why the possibility of tenders for selected technologies, provided for in the guidelines as an open list of justified situations, is crucial for the biogas sector.

Gas and fossil fuels

Gas can be supported only under strict conditions, so as to prevent lock-in to infrastructure and the displacement of cleaner investment. Other fossil fuels, as a rule, cease to be eligible for aid, except for aid facilitating phase-out. A biogas plant, as a renewable source, falls into the renewables category and not the gas category, to which stricter conditions apply.

How the CEEAG relate to RED II

The guidelines and the Renewable Energy Directive complement each other. RED II sets out what support schemes should look like from the energy policy point of view (market-based character, protection against retroactive changes, sustainability criteria; see the article on RED II), while the CEEAG determine when such support is compatible with EU state aid rules. A state that wants to maintain a stable premium system for biogas plants must therefore take care of both levels: compliance with the directive and notification consistent with the guidelines. For an investor this usually means a longer approval process and greater predictability, because the Commission's decision sets the framework of the scheme for several years.

What this means for an investor

• Support schemes for energy from biogas and biomass notified from 2022 will be based on tenders, with exceptions for small installations.
• The amount of aid is limited by the funding gap, so premiums are calculated on the basis of costs.
• Compliance with RED II (sustainability criteria) is a condition of support.
• When assessing a project, it is worth checking whether an energy community or SME can benefit from the exemption from tendering below 6 MW.