Denmark: Commission approves DKK 4.15 billion for existing biomass power plants (SA.55891)

On 19 May 2020 the European Commission approved the Danish State aid scheme SA.55891 with a budget of DKK 4.15 billion (about €550 million), which will support electricity from existing biomass power plants. The scheme is intended to prevent these installations from reverting to fossil fuels and runs until the end of 2029.

Who the scheme covers

Support covers existing, fully depreciated biomass installations generating electricity. This is an important distinction: these are not new investments but power plants and combined heat and power plants whose capital costs have already been repaid, and whose profitability depends on the difference between the cost of biomass fuel and the cost of fossil fuel. The scheme does not apply to agricultural biogas plants, but it matters for the whole market of "dirty renewables", because it shows how states keep biomass generation going during the coal phase-out.

How the premium is calculated

According to the Commission's announcement, the premium covers the additional cost of operating on biomass compared with coal. Its level is calculated annually and capped at DKK 0.11 per kWh, which corresponds to about €0.015/kWh, or roughly €15 per MWh (at a stable Danish krone to euro rate of about 7.46 DKK/EUR). This is a ceiling, not a guaranteed rate: the actual premium depends on the cost calculation in a given year.

Legal basis and purpose

The Commission assessed the scheme under the 2014 guidelines on State aid for environmental protection and energy, finding it necessary to prevent the supported installations from switching to fossil fuels. The scheme supports Denmark's goals of 55% of electricity from renewable sources by 2030 and a coal phase-out in electricity generation by the same year, as well as the European Green Deal.

Details of the decision are to be published in the public State aid register once confidentiality issues have been resolved.

What this means for the market

• The premium is operating rather than investment aid: it supports current biomass consumption, not the construction of new capacity.
• The DKK 0.11/kWh limit is several times lower than the rates Denmark paid for years for energy from new biogas plants; it reflects the difference between a depreciated power plant and a new investment.
• The scheme ends in 2029, so operators must plan their profitability without subsidies after that date.