Commission approves Irish renewable power support scheme
The European Commission (EC) has approved, under EU State aid rules, a scheme to support electricity production from renewable sources in Ireland. The measure will contribute to the EU environmental objectives without unduly distorting competition.
“This Renewable Electricity Support Scheme will contribute to Ireland's transition to low carbon and environmentally sustainable economy, in line with the Green Deal and our state aid rules,” said Margrethe Vestager, Executive Vice-President.
Ireland intends to introduce a new aid measure, called the Renewable Electricity Support Scheme (RESS), to support electricity production from renewable sources, including solar photovoltaic and wind. The RESS will contribute to the EU renewable energy target and will help Ireland reach its national target to transition away from fossil fuels and reach a share of 70 percent of renewables in its electricity mix by 2030.
The RESS, with an estimated total budget of between EUR 7.2 billion and EUR 12.5 billion, will run until 2025. During this time, aid for the production of electricity from renewable sources granted under the RESS will be allocated through auctions.
All eligible technologies will compete for subsidies in these auctions, which should ensure the cost-effective achievement of renewable electricity targets by encouraging competition. However, Ireland has justified preferential treatment for a small quantity of energy from solar PV, as well as from offshore wind on the basis of the longer-term potential of these technologies for the country.
Auction set strike price
Successful applicants of the RESS will receive support over 15 years in the form of a premium on top of the market price. The competitive auctions through which the aid is granted will set a ‘strike price’. When the market price is below this ‘strike price’, beneficiaries will be entitled to receive payments equal to the difference between the two prices.
However, when the market price is above the ‘strike price‘, beneficiaries will have to make payments equal to the difference between the two prices. These payments will be returned to Irish consumers in the form of reduced electricity bills.
To help build public acceptance and support for Ireland’s ambitious renewable energy targets, the RESS includes specific forms of support for projects developed by renewable energy communities and for communities that host projects supported by the RESS.
Projects developed by renewable energy communities will benefit from grants and loans to support the development of their projects and will participate in auctions in a special category in order to ensure that a certain number of these projects are successful.
The communities hosting projects supported by the RESS will benefit from a fund to which all RESS beneficiaries will contribute to and that will invest in certain technologies and ‘sustainable goals’ including education, energy efficiency, sustainable energy, and climate action initiatives in the area surrounding the RESS projects.
Ireland has also developed a detailed plan for evaluating the RESS, including in particular a full analysis of the costs and benefits of the innovative measures supporting the renewable energy communities.
State aid necessary and proportionate
The Commission assessed the scheme under EU State aid rules, in particular under the 2014 Guidelines on State aid for environmental protection and energy.
The Commission found that the aid is “necessary and has an incentive effect”, as electricity prices do not fully cover the costs of generating electricity from renewable energy sources and only renewable technologies that need public support to be a viable investment will be eligible for support under the RESS.
The aid is also proportionate and limited to the minimum necessary, as the amount of aid will be set through competitive auctions.
Therefore, the Commission concluded that the Irish RESS is in line with EU State aid rules, as it promotes the generation of electricity from renewable sources, in line with the European Green Deal, without unduly distorting competition.