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Commission approves Lithuanian support for renewable power production and for electro-intensive users

The European Commission has approved, under EU State aid rules, a measure to support the production of electricity from renewable energy sources and a measure to support electro-intensive users in Lithuania.
"This will contribute to Lithuania's transition to low carbon and environmentally sustainable energy supply, in line with the EU environmental objectives and our state aid rules," said Commissioner Margrethe Vestager, in charge of competition policy.

According to Commissioner Margrethe Vestager, the two schemes will allow Lithuania to both continue supporting the development of renewable energy sources in the country and to preserve the competitiveness of electricity-intensive companies by reducing their contributions to the financing of this support.

Support for renewable power generation

In 2012, Lithuania set up a scheme to support producers of electricity from renewable energy sources. The scheme will run until 2029 and the overall budget until the end of the support is expected to amount to EUR 1.242 billion.

The woodchip fired Danpower Baltic plant is the first biomass-fired CHP in Kaunas (photo courtesy Axis Technologies).

The Commission approved aid granted under this scheme from 2012 to 2015 when the last beneficiary under the scheme was selected. During this period, beneficiaries were selected through tender procedures and are then granted support in the form of a feed-in-premium for a period of 12 years.

In order to avoid excessive administrative costs, small scale electricity plants below 30 kW (and since 2013, below 10 kW) receive support in the form of a fixed feed-in-tariff (FIT) for a period of 12 years.

The Commission assessed the scheme under EU State aid rules, in particular under the 2008 Guidelines on State aid for environmental protection and 2014 Guidelines on State aid for environmental protection and energy and found that the aid has an incentive effect, as the market price does not fully cover the costs of generating electricity from renewable energy sources and the beneficiaries applied for the aid before the installations started working.

The aid is also proportionate and limited to the minimum necessary, as it only covers the difference between the production costs and the market price of electricity. Therefore, the Commission concluded that the Lithuanian measure is in line with EU State aid rules, as it promotes the generation of electricity from renewable sources, in line with the environmental objectives of the EU, without unduly distorting competition.

Aid to energy-intensive users

The Lithuanian support scheme for producers of electricity from renewable energy sources is financed via a levy paid by the final electricity consumers. From 1 January 2019, Lithuania intends to grant reductions on this levy to energy-intensive industrial users, such as companies active in the manufacture of fertilizers.

The beneficiaries will obtain compensation for 85 percent of the levy paid the previous year if they demonstrate an electro-intensity of at least 20 percent. EU State aid rules, in particular, the Guidelines on State aid for environmental protection and energy 2014-2020, authorise reductions – up to a certain level – in contributions levied on electricity-intensive companies exposed to international trade and used to fund renewable energy support schemes.

These provisions enable Member States to support renewable energies while safeguarding the international competitiveness of their electricity-intensive companies.

The Commission found that that the levy reductions will only be granted to energy-intensive companies exposed to international trade and concluded that the Lithuanian measure is in line with EU State aid rules. The measure will promote EU energy and climate goals and ensure the global competitiveness of energy-intensive users and industries, without unduly distorting competition in the Single Market.

About EU State Aid

The Commission’s 2014 Guidelines on State Aid for Environmental Protection and Energy (see full text here), allow Member States to support the production of electricity from renewable energy sources, subject to certain conditions. These rules are aimed at meeting the EU’s ambitious energy and climate targets at the least possible cost for taxpayers and without undue distortions of competition in the Single Market.

The Renewable Energy Directive (RED) established targets for all Member States’ shares of renewable energy sources in gross final energy consumption by 2020. For Lithuania, that target is 23 percent by 2020, a target the country has already achieved.

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