State aid rules for energy - Key questions identified by practionners -

1. State aid rules for energy- Key questions identified by practionners - Yvonne SIMON, Legal officer, DG REGIO Maud Skäringer, Policy analyst, DG REGIO Disclaimer: The views expressed are those of the author and cannot be regarded as stating an official position of the European Commission.

2. "There are inconsistencies between State aid rules and cohesion policy rules. • Some things which can get EU financing are not allowed by the State aid rules. Other things are allowed under State aid rules but they are not included for cohesion policy."

3. Cohesion policy rules and State aid rules are two set of rules which apply in parallel. They have different objectives and therefore there can be differences between scope and terminology.

4. "I understand that State aid rules allow a 100%-financing of non-economic activities. Can this apply to financings in the field of energy? How do I distinguish economic and non-economic activities?"

5. Public funding for non-economic activities is not State aid (see para 203 NOA); non-economic activities need to be clearly separable from economic ones • Economic: "offering goods or services on a market" / construction of economically exploited infrastructure • In the energy sector, most activities are 'economic' • Examples for non-economic activities: • Energy production for exclusively own use (eg photovoltaic appliances with no feed-in to the grids) • Possibly energy efficiency support for private housing

6. "How do I avoid spill over of public funding for non-economic activities to economic activities?"

7. Activities need to be clearly separated so that cross-subsidisation of economic activities is effectively avoided • Separation is done by keeping separate accounts in line with the principles governing the Transparency Directive 2006/111/EC ("functional separation")

8. "We expect that our planned photovoltaic infrastructure for a public building will feed in only limited amounts of electricity into the general grids. Is this limited sale of electricity changing the character of the infrastructure from non-economic to economic? Can the ancillarity concept be applied?"

9. Para 207 NOA: Financing can fall outside State aid rules in its entirety if the economic use of an infrastructure is purely ancillary. • Requires that: • economic activity is directly related and necessary, or intrinsically linked (same inputs) to the non-economic activity, and • the economic use is <20% of the relevant annual capacity Capacity-share can be determined in several ways, e.g. number of working hours/days, input-volumes; revenues are typically not appropriate for measuring capacity.

10. "We are a municipality and we want to invest into solar panels on our city hall. The electricity will be used for own consumption but large parts will also be fed into the net. We can get part of the necessary financing from the ERDF. The other parts will come from our own resources. Are our own resources also State aid?"

11. The resources of the municipality are 'State resources. Since the municipality is a public administration there is also 'imputability' of resources to the State. • If for the own contribution (with the aid received, within the accepted aid intensities) the public authorities would obtain a reasonable return on investment, that part of the investment (the own contribution) would not be State aid. • Separate accounts are needed to show that the 'own' resources are indeed originating from the municipality and that there is no cross-subsidisation.

12. "Our planned energy infrastructure is located in an assisted region. Instead of relying on the State aid provisions for energy, could we apply the State aid rules for regional aid?"

13. No. The application of the RAG and of the regional aid section of the GBER are excluded for energy generation, distribution and infrastructure. Please note that energy efficiency support is not covered and therefore possible under the regional aid section of the GBER.

14. "We intend to finance an electricity grid. Can we apply Article 48 of the GBER even though it says that 'electricity and gas storage projects' are excluded?"

15. For electricity infrastructure, the exclusion of Article 48(5) GBER relates only to electricity storage. Support for other types of 'electricity infrastructures' as defined in Article 2(130) GBER, can be covered by Article 48 GBER.

16. "My planned electricity grid is going over many kilometres. Is it a single infrastructure project even if several national administrative approvals are necessary for the whole distance?

17. Issue is relevant for notification thresholds and aid intensities • Energy infrastructure is defined in Article 2(130) GBER, but there is no pre-defined list of criteria for determining whether it is a single project or several projects. • National authorities should determine this, in particular on the basis of: • the project description (e.g. same beneficiary for the whole project; same content, same timing), • Economic logic (does the project make sense only as one project, or do separate parts also make sense on a standalone basis) • Other criteria possible

18. "We want to calculate the permissible aid amount for financing an electricity grid. How much can be given to it under Article 48 of the GBER?"

19. The credentials for the calculation under Art. 48 GBER: • Eligible costs: investment costs. • Max. aid amount: difference of eligible costs and operating profit • Operating profit: Art. 2(39) GBER: difference btw discounted revenues and discounted operating costs where the difference is positive. • Operating costs include material, personnel etc, but not depreciation costs and financing costs. • Ex-ante estimation of operating profits or claw-back mechanism In practice - calculations for the planned grid: • What are the investment costs? • What is: investment costs minus operating profit? For calculating the operating profit of the grid (estimation of appropriate user fee for grid)

20. "For renewable energy investments the GBER says that eligible costs are the 'extra investment costs'. What does this mean when our options are: 1) the planned renewable energy facility, or 2) 'no investment', or 3) investment in non-renewables with same capacity, or 4) facility with half the capacity of option 1?"

21. The 'extra investment' cost in Art. 41 GBER refer to a less environmentally friendly production facility. • Annex II EEAG has a list with typical counterfactuals; for RES it is: • For RES electricity production: costs of a conventional power plant with the same capacity • For RES heating: costs of a conventional heating system with the same capacity • Re the question: the right counterfactual is 'option 3'. If the conventional facility costs you 100 and the price of the RES facility is 150, the eligible costs are 50.

22. "We want to give loans for energy efficiency renovations in large apartment buildings. What are our main options for achieving State aid compliance?"

23. Options depend on the content of the project Main considerations: (1) Is there State aid? • Need for check at all levels of potential aid beneficiaries (final beneficiaries, entities handing out the loans, funds, fund managers, potential other investors) • Use of off-the-shelf instrument for energy efficiency ensures compliance (ensures 'no aid' at all levels). (2) If State aid cannot be excluded, is there a notification exemption? • Art. 39 or Art. 38 GBER could apply; in assisted regions also the GBER regional aid section could be possible. (3) State aid notification

24. "I need legal certainty for my project. Please tell me how I should to set it up and draft my support scheme to have it compliant with State aid rules"

25. MS have flexibility on how to set up projects/schemes. Commission services may not replace MS' choices. • For achieving State aid compliance, MAs • should first discuss with their State aid contact points in national administrations • TA budget may be used for getting expert advice • For advise on setting up of schemes or individual projects, MS may contact COMP for pre-notification talks • It is a key part of cohesion policy for 2014-2020 to increase administrative capacity in MS in the field of State aid

26. "I have a question about the interpretation of State aid rules. Where can I get guidance?"

27. Get in touch with the State aid contact point in your national administration • 'eStateAid-WIKI' • Forum where MS' authorities can submit questions on the interpretation of State aid rules; • Submitting question is limited to few authorities per MS; 'read-access' is provided more widely – first step is sending a request to the national State aid authority • Other ways of obtaining guidance (expert advice, or contacting COMP, or REGIO) remain possible.

28. Thank you for your attention!