EASE Reply to the Public Consultation for the Revision of the Guidelines on State Aid for Environmental Protection and Energy

EASE took part in the European Commission Public Consultation for the Revision of the Guidelines on State aid for Environmental protection and energy 2014-2020 (EEAG). EASE supports updating the EEAG to achieve a normative framework that is aligned with the EU’s ambitious decarbonisation targets and the European Green Deal more broadly.

EASE believes that higher support through state aid should be allowed for energy storage technologies since their contribution to decarbonisation is already essential and will only become more so in the coming years.

Providing valuable flexibility services at different grid locations and timescales, energy storage is essential to enabling the widespread deployment of renewable energy sources. Moreover, energy storage can play a vital role in supporting the transition of sectors that present high energy intensity or are hard to decarbonise. Energy storage support through state aid should have adequate safeguards against market distortions.

In its consultation reply, EASE highlighted several considerations for aligning the EEAG with the European Green Deal. One primary issue is the scope of support for key decarbonisation technologies. The scope of support for energy storage projects must be expanded, in line with the energy storage provisions in the Clean Energy Package:

• Covering all energy storage technologies, including power-to-x, rather than only ‘electricity storage’ as currently defined in Article 1, Par. 1.3, 31-(a)-(iii) of the EEAG. A technology neutral approach is essential to allow the various energy storage solutions to compete on a level playing field, rather than picking winners and losers through administrative procedures.
• We do not see a rationale for limiting the consideration of storage projects to those connected to high-voltage transmission lines designed for a voltage of 110kV or more (as is currently the case in the EEAG). Many energy storage facilities are now deployed at distribution level to support the integration of variable Renewable Energy Sources (vRES), and storage can also be deployed behind-the-meter at commercial & industrial facilities as well as residential homes.

The unique added value of energy storage to the energy system must be supported also in the EEAG, in order to ensure a fair treatment of these solutions.

In addition to energy storage, higher aid intensities could be warranted for renewable and low-carbon hydrogen production, decarbonisation of heating and cooling (including thermal storage), industrial decarbonisation, low/zero-emission transport infrastructure, and energy infrastructure. Aid for energy storage and renewable/low-carbon hydrogen could cover operating costs on top of investment costs, as long as there are sufficient safeguards against undue competition distortion.

EASE supports the introduction of carbon contracts that will reimburse the extra costs resulting from decarbonisation by paying the investor the difference between the costs of reducing one ton of CO2 to produce a given product and the actual CO2 price in the ETS. This type of contract could create a further incentive for industries to invest in decarbonisation technologies beyond the ETS incentive by removing uncertainties the investment’s profitability and guaranteeing a specific return rate for the investment. EASE believes that carbon contracts should only be awarded via competitive bidding procedures and be technologically neutral. Besides the contracts should be sector-specific, provided it is possible to have a competitive bidding procedure. They should apply only to investments that have a high emissions reduction potential and cover only sectors that are facing particular technological challenges to decarbonise. In any case, EASE affirms that a well-functioning ETS is essential to ensure an effective decarbonisation process. Therefore, carbon contracts for difference must be designed to avoid distortions.

Given the regional nature of the decarbonisation challenge, EASE sees as positive an opening of Member States’ support schemes for decarbonisation across borders (up to 10% of the scheme). Such an initiative could help ensure a more harmonised market, reducing the risk of “deep-pocket distortions” between Member States.

With the revision of the EEAG, the EU faces the challenge of ensuring a clear framework that supports decarbonisation in a cost-effective manner while maintaining competition and fair trade. EASE is committed to supporting the process and ensuring the fair consideration of energy storage technologies.