The European Commission has approved a €1.5 billion French scheme to support the production of sustainable biomethane to foster the transition towards a net-zero economy. The scheme was approved under the State aid Temporary Crisis and Transition Framework ('TCTF') adopted by the Commission on 9 March 2023 and amended on 20 November 2023 and on 2 May 2024.
The French measure
France notified to the Commission, under the TCTF, a scheme to support the production of sustainable biomethane to be injected into the natural gas grid.
The measure will be open to new installations with a projected annual production of biomethane of more than 25 GWh per year. Beneficiaries will be selected through a competitive, transparent and non-discriminatory bidding process on the basis of the strike price per MWh of biomethane offered. The installations must be completed and in operation within 36 months after the granting of the aid. The measure is expected to support the production of 1.6 TWh of sustainable biomethane per year.
Under the scheme, the aid will be granted in the form of two-way contracts for difference ('CfD'), concluded for a duration of 15 years. The amount of aid corresponds to the difference between the strike price, determined in the tender offer of the beneficiary ('pay as bid'), and the market price of natural gas. If, however, the market price of natural gas is higher than the strike price, the difference between the two prices will be paid back to the State.
The Commission found that the French scheme is in line with the conditions set out in the TCTF. In particular, the aid (i) will be granted on the basis of a scheme with an estimated capacity volume and budget; (ii) will take the form of a two-way contract for difference and (iii) will be granted no later than 31 December 2025.
Furthermore, the aid will be subject to conditions to limit undue distortions of competition, including safeguards to guarantee the competitiveness of the bidding procedure.
The Commission concluded that the French scheme is necessary, appropriate and proportionate to accelerate the green transition and facilitate the development of certain economic activities, which are of importance for the implementation of the REPowerEU Plan and the Green Deal Industrial Plan, in line with Article 107(3)(c) TFEU and the conditions set out in the Temporary Crisis and Transition Framework.
On this basis, the Commission approved the aid measure under EU State aid rules.
Background
On 9 March 2023, the Commission adopted the TCTF to foster support measures in sectors which are key for the transition to a net-zero economy, in line with the Green Deal Industrial Plan.
The TCTF provides for the following types of aid, which can be granted by Member States until 31 December 2025 in order to accelerate the green transition:
- Measures accelerating the rollout of renewable energy (section 2.5). Member States can set up schemes for investments in all renewable energy sources, with simplified tender procedures.
- Measures facilitating the decarbonisation of industrial processes (section 2.6). Member States can support investments in the decarbonisation of industrial activities with a view to reduce dependency on imported fossil fuels, in particular through electrification, energy efficiency and the switch to the use of renewable and electricity-based hydrogen which complies with certain conditions, with expanded possibilities to support the decarbonisation of industrial processes switching to hydrogen-derived fuels.
- Measures to further accelerate investments in key sectors for the transition towards a net-zero economy (section 2.8). Member States can grant investment support for the manufacturing of strategic equipment (namely batteries, solar panels, wind turbines, heat-pumps, electrolysers and carbon capture usage and storage), as well as for production of key components and for production and recycling of related critical raw materials. Support is capped at a certain percentage of the investment costs up to specific amounts, depending on the location of the investment and the size of the beneficiary. Higher support is possible for small and medium-sized companies, as well as companies located in disadvantaged regions to ensure that cohesion objectives are duly taken into account. Furthermore, in exceptional cases, Member States may provide higher support to individual companies, where there is a real risk of investments being diverted away from Europe, subject to a number of safeguards.
