On 9 April 2014, the European Commission has adopted new rules on public support for environmental protection and energy. The guidelines set out the criteria that the Commission will apply when assessing State aid measures in the environmental protection and energy field. In other words, the Commission utilizes the guidelines to provide guidance for member states and potential aid recipients on the compatibility of the state measures with the state aid rules.

The new guidelines aim at ensuring the integration of renewables into the internal electricity market, by promoting a gradual move to market-based support for renewable energy. The Commission’s guidance reflects the fact that the subsidies granted to renewable energy sources the last few years have resulted to substantial market distortions. The new guidelines aim at helping Member States to design state aid measures that contribute to reaching their 2020 climate targets, while ensuring that those measures do not cause distortions of competition. In this context, the Commission introduces three significant modifications concerning renewable energy support, energy price reductions for energy – intensive companies and public support to ensure energy security.

Specifically, the guidelines introduce important changes to the ability of EU Member States to grant operating aid to the producers of renewable energy. Most importantly, the Commission foresees the gradual replacement of feed-in tariffs by feed-in premiums. From 1 January 2016 the new aids are granted as a premium in addition to the market price whereby the generators sell its electricity directly in the market. Additionally, in 2015 -2016, at least 5 per cent of the planned new electricity capacity from renewable sources will have to be subjected to a competitive bidding process. From 2017 on, a competitive bidding process shall be conducted for the award of all public aids.

Furthermore, the Commission introduces energy price reductions for energy-intensive companies in order to support competitiveness of European industry. Sectors, such as the manufacturing of chemicals, plastics, paper or metals are exposed to a risk to their competitive position due to the high costs resulting from the funding of support for renewable energy as a function of their electro-intensity. In this context, the new rules provide criteria on how Member States can relieve energy intensive companies that are particularly exposed to international competition from charges levied for the support of renewables.

Moreover, the guidelines allow Member States to grant support to renewable energy producers to secure adequate electricity generation. Member States shall clearly demonstrate a real risk of insufficient electricity generation capacity and the need for State intervention. Overall, the guidelines are consistent with the objective to ensure that public support for renewable energy producers will be gradually phased out. The new community rules will affect the ability of Member States to support the development of renewable energy sources.