Alina Oprea • 22 June, 2023 at 5:00 PM
The European Commission has approved a €1.1 billion Hungarian scheme to support electricity storage facilities to foster the transition to a net-zero economy. The scheme was approved under the State Aid Temporary Crisis and Transition Framework, adopted by the Commission on 9 March 2023 to support measures in sectors that are key to accelerating the green transition and reducing fuel dependencies in the context of Russia's war against Ukraine. The new Framework amends and prolongs in part the Temporary Crisis Framework, adopted on 23 March 2022 to enable Member States to support the economy in the context of the current geopolitical crisis, already amended on 20 July 2022 and on 28 October 2022.
Hungary notified to the Commission, under the Temporary Crisis and Transition Framework, a Hungarian scheme to support the installation of at least 800 MW/1600 MWh of new electricity storage facilities. The scheme aims at enhancing the flexibility of the Hungarian electricity system by supporting storage investments to facilitate the smooth integration of high-capacity of variable renewable energy sources in the Hungarian electricity system.
The measure will be open to companies active in the energy sector in Hungary, with the exception of financial institutions. It will also be open to cross-border participation (i.e. storage facilities in neighboring Member States), within the limits of available transmission capacity and taking into account the share of renewables in the energy mix of neighboring Member States. All storage technologies will be eligible.
The storage projects to be supported under the scheme will be selected through a competitive bidding process. The award of the grant contracts to the selected projects is planned to take place before the end of 2024.
”This €1.1 billion Hungarian measure will facilitate the development of electricity storage capacity. The Hungarian electricity system will be more flexible. The preparation for a higher integration of renewables into the electricity mix, is in line with EU climate and energy targets”, says Margrethe Vestager, Executive Vice-President in charge of competition policy.
The aid will be granted in two cumulative forms: an investment grant, which will be paid during the construction phase of the supported projects; and support in the form of a two-way contract for difference (“CfD”) to be paid annually during the 10 first years of the operations phase of the supported projects.
The investment grant will be partly financed by the Recovery and Resilience Facility, and partly by the Modernisation Fund, while the 10-year annual support will be financed through a levy.
The Commission found that the Hungarian scheme is in line with the conditions set out in the Temporary Crisis and Transition Framework. In particular, (i) the scheme will be open to all storage technologies; (ii) the aid will be granted through a competitive bidding process; (iii) the aid will be granted before 31 December 2025; and (iv) the storage facilities will have to be completed and put in operation within 36 months from the signing of the contract.
The Commission concluded that the Hungarian 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 REPower EU Plan and the Green Deal Industrial Plan, in line with Article 107(3)(c) Treaty on the Functioning of the European Union 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.
The Temporary Crisis and Transition Framework provide for the following types of aid, which can be granted by Member States:
- Limited amounts of aid, in any form, for companies affected by the current crisis or by the subsequent sanctions and countersanctions up to the increased amount of €250,000 and €300,000 in the agriculture, fisheries, and aquaculture sectors respectively, and up to €2 million in all other sectors;
- Liquidity support in the form of State guarantees and subsidized loans. In exceptional cases and subject to strict safeguards, Member States may provide energy utilities for their trading activities with public guarantees exceeding 90% coverage, where they are provided as unfunded financial collateral to central counterparties or clearing members.
- Aid to compensate for high energy prices. The aid, which can be granted in any form, will partially compensate companies, in particular intensive energy users, for additional costs due to exceptional gas and electricity price increases.
- Measures accelerating the rollout of renewable energy. Member States can set up schemes for investments in all renewable energy sources, including renewable hydrogen, biogas, and biomethane, storage, and renewable heat, including through heat pumps, with simplified tender procedures that can be quickly implemented, while including sufficient safeguards to protect the level playing field.
- Measures facilitating the decarbonization of industrial processes. To further accelerate the diversification of energy supplies, Member States can support investments to phase out 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 decarbonization of industrial processes switching to hydrogen-derived fuels.
- Measures aimed at supporting electricity demand reduction.
- Measures to further accelerate investments in key sectors for the transition towards a net-zero economy, enabling investment support for the manufacturing of strategic equipment, namely batteries, solar panels, wind turbines, heat pumps, electrolyzers, and carbon capture usage and storage as well as for production of key components and for production and recycling of related critical raw materials.
Sanctioned Russian-controlled entities will be excluded from the scope of these measures.
Measures particularly important to accelerate the green transition and reduce fuel dependencies will be in place until 31 December 2025. This concerns in particular measures accelerating the rollout of renewable energy and energy storage, measures facilitating the decarbonization of industrial processes, and measures to further accelerate investments in key sectors for the transition towards a net-zero economy.
The remaining provisions of the Temporary Crisis Framework aimed at providing a more immediate crisis response (limited amounts of aid, liquidity support in the form of State guarantees and subsidized loans, aid to compensate for high energy prices, and measures aimed at supporting electricity demand reduction), remain applicable until 31 December 2023. With a view to ensuring legal certainty, the Commission will assess at a later stage the potential need for an extension.
The Temporary Crisis and Transition Framework complements the ample possibilities for Member States to design measures in line with existing EU State aid rules. For example, EU State aid rules enable Member States to help companies cope with liquidity shortages and need urgent rescue aid. Furthermore, Article 107(2)(b) of the Treaty on the Functioning of the European Union enables Member States to compensate companies for the damage directly caused by an exceptional occurrence, such as those caused by the current crisis.