State aid: Commission approves EUR2.08 billion French measure to support offshore wind energy generation

The European Commission has approved, under EU State aid rules, a €2.08 billion French measure to support offshore wind electricity production in France. The measure will contribute to achieving France’s energy and environmental targets, as well as the objectives relating to the EU’s Offshore Renewable Energy Strategy and the European Green Deal.

The French measure

France notified to the Commission its intention to support the construction and the operation of a floating offshore wind farm in the sea off the coast of the South of Brittany.  The aid measure, which will run for a period of 20 years starting of the operation of the wind farm in 2028, will have a total maximum budget of €2.08 billion.

Floating offshore wind technology is at an initial stage in France; until now only small pilot projects have been developed. The floating offshore wind farm supported by the measure will be the first commercial project of this kind in France. It is expected to have a capacity of 230 to 270 MW, and to generate 1 TWh of renewable electricity per year for a period of 35 years.

The beneficiary of this measure will be selected through a transparent and non-discriminatory bidding process, where bidders will compete mainly on the basis of the amount of aid per MW of installed capacity. The beneficiary is planned to be designated in the second semester of 2023.

The aid will be granted in the form of a monthly variable premium under the model of a two-way Contract for Difference. The variable premium will be calculated by comparing a reference price, determined in the tender offer of the beneficiary (“pay as bid”), and the market price for electricity. When the market price is below the reference price, the beneficiary will be entitled to receive payments equal to the difference between the two prices. However, when the market price is above the reference price, the beneficiary will have to pay the difference between the two prices to the French authorities.

The measure will help France meet its target of producing 33% of its energy needs from renewable sources by 2030. The scheme is expected to lead to the reduction of greenhouse gas emissions by 430.000 tonnes of carbon dioxide per year.

The Commission’s assessment

The Commission assessed the measure under EU State aid rules, in particular Article 107(3)(c) of the Treaty on the Functioning of the European Union (‘TFEU’), which enables Member States to support the development of certain economic activities subject to certain conditions, and the 2022 Guidelines on State aid for climate, environmental protection and energy (‘CEEAG’).

The Commission found that the measure:

• Facilitates the development of certain economic activities, in particular the production of renewable electricity from floating offshore wind technology.
• Has an ‘incentive effect’, as the beneficiary would not carry out the investments in the floating offshore windfarm project without the public support.
• Has a limited impact on competition and trade within the EU. In particular, it is necessary and appropriate to promote the production of renewable electricity. In addition, it is proportionate, as the level of the aid corresponds to the effective financing needs. Moreover, necessary safeguards limiting the aid to the minimum will be in place, including a competitive bidding process for awarding the aid. Finally, the measure brings about positive effects, in particular environmental ones, that outweigh any possible negative effects in terms of distortions to competition and trade in the EU.

On this basis, the Commission approved the French measure under EU State aid rules.

Background

The Commission’s 2022 Guidelines on State aid for climate, environmental protection and energy (‘CEEAG’) provide guidance on how the Commission will assess the compatibility of environmental protection, including climate protection, and energy aid measures which are subject to the notification requirement under Article 107(3)(c) TFEU.

These guidelines, applicable as from January 2022, create a flexible, fit-for-purpose enabling framework to help Member States provide the necessary support to reach the Green Deal objectives in a targeted and cost-effective manner. The rules align with the important EU’s objectives and targets set out in the European Green Deal and with other recent regulatory changes in the energy and environmental areas and cater for the increased importance of climate protection. They include sections on aid for renewable energy, energy efficiency measures, aid for clean mobility, infrastructure, circular economy, pollution reduction, protection and restoration of biodiversity, as well as measures to ensure security of energy supply, subject to certain conditions.

The 2022 CEEAG allow Member States to support the production of electricity from renewable energy sources, subject to certain conditions. These rules aim to help Member States meet the EU’s ambitious energy and climate targets at the least possible cost for taxpayers and without undue distortions of competition in the Single Market.

The Renewable Energy Directive of 2018 established an EU-wide binding renewable energy target of at least 32% by 2030. With the European Green Deal Communication in 2019, the Commission reinforced its climate ambitions, setting an objective of net zero emissions of greenhouse gases in 2050. The European Climate Law in force since July 2021, which enshrines the 2050 climate neutrality objective and introduces the intermediate target of reducing net greenhouse gas emissions by at least 55% by 2030, sets the ground for the ‘Fit for 55′ legislative proposals presented  by the Commission on 14 July 2021. Among these proposals, the Commission has presented amendments of the Renewable Energy Directive and the Energy Efficiency Directive with more ambitious binding annual targets to increase the production of energy from renewable sources and reduce energy use at EU level.

The non-confidential version of the decision will be made available under the case number SA.100269 in the State aid register on the Commission’s competition website once any confidentiality issues have been resolved. New publications of State aid decisions on the internet and in the Official Journal are listed in the Competition Weekly e-News.