Commission approves €3 billion German-Dutch State aid scheme to support the production of renewable fuels of non-biological origin – EQ
The European Commission has approved, under EU State aid rules, a €3 billion German-Dutch scheme to support the production of renewable fuels of non-biological origin (RFNBOs), including renewable hydrogen, throughout the world. These RFNBOs will be imported and sold in the EU, contributing to the objectives of the EU Hydrogen Strategy, the European Green Deal, as well as of the REPowerEU Plan to reduce dependence on Russian fossil fuels and accelerate the green transition.
The German-Dutch scheme
Germany and the Netherlands notified the Commission of their intention to introduce a €3 billion scheme to cost-efficiently support RFNBO production. Germany will contribute to the scheme with €2.7 billion and the Netherlands will contribute with €300 million.
The scheme will support the construction of at least 1.875 GW of electrolysis capacity throughout the globe. The aid will be awarded through a competitive bidding process planned to be concluded in 2025. The tenders, organised on a multi-regional basis, will be open to projects with an electrolyser capacity of at least 5 MW.
The scheme is based on a double auction system, which brings together RFNBO producers, most of which will be in non-EU countries, and RFNBO buyers in Germany and the Netherlands. The companies offering to sell RFNBOs at the lowest price, and to buy RFNBOs at the highest price, will each be awarded a contract for the sale or purchase of the RFNBOs produced under the scheme, with State resources filling the funding gap between the two prices.
Beneficiaries will have to prove compliance with EU criteria for the production of RFNBOs, as set out in the delegated acts on renewable hydrogen.
The scheme will contribute to meeting Germany’s and the Netherlands’ demand for RFNBOs from 2030 onwards. It will also support the EU’s ambition for renewable hydrogen technologies to be deployed on a large scale from 2030 onwards. Germany and the Netherlands expect that the scheme will lead to up to 5.73 million tonnes of CO2 equivalent being avoided, which will contribute to Germany’s, the Netherlands’, and the EU’s climate targets.
The Commission’s assessment
The Commission assessed the measure under EU State aid rules, in particular Article 107(3)(c) the Treaty on the Functioning of the EU, which enables Member States to support the development of certain economic activities under certain conditions, and the 2022 Guidelines on State aid for climate, environmental protection and energy (‘CEEAG’).
In particular, the Commission found that:
- The scheme was designed taking account of the experience of the previous German ‘H2Global’ State aid scheme, which the Commission approved in December 2021, as well as stakeholders’ feedback via public consultations.
- The scheme is necessary and appropriate to facilitate the production of renewable hydrogen. At the same time, it supports the objectives of key EU policy initiatives such as the European Green Deal, the EU Hydrogen Strategy, and the REPowerEU Plan.
- The measure has an ‘incentive effect’, as the beneficiaries would not carry out the relevant investments to the same extent without the public support.
- The Netherlands and Germany have put in place sufficient safeguards to ensure that the scheme has a limited impact on competition and trade within the EU. In particular, the beneficiaries will be selected following an open, transparent and non-discriminatory bidding process, and the aid will be kept to the minimum necessary to undertake the projects. In addition, measures are taken to avoid overcompensation of buyers who are eligible to benefit from consumption-based State aid schemes.
- The aid will bring about positive effects that outweigh any possible negative effects in terms of distortions to competition.
On this basis, the Commission approved the German-Dutch scheme under EU State aid rules.
Background
This scheme follows a previous German scheme approved by the Commission in December 2021, to support investments in the production of renewable hydrogen in non-EU countries, to then be imported and sold in the EU.
The 2022 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.
The Renewable Energy Directive of 2018 set out stringent criteria for RFNBOs, such as renewable hydrogen, to ensure that their environmental impact is minimal and that they contribute to the deployment of renewable energy. Amongst others, emission savings of the end product must be at least 70% across the entire value chain. Amendments to the Renewable Energy Directive in 2023 increased the target for the share of renewable energy in the EU’s gross energy consumption to 42.5% by 2030, and introduced a target that 42% of the hydrogen used in industry should be renewable by 2030 , increasing to 60% by 2035.
The non-confidential version of the decision will be made available under the case numbers SA.108511 and SA.110056 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.
