European Energy Programme for Recovery (EEPR): Regulation 663/2009
Overview
In December 2008, the European Council endorsed a 'European Economic Recovery Plan' (EERP) proposed by the European Commission. The Plan was granted a budget of €200 billion to implement a series of measures to assist the recovery of the European economy after the financial crisis and stimulate European investment. The Council asked the Commission to elaborate more detailed, sector-based strategies for the energy sector. The Commission proposed an economic strategy 'to financially support innovative energy projects', which resulted in the European Energy Programme for Recovery (EEPR) (Regulation 663/ 2009).
This Programme was adopted by Regulation in July 2009 and entered into force on the 1 August 2009. It enacts a plan to provide incentives for projects in three energy sectors: gas and electricity interconnectors, wind energy and CCS.
The European Commission has already selected the CCS projects which will be granted funding under the EEPR Regulation.
What are the aims and requirements of the Regulation?
The main objectives of the EEPR are: economic recovery, energy security and greenhouse gas (GHG) emissions reduction. With particular regard to GHG emissions, the programme contributes to implementation of the 2008 climate change package by stimulating investment in low carbon technologies.
The Regulation sets up a 'financial instrument' amounting to €3.98 billion from the EU Budget over the period 2009-10, which will co-finance three categories of projects:
gas and electricity interconnections(€2.365 billion, 60% of the budget);
offshore wind energy projects (€565 million, 14% of the budget) and
carbon capture and storage projects (€1.05 billion, 26% of budget) (Article 3).
The Regulation establishes eligibility, selection and award criteria for this financial support to be granted, with no more than one project eligible in each Member State. Applications can be submitted by one or more companies, acting jointly. It also provides common rules for the three categories, although different criteria and conditions apply.
The analysis below only refers to CCS projects.
Granting of EEPR assistance and eligibility criteria for CCS projects
The EEPR assistance for CCS projects will be awarded to 'actions that implement' pre-selected projects listed in Part C of the Annex to the Regulation. These actions were identified by means of a call for proposals published by the Commission in May 2009, which also set out eligibility and award requirements.
Under the Regulation, project developers must be able to:
demonstrate that the installation can capture at least 80% of CO2;
show that the installation provides 'at least 250MW electrical output or equivalent', when CCS is demonstrated in a power plant;
commit to sharing the knowledge created by the operation of the demonstration CCS plant with wider industry and the European Commission (Article 18). This information will not include sensitive data.
Selection and award criteria for CCS projects
The Regulation requires the Commission to select among eligible projects on the basis of four selection criteria:
soundness and technical adequacy of the outline;
maturity of the project;
soundness of the financial package; and
acquisition of all necessary permits or strategy in place to acquire them (Article 19).
Finally, the Commission is also in charge of applying the 'award criteria' in order to assess the proposals. These include:
the extent to which the lack of EEPR funding would delay the project;
the relationship between the amount of financial support required and the foreseen amount of CO2 abated in the first 5 years of activity;
the complexity and level of innovation of the project; and
the quality of the management plan, including its ability to be fully operational by 31 December 2015.
Funding conditions
The EEPR contribution can only cover expenditures related to the implementation of the project incurred by the beneficiary of the grant or by third parties in charge of the implementation. CCS projects could be financed under the EEPR for up to 80 % of the 'total eligible investment costs' (Article 20).
The implementation of the Regulation
The European Commission is in charge of selecting the proposals for EEPR assistance and determining its amount. Member States are asked to assist the implementation of the project through all administrative and permitting procedures.
The Commission, assisted by a Committee, is tasked with monitoring the implementation of the Regulation and submitting a report every year to the European Parliament and the Council of Ministers (Article 28), the first report being due by spring 2010. An evaluation of the EEPR as a whole will be carried out by the Council by the end of 2011 and an evaluation report will be submitted to the Parliament, the Council, the European Economic and Social Committee and the Committee of Regions.
The Regulation also requires compliance with other pieces of EU legislation, with special attention to 'competition, state-aid rules, protection of the environment, health, sustainable development and public procurement' (Article 23.4).
Latest developments
The Commission launched a single call for proposals for all three categories covered by the Regulation on 19 May 2009 and the deadline for submissions was set at 15 July 2009. In response it received twelve proposals for CCS projects amounting to a funding request of €1.77 billion. Eleven out of twelve projects met the eligibility criteria.
The Commission evaluated the proposed CCS projects with the assistance of an Evaluation Committee composed of Commission experts and external observers from the European Investment Bank (EIB). The Committee concluded its assessment of the eligibility, selection and award criteria in September 2009.
Following the Committee's recommendations, the Commission approved the list of six successful applications on the 9 December 2009: Jaenshwalde (Germany), Rotterdam (Netherlands), Belchatow (Poland), Compostilla (Spain), Hatfield (United Kingdom) and Porto Tolle (Italy). 4 projects were selected for the reserve list: Huerth (Germany), Eemshaven (Netherlands), Kingsnorth (UK) and Longannet (UK).
Three grant agreements have already been signed between the Commission and the operators and the last three are due to be concluded shortly.
Key Issues concerning CCS
The allocation of European funds to CCS projects to accelerate the implementation of CCS is a positive development. However, this Regulation only addresses specific European projects and this narrow focus means the instrument is only capable of playing a limited role in the broader objective of the long-term deployment of CCS.
Under the EEPR Regulation, only the pre-selected CCS proposals listed in Annex C are eligible for funds. Projects not included in the list, for instance projects outside the EU and other potential joint ventures, are therefore not eligible to receive funding under the EEPR.
In principle, EEPR assistance can be combined with national funds, provided that the total accumulated funding does not exceed 100% of the eligible project costs and national funds have been notified to the Commission for state-aid control and review (see section on State Aid). Combining EEPR funds with other European funding, such as
FP7, to support a single CCS project is not permitted. However, dividing the eligible CCS project into phases (capture/transport/storage) could circumvent this problem. The final decision on this point has to be made by the European Commission. As for combining EEPR assistance and funding under the NER 300 Decision, it is important to note that although the NER mechanism was established under the ETS Directive, it does not allocate Community funding. The ETS certificates for NER are effectively owned by Member States. Thus, combining funds from the EEPR and the ETS/NER financing could, in principle, be possible in a similar way to national funds being combined with NER funding (see NER 300 section).
Costs incurred in third countries are not eligible for EEPR. However, costs incurred by non-EU undertakings operating inside the EU territory might be eligible provided that their activity serves the objective of security of energy supply and is indispensable for the implementation of the project.