European Commission: Commission approves €390 million Romanian scheme under Recovery and Resilience Facility to support high-efficient cogeneration of electricity and heat

The European Commission has approved, under EU State aid rules, a €390 million Romania scheme, made available in part through the Recovery and Resilience Facility (‘RRF’), to support the production of electricity and heat from high-efficient cogeneration installations connected to district heating networks in Romania. The scheme will also contribute to the EU’s strategic objectives relating to the EU Green Deal.

Executive Vice-President Margrethe Vestager, in charge of competition policy, said: “This €390 million scheme enables Romania to support the construction of more efficient district heating systems, contributing to greening the sector. This aid measure, which will be partly funded by the Recovery and Resilience Facility, will contribute to achieving the EU Green Deal objectives and will help Romania meet its emission reduction targets, while limiting possible distortions of competition.”

The Romanian scheme

The measure notified by Romania, with a budget of €390 million, will be partially funded through the RRF, following the Commission’s positive assessment of the Romanian Recovery and Resilience Plan and its adoption by the Council.

The scheme, which will run until 30 June 2024, aims to support the production of electricity and heat from high-efficient cogeneration installations connected to district heating networks in Romania. In particular, the measure aims at promoting the construction of new high-efficiency plants, as well as the transformation of existing plants powered from coal to be powered by natural gas.

The projects that will benefit from the aid will be selected based on the order in which the applications are received. To be eligible, they must relate to projects for high-efficient cogeneration installations powered by natural gas and must comply with the EU 2030 and 2050 carbon neutrality targets. Under the scheme, the aid will take the form of direct grants. The support will be granted for a maximum period of 3 years.

The Commission’s assessment

The Commission assessed the scheme under EU State aid rules, in particular Article 107 (3) (c) of the Treaty on the Functioning of the European Union, which enables EU countries 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, which allow Member States to support high-efficient cogeneration, under certain conditions, in order to stimulate energy savings.

The Commission found that:

The scheme facilitates the development of certain economic activities. In particular, it promotes energy-efficiency cogeneration installations in Romania and reduces greenhouse gas and CO2 emissions.
The aid has an incentive effect, as the beneficiaries would not carry out the investments in high-efficient cogeneration installations to the same extent without the public support.
The measure has a limited impact on competition and trade within the EU. In particular, it is necessary and appropriate for Romania to meet the European and national environmental targets. In addition, it is proportionate and any negative effect on competition and trade in the EU will be limited in view the size of the projects, the aid amounts and the characteristics of the sector. Moreover, necessary safeguards limiting the aid to the minimum will be in place, as Romania will ensure that the aid does not exceed the funding gap (i.e. the minimum aid amount necessary to attract the investments that otherwise would not take place). Finally, Romania commits to avoid any lock-in effect of the gas-fired energy generation (i.e. to avoid making it more difficult to switch from natural gas to other less polluting alternatives).
On this basis, the Commission approved the measure under EU State aid rules.