The European Commission has approved a plan to provide state aid to utilities in Spain that use domestic coal in their power plants.
Under the plan, generators using domestic coal will be given priority in the Spanish electricity market. The Spanish government says that the measure is needed to ensure security of supply.
The Commission has approved the plans because under the EU’s electricity market liberalisation directives, member states are allowed to impose public service obligations on its electricity generators to use domestic fuel sources in the interest of security of supply.
The rules impose a limit of 15 per cent of national electricity consumption on such measures.
Spain’ sgovernment says that the plan is designed to be a temporary measure while work is carried out to boost electricity interconnections with neighbouring countries. The country has limited interconnections with France and Portugal, and also has a high proportion of intermittent renewable energy – especially wind – operating in its system.
The government has promised that the measure will finish by the end of 2014. In total ten power plants are concerned by the public service obligation.
The EU framework on state aid in the form of public service compensation allows aid where it does not exceed the difference between the costs incurred for providing the service and the revenues obtained in that context, taking account of a reasonable profit. In this case, the compensation to the power plants is strictly limited to the extra costs imposed by the public service, says the Commission.
The European Commission says that the plans will not interfere with plans that are currently being discussed to close down Europe’s uneconomic coal mines.
The new Coal Regulation would replace the current coal subsidy scheme, which ends at the end of 2010, and would provide EU member states with financial assistance as long as they close down uneconomic coal mines by October 2014.