EU approves €1.5 bn French aid for biomethane production

The European Commission has granted approval to a substantial €1.5 billion French state aid package designed to stimulate the domestic production of sustainable biomethane. This strategic investment is intended to accelerate France’s transition to a net-zero carbon economy by promoting the development of a robust and resilient biomethane sector. The Commission’s decision is grounded in the Temporary Crisis and Transition Framework (TCTF), a regulatory mechanism established to support member states in addressing economic challenges and fostering green growth. By endorsing this French initiative, the Commission underscores its commitment to facilitating the energy transition and achieving EU-wide climate objectives.

Under the scheme, aid will be provided through two-way contracts for difference (CfD) that last for 15 years. The aid amount is based on the difference between the strike price, set during the beneficiary’s tender offer (‘pay as bid’), and the market price of natural gas. If the market price exceeds the strike price, the beneficiary must return the difference to the State. This mechanism ensures that the aid adapts to market conditions, offering financial stability to the beneficiary while protecting public funds when market prices are favorable.

The Commission determined that the French scheme complies with the requirements outlined in the TCTF. Specifically, the aid will (i) be provided according to a scheme with a specified capacity volume and budget, (ii) be delivered through a two-way contract for difference, and (iii) be granted by December 31, 2025, at the latest.

France has introduced a new scheme under the TCTF to bolster the production of sustainable biomethane, which will be injected into the natural gas grid. This measure specifically targets new installations that have a projected annual production of more than 25 GWh of biomethane. The selection of beneficiaries will be carried out through a competitive, transparent, and non-discriminatory bidding process, focusing on the strike price per MWh of biomethane offered. The requirement is that these installations must be completed and operational within 36 months after the aid is granted, ensuring timely development and integration into the grid.

The initiative is a significant step towards increasing France’s production of sustainable biomethane, with an expected annual output of 1.6 TWh. By fostering a competitive environment, the scheme aims to encourage innovation and efficiency in biomethane production, ultimately contributing to the country’s renewable energy targets and reducing reliance on fossil fuels.

The Commission determined that the French scheme is essential, suitable, and balanced to expedite the green transition and support the growth of key economic sectors crucial for the REPowerEU Plan and the Green Deal Industrial Plan.

Margrethe Vestager, Executive Vice-President in charge of competition policy, highlighted that the €1.5 billion initiative aims to boost sustainable biomethane production in France. This effort is designed to lessen dependence on imported fossil fuels and support the EU’s strategic objectives for a net-zero economy. Vestager emphasized that this scheme not only advances the transition to a more sustainable economy but also ensures fair competition within the Single Market, marking a significant stride towards environmental and economic goals.