Introduction

On September 10 2015 a new subsidy scheme for electricity-intensive businesses came into force, which offers companies financial support to cover part of the public service obligation (PSO) fee for electricity consumption. The support is aimed at companies which are burdened by the PSO fee because of their high consumption of electricity and strong foreign competition and represents approximately Dkr0.07 per kilowatt hour (kWh). The total pool available for support is Dkr185 million annually.

Background

All electricity users – including private consumers and businesses – pay a proportionate share of the costs of electricity supply companies to implement a series of PSOs. The PSO payment supports renewable energy-based power generation and other types of environmentally friendly power generation, as well as supporting research and development and the security of supply.

The average PSO payment in 2014 was Dkr0.216 per kWh, of which the average share for renewables was Dkr0.1456 per kWh.

In 2014 the government entered into an agreement with a number of other parties regarding relief for the PSO payment. The scheme implements parts of this agreement.

Subsidy scheme

The scheme's main objectives are to ensure that electricity-intensive businesses are not burdened with a PSO payment meaning that their competitiveness suffers noticeably and to promote energy efficiency in electricity-intensive businesses.

Electricity-intensive businesses are defined in Annex 3 of the European Commission's Guidelines on state aid for environmental protection and energy 2014-2020, in which the commission identified 68 industries considered to be electricity intensive and subject to competition to an extent that state aid for easing the PSO payment may be relevant. It is estimated that there are companies in almost all of these industries in Denmark, including the production of:

  • refined petroleum products;
  • industrial gases;
  • cement;
  • paper and cardboard; and
  • iron products.

The scheme establishes a pool of Dkr185 million per year for 2015-2020, for which eligible companies can apply to cover part of their PSO payments in connection with electricity use. The subsidy is estimated to be approximately Dkr0.07 per kWh, depending on the number of applicants and electricity consumption.

The subsidy is subject to the electricity-intensive business signing an agreement with the Energy Agency on energy efficiency. This will ensure that the electricity-intensive business improves its energy efficiency, even though the cost of electricity is reduced.

The agreement will include energy management (eg, the mapping and monitoring of energy consumption), as well as specific analysis to identify potential energy efficiency improvements or other potential energy reductions.

Compliance with the agreement must be documented annually to receive support.

Repeal of reduced PSO fee

Along with the introduction of the subsidy scheme, the previous 100 gigawatt hours (GWh) scheme, which provided for a reduced PSO fee for companies with electricity consumption above 100 GWh per year, has been repealed. The 100 GWh scheme was deemed to be incompliant with the new state aid guidelines, which came into force on July 1 2014.

For further information on this topic please contact Nicolaj Kleist at Bruun & Hjejle by telephone (+45 33 34 50 00) or email (nkl@bruunhjejle.dk). The Bruun & Hjejle website can be accessed at www.bruunhjejle.com.

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