EU: Commission approves €1.5 billion French State aid scheme to support sustainable biomethane production to foster the transition to a net-zero economy

The European Commission has approved a €1.5 billion French scheme to support the production of sustainable biomethane to foster the transition towards a net-zero economy. The scheme was approved under the State aid Temporary Crisis and Transition Framework (‘TCTF’) adopted by the Commission on 9 March 2023 and amended on 20 November 2023 and on 2 May 2024.

The French measure

France notified to the Commission, under the TCTF, a scheme to support the production of sustainable biomethane to be injected into the natural gas grid.

The measure will be open to new installations with a projected annual production of biomethane of more than 25 GWh per year. Beneficiaries will be selected through a competitive, transparent and non-discriminatory bidding process on the basis of the strike price per MWh of biomethane offered. The installations must be completed and in operation within 36 months after the granting of the aid. The measure is expected to support the production of 1.6 TWh of sustainable biomethane per year.

Under the scheme, the aid will be granted in the form of two-way contracts for difference (‘CfD’), concluded for a duration of 15 years. The amount of aid corresponds to the difference between the strike price, determined in the tender offer of the beneficiary (‘pay as bid’), and the market price of natural gas. If, however, the market price of natural gas is higher than the strike price, the difference between the two prices will be paid back to the State.

The Commission found that the French scheme is in line with the conditions set out in the TCTF. In particular, the aid (i) will be granted on the basis of a scheme with an estimated capacity volume and budget; (ii) will take the form of a two-way contract for difference and (iii) will be granted no later than 31 December 2025.

Furthermore, the aid will be subject to conditions to limit undue distortions of competition, including safeguards to guarantee the competitiveness of the bidding procedure.

The Commission concluded that the French scheme is necessary, appropriate and proportionate to accelerate the green transition and facilitate the development of certain economic activities, which are of importance for the implementation of the REPowerEU Plan and the Green Deal Industrial Plan, in line with Article 107(3)(c) TFEU and the conditions set out in the Temporary Crisis and Transition Framework.

On this basis, the Commission approved the aid measure under EU State aid rules.