State aid: Commission approves aid for Finland's first LNG terminal
23 September 2015
The European Commission has approved under EU state aid rules Finland's plans to grant €23 million to construct a small scale LNG terminal at Pori on Finland's west coast.
The European Commission has concluded that Finland's plans to grant €23 million of public funding for the construction of a small scale LNG terminal at Pori, in the Satakunta region on Finland's west coast, are compatible with EU state aid rules. The project aims to encourage the use of LNG as fuel for ships, in place of fuel oils and liquefied petroleum gases.
The Commission concluded that the project contributes to environmental protection and to the security of gas supply in Finland whilst maintaining competition in the Single Market. Seeking to end the energy isolation of the Baltic Sea Region and to integrate it fully into the EU energy markets is a key building block for the EU’s Energy Union strategy and one of the key priorities of the Juncker Commission.
EU Commissioner in charge of competition policy Margrethe Vestager said: "The LNG terminal in Pori is the first of its kind in Finland. It will provide a new source of cleaner fuel for the maritime industry and diversify Finland's gas supply sources. It is a good example of how EU state aid rules can encourage sound public investment that helps the EU reach its goals on energy security and environmental protection."
Currently, there are no LNG terminals in Finland. The Pori project is part of Finland’s plans to create a network of small scale LNG terminals with the aim of offering alternative fuel infrastructure to the maritime industry, i.e. LNG fuelling stations for ships. The project will bring about a significant reduction in CO2 emissions by providing cleaner fuel for maritime transport. At the same time, the LNG infrastructure will increase the security of supply in Finland, providing local industries with access to gas. The Pori terminal has a storage capacity of 30 000 m3. The public funding of €23 441 500 will cover less than 30% of the total investment costs; the remainder will be funded by the developer and future owner of the terminal.
The Commission assessed the project under Article 107(3)(c) of the Treaty on the Functioning of the European Union that allows aid to be granted for the development of certain economic activities, and the 2014 Environmental Protection and Energy State Aid Guidelines. In particular, the Commission's assessment showed that the project could not have been carried out without public funding. Indeed, as Finland currently has no LNG infrastructure, potential customers are reluctant to carry out the long-term and costly investments for switching to LNG fuel. In turn, private investors have no incentive to build LNG infrastructure because there is no demand.
Moreover, the operator of the infrastructure will be under an obligation to provide access to interested users at a competitive price. This will ensure that the aid is limited to the minimum necessary for triggering the investment and that distortions of competition and trade are minimised.
Background
Under the Commission's 2014 Environmental Protection and Energy State Aid Guidelines (also see MEMO), Member States can support energy infrastructure projects subject to certain conditions. In addition to making sure the aid is necessary to realise the projects and is limited to the minimum required, the rules also ensure that the projects do not result in undue negative effects on competition and trade – no crowding-out of private investment and guaranteed open access to the new gas infrastructure by third parties.
For more information on the Guidelines also see the Commission's Policy brief on "Improving State Aid for Energy and the Environment".
The measure will also contribute to the objectives of Directive 2014/94/EU on the deployment of alternative fuels infrastructure[1]. The Directive aims at ensuring the build-up of alternative fuels infrastructure as part of a sustainable fuels strategy and the implementation of common technical specifications for this infrastructure in the Union. The preamble of the Directive recognises the importance of LNG, in particular, for maritime use as an alternative low sulphur fuel. The project will contribute to decreasing air pollution from sulphur oxides (SOx) in the EU emission control areas as required by Directive 2012/33/EU, which affects half of the ships sailing on European short sea routes. Directive 2014/94/EU further calls for the development of a network of refuelling points for LNG for maritime use and for land transport.
The non-confidential version of the decision will be made available under the case number SA.39515 in the State aid register on the DG Competition website once any confidentiality issues have been resolved.
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