Commission approves Lynemouth conversion

In December of 2014, the U.K. notified plans to subsidize the conversion of the coal-fired Lynemouth power plant to biomass. The plant would be able to generate 420 MW of electricity running exclusively on wood pellets. The U.K. Government intends to support the project in the form of a premium paid on top of the market price of the electricity generated (a so-called “Contract for Difference”). The project will receive aid until 2027 and, according to U.K. estimates, will generate about 2.3 TWh of low-carbon electricity per year. The plant is due to use approximately 1.5 million tonnes of wood pellets per year, mainly sourced from the United States, Canada and Europe.

The Commission opened an in-depth investigation in February of 2015 to assess whether the terms and conditions of the U.K. support, and in particular the financial calculations and estimates regarding key cost parameters, would avoid overcompensation. In light of the comments received from interested third parties as well as detailed technical information submitted by the U.K., the Commission is now satisfied that the submitted parameters are robust and present no risk of overcompensation.

The Commission’s investigation also did not find any evidence of market distortion in the global wood pellets market. Finally, it is satisfied that the measures will not lead to undue distortions of competition in the market for other wood-based products.

On the basis of this analysis the Commission concluded that the project’s contribution to the European renewable energy and CO2 emissions reduction targets clearly outweighs any potential distortions of competition that could be triggered by the state support.