State aid: Commission approves €26.3 million Finnish measure to support SEVO in construction of hydroelectric pump storage
The European Commission has approved, under EU State aid rules, a €26.3 million Finnish aid measure to support Suomen Energiavarasto Oy (‘SEVO’) in the construction of an underground hydroelectric pump storage facility. The measure will increase the share of renewables in Finland’s electricity generation in line with the EU’s European Green Deal objectives. At the same time, it will help reduce dependence on Russian fossil fuels and fast forward the green transition in line with the REPowerEU Plan.
The Finnish measure
Finland notified the Commission of its plan to support SEVO, a subsidiary of EPV, in the conversion of a non-active mine located in Pyhäsalmi into a pumped hydroelectricity storage facility. The storage unit will participate in the electricity spot markets, as well as in electricity balancing markets. The storage unit will effectively substitute in the grid electricity generated by high-cost gas-fired units with low-cost, clean electricity available notably during strong renewable energies generation conditions (such as hours with high wind infeed). It will also help integrate a higher share of renewable electricity generation in the grid.
The aid, which will take the form of a €26.3 million investment grant, will support the construction and the installation of the storage unit.
The hydroelectric pump storage facility will have a capacity of 75 MW and 530 MWh and is expected to generate between 60 and 160 GWh of clean electricity per year. The facility is envisaged to start operating by the end of 2025. Once completed, the project is expected to avoid the release of 202,000 tonnes of carbon dioxide annually.
The Commission’s assessment
The Commission assessed the measure under EU State aid rules, in particular Article 107(3)(c) of the Treaty on the Functioning of the European Union (‘TFEU’), which enables Member States to support the development of certain economic activities subject to certain conditions, and the 2022 Climate, Energy and Environment Aid Guidelines (‘CEEAG’).
The Commission found that:
The project implements an innovative technology in the electricity storage sector.
The measure facilitates the development of an economic activity, in particular the integration of renewable electricity generation into the power grid. At the same time, it supports the objectives of key EU policy initiatives, such as the European Green Deal and the REPowerEU Plan.
The aid has an ‘incentive effect’, as the beneficiary would not carry out the investments without the public support. Furthermore, the project may incentivize more innovative storage solutions that would enable a higher integration of renewable energy in the Finnish electricity system.
The measure has a limited impact on competition and trade within the EU. In particular, it is necessary and appropriate to increase the share of renewable electricity generation. In addition, it is proportionate, as the aid amount is limited to the effective financing needs. Furthermore, the project will bring societal benefits, such as job creation on national and local level due to the construction, installation and operation of the new storage facility.
The aid brings about positive effects that outweigh any potential distortion of competition and trade in the EU.
On this basis, the Commission approved the Finnish measure under EU State aid rules.