The European Commission has approved an up to €406.4 million Dutch scheme to support the filling of the gas storage facility Bergermeer in the context of Russia’s invasion of Ukraine. The scheme was approved under Article 107(3)(b) of the Treaty on the Functioning of the European Union (‘TFEU’), recognising that the EU economy is experiencing a serious disturbance.
Executive Vice-President Margrethe Vestager, in charge of competition policy, said: “This scheme will enable the Netherlands to give companies incentives to store natural gas in the large storage facility Bergermeer, by protecting them from unexpected adverse price developments over the storage period this summer. The Commission called for rapidly filling gas storages ahead of the winter and the Netherlands responded with a well-designed scheme that will allow the filling of one of the largest gas storages in Europe and contribute to the Union’s security of supply.”
The Dutch measure
The Netherlands notified to the Commission a scheme to support the filling of the gas storage facility Bergermeer in the context of Russia’s invasion of Ukraine.
This measure will enable the Netherlands to ensure that existing gas storage facilities on its territory are filled up to at least 80% of their capacity by 1 November 2022 and thus comply with the gas storage level obligation foreseen in the recently adopted regulation on gas storage.
In order to meet the above-mentioned obligation, the Netherlands needs to ensure the partial filling of the Bergermeer facility, a large seasonal storage facility for High Calorific gas. The Bergermeer facility, which is also used by neighbouring countries, is different from other storage facilities in the Netherlands, which are used to store Low Calorific gas, historically largely sourced from the Groningen gas field located on Dutch territory.
For the latter storage facilities, the Netherlands had already put in place a filling agreement to ensure an adequate storage level in view of the planned gradual closure of the Groningen gas field. This measure is therefore only necessary to ensure the partial filling of the Bergermeer storage facility for High Calorific gas.
In general, market participants have an incentive to store gas if, at the time of storing, they expect prices in the winter to be higher than summer prices, so as to be able to cover at least the storage costs.
Under the scheme, the aid will take the form of insurance against negative winter-summer gas price spreads, i.e. when market gas prices are higher in summer when buying and storing gas, compared to the winter when selling it. The aid will incentivise market participants to fill seasonal gas storages by covering (i) the costs of storing gas during summer for the winter season when the winter-summer gas spreads are too low to cover costs; and (ii) potential losses incurred in case of negative winter-summer gas price spreads. The maximum amount that the Netherlands could be liable for amounts to €406.4 million.
If the average spread between winter and summer gas prices is positive and covers the costs of storing the gas for winter, the Dutch government would not need to provide support.
The aid will be awarded through a competitive tender process in two separate auctions carried out on 30 May and 7 June 2022. The competitive bidding process will ensure that the aid is kept at the minimum.
Furthermore, the public support includes provisions to limit undue distortions of competition, including a profit sharing mechanism with the Dutch government in case of excessive unexpected profits. It also avoids possible negative impacts on the functioning of spot and forward gas markets.
The Commission assessed the measure under EU State aid rules, in particular Article 107(3)(b) TFEU, which allows Member States to grant aid to specific companies or sectors to remedy a serious disturbance in a Member State’s economy. The Commission concluded that the measure is in line with EU State aid rules. In particular, the Commission found that the measure:
- Is appropriate, necessary and proportionate. In particular, it will increase security of gas supply and remedy a serious disturbance in the economy, without affecting trading conditions to an extent contrary to the common interest. Moreover, the measure does not go beyond what is necessary to address the gas storage obligations for the Netherlands.
- Has a strictly temporary nature as it will only apply for gas put in the storage unit until 21 October 2022.
On this basis, the Commission approved the scheme under EU State aid rules.
In Versailles on 10-11 March 2022, EU leaders agreed to phase out the EU dependency on Russian gas, oil and coal imports as soon as possible and invited the Commission to put forward a plan to ensure security of supply and affordable energy prices during the next winter season by end of March 2022.
On 23 June 2022 the Parliament and on 27 June 2022 the Council adopted the proposal by the Commission for a regulation on gas storage to ensure an adequate level of gas storage before the start of the heating season in October 2022. The regulation requires that Member States ensure that existing gas storage facilities on their respective territory are filled up to at least 80% of their capacity by 1 November 2022.
The gas storage level obligation is imposed on Member States, which shall take all necessary measures to ensure that the mandatory filling target is reached. Since the filling of gas storages started already at the beginning of April 2022 and since it takes 132 to 180 days to fill a typical seasonal storage facility of the size of the Bergermeer facility, the Netherlands decided to act preemptively to ensure it meets the target by the deadline indicated in the legislative proposal.
Furthermore, on 23 March 2022, the European Commission adopted a State aid Temporary Crisis Framework to enable Member States to use the flexibility foreseen under State aid rules to support the economy in the context of Russia’s invasion of Ukraine. The Temporary Crisis Framework complements the existing State aid toolbox with many other possibilities already available to Member States, such as measures providing compensation to companies for damages directly suffered due to exceptional circumstances, and measures outlined in the Commission Communications on energy market developments.
More information on the Temporary Crisis Framework and other actions taken by the Commission to address the economic impact of Russia’s invasion of Ukraine can be found here.
The non-confidential version of the decision will be made available under the case number SA.103012 in the State aid register on the Commission’s competition website once any confidentiality issues have been resolved. New publications of State aid decisions on the internet and in the Official Journal are listed in the Competition Weekly e-News.