Proposed amendments to Clean Industrial Deal State Aid Framework (CISAF)

1. Industrial Electrification

Electrification is the fastest and most cost-effective way to significantly decarbonise industry. The CISAF sets a strong example by prioritising direct electrification, particularly for low-temperature heat—which makes up over 40% of industrial heat and is well-suited to existing, scalable solutions.

To accelerate this shift, we recommend the following changes:

1. How and what aid is granted: (Carbon) Contracts for Difference should be enabled to support first-mover investment decisions. The aid intensity for CAPEX should be set at 50% for all the technologies.
   1. Additionality: With an electricity mix that is already 74% decarbonised, direct electrification is an immediate contributor to speed up industrial decarbonisation now. Imposing additionality rules on direct electrification is disproportionate and would unnecessarily delay projects that can deliver fast, tangible climate benefits.
   1. State Aid requirements should reflect the reality of electrification projects. These include: i) allowing consumers to rely on the grid for electricity sourcing instead of overestimating the potential of self-generation; ii) considering grid connection delays in completion deadlines; and iii) assessing a project’s potential at the process level, rather than the site level.
   1. Low-temperature heat upper limits: The upper limits should be increased from 400 to 500 degrees Celsius to include widely established solutions like e-boilers.
   1. Accelerated depreciation for clean technologies: A good proposal that would de-risk investments through tax rebates. It should be maintained and improved.

2. Capacity mechanisms (CRMs)

CRMs may be needed to secure and coordinate investments in firm and flexible technologies. They could benefit from CISAF’s drive for greater convergence across Europe and a faster approval process. At the same time, the requirements should minimise distortions and account for different system needs. In any case, CRMs not eligible for CISAF’s streamlined procedure should be promptly assessed under the standard procedure, which must also be swift and efficient.

The following points aim to strike this balance:

1. National Resource Adequacy Assessments (NRAAs): the current draft relies heavily on the European Resource Adequacy Assessment (ERAA). However, NRAAs should also inform design choices, de-rating factors, and other parameters, ensuring that national system specificities are fully considered.
2. Accurate cost allocation: With the proposed requirement, CRM costs could be allocated to hours with high prices without actual stress on the electricity system. Instead, we propose using stress periods defined ex-ante.
3. Joint procurement of adequacy and flexibility: The draft text may lead Member States to procure flexibility and adequacy jointly by default. Instead, the necessity of a joint procurement should be assessed on a case-by-case basis, reflecting the specific conditions of each national system.
4. Secondary trading: should be allowed without temporal restrictions.
5. Other design elements: we suggest changes to ensure that the duration of capacity agreements does not favour capacities with a lower contribution to security of supply; delivery windows align with system stress periods in each country; or requirements for ex-ante consultations with stakeholders are included.  

3. Non-fossil flexibility support schemes

Investments should primarily rely on price signals and market mechanisms. However, these may not always be sufficient to provide the appropriate visibility for investors or operators. In some cases, additional flexibility support schemes might therefore be needed to address system needs. Such mechanisms should remain market-based, inclusive, non-distortive and open to all technologies.

In this respect, we welcome CISAF’s simplification of the rules for non-fossil flexibility support schemes and we recommend that:

1. The option for repowering is included in addition to new investments. Repowering can increase the effectiveness and efficiency of flexibility resources and should not be discriminated when compared to new investments.
   1. The joint procurement of adequacy and flexibility is not pre-empted in the guidelines.  
   1. Other design elements: all non-fossil assets are eligible; contract durations should accommodate for technologies like pumped storage hydropower, and there should be room to adjust the cost allocation methodology.  

4. Renewable Energy (RES) support schemes

Regarding the deployment of RES, of most importance, we propose the following changes:

1. Project completion deadlines: Theseshould consider factors beyond developers’ control—such as delays in grid connection. Also, although we support the exemption for hydropower storage, it should be clarified that the guidelines refer to electricity storage, and not water storage.
2. Hybrid projects: RESprojects are increasingly reliant on storage solutions to optimise the value of solar and wind power. Hybrid projects should therefore be eligible for direct price support.
3. Payback obligations: Payback obligations should be limited strictly to the duration during which support is received and not extended beyond it.

5. Technology neutrality

On electrolytic hydrogen, CISAF should not impose additional conditions on low carbon hydrogen compared to renewable hydrogen. Applying the principle of technology neutrality ensures Member States and stakeholders can opt for the mix that best suits their local reality, thus delivering cost-efficient, reliable, decarbonised electrification.

Finally, investments in natural gas should follow the same requirements defined in the CEEAG.