EU funding for RES and environmental measures

The energy crisis, resulting from, among other things, the COVID-19 pandemic, the war in Ukraine and the unstable situation in the Middle East, has made the need for the European Union, including Poland, to become energy independent from fossil fuel imports more realistic. A key element of the EU’s strategy has become the transition to renewable energy sources, which are expected not only to enhance energy security, but also to accelerate the green transition process. Renewable energy sources and pro-environmental measures are therefore priority areas in the context of the allocation of public support instruments. Below, we provide an overview of the funding opportunities available for business investment in RES, the budget allocated for this and the process of obtaining the funds itself.

Why RES and energy efficiency?

Europe, including Poland, has begun the process of abandoning traditional fuels such as coal, wood, gas and oil, which are not only increasingly unavailable, more difficult and expensive to extract, but also cause environmental degradation – both as a result of extraction and use. EU Member States have committed themselves to significantly reducing CO2 emissions, ensuring a 42.5% share of green energy in the overall energy mix (by 2030) and achieving climate neutrality by 2050.

Hundreds of billions of euros will be invested in RES and green technology industries, both in the public and private sectors, but this will have a concrete economic effect, including financial. Experts from the Energy Forum cite consolidated comparative figures in their November 2023 report: „Over the years, the EU has paid an average of €300 billion per year for oil, coal and natural gas imports. However, by 2022 alone, due to Russia’s aggression in Ukraine, cutting off fossil fuel supplies from Russia and supplementing them from other directions, the EU’s fuel bill has risen to around €720 billion. This is comparable to the entire Polish GDP. For years, Poland alone has been buying energy raw materials at a cost of around PLN 70 billion a year. By 2022, this bill had reached almost PLN 200 billion.

The scale of expenditure incurred on fuel imports alone and the savings that can be achieved puts the allocation of 30% of the EU budget to climate and environmental objectives into perspective.

In Poland, the green transition has only just begun. According to the Pekao SA Report, „Poland remains one of the most energy-intensive and 'dirty’ economies in the EU”. The share of zero-emission technologies in electricity production is the lowest in the entire EU. Poland’s emissivity in the energy sector is 544% of the EU average, in the business sector 310%, and in processing 180%.

Meeting the requirements of the energy transition will be a huge challenge in our country, but at the same time it brings the prospect of rapid development in energy industries and those related to broadly understood pro-environmental solutions. Taking advantage of the financing on offer will not only bring climate benefits, but will also allow for economic development, increase the competitiveness and profitability of companies investing in green energy.

EU budget

In order to stimulate investment in energy efficiency and RES, for which one of the main barriers is the very high initial investment costs, a range of support instruments financed from EU and national sources are offered.

Under the EU’s current multiannual financial plan (2021-2027), a record amount has been allocated to support the green transition. In response to environmental threats and threats to energy security, as much as 30 per cent of the planned expenditure has been earmarked for climate and environmental projects. Some of the support instruments were planned over a longer period, contracting additional future revenues from the ETS.

The programmes, which are a continuation of the previous period, have retained their specificity but have been geared towards environmentalism, and new funds have been created, such as:

• REPowerUE – approximately EUR 300 billion for energy conservation, diversification of energy supply and renewable energy sources,
• Social Climate Fund – around EUR 65 billion to minimise the impact of the new emissions trading scheme on buildings, road transport and fuels for additional sectors),
• Modernisation Fund – approximately EUR 57 billion for 13 low-income Member States for energy transition,
• Fair Transition Mechanism – around  EUR 55 billion to address the socio-economic impacts of the environmental transition.

EU funds are distributed between programmes operating at central level (open to applicants from the whole of the European Union and in some cases also from outside the EU), international level (applicants from selected countries or areas), cross-border level (applicants from border areas), national level (applicants from within a country) and regional level (applicants from an area covering a region within a country).

Programmes and funds in Poland

Since its accession to the European Union, Poland has been the largest beneficiary of support. In the EU’s financial perspective for 2021-2027, Poland is expected to receive around EUR 140 billion, of which a minimum of 30% will be allocated for environmental purposes. In the case of the National Reconstruction and Development Plan (NRP), this will be almost 50% of the programme’s funds.

The main programmes available at national and regional level in Poland from which support can be obtained for environmental and climate projects are:

• National Recovery and Resilience Plan (NRP) – strengthening the economy and resilience to crises (c. PLN 268 billion),
• European Funds for Infrastructure, Climate, Environment – energy, RES development, environmental protection, transport (approx. PLN 125.8 billion),
• European Funds for the Modern Economy – research, development and innovation projects (approx. PLN 42.9 billion),
• European Funds for Eastern Poland – support for 5 voivodeships: lubelskie, podlaskie, podkarpackie, świętokrzyskie and warmińsko-mazurskie and part of mazowieckie (approx. PLN 13.4 billion),
• 16 regional programmes – each voivodeship has its own programme to finance investments in its area (approx. PLN 155.4 billion),
• Modernisation Fund – modernising the energy system and improving energy efficiency (approx. EUR 19.5 billion)
• the Social Climate Fund is being implemented – support during the energy transition (approx. EUR 50 billion)

Acquisition of funding

Entrepreneurs can obtain support mainly through competitively run calls for proposals. This means that anyone who meets the subject and object conditions for participation in the call is entitled to apply for support. Call schedules (usually annual) are laid down in each programme, which allow you to consider submitting an application in advance. Special attention should be paid to who will organise the call. It is not always the Managing Authority of the programme or priority – often it is the so-called Operator or Intermediate Body – in which case detailed information on the call for proposals should be sought directly from these entities.

The announcement with the full call documentation is usually made 1 to 3 months before the call is launched (although this is not the rule, there may be longer and shorter deadlines). The documentation contains detailed requirements concerning the type of beneficiaries, project intentions and other requirements; it consists of the call rules, a model application with instructions, evaluation criteria, catalogue of eligible costs, model contract, etc.

The call may be closed (applications may be submitted until a specific date) or open (until the allocation, i.e. the pool of funds earmarked for the competition, is exhausted). Attention should be paid to whether there are provisions concerning early closure of the call, e.g. after submitting applications for the amount which is twice the competition allocation. In such a case, the minimum duration of the call for proposals is usually specified, so it is worth submitting the application within the time limit which guarantees its consideration, as a precautionary option.

It is extremely important that the project obtains at least the minimum required number of points according to the evaluation criteria, so it is advisable to familiarise yourself with them before starting work and to make a preliminary simulation of the possible points to be obtained.

Each application undergoes at least a formal and substantive appraisal. During the formal appraisal, as the name suggests, formal issues are checked, e.g. has the application been submitted to the relevant competition, does the applicant fit into the catalogue of entities entitled to apply for support, has all the required information been provided, etc. The formal appraisal is followed by content-related appraisal, which concerns issues strictly related to the activities envisaged in the project. A positive formal appraisal is followed by a substantive appraisal, which concerns issues strictly related to the activities envisaged in the project. It is carried out on the basis of substantive assessment criteria announced in the call for proposals documentation. This may be, e.g. adequacy and verifiability of indicators, correctness of constructed budget, declared level of innovation of the planned solution, etc. At this stage, points are awarded, which are decisive for winning the competition and, therefore, for obtaining support.

Following the evaluation, a ranking list is drawn up, according to which the competition funds are distributed according to the number of points awarded to projects, starting with those with the highest number of points until the allocation is exhausted, and then grant agreements are signed.

Who can apply for funding?

In simple terms, EU support can be provided to any entity operating in the European Union. The EU, directly and indirectly, offers a wide range of opportunities for different types of factors, with entrepreneurs being one of the most important groups of beneficiaries.

However, the characteristics of an entity can influence a number of factors affecting the ultimate value of the support available, and sometimes the very possibility of applying for it.

An entrepreneur who intends to obtain EU funding should first of all verify his status as a micro or medium-sized enterprise (so-called SME) or as another (large) enterprise. The number of employees and the annual turnover or annual balance sheet total determine whether an independent enterprise belongs to a particular group. In the SME sector, a distinction is made between micro, small and medium-sized enterprises; in the large sector, the small-mid-cap and mid-cap categories are further distinguished in the current perspective:

• micro-enterprise – has fewer than 10 employees, an annual turnover or annual balance sheet total not exceeding EUR 2 million
• small enterprise – has fewer than 50 employees, annual turnover or annual balance sheet total not exceeding EUR 10 million
• medium-sized enterprise – has fewer than 250 employees, an annual turnover not exceeding EUR 50 million or an annual balance sheet total not exceeding EUR 43 million
• small mid-cap – „small mid-cap company”, with up to 499 employees, an annual turnover of less than EUR 100 million and an annual balance sheet total of EUR 86 million
• mid-cap – „mid-cap company”, with no more than 3 000 employees, not being an SME or small mid-cap company
• large company – exceeds the thresholds stated above.

What funding can be obtained

It all depends on the status of the beneficiary, the cost of the project, the type of aid from which it will be financed and the applicable support intensity in the area. As a rule, the regulations for a given call for proposals for funding determine the maximum amount that can be raised.

For example, the intensity of the most popular regional investment aid depends on the size of the enterprise and the location of the project: from 0% (not available) in Warsaw to 70% of eligible costs for micro and small enterprises (50% for large ones) in the eastern regions of Poland.

The vast majority of EU support is state aid (allowed under Commission Regulation (EU) No 651/2014 of 17 June 2014 declaring certain types of aid compatible with the internal market in application of Articles 107 and 108 of the Treaty). State aid can take various forms, such as:

• subsidies,
• guarantees,
• surety,
• preferential loans and credits,
• compensations,
• capital-investment subsidies,
• non-refundable benefits,
• Tax relief.

Combining different forms and types of support

What will probably please investors, EU support can be combined (under certain conditions) with other forms of state aid, e.g. the Polish Investment Zone relief (income tax exemption) or the Government Grant (support for job creation) with an EU subsidy.

The general conditions for cumulation of state aid state that state aid granted from different sources should concern different, identifiable eligible costs. Using the example of an investor who plans to implement an innovative production line and build a biogas plant, the whole investment can be divided into two projects:

• implementation of an innovative production line, for which it is possible to obtain an EU grant from competitions aimed at implementing innovation,
• the construction of a biogas plant, for which EU subsidies can be obtained from competitions aimed at implementing RES solutions.

If aid obtained from different sources relates to the same eligible costs, the intensity of the support must not exceed the applicable maximum aid intensity limits. For example, the above-mentioned investor obtained the maximum subsidy for the implementation of an innovative production line under the regional investment aid. He intends to finance the investment with a commercial loan, for which he obtained security in the form of a de minimis guarantee from Bank Gospodarstwa Krajowego. There is an overlap here between regional investment aid and de minimis aid in respect of the same eligible costs, so that the grant financed by regional aid will be reduced by the amount of de minimis aid received.

Of course, there are exceptions to the general rule, e.g. the cumulation of aid for disabled workers can be combined with other aid for the same eligible costs, exceeding the highest thresholds, provided that this cumulation does not result in an aid intensity exceeding 100% of the relevant costs over the period of employment of the workers concerned.

In many competitions it is also permissible to combine or select different types of state aid. Depending on the component, a single project may be financed by different types of aid, e.g. a project involving R&D with implementation of the results, training of employees and a green transformation module may take the following financing structure:

• R&D work module – funding from aid for research, development and innovation activities,
• R&D results implementation module – funding from regional investment aid,
• training module – training aid funding,
• green transformation module – funding from environmental aid.

It may also happen that a certain type of aid will be unavailable, in which case it is often possible to take advantage of other types of support. For example, an entrepreneur from Warsaw will not be able to take advantage of regional investment aid in the implementation component, but instead can take advantage of de minimis aid, which does not depend on the size of the entity and the location of the investment (up to the eligible limit and on condition that such a solution is allowed in the call for proposals regulations).

There are many possibilities and configurations, each case to be considered individually.

Additional remarks

The possibility of receiving support is subject to various determinants that can affect the effectiveness of the support, and sometimes the possibility of receiving it at all.

In particular, it is worth mentioning the so-called incentive effect, which in most cases must be met for public support to be granted. In simple terms, this effect consists in the fact that public support is supposed to induce/incentivise the investor to implement a project, which would not be implemented at all or to a limited extent without support. The incentive effect has two aspects – formal and substantive. In terms of the formal aspect, it must be demonstrated that the project did not start before the application was submitted (usually excluding the necessary preparatory work), while in terms of the substantive aspect – that it would not have been possible to implement the project to the full extent (or at all) without the support of public aid. It therefore requires all the more careful planning of the activities undertaken.

In the case of high-value projects, one should also bear in mind the thresholds of support value, exceeding of which requires the so-called notification of aid. In such a case, a given state (e.g. Poland) cannot decide on co-financing on its own, and the consent of the European Commission is required, e.g. the European Commission:

• For investment aid for research infrastructure, this is a threshold of EUR 35 million,
• For investment aid for energy infrastructure, this is a threshold of EUR 70 million,
• for investment aid for hydrogen charging or refuelling infrastructure, the threshold is EUR 30 million.

Selected support options for RES and pro-environmental investments

In conclusion, investments in energy efficiency, renewable energy sources and pro-environmental technologies are not only a necessity in the face of existing threats, but also an opportunity for the rapid development of companies in these sectors, to maintain and increase competitiveness and profitability, to become independent from imports of raw materials and to secure a stable energy future. It is therefore worth taking advantage of available funding sources and subsidies to accelerate the green transition and benefit from green, safe and economical solutions. It is an investment that will benefit not only us, but also future generations.

Please find below a selection of support opportunities for RES and energy efficiency investments. If you are interested in obtaining support for your projects, please do not hesitate to contact us!

Selected support options for RES and energy efficiency investments