Article 8 describes the rules for selecting projects. Step one is, within each subcategory, to identify the proposal with the lowest “ranking cost” per total amount of energy that the proposed project will produce over the first 5 years of operation. A plausible definition of “ranking cost” is given in this slide.

Next the combined total of the public subsidy requested by the all CCS proposals and all the non-CCS proposals (called the “RES Group”) is compared. In the likely event that both exceed the funding available, a proportional cut will be made in the funding to available for each set. Within the RES Group, the proposal with the highest ranking cost compared to its energy production will be deselected first. Next, the proposal with the next highest ranking cost per energy production from “another category” will be deselected, and so on until there is sufficient funding for the remaining projects.

But three things might interfere with this scheme, given below in descending order of importance (NER300.com’s assessment):

1. Possibly the most important is NER300’s implementation of Article 10a (8) of the revised Emissions Trading Directive’s requirement for “geographic balance”. Every Member State will get at least one NER300 project and the deselection rules will be bent to ensure this happens by allowing a Member State to propose a project below the capacity threshold stipulated in Annex I A.
2. If all the proposals received for a particular renewable energy or smart grid subcategory are weak, the proposal with the next lowest public subsidy-request-per-energy-output ratio in that category will be funded, resulting, therefore, in more than one proposal being funded in that subcategory.
3. In the first Call, if less than three proposals are received for a subcategory, “the Commission shall assess possible impacts on the competition for selection” and may, “where appropriate”, choose not to fund a project in that subcategory. The inconsistency in the Decision’s description of the Commission’s action in this circumstance and in the circumstance outlined in (2) could lead to manipulation of the project selection process, so NER300.com expects the Commission to use its discretion to take the same action in both cases. However, this provision might not even survive into the Call: some in the Commission have hinted that it will be ignored. Alternatively, it could be made apply to CCS proposals, but not to the RES Group, for which existing Guidelines on State Aid for Environmental Protection lay down measures to take when competition is weak (see NER300.com commentary below).

The slideshow available below illustrates how the project selection process could be made to work. It is easiest to follow with the animations visible and with the notes accompanying the slides to hand.

1. NER300.com’s commentary and recommendation:

   Practically, the only way “technical balance” – the aim to demonstrate a wide range of renewable energy technologies – is recognised in the selection process is through the requirement that, if proposals must be deselected from the RES Group list, the next proposal to be deselected must come from “another category” to the current one. This phrasing could allow the iterative process to keep coming back to a technology with a poor public subsidy-request-per-energy-output ratio, rather than forcing it to cycle through the whole range of categories until a category is again eligible for the deselection of one its subcategories. NER300.com recommends cycling through the whole range of categories otherwise proposals in some categories that are far from the market, like ocean energy technologies, stand very little chance of receiving funding.

   §102 to §104 of the Guidelines on State Aid for Environmental Protection say that with a “clear, transparent and non-discriminatory” competition for funding, a company can receive State Aid amounting to up to 100% of its relevant costs for its renewable energy project, but without such a competition, coverage of relevant costs to between 60-80% is still possible depending on the company’s size. Rather than roll a project over to the next Call if too few proposals are submitted in a particular subcategory, it seems more logical to keep NER300’s rules consistent with the Guidelines and allow the project to receive money subject to the appropriate cap. NER300 can only cover up to 50% of relevant costs. In the current economic climate, governments seem unlikely to provide further investment aid to renewables projects even if they were allowed to.

   The Guidelines, written in 2008, are silent on CCS. Either the rules that apply to renewables should also apply to CCS or the first Call needs to specify that the option of rolling-over to the second Call applies only to CCS projects.

   The Commission might seek to create two groups of proposals, one containing projects that were selected for funding on the basis of a “clear, transparent and non-discriminatory” competition and another group containing those whose selection required the competition’s rules to be bent in some way. This would reduce the time it must spend on clearing proposals for compatibility with the Guidelines (see news story).