The European Commission has given the green light to a €3.1 billion Spanish state aid scheme aimed at ramping up electricity production from highly efficient combined heat and power (CHP)
plants. The decision clears the way for Spain to strengthen energy efficiency, cut emissions and support industrial competitiveness, in line with both EU climate goals and Spain’s own National Energy and Climate Plan.
What the Spanish scheme covers
Spain notified the Commission of its plan to support new and substantially refurbished high-efficiency cogeneration installations across the country. The scheme will run for 10 years and has a total budget of €3.1 billion.
Financial support will be available to operators of CHP plants that meet the EU definition of high-efficiency cogeneration under the Energy Efficiency Directive. Eligible projects include installations powered by natural gas, bioliquids, biogas and solid biomass.
To prevent long-term dependence on fossil fuels, projects using natural gas must be technically equipped to run on at least 10% renewable hydrogen by volume. This requirement is designed to avoid locking Spain’s energy system into natural gas over the long term.
How the aid will work
The aid will be granted through a remuneration premium with two distinct components:
- ‘Investment support’, awarded through open and competitive auctions to ensure transparency and cost efficiency.
- ‘Operational support’, calculated using a clear methodology and updated quarterly to reflect market conditions such as electricity prices, fuel costs and CO₂prices.
This structure is intended to provide certainty for investors while ensuring public funding remains proportionate and responsive to market developments.
Commission’s assessment
The Commission assessed the scheme under EU state aid rules, notably Article 107(3)(c) of the Treaty on the Functioning of the EU and the 2022 Guidelines on State aid for climate, environmental protection and energy.
Its conclusion was clear: the measure meets all the necessary conditions for approval.
According to the Commission, the scheme:
- Supports a legitimate economic activity — the production of electricity;
- Has a genuine incentive effect, as many projects would not go ahead without public support;
- Is necessary and appropriate to improve energy efficiency and accelerate the green transition;
- Is proportionate, with investment aid awarded via competitive tenders and operational aid closely monitored and adjusted;
- Delivers benefits that outweigh any potential distortions to competition or trade within the EU.
In particular, the Commission highlighted the scheme’s contribution to decarbonisation and industrial efficiency, aligning it with the EU’s Clean Industrial Deal and broader climate strategy.
Why it matters
Cogeneration technology allows the simultaneous production of electricity and useful heat, significantly reducing energy losses compared to conventional power generation. By supporting high-efficiency CHP, Spain aims to cut emissions, lower energy costs for industry and make better use of fuel resources during the transition to cleaner energy.
Broader EU context
The approval fits into a wider EU policy framework. The 2022 State aid Guidelines give Member States greater flexibility to support climate and energy measures in a targeted and cost-effective way. They are aligned with the European Green Deal, the revised Energy Efficiency Directive and the EU’s long-term climate objectives.
Under the updated Energy Efficiency Directive, the EU has set a binding target to reduce final energy consumption by 11.7% by 2030. This comes alongside the legally binding goal of climate neutrality by 2050 and an intermediate target of cutting greenhouse gas emissions by at least 55% by 2030.
Against this backdrop, the Commission’s approval of Spain’s cogeneration support scheme marks another step in turning Europe’s climate ambitions into concrete investments on the ground.