Contracts for difference: 70 million euros for Flemish companies investing in the reduction of carbon emmissions
The pilot call transitiecontract klimaatsprong 2024 aims to reduce CO2 emissions in Flanders, through investments in certain types of large-scale electric boilers and heat pumps.
This support instrument differs from conventional subsidy provision on a number of points:
- it is possible to also support operational costs (OPEX) during a number of project years;
- there is partial risk coverage during the term of the agreement, this should make it easier to find investment capital;
- the call is launched in the form of an auction procedure. Companies can bid per ton of CO2 emissions avoided. Projects requesting the least support (lowest application amounts) for the reduction of CO2 emissions are given priority.
The allocation of funds awarded from the auction is based on the concept of two-sided “contracts for difference” (CfDs). With this, Flanders wants to encourage large companies to invest more quickly in technologies that reduce CO2 emissions. In this system, support is given over several years and linked to the evolution of certain economic parameters.
For the current call, the economic parameters are the prices of electricity and natural gas and the cost of emission rights. The level of support is adjusted annually to developments in the energy and emissions market, allowing the scheme to remain flexible and responsive to changes in market conditions. In other words, if net revenues from the project increase, the support paid to the project decreases and vice versa. The investments can, under certain conditions, also be carried out by a third party.
In this pilot call, the support is granted for a support period of 10 years. This provides investors with long-term security and encourages the long-term development of renewable energy projects.