The European Court of Justice (ECJ) confirmed earlier this month that it will undertake a formal review as to the legality, under the current EU State aid rule, of a 2008 French law under which the additional cost which non nationalised distributors and Electricité France incur in purchasing energy produced through wind power are recovered.
The key element of the new law, which resulted in the referral of the matter to the ECJ and the ECJ agreeing to formally review it, is the basis on which the extra costs incurred are recovered. Prior to the 2008 law, costs incurred by French distributors through the obligation to purchase wind power at a price set by the French Government were paid out from a specific fund made up of contributions by energy distributors and producers. The position was, however, changed by the 2000 law which provides that the extra costs are paid for by consumers based on their energy consumption.
The question of the legality of this law was originally raised on the grounds that it would provide wind power developers with an undue advantage and thus should be regarded as State aid (with the inference that any such State aid should be deemed to be incompatible with the Treaty on the Functioning of the European Union and thus unlawful). Whilst the presence of an selective advantage is one of the criteria for State aid (a set out in Article 107(1) of the Treaty on the Functioning of the European Union) is not the only criteria, with a measure only amount to State aid if all the criteria are met. Therefore, the mere presence of an advantage does not mean the measure will always be deemed to amount to a State aid.
The ECJ applied this principle in its Preussenelektra judgment (which related to a German scheme which obliged generators to pay premium prices for electricity from renewables, and to share the cost of doing so amongst themselves) where it stated that:
“Not all advantages created by a State constitute aid. Only aid granted directly or indirectly through State resources constitutes aid within the meaning of the Treaty. The Court considers that neither the statutory obligation introduced by the German rules, nor the allocation of financial burden between private supplier undertakings and private operators of upstream electricity networks involves a direct or indirect transfer of State resources.”
The ECJ review is therefore likely to focus on whether the transfer of the burden onto end users by way of the 2008 law changes this position and as a result can be regarded as involving the direct or indirect use of State resources.
An industry source has indicated that the referral to the ECJ is likely to cause uncertainty within what was seen as a very stable market for renewables and this may well impact on investment plans going forward.