In a ruling handed down on 29 September, the CJEU (Second Chamber), declining to follow the opinion of the Advocate General (Bot), declared a Belgian scheme for the support of green electricity to be unlawful because it discriminated unfairly against green power producers in other Member States.
The scheme, operating in the Flanders Region, is designed to promote the production of green electricity in the Region by exempting from distribution network charges those electricity suppliers who feed-in electricity produced by generators connected to the Flemish distribution network, but not those who feed-in electricity produced elsewhere. Essent Belgium, the applicant in the these proceedings, supplies customers in the Flanders Region which it imports mainly from the Netherlands and which, it claims, is green electricity. Essent raised proceedings to challenge the compatibility of the Flemish regime with EU law.
The Court (and Advocate General) both agreed that the fundamental EU law question at issue was whether the decision of the Flemish authorities to restrict the exemption to Flemish electricity producers was consistent with the principle of proportionality. Both the Court and the AG noted that such a difference in treatment is in principle capable of amounting to a barrier to inter-state trade and that previous rulings (such as Ålands vindkraft) have accepted that the setting of EU targets for the production of green electricity at the Member State level entitles Member States to justify measures which are designed to encourage the growth in domestic green electricity production.
However, where the Court and AG differed was in the legitimacy of such a distinction in circumstances (such as the present case) where the national support scheme did not directly benefit electricity generators, but only indirectly benefited them.
According to the AG, the Flemish measures, "seem appropriate for ensuring attainment of the objective pursued in so far as, by eliminating the cost of distribution, they encourage suppliers to increase the proportion of green energy in their energy package and therefore contribute, albeit indirectly, to increasing demand by concomitantly encouraging increased use of renewable energy sources in the production of electricity" (paragraph 95).
The Court was not, however, convinced. As it put it, "such a support mechanism offers no certainty that the economic advantage thus obtained for suppliers will ultimately actually and essentially be required to benefit producers of green electricity, particularly the smallest local generating installations which the Flemish Region claims to have wanted to support, which are not both producers and suppliers" (paragraph 113). Indeed, according to the Court, "The benefit that such green electricity producers may derive from that economic advantage will depend on various factors specific to the markets, such as, for example, electricity prices on the market, supply and demand, or the balance of power between the operators involved and the extent to which suppliers will be prepared to allow producers to benefit from that advantage" (paragraph 114).
Thus, the Court held, "In view of what is thus the indirect, uncertain and risky nature of any support that might flow for the green electricity producer himself from the free distribution scheme at issue in the main proceedings, it must be concluded that the genuine ability of that scheme to achieve the legitimate objective pursued in the present case" had not been established (paragraph 115).