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Update Energy Law: E-mobility

Baker McKenzie

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European Union, Germany September 8 2020

The third part of our Client Briefing takes a look at the developments in the

field of e-mobility, which is an essential pillar of the EU’s and Germany’s

strategy to address the climate change.

Despite the important role of e-mobility, the legislators do not consider themselves

to be in a position to force the phase-out of "petrol/diesel" directly. Instead, the

transition shall result from the automotive industry's incentives and the customers'

buying intention. In order to promote this, a large number of accompanying

measures have been launched, such as financial incentives to buy, obligations to

develop a nationwide charging infrastructure and improvements to the role of

charging point operators. In Germany, for example, the target is to register seven to

ten million electric vehicles by 2030.1

A uniform definition for "electric vehicles" does not yet exist. At European level, for

example, it is stated that an "electric vehicle" is "a motor vehicle equipped with a

powertrain containing at least one non-peripheral electric machine as energy

converter with an electric rechargeable energy storage system, which can be

recharged externally"2; whereas at national level it is stated that an "electrically

powered vehicle" is a "pure battery electric vehicle, an externally chargeable hybrid

electric vehicle or a fuel cell vehicle".3

1. European regulatory framework

There is no strict regulatory framework for e-mobility on EU level. Instead, various

regulations were adopted in recent years, among others dealing with "targets",

"battery storage", "charging infrastructure" and "support programs". The most

important rules and regulations are summarized below:

Regulation (EU) No 1316/2013 established the Connecting Europe Facility. The

facility aims to support the conditions, methods and procedures for providing

financial assistance to, inter alia, projects of common interest in the field of transport

and energy infrastructures. An amendment to the facility shall, among other things,

pave the way at achieving near-zero-emission mobility. It was initiated in 2018, but

is still in the legislative process and might enter into force on 1 January 2021.4 The

facility plays an important role in the context of post-Corona measures (see point 2.).

1 Federal Government: Climate Protection Programme 2030 of the Federal Government to implement the Climate Protection Plan 2050, 2020, p. 76. 2 Art. 2 Nr. 2 Directive 2014/94/EU, other than that, for example Art. 3 Nr. 33 Regulation (EU) No 168/2013 for "Hybrid electric vehicles". 3 Art. 2 para. 1 Electric Mobility Act (Elektromobilitätsgesetz). 4 See on the state of proceedings: https://eur-lex.europa.eu/procedure/EN/2018_228.

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Directive 2014/94/EU of 22 October 2014 on the Deployment of Alternative Fuels

Infrastructure contains minimum requirements, covering inter alia (i) the

establishment of charging infrastructure for electric vehicles, targets in relation to the

number of charging points and their technical standard, (ii) the relationship between

charging point operator / customer or charging point operator / distribution system

operator, and (iii) requirements for user information.5 The directive is relevant for the

set-up of the charging infrastructure in national law.

As early as 2015, measure no 7 of the SET-Plan6 described how the EU can become

globally competitive in the battery sector with the aim to promote e-mobility. The

opening up of the world market for battery technology continues to be a focus at

European and German level.

In 2016, the EU Commission issued a communication titled a European Strategy

for Low-Emission Mobility7, which sets the goal of reducing transport-related

greenhouse gas emissions by at least 60% compared to 1990 by the middle of the

century and moving towards zero emissions. 8 In the field of e-mobility, it envisaged

to eliminate "barriers to charging of electric vehicles across the EU", "foster the

creation of an EU-wide e-mobility services market" and "facilitate the integration of

e-mobility, by encouraging charging at times of cheap electricity when demand is low

or supply is high".9

Pursuant to Art. 1 of the Renewable Energies Directive (RED II) 10 of 2018, RED II

aims to prescribe rules for the use of energy from renewable sources in the transport

sector. However, only Art. 25 provides specific guidelines: each Member State must

commit fuel suppliers to ensure that the share of renewable energy in final energy

consumption in the transport sector is at least 14% by 2030 (minimum share). This

is based on an indicative target path set by each Member State.

The Buildings Directive11 of 2018 names requirements to establish or ease the

supply with charging points. In addition, by January 1, 2023 the EU Commission

needs (i) to report to the European Parliament and the Council on the possible

contribution of the EU's buildings policy to the promotion of e-mobility and (ii) to

propose respective measures.

The 2019 Internal Electricity Market Directive12 sets out requirements for the

integration of e-mobility into the power grid in Art. 33. According to that, Member

States have to provide a regulatory framework to connect publicly accessible and

private charging points to the distribution network. Within this scope, the distribution

system operators are required to cooperate in a non-discriminatory manner with

undertakings that own or develop, manage or operate charging points for electric

vehicles. Distribution system operators are generally not allowed to own charging

5 Directive 2014/94/EU of 22 October 2014 on the deployment of alternative fuels infrastructure, Art. 1. 6 EU Commission: Accelerating the transformation of the European energy system through an integrated Strategic Energy Technology Plan (SET-Plan), COM(2015) 6317 final, 2015. 7 EU Commission: A European strategy for low-emission mobility, COM(2016) 501 final. 8 EU Commission: A European strategy for low-emission mobility, COM(2016) 501 final, p. 2. 9 EU Commission: A European strategy for low-emission mobility, COM(2016) 501 final, p. 7 und p. 11. 10 Directive 2018/2001/EU of 11 October 2018 on the promotion of the use of energy from renewable sources. 11 Directive (EU) 2018/844 of 30 May 2018 amending Directive 2010/31/EU on the energy performance of buildings and Directive 2012/27/EU on energy efficiency. 12 Directive (EU) 2019/944 of 5 June 2019 on common rules for the internal market for electricity and amending Directive 2012/27/EU. For implementation in Germany, see Part 4 below.

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points for electric vehicles or to develop these charging points themselves. However,

revocable exceptions to this prohibition apply if certain conditions are met.

Finally, the Green Deal13 provides, among other things, that (i) the EU Commission,

in addition to national measures, shall support the establishment of public charging

stations where coverage gaps exist (especially long-distance traffic and sparsely

populated areas), (ii) the introduction of emission-free and low-emission vehicles

shall be accelerated, and (iii) stricter limits for air pollutant emissions from vehicles

with combustion engines shall be proposed, possibly combined with the application

of European emissions trading to road traffic.

In addition, EU-wide Fleet Targets intend to increase the share of electric vehicles

in the market. Regulation (EU) 2019/631 sets a target of 95g CO2/km for new

passenger cars in 2020 and aims to reduce the average emissions of the fleet by

37.5% by 2030 compared to 2021. The exact caps are determined separately for

each car manufacturer and can only be met by increasing sales of electric vehicles.

The system is based on an emission value of 0g CO2/km for electric vehicles, which

means that the average emissions of the car manufacturer's fleet as a whole can be

significantly reduced by adding electric vehicles. In addition, electric vehicles receive

so-called "Super Credits". For example, an electric vehicle is counted as two vehicles

with combustion engine in 2020, as 1.67 vehicles with combustion engine in 2021

and as 1.33 vehicles with combustion engine in 2022. If the car manufacturer

exceeds the agreed caps, it must pay a so called excess emissions premium per

gram and vehicle. This payment shall provide incentives to sell electric vehicles.

2. Adaptation of the European regulatory framework

The EU Commission's communication Europe's Moment 14 takes into account the

"key role" of the transportation sector for value chains and economies. In order to

create jobs, the production and use of sustainable vehicles and alternative fuels

should be promoted. "Connecting Europe", "InvestEU" and other funds are built up

to co-finance the creation of one million charging points, help cities and businesses

to renew their fleets with clean vehicles, promote the development of sustainable

transport infrastructure and facilitate the transition to clean urban mobility.15 In

addition, under the Action Plan for Critical Raw Materials, markets for e-mobility

and batteries, among other things, should be strengthened to prevent dependence

on non-energy raw materials.16 However, the documents do neither provide any

details on the aforementioned topics nor on their implementation.

3. The national regulatory framework

The transport sector accounts for almost 30% of the national final energy

consumption, 90% of which comes from oil in the form of petrol or diesel.

Greenhouse gas emissions from this sector account for 19% of total emissions in

Germany.17 Against this background, the Federal Government took measures to

promote e-mobility in Germany already by the National Development Plan E-

13 EU Commission: The European Green Deal, COM(2019) 640 final, p. 13. 14European Commission, Europe's moment: Repair and Prepare for the Next Generation, COM(2020) 456 final. 15 EU Commission: The European Green Deal, COM(2019) 640 final, p. 10. 16 EU Commission: The European Green Deal, COM(2019) 640 final, p. 17. 17 Federal Government: Climate Protection Programme 2030 of the Federal Government to implement the Climate Protection Plan 2050, 2020, p. 61.

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mobility in 2009. Germany aims to become the leading provider and lead market for

e-mobility.18 However, the regulatory framework at national level is very fragmented.

a. Implementation of European requirements

First of all, EU Member States were obliged to transpose the provisions of the

Directive on the Deployment of Alternative Fuels Infrastructure19 into national

law by 18 November 2016. According to Art. 4 para. 10 of the directive, Member

States must ensure that the prices charged by operators of publicly accessible

charging points are proportionate, easily and clearly comparable, transparent and

non-discriminatory. Germany has only partially fulfilled this obligation, in particular

because the price regulation was not implemented when passing the Charging

Point Ordinance (Ladesäulenverordnung – LSV). As a result, proceedings against

Germany led by the EU Commission are ongoing.

In addition, according to Annex I of the Regulation on Binding Annual

Greenhouse Gas Emission Reductions20, there is an obligation to reduce CO2

emissions in the sectors not covered by emissions trading (such as transport) by

38% by 2030 compared to 2005. In excess of this target, Germany has set itself the

goal of reducing CO2 emissions from the transport sector by 40% to 42% by 2030

compared to 1990 in its Climate Protection Plan 2050 and has already implemented

various measures to achieve this. 21

b. Further regulations

The E-mobility Act (Elektromobilitätsgesetz – EmoG), launched in 2015, contains

measures to give electric vehicles priority in road traffic. It defines, amongst others

"electrically powered vehicles" and implements privileges (e.g. for preferred parking

and reduced parking fees). The financial incentive system (e.g. purchase premiums,

advantages in company car taxation, special depreciation and other measures) is

based, inter alia, on the German Act on further Tax Incentives for E-mobility and

Amendments to other Tax Regulations (Gesetz zur weiteren steuerlichen

Förderung der Elektromobilität und zur Änderung weiterer steuerlicher Vorschriften)

as of December 2019 and on regulations on the level of the federal states,

municipalities and cities.

Another focus of the legislator was the classification of charging point operators.

as final consumers and not as electricity suppliers in the German Energy Industry

Act. As a result, for example, certain notification obligations and requirements for

invoicing are not applicable. Classification as a final consumer also applies to the

Electricity Tax Act (Stromsteuergesetz – StromStG) in accordance with section 1a

para 2 of the Electricity Tax Implementing Ordinance (Stromsteuer-

Durchführungsverordnung – StromStV). Therefore, tax regulations for electricity

suppliers do not apply to charging point operators.

18 Federal Government: Climate Protection Programme 2030 of the Federal Government to implement the Climate Protection Plan 2050, 2020, p. 77. 19 Directive 2014/94/EU of the European Parliament and of the Council of 22. October 2014 on the

deployment of alternative fuels infrastructure. 20 Regulation (EU) 2018/842 of 30 May 2018 on Binding Annual Greenhouse Gas Emission Reductions by Member States from 2021 to 2030 contributing to climate action to meet commitments under the

Paris Agreement and amending Regulation (EU) No 525/2013. 21 Federal Government: Climate Protection Programme 2030 of the Federal Government to implement the Climate Protection Plan 2050, 2020, p. 62.

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The aforementioned Charging Point Ordinance on charging point infrastructure is

also aimed at charging point operators and regulates the minimum technical

requirements for the safe and interoperable construction and operation of publicly

accessible charging points as well as other aspects of the operation of charging

points such as access/authentication, use and payment. In addition, laws governing

measurement and calibration have to be considered and regulations of municipal

transport and urban development planning apply to the construction of charging

infrastructure.

To increase investment, the Second National Innovation Program Hydrogen and

Fuel Cell Technology offers financial incentives for research and development

in the field of e-mobility until 2026.

Unresolved questions regarding the installation of charging infrastructure in the

private sector, especially in multi-owner apartment compounds, continue to be an

"obstacle" to expansion. 22 The required adjustments to the German Civil Code

(Bürgerliches Gesetzbuch – BGB) and German Condominium Act

(Wohnungseigentumsgesetz – WEG) have not yet been made.

c. Changes through the Climate Protection Programme 2030

The Federal Government's climate protection program includes numerous measures

to promote e-mobility, in particular:

The quota of motor vehicles with alternative and environmentally friendly

technologies (including battery electric vehicles, fuel cell vehicles, certain externally

rechargeable hybrid electric vehicles and vehicles powered only by biogas) shall be

increased to 40% by 2025 and to 100% by 2030.23 Following the requirement of "Putting low-CO2 passenger cars on the road"24, it is therefore determined that

seven to ten million electric vehicles should be registered in Germany by 2030. In

order to achieve this, it is planned to extend the purchase premium paid by the

Federal Government, to increase promotion for small electric vehicles and to extend

the beneficial tax regime for electricity-powered company cars by 2030.

The introduction of CO2 pricing25 through a national emissions certificate trading

scheme for the heating and transport sectors intends to provide an incentive to

switch from emission-intensive to more climate-friendly technologies and is therefore

highlighted once again in the Climate Protection Program 2030. The CO2 pricing will

start in 2021. The additional revenues from CO2 pricing are to be used for the other

support measures of the Climate Protection Program 2030 or to be returned to the

citizens in the form of e.g. tax reliefs.26

22 A detailed overview contains: Pfeifer/Nowack: Der Rechtsrahmen zur Förderung der Elektromobilität

unter besonderer Berücksichtigung kommunaler Handlungsmöglichkeiten in ZUR 2019, S. 655 ff. 23 Federal Government: Climate Protection Programme 2030 of the Federal Government to implement the Climate Protection Plan 2050, 2020, p. 141. 24 Federal Government: Climate Protection Programme 2030 of the Federal Government to implement the Climate Protection Plan 2050, 2020, p. 76 f. 25 This was introduced at the end of 2019 by the Fuel Emission Trading Act (Brennstoffemissions- handelsgesetz). 26 Federal Government: Climate Protection Programme 2030 of the Federal Government to implement the Climate Protection Plan 2050, 2020, p. 27.

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In the area of tax incentives, measures include a special depreciation for electric

transport vehicles or trade tax relief for the rental and leasing of electric vehicles.

Further, electric vehicles remain exempt from motor vehicle tax.

The planned expansion of charging infrastructure27 provides for the promotion of

commercial and private charging infrastructure in order to establish one million

charging points by 2030. This shall be achieved with the help of subsidy programs

until 2025 and in coordination with car manufacturers and the energy industry. For

example, charging points shall be offered at all gas stations and jointly used charging

infrastructure (multi-family houses, employee parking spaces) will be promoted.

Regulatory measures may be applied. For this purpose, the Federal Government

has published its Master Plan for Charging Infrastructure.

In addition, the Federal Ministry of Transport and Digital Infrastructure (BMVI) will

soon initiate a procurement procedure for the construction and operation of 1000

fast-loading charging points. The procurement procedure marks a shift away from

the allocation of subsidies to companies for the development of charging

infrastructure at economically lucrative locations to a user-oriented, state-

coordinated and state-financed development of charging infrastructure at pre-

selected locations.28

In general, the Federal Government aims to remove legal barriers to the expansion

of electric charging points. This includes, among other things, the accelerated grid

connection of charging infrastructure in the Grid Connection Ordinance

(Niederspannungsanschlussverordnung – NAV), the creation of legal certainty in the

calculation of charges and the controllability/load management of charging

infrastructure for grid-supported charging.29 As power peaks – times when many

electric vehicles are charged simultaneously – change the requirements on the

distribution networks, the Federal Government wants "the distribution system

operators [to] invest in the intelligence and controllability of the grids and expand

their grids with foresight []... so that the distribution grid can also supply the targeted

number of electric vehicles in a high-quality manner".30 In addition, the Federal

Network Agency, as part of the amendment to the Electricity Grid Access Conditions

(Netzzugangsbedignungen), conducted a consultation on the "E-Mob" Grid Usage

Contract for charging points in summer 2020. The contract is intended to enable a

change of the supplier at the charging points in order to stimulate competition.31

27 Federal Government: Climate Protection Programme 2030 of the Federal Government to implement the Climate Protection Plan 2050, 2020, p. 78 f. 28 https://www.bmvi.de/SharedDocs/DE/Pressemitteilungen/2019/100-scheuer-ladeinfrastruktur- kommt.html. 29 Federal Government: Climate Protection Programme 2030 of the Federal Government to implement

the Climate Protection Plan 2050, 2020, p. 79. 30 Climate Protection Plan 2030, p. 19. 31 The consultation version of the "E-Mob" grid usage contract is available at: https://www.bundesnetzagentur.de/DE/Service-Funktionen/Beschlusskammern/1_GZ/BK6- GZ/2020/BK6-20-160/netznutzungsvertrag_e- mob_konsultationsfassung.pdf?__blob=publicationFile&v=1

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4. Adaptation of the national regulatory framework

The Corona Pandemic has not changed the Federal Government's expansion plans.

However, the implementation of the Climate Protection Program 2030 should be

continued and accelerate the structural change in the automotive industry and the

establishment of sustainable value chains.32

A number of individual measures are envisaged in the Corona Key Issue Paper33

for this purpose. These include a stronger orientation of motor vehicle tax towards

CO2 emissions (No. 35a) and doubling the federal premium for the promotion of

environmentally friendly electric vehicles as an innovation premium (No. 35b). In

the commercial sector, fleet exchange programs for social services, craftsmen and

small and medium enterprises are promoted (Nos. 35d and e). A bonus program

for investments favors car manufacturers and suppliers until 2021, research and

development is to be supported with one billion euro (no. 35c). In addition,

investments of 2.5 billion euros are to be made in the expansion of modern and safe

charging point infrastructure, the promotion of research and development in the

field of e-mobility and battery cell production, including additional locations (No. 35f).

Finally, the legislation process for the Building E-mobility Infrastructure Act

(Gebäude-Elektromobilitätsinfrastruktur-Gesetz – GEIG)34 is ongoing. It intends to

create the conditions for accelerating the expansion of the cabling and charging

infrastructure for e-mobility in the building sector and implements the provisions of

the Buildings Directive (see previously under 1. European regulatory framework.

5. Conclusion and outlook

E-mobility is one of the most promising developments at European and national

level. The financial and legislative efforts of the EU and Germany to promote e-

mobility are immense. They offer manufacturers in the battery cell and automotive

industry and the supply industry access to a wide range of funding.

Whether the hoped-for market diffusion of e-vehicles can be achieved in this way will

depend to a large extent on whether the other market barriers - incomplete charging

infrastructure, limited ranges, higher prices compared to vehicles with combustion

engine - can be effectively removed.

32 Coalition committee: Corona-Folgen bekämpfen, Wohlstand sichern, Zukunftsfähigkeit stärken, 3. Juni 2020, Nr. 35. 33 Coalition committee: Corona-Folgen bekämpfen, Wohlstand sichern, Zukunftsfähigkeit stärken, 3. Juni 2020, Nr. 35. 34 Building Electromobility Infrastructure Act (Gebäude-Elektromobilitätsinfrastruktur-Gesetz), see http://dipbt.bundestag.de/extrakt/ba/WP19/2597/259792.html.

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For further information, please contact:

Dr. Claire Dietz-Polte, LL.M. claire.dietz-polte @bakermckenzie.com

Holger Engelkamp, B.Sc., LL.M. holger.engelkamp @bakermckenzie.com

Vivien Vacha vivien.vacha @bakermckenzie.com

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Baker & McKenzie - Partnerschaft von Rechtsanwälten und Steuerberatern mbB is a professional partnership under German law with its registered office in Frankfurt/Main, registered with the Local Court of Frankfurt/Main at PR No. 1602. It is associated with Baker & McKenzie International, a Verein organized under the laws of Switzerland. Members of Baker & McKenzie International are Baker McKenzie law firms around the world. In common with terminology used in professional service organizations, reference to a "partner" means a professional who is a partner, or equivalent, in such a law firm. Similarly, reference to an "office" means an office of any such law firm. © Baker McKenzie

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