Just how far does EU law permit a Member State to go in designing a renewable support scheme which favours domestic renewable generators over imported ‘green’ power?

An indication of the answer to that question emerged on 8 May from the European Court of Justice in an opinion (currently unavailable in English) of the Advocate General in ‘Essent Belgium NV v. VREG’ (Joined Cases C-204/12 to C-208/12).

Background

Under the law of the Flemish Region of Belgium, suppliers of electricity to final customers connected to the distribution network or the transmission network were required to submit a certain number of ‘green certificates’ annually to the Regulatory Authority (the Vlaamse Reguleringsinstantie voor de Elektriciteits- en Gasmarkt (VREG)). Under the regime operated by the VREG, only green certificates in respect of electricity generated in the Flemish Region were taken into account when ascertaining whether the quota obligation was fulfilled. Suppliers were not entitled to demonstrate compliance with their quota obligations by submitting ‘guarantees of origin’ in respect of electricity generated in other Member States or other EEA States

Nonetheless, in order to comply with its quota obligations during the period from 2005 to 2009 Essent Belgium (a Flemish electricity supplier) chose to submit to the VREG not only ‘green certificates’ in respect of renewable electricity generated in the Flemish Region, but also ‘guarantees of origin’ in respect of renewable electricity generated in the Netherlands, Denmark and Norway. Consequently, Essent was fined by the VREG for failing to comply with its quota obligations. It applied to the Belgian court for review of the fining decision.

The Belgian court referred to the European Court a number of questions concerning the compatibility of the VREG regime with EU law and, in particular, with the provisions of the Treaty on the Functioning of the European Union concerning free movement of goods (Article 34 TFEU), equal treatment and non-discrimination and the requirements of the Directives on promotion of renewable electricity (Directive 2001/77/EC) and on the internal electricity market (Directive 2003/54/EC). The court also referred similar questions concerning the analogous provisions of the EEA Agreement.

The AG’s Opinion

In his opinion of 8 May 2013 the Advocate General (Bot) found that there was nothing in Directive 2001/77/EC that required the Flemish Region to assimilate the ‘guarantees of origin’ regime established under the Directive with its own ‘green certificates’ regime. The Advocate General recalled, however, that in the absence of harmonisation of national support schemes under the Directive, those schemes nonetheless had to respect the Treaty rules on free movement of goods. In that context, the Flemish scheme clearly had the effect of distorting competition between the producers of renewable electricity (treated as goods for Treaty purposes) in the Flemish Region versus those in other Member States.

The Advocate General was not persuaded that the discriminatory treatment of renewable electricity from other Member States under the Flemish scheme could be justified either on environmental protection or security of supply grounds. Looking at environmental protection first of all, the AG took the view that renewable electricity produced outside the Flemish Region could be said to contribute to the reduction in greenhouse gas emissions in the Flemish Region in the same proportion to that produced within the Flemish Region. He also dismissed the suggestion (employed previously in a waste context) that the principle of tackling environmental damage at source would apply in this context. Turning to security of supply, the AG was not persuaded that the promotion of domestic renewable electricity production could be said to promote any greater security than the development of greater interconnection between national networks. At the same time, the AG pointed out that the Commission itself had recognised the possibility for Member States to account for achievement of national renewable targets via imports with the agreement of the authorities in exporting states and with suitable arrangements in place to avoid double counting.

On this basis, the Advocate General’s opinion was that the Flemish scheme was incompatible with the Treaty requirements on free movement of goods.