The European Court of Justice's judgment in Ålands Vindkraft is good news for the EU renewables sector
On July 1, 2014, the European Court of Justice gave its ruling in the case Ålands Vindkraft (C-573/12)1. The Court confirmed that Member States are able to lawfully limit their renewables support schemes to domestic production pursuant to the Renewables Directive (Directive 2009/28/EC).
The Finnish company Ålands Vindkraft operates wind farms on the Åland Islands. These wind farms, though located on Finnish territory, are connected to the Swedish electricity grid. When Ålands Vindkraft applied for Swedish green electricity certificates to the Swedish authorities in 2009, its application was rejected on the grounds that certificates are only available to green electricity production installations located within Sweden's borders. Ålands Vindkraft subsequently challenged the decision before the Swedish courts, arguing that the Swedish renewables support scheme violated the principle of free movement of goods set out in Art. 34 of the Treaty on the Functioning of the European Union ("TFEU"). The court hearing the action requested the Court of Justice to provide a preliminary ruling on the compatibility of the Swedish scheme with the European Renewable Energy Directive2 and Art. 34 TFEU.
2. The Court's ruling
The Court expressly confirms that national renewable support schemes are justified by the public interest objective of renewable energy promotion and as such can legitimately target national production.
First of all, the Court notes that the Renewable Energy Directive expressly provides that Member States have the right to decide to what extent they support energy from renewable sources produced in other Member States. Support schemes limited to national production are therefore compatible with the Renewable Energy Directive.
The Court goes on to note that the Swedish support scheme is capable of hindering imports of electricity from other Member States and therefore constitutes a restriction of the free movement of goods. However, the Court
1 Please find the press release here. The full text of the ECJ's ruling is available here.
2 Directive 2009/28/EC of the European Parliament and of the Council of 23 April 2009 on the promotion of the use of energy from renewable sources and amending and subsequently repealing Directives 2001/77/EC and 2003/30/EC (OJ 2009 L 140, p. 16).
Renewable Energy Germany
finds that this restriction is justified by the public interest objective of promoting the use of renewable energy sources. In particular, it considers the Swedish support scheme proportional. It therefore comes to the result that the Swedish support scheme is also compatible with the principle of free movement of goods.
The Court did not follow the Advocate General, who had held the limitation of national renewables support schemes to domestic production violated EU law and suggested that Member States should open their schemes up to EU imports of renewables within a period of two years.
3. Implications, in particular for the current reform of the German Renewable Energy Sources Act
This judgment should reassure renewables producers, investors and Member States alike that national renewables support schemes are not under threat of needing to be opened for green electricity produced in other Member States, which would have strained budgets and thus would have required a reduction of support levels across the board for budgetary reasons.
However, the judgment expressly only deals with the compatibility of renewables support and does not address potential conflicts of the respective financing mechanisms with EU principles. This is particularly relevant for Germany. The European Commission has voiced its opinion that the German financing mechanism, under which transmission network operators may charge a surcharge from electricity suppliers for each kilowatt of electricity supplied to final consumers regardless of the electricity's origin, could potentially constitute a measure having an effect equivalent to customs duties (Art. 30 TFEU) or a discriminatory taxation (Art. 110 TFEU).3 The Commission points to the fact that the surcharges must be paid for both electricity produced in Germany and imported electricity, whereas the benefits financed by the surcharges are only available to national electricity producers. Likewise, the Court's judgment does not address the compatibility of renewables support schemes with European State aid principles, another contentious point between the European Commission and the German government.
Therefore, while the judgment is good news, it does not resolve all issues relating to the compatibility of national support schemes with European law. The much-needed clarity for renewable electricity producers and investors in this respect is still out of reach.
3 Please find the Commission's press statement of 26 June 2014 here.
For further information, please contact:
Prof. Dr. Joachim Scherer, LL.M.
Dr. Janet Kerstin Butler
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