Focus: European Court of Justice (ECJ) and Conseil d’Etat judge on French wind energy support scheme – side glance at the current situation in Germany

With its judgment of December 19, 2013, the European Court of Justice (ECJ) decided in a preliminary ruling procedure that “a mechanism for offsetting in full the additional costs imposed on undertakings because of an obligation to purchase wind-generated electricity at a price higher than the market price that is financed by all final consumers of electricity in the national territory, […] constitutes an intervention through State resources” (Rs. C-262/12). The dispute in the main proceedings was about the French support scheme for wind energy.

Background of the ECJ decision
In order to promote the development of renewable energies, the French government has put in place two support mechanisms:

  • A guaranteed purchase tariff mechanism [article L.314-1 of the French Energy Code (Code de l’Energie)] according to which the traditional historical operator, Electricité de France, has the duty to conclude a power purchase contract with every renewable energy producer that operates a plant meeting certain requirements depending on the renewable energy contemplated; in this case the purchase tariff is determined by ministerial orders.
  • A tendering procedure mechanism in which the amount of renewable energy produced is determined ex ante; operators are then chosen depending on the purchase tariff proposed by the candidates. 

The French government chose to apply the guaranteed purchase tariff mechanism to all the on-shore wind projects. Several ministerial orders have been passed in order to determine the applicable tariff.

The determined guaranteed purchase tariff is indeed higher than the market price and the additional costs arising from the obligation to purchase are compensated by charges payable by the final electricity consumers living in France. A specific tax has been put in place in order to fund this mechanism.

The Ministerial Order of November 17, 2008 (modified by the Ministerial Order of December 23, 2008) relating to the purchase conditions for energy from wind plants has been challenged by the community of interest “Association Vent De Colére! Fédération nationale” before the Conseil d’Etat (Supreme Administrative Court in France) on the ground that the regulations of this order are an unlawfully granted State aid, as—although this would have been required—they were not notified as such to the European Commission.

Decision of the Conseil d’Etat

On May 15, 2012 the Conseil d’Etat stated (judgment “Association Vent de Colére!”, no 32452) that the Ministerial Order of 2008 fulfills three of the first four criteria making up the test to determine whether a measure is state-aid or not. These four criteria are as follows:

  • The intervention has to give the recipient an advantage;
  • competition has been or may be distorted;
  • the intervention is likely to affect trade between Member States;
  • it should be an intervention by the State or through State resources.

The legal consequence of the (cumulative) fulfillment of these four criteria and thus their definition as state-aid is that it must be notified with the European Commission. To have the state-aid be considered as legal it must be confirmed by the EU Commission in the end of the proceedings.

As far as the fourth criterion was concerned, the Conseil d’Etat required a preliminary ruling under article 267 TFEU by the ECJ in order to decide whether the mechanism must be regarded as an intervention by the State or through State resources.

Decision of the ECJ
In answer to such decision the ECJ ruled that the French mechanism for offsetting the additional costs arising from the obligation to purchase the wind electricity falls within the concept of an intervention by the State through State resources. The Court has recalled that advantages are considered aids if:

  • first, the mechanism is attributable to the State and,
  • secondly, if they have been granted directly or indirectly through State resources.

Firstly, the Court has found that the mechanism was attributable to the French State since it was established by legislation.

Secondly, it constitutes an advantage granted through State resources. The amount paid by final consumers of electricity, managed and forwarded to the providers by the Caisse des depôts et consignations, which is a public entity, must indeed be regarded as remaining under public control. Moreover, the charge imposed on each final consumer is set annually by a ministerial order. As the Court has previously stated, funds financed through compulsory charges imposed by national legislation and managed in accordance with the provisions of that legislation, may be regarded as State resources.

Final Decision of the Conseil d’Etat

Finally, on May 28, 2014 the Conseil d’Etat issued its final ruling and cancelled the 2008 Ministerial Order, as it constitutes a non-authorized State aid, since the Ministerial Order had not been notified to the European Commission.

However, the Conseil d’Etat does not settle the consequences of the cancellation of the Ministerial Order; whereas it could have pronounced the recovery of the interests that the beneficiary would have paid if he had borrowed the matching amount on the market (ECJ, February 12, 2008, CELF I, C-199/06).

Nevertheless, it appears that no one requested the Conseil d’Etat draw the necessary conclusions from the cancellation, even if the Rapporteur public advised to do so.

Outlook and Situation in Germany

The French government is aware of the existing difficulties with regard to the order of 2008 and has notified the European Commission of a new regulation for the promotion of wind energy which shall apply after the end of 2013.

Subsequently, the European Commission issued a decision on March 27, 2014 stating a state aid, which is, however, in line with EU state aid rules.

The decision of the ECJ raised considerable attention in Germany as well. There are different opinions on whether this decision is applicable to the German law on renewable energies (“EEG”). These diverging opinions even extend to the investigation procedure on state-aid initiated by the European Commission against Germany. In the indictment of this procedure the commission quotes among others the said ECJ decision. So far, after the “Preussen-Elektra” decision was taken (RS C-379/98) in 2001, there more or less was a consensus in Germany that the support mechanism of the EEG does not have to be considered as state-aid in the sense of European law, since there are no direct or indirect public funds. Notwithstanding this, the urgent applications submitted by seven German companies of the steel and forge industry to the ECJ—challenging the investigation procedure on state-aid of the European Commission—were not successful in the first instance (Rs. T-172/14 R u.a.).

A significant difference between the French and the German model is likely the following: in Germany only private energy providers are under the obligation to purchase renewable energy, and therefore such obligation cannot be considered as an intervention by the state by providing public funds, since public money is not transferred at any time. Beyond that, the state does not assign the administration of public funds to private providers; on the contrary, they are only obliged to purchase by using their own financial means. Consequently, the relevant financial means cannot be considered as public funds since they are at no time controlled by the state. The German mechanism therefore is no state-aid. Conversely, the EJC is right in its result that the French regulation is state-aid and consequently would have had to be notified by the European Commission.

For the EEG 2014, which entered into force on August 1, 2014, it is assumed that since it was agreed upon with the European Commission, it is in line with European law. This also becomes evident by the resolution of the commission dated July 23, 2014 which, however, stills excludes the special regulation on compensation for rail operators. A relevant decision of the commission on that issue is expected for late summer. As a matter of fact after the turning point of the “Vent de Colére” decision there are hints from jurisdiction indicating that the promotion of renewable energies in compliance with the EEG—at least on legal grounds in its version now modified—is generally not in danger. The EJC has e.g. decided in its resolution Rs. C-573/12 that the member states are not obliged to promote the generation of renewable energies in EU countries other than their own; merely national promotion mechanisms are thus in general in compliance with European law. An adverse decision— which following the arguments of the Advocate General of the EJC could have been possible— would most probably have had considerable consequences for the EEG.