PHOTON International The Photovoltaic Magazine

Neither state aid nor trade barrier

The Court of Justice of the European Communities backed Germany's Renewable Energy Law (REL) when it decided in a dispute between two German utilities that guaranteed minimum prices for electricity from renewable energy are not necessarily »prohibited« state aid.

Many in the German electricity world were anxiously awaiting a judgment from the European Court in case C-379/98, between the German utility PreussenElektra (now part of E.on) and its subsidiary Schleswag. On one hand, traditional electric utilities were hoping for an end to the obligation to purchase electricity from renewable energies at guaranteed minimum prices. On the other hand, investors in renewable energy power plants feared that a negative outcome could lead to demands by the utilities for back payment. All became clear on March 13, when the judges ruled in favor of the renewable energy industry. »Finally, we have the legal basis for decisions to invest in new PV factories and systems,« comments Carsten Körnig of the Berlin-based industry lobby group Unternehmensvereinigung Solarwirtschaft (UVS). And for Peter Ahmels, the president of the German wind energy industry lobby Bundesverband Windenergie, the judgment »shows the behavior of the utilities was purely a strategy of intimidation against green electricity producers.«

What was the case? The court of the German state of Schleswig-Holstein, the Landgericht Kiel, sent a lawsuit from PreussenElektra to the European Court of Justice in Oct. 1998. The utility had sued the local electricity distributor Schleswag to recover 500,000 DM ($236,000 USD). This represented part of the money that, in accordance with the German Feed-In Tariff Law, the Stromeinspeisungsgesetz (StrEG), Schleswag had paid to producers of wind turbine-generated electricity and then invoiced to PreussenElektra as the neighboring transmission grid operator. PreussenElektra claimed that this payment contravened European law, since it represented an »amended system of state aid« that should have been but was not reported to the European Commission.

In his summation last October, Francis Jacobs, the European Court's advocate general, said that minimum prices are not state aid within the meaning of Article 92(1) of the European Treaty, which says that any aid granted through state resources in a form which distorts or threatens to distort competition by favoring certain undertakings or products insofar as it affects trade between member states is prohibited. But he did raise the question of whether such regulations are compatible with Article 30, which prohibits all national measures hindering imports from other Community member states (see PI 11/2000, p. 16).

So the first reaction of the wind and solar industries after Jacobs' statement was one of relief, tempered with some nagging uncertainty. From the perspective of the large utilities, a last hope for victory remained in the battle over Europe's most successful funding model for renewable energies. »The German electricity suppliers expect final clarification of legal matters concerning federal funding of renewable energies,« stated the web site of the German association of electricity companies, Verband der Elektrizitätswerke (VDEW), on Oct. 26. It also pointed out that the Court is not required to heed the advice of its advocate general.

Indeed, the judges didn't follow advocate general Jacobs in everything, but not in the way VDEW had hoped for. In its judgment, the Court not only refused to classify the StrEG as state aid, but also was unable to find any reason to categorize it as an illegal intervention restricting trade between the member states.

The Court explained that only those advantages granted directly or indirectly through state resources are to be considered state aid. But neither the legal obligation imposed on private electricity suppliers to purchase electricity in accordance with the StrEG, nor the financial burden for private electricity suppliers and the operators of upstream transmission grids, constitutes a transfer of state resources. Even the fact that this purchase obligation is imposed by law and confers an undeniable advantage on certain undertakings is not capable of conferring upon it the character of state aid in the meaning of the Treaty. »The current rules in the electricity market do not preclude German legislation which imposes an obligation to purchase electricity produced from renewable energy sources,« says a Court press release. Consequently, the Renewable Energy Law (REL), which succeeded the StrEG in April 2000, is not state aid either.

With regard to the subject of limiting trade between the member countries, the Court declared that a national rule for higher feed-in tariffs for renewable energies is indeed »capable, at least potentially, of hindering intra-Community trade.« However – and this is really remarkable – the Court, in its judgment, then referred to the Kyoto protocol and a number of Treaty articles underlining the fact that environmental issues are priority objectives of the European Community. Consequently, this goal has a higher value than unhindered trade. So the StrEG, which aims to protect the environment by contributing to the reduction of greenhouse gases, does not contravene the free movement of goods in the current reading of Community law.

This judgment could affect other European countries as well. »The decision of the European Court immediately and effectively removes many of the fears that some other member states have expressed about introducing such schemes,« says Murray Cameron, chief executive of the European Photovoltaic Industry Association (EPIA). He adds that the »current expansion of the PV market can only be sustained if other European markets outside Germany are stimulated through the highly successful premium feed-in tariff concept.«

The full judgement can be found at
www.curia.eu.int/en/jurisp/index.htm.
Click on »Recent case-law of the Court of Justice
and of the Court of First Instance« and enter
case No. C-379/98 as the search option.