The ECJ / Ålands case – Implications for National Renewables Support Systems

04-04-2014


Ålands Case – Open season for renewables supports?

On 28 January 2014, Advocate-General Yves Bot of the European Court of Justice (“ECJ”) published an opinion (the “Opinion”) that strongly advocates the creation of an integrated European market in renewable energy through far wider eligibility for participation in national renewables support schemes. The Opinion, although not binding on the ECJ (ruling awaited as at the date of this note), has re-focused attention on several complex areas of European energy policy; moreover it has triggered debate on the longer term value and use of a common system of renewables supports such as Guarantees of Origin.

Renewable Energy Support Schemes

The Renewable Energy Directive (“RED”) provides that each Member State has to achieve a certain percentage of energy from renewable sources by 2020. Consistent with the wider European Council aspiration to create an internal energy market, Member States are permitted, under Article 3 of the RED, to set up national support schemes for renewables and co-operate with other Member States in meeting the relevant prescribed targets.

To date, national renewable support schemes have been characterised by a diversity in structure, value and regulatory certainty with the result that different jurisdictions have offered significantly different signals to market participants.

Ålands Vindkraft AB v. Energimyndigheten (the “Ålands Case”)

A Finnish company, Ålands Vindkraft, operates wind projects on the Åland Islands. Although located in Finnish waters, the projects are (critically) connected to the Swedish grid. In 2009, Ålands Vindkraft applied for Swedish green certificates, with the Swedish Energy Agency subsequently rejecting the application on the grounds that only electricity generating facilities located within Sweden’s borders are considered eligible for allocation of green electricity certificates.

Ålands Vindkraft appealed the decision to the Swedish courts on the grounds that the Swedish support scheme violated core “free movement of goods” principles and, specifically, the provisions of Article 34 of the Treaty on the Functioning of the European Union (“TFEU”) to the extent that only producers of renewable energy located in Sweden could benefit and imported renewables were otherwise excluded or discriminated against. In December 2012, the Swedish higher courts referred the matter to the ECJ.

AG Bot expressed the view that although the Swedish national renewable energy support scheme complies with the RED, it violates the sanctity of the long established principle of free movement of goods in that Article 3(3) of the RED permits a Member State to deny or restrict access to its national support regime to producers whose plants are situated in other Member States.

In his Opinion AG Bot made several references to a comparable ongoing case (in relation to which he has also issued an important opinion) also awaiting final ECJ judgment; the “Essent Case”. The Essent Case was brought by the Belgian subsidiary of the Dutch utility Essent, which applied for Belgian green certificates for imported wind power but was refused on broadly the same grounds as Ålands Vindkraft. In several key respects, including stating that electricity is a “good” that qualifies for protection under the freedom of movement principle, the Ålands case will be seen as underlining the earlier opinion (May 2013) on the Essent Case.

Restructuring of national support schemes?

Pending an ECJ judgment, it is too early to assess what the full implications of the combined impact of AG Bot’s Ålands and Essent Opinions may be. Their possible significance is not lost on AG Bot who recommends that rather than take retrospective effect, Member States be given up to two years to restructure their support schemes to make them TFEU compatible. AG Bot also refuted any argument that imported renewables can hinder a Member State’s ability to comply with fuel mix disclosures on the basis that RED created the concept of Guarantees of Origin.

If, as seems likely, an ECJ ruling prioritises a move towards a truly integrated energy market, the Guarantee of Origin is the most advanced product available to value and facilitate the cross border trading in renewables. When considered in the context of the implementation of the Target Model the Ålands Case may yet be seen as a forerunner for an established pan-European framework for a common set of supports and a tradable market for renewables supports.

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