When does a renewable energy charges scheme constitute prohibited state aid?


Renewable energy is currently one of the most important topics in the European Union. Estonia is quite successful with respect to renewable energy, fulfilling the goals set. Other countries are also making contributions into renewable energy. For example, the aim of Germany is to supply as much as 80%[1] of electric energy from renewable sources by 2050. In the legal world, there have been many disputes over whether and when does supporting renewable energy constitute prohibited state aid. The EU General Court has recently passed an important judgement in the case T-47/15 Germany vs the Commission, explaining why and when does a renewable energy scheme constitute prohibited state aid.

The support scheme under dispute

In the General Court judgement T-47/15, one of the disputed issues was a support payment called the “renewable energy premium”. The German renewable energy act enforces a scheme, based on which distribution network operators shall, first, buy renewable energy and pay charges and a market premium to renewable energy producers. This is compensated for by the transmission network operator by payment of a fee to the distribution network operator, which is equal to the charges and the market premium paid. Transmission network operators shall market the energy accepted into their network on electricity exchange. If the price received in this manner fails to allow the transmission network operator to cover all the financial expenses incurred, the operator may request the suppliers providing electricity to the end customer to cover the price difference based on the sales volumes. Thus, for the purposes of the German law, the “renewable energy premium” is a support payment paid to transmission network operators in order to compensate for performance of their obligations arising from the law.

The activity of the transmission network operator is comparable with executing a concession issued by the state

In the case in question, the General Court found that the state has created a system, in which the expenses of the transmission network operators are fully covered from the renewable energy premium and the undertakings supplying electricity have the authority to transfer the renewable energy premium to the end customer. The amounts received from the renewable energy premium are thus tax-like financial resources, for which availability of state resources is required.

Thereat, the General Court explained why they reached a different decision in this case compared to the significant judgement passed in case no. C-379/98 PreussenElektra in 2001. In the case of PreussenElektra, transmission network undertakings were also under the obligation arising from the law to purchase renewable energy, but they had to use their own financial resources to perform the obligation. In this case, on the other hand, the obligation to pay a premium to renewable energy producers is not performed by using the undertaking’s own funds, but by using the funds received from the renewable energy premium, which is managed by the transmission network undertakings and exclusively used for financing the support and compensation plan implemented with the renewable energy act of 2012.

What to learn from the case?

  • In a situation where the transmission network operator has been, based on the act governing the renewable energy charges, basically appointed the entity in charge of the renewable energy charge, the operator is comparable to a body executing a concession issued by the state.
  • This is a case of a state-prescribed mechanism for compensation of the expenses arising from purchasing renewable energy.
  • In such case, the renewable energy premium constitutes prohibited state aid irrespective of the transmission network operator not being a public entity and the resources paid to the transmission network operator for covering the expenses arising from the sales of electricity generated from renewable energy sources on the electricity exchange.

As the judgement in question is a General Court judgement, the conclusion of the case may still change. However, the judgement shows that the state must, in any case, carefully consider how to avoid the problem of state aid in reshaping the regulation of renewable energy charges. Estonia, of course, need not worry at this point: in judgement no. C (2014)8106 of 28.10.2014, the European Commission has found that the renewable energy support scheme implemented in Estonia is in conformity with the rules of state aid.

[1] EU General Court T-47/15, p 2.

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