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Renewable Energy: The ECJ to Decide on the Compliance of the Green Energy Support Schemes With the EU Principle of Freedom of Movement

28 March 2014

The Court of Justice of the European Union to decide whether the limitation of the application of an EU Member State’s national support scheme for green energy to production facilities located in that country is compatible with the EU principle of freedom of movement

Sweden aimed to implement Directive 2009/28/EC on the promotion of the use of energy from renewable sources (the ‘RES Directive’) by means of a green electricity certificate system in order to fulfil its mandatory national target for the share of energy from renewable sources. Under the Swedish green electricity certificate system, an electricity producer is granted a certificate for each megawatt hour (MWh) of energy produced from renewable energy sources or peat. The electricity producers thereafter sell the so-called ‘green certificates’ to electricity suppliers and certain industrial users who are under an obligation to buy a number of certificates corresponding to a certain quota of their electricity sold or used. Thus, Swedish producers of energy from renewable sources receive additional revenue from their production. The RES Directive allows EU Member States to decide whether their subsidy systems will also be available for energy from renewable sources produced in the territory of other EU Member States, and in the case of such a ‘joint support scheme’, a certain amount of energy from renewable sources produced in the territory of one participating EU Member State may count towards the national overall target of another participating EU Member State. Sweden entered into such a joint support scheme with Norway in 2011.

Ålands Vindkraft AB, which operates a wind farm on the Finnish Åland islands and is connected to the Swedish electricity network, was denied green certificates by the Swedish Energy Agency on the basis of that only facilities located in Sweden may benefit from the Swedish support scheme. The Administrative Court in Linköping, Sweden, sought guidance on the interpretation in the case from the European Court of Justice (ECJ) on 6 December 2012. The Administrative Court requested confirmation on whether the RES Directive should be interpreted as meaning that it allows an EU Member State to apply such a national support scheme in which only producers located in the territory of that country can participate, with the result that those producers will have an economic advantage over producers to whom an electricity certificate cannot be issued. The Administrative Court also requested confirmation on whether the said support scheme constitutes a quantitative restriction on imports or a measure having equivalent effect, and, if so, whether it is compatible with the Treaty of Lisbon as regards the objective of promoting the production of electricity from renewable energy sources.

On 28 January 2014, Advocate General Bot delivered a proposal for judgment to the ECJ according to which the RES Directive indeed allows an EU Member State to apply a support scheme only to electricity producers located within that country. However, the Advocate General voted that such a territorial restriction is not justified due to, for example, the deregulation of the electricity markets through the “third package for an internal EU electricity market” and that incorporation of green energy on the internal EU electricity market is one of the most important objectives of the RES Directive. Therefore, a territorial restriction such as the one above is not compatible with the EU principle of freedom of movement. As a consequence, the Advocate General estimates that the relevant article of the RES Directive will be deemed invalid to the extent that it allows an EU Member State to block entry to its support scheme for producers whose facilities for the production of energy from renewable sources are located in another EU Member State. The Advocate General proposed that the invalidity, which will not have retrospective effect, will enter into force two years after the ECJ’s judgment is rendered, in order to allow the Member States to make the required amendments to the RES Directive. The Advocate General's opinion is not, however, binding on the ECJ, which will give its judgment later on.