European Court Backs Renewable Energy

A top court in Europe has ruled that Germany’s support for renewable energy is not illegal.

BRUSSELS, BE, 2001-03-20 <> The European Court of Justice ruled that the Feed in Law (Stromeinspeisungesetz) is not state aid and that the provisions of the legislation comply with internal market rules because they are designed to promote environmental objectives that are a priority for the European Community, namely the protection of the environment by reducing greenhouse gas emissions. The ruling concludes a case that commenced in 1998, involving two power suppliers, PreussenElecktra AG of Hanover and Schleswag AG. PreussenElektra is part of the E.ON utility, and complained that it was forced to pay too much for generation from wind turbines. Under the German law, suppliers must purchase renewable energy produced within their region of supply, and PreussenElektra said it had to purchase wind power from its north German subsidiary, Schleswag. It launched legal action on the basis that the law permits the allocation of extra costs for renewable energy resources and, therefore, violates E.U. rules on subsidies because it was an amended state aid. Purchase obligations with guaranteed feed-in tariffs or premiums have proved to be the most successful means of stimulating and sustaining the development of wind energy markets in Europe. The court ruling will encourage countries within the E.U. to apply similar support systems, which can be adapted to national circumstances for the promotion of renewable energy use. The decision allows member states to implement similar schemes without challenge under European rules, because it clearly rules that European state aid rules do not stand in the way of countries setting an obligation to purchase electricity from renewable sources. In parallel with the recent E.U. guidelines on State Aid for Environmental Protection, the ruling provides a clear framework in which national support schemes can be developed without obstacle. The ruling secures the prices for green power suppliers set by the state, but payable by utilities and their customers. Mandatory minimum charges payable by power distributors for green power did not represent state aid. Not only does the German legislation not violate illegal state aid rules, the court found the environmental protection aim of reducing greenhouse gas emissions justifies rules that could potentially hinder intra-Community trade. “Not all aid granted by states is state aid; the current rules in the electricity market do not preclude German legislation which imposes an obligation to purchase electricity produced from renewable resources,” says a court statement. “Neither the statutory obligation introduced by the German rules (to promote renewable energy resources), nor the allocation of the financial burden between private supply undertakings and private operators of upstream electricity networks involved a direct or indirect transfer of state resources.” The court agreed that aid granted by states or through state resources which distort competition is incompatible with European rules against a restriction of trade, but said only aid granted directly or indirectly through state resources constitutes aid within the meaning of the EC Treaty. It was not enough to find illegal state aid because a purchase obligation imposed by statute conferred an undeniable advantage on some electricity producers, it found. “Statutory provisions of a Member State which, first, require private electricity supply undertakings to purchase electricity produced in their area of supply from renewable energy sources at minimum prices higher than the real economic value of that type of electricity and, second, distribute the financial burden resulting from that obligation between those electricity supply undertakings and upstream private electricity network operators do not constitute State aid within the meaning of Article 92(1) of the EC Treaty,” reads the decision. “In the current state of Community law concerning the electricity market, such provisions are not incompatible with Article 30 of the EC Treaty.” VDEW, the association for electricity suppliers in Germany, estimates the additional cost to purchase power under the law is two billion marks a year. Officials said support for renewable energy should be more targeted and harmonised across E.U. members so that German utilities and their customers were not disproportionally disadvantaged. “This is obviously an important ruling because it goes to the fundamentals of the state aid rules,” says European Commission spokesman Michael Tscherny. “This decision puts wind back into the sails of renewable energy developments across Europe,” says Klaus Rave, president of the European Wind Energy Association. “This will stimulate growth and give stability for future investments.” The law subsidizes wind power at 12.1 to 17.8 pfennigs for each kilowatt hour, and at least 99 pfennigs for solar electric power.

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