German Feed-in Tariff and EU Subsidies

Handelsblatt reports on talks between the European Union Commission and the German Economy Ministry, where the Commission took the position that the German feed-in tariff system is a subsidy under the European rules, and that the feed-in tariff reductions for industry are as well.

This is of course in direct contradiction to what the European Court of Justice decided in the 2001 Preussenelektra case.

The Commission says they don’t respect that decision. They think the situation has changed since 2001.

According to Handelsblatt, the EU Commission may start a formal procedure some time next February.

In contrast, I think the reasoning in the following parts of the 2001 judgment is convincing:

59 In this case, the obligation imposed on private electricity supply undertakings to purchase electricity produced from renewable energy sources at fixed minimum prices does not involve any direct or indirect transfer of State resources to undertakings which produce that type of electricity.

60 Therefore, the allocation of the financial burden arising from that obligation for those private electricity supply undertakings as between them and other private undertakings cannot constitute a direct or indirect transfer of State resources either.

61 In those circumstances, the fact that the purchase obligation is imposed by statute and confers an undeniable advantage on certain undertakings is not capable of conferring upon it the character of State aid within the meaning of Article 92(1) of the Treaty.

I think that these observations are convincing. I also note that the Commission at the time was opposed to the view of the European Court of Justice, but failed to get their view adopted.

While it is certainly interesting to debate this question in more detail, I think it is highly unfortunate that the Commission should try to meddle in the renewable support policy of the Member States. The Commission has tried that again and again and was refused a majority in Council and Parliament each time they tried to pull this kind of thing off. The present Directive 2009/28 makes it quite clear that it is none of the business of the Commission how the Member States want to set up their support schemes.

It is also unfortunate that the Commission thinks it should attack the most effective form of support there is. The feed-in tariff has been wildly successful in getting things done in Germany, and getting prices of solar down massively.

While the idea of an European Union does have some merit in many situations, this particular attempt of grabbing powers the Commission does not and should not have is not one of them.

Published by kflenz

Professor at Aoyama Gakuin University, Tokyo. Author of Lenz Blog (since 2003, lenzblog.com).

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