European Court of Justice Ålands Vindkraft Decision

Has been published yesterday at the Eur-Lex website.

In that case, Ålands Vindkraft applied for wind energy they generated outside of Sweden to be considered under the “green certificate” support scheme for renewable energy in place in Sweden. The Swedish authorities refused, since support is available only for renewable energy generated in Sweden.

The Swedish court deciding about this matter asked some questions about how to understand Directive 2009/28 and Article 34 of the Treaty on the Functioning of the European Union in this context.

The Court confirmed that Sweden has the right to introduce this kind of support scheme. That is a blow to the recent EU Commission power grab asserting that Member States are only allowed to have support schemes that the EU Commission happens to like (at present some kind of auction model).

The Court also decided that Member States are free to limit their support schemes to renewable energy generated in their own territory. While this clearly is a measure with an effect equivalent to quantitative restrictions under the Dassonville definition (paragraphs 65 to 75 of the judgment). But this restriction of trade is justified by an overriding purpose of environmental protection (paragraphs 76 to 119).

One of the reasons stated for this is found in paragraph 99:

Furthermore, as was also noted by the EU legislature in recital 25 to Directive 2009/28, it is essential, in order to ensure the proper functioning of the national support schemes, that Member States be able to ‘control the effect and costs of their national support schemes according to their different potentials’, while maintaining investor confidence.

If Member States were not allowed to limit their support schemes to renewable energy generated in their territory, it would become very difficult for them to predict the costs of such a scheme. That would destabilize any such system, leading in turn to less investor confidence in its stability.

Such investor confidence is vital for keeping costs down. The costs for renewable energy are almost all fixed costs of building the installation in the first place. The interest rate for financing that cost is very important. If lenders need to perceive such a project as risky, they will ask for higher interest rates. If in contrast they can rely with confidence on the stability of such a system, a low interest rate will be enough.

This decision is in line with what the Court said earlier in the PreussenElektra case. I agree with this.

And this is another blow to the EU Comission. They seem to think that they get to decide about this matter. In their useless and harmful communication “Guidelines on State aid for environmental protection and energy 2014-2020” they say (paragraph 122) that they want Member States to open their support schemes for installations in other EEA Member States. This decision of the Court says quite clearly that this is nothing of the Commission’s business, and that Member States retain the right to restrict their support policies to renewable energy generated on their own territory.

Published by kflenz

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

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