National Energy Support Schemes Under EU State Aid Scrutiny

Keywords: National Energy Support Schemes, EU,

Increasing industrial and personal demand for electricity, uncertain supplies and an urgent need to combat global warming are significant challenges. In order to tackle these challenges, the EU decided, a few years ago, to issue legislation to promote and increase the use of renewable energy. In 2007, the European Council agreed on an Energy Policy for Europe and endorsed, as a mandatory target, a 20 percent share of energy from renewable sources in overall EU energy consumption by 2020.

As a consequence, in 2009, the EU adopted the Renewable Energy Directive (2009/28/EC) to establish a common framework for the promotion of energy from renewable sources. The Directive sets out mandatory targets for each Member State, requiring them to reach a certain percentage of energy from renewable sources in gross final consumption by 2020. To achieve their goals, Member States may introduce support schemes to promote the use of energy from renewable sources. The support can be granted either by reducing the cost of producing energy from renewable sources or by increasing the sales price or volumes of such energy. This may be done through investment aid, tax exemptions or reductions, renewable energy obligation support schemes and direct price support schemes, such as feed-in tariffs and premium payments.

However, whenever governments decide to support certain companies financially, e.g., by reducing their tax burden, these companies may gain an advantage over competitors, which can trigger concerns regarding the compatibility with the EU State aid rules. Under Article 107 Treaty on the Functioning of the European Union (TFEU), all State aid measures are prohibited unless explicitly authorized following prior notification by the Member State concerned. Non-notified aid is deemed illegal and, like unauthorized aid, must be recovered from the beneficiaries by the national governments.

To facilitate the assessment of what constitutes illegal aid and what can still be authorized, on 9 April 2014 the European Commission (Commission) adopted non-binding State aid guidelines (the EEAG) in the energy and environmental sectors covering the years 2014-2020. These guidelines are meant to support Member States in reaching their 2020 climate targets by setting out a method for addressing market distortions resulting from certain support measures for renewable energy sources. The EEAG include certain criteria under which energy intensive companies can be relieved from additional charges for the support of renewable energy.

During 2014, the Commission has carried out several significant and highly political State aid investigations against Member States, including Germany and the United Kingdom, that have supported certain industry players by reducing the financial burden caused by the support for the generation of renewable energy. In addition, the European Court of Justice (ECJ) has recently issued its ruling in a case on the Swedish support scheme for renewable energy, the benefit of which was limited to renewable energy produced in the Swedish territory.

German Renewable Act

On 18 December 2013, the Commission opened an in-depth investigation into certain provisions of the German Renewable Energies Act (EEG-2012) to examine whether they were compatible with the EU State aid rules. The German law...