Short Reads

General Court confirmed that German law on renewable energy amounts to State aid

General Court confirmed that German law on renewable energy amounts to State aid

General Court confirmed that German law on renewable energy amounts to State aid

02.06.2016

On 10 May 2016, the General Court ("GC") dismissed Germany's appeal against the decision of the European Commission concerning the German law on renewable energy, which came into effect in 2012 ("EEG 2012"). Germany disputed the Commission's finding that the EEG 2012 amounted to State aid despite the fact that the Commission largely approved the aid.

The proceedings started after the German Association of Energy Consumers lodged a complaint with the Commission about the EEG 2012. The EEG 2012 aims to increase the development of renewable energy by laying down a scheme to support undertakings that produce such energy. These undertakings receive a price from network operators for the renewable electricity which is higher than the market price ("first beneficiaries"). In order to finance this measure the suppliers of the renewable energy have to pay an "EEG surcharge" to the network operators responsible for its collection and administration. In practice, the costs of this surcharge are passed on by the suppliers to the final consumers in the form of a higher price for the transferred energy. The scheme stipulates that the amount of the EEG surcharge that may be passed on by electricity suppliers to final consumers is subject to a cap when it concerns 'electricity-intensive undertakings in the manufacturing sector' ("second beneficiaries"). The cap serves to reduce the energy costs of these undertakings so as to maintain their international competitiveness.

The Commission decided in 2014 that the aid to the first beneficiaries constituted State aid which was compatible with the internal market. However, the Commission decided that the State aid to the second beneficiaries was considered only partially compatible with the internal market. The other part of the aid therefore had to be recovered by Germany. Germany appealed this decision, arguing that the entire scheme provided for by EEG 2012 does not amount to State aid.

The GC dismissed the appeal. First of all, it held that the funds generated by the EEG surcharge qualify as State resources because the State controls the way in which the network operators collect and administer the funds. In the otherwise comparable PreussenElektra case, the funds were transferred directly from private parties to the producers of renewable energy, i.e. without the involvement of a State-controlled intermediary. In that case the measures did not qualify as State aid. Secondly, the GC rejected the argument that the second beneficiaries did not receive an advantage but were rather compensated for a competitive disadvantage due to the fact that energy charges are lower in other countries of the European Union. It pointed out that attempts to mitigate the differences in economic conditions with other Member States do not deprive a measure of its character as State aid.

In conclusion, this judgement illustrates (i) that competitive disadvantages in comparison to undertakings in other Member States do not prevent a measure from being regarded as State aid and (ii) that the way in which a scheme is shaped is important. In particular, schemes which bring funds under State control will generally be regarded as State aid.

This article was published in the Competition Law Newsletter of June 2016. Other articles in this newsletter:

  1. General Court rejects Trioplast's action for annulment of a Commission notice to pay interest
  2. Commission blocked Hutchison's proposed acquisition of Telefónica UK
  3. European Commission publishes guidance on the notion of State aid
  4. District Court of Rotterdam upheld the ACM's unconditional clearance decision in telecoms merger KPN/Reggefiber
  5. Rotterdam District Court considered "franchise agreements" in breach of competition law in launderette cartel case
  6. UK High Court held that territorial limits apply to EU cartel damages claims

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