German renewables support "not a state subsidy"

European Court legal opinion seen as major boost for national "feed-in" renewables schemes

A generous financial support scheme for German renewable energy generators does not amount to a state subsidy and so should not be subject to EU rules limiting state aids, an advisor to the European Court of Justice (ECJ) said yesterday. Jubilant environmentalists say the opinion, delivered by advocate general Francis Jacobs in a case prompted by German utility Preussen Elektra, will secure similar schemes across the EU against European Commission attempts to outlaw them.

Germany's stromeinspeisungsgesetz, or "feed-in" law, of 1990 obliges electricity distributors to buy at a premium all renewably generated electricity offered to them by generators in their distribution area. The law has heralded an enormous expansion of German renewables capacity.

In 1998 Preussen Elektra (PE) challenged the law in a German regional court, claiming it contravened EU state aid rules and demanding reimbursement of the extra costs it has borne. The court referred the matter to the ECJ. In his opinion, Mr Jacobs says the feed-in law is not a subsidy because the financial support comes directly from utilities such as PE and not from "state resources". The assessment is not legally binding on the full court, which nevertheless usually rules in accordance with advocate generals' opinions.

Though a setback for PE, the opinion is potentially a bigger reverse for the European Commission, which has long opposed the feed-in system as potentially disruptive to the EU's single market. Last year it warned Germany that it might challenge the scheme as an illegal subsidy (ENDS Daily 21 July 1999), prompting several changes to it (ENDS Daily 29 February). It has not yet taken similar action against Spain, however, which also operates a successful feed-in scheme.

Last year, the Commission also tried unsuccessfully to block feed-in schemes EU-wide in draft proposals for a directive on electricity from renewables (ENDS Daily 29 January 1999).

More recently it caused uproar in green circles by proposing guidelines on environmental subsidies that would force EU member states to limit renewables support (ENDS Daily 3 October).

An ECJ judgement reaching the same conclusion as Mr Jacobs would effectively exempt feed-in initiatives from Commission scrutiny. "This is a major breakthrough for renewables," Green MEP and clean energy campaigner Claude Turmes told ENDS Daily after the opinion was delivered. "It's important for the whole of Europe; it means Spain is also secure."

A spokesman for EU competition commissioner Mario Monti said yesterday the EU's executive was maintaining its opposition to the interpretation. "We think that even if the state is not directly involved in giving a subsidy... it can still be a subsidy because the obligation for companies to buy electricity is a legal obligation," he told Reuters.

Follow Up:
European Court of Justice, tel: +352 43031, the opinion in case C-379/98, and a press release.

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