German Renewable Energies Law and its Exemptions under EU Scrutiny: European Commission may Launch Legal Proceedings for Breach of Competition Law

The news came on 14 July that the European Commission is considering launching legal proceeding against Germany's Renewable Energies Act (so-called EEG, founding act of the German energy transition, Energiwende). The information was originally released by Der Spiegel. 

DG Competition services have apparently concluded, after scrutiny of the German legislation for renewables, that some of the legal provisions providing for exemptions from charges levied on electricity consumers with the purpose of financing RES generation support (EEG levy, grid fees) may breach EU competition law (Der Spiegel, "Unfair Competition? EU Takes on German Green Energy Law", 15.07.2013). Some 3,200 companies have applied for an exemption to the EEG levy in 2012. (See also previous article in Der Spiegel, "War on Subsidies: Brussels Questions German Energy Revolution", 29.05.2013.)

According to Der Spiegel, the Commission will launch on Wednesday 17 July proceedings motivated by complaints and the rise of German consumers' electricity bill. Proceedings may include request for repayment, a worst case scenario (as Commissioner Oettinger have apparently commented in May in Brussels; source: Der Spiegel). Chancellor Merkel commented the allegations on 14 July, confirming that the German had been informed about the concerns raised by the Commission and that she will propose amendments if she wins a new term in September. The question is: will that be sufficient?

As regards this first ground of allegation, it is not surprising that the Commission envisages using competition law rules to breach anti-competitive behaviours in the energy sector. There is a long established administrative practice and case law in this area. The exemptions from network charges given to large electricity consumers in Germany are already subject to an in-depth inquiry started in March 2013 (see press release, IP/13/191). Similar measures have been investigated under state aid rules in the past. The novelty resides in the sector the Commission is looking at, namely renewables and their financing. It reflects that the market for RES generation has reached a new stage, and that competition much be respected in that sector too. How the relevant product and geographic market will be defined will be of particular interest, as well as the grounds for providing exemptions. Energy-intensive industry benefits from various exemptions, because of overlapping climate/renewables obligations (EU ETS/national support scheme) or due to fears of lack of international competitiveness (e.g., carbon leakage). The result is a puzzle of exemptions between the different Member States, raising concerns for the good functioning of the internal market.

The move also reflects the ambition of the European Commission to push forward the idea of a European energy policy, including for renewables support, using competition law as a tool. This can be related to the post-2020 climate and energy strategy currently under discussion, and the aim to complete the internal energy market by 2014. See also previous post on that blog on the idea of a European Energy Community (here). 

This remains to be confirmed, but the German newspaper also reports on allegation by Energy Commissioner Oettinger as to barriers to access German RES support scheme for foreign operators delivering electricity to Germany such as Norway and Denmark. This is a much more controversial issue as access to national support scheme is for the moment protected by provisions under the Renewable Energy Sources Directive 2009/28/EC.