Supporting domestic renewable projects over imported power may breach EU law, says Advocate General

In a recent opinion Advocate General Bot said that a scheme run in the Flemish Region of Belgium appeared to distort competition between renewable energy producers in the region and those in other member states. He said that he was not persuaded that this could be justified either on environmental protection grounds, or by reference to security of supply.

The case will be heard by the Court of Justice of the European Union (CJEU) shortly. Opinions of Advocates General are not binding, but their advice is often followed by the CJEU.

Environment and energy law expert Fiona Ross of Pinsent Masons, the law firm behind Out-Law.com, said that the opinion could have "hugely significant implications" for national support schemes if it is followed by the Court of Justice of the European Union (CJEU). If followed "the opinion effectively opens up the potential for support schemes to have to allow for participation by generators in other EU member states," Ross said. "This would signal an unprecedented shake-up in renewable support across the EU, and could lead to support schemes being put on hold pending resolution of the mechanics of such an EU-wide system."

Under Flemish law, electricity suppliers must meet certain renewable targets each year and must submit a number of green electricity certificates to the regulator, the Vlaamse Reguleringsinstantie voor de Elektriciteits en Gasmarkt (VREG), to prove this. The required certificates are granted in respect of renewable electricity generated in the Flemish region.

The case was brought by Essent Belgium, a Flemish electricity provider, which had submitted 'guarantees of origin' covering renewable energy generated in the Netherlands, Denmark and Norway as part of its quota requirements between 2005 and 2009. VREG did not accept these guarantees and fined the energy company for failing to comply with its quota obligations.

The Advocate General said that, in his opinion, there was nothing in the Renewable Energy Directive requiring the Flemish Region to treat 'guarantees of origin' in the same way as its own 'green certificates'. In addition, there were no EU rules to harmonise member states' own renewable support schemes at present. However, these schemes must still respect the general EU principles of free movement of goods between member states, equal treatment and non-discrimination, he said.

Turning to the question of whether VREG's conduct could be justified, the Advocate General said that VREG could not rely on environmental protection as a justification as renewable energy produced outside the region was equally capable of reducing overall greenhouse gas emissions. He was also not persuaded that encouraging domestic production of renewable energy would have any more impact on security of supply in the region than developing greater connection with the electricity networks of other member states.

"It will be interesting to see the final judgment, and whether it adopts the analysis of the Advocate General's opinion to the effect that there is no justification for restricting the free movement of electricity within the EU based on environmental protection issues," said environment and energy law expert Fiona Ross. "In that context, the purported environmental benefits of cross-border movements of renewable electricity could be undermined by the transmission losses affecting movements of electricity over long distances - something that did not seem to be picked up in the opinion."

"In any event, as the UK Government continues to finalise the operational framework for Contracts for Difference and plots the transitional demise of the Renewables Obligation, both national governments and the sector in general will be keeping a close eye on the outcome," she said.