The EU Renewable Electricity Regulatory

ANGLIA RUSKIN UNIVERSITY
ANGLIA LAW SCHOOL
DOCTOR OF PHILOSOPHY
The EU Renewable Electricity Regulatory

Framework and Its Legal Conflicts With Free
Trade Principles
SCOTT ANDREW FOTHERINGHAM
A Thesis in partial fulfilment of the

requirements of Anglia Ruskin University
for the degree of Doctor of Philosophy
Submitted: 31 October 2018
FACULTY OF BUSINESS & LAW

ACKNOWLEDGEMENTS
I would like to offer my profound thanks to my supervisors Dr Egle Dagilyte and Dr

Aldo Zammit Borda who oversaw this research and guided it to a successful
completion.
In addition, I would like to thank Dr Aldo Zammit Borda for suggesting the theoretical
framework of Directive type (command and control/market and shared competence
or EU exclusive competence) used throughout this work.
This research benefited from various professional and academic experiences for
which thanks are due to friends, colleagues and mentors all assisting and
contributing to this research in their own special way but are too numerous to
mention.
EU Renewable Energy Law Page 1

ANGLIA RUSKIN UNIVERSITY
ABSTRACT
FACULTY OF BUSINESS & LAW

DOCTOR OF PHILOSOPHY
This research considers the EU’s 21st century objective of mitigating climate change
by promoting renewable electricity and the multiple legal conflicts between this
objective and EU’s core legal principles of free movement, the prohibition of
distortion of competition and other forms of state aid.
This research fills a gap in academic literature by analysing the EU renewables

regulatory framework. The research finds renewable electricity is accorded a
‘special’ status, allowing export restrictions, price enhancements, priority market
access, tax exemptions and payment guarantees. This ‘special’ status is analysed
via case law and empirical research data.
The case law analysis confirms a lex specialis approach by the CJEU. This is
considered problematic from a legal consistency point of view, as it leads to unclear
investment signals and short-termism in an industry with long-term investment
horizons.
Uniquely, within the academic context, the empirical research considers how market
operators view these conflicts, via the findings of semi-structured interviews. The
research shows that market operators (i) prioritise regulatory stability to ensure long-
term asset business case validity, (ii) mitigate against uncertainty via higher financial
returns and (iii) lobby legislators and regulators to manage change. Market operators
recognise that diagonal conflicts exist and see the CJEU’s use of lex specialis as a
temporary expedient, surrounded by judicial and political risk.
The research proposes regulatory change to remove the ‘special’ status and outlined
diagonal conflicts, including carbon pricing mechanisms, removing fossil fuel
subsidies and enforcing network access rules. These proposals align the regulatory
framework with EU free trade principles - to create long-term regulatory stability,
valued by market operators.
Key Words: Renewables Regulatory Framework, Free Movement of Goods, State

Aid

Contents
Acknowledgements ........................................................................................................................................................ 1
ABSTRACT .................................................................................................................................................................... 2
COPYRIGHT DECLARATION ...................................................................................................................................... 8
ABBREVIATIONS & DEFINITIONS .............................................................................................................................. 9
Chapter 1 – Introduction .............................................................................................................................................. 12
1.1 Introduction ....................................................................................................................................................... 12
1.2 Diagonal and Other Conflicts ........................................................................................................................... 17
1.3 Research Issues – Contribution to Knowledge ............................................................................................... 23
1.4 Research Methods ........................................................................................................................................... 25
1.5 EU’s Need for Available Energy – Importance of Energy Policy & Stable Regulatory Framework ............... 30
1.6 EU Renewable Electricity Law – Its Development and the Electricity Trilemma............................................ 31
1.7 EU Carbon Emissions Reduction Objective .................................................................................................... 34
1.8 Security of Supply............................................................................................................................................. 36
1.9 EU Free Trade Principles – Free Movement & State Aid ............................................................................... 38
1.10 Fossil Fuel Subsidy ........................................................................................................................................ 40
1.11 Thesis Structure ............................................................................................................................................. 41
Chapter 2 – Renewables Regulatory Framework....................................................................................................... 43
2.1 Introduction ....................................................................................................................................................... 43
2.2 Fragmentation: EU and International Law ....................................................................................................... 44
2.3 Legal Conflict Resolution.................................................................................................................................. 47
2.4 Theoretical Research Framework .................................................................................................................... 53
2.5 UN Framework Convention on Climate Change (UNFCCC), Kyoto Protocol and COP 21 Paris Global
Climate Change Agreement ................................................................................................................................... 57
2.6 EU’s Definition of Renewable Energy – Environmental Lunacy ..................................................................... 61
2.7 Renewables – Costs of Production & the Need for Revenue Support ........................................................... 62
2.8 EU & Member State Renewable Energy Regulatory Institutions – Commission, CJEU, ACER and National
Regulators ............................................................................................................................................................... 66
2.9 Treaty Provisions - Environmental and Energy Regulatory Framework......................................................... 71
2.9.1 Article 11 TFEU – Implementation of Environmental Protection within the EU ..................................... 72
2.9.2 Energy Network Requirements – Article 170 to 172 TFEU .................................................................... 75
2.9.3 Energy & Environment - Articles 191 to 194 TFEU................................................................................. 77
2.10 Directives forming the Renewables Regulatory Framework ......................................................................... 81
2.10.1 EU Emissions Trading Scheme (EU-ETS) – Directive 2003/87 & 2009/39 ......................................... 82
2.10.2 Effort Sharing Decision – Regulating the Kyoto Protocol Gases Scheme ........................................... 90
2.10.3 Industrial Emission Directive – Controlling Thermal Generation & Setting Electricity Market Price ... 94
2.10.4 Energy Efficiency Directive – Reducing Electricity Demand & Changing Demand Profile................ 100
2.10.5 Carbon Capture & Storage Directive – Coal Generation’s Future ..................................................... 105
2.10.6 Electricity Market Directive – The Market Structure ............................................................................ 107
2.10.7 Renewable Energy Directive (2009) – Mandatory Targets & Renewables Support Schemes:
Renewables Investment Outcome .................................................................................................................. 112
2.11 Road Map to the Future of Climate Change................................................................................................ 120

2.11.1 EU 2030 Climate Framework – COP 21 Commitments...................................................................... 120
2.11.2 EU 2050 Climate Policy Roadmap – 80% Renewables ..................................................................... 124
2.12 Harmonisation of Renewables Regulatory Framework – Member States Say No .................................... 125
2.13 Conclusions & Key Lessons......................................................................................................................... 127
Chapter 3 – Conflicts between the Renewable Electricity Regulatory Framework & EU Free Trade Principles ... 132
3.1 Introduction ..................................................................................................................................................... 132
3.2 Introduction to Conflicts with Free Movement of Goods - Electricity is Goods ............................................ 135
3.3 Exceptions & Derogations from Free Movement .......................................................................................... 139
3.4 State Aid Policy and its Conflict with Renewable Energy ............................................................................. 143
3.5 Renewable Energy Directive & Conflicts with EU Free Trade Principles ..................................................... 148
3.5.1 Free Movement – Flemish Renewables Essent 1 ................................................................................ 148
3.5.2 Swedish Renewables & Free Movement – Ålands Vindkraft ............................................................... 154
3.5.3 Acceptance of Foreign Certificates & External competence of EU - Green Network .......................... 166
3.5.4 Free Movement of Goods – purchase criteria – Public Procurement & the German Stadtwerke System
.......................................................................................................................................................................... 169
3.5.5 Free Movement & State Aid: Energy Taxation – equivalent effect & Selective Measure - Outokumpu
Oy ..................................................................................................................................................................... 171
3.5.6 Price Fixing – distortion of competition state aid - PreussenElektra .................................................... 178
3.5.7 Essent 1 Price Fixing and Thin Markets ................................................................................................ 181
3.5.8 Legitimate expectation, the right to regulate and State Aid .................................................................. 183
3.5.9 State Aid – state resources - PreussenElektra ..................................................................................... 188
3.5.10 French Renewables & the State Management of Funds - Vent De Colère ....................................... 190
3.5.11 Austria - Intensive Energy Users & Exemption from Austrian Green Levy ........................................ 194
3.5.12 German Intensive Energy Users & Exemption from Green Levy ....................................................... 197
3.5.13 State Aid Embedded Benefits & Network Access - Essent 2 ............................................................. 203
3.5.14 Summary of Conflicts between Renewable Energy Directive & EU Free Trade Principles .............. 208
3.6 Emissions Trading Directive & Conflicts with EU Free trade Principles ....................................................... 211
3.6.1 Competency and National Allocation Plans of Emission Allowances - Commission v Estonia .......... 212
3.6.2 State Aid Over Allocation of Emission Allowances - Borealis Polyolefine ........................................... 214
3.6.3 Emissions Trading – Hardship & Lack of Harmonisation - DK Recycling ............................................ 217
3.6.4 Emissions Trading Conflicts with Polluter Pays Principle (Article 191(2)TFEU) .................................. 219
3.6.5 Summary of Conflicts between Emission Trading Directive & EU Free Trade Principles ................... 221
3.7 Conclusion ...................................................................................................................................................... 222
Chapter 4 – Findings from Empirical Research ........................................................................................................ 224
4.1 Introduction to Empirical Research Phase .................................................................................................... 224
4.2 Process for Conducting Empirical Research ................................................................................................. 226
4.3 Sample Size and Saturation of Research Findings.............................................................................. 230
4.4 Respondents by Categories & Data Management Issues ............................................................................ 231
4.5 Research Hypothesis ..................................................................................................................................... 234
4.6 Research Findings .......................................................................................................................................... 236
Theme 1 – What is Regulatory Risk and Why is it Important.............................................................................. 236
Theme 1.1 – Regulatory Volatility and Why its Reduction is Important......................................................... 236
Theme 1.2 Diagonal Conflict between the Renewable Energy Regulatory Framework and Free Movement
of Goods........................................................................................................................................................... 242
Theme 1.3 Removal of Priority........................................................................................................................ 246
Theme 1.4 Removal of Embedded Benefits ................................................................................................... 249

Theme 1.5 Discontinuity between Generation Waste (Ash) and Carbon Emissions – Polluter Pays
Uncertainties .................................................................................................................................................... 251
Theme 2 Origins of Regulatory Risk .................................................................................................................... 253
Theme 2.1 Political Risk .................................................................................................................................. 253
Theme 2.2 Regulatory Volatility – Rapid Unforecastable Regulatory Change ............................................. 255
Theme 2.3 Poorly Drafted Framework & Regulatory Inconsistencies ........................................................... 258
Theme 3 Regulatory Risk Management & Mitigation .......................................................................................... 260
Theme 3.1 Tracking and Articulating Regulatory Risk ................................................................................... 260
Theme 3.2 Management Frameworks for Regulatory Risk ........................................................................... 263
Theme 3.3 Active Management of Regulatory Risk - Lobbying .................................................................... 265
Theme 3.4 Active Management of Regulatory Risk - Negotiation ................................................................. 267
Theme 3.5 Active Management of Regulatory Risk – Forecasting Future Regulations ............................... 268
Theme 3.6 Active Management of Regulatory Risk – Rate of Return ........................................................... 269
Theme 4 – Future of Regulation .......................................................................................................................... 271
Theme 4.1 – Focus Renewable Energy Regulatory Framework & Carbon Emission Pricing ...................... 272
Theme 4.2 – Change Topology of Transmission Network ............................................................................. 274
Theme 4.3 – Future of Regulatory Oversight ................................................................................................. 276
4.6 Conclusions & Key Lessons.................................................................................................................. 278
Chapter 5 – Conclusions & Recommendations ........................................................................................................ 281
5.1 Introduction ..................................................................................................................................................... 281
5.2 Overview of Research Findings ............................................................................................................ 281
5.3 Key Contribution .................................................................................................................................... 282
5.4 Conclusions .................................................................................................................................................... 286
Conclusion 1 – Renewable Energy Regulatory Framework in Diagonal Conflicts with EU Free Trade
Principles.......................................................................................................................................................... 286
Conclusion 2 - The Renewables Regulatory Framework Contains Inconsistencies within Itself ................. 289
Conclusion 3 – The Complexity of the Renewable Electricity Regulatory Framework ................................. 290
Conclusion 4 – The Developer Operators Are Concerned with the Regulatory Framework in Front of Them
.......................................................................................................................................................................... 291
Conclusion 5 – Market Based Solutions Bring Economic Efficiency to Carbon Emissions Abatement –
Solving the Trilemma ....................................................................................................................................... 292
Conclusion 6 – Energy Efficiency Measures Are the Best Form of Emissions Abatement .......................... 293
5.5 Renewables Regulatory Framework that is Not Working - Recommendations for Change ........................ 293
Recommendation 1 - EU Method for Legal Diagonal Conflict Resolution ..................................................... 294
Recommendation 2 - Call for Regulatory Clarity & Consistency – Reduction in the Number of Directives . 297
Recommendation 3 - Carbon Pricing as Regulatory Change ........................................................................ 299
Recommendation 4 – Electricity Grid Interconnection & Access to Harmonised Regulation ....................... 301
Recommendation 5 - Nodal Pricing & Transmission Losses to Manage Free for All ................................... 302
5.6 Limitations of the Research ............................................................................................................................ 303
5.7 Where to Next ................................................................................................................................................. 304
Bibliography ............................................................................................................................................................... 306
Primary Legislation & Other Treaties ................................................................................................................... 306
Secondary Legislation .......................................................................................................................................... 306
Member State & Third Country Legislation .......................................................................................................... 307
EU Cases .............................................................................................................................................................. 308
Miscellaneous Cases ............................................................................................................................................ 313
EU Commission Decisions ................................................................................................................................... 314

EU Institutions Communication (Commission, ACER & Others) ........................................................................ 315
Books .................................................................................................................................................................... 317
Edited Books ......................................................................................................................................................... 321
Journal Articles ..................................................................................................................................................... 325
News Paper & Other Articles (Inc Working Papers) ............................................................................................ 339
Online & Other Miscellaneous Sources ............................................................................................................... 343
Annex 1 ...................................................................................................................................................................... 347
A1.1 Sustainability ........................................................................................................................................... 347
A1.2 Precautionary Principle ........................................................................................................................... 348
A1.3 Polluter Pays Principle ............................................................................................................................ 349
Annex 2 – Introduction to Legal Theory .................................................................................................................... 351
Annex 3 – Practical Operation of the Electricity Market ........................................................................................... 353
A3.1 Introduction ................................................................................................................................................... 353
A3.2 Inability to Store Electricity on a Meaningful Scale ..................................................................................... 353
A3.3 The Electricity Grid – Transmission and Distribution Networks ................................................................. 354
A3.4 Operation of Electricity Markets................................................................................................................... 355
A3.5 Transmission System Operator – Duties & Obligations ............................................................................. 358
A3.6 Merit Order Dispatch .................................................................................................................................... 358
A3.7 Transmission Constraints - Curtailment ...................................................................................................... 359
A3.8 Renewable Generation & Priority Dispatch ................................................................................................. 361
A3.9 Embedded Benefits ...................................................................................................................................... 361
A3.10 Nodal Pricing .............................................................................................................................................. 363
A3.11 Conclusion .................................................................................................................................................. 364
Annex 4 - Service of General Economic Interest & State Aid .................................................................................. 365
Annex 5 - State Aid - General Block Exemption Regulation (GBER) ...................................................................... 367
Annex 6 - 2014 Guidelines on State Aid for Environmental Protection & Energy ................................................... 370
Annex 7 – Thematic Analysis Coding Scheme ......................................................................................................... 376
Annex 8 - Thematic Map ........................................................................................................................................... 378
Annex 9 - Data Saturation and Sample Size ............................................................................................................ 379
A9.1 Derivation of the Probability Table ........................................................................................................ 379
A9.2 Number of Interviews is Sufficient ........................................................................................................ 380
A9.3 Views and Interview Table .................................................................................................................... 380

S ustainable energy is the golden thread that connects economic growth,
increased social equity and an environment that allows the world to
thrive. Low-carbon growth can foster decent jobs, empower women, promote
equality, provide access to sustainable energy, make cities more sustainable
and enhance the health of both people and the planet.’ UN Secretary-General
Ban Ki-moon 12 May 20141
O ur problems are man-made. Therefore, they can be solved by man. And

man can be as big as he wants. No problem of human destiny is beyond
human beings.’ John F. Kennedy, American University, 19632
1
https://www.un.org/press/en/2014/sgsm15839.doc.htm
2
http://www.presidency.ucsb.edu/ws/?pid=9266

COPYRIGHT DECLARATION
Attention is drawn to the fact that copyright of this Thesis rests with:
(i) Anglia Ruskin University for one year following submission and thereafter with
(ii) Scott Andrew Fotheringham
This copy of the Thesis has been supplied on condition that anyone who consults it
is bound by copyright.

ABBREVIATIONS & DEFINITIONS
Abbreviation Definition
ACER The Agency for the Co-operation of Energy Regulators

Set up in 2010 to help national energy regulators co-ordinate
their actions at EU level
CJEU Court of Justice of the European Union
COP 21 Twenty first Conference of the Parties to the United Nations
Framework Convention on Climate Change (1994) (UNFCCC)
Developer An undertaking which develops and operates generating
Operator facilities and could also be known as a Generator
Distribution A network of electricity cables, overhead lines and other
Network apparatus and plant operating at a voltage of 132kV and below.
It is the network most readily associated with the supply of
electricity to consumers
ECSC European Coal and Steel Community
EU European Union – also used in this Thesis to mean previous
incarnations such as the European Economic Community
EU-ETS The EU’s emissions trading system, launched in 2005, is a
Europe-wide cap-and-trade scheme designed to incentivise
power stations and other heavily polluting industries to reduce
their carbon (CO2) emissions. In phases one and two (2005-
12), each member-state determined its own cap, and permits to
pollute were allocated to companies for free. In phase three,
starting in 2013, the Commission set the overall cap, and many
of the sectors covered, including the electricity sector that is
responsible for most CO2 emissions within the EU, purchases
permits in an auction process. Companies that have bought too
few or too many permits can buy or sell them on in the EU
carbon market
GATT General Agreement on Tariffs and Trade 1997
Generator An undertaking that produces electricity at a generating facility
or power station. A single undertaking may have a dual role of
generator and supplier (see definition below) but in regulatory
terms they are separate functions and are subject to similar but
different regulatory frameworks

Interconnector A cross-border link between national electricity grid systems
IRR A metric used in capital budgeting to estimate the profitability of

potential investments. Internal rate of return is a discount rate
that makes the net present value (NPV) of all cash flows from a
project equal to zero
Rate of Return The gain [or loss] on an investment over a specified time period,
expressed as a percentage of the investment's capital cost.
Gains on investments can also be defined as income received
plus any capital gains realised on the sale of the investment
Regulators EU and national institutions/regulators set up by statute (e.g.
Ofgem or Bundesnetzagentur), and ministries and ministers
when they act in an adjudicative capacity related to the
applicable Regulatory Framework
Regulatory A framework equally composed of EU and the national
Framework laws (primary and secondary legislation), case law, guidelines
and policy documents which seek to implement the EU laws
Regulatory The forecastability of regulatory change. Where regulatory
forecastability change is forecastable by Developer Operators, as investors in
the industry, and as necessary by legislators, ministries and
regulators. Forecasts of the Regulatory Framework take
account of the following issues – the previous magnitude of
regulatory change, stated duration of the policy (terminated
date if any), publication of future policy/regulations, political
instability as a potential for policy change, technology change,
underlying price of the market, demand growth, potential for
other generation assets to enter the market (ease of getting
consents)
Regulatory Changes in the regulatory framework that were not forecastable
Risk at the time of the asset investment decision and therefore will
include Regulatory Volatility, as well as regulatory changes that
only become forecastable after the asset investment decision
is made
Regulatory The current regulatory framework is wholly or materially stable
Stability with consistent implementation of an unchanging regulatory
framework into the future, this can also be seen to be a

framework that is robust to changes in the wider business
environment. Stability also has a concept of time such that this
stability would be over the lifecycle of the asset in question with
changes only being brought about following full consultation
and with agreement between legislators, regulators and assets
developers
Regulatory Regulatory change that is or has not been forecast by
Volatility Developer Operators as investors in the industry and as
necessary by legislators and regulators
Supplier An undertaking which sells electricity to the end consumer. A
single undertaking may have a dual role of generator (see
definition above) and supplier but in regulatory terms they are
separate functions and are subject to similar but different
regulatory frameworks
TEU Treaty on European Union 1992 (also referred to as the
Maastricht Treaty)
TFEU Treaty on the Function of the European Union – the
consolidated Treaty following the execution of the Treaty of
Lisbon 2009
Transmission A network of electricity cables, overhead lines and other
Network apparatus and plant operating at a voltage above 132kV. It is
the network most readily associated with the bulk transport of
electricity
UNFCCC United Nations Framework Convention on Climate Change
(1994)
WTO World Trade Organisation.

Chapter 1 – Introduction
1.1 Introduction
The European Union (EU) is a unique economic and political organisation.3 Its main
objective at its formation in 1957 was the fostering of economic cooperation: the
principle being that countries linked by trade become economically interdependent
and thus likely to avoid armed conflict.4 Since 1957, the EU has evolved to address
changing political imperatives from a purely economic organisation into one
spanning policy areas such as energy,5 climate change mitigation, 6 environment
and health,7 external relations and security,8 justice and migration.9 In addressing
these expanded imperatives in relation to electricity the EU has evolved a complex,
polycentric, multi-layered regulatory 10 internal electricity market. 11 This research
contemplates to what extent the EU’s 21st century policy objective 12 to mitigate
climate change via the promotion of renewable electricity, 13 and the regulatory
framework14 put in place to facilitate this promotion, is in a form of legal diagonal
3
European Commission ‘Europe in 12 lessons’ available at https://publications.europa.eu/en/publication-detail/-
/publication/009305e8-2a43-11e7-ab65-01aa75ed71a1 accessed 25 July 2017
4
Karin Arts and Anna Dickson ‘EU development cooperation: from model to symbol? in Karin Arts and Anna K
Dickson (eds) EU development cooperation: from model to symbol? (Manchester University Press, 2004)
5
For an introduction to energy law see Raphael Heffron Energy Law: An Introduction (Springer, 2014); See Also
Peter Cameron and Raphael Heffron (eds) Legal Aspects of EU Energy Regulation (Oxford University Press,
2016); Martha Roggenkamp, Catherine Redgwell, Anita Ronne, and Inigo del Guayo (eds) Energy Law in Europe
National, EU and International Regulation (Oxford University Press, 2016)
6
Change in average temperature of earth’s surface is termed as climate change. ‘Climate change is a natural
phenomenon but post the industrial revolution period, human activity is cited as the important trigger for change in
climatic condition on the earth. Anthropocentric activities increase the carbon concentration in the atmosphere that
traps additional heat, leading to global warming and thus contributing to climate change’. -
http://www.powerplantccs.com/ref/glos/climate_change.html accessed 19 April 2018
7
The TFEU contains Article 168 (protection of public health), Article 114 (approximation of laws) and Article 153
(social policy) to facilitate the promotion of health across the EU. -
https://ec.europa.eu/health/policies/overview_en accessed 29 May 2018
8
The TFEU contains Article 75 (Area of freedom, security and justice)and Article 215 (‘specific provisions on the
common foreign and security policy); see Case C-130/10 Parliament v Council ECLI:EU:C:2012:472; See
https://europa.eu/european-union/topics/foreign-security-policy_en accessed 29 May 2018; See Also Annegret
Bendiek, ‘A Paradigm Shift in the EU’s Common Foreign and Security Policy: From Transformation to Resilience’
[2017] German Institute for International and Security Affairs; See Also Uwe Puetter, ‘The Latest Attempt at
Institutional Engineering: The Treaty of Lisbon and Deliberative Intergovernmentalism in EU Foreign and Security
Policy Coordination’ in Paul Cardwell (ed) EU External Relations Law and Policy in the Post-Lisbon Era (Asser
Press, 2012), 17
9
Willem Maas, ’The Origins, Evolution, and Political Objectives of EU Citizenship’, (2014) 15(5) German Law
Journal, 797; See also European Commission ‘EU in Brief’, https://europa.eu/european-union/about-eu/eu-in-
brief_en accessed 25 July 2017; Also to address changing ‘goals to be reached, generally an improvement in
some economic, political, or social feature of the community.’ Ronald Dworkin Taking Rights Seriously
(Bloomsbury, 2013), 22
10
Céline Gauer and Lars Kjølbye ‘Energy’ in by Ali Nikpay and Jonathan Faull (eds) The EC Law of Competition
(Oxford University Press, 2014)
11
Peter Cameron, ‘The Internal Energy Market – Redefining Objectives’ Peter Cameron and Raphael Heffron
(eds) Legal Aspects of EU Energy Regulation (Oxford University Press, 2016), 3
12
Klaus Segbers, ‘The New Global Landscape and Energy Politics in the 21st Century’ in Rafael Leal-Arcas and
Jan Wouters (eds) Research Handbook on EU Energy Law and Policy (Elgar, 2017)
13
It being recognised that bio-diesel is regarded as a renewable energy source within the EU, however, such
sources are outside the scope of this research project, to allow the renewable electricity focus to be maintained
14
Within this research ‘regulatory structure’ is considered to be explicit legislative and administrative instruments,
as well as controls over any taxes or subsidies (including ‘support schemes’) of all sorts, including entry rates, and
other facets of economic activity – derived from Richard Posner, ‘Theories of economic regulation’ (1974) 5(2)
The Bell Journal of Economics and Management Science, 335. 335; George Stigler, ‘The Theory of Economic

conflict15 with one or more elements of primary EU legislation.16 The conflict being
said to result from the different policy goals pursued at different levels of
governance17 within the EU and the member states.
Furthermore, the research considers if electricity generated from renewable
sources18 has been accorded a ‘special status’ as part of an overriding objective19
or an overriding public interest20 to mitigate climate change due to the derogations
it has received from EU free trade principles (e.g. free movement and anti-state aid
provisions).
It should be noted a conflict being regarded as ‘diagonal’ when different
elements of the regulatory framework are variously in conflict not with the Treaty
Article from which they are derived (which would be vertical conflict), but other Treaty
Articles. This research outlines that the renewable electricity regulatory framework
is in diagonal conflict with three elements of the EU’s free trade principles
• Free movement of goods: the national regulatory frameworks, as allowed
by Article 3 of the Renewable Energy Directive, 21 prevent the export of
Regulation’ (1971) 2(1) The Bell Journal of Economics and Management Science, 3; Sam Peltzman, ‘Towards a
More General Theory of Regulation’ (1976) 19(2) Journal of Law & Economics, 211. Furthermore ‘Support
Scheme’ means ‘any instrument, scheme or mechanism applied by a Member State or a group of Member States,
that promotes the use of energy from renewable sources by reducing the cost of that energy, increasing the price
at which it can be sold, or increasing, by means of a renewable energy obligation or otherwise, the volume of such
energy purchased. This includes, but is not restricted to, investment aid, tax exemptions or reductions, tax
refunds, renewable energy obligation support schemes including those using green certificates, and direct price
support schemes including feed-in tariffs and premium payments’ – Definition from Article 2 Renewable Energy
Directive (2009/28/EC)
15
Joost Pauwelyn, Conflict of Norms in Public International Law (Cambridge University Press 2003); see also
Sumudu Atapattu, ‘International Environmental Law and Soft Law: A New Direction or a Contradiction?’ in Cecilia
Bailliet (ed.), Non-State Actors, Soft Law and Protective Regimes: From the Margins (Cambridge University Press,
2012). In this research, diagonal conflict means a conflict between the regulatory framework of Directives and
Regulations which surrounds renewable energy and the Treaty articles relating to three cornerstones of EU law: the
free movement of goods; competition law; state aid. This is different from vertical conflict which would be, for
example a Directive being in conflict with the Treaty article from which it is derived; or horizontal being the conflict
between two Directives or two Treaty articles.
16
For an introduction to EU Energy Law See - Ana Stanic ‘An Overview of EU Energy Law’ in Peter Cameron and
Raphael Heffron (eds) Legal Aspects of EU Energy Regulation (Oxford University Press, 2016); See also Hans
Vedder, Anita Rønne, Martha M Roggenkamp, and Íñigo del Guayo, ‘EU Energy Law’ in Martha Roggenkamp,
Catherine Redgwell, Anita Ronne, and Inigo del Guayo (eds) Energy Law in Europe (Oxford University Press,
2016)
17
Rike Krämer, ‘The Notion of Diagonal Conflicts as a Key Concept of European Conflicts Law’ in Christian Joerges
(ed) After Globalisation, New Patterns of Conflict and their Sociological and Legal Reconstructions (ARENA Report
No 4/11, 2011), 145, 158
18
Electricity known as ‘renewable electricity’ is in fact not renewable in its self, it is simply the originating energy
source that is renewable, e.g. wind, solar and hydro. Therefore using the term ‘renewable electricity’ is simply a
shorthand for electricity generated using a renewable form of energy as the motive force or fuel for the generating
facility
19
‘overriding objective of environmental protection’ from C-524/07 Commission v Austria ECLI:EU:C:2008:717,
para 57 or ‘overriding requirement of environmental protection’ from Case C-573/12, Ålands Vindkraft AB v
Energimyndigheten ECLI:EU:C:2014:2037, para 76 and 80
20
Case C-164/17 Edel Grace and Peter Sweetman v An Bord Pleanala ECLI:EU:C:2018:593, para 55 – ‘projects
may be undertaken for imperative reasons of overriding public interest, including those of a social or economic
nature’
21
Council Directive 2009/28/EC 23 April 2009 Promotion of the use of energy from renewable sources OJ
L140/16 (Renewable Energy Directive) available at http://eur-lex.europa.eu/legal-
content/EN/TXT/PDF/?uri=CELEX:32009L0028&from=EN

renewable electricity and restrict access to their renewables support
schemes22 to renewable generating facilities from other member states,
• State aid prohibition of market segmentation (Article 107(1) TFEU):
renewable electricity facilities are accorded priority dispatch 23 as a
derogation from the normal dispatch rules thus relieving such facilities
from the normal competitive process around dispatch, as well as granting
them priority connection to the transmission or distribution network,24 and
• state aid prohibition of anti-competitive pricing (Article 107 TFEU): due to
the collection by emanations of the state 25 of monies from electricity
consumers to pay one form of another of financial support to renewable
electricity facility operators (Article 3(3) Renewable Energy Directive –
defines such mechanisms of ‘support mechanisms’) 26 a feed-in tariff 27
which fixes the selling price for renewable electricity above that available
in the wholesale electricity market, or the granting of a tradeable green
certificate28 to renewable electricity producers and also sometimes the
granting of tax incentives, state aid has been found to have been made
available.
22
means ‘any instrument, scheme or mechanism applied by a Member State or a group of Member States, that
promotes the use of energy from renewable sources by reducing the cost of that energy, increasing the price at
which it can be sold, or increasing, by means of a renewable energy obligation or otherwise, the volume of such
23
‘Dispatch of generating facilities means the short-term determination of the economically optimal output of a
series of electricity generation facilities connected to an electricity network to meet the electicity demand on that
network, at the lowest possible cost, subject to transmission capacity and operational constraints’ - P Palermo
‘Approaches to Generation Dispatch in Transmission Planning’ (2009) 135 CIGRE; therefore ‘Priority Dispatch’ is
the practice by transmission system operators when dispatching electricity installations they shall give priority to
renewable electricity generating installations, thus placing such installations outside the normal dispatch rules -
Article 16(2) (c) Council Directive 2009/28/EC 23 April 2009 Promotion of the use of energy from renewable
sources OJ L140/16 (Renewable Energy Directive)
24
Ibid, Article 16(2)(b)
25
Means ‘a body, whatever its legal form, which has been made responsible, pursuant to a measure adopted by
the state, for providing a public service under the control of the state and has for that purpose special powers
beyond that which result from the normal rules applicable in relations between individuals.’ Case C-188/89 Foster
v British Gas plc ECLI:EU:C:1990:313
26
Thomas Schomerus, ‘Renewable energy: support mechanisms’ in Daniel Faber and Marjan Peeters (eds)
Climate Change Law (Elgar, 2016)
27
Feed-in Tariff is a contract mechanism between the owner of the renewable electricity generating facility and a
purchasing organisation which provides a guaranteed price for generated output (usually providing an enhanced
price above wholesale market prices) to the owner. This is generally combined with a purchase obligation.
Typically the costs are borne either by consumers or by the public budget; See Bert Saveyn, Antonio Soria
Ramírez and Tobias Wiesentha ‘Renewable electricity policy: feed-in tariffs versus tradeable green certificates’
[2008] Institute for Prospective Technological Studies
28
Green certificates are instruments certifying the production of electricity from renewable sources. Electricity
suppliers are expected to generate a given amount of electricity from renewable energy sources, an act which is
demonstrated by the possession of a green certificate which can be traded and thus revenues recovered -
Gestore Mercati Energetici, ‘About Green certificates’ <mercatoelettrico.org/en/mercati/cv/CosaSonoCv.aspx.
accessed 25 January 2016

In addition to the diagonal conflicts the regulatory framework is also in vertical
conflict with the ‘polluter pays’ principle (Article 191(2) TFEU) due to the
acquiescence to emissions via elements of the regulatory framework such as the
Emissions Trading Directive, 29 the Effort Sharing Decision 30 and the Industrial
Emission Directive.
For the avoidance of doubt, it should be noted that this research does not
concern ‘conflict of laws’ which is a procedural process dealing with the choice of
jurisdiction (law) when a legal action implicates the substantive laws of more than
one jurisdiction and a court must determine which law is most appropriate to resolve
the dispute.31
Instead, this research shows, via case law analysis, that the legal diagonal
conflict does exist and is able to quantify the importance of this conflict to market
operators via empirical research. The empirical phase showed that certain market
operators are concerned that these socio-political protections from the EU’s free
trade principle could be removed in a paradigm shift (defined in this research as
‘regulatory volatility’)32 thus undermining the business case of long-term investments
in the renewables sector. The removal of support for renewable electricity generation
is a business scenario market operators see as having more than a de-minimis
probability – therefore regulatory stability33 across the lifecycle of the assets is seen
as unlikely, despite it being one of the main aspirations of any regulatory framework
reported by the developer operators of these facilities.
The research stems from the socio-legal34 tradition and uses the practical
example renewable electricity promotion within the EU to consider if the CJEU is
following an approach which would be favoured by Dworkin35 that rights and moral
considerations (in this case those legal concepts set out in the TFEU) should prevail
over policy considerations or is the CJEU taking a Hart36 legal positivist approach
29
Council Directive 2003/87 13 October 2003 Establishing a scheme for carbon emission trading allowance
trading within the Community OJ L L 275, 25.10.2003 the Directive was amended by Directive 2009/29 ‘To
improve and extend the carbon emission trading scheme of the Community’ OJ L140/63
30
Council Decision No 406/2009/EC 23 April 2009 ‘Reduction in carbon emissions to meet the Community’s
carbon emission reduction commitments up to 2020’ (Effort Sharing Decision)
31
Michael Hoffheimer Examples & Explanations: Conflict of Laws (Aspen, 2012); Adrian Briggs The Conflict of
Laws (Oxford University Press, 2008); Ronald Graveson Conflict of Laws: Private International Law (Sweet and
Maxwell, 1974)
32
Regulatory volatility is used within this work to mean changes in the regulatory framework that cannot be or are
not forecastable – a high rate of volatility would be the rapid unforecastable change in the regulatory framework.
33
Regulatory stability is the maintenance of the regulatory framework in place at the time the investment decision
is made across the lifecycle of the asset
34
Socio-legal research combines doctrinal and empirical methods which lead to the development of the grounded
theory, as well as policy orientated studies - https://sociolegaldcu.wordpress.com/what-is-socio-legal-research.
35
Ronald Dworkin Law's Empire (Harvard University Press, 1987) - Such that the law is an empire, liegemen to its
methods and ideals, including jurisprudence, politics, sociology, as well as morals, ethics and aesthetics as these
affect society; See also Ronald Dworkin Taking Rights Seriously (Bloomsbury, 2013),xi
36
Herbert Hart The Concept of Law (ed) Penelope Bulloch and Joseph Raz (Clarendon Press, 1994); See Also
Herbert Hart, ‘Positivism and the Separation of Law and Morals’ (1958) 71(4) Harvard Law Review 593, 601-2

which would seek to differentiate between law as it is and as it ought to be, by filling
any gap in the existing law with a new rule and differentiating between what Hart
calls ‘primary and secondary law’.37 (An introduction to jurisprudence – Section 2.3
and Annex 2)
The research sets out how the outcomes from the EU’s political decision and
the CJEU considerations operate from a set of concerns, even moral concerns,
related to the abatement of climate change.38
In seeking to better understand the above areas of legal conflict, and their
business implications, as a key contribution to academic work, empirical research
(using direct semi-structured interviews39 and thematic analysis)40 was undertaken
with market participants to consider their perceptions of these conflicts and how they
lead to the potential for change to the regulatory paradigm – so called regulatory
risk.41 The empirical research is undertaken with directors or heads of function within
various market operators by a researcher of equivalent status and provides an
industry perspective that has not been investigated previously in scholarly literature.
This research sets out to enrich the understanding of how EU law operates in
commercial practice. The empirical research findings outlined in this thesis will assist
legislators and regulators (both national and European) by setting out the effects of
regulatory uncertainty42 as seen by renewables project developers and financiers.
The empirical research also considers the risk mitigation measures they put in place
by project developers. This element of the research will also be useful to those
seeking an understanding of the issues before entering the renewables market.
This introductory chapter initially provides a summary of methods and
protocols to generally resolve legal conflicts, before considering the issues to be
37
Ibid, 95
38
Ronald Dworkin Law's Empire (Harvard University Press, 1987), 191
39
William Harvey, ‘Strategies for Conducting Elite Interviews’ (2011) 11(4) Qualitative Research, 431
40
David Silverman Interpreting Qualitative Data (SAGE, 2014); See Also Lorelli Nowell, Jill Norris, Deborah White
and Nancy Moules, ‘Thematic Analysis: Striving to Meet the Trustworthiness Criteria’ (2017) 16(1) International
Journal of Qualitative Methods; See also Moira Maguire and Brid Delahunt, ‘Doing a Thematic Analysis: A
Practical, Step-by-Step Guide for Learning and Teaching Scholars’ (2017) 8(3) All Ireland Journal of Teaching and
Learning in Higher Education
41
“Regulatory Risk” or ‘Regulatory Uncertainty’ is a process by which applicable regulators change the regulatory
framework undermining the business case for an asset before the end of the asset’s operational life or more
acutely before its finance arrangements have been discharged (put more simply it is the probability that the ‘rules
of the game’ existing at the time of the investment decision change during the operational life of the asset); See -
Cameron Hepburn, ‘Regulation by Prices, Quantities, or Both: A Review of Instrument Choice’, (2006) 22 (2)
Oxford Review of Economic Policy, 225; See also Harri Kalimo, Filip Sedefov and Max Jansson, ‘Market definition
as value reconciliation: The case of renewable energy promotion under the WTO Agreement on Subsidies and
Countervailing Measures’, (2017) 17(3),International Environmental Agreements: Politics, Law and Economics;
Colin Kirkpatrick, David Parker and Yin-Fang Zhang, ‘Foreign Direct Investment in Infrastructure in Developing
Countries: Does Regulation Make a Difference?’, (2006) 15(1) Transnational Corporations; Dieter Helm, Cameron
Hepburn and Richard Mash, ‘Credible Carbon Policy’, (2003) 19(3) Oxford Review of Economic Policy, 438;
Henok Birhanu Asmelash, ‘Energy subsidies and WTO dispute settlement: Why only renewable energy subsidies
are challenged’, (2015) 18 (2) Journal of International Economic Law, 261;
42
Reza Banakar, ‘Introducting Legal Uncertainty’, in Reza Banakar (ed.), Normativity in Legal Sociology:
Methodological Reflections on Law and Regulation in Late Modernity (Springer, 2014)

researched and research methods. The importance of energy policy and the need
to resolve the trilemma of reliability, sustainability and affordability energy are also
outlined. 43 The structure of the renewable energy regulatory framework is also
outlined, together with key supporting principles such as carbon trading,
sustainability, 44 the precautionary principle; 45 the ‘polluter pays’ principle 46 and
security of supply.47 The chapter also provides an introduction to the EU’s free trade
principles with which the renewable electricity regulatory framework conflicts. The
chapter closes with an introduction to the research issues and methods used, finally
summarising the content of each subsequent chapter.
1.2 Diagonal and Other Conflicts
Before considering the specific legal conflicts that are focus of this research, this
section gives a brief outline of how legal conflicts occur and how they are managed
more widely within EU and international law,48 thus setting the discussion of diagonal
conflicts within the wider legal context of conflict resolution. In this context
international law is not considered a unified system but merely an aggregate of rules
that states have contracted.49
It has been stated50 that legal uncertainty is an almost universal feature of all
legal systems and there are four basic sources of this uncertainty,(i) value pluralism
(a collision of legal norms - legal system is pluralist when it contains inconsistent
rules), 51 with legal issues being governed by two or more conflicting rules, 52 (ii)
linguistic vagueness, resulting from poorly drafted legal text, (iii) rule instability, due
43
David Newbury ‘Questioning the EU Target Electricity Model – how should it be adapter to deliver the Trilemma’
[2016] Cambridge University, Energy Policy Research Group Working Paper: See Also Raphael Heffron Energy
Law: An Introduction (Springer, 2014)
48
International Law being considered as a body of law or a jurisdiction brought about by the collaboration of two
or more soverign states – Hans Kelsen Principles of International Law (Rinehart, 2003), 201
48
48
48
48
49
Herbert L A Hart The Concept of Law (Clarendon Press, 1961), 208
50
Gunnar Beck, ‘The Macro Level: The Structural Impact of General International Law on EU Law The Court of
Justice of the EU and the Vienna Convention on the Law of Treaties’ (2016) 35(1) Yearbook of European Law,
484
51
Nicholas Barber, ‘Legal Pluralism and the European Union’ (2006) 12(6) European Law Journal; See Also
Klemen Jaklic Constitutional Pluralism in the EU (Oxford University Press, 2014)
52
For example free movement and exceptions there to – See Case C-438/05 International Transport Workers’
Federation and Finnish Seamen’s Union v Viking Line ABP and OÜ Viking Line Eest ECLI:EU:C:2007:772 &
Case C-342/05 Laval un Partneri Ltd v Svenska Byggnadsarbetareförbundet ECLI:EU:C:2007:809

to changing judicial thought and practice changing precedents53 (iv) gaps in the law,
where a court has to decide an issue which is governed by no obvious primary legal
instruments or precedents.
This research considers a specific instance of value pluralism (conflict of
norms) where diagonal and other conflicts exist between the EU’s renewable
electricity regulatory framework and the Treaty based EU’s free trade principles (the
consolidated TFEU). The research has found that the conflict exists as the
renewable electricity regulatory framework allows nationally focused support
schemes to be put in place and the sharing of competency between the EU and
member states which allowed member states to confer an advantage to
undertakings within its territory. The structure of the regulatory framework and the
practices of member states conflict variously with free movement of goods and state
aid. Also considered is the environmental principle known as the ‘polluter pays’.
Before considering the specific instances of conflict for the renewable
regulatory framework a general outline of legal conflicts is considered useful so that
an understanding of how the concepts are designed and described in this research
can be gained.
With the increase in cross border trade and globalisation generally the
interaction of the legal systems of different member states and member states and
54
the EU has also increased. These interactions have highlighted several
inconsistencies and conflicts between the legal systems of the member states
(horizontal conflict) and between member states and the EU (vertical conflict)
A vertical conflict occurs where a secondary law does not correctly, or fully,
implement the provisions of a primary or superior law.55 This being characterised as
where an EU Directive does not correctly implement the provisions of the TFEU
article to which it is supposed to give effect, for example the Emissions Trading
Directive, 56 which allows emissions trading, is in conflict with the ‘polluter pays’
principle, which as drafted in the TFEU would not (See Section 3.6).
53
‘Precedent’ being used as not only binding decisions – but also in the EU context with no doctrine of formally
binding precedents - but where previous judicial decisions are principles upon which to issues can be adjudicated
– See Gunnar Beck, ‘The Macro Level: The Structural Impact of General International Law on EU Law The Court
of Justice of the EU and the Vienna Convention on the Law of Treaties’ (2016) 35(1) Yearbook of European Law,
484, 486
54
Pierre Larouche, ‘Coordination of European and Member State Regulatory Policy - Horizontal, Vertical and
Transversal Aspects’ (2004) 5(1) Journal of Network Industries, 277
55
Christian Joerges, Poul Kjaer and Tommi Ralli, ‘A New Type of Conflicts Law as Constitutional Form in the
Postnational Constellation’ (2011) 2(2) Transnational Legal Theory, 153, 155
56

Similarly, a horizontal conflict occurs where two legal instruments of the
same hierarchical position contain conflicting provisions. An EU example being the
conflict between the Emissions Trading Directive and the Energy Efficiency
57
Directive, where the Efficiency Directive reduces energy demand without a
feedback as to the number of emission allowance issued under the EU-ETS which
undermines the price of carbon emissions (See Section 2.10.4).
A diagonal conflict is where a secondary legal instrument in one field conflicts
with a superior legal instrument in another field. Within this research a diagonal
conflict is a conflict between an instrument of EU secondary law (Directive or
Regulation) and a Treaty Article other than that from which the instrument is derived.
The concept is also widened to encompass the member state implementation of the
principles contained within a Directive.
Diagonal conflicts have been explored by other scholars previously,58 but not in the
field of renewable electricity. One area is data privacy, where a diagonal legal
conflict can be seen in a person’s right to retain confidential certain elements of
personal data (Article 16 TFEU), rights set out in more detail in the GDPR. 59
Whereas to prevent crime members states, and their associated security services,
need access to data and, in certain situations, to allow the free movement of this
data to other member states (Article 67 TFEU). Additionally, Article 56 TFEU states
that the EU provides for the freedom to provide services, the ability to do so may be
enhanced by the obtaining and manipulating of personal data. The ability to obtain
and manipulate personal data is also restricted by the GDPR and thus a diagonal
conflict can be said to exist.
With the renewable electricity regulatory framework an example of diagonal
conflict is the conflict between the Renewable Energy Directive, 60 put in place to
implement the obligation to support renewable energy, contained in Article 194
57
Council Directive 2012/27/EU 25 October 2012 – Energy Efficiency Directive OJ L315/1 Available at http://eur-
lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2012:315:0001:0056:en:PDF
58
S Evju, ‘Revisiting the Posted Workers Directive: Conflict of Laws and Laws in Contrast’ (2009) 12 Cambridge
Yearbook of European Legal Studies; See Also L Zucca Constitutional Dilemmas: Conflicts of Fundamental Legal
Rights in Europe and the USA (Oxford University Press, 2008); A T Pérez Conflicts of Rights in the European
Union. A Theory of Supranational Adjudication (Oxford University Press, 2010); Marco Dani, ‘Economic and
Social Conflicts, Integration and Constitutionalism in Contemporary Europe’ [2009] London School of Economics
Europe in Question Series Paper No. 13/2009 46; J H Gerards, ‘Fundamental Rights and Other Interests: Should
It Really Make a Difference?’ in E Brems (ed), Conflicts Between Fundamental Rights (Intersentia 2008); T Novitz
and P Syrpis, ‘Economic and Social Rights in Conflict: Political and Judicial Approaches to Their Reconciliation’
(2008) 33 European Law Review; N Lindstrom, ‘Service Liberalization in the Enlarged EU: A Race to the Bottom
or the Emergence of Transnational Political Conflict?’ (2010) 48 Journal of Common Maket Studies 1307; Marco
Dani, ‘Rehabilitating Social Conflicts in European Public Law’ (2012) 18 European Law Journal 621; M Husovec,
‘Intellectual Property Rights and Integration by Conflict: The Past, Present and Future’ (2016) 18 Cambridge
Yearbook of European Legal Studies, 239
59
Regulation (EU) 2016/679 ‘The protection of natural persons with regard to the processing of personal data and
on the free movement of such data’ OJ L 119/1
60

TFEU, which allows member states to restrict their renewables support schemes61
to only generation facilities within their sovereign territory, in contravention of the
free movement obligations contained in Articles 28 to 35 TFEU.62
This research’s specific example of pluralism is where the legal instruments
regulating renewable electricity conflict as they fulfil certain conditions (i) they exist
contemporaneously, (ii) contain contradictory provisions, 63 (iii) may overlap in
scope 64 and (iv) importantly ‘contain obligations which cannot be complied with
65
simultaneously’ and are therefore likely to be in diagonal conflict with certain
provisions of the TFEU. 66
It should be noted that different legal systems, international, EU and national
laws may have various rules to resolve legal conflicts and diagonal conflicts. There
are so called horizontal techniques such as lex specialis, where the most specialist
legal instrument would prevail, or lex posterior where the most recent instrument
would prevail.67 The so called vertical techniques relate to hierarchy, where one
instrument would be seen to have superiority over another, however this is said to
have limited application in international law as different tribunals usually have no
formal hierarchy between them.68 The only practical exception to the use of such
technique in international law would be in the application of a jus cogens69 guideline
for the interpretation of norms.70 There are also mutual recognition conventions, so
called ‘tolerance’, where a margin of appreciation is observed, although this is seen
61
62
Hans Vedder, Anita Rønne, Martha M Roggenkamp and Íñigo del Guayo, ‘EU Energy Law’ in Martha
Roggenkamp, Catherine Redgwell, Anita Ronne, and Inigo del Guayo (eds) Energy Law in Europe National, EU
and International Regulation (Oxford University Press, 2016)
63
Wilfred Jenks 'The Conflict of Law-Making Treaties' (1953) 30 British. Yearbook of International Law, 401
64
Joost Pauwelyn Conflict of Norms in Public International Law (Cambridge University Press, 2003), 176; See
also Erich Vranes, ‘The Definition of ‘Norm Conflict’ in International Law and Legal Theory’ (2006) 17(2) European
Journal of International Law, 395, 412
65
WTO Panel Report, Indonesia Certain Measures Affecting the Automobile Industry, WT/DS54/R, WT/DS59/R,
WT/DS64/R, adopted on 23 July 1998, at note 649
66
Martin Borowski ,’Legal Pluralism in the European Union’ in Agustín José Menéndez and John Erik Fossum
(eds) Law and Democracy in Neil MacCormick's Legal and Political Theory: The Post-Sovereign Constellation
(Springer, 2011)
67
Dirk Pulkowski The Law and Politics of International Regime Conflict (Oxford University Press, 2014)
68
Anne Peters, ‘The refinement of international law: From fragmentation to regime interaction and politicization’
(2017) 15(3) International Journal of Constitutional Law, 671, 671
69
Jus cogens literally means ‘compelling law’. It designates norms from which no derogation is permitted by way
of particular agreements. Note the Vienna Conventions on the Law of Treaties stipulate that a treaty is void if it
conflicts with jus cogens (Art. 53 and 64)
70
Andrea Bianchi, ‘Human Rights and the Magic of Jus Cogens’ (2008) 19(3) The European Journal of
International Law, 491

to simply enshrine any differences rather than bringing the regimes together71 as
such is not particularly useful in reducing fragmentation.
Despite the above described techniques, the most commonly applied
technique is the systematic interpretation methods set out in the Vienna
Convention72 and interpretational protocols such as lex posterior, lex superior and
lex specialis; 73 each discussed in turn below.
The Vienna Convention sets out a system which allows the resolution of
conflicts between treaties. The Vienna Convention states (unless there is a specific
article in the treaties to the contrary or the parties to the treaties have developed
definitive interpretive practice),74 that (i) it cannot be applied retroactively,75 (ii) the
most recent treaty prevails in the event of a conflict,76 unless the most recent treaty
conflicts with a ‘peremptory norm of general international law’ in which case it is
void, 77 (classifying an event or practice as a ‘peremptory norm’ has not been
universally successful – potential examples would be the abuse of children or
vulnerable adults and human trafficking).78 Therefore the lex posterior principle in
Article 30 seems to be the most readily usable element of the Vienna Convention.
However, this concept does not seem to have been applied by the EU in the context
of the diagonal conflict between the renewable electricity regulatory framework and
the TFEU.
Turning to Lex superior, which is a means of declaring a legal hierarchy
between legal instruments such that superior laws are deemed to take precedence
over others. The main issues with lex superior are (i) the need to have previously
determined distinct instruments and (ii) a means of determining which rule is
superior.79 The EU due to the position of the Treaty, secondary legislation and the
resulting legislation of member states should be an organisation which is able to
implement a lex superior method to resolving conflicts between legal instruments.
71
Joseph Weiler, ‘Why Should Europe be a Democracy: The Corruption of Political Culture and the Principle of
Tolerance’ in Francis Snyder (ed) The Europeanisation of Law: The Legal Effects of European Integration
(Bloomsbury, 2000)
72
Vienna Convention on the law of treaties (with annex). Concluded at Vienna on 23 May 1969. Authentic texts:
English, French, Chinese, Russian, and Spanish. 1155 U.N.T.S. 331, 8 I.L.M. 679, entered into force Jan. 27,
1980 - available at https://treaties.un.org/doc/publication/unts/volume%201155/volume-1155-i-18232-english.pdf
accessed 16 September 2017
73
74
Ibid Article 31(3)
75
Ibid Article 28
76
Ibid Article 30(3)
77
Ibid Article 53
78
Janelle Diller,’ Economic, Social and Cultural Human Rights: The Journey towards Peremptory Norms in
International Law’ (2018) 36(1) Nordic Journal of Human Rights, 19; See Also Kamrul Hossain, ‘The Concept of
Jus Cogens and the Obligation Under The U.N. Charter’ (2005) 3(1) Santa Clara Journal of International Law, 72
79
Silvia Zorzetto, ‘The Lex Specialis Principle and its Uses in Legal Argumentation: An Analytical Inquiry’ (2012) 3
Eunomia, 61, 66

In pursuit of an application of the lex superior principle Article 351(1) TFEU
states that agreements concluded between member states or between and member
state and a third country do not affect the provisions of the TFEU (despite EU
member states being signatory to the Vienna Convention). Also, Article 351(2) TFEU
states that where a member state enters into an agreement which conflicts with the
TFEU the member state shall take appropriate steps to remove the conflict by
amending the arrangement with the third party. Thus, the EU has taken a lex
superior approach to its legal instruments over national laws or other treaties
executed by member states. This approach was also confirmed by the CJEU in
cases such as Costa v ENEL, Van Gen den Loos and others. 80 This approach is
very clearly visible in the concept of ‘autonomy of EU law’. It being noted that Van
Gend holds EU law to be a new order of international law.81 To benefit from this new
legal order Member States have limited their sovereign rights. 82 It having been
stated that to allow the operation of principles of EU law such as 'direct effect' the
EU needs to confirm the autonomous nature of its legal system relative to
international law. 83 The CJEU has stated that EU law has its own constitutional
framework and founding principles, with a sophisticated institutional structure and
an extensive legal framework ensuring its operation. 84 However, in relation to
renewable electricity regulation, the EU and CJEU have implemented a lex
specialis85 (the ‘special status’ outlined above) 86 method to resolving the conflict
between the renewable electricity regulatory framework and the provisions of the
TFEU, the method being confirmed in Parliament v Council87 and the cases outlined
in Chapter 3. The CJEU in applying the lex specialis approach has resolved the legal
80
Case 6/64, Flaminio Costa v Ente Nazionale Energia Elettrica (Enel) ECLI:EU:C:1964:66; See also Case 26/62,
NV Algemene Transport-en Expeditie Onderneming Van Gend en Loos v Nederlandse Administratie der
Belastinger, ECLI:EU:C:1963:1 ; Case C-266/16 Western Sahara Campaign UK v Commissioners for Her
Majesty's Revenue and Customs and Secretary of State for Environment, Food and Rural Affairs
ECLI:EU:C:2018:118; Case C-284/16 Slowakische Republik v Achmea BV ECLI:EU:C:2018:158
81
82
Case 26/62, NV Algemene Transport-en Expeditie Onderneming Van Gend en Loos v Nederlandse
Administratie der Belastinger, ECLI:EU:C:1963:1, para 4
83
Jan-Wilem Rossem ‘The Autonomy of EU Law: More is Less?’ in Ramses Wessel and Steven Blockmans
Between Autonomy and Dependence: The EU Legal Order under the Influence of International Organisations
(Springer, 2013), 22; See also Opinion 1/91 Agreement between EEC & European Economic Area
ECLI:EU:C:1991:490
84
Opinion 2/13 Opinion pursuant to Article 218(11) TFEU — Draft international agreement — Accession of the
European Union to the European Convention for the Protection of Human Rights and Fundamental Freedoms —
Compatibility of the draft agreement with the EU and FEU Treaties ECLI:EU:C:2014:2454, para 158
85
Lex specialis is a method of resolving legal conflicts where specialist legal provisions take precedence over
more general provisions.
86
87
Case C-490/10 Parliament v Council ECLI:EU:C:2012:525 para 65 to 67

conflicts between the renewable electricity framework and the provisions of TFEU,
on necessity and ‘overriding objective’88 grounds.89
The empirical research phase herein finds that market operators view the
use of the lex specialis approach as a potential source of regulatory risk, a finding
discussed on Section 1.3 as a contribution to knowledge.
1.3 Research Issues – Contribution to Knowledge
This research contributes to existing knowledge in the five main ways outlined below
and further detailed in Section 5.3.
Firstly, the research uses case law analysis to consider the interaction of EU
renewable electricity law,90 free movement (Article 34 TFEU) 91 and state aid (Article
107 TFEU),92 building on the academic literature surrounding vertical and horizontal
conflicts,93 to discuss diagonal conflicts in the context of renewable electricity.94 The
research shows the consistent use of lex specialis by the CJEU in resolving these
diagonal conflicts.
Secondly, the research points out that the CJEU’s use of lex specialis in
favour of the renewable electricity law 95 denies consistent application of other
provisions of the Treaty, such as the network provisions contained in Articles 170 to
172 TFEU. The research thus suggests other means of supporting renewable
electricity capacity that would temper the continued use of lex specialis. 96
88
Energimyndigheten ECLI:EU:C:2014:2037, para 76 and 80 - Case C-164/17 Edel Grace and Peter Sweetman v
An Bord Pleanala ECLI:EU:C:2018:593, para 55 – projects may be undertaken for imperative reasons of
overriding public interest, including those of a social or economic nature
89
Odile Ammann, ‘The Court of Justice of the European Union and the Interpretation of International Legal
Norms: To Be or Not to Be a “Domestic” Court?’ in Nicolas Levrat and Pola Cebulak (eds) The European Union
and International Law (Schulthess, 2015)
90
Renewable Energy Directive, Emissions Trading Directive, Effort Sharing Decision, Industrial Emissions
Directive, Energy Efficiency Directive, Electricity Market Directive, Energy Taxation Directive and others
91
92
Kamiel Mortelmans, 'Towards Convergence in the Application of the Rules on Free Movement and on
Competition?' (2001) 38,3 Common Market Law Review, 613, 613.
93
Sybe de Vries ‘The Protection of Fundamental Rights Within Europe’s Internal Market After Lisbon: An
endeviour for more harmony’ in Sybe de Vries, Ulf Bernitz and Stephen Weatherill (eds) The Protection of
Fundamental Rights in the EU After Lisbon (Hart, 2013); Philippe Sands and Paolo Galizzi Documents in
European Community Environmental Law (Cambridge University Press, 2006); Eva Heidbreder ‘Strategies in
multilevel policy implementation: moving beyond the limited focus on compliance’ (2017) 24(9) Journal of
European Public Policy, 1367;
94
Rike Krämer, ‘The Notion of Diagonal Conflicts as a Key Concept of European Conflicts Law’ in Christian Joerges
(ed) After Globalisation, New Patterns of Conflict and their Sociological and Legal Reconstructions (ARENA Report
No 4/11, 2011), 145, 158
95
96
Aviel Verbruggen and Volkmar Lauber, ‘Basic Concepts for Designing Renewable Electricity Support Aiming at
a Full-scale Transition by 2050’ (2009) 37 Energy Policy 5732, 5734

Thirdly, building on general academic literature surrounding legal conflict
resolution, 97 by looking at an analysis framework which divides the Directives
forming the renewables regulatory framework according to the body which holds the
competence98 for that area of EU law (e.g. Commission, member state or a shared
competence) and if the Directive is based on a command and control (C&C)99 or
market-based structure. This original analysis framework has allowed consideration
to be given to which type of Directive C&C or market based combined with the
competence holding structure induces a higher number of conflicts.
The research further showing the Luxembourg Court has allowed
inconsistency to develop between its findings to the detriment of regulatory stability,
allowing retroactive changes to the regulatory framework in national renewable
support schemes100 (e.g. Spain (Charanne)101 and Italy (Scat Punti).102 These cases
highlight issues surrounding the interaction of EU law, (i) its primacy,103 (ii) the right
to regulate (Energy Charter Treaty),104 (iii) consumer protection (RWE Vertrieb105
106
and Schulz-Egbringhoff), (iv) network infrastructure concessions (ASM
97
European Public Policy, 1367
98
Competence is the ability to act in a certain field. The Commission, as the executive of the EU, only acts to the
extent allowed by the Treaty. Energy and the environment are shared competences between the EU and member
states (Article 4 TFEU). The exercise of competences is subject to two principles (Article 5 of the Treaty on EU) –
proportionality (the content and scope of actions may not go beyond what is necessary to achieve the objectives
of the Treaties) and subsidiarity (in the area of its non-exclusive competences, the EU may act only if, and in so
far as, the objective of an action cannot be sufficiently achieved by the EU countries, hence better achieved at EU
level) available at http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=LEGISSUM%3Aai0020 accessed 1 March
2018; See Also Kim Talus and Pami Aalto, ‘Competences in EU energy policy’ in Rafael Leal-Arcas and Jan
Wouters (eds) Research Handbook on EU Energy Law and Policy (Elgar, 2017)
99
Command and Control Regulation being ‘the direct regulation of an activity by legislation that states what is
permitted’ - Phil McManus Environmental Regulation (Elsevier, 2009); See also Beatriz Junquera and Jesús
Ángel Del Brío ‘Preventive Command and Control Regulation: A Case Analysis’ (2016) 99(8) Journal of
Sustainability
100
101
Arbitration 062/2012, Charanne B.V. & Construction Investments S.A.R.L v Kingdom of Spain (January 2016)
Available At http://www.italaw.com/sites/default/files/case-documents/italaw7097_0.pdf
102
Decision 10/2015, Scat Punti Vendita Spa v Agenzia delle entrate - Direzione provinciale di Reggio Emilia,
(October 2015) http://www1.agenziaentrate.gov.it/english/
103
Case C-6/64, Flaminio Costa v Ente Nazionale Energia Elettrica (Enel) ECLI:EU:C:1964:66; See also Case C-
26/62, NV Algemene Transport-en Expeditie Onderneming Van Gend en Loos v Nederlandse Administratie der
104
The Energy Charter Treaty 1994 – available at http://www.energycharter.org/process/energy-charter-Treaty-
1994/energy-charter-Treaty; For an introduction to the Energy Charter Treaty see Graham Coop and Bernhard
Maier, ‘External Relations of EU Energy Regulation’ in Peter Cameron and Raphael Heffron (eds) Legal Aspects
of EU Energy Regulation (Oxford University Press, 2016), 66
105
Case C-92/11 RWE Vertrieb AG v Verbraucherzentrale Nordrhein-Westfalen eV.,ECLI:EU:C:2013:180
106
Joined Cases C-359/11 and C-400/11 Alexandra Schulz v Technische Werke Schussental GmbH und Co. KG
and Josef Egbringhoff v Stadtwerke Ahaus GmbH, ECLI:EU:C:2014:2317

Brescia)107 and (v) the support for renewable energy sources (Plantanol108 – the
Court restricting changes to support for bio-diesel).
Fourthly, the empirical research contributes by setting out the importance to
market participants of the conflicts described and their view of the justification and
robustness (long-term legal sustainability) of the granting to renewable electricity a
‘special status’109 by way of a derogation from the application of free movement and
undistorted competition and other anti-state aid provisions contained in Article
107(1) TFEU110 as part of the application of the overriding objective.111
The empirical research also found Developer Operators have a negative
perception of the value 112 of their investments in renewable generating facilities
because of intervention by national and EU regulatory functions in what is perceived
to be a liberalised electricity market. It being found that the Developer Operators
have been prepared to litigate in relation to the imposition of price caps
(Federutility 113 and Enel) 114 on the grounds of protection under, international
investment law (Commission v Slovakia)115 and the right to property (Essent).116
Lastly the recommendations for the reshaping of the regulatory framework
set out in Chapter 5 outline a requirement to increase transmission network
interconnectedness, simplifying and focusing the regulatory framework on
emissions trading and energy efficiency is not known to be suggested in academic
literature to date.
1.4 Research Methods
107
Case C-347/06 ASM Brescia SpA v Comune di Rodengo Saiano, ECLI:EU:C:2008:416
108
Case C-201/08 Plantanol GmbH & Co. KG v Hauptzollamt Darmstadt, ECLI:EU:C:2009:539
109
Geert van Calster,’ Climate Change and Renewable Energy as a Super Trump for EU Trade Law
However all Essent clear’ (2014) 1 2014 Renewable Energy Law & Policy Review, 60
110
Catherine Barnard, The Substantive Law of the EU: The Four Freedoms, (Oxford University Press 2007)
111
112
Joanna Lewis, ‘The rise of renewable protectionism: Emerging trade conflicts and implications for low carbon
development’ (2014) 14(4) Global Environmental Politics, 10
113
Case C-265/08 Federutility and others v Autorità per l’energia elettrica e il gas ECLI:EU:C:2010:205
114
Case C-242/10 Enel Produzione SpA v Autorità per l’energia elettrica e il gas ECLI:EU:C:2011:861
115
Case C-264/09 Commission v Slovak Republic, ECLI;EU:C:2011:580
116
Joined Cases C-105/12 to C-107/12 Staat der Nederlanden v Essent NV, Essent Nederland BV, Eneco
Holding NV and Delta NV, ECLI:EU:C:2013:677

Renewable electricity, to fulfil the overriding objective of environmental protection,117
has been granted a ‘special status’118 in EU law. The methodological basis for this
research has been shaped by the analysis of this ‘special status’ via mixed socio-
legal methods of doctrinal and empirical research.
The doctrinal research provides a systematic discussion of the EU renewable
electricity regulatory framework, analysing the ‘special status’ and them considers
119
future developments. The doctrinal approach uses a constitutionalist
perspective 120 to consider rule of law and separation of power issues within the
conflicts outlined. Whilst recalling the ‘special status’ could be following a Dworkin
constructive approach to interpretation looking at political or moral concerns, related
to climate change.121
In addition to the doctrinal analysis, the empirical phase, using thematic
analysis122 was undertaken to understand the views of renewable electricity market
participants as to the conflicts and their effect on the market and business practice.
This phased approach not only generates an understanding of the EU’s
structures,123 but how the shared competences124 between the EU and the member
states have been used to put in place a hierarchy of EU and national law to support
the development of renewable electricity generation, before seeking to understand
the views of market participants via empirical research.
The EU’s renewable electricity regulatory framework lends itself to
constitutional analysis,125 considering the implementation of the principles set out by
117
118
Geert van Calster,’ Climate Change and Renewable Energy as a Super Trump for EU Trade Law: However all
Essent clear’ (2014) 1 Renewable Energy Law & Policy Review, 60
119
Terry Hutchinson and Nigel Duncan ‘Defining & describing What We do: Doctrinal Legal Research’ (2012)
17(1) Deakin Law Review, 83, 101; See Also Susan Bartie, ‘The Lingering Core of Legal Scholarship’ (2010)
30(3) Legal Studies, 345; Paul Chynoweth, ‘Legal Research’ in Andrew Knight and Les Ruddock (eds), Advanced
Research Methods in the Built Environment (Wiley-Blackwell, 2008) 37
120
Rafael Leal-Arcas and Andrew Filis, ‘Conceptualizing EU Energy Security through an EU Constitutional Law
Perspective’ (2013) 36 Fordham International Law Journal, 1224; see also Joseph H H Weiler, The Constitution of
Europe – “Do the new clothes have an emperor?”, (Cambridge University Press 1999); Allan Rosas and Lorna
Armati EU Constitutional Law: An Introduction (Hart Publishing, 2012); Robert Schütze European Constitutional
Law (Cambridge University Press, 2012)
121
122
Lorelli Nowell, Jill Norris, Deborah White and Nancy Moules, ‘Thematic Analysis: Striving to Meet the
Trustworthiness Criteria’ (2017) 16(1) International Journal of Qualitative Methods; See also Moira Maguire and
Brid Delahunt, ‘Doing a Thematic Analysis: A Practical, Step-by-Step Guide for Learning and Teaching Scholars’
(2017) 8(3) All Ireland Journal of Teaching and Learning in Higher Education
123
Robert Schütze - European Constitutional Law (Cambridge University Press, 2012), 83
124
Robert Schütze,’ EU Competences: Existence and Exercise’ in Damian Chalmers and Anthony Arnull (eds)
The Oxford Handbook of European Union Law (Oxford University Press, 2015): See Also Article 4(2)(e)
(Environment) and (i) TFEU (Energy) provide for a shared competence between the EU and the member state -
"Shared competence" means that both the EU and its member states may adopt legally binding acts in the area
concerned. However, the member states can do so only where the EU has not exercised its competence or has
explicitly ceased to do so.
125
Nicholas Tsagourias, Introduction – Constitutionalism: a theoretical roadmap’ in Nicholas Tsagourias (ed)
Transnational Constitutionalism: International & European Perspectives (Cambridge University Press 2007)

its founders (Spaak Report), 126 through to the implementation of environmental
protection as a 21st century objective.127 A constitutionalist approach also allows the
EU’s structures 128 to be analysed with a separation of powers, rule of law and
political democracy perspective.129
A multi-level130 and separation of powers perspective helps in the analysis of
where authority (‘competence’131 in the EU context) and policy-making are shared
across the EU’s organisations (namely Commission, EU Parliament, Council of
Ministers, the CJEU and increasingly ACER) 132 and member states, with the
member states agreeing the Treaty, the Commission drafting the Directives (subject
to the normal legislative process) and the member states putting in place
frameworks at the national level against which market participants seek to develop
and operate electricity facilities.133
Besides outlining the regulatory framework and considering the CJEUs
application of lex specialis within the case law, the doctrinal phase allowed the
development of research questions for the empirical research. The empirical
research was undertaken in accordance with the terms of Anglia Ruskin University's
Research Ethics Policy, the university’s research ethics clearance being obtained
on 12 April 2017.
The empirical research phase provides a cross reference as to the
importance to market operators of the legal conflicts analysed during the doctrinal
126
Paul-Henri Spaak, ‘Intergovernmental Committee on European Integration. The Brussels Report on the
General Common Market (abridged, English translation of document commonly called the Spaak Report) (June
1956) Information Service High Authority of The European Community for Coal and Steel
127
COM(2010) 639 final, ‘Energy 2020 - A strategy for competitive, sustainable and secure energy’, Available at
http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:52010DC0639&from=EN ; See Also Klaus
Segbers, ‘The New Global Landscape and Energy Politics in the 21st Century’ in Rafael Leal-Arcas and Jan
128
The EU is composed of 7 institutions - the European Parliament; the European Council; the Council of the
European Union (simply called 'the Council'); the European Commission; the Court of Justice of the European
Union; the European Central Bank - Article 13 of the Treaty on European Union
129
Giacinto della Cananea, ‘Is European Constitutionalism Really Multilevel’ [2009] German-Italian conference
of public law
130
Gary Marks, Liesbet Hooghe and Kermit Blank, ‘European Integration from the 1980’s; State-centric v Multi-
level Governance’ (1996) 34(3) Journal of Common Market Studies, 341
131
132
For an Introduction to the role of ACER see - Raphael Heffron 'Shared Governance': ACER and the Roles of
the National Energy and Competition Regulators in the EU’ in Peter Cameron and Raphael Heffron (eds) Legal
Aspects of EU Energy Regulation (Oxford University Press, 2016)
133
Fritz Scharpf, ‘Introduction: The Problem Solving Capacity of Multi-Level Governance’ (1997) 4(4) Journal of

phase (so called multi-method or triangulation approach).134 The empirical research
overcomes one of the weaknesses 135 of purely doctrinal research which is that
doctrinal analysis will identify an issue, but cannot directly calibrate the importance
of the issue to practitioners in the field.136 The combination of the doctrinal and
empirical allows the clear setting out of the issues of diagonal conflict, and then lets
market operators highlight the importance of these conflicts, as well as how they are
mitigated by market operators. 137
The empirical research consisted of qualitative semi-structured138 interviews
conducted with persons who have a senior position within their organisation or have
a particular expertise. 139 The participants were senior developers, regulatory
specialist, lawyers (external and in-house) and insurers, chosen to understand their
differing perspectives on the legal and economic drivers of the specified areas of EU
Law.140
The interview format was chosen as it allowed the participants to speak
widely, on and around the subject under discussion, allowing ideas and insights to
emerge which may not have been forthcoming as part of answers to a simple
survey.141 Participants were invited to participate by three methods (i) direct contact,
(ii) a general invitation issued at a post experience energy sector conference142 and
(iii) a general invitation issued via ‘LinkedIn’.
Analysis of the data obtained was undertaken using a thematic approach143
with data coding being undertaken to develop a meaningful expression of research
134
John Brewer and Albert Hunter Foundations of Multimethod Research: Synthesizing Styles (Sage, 2006): See
also Ronet Bachman and Russell Schutt The Practice of Research in Criminology and Crimainal Justice (Sage,
2007)
135
Sanne Taekema and Bart van Klink, ‘On the border: Limits and Possibilities of Interdisciplinary Research’, in
Bart van Klink and Sanne Taekema (eds.), Law and Method, Interdisciplinary Research into Law (Tübingen: Mohr
Siebeck, 2011), 7; See Also Elizabeth Chambliss, ‘When do Facts Persuade? Some Thoughts on the Market for
‘Empirical Legal Studies’ (2008) 71(:2)Law and Contemporary Problems 17
136
Paddy Hillyard ‘Invoking Indignation: Reflections on Future Directions of Socio-legal Studies’ (2002) 29 Journal
of Law and Society, 650
137
Reza Banakar, ‘On the Paradox of Contextualisation’, in Reza Banakar (ed.), Normativity in Legal Sociology:
Methodological Reflections on Law and Regulation in Late Modernity (Springer, 2014), 91
138
William Harvey, ‘Strategies for Conducting Elite Interviews’ (2011) 11(4) Qualitative Research, 431; See Also
Thomas Diefenbach, ‘Are case studies more than sophisticated storytelling?:Methodological problems of
qualitative empirical research mainly based on semi-structured interviews’ (2009) 43 Quality & Quantity, 875; Lisa
Webley, ‘Qualitative Approaches to Empirical Legal Research’ in Peter Cane and Herbert Kritzer, (eds) The
Oxford Handbook of Empirical Legal Research (Oxford University Press, 2010)
139
The participants would be those described in academic literature as ‘elite’ – Kari Lancaster, ‘Confidentiality,
anonymity and power relations in elite interviewing: conducting qualitative policy research in a politicised domain’
(2017) 20(1), 93,93; See also Zoë Slote Morris, ‘The Truth about Interviewing Elites’ (2009) 29(3), 209
140
Robert Weiss, Learning from Strangers: The Art and Method of Qualitative Interview Studies (Free Press,
1994)
141
Ray Galvin, ‘How many interviews are enough? Do qualitative interviews in building energy consumption
research produce reliable knowledge?’ (2015) 1 Journal of Building Engineering 2,2
142
Global EPC Contract and Risk Management Conference (London / 12-13 OCT 2017)
143
Trustworthiness Criteria’ (2017) 16(1) International Journal of Qualitative Methods; See also Moira Maguire and
Brid Delahunt, ‘Doing a Thematic Analysis: A Practical, Step-by-Step Guide for Learning and Teaching Scholars’
(2017) 8(3) All Ireland Journal of Teaching and Learning in Higher Education

findings.144 The themes found ranged from a perception of regulatory uncertainty,
business risks and mitigations to views on future developments in the regulatory
framework.
The research was conducted in 16 interviews, with the number of interviews
being seen to provide a spectrum of market operator views and achieve substantive
‘data saturation’145 such that additional data acquisition was unnecessary. Whilst
several authors146 have sought to define methods for allowing the declaration of data
saturation (such as no new themes emerging or coded data being repeated by
interviewees), it has also been demonstrated that for interview research amongst
‘elite’ populations saturation can occur within a data set of only twelve interviews,
with basic elements of meta-themes being present with as few as six interviews.147
Additionally, numerical methods were considered to give a measure of the
probability of a theme emerging from the interviewees and to consider when
saturation was achieved within the research data for all practical purposes.148 The
numerical methods shows that based on a population of elite market operators of 16
respondents, however, as a result of secondary discussions some 22 interviews
were held such that if the view was only held by 10%, or less, of the population
confidence would be over 90% that the view or theme has emerged (the numerical
methods used are outlined in more detail in Annex 8).
144
Coding is an analysis process whereby the transcripts of the interviews are broken down by phrase, verb or
noun and by so doing labelling it (a ‘code’) and grouping these parts into a more meaningful expression which can
be developed into a theme or finding. Code is a tag or label to give meaningful expression to a parcel of text –
developed from Matthew Miles and Michael Huberman Qualitative Data Analysis (SAGE, 1994)
145
‘Data saturation’ is generally definted in literature as the point where no additional or new themes will emerge
from the collection of more data - Barney Glaser and Anselm Strauss Discovery of Grounded Theory Strategies
for Qualitative Research (Routledge, 1967); See Also Melanie Birks and Jane Mills Grounded Theory: A Practical
Guide, (2nd edn. Sage, 2015); Lisa Given 100 Questions (and Answers) About Qualitative Research (Sage,
2016); Ellen Olshansky, Generating theory using grounded theory methodology. In: Mary de Chesnay (ed.)
Nursing Research Using Grounded Theory: Qualitative Designs and Methods in Nursing (Springer, 2015), 19-28
146
Benjamin Saunders, Julius Sim, Tom Kingstone, Shula Baker, Jackie Waterfield, Bernadette Bartlam, Heather
Burroughs and Clare Jinks, ‘Saturation in qualitative research: exploring its conceptualization and
operationalization’ (2018) 52(4) Quality & Quantity, 1893; Clive Boddy, ‘Sample size for qualitative research’
(2016) 19(4) Journal of Qualitative Market Research, 426; Alan Bryman, ‘How many qualitative interviews is
enough?’ in Sarah Baker and Rosalind Edwards (eds.) How Many Qualitative Interviews is Enough? Expert
Voices and Early Career Reflections on Sampling and Cases in Qualitative Research, ESRC National Centre for
Research Methods, University of Southampton, Southampton (2012), 18; Jill Francis, Marie Johnston, Clare
Robertson, Liz Glidewell, Vikki Entwistle, Martin Eccles and Jeremy Grimshaw ‘What is an adequate sample size?
Operationalising data saturation for theory-driven interview studies’ (2010) 25(10) Psychology & Health, 1229;
Patricia Fusch and Lawrence Ness, ‘Are we there yet? Data saturation in qualitative research’ (2015) 20(9) The
Qualitative Report, 1408; Greg Guest, Arwen Bunce and Laura Johnson, ‘How Many Interviews Are Enough? An
Experiment with Data Saturation and Variability’ (2006) 18(1) Field Method, 59; Konstantina Vasileiou, Julie
Barnett, Susan Thorpe and Terry Young, ‘Characterising and justifying sample size sufficiency in interview-based
studies: systematic analysis of qualitative health research over a 15-year period’ (2018) BMC Medical Research
Methodology; Monique Hennink, Bonnie Kaiser and Vincent Marconi, ‘Code Saturation Versus Meaning
Saturation: How Many Interviews Are Enough?’ (2016) 27(4) Qualitative Health Research, 591
147
Greg Guest, Arwen Bunce and Laura Johnson, ‘How Many Interviews Are Enough? An Experiment with Data
Saturation and Variability’ (2006) 18(1) Field Methods, 59
148
research produce reliable knowledge?’ (2015) 1 Journal of Building Engineering, 2,2

1.5 EU’s Need for Available Energy – Importance of Energy Policy & Stable
Regulatory Framework
Energy policy generally, and that related to electricity specifically, is important at the
EU and member state level. 149 In recent years the availability of electricity has
become core to the member states’ ability to discharge their economic and social
functions.150 Every aspect of modern life151 requires available and affordable energy
- from mass communications and transport, to food production and health. Therefore
‘security of supply’152 has become a highly political issue for EU members.153 It being
said that accessible and reliable supplies of electricity, have the characteristics of a
‘public good’.154 In relation to this ‘public good’ the EU Commission is said to be
acting as a ‘trustee of the regional interest’.155 In the long term, the EU's energy
security is inseparable from, and significantly fostered by, its need to move to a
competitive, low-carbon economy which reduces the use of imported fossil fuels.156
Energy policy is an area 157 where member states share sovereignty to derive a
better future for all.158
With this background, the EU’s current energy policy has two main themes;
(i) the lowering of carbon emissions 159 to reduce the environmental impact of
149
Penelope Crossley, ‘The role of renewable energy law and policy in meeting the EU’s energy security
challenges’ in Rafael Leal-Arcas and Jan Wouters (eds) Research Handbook on EU Energy Law and Policy
(Elgar, 2017)
150
Catherine Redgwell, ‘Energy, Environment and Trade in the European Community’ (1994) 12 Journal of
Energy & Natural Resources Law 128, 140
151
Thomas-Olivier Léautier and Claude Crampes,’ Liberalisation of the European electricity markets: a glass half
full’ (2016) Toulouse School of Economic Management Working Paper available at http://fsr.eui.eu/liberalisation-
european-electricity-markets-glass-half-full accessed 21 November 2017
152
Security of Supply means ‘the ability to ensure the continued satisfaction of essential energy needs by means
of, on the one hand, sufficient internal resources exploited under acceptable economic conditions and, on the
other, of accessible, stable and diversified energy sources’ found in
http://europedia.moussis.eu/books/Book_2/6/19/03/?all=1 accessed 14 March 2018
153
COM 330 (2014) ‘European Energy Security Strategy’
154
Public goods are those goods that cannot be provided selectively to only certain members of the public; See
Nicole Robins and Tridevi Chakma,’ State Aid in Energy under the Spotlight: The implications of the Hinkley Point
Decision’ (2016) 2 European State Aid Quarterly, 247, 251
155
Gerd Winter, ‘Introduction’ in Gerd Winter (ed.), Multilevel Governance and Global Environmental Change
(Cambridge University Press, 2006), 24 – The general duties of the Commission in this regard being set out in
Article 17(1) TEU: The Commission shall promote the general interest of the Union and take appropriate initiatives
to that end. It shall ensure the application of the Treaties, and of measures adopted by the institutions pursuant to
them. It shall oversee the application of Union law under the control of the Court of Justice of the European Union.
It shall execute the budget and manage programmes. It shall exercise coordinating, executive and management
functions, as laid down in the Treaties. With the exception of the common foreign and security policy, and other
cases provided for in the Treaties, it shall ensure the Unionʼs external representation. It shall initiate the Unionʼs
annual and multiannual programming with a view to achieving interinstitutional agreements’
156
COM 330 (2014) ‘European Energy Security Strategy’, 3; See Also Penelope Crossley, ‘The role of renewable
energy law and policy in meeting the EU’s energy security challenges’ in Rafael Leal-Arcas and Jan Wouters
(eds) Research Handbook on EU Energy Law and Policy (Elgar, 2017)
157
Matthew Burke and Jennie Stephens, ‘Energy democracy: Goals and policy instruments for sociotechnical
transitions’ (2017) 33 Energy Research & Social Science, 35
158
John Gough, The Social Contract (Clarendon Press, 1936), 2-3; see also Celeste Friend Social Contract
Theory (International Encyclopaedia of Philosophy, 2004)
159
‘Carbon Gases are those gases, such as water vapour, carbon dioxide, nitrous oxide, methane,
hydrofluorocarbons (HFCs), perfluorocarbons (PFCs) and sulphur hexafluoride, that are transparent to solar
(short-wave) radiation but opaque to long-wave (infrared) radiation, thus preventing long-wave radiant energy
from leaving earth’s atmosphere. The net effect is a trapping of absorbed radiation and a tendency to warm the
planet's surface.’ - definition contained in Dag Klackenberg, Christian Egenhofer and Kyriakos Gialoglou

electricity generation and (ii) increasing security of supply 160 by reducing the
dependence on imported energy (shortening supply chains). 161 These policy
objectives are delivered by binding targets for carbon emission reductions,
renewable energy use (both electricity and bio-diesel) and energy savings.162 The
European Council of March 2007 emphasised that the EU is committed to
transforming Europe into a highly energy-efficient and low greenhouse-gas-emitting
economy; making a firm independent commitment to achieve a 20% reduction in
carbon emissions by 2020 compared to 1990 levels.163
A stable regulatory framework has been acknowledged by the EU as a key
enabler in achieving these goals.164 This was a factor confirmed by the Developer
Operators during the empirical research set out in Chapter 5.
1.6 EU Renewable Electricity Law – Its Development and the Electricity

Trilemma
The EU’s energy policy seeks to reconcile several issues (i) it seeks to resolve the
trilemma of reliability, sustainability and affordability,165 as well as, in more recent
times, reducing climate change and achieving electricity market liberalisation166and
(ii) enhancing its social acceptance, 167 which allows development permits to be
obtained readily. To resolve these issues, a holistic regulatory framework 168 is
‘Rethinking the EU Regulatory Strategy for the Internal Energy Market’ (2004) Task Force Report No 52, Centre
for European Policy Studies
160
European Commission Com (2000) 769 ‘Towards a European Strategy for the Security of Energy Supply’
defines energy security as ‘The uninterrupted physical availability of energy products on the market, at a price
which is affordable for all consumers (private and industrial), while respecting environmental concerns and looking
towards sustainable development’
161
European Commission COM (2014) 330 ‘European Energy Security Strategy’; see also European
Commission ‘The European Union Leading In Renewables’ Dec 2015, 7; see also Dejan Ž. Đorđević and Milan
Veselinović ‘The Policy of Renewable Energy Sources in the Function of the Environmental Protection in the EU’
(2015) 53 (3) Economic Themes 343
162
Article 2.1 Council Directive 2009/28/EC 23 April 2009 Promotion of the use of energy from renewable sources
OJ L140/16 (Renewable Energy Directive) available at http://eur-lex.europa.eu/legal-: In relation to a general
introduction to the regulatory framework see - European Commission COM(2013) 169 Green Paper ‘A 2030
framework for climate and energy policies’
163
EU Decision (406/2009/EC ) 23 April 2009, ‘The effort of Member States to reduce their carbon emissions to
meet the Community’s carbon emission reduction commitments up to 2020’ (known as the ‘Effort Sharing
Decision’), OJ L 140/137, preamble para 4
164
Directive 2009/28/EC Renewable Energy Directive, Recital 25
165
David Newbury ‘Questioning the EU Target Electricity Model – how should it be adapter to deliver the
Trilemma’ [2016] Cambridge University, Energy Policy Research Group Working Paper: See Also Raphael
Heffron Energy Law: An Introduction (Springer, 2014)
166
Christian Egenhofer, Integrating Security of Supply, Market Liberalization and Climate Change Appearing in
Michael Emerson, Readings in European Security, (Vol 4 Centre for European Policy Studies, 2007); See also
Hazel Nash, ‘The European Commission’s Sustainable Consumption and Production and Sustainable Industrial
Policy Action Plan’ (2009) 17 Journal of Cleaner Production 496
167
Lucia Elghali, Roland Clift, Philip Sinclair, Calliope Panoutsou and Ausillo Bauen, ‘Developing a Sustainability
Framework for the Assessment of Bioenergy Systems’ (2007) 35 Energy Policy 6075; See also Birgitte Olsen,
‘Renewable energy:public acceptance and citizens’ financial participation in Daniel Faber and Marjan Peeters
(eds) Climate Change Law (Elgar, 2016)
168
Carmelina Cosmi, Jolanta Dvarionienė, Isabel Marques, Senatro Di Leo, Giedrius Gecevičius, Inga
Gurauskienė, Gisela Mendes, Catarina Selada, ‘A Holistic Approach to Sustainable Energy Development at
Regional Level: The RENERGY Self-Assessment Methodology’ (2015) 49 Renewable and Sustainable Energy
Reviews, 693, 706

needed that considers and balances environmental and socio-economic
concerns.169 Energy justice is also able to contribute to resolving the trilemma by
using an equitable approach to energy use and infrastructure investment.170
The EU’s energy policy has thus evolved to be focused on two limbs (i)
sustainability and (ii) security of supply. This section gives a brief history of the
development of the EU’s energy policy, before considering the sustainability,
security of supply and their satellite concepts.
In addressing the economic imperatives of the 1950s, the Treaty of Rome
makes scant mention of environmental protection or climate change.171 Therefore
the regulatory policy of the time focused on making electricity available, reliable and
affordable; with little focus on environmental concerns.172
The 1972 Paris Heads of State Summit is regarded as the first step to an EU
environmental and energy policy,173 leading to the November 1973174 Environmental
Action Programme.175
The EU’s initial environmental policy was not universally acclaimed and was
said to be ‘incidental, responsive and unarticulated’.176 Additionally it was said to be
inconsistent leading to pervasive neglect of its cumulative impacts.177
EU energy policy has evolved from these first steps due to climate change
being seen as a complex and intractable problem, characterised as ‘super
wicked’,178 with far reaching, long-term and potentially irreversible consequences,
an ‘issue from hell’179 and the ‘hardest political problem the world has ever had to
deal with’.180 The EU has described climate change in terms of risk by stating ‘one
169
Matthew Burke and Jennie Stephens, ‘ Political power and renewable energy futures: A critical review’ (2018)
35 Energy Research & Social Science 78
170
Raphael Heffron, Darren McCauley, and Benjamin Sovacool, ‘Resolving society's energy trilemma through the
Energy Justice Metric’ (2015) 18 Energy Policy, 168
171
Ludwig Krämer, ‘The Genesis of EC Environmental Principles’ (2003) 7 College of Europe
172
Francis McGowan, ‘Can the European Union’s Market Liberalism Ensure Energy Security in a Time of
“Economic Nationalism”’ (2008) 4(2) Journal of Contemporary European Research, 93, 94
173
Christoph Knill and Duncan Liefferink, ‘The Establishment of EU Environmental Policy’ in Andrew Jordan and
Camilla Adelle (eds), Environmental Policy in the European Union: Contexts, Actors and Policy Dynamics (3rd
edn, Earthscan 2012); See Also Bulletin of the European Communities, (No. 10, 1972), ‘Meeting of the Heads of
State or Government – Paris 19-21 October 1972 - The First Summit Conference of the Enlarged Community -
Official Communiqué,
174
Philipp Hildebrand, ‘The European Community's environmental policy, 1957 to 1992', in David Judge (ed) A
Green Dimension for the European Community, (Frank Cass 1992),13
175
European Community COM ‘Programme of Action of the European Communities on the Environment’ 1973
OJ 112; See Also Philipp Hildebrand, ‘The European Community's environmental policy, 1957 to 1992', in David
Judge (ed) A Green Dimension for the European Community, (Frank Cass 1992),13; See Also Stanley Johnson
and Guy Corcelle, The Environmental Policy of the European Communities, (Graham & Trotman, 1989)
176
Laurens Jan Brinkhorst ‘The Road to Maastricht’ (1993) 20(1) Ecology Law Quarterly, 7
177
Uma Outka, ‘The Renewable Energy Footprint’ (2011) 30 Stanford Environmental Law Journal, 36; See also
Steven Ferrey, ‘The Failure of International Global Warming Regulation to Promote Needed Renewable Energy’
(2010) 37 Boston College Environmental Affairs Law Review, 67
178
Richard Lazarus, ‘Super Wicked Problems & Climate Change: Restraining the Present to Liberate the Future’
(2009) Cornell Law Review 1153
179
Al Gore, The Future: Six Drivers of Global Change (Random House 2013) 314
180
The Economist ‘Getting Warmer’ The Economist, 3 December, 2009, available (subscription required) at:
http://www.economist.com/specialreports/displaystory.cfm?story_id=E1_TQJJQRSN assessed 15 September
2015

of the greatest challenges facing today’s environmental policymakers is how to deal
with complex risks, such as those associated with climate change’. 181 These
sentiments have resulted in the CJEU describing climate change as ‘one of the
greatest social, economic and environmental threats the world faces’.182Therefore
environmental, energy policy and the drafting of the various EU Treaties over the
last 30 years have been guided, amongst other objectives, by the need to mitigate
climate change and increase security of supply, 183 with a , realisation that
environmental pollution had to be addressed multi-nationally.184 This process limited
national sovereignty 185 and the developed a regional approach to address the
issues. The Single European Act in 1986 included Articles related to the
environment, giving economic and ecological objectives a more equivalent status186
conferring on environmental protection, weight and importance.187
Reports for individual EU member states (the 2006 Stern Review,188 to the
2018 Graham Institute Study)189 strengthened the resolve of member states to act
on climate change and placed environmental protection at the centre of EU energy
policy, due to the reported economic,190 environmental191 and social/ethical192 costs
of failing to mitigate climate change. Hence environmental protection (reducing
carbon emissions) developed into one of the EU’s leading objectives for the 21st
century.193 It should be noted that the EU’s climate change policy has effectively
181
Science for Environment Policy ‘The Precautionary Priniple: decision making under uncertainty’ (2017) Future
Brief 18. Produced for the European Commission DG Environment by the Science Communication Unit, UWE,
Bristol
182
Case T-263/07 Estonia v Commission ECLI:EU:T:2009:351 par 49
183
Dieter Helm, ‘The European framework for energy and climate policies’ Energy Policy Vol 64 January 2014, 29,
31
184
Christoph Knill and Duncan Liefferink, ‘The Establishment of EU Environmental Policy’ in Andrew Jordan and
Camilla Adelle (eds), Environmental Policy in the European Union: Contexts, Actors and Policy Dynamics (3rd
edn, Earthscan 2012)
185
Anita Halvorssen, ‘International Law and Sustainable Development – Tools for Addressing Climate Change’
(2010-2011) 39 Denver Journal International Law & Policy, 397
186
John McCormick, Environmental Policy in the European Union (Palgrave 2001)
187
Adapted from Ronald Dworkin Taking Rights Seriously (Bloomsbury, 2013), 43 – stating that principles of law
have the ‘dimensions of weight or importance’
188
Nicholas Stern, ’Stern Review: The economics of climate change’, (2006), Report presented to the UK Prime
Minister and the Chancellor of the Exchequer on the Economics of Climate Change. available at http://www.hm-
treasury.gov.uk/independent_reviews/stern_review_economics_climate_change/sternreview_index.cfm;.accessed
27 Sept 2017
189
Simon Dietz, Alex Bowen, Baran Doda, Ajay Gambhir, and Rachel Warren, ‘The Economics of 1.5°C Climate
Change’ (2018) 43 Annual Review of Environment and Resources
190
William Nordhaus The Climate Casino: Risk Uncertainty and Economics of a Warming World (Yale University
Press, 2013); See also Gernot Wagner and Martin Weitzman Climate Shock: The Economic Consequences of a
Hotter Planet (Princeton University Press, 2015)
191
Daniel Bodansky The Art and Craft of International Environmental Law (Harvard University Press, 2010)
192
Stephen Gardiner , Simon Caney and Dale Jamieson Climate Ethics: Essential Readings (Oxford University
Press, 2010); See Also Pope Francis ‘Laudato Si – Care for our common home’ [2015]
http://w2.vatican.va/content/francesco/en/encyclicals/documents/papa-francesco_20150524_enciclica-laudato-
si.html; See Also Raphael Heffron and Darren McCauley, ‘Achieving sustainable supply chains through energy
justice’ (2014) 123 Applied Energy 435
193
Klaus Segbers, ‘The New Global Landscape and Energy Politics in the 21st Century’ in Rafael Leal-Arcas and
Jan Wouters (eds) Research Handbook on EU Energy Law and Policy (Elgar, 2017); See Also World Commission
on Environment and Development (‘Brundtland Commission’), Our Common Future, (Oxford University Press,
1987), 43;.Rajendra Pachauri and Andy Reisinger, Contribution of Working Groups I, II and III to the Fourth
Assessment Report of the Intergovernmental Panel on Climate Change (Inter-Governmental Panel on Climate

addressed the ‘flow’ of carbon emissions into the atmosphere, rather than
particularly addressing the ‘stock’ of atmospheric carbon, when global warming is a
stock problem. Therefore, although under used and under enforced, the Carbon
Capture and Storage Directive194 and the polluter-pays principle are important.195
An outline of the concepts upon which the EU’s renewable electricity
regulatory framework is built is set out in Annex 1 (emissions reduction,
sustainability, precautionary principle and ‘polluter pays’)
1.7 EU Carbon Emissions Reduction Objective
The objective of reducing carbon emissions is very much within the sustainability
limb of the EU’s renewable energy policy. It is known that the energy industry and
the EU are complex entities 196 and as such the EU has set out the general
framework in its 2020 energy strategy. 197 This strategy was set out despite
challenges to the science of global warming from many traditional energy
companies.198
The complexity is reflected in the regulatory framework which contains a
broad set of initiatives ranging from support for the development of renewable
electricity (Renewable Energy Directive),199 to the carbon emissions reductions of
the Effort Sharing Decision. 200 As the renewable energy regulatory framework is
based on a Directives structure, it requires member state implementation which
Change 2009) , 104; see also Miranda Schreurs and Yves Tiberghien, ‘Multi-Level Reinforcement: Explaining
European Union Leadership in Climate Change Mitigation’ (2007) 7(4) Global Environmental Politics 19;
Sebastian Oberthur and Claire Roche Kelly, ‘EU Leadership in International Climate Policy: Achievements and
Challenges’ (2008) 43(3) International Spectator; John Schmidt, ‘Why Europe Leads on Climate Change’, (2008)
50(4) Survival 83
194
Council Directive 2009/31/EC 23 April 2009 on the geological storage of carbon dioxide OJ L140/114 (Carbon
Capture & Storage Directive)
195
Glenn Harrison ‘Stocks and Flows’ in Steven Durlauf and Lawrence Blume (eds) The New Palgrave Dictionary
of Economics (Palgrave Macmillan, 2008); See Also Daniel Bodansky, Jutta Brunnée, and Lavanya Rajamani
International Climate Change Law (Oxford University Press, 2017)
196
Giuseppe Martinico The Tangled Complexity of the EU Constitutional Process: The Frustrating Knot of Europe
(Routledge, 2013) 36; See also Peter Cameron, ‘The Internal Energy Market – Redefining Objectives’ Peter
Cameron and Raphael Heffron (eds) Legal Aspects of EU Energy Regulation (Oxford University Press, 2016), 27
197
COM(2010) 639, ‘Energy 2020 - A strategy for competitive, sustainable and secure energy’, Available at
<http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:52010DC0639&from=EN> accessed 16 July
2017; see also Michal Natorski and Anna Surralles, ‘Securitising Moves to Nowhere? The Framing of the
European Union’s Energy Policy’ (2008) 4 Journal of Contemporary European Research 71
198
David Levy, ‘Business and the Evolution of the Climate Regime: The Dynamics of Corporate Strategies’ in
David Levy and Peter Newell (eds), The Business of Global Environmental Governance (Massachusetts Institute
of Technology, 2005) 73
199
200

creates a multi-layered 201 and polycentric 202 set of obligations. However, the
renewable electricity regulatory framework goes beyond the EU's Kyoto Protocol.203
The EU’s 2020 energy strategy204 states that the well-being of the EU is
dependent on safe, secure, sustainable and affordable energy. The 2020 energy
strategy also acknowledges that electricity generation produces around 80% of the
EU's carbon emissions;205 therefore a focus of energy policy is the reduction in
carbon emissions from electricity generation.206
The current EU regulatory framework is characterised as ‘20-20-20 by
2020’ 207 – a 20% reduction in carbon emissions, 208 switching 20% of electricity
generation capacity to renewables and achieving a 20% reduction in energy usage
due to energy efficiency by the year 2020.209
Fulfilling these goals has required member state’s electricity markets to focus
on the achievement of environmental targets, rather than driving for the lowest
possible cost of electricity production.210 These EU environmental targets should be
seen against the forecast increase of overall global energy demand of 28% by
2040.211 The EU’s energy regulatory framework therefore does not rely on individual
behavioural change, but seeks to shape consumption patterns at the societal
level.212
201
Bruno Simma, ‘Bliateralism and Community Interest in the Law of State Responsibility’ in Yoram Dinstein (ed),
International Law at a Time of Perplexity: Essays in Honour of Shabtai Rosenne (Martinus Nijhoff 1989) 822-23
202
Giuseppe Bellantuono ‘Renewables, Investments, and State Aids: Exploring the Legal Side of Polycentricity’
[2017] Institute of European Law Birmingham Law School Working Paper 04/2017
203
Rafael Leal-Arcas and Andrew Filis, ‘Legal Aspects of the Promotion of Renewable Energy within the EU and
in Relation to the EU's Obligation in the WTO’ (2014) 3(1) Renewable Energy Law & Policy
204
COM(2010) 639 final, ‘Energy 2020 - A strategy for competitive, sustainable and secure energy’, Available at
http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:52010DC0639&from=EN
205
ibid para 1
206
Rajendra Pachauri and Andy Reisinger, Contribution of Working Groups I, II and III to the Fourth Assessment
Report of the Intergovernmental Panel on Climate Change (Inter-Governmental Panel on Climate Change 2009),
104; See Also The definition relating to which types of electricity facilities are regarded as renewable is contained
in the 2014 Guidelines on state aid for environmental protection and energy (Communication from the
Commission ‘Guidelines on State aid for environmental protection and energy 2014-2020’ - (2014/C 200/01)) -
with renewable energy including wind, solar and hydropower. It is interesting to note that nuclear energy, which
also does not emit carbon, is excluded whilst biomass, landfill gas, sewage treatment plant gas and biogases are
defined as renewable, all of which emit carbon as a bio-product of combustion to generate electricity
207
Eurostat ‘Europe 2020 indicators - climate change and energy’ (2016), available at
http://ec.europa.eu/eurostat/statistics-explained/index.php/Europe_2020_indicators_-
_climate_change_and_energy accessed 10 January 2016
208
EU COM 0482/2016 ‘on binding annual carbon emission reductions by Member States from 2021 to 2030 for a
resilient Energy Union and to meet commitments under the Paris Agreement’ available at http://eur-
lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:52016PC0482 accessed 1 May 2018, Recital 1
209
Andreas Löschel and Oliver Schenker,’On the Coherence of Economic Instruments: Climate, Renewables and
Energy Efficiency Policies’ (2014) Energy Tax & Regulatory Policy Conference CESInfo
210
David Newbury ‘Reforming Competitive Electricity Markets to Meet Environmental Targets’ (2012) 1(1) Journal
of Economics of Energy & Environmental Policy
211
Energy Information Administration, ‘International Energy Outlook 2017’ 14 September 2017 available at
https://www.eia.gov/outlooks/ieo/pdf/0484(2017).pdf accessed 9 January 2018
212
Matthew Burke and Jennie Stephens, ‘Political power and renewable energy futures: A critical review’ (2018)
35 Energy Research & Social Science, 78; See also Anna-Kaisa Kosenius and Markku Ollikainen, ‘Valuation of
environmental and societal trade-offs of renewable energy sources’ (2013) 62 Energy Policy 1148; See also
Kirsten Gram-Hanssen, ‘Consuming Technologies – Developing Routines ‘ (2008) 16(11) Journal of Cleaner
Production 1181

The EU’s regulatory framework restricts carbon emissions from industrial
and domestic activities via the Industrial Emissions Directive 213 and the Energy
Efficiency Directive214 respectively. The regulatory framework has also put in place
a trading mechanism for carbon emissions and credits (via the European Emissions
Trading Mechanism, EU-ETS, implementing the Emissions Trading Directive215).216
To control the emission of the six gases named in the Kyoto Protocol,217 not traded
via the EU-ETS, the Effort Sharing Decision218 puts in place a regulatory mechanism
for these gases (although bring the EU-ETS and the Kyoto gases within a common
trading platform is a future development – Section 2.11). The Renewable Energy
Directive also establishes a target for 10%219 of road transport fuel to be derived
from renewable sources across all member states by 2020.220
It is the number of interlocking Directives and Regulations that make the
renewable energy regulatory framework a masterpiece of complexity,221 developed
from the so called first,222 second223 and third224 energy regulatory packages to the
2030225 and 2050226 energy strategies.
1.8 Security of Supply
213
Council Directive (EC) 2010/75/EC 24 November 2010 – Industrial Emissions (integrated pollution prevention
and control) OJ L334/17 Available at http://ec.europa.eu/environment/industry/stationary/ied/faq.htm
214
215
216
Michael Grubb and Karsten Neuhoff, ‘Allocation & Competitiveness in the EU Emissions Trading Scheme:
Policy Overview’, (2006) 6 Journal of Climate Policy, 35
217
Kyoto Protocol to the United Nations Framework Convention on Climate Change (1998) Annex A - carbon
dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs) and
sulphur hexafluoride (SF6); available at http://unfccc.int/kyoto_protocol/items/2830.php
218
Commission Decision No 406/2009/EC 23 April 2009 Reduction in carbon emissions to meet the Community’s
carbon emission reduction commitments up to 2020’ (Effort Sharing Decision) OJ L 40/136
219
Article 21 (1) Renewable Energy Directive
220
Bio-diesel is divided into two main types (i) Bio-diesel: produced through a process known as
transesterification, which separates glycerine from vegetable oil, leaving bio-diesel. The glycerine can then be
used in the making of other products, such as soap. Bio-diesel can be used as a straight fuel, or blended with
mineral diesel to create a diesel blend - both types can be used without any engine modification. Current EU
regulations allow for blends of transport fuel to be up to 7% bio-diesel, .(ii) Bio-ethanol: produced from plants such
as maize, wheat, sugar beet and sugar cane, through a process of fermentation, distillation and dehydration.
Brazil is currently the world’s largest producer, with almost half of all fuel used in Brazilian cars being bio-ethanol.
It can be used as a 5% blend with petrol in unmodified engines. Through the Fuel Quality Directive, EU
regulations now permit blends of up to 10% bio-ethanol. Higher blends or use as a direct substitute for petrol
require some engine modifications. Council Directive 98/07/EC 23 April 2009 The specification of petrol, diesel
and gas-oil and introducing a mechanism to monitor and reduce carbon emissions (Fuel Quality Directive) OJ
L140/88
221
222
Council Directives 96/92/EC concerning common rules for the internal market in electricity and 98/30/EC on
common rules for the internal market in natural gas
223 223
http://ec.europa.eu/competition/sectors/energy/overview_en.html
224
https://ec.europa.eu/energy/en/topics/markets-and-consumers/market-legislation
225
COM(2016) 860 30 November 2016 ‘Clean Energy For All Europeans’; See
www.ec.europa.eu/clima/policies/strategies/2030_en#tab-0-1
226
EU COM (2011) 112: A Roadmap for moving to a competitive low carbon economy in 2050 (08 Mar 2011)
available at www.ec.europa.eu/clima/policies/strategies/2050_en#tab-0-1 accessed 23 March 2018

As stated, an objective of EU energy policy is security of supply,227 reducing the
dependence on imported energy (shortening energy supply chains), 228 reducing
political risk associated with energy supply,229 making energy production EU based
and sustainable by using renewables.230 Security of supply is the second limb of the
EU’s energy policy and as such seeks to ensure that energy is available as needed.
The ‘security of supply’ objective of the EU’s energy framework is considered
essentially delivered by a focus on the reduction of carbon emissions and the growth
of renewable energy – hence these goals are part of the same strategy, with work
to achieve one helping deliver the other.231
The EU is considered not to focus on sustainability but on the proxy objective
of carbon emissions reduction, as most of the renewables energy regulatory
framework targets emissions reduction (Emissions Trading Directive,232 Renewable
Energy Directive, 233 Industrial Emissions Directive, 234 and the Effort Sharing
Decision)235 rather than security of supply. As an example, the EU’s Security of
Electricity Supply Directive236 is only focussed on the short-term robustness of the
dispatch237 of electricity rather than being focussed on the diversification of sources
of electricity in terms of fuel type and geographic location.
As such, ‘security of supply’ and the second limb of the EU’s energy policy
does not form a focus of this research project, with the focus remaining with the
balance of the Directives seeking to reduce carbon emissions.
227
Penelope Crossley ‘The role of renewable energy law and policy in meeting the EU’s energy security
challenges’ in Rafael Leal-Arcas and Jan Wouters (eds.) Research Handbook on EU Energy Law and Policy
(Elgar, 2017)
228
Commission ‘The European Union Leading In Renewables’ Dec 2015, 7; see also Dejan Đorđević and Milan
229
Gokhan Ozkan, ‘Global Energy Security, International Politics and Renewable Energy Sources’ (2018) 5(1)
International Journal of Multidisciplinary Approach and Studies, 29
230
https://ec.europa.eu/energy/en/topics/renewable-energy accessed 28 December 2017
231
Francesco Gracceva and Peter Zeniewski,’ A systemic approach to assessing energy security in a low-carbon
EU energy system’ (2015) 123 Applied Energy, 345
232
233
234
and control) OJ L334/17 (Industrial Emission Directive)
235
236
Directive 2005/89/EC of 18 January 2006 ‘concerning measures to safeguard security of electricity supply and
infrastructure investment’ OJ L 33/22
237
‘ Dispatch of generating facilities means the short-term determination of the economically optimal output of a
network, at the lowest possible cost, subject to transmission capacity and operational constraints. ’ -P. Palermo
‘Approaches to Generation Dispatch in Transmission Planning’ (2009) 135 CIGRE

1.9 EU Free Trade Principles – Free Movement & State Aid
It can be seen from the above that the EU and the member states have expanded
their environmental and energy objectives over the years, with competences 238
either held exclusively by the Commission or member states or shared between
them. To gain an understanding of the nature of the legal conflict between the
renewable regulatory framework and EU free trade principles this section gives a
brief introduction to those principles, allowing a better understanding of the research
issues outlined in Section 1.3.
The EU maintains that the operation of the single market is based on what
has been called the ‘four freedoms’;239 a shorthand for the ability of goods, services,
capital and persons to move freely within the EU without customs formalities or tariff
barriers.240 The application of free movement has been declared in Opel v Council
of Europe to require ‘equal treatment of individuals and economic
241 242
operators’. Additionally cases such as REWE and Commission v France
(Spanish Strawberries) 243 have affirmed that the free movement of goods is a
fundamental principle of the EU. The provision of free movement of goods is set out
within Articles 28 to 36 TFEU as well as case law such as Dassonville 244 (the
prohibition of measures or potentially hindering trade) Cassis de Dijon245(removal of
technical barriers to trade), Keck246 and Mickelsson & Roos247(selling arrangements
in a market must not discriminate between domestic and imported goods). These
cases have clear implications for the rules related to power station dispatch, 248 the
238
239
240
Kamiel Mortelmans, ‘Towards a convergence of the application of the rules on free movement and
Competition’ (2001) Common Market Law Review 613, 613
241
Case T-115/94 Opel Austria GmbH v Council of the European Communities ECLI:EU:T:1997:3 para 108
242
Case 37/83 Rewe-Zentral AG v Direktor der Landwirtschaftskammer Rheinland.ECLI:EU:C:1984:89 para 18
243
C-265/95 Commission v France [1997] (Spanish Strawberries) ECLI:EU:C:1997:595, para 24
244
Case 8/74, Procureur du Roi v Dassonville ECLI:EU:C:1974:82, para 5
245
Case 120/78, REWE-Zentrale AG v Bundesmonopolverwaltung für Branntweien (Cassis de Dijon)
ECLI:EU:C:1979:42
246
Cases C-267/91 & C-268/91 Keck and Mithouard ECLI:EU:C:1993:905; the Keck judgement was also
followed in 1993 in Case 292/92 Hunermund v Landesapothekerkammer Baden-Wurttenberg
ECLI:EU:C:1993:932
247
Case C-142/05, Åklagaren v Mickelsson and Roos ECLI:EU:C:2009:336; See also, more recently, Case C-
639/11 Commission v Poland ECLI:EU:C:2014:173; Case C-16/12 Commission v Lithuania ECLI:EU:C:2012:426;
Case C-428/12 Commission v Spain ECLI:EU:C:2014:218 . The last time the Keck and Mithouard was cited by
the CJEU as good law dates from 2010: Case C-108/09, Ker-Optika bt v ÀNTSZ Dél-dunántúli Regionális Intézete
ECLI:EU:C:2010:725, para 51.
248

cross-border trading of electricity and the development of energy trading hubs249
(further discussed in Section 3.5). In short, the Treaty articles and case law confirm
that organisations engaged in legitimate activities in one-member state can only
have restricted access across the EU (the so called ‘market access test’ - Cassis de
Dijon) 250 if the restrictions can be justified via an overriding objective251 and are
proportionate.252
The EU also prohibits anti-competitive behaviour and practices (including
potential effects of the same – Consten & Grundig) 253 such as price-fixing 254 or
market-sharing cartels 255 via Articles 101(collusion) and 102 TFEU (abuse of a
dominant position (although some justifications were confirmed by the CJEU -
Hilti).256 Such behaviour is prohibited regardless of it being between companies at
the same economic level (horizontal) or at different levels in the supply chain
(vertical).257 As the renewable electricity regulatory framework is put in place by the
state and not commercial undertakings the anti-competitive behaviours and
practices are tested using the concept of potential distortion of competition contained
in Articles 107 TFEU relating to state aid.
network, at the lowest possible cost, subject to transmission capacity and operational constraints.’ - P. Palermo
249
The trading hub or power exchange is the heart of the electricity market. The power exchange’s members will
consist of producers, retailers and traders as well as large end users. The exchange will trade a series of standard
products in both volume and time, with the delivery location and other technical details relating to the trade set out
in a trade master agreement. Each individual trade will in effect be a supplemental agreement to this trade master
agreement. The market price is determined by supply and demand considerations, with both varying during the
day, a different price is determined for each trading period (usually an hour, or in the UK half hour). The market
price may vary somewhat between different market regions, depending on physical transmission limitations that
sometimes occur and the generation mix within each region. Available at https://corporate.vattenfall.com/about-
energy/energy-markets/ accessed 22 April 2018
250
Case 120/78, Rewe-Zentral AG v Bundesmonopolverwaltung für Branntwein (Cassis de Dijon)
ECLI:EU:C:1979:42
251
Energimyndigheten ECLI:EU:C:2014:2037, para 76 and 80; Also Case C-164/17 Edel Grace and Peter Sweetman
v An Bord Pleanala ECLI:EU:C:2018:593, para 55 – projects may be undertaken for imperative reasons of
252
Jukka Snell, ‘The Notion of Market Access: A Concept or a Slogan?’ (2010) 47(2) Common Market Law
Review. 437; see also Eleanor Spaventa. ‘Leaving Keck behind? The free movement of goods after the rulings in
Commission v. Italy and. Mickelsson and Roos’ (2009) 6 (34) European Law Review; Catherine Barnard and
Simon Deakin, ‘Market Access and Regulatory Competition’, Jean Monnet Working Paper 9/01. Available at:
http://www.jeanmonnetprogram.org/papers/01/012701.html accessed 17 January 2017
253
Joined Cases C-56/64 and C-58/64 Consten S.à.R.L. and Grundig-Verkaufs-GmbH v Commission
ECLI:EU:C:1966:41
254
Joined Cases C-264/01, C-306/01, C-354/01 and C-355/01 AOK Bundesverband v Ichthyol-Gesellschaft
Cordes Hermani ECLI:EU:C:2004:150 – defined as ‘an agreement or decision on the part of buyers to fix the
purchase price on a given market must be understood to have as its object to restrict competition, without the
need, at that stage of the analysis, for any investigation of its competitive effects.’
255
Example energy cases - Case T-360/09 E.ON Ruhrgas and E.ON v Commission ECLI:EU:T:2012:332; Case
T-370/09 GDF Suez v Commission ECLI:EU:T:2012:333; Case T-196/06 Edison v Commission
ECLI:EU:T:2011:281; See also Mark Jephcott, Law of Cartels (Jordan Publishing, 2011)
256
Case C-53/92 Hilti v Commission ECLI:EU:C:1994:77
257
Case 56/65 Société Technique Minière v Société Maschinenbau Ulm GmbH ECLI:EU:C:1966:38

The EU has a general prohibition against the granting of state aid (Article
107 TFEU) as this is said to distort 258 the internal market. 259 The ever-growing
importance of EU state aid law in the electricity field has been highlighted by recent
investigations ranging from the financing of nuclear power stations260 to the support
for renewable energy sources.261
1.10 Fossil Fuel Subsidy
Energy subsidies are one policy instruments used by governments to attain

economic, social and environmental objectives262 taking many forms such as, (i)
direct price subsidy, (ii) enhancing producer’s revenues, or (iii) simply reducing costs
for producers via tax or other exemptions.263
It is known that fossil fuels (coal and gas) receive subsidies globally and
within the EU.264 These subsidies were estimated to be US$ 5.3 trillion in 2015.265
These subsidies can be of equal importance in the development of renewable
electricity facilities as the support schemes implemented in accordance with the
EU’s renewable energy regulatory framework.266 However, research is focused on
the diagonal conflicts between the renewables regulatory framework and wider EU
free trade principles and as such these subsidies are outside the scope of this
research.
258
Miek Van der Wee (Head of Unit International Relations DG Competition),’State Aid and the Distortion of
Competition’ 2011, 3 available at http://ec.europa.eu/competition/speeches/text/sp2011_17_en.pdf accessed 1
March 2018
259
Internal Market is an area without internal frontiers in which the free movement of goods, persons, services and
capital is ensured - Case T-356/15 Austria v Commission ECLI:EU:T:2018:439, para 516
260
European Commission, Decision of 18 December 2013 'State aid SA34947 (2013/C) (ex 2013/N)-United
Kingdom, Investment Contract (early Contract for Difference) for the Hinkley Point C New Nuclear Power Station',
269 OJ L/109/2015 See also Case T-356/15 Austria v Commission ECLI:EU:T:2018:439
261
Case C-262/12, Association Vent De Colère Fédération nationale v Ministre de l’Écologie, du Développement
durable, des Transports et du Logement, Ministre de l’Économie, des Finances et de l’Industrie
ECLI:EU:C:2013:851 ; See also Case T-251/11 Austria v Commission, ECLI:EU:T:2014:1060
262
OECD Report ‘Aanalysis of the Scope of Energy Subsidies and Suggestions for the G-20 Initiative’ [2010]
Prepared for submission to the G-20 Summit Meeting Toronto (Canada), 26-27 June 2010 available at
https://www.oecd.org/env/45575666.pdf accessed 20 October 2016
263
EEA ‘Energy subsidies in the European Union: A brief overview’ [2010] Technical Report 1/2004 available at
https://www.eea.europa.eu/publications/technical_report_2004_1 accessed 20 October 2016
264
Jun Rentschler, Morgan Bazilian, ‘Principles for Designing Effective Fossil Fuel Subsidy Reforms’ (2017) 11(1)
Review of Environmental Economics and Policy 135; See Also Marcella Nicolini, Massimo Tavoni, ‘Are renewable
energy subsidies effective? Evidence from Europe’ (2017) 74(c) Renewable and Sustainable Energy Reviews
412; See Also Jun Rentschler, Morgan Bazilian, ‘Reforming fossil fuel subsidies: drivers, barriers and the state of
progress’ (2016) 17(7) Climate Policy 891; See Also Simon Commander, ‘A Guide to the Political Economy of
Reforming Energy Subsidies’ (2012) IZA Policy Paper No. 52 available at http://ftp.iza.org/pp52.pdf accessed 1
September 2018
265
David Coady, Ian Parry, Louis Sears and Baoping Shanga, ‘How Large Are Global Fossil Fuel Subsidies?’
(2017) 91 World Development 11
266
Monika Papież, Sławomir Śmiech and Katarzyna Frodyma, ‘Determinants of renewable energy development in
the EU countries. A 20-year perspective’ (2018) 91 Renewable and Sustainable Energy Reviews 918; See Also
Jean-Marc Burniaux and Jean Chateau, ‘Greenhouse gases mitigation potential and economic efficiency of
phasing-out fossil fuel subsidies’ (2014) 140 International Economics 71; See Also Gabriela Mundaca, ‘How
much can CO2 emissions be reduced if fossil fuel subsidies are removed?’ (2017) 64 Energy Economics 91

1.11 Thesis Structure
As stated above, this research project considers the nature of the diagonal conflict
between the renewable energy regulatory framework and the EU’s free trade
principles - free movement, undistorted competition, other elements of state aid and
the vertical conflict with the ‘polluter pays’ principle.
To introduce the day to day operation of the electricity market within the EU
Annex 3 outlines the timeline of the market structure as well as a series of key
concepts.
To address the research question, Chapter 2 lays out the scope of the
renewable energy regulatory framework.267 The chapter commences by illustrating
that the EU not only seeks to reduce carbon emissions and increase security of
supply, but also seeks to implement the EU’s external climate change commitments
via the UNFCCC,268 the Kyoto Protocol269 and COP 21.270 Mention is also made of
the post Kyoto ‘euphoria’271 which has aided the execution of current environmental
commitments.
Chapter 3 considers how the CJEU has sought to ensure the implementation
of environmental protection measures (via the renewables regulatory framework)
whilst reconciling this against the EU’s free trade principles. 272 The case law
analysis of Chapter 3 shows the CJEU supports an EU regulatory structure based
on nationally focussed renewables support schemes,273 granting member states a
267
Implemented via a series of Directives: Council Directive 2003/87 13 October 2003 Establishing a scheme for
carbon emission trading allowance trading within the Community OJ L275, 25.10.2003 the Directive was amended
by Directive 2009/29 ‘To improve and extend the carbon emission trading scheme of the Community’ OJ L140/63;
Council Decision No 406/2009/EC 23 April 2009 ‘Reduction in carbon emissions to meet the Community’s carbon
emission reduction commitments up to 2020’ (Effort Sharing Decision); Council Directive (EC) 2010/75/EC 24
November 2010 – Industrial Emissions (integrated pollution prevention and control) OJ L334/17 (Industrial
Emission Directive); Council Directive 2012/27/EU 25 October 2012 – Energy Efficiency Directive OJ L315/1;
Council Directive 2009/28/EC 23 April 2009 Promotion of the use of energy from renewable sources OJ L140/16
(Renewable Energy Directive)
268
See http://unfccc.int/parties and observers/items/2704.php.
269
See http://unfccc.int/kyoto-protocol/status of ratification/items/2613.php.
270
UNFCCC (2015), ‘Adoption of the Paris Agreement: Proposal by the President’, Draft Decision, 12 December
2015, https://unfccc.int/resource/docs/2015/cop21/eng/l09r01.pdf (accessed 13 July 2016).
271
Jorge Viñuales, Joanna Depledge, David Reiner and Emma Lees ‘Climate policy after the Paris 2015 climate
conference’ (2017) 17(1) Climate Policy, 1, 7
272
Example cases covering free movement, competition and state aid - Case C-379/98 PreussenElektra AG v
Schleswag AG, ECLI:EU:C:2001:160 ; C-204/12 Essent Belgium NV v Vlaamse Reguleringsinstantie voor de
Elektriciteits- en Gasmarkt ECLI;U:C:2014:2192 ; Case C-573/12, Ålands Vindkraft AB v Energimyndigheten
ECLI:EU:C:2014:2037; Case C-492/14 Essent Belgium NV v Vlaams Gewest ECLI:EU:C:2016:732; Case C-
262/12, Association Vent De Colère Fédération nationale v Ministre de l’Écologie, du Développement durable, des
Transports et du Logement, Ministre de l’Économie, des Finances et de l’Industrie, ECLI:EU:C:2013:85; Case T-
251/11 Austria v Commission, ECLI:EU:T:2014:1060 ; Case C-275/13, Elcogas SA v Adminstracion del Estado &
Iberdrola SA, ECLI:EU:C:2014:2314; Case T-47/15 Germany v Commission, ECLI:EU:T:2016:281; Case C-
393/92, Gemeente Almelo v NV Energiebedriif Ijsselmij ECLI:EU:C:1994:171
273

wide margin of discretion in regulating renewables (lex specialis).274 The chapter
also provides an analysis of the market failures which bring about the need for
revenue support for renewable generation across the EU.275
Chapter 4 considers, via empirical research, the views and adjustments used
by market operators to overcome regulatory uncertainties. The chapter thus
considers the importance to market operators of the conflicts outlined in Chapters 2
and 3. The chapter also considers the views of companies with high levels of coal
fuelled generation capacity in their portfolio to a strict enforcement of the ‘polluter
pays’ principle and the effect of the Industrial Emissions Directive276 on the operating
hours of coal generation and electricity market prices.
The empirical research highlights the concern that market operators have
with regards to retrospective changes in national renewable frameworks e.g.
changes in feed-in tariff, dispatch priority and narrowing of the definition of
renewable electricity.
Chapter 5 sets out the overall conclusions generated from the research. The
chapter also makes several proposals for regulatory change to simplify the structure
of the framework and reduce the conflicts. These proposals are likely to require
legislative action at EU and member state level.
274
Torben Spaak, ‘Guidance and Constraint: The Action-Guiding Capacity of Theories of Legal Reasoning’,
(2007) 26 Law and Philosophy, 343
275
Carolyn Fischer and Louis Preonas, ‘Combining Policies for Renewable Energy: Is the Whole Less than the
Sum of its Parts?’ (2010) 4 International Review of Environmental and Resource Economics 51, 83; See also
Joyashree Roy, Duke Ghosh, Anupa Ghosh and Shyamasree Dasgupta, ‘Fiscal Instruments: Crucial Role in
Financing Low Carbon Transition in Energy Systems’ (2013) 5 Current Opinion in Environmental Sustainability
261; See also Christoph Burger and Jens Weinmann, ‘Germany’s Decentralized Energy Revolution’ (2014)
Distributed Generation and its Implications for the Utility Industry 49, 53;
276

Chapter 2 – Renewables Regulatory Framework
2.1 Introduction
The European electricity industry is complex, 277 composed of a multiplicity of

companies with specialised functions such as generation, transmission and supply
(See Annex 3). This organisational structure was brought about by the EU’s
liberalisation process whereby national monopolies were functionally separated to
bring market practices to one of the EU’s largest industries.278
The complexity of the industry’s ownership structure is reflected in the
complexity of the regulatory framework set out in a matrix of legal principles,
Directives, Regulations and national laws.279
This chapter analyses the regulatory framework as the EU seeks to resolve
the trilemma of reliability, sustainability and affordability.280 The research focuses on
how the EU has sought to increase the sustainability (reducing carbon emissions)
of the electricity generation sector and in so doing has created a series of legal
conflicts between the regulatory framework and the EU’s free trade principles.
The chapter initially considers issues surrounding rule conflict in, and
between, international and EU law, looking at fragmentation281 and illustrating that
the issues outlined in this research are an example of this phenomenon in practice.
277
Rafael Leal-Arcas and Andrew Filis, ‘Legal Aspects of the Promotion of Renewable Energy within the EU and
in Relation to the EU's Obligation in the WTO’ (2014) 3 Renewable Energy Law & Policy
278
EU Directive Electricity Liberalisation Directive (96/92/EC)
279
Rafael Leal-Arcas and Stephen Minas, ‘Mapping the International and European Governance of Renewable
Energy’, (2016) 35(1) Yearbook of European Law, 621; Sybille Roehrkasten, Global Governance on Renewable
Energy: Contrasting the Ideas of the German and Brazilian Governments (Springer, 2015); Marjan Peeters,
‘Governing Towards Renewable Energy in the EU: Competences, Instruments & Procedures’ (2014) 21(1)
Maastricht Journal of European & Comparative Law, 39; Maria Kottari and Panagiotis Roumeliotis, ‘Renewable
energy governance: Challenges within a “puzzled” institutional map’, in Evanthie Michalena, and Jeremy Maxwell
Hills (eds), Renewable Energy Governance: Complexities and Challenges (Springer, 2013); Nicolas de Sadeleer,
‘Environmental Governance & the Legal Basis Conundrum’ (2012) 31(1) Yearbook of European Law, 373; Dieter
Helm, ‘The European framework for energy and climate policies’ (2014) 64 Energy Policy 29; Tim Maxian
Rusche, EU Renewable Electricity Law and Policy: From National Targets to a Common Market (Cambridge
University Press, 2015); Volker Oschmann, ‘Introduction to European Law on Renewable Energy Sources’ in
Leslie Parker, Jennifer Ronk, and Rachel Maxwell (eds), From Debate to Design: Issues in Clean Energy and
Climate Change Law and Policy (Yale School of Forestry and Environmental Studies 2008); Angus. Johnston,
‘Recent Renewables Litigation in the UK: Some Interesting Cases’ (2015) Oil Gas and Energy Law available at
https://www.ogel.org/article.asp?key=3547; Andreas Goldthau and Nick Sitter, ‘Soft power with a hard edge: EU
policy tools and energy security’ (2014) European Policy Brief available at
http://cris.unu.edu/sites/cris.unu.edu/files/GREEN%20Goldthau%20Sitter%20Policy%20Brief%2037.pdf; Miranda
A Schreurs and Yves Tiberghien, ‘Multi-Level Reinforcement: Explaining European Union Leadership in Climate
Change Mitigation’ (2007) 7(4) Journal of Global Environmental Politics, 19
280
Trilemma’ [2016] Cambridge University, Energy Policy Research Group Working Paper See Also Raphael Heffron
Energy Law: An Introduction (Springer, 2014)
281
‘The fragmentation of public international law is a long-observed phenomenon that demonstrates uneven
normative and institutional development and evolution in inter-state relations. Separate legal norms and
institutions have developed largely independently from one another, often instigated by non-identical groupings of
states and in response to specific functional issues.’ From Margrate Young, ‘Fragmentation’ Oxford
Bibliographies available at http://www.oxfordbibliographies.com/view/document/obo-9780199796953/obo-
9780199796953-0113.xml accessed 12 March 2019

The chapter then sets out the theoretical framework used for the analysis of
the regulatory framework. An overview of the EU’s external obligations via the
UNFCCC,282 the Kyoto Protocol283 and finally the COP 21284 global climate change
agreement is given as these obligations have informed the form and content of the
regulatory framework. To understand the process of development of the regulatory
framework, the nature and duties of the three main EU regulatory institutions are
considered – Commission, CJEU and ACER.
Most of the chapter analyses the Treaty articles (focusing on the TFEU) and
the Directives associated with the regulatory framework. The chapter concludes by
looking at the future via the EU’s 2030285 and 2050286 energy road maps.
2.2 Fragmentation: EU and International Law
Fragmentation in international law287 is both a process and a result derived from a

proliferation of specialised legal tribunals, each seeing itself as an autonomous
judicial body 288 and each using different methods of interpretation of legal
instruments and norms.289 This proliferation led the president of the international
court of justice to state that this practice could raise the risk of parties competing for
courts (sometimes referred to as ‘forum shopping’) due to overlapping jurisdictions,
thus jeopardising the unity of international law.290
The main causes of fragmentation are (i) the decentralised structure of
international law which occurs as a result of the multiplicity of states and
organisations involved in executing the legal instruments (treaties and other
accords), (ii) the globalisation of legal issues (e.g. climate change, migration, armed
conflict, access to natural resources) all resulting in specialised regulation and
282
283
284
2015, https://unfccc.int/resource/docs/2015/cop21/eng/l09r01.pdf accessed 13 July 2016
285
COM(2016) 860 30 November 2016 ‘Clean Energy For All Europeans’; See Also SWD(2014) 15 final, ’A policy
framework for climate and energy in the period from 2020 up to 2030’
286
COM (2011) 112: A Roadmap for moving to a competitive low carbon economy in 2050 (08 Mar 2011) see
287
or more soverign states – Hans Kelsen Principles of International Law (Rinehart, 2003), 201; See also Martti
Koskenniemi and Päivi Leino, ‘Fragmentation of International Law? Postmodern Anxieties’ (2002) 15 Leiden
Journal of International Law ,553
288
Daryl Mundis, ‘ICTY (Appeals Chamber): Prosecutor v. Delalić (Čelebići Case)’ (2001) 40(3) International
Legal Materials, 626
289
290
H.E. Judge Gilbert Guillaume, President of the International Court of Justice, Speech to the General
Assembly of the United Nations (30 Oct. 2001), http://www.icj-cij.org/files/press-releases/5/2995.pdf accessed 10
March 2019; See Also Mario Prost and Paul Clark, ‘Unity, Diversity and the Fragmentation of International Law:
How Much Does the Multiplication of International Organizations Really Matter?’ (2006) 5(2) Chinese Journal of

dispute resolution processes291 (iii) furthering the agenda of ‘powerful states’ as
fragmentation limits the influence of ‘weaker states’. 292 Fragmentation can also
occur within international law due to a lack clear normative and institutional
hierarchy.293
One of the outcomes of fragmentation in the context of renewable electricity
is inter-institutional and legal conflicts between EU and international law.294
An example of this inter-institutional and legal conflict is the Vattenfall295 case
where a conflict between investment and environmental protection was said to exist.
The German regulator denied water and emission permits for a power plant project
owed by a Swedish developer (Vattenfall) to comply (it stated) with commitments
under the EU Water Framework Directive296 and the UNFCCC. These commitments
conflicted with the state’s obligations under the Energy Charter Treaty297 to accord
foreign investor’s fair and equitable treatment. Vattenfall requested arbitration,
following which the permits were granted.
The EU is important in international legal terms, as it is a distinct jurisdiction
of international law, an international organisation, and party to numerous
international treaties.298 The EU, and particularly the CJEU, can be said to interpret
the EU treaties as a kind of ‘constitutional charter’299 rather than as instruments of
international law, reinforcing constitutionalist paradigm, as an example of the
CJEU’s view of the autonomy of EU law (Section 1,2). The CJEU can therefore be
seen to be self-contained and inward looking, referring to, and prioritising, its own
legal instruments in its judgments. An example of this practice is Kadi,300 a classic
fragmentation situation, resolved the conflict between certain EU legal obligations
and those of the UN Charter by prioritising EU law over the UN Charter. This
conclusion was reached by the CJEU despite Article 3(5) TEU stating that the EU
291
Michael Zürn and Benjamin Faude, ‘Commentary: On Fragmentation, Differentiation and Coordination’ (2013)
13(3) Global Environmental Politics, 119, 125–126
292
Eyal Benvenisti and George Downs, ‘The Empire’s New Clothes: Political Economy and the Fragmentation of
International Law’ (2007) 60(2) Stanford Law Review 595
293
Martti Koskenniemi, ‘Fragmentation of International Law: Difficulties Arising From the Diversification and
Expansion of International Law’ [2006] International Law Commission
294
Fariborz Zelli, ‘The fragmentation of the global climate governance architecture’ (2011) 2 Climate Change, 255
295
Vattenfall v Germany International Center for Settlement of Investment Disputes Case No. Arb/09/06, 11 March
2011
296
EU Directive 2000/60/EC ‘a framework for Community action in the field of water policy’ OJ L 327/1
297
Energy Charter Treaty 1994 – available at http://www.energycharter.org/process/energy-charter-Treaty-
298
Katja Ziegler, 'The Relationship Between EU Law and International Law', in D Patterson and A Soderston (eds)
A Companion to EU and International Law (Wiley Blackwell, 2016), 42
299
Case C-294/83, Parti écologiste “Les Verts” v European Parliament ECLI:EU:C:1986:166, para 23
300
Joined Cases C-402 & C-415/05 Yassin Abdullah Kadi and Al Barakaat International Foundation v Council and
Commission ECLI:EU:C:2008:461

will ensure ‘observance and the development of international law, including respect
for the principles of the United Nations Charter’.
The CJEU has also forcefully confirmed the autonomy of EU Law in relation
to international law301 by stating that the interpretation of rights must be within the
framework of EU law.302 This approach has been stated to bring into being a ‘fortress
Europe’.303
The Commission has also taken a highly constitutionalist approach arguing
for the jurisdiction of EU law and insisting issues could only be determined in the
context of EU law (examples from the field of EU energy law being Electrabel,304
EDF International305 and Micula).306 The Commission has also stated previously that
should an award be made not on the basis of EU law this could be regarded as state
aid and as such repayable.307 In April 2015, however, the Commission issued four
cases related to changes made by the Czech Republic to its support scheme for the
production of renewable energy. 308 These cases were all based on the same
treaties, namely the Energy Charter Treaty 309 and a bilateral investment treaty
between Germany and the Czech Republic. The Commission states within its
submissions that EU law should be used, not because it is legally superior, but
because of the lex posterior rule in both Articles 30 and 59 of the Vienna Convention
of the Law of Treaties.
Hence it can be seen that the EU is increasingly important in an international
law context. 310 It has the competence to conclude treaties and thus as an
301
302
Opinion C-2/13 ‘Accession of the European Union to the European Convention for the Protection of Human
Rights and Fundamental Freedoms - Compatibility of the Draft Agreement With the EU and FEU Treaties’
ECLI:EU:C:2014:2454; See also Katja Ziegler, ‘Beyond Pluralism and Autonomy: Systemic Harmonization as a
Paradigm for the Interaction of EU and International Law’ (2016) 35(1) Yearbook of European Law, 667
303
Adam Lazowsky and Ramses Wessel, 'When Caveats Turn Into Locks: Opinion 2/13 on Accession of the
European Union to the ECHR' (2015) 16(1) German Law Journal, 179, 187
304
Electrabel SA v Republic of Hungary International Center for Settlement of Investment Disputes Case No.
ARB/07/19, Decision on Jurisdiction, Applicable Law and Liability, 30 November 2012, paras 27-34
305
EDE International v Hungary UNCITRAL, PCA, Award of 4 December 2014 available at
http://www.iareporter.com/articles/investigation-in-recent-briefs-europeancommission-casts-doubt-on-application-
of-energy-charter-treaty-to-any-intra-eudispute/ accessed 10 March 2019
306
loan Micula v Romania, International Center for Settlement of Investment Disputes Award of the Arbitral
Tribunal, Case No. ARB/05/20, 11 December 2013
307
Commission Decision (EU) 2015/1470 of 30 March 2015, State Aid SA.38517 (2014/C) implemented by
Romania — Arbitral award Micula v Romania OJ L 232/43, para. 2 [Letter from the Commission].
308
Voltaic Network GmbH v Czech Republic, PCA Case No. 2014-20, registered 8 May 2013; L C.W Europe
Investments Limited v Czech Republic, PCA Case No. 2014-22, registered 8 May 2013; Photovoltaic
KnopfBetriebs-GmbH v Czech Republic, PCA, registered 8 May 2013; WA Investments Europa Nova Limited v
Czech Republic, PCA Case No. 2014-19, registered 8 May 2013
309
310
Ernst-Ulrich Petersmann ‘International Activities of the European Union and Sovereignty of Member States’ in
Enzo Cannizzaro (ed), The European Union as an Actor in International Relations (Kluwer Law International, 2002),
321; See Also Koen Lenaerts and Eddy de Smijter, ‘The European Union as an Actor in International Law’ (1999)
19(1) Yearbook of European Law, 95

organisation contributes to the shaping of international law.311 The EU treaties do
not contain explicit rules about the status of international law within EU law.
However, Article 216(2) TFEU states that treaties are binding on EU institutions and
member states, the Article referring to the binding effect internationally rather than
within EU law.
The fragmentation between EU and the norms of international law should be
noted when consideration is given to the norms and protocols used to resolve the
conflicts which are at the heart of this research.
EU free trade principles and environmental law emerge from different policy
areas and this divergence of origins may affect the relevant rules of interpretation.312
While such ‘policy-divergence’ does not lead to automatic incompatibility between
obligations, they may nevertheless also be relevant for fragmentation.313 The norms
used for resolution of these conflicts are set out in Section 2.3 below.
2.3 Legal Conflict Resolution
In considering methods for resolving diagonal and other conflicts within EU and
international law314 it should be noted that there are several different actors that will
become involved in the resolution of these conflicts. At their most general these
actors can be categorised as legislators or judicial bodies. These different actors
may use different techniques for resolving conflicts. Disputes between sovereign
states tend to be settled at the political level,315 however, when states execute a
treaty between themselves they invariably agree to dispute processes which are
managed by a specific court or tribunal. The use of political processes to resolve
disputes between states is out with the scope of this research, thus the legal conflict
and dispute resolution methods analysed below focus of those generally used by
judicial bodies.
311
Sebastian Oberthür and Lisanne Groen, ‘Explaining goal achievement in international negotiations: the EU and
the Paris Agreement on climate change’ (2018) 25(5) Journal of European Public Policy, 708
312
Gareth Davies, ‘Interpretative Pluralism within EU Law’ in Gareth Davies and Matej Avbelj (eds) Research
Handbook on Legal Pluralism and EU Law (Elgar, 2018)
313
Rüdiger Wolfrum and Nele Matz Conflicts in International Environmental Law (Springer, 2003), 6-13
314
315
Gerhard von Glahn and James Taulbee Law Among Nations: An Introduction to Public International Law
(Routledge, 2017)

Uncertainty within and between legal systems is an issue requiring methods
of judicial interpretation that impose constraint on the interpretive process as in the
absence of such constraint the judicial process would be little more than arbitrary.316
In seeking a system to resolve legal conflicts consideration should be given
to the positivist317 and the natural law318 view of the legal framework.
The positivist view of law sees it as a normative set of rules319 and is a matter
of what has been posited (ordered, decided, practiced, tolerated, etc.); in other
words, a social construction. Human society has a social order, a means of
regulating behaviour, deterring anti-social behaviour, and resolving disputes. The
positivist theory separates the existence of law as a normative set of rules from moral
ideals. 320
Whereas, natural law theory 321 sees the law as a branch of political
morality322 or natural law. Accordingly, natural law theorists state that the driving
feature of law is not as a source-based system, but in its capacity to advance the
common good323 - such as climate change mitigation. Additionally, it is said that
judges in exercising moral judgment in the penumbra of legal rules in effect ‘revise
our concept of what a legal rule is’. 324
Turning to the more day to day judicial conflict resolution techniques which
relate to interpretation of the text, context, object (or purpose) and preparatory works
of the treaty or legal instrument.325 There are also protocols such as lex specialis,326
lex superior327 and lex posterior328 .329 In addition to these protocols there is the
316
484
317
Herbert L A Hart, ‘Positivism and the Separation of Law and Morals’ (1958) 71 Harvard Law Review, in H L A
Hart (ed) Essays in Jurisprudence and Philosophy ( Clarendon Press, 1983)
318
Ronald Dworkin Taking Rights Seriously (Harvard University Press, 1978)
319
Hans Kelsen General Theory of Law and State (Russell and Russell, 1945)
320
321
322
Lon Fuller, ‘Positivism and Fidelity to Law: a Reply to Professor Hart’ (1958) 71 Harvard Law Review, 630; See
also Lon Fuller The Morality of Law (Yale University Press, 1969)
323
Lon Fuller, ‘Positivism and Fidelity to Law: a Reply to Professor Hart’ (1958) 71 Harvard Law Review, 630; See
also Lon Fuller The Morality of Law (Yale University Press, 1969)
324
Hart (ed) Essays in Jurisprudence and Philosophy ( Clarendon Press, 1983), 72
325
Richard Gardiner Treaty Interpreatation (Oxford University Press, 2008); See Also Isabelle van Damme Treaty
Interpetation by the WTO Appellate Body (Oxford University Press, 2007)
326
Lex Specialis is a method of resolving legal conflicts where specialist legal provisions take precedence over more
general provisions
327
Lex Superior is a means of declaring a legal hierarchy between legal instruments such that superior laws are
deemed to take precedence over others -
328
Lex Posterior means that more recent legal instruments have precedence over older instruments
329
Ralf Michaels and Joost Pauwelyn, ‘Conflict of Norms or Conflict of Laws?: Different Techniques in the
Fragmentation of International Law’ (2012) 22(3) Duke Journal of Comparative & International Law, 349

process set out in the Vienna Convention on the Law of Treaties330 (VCLT) – each
discussed in turn below.
Whilst treaty interpretation in international law is governed by the rules of the
Vienna Convention on the Law of Treaties331 (VCLT) uncertainty is still seen to
continue and thus judicial discretion is required to ensure determination of issues
brought before the various courts can be achieved.
The VCLT sets out in Articles 31 and 32 general rules of interpretation. The
VCLT rules should apply in all international courts or tribunals. The first interpretive
rule332 is that treaty drafting is interpreted in ‘good faith’, within the ‘ordinary meaning’
of the ‘terms’ of the treaty, in ‘context’, and considering the treaty’s ‘object and
purpose’. The VCLT’s second general interpretative rule333 is that the ‘preparatory
work of the treaty and the circumstances of its conclusion’ are only secondary
sources in relation to interpretation.
The VCLT states (unless there is a specific article in the treaties to the
contrary or the parties to the treaties have developed definitive interpretive
practice),334 that (i) it cannot be applied retroactively,335 (ii) the most recent treaty
prevails in the event of a conflict,336 unless the most recent treaty conflicts with a
‘peremptory norm of general international law’ in which case it is void,337 (classifying
an event or practice as a ‘peremptory norm’ has not been universally successful –
potential examples would be the abuse of children or vulnerable adults and human
trafficking).338 Therefore the lex posterior principle in Article 30 seems to be the most
readily usable element of the Vienna Convention. However, this concept does not
seem to have been applied by the EU in the context of the diagonal conflict between
the renewable electricity regulatory framework and the TFEU.
330
331
332
Article 31
333
Ibid Article 32
334
Ibid Article 31(3)
335
Ibid Article 28
336
Ibid Article 30(3)
337
Ibid Article 53
338
Janelle Diller,’ Economic, Social and Cultural Human Rights: The Journey towards Peremptory Norms in
International Law’ (2018) 36(1) Nordic Journal of Human Rights, 19; See Also Kamrul Hossain, ‘The Concept of
Jus Cogens and the Obligation Under The U.N. Charter’ (2005) 3(1) Santa Clara Journal of International Law, 72

Despite EU member states being signatory to the VCLT, the EU has taken a
lex superior approach to its legal instruments over national laws or other treaties
executed by member states (this approach being derived from Article 351 TFEU).
The CJEU confirmed this lex superior approach in cases such as Costa v ENEL,
Van Gen den Loos and others339 and goes to the heart of the consideration of EU
law as autonomous.
Additionally, despite its growing position as a party to international treaties,
the EU has demonstrated itself opposed to the use of alternative dispute resolution
fora (for example Mox Plant)340 and therefore any process to reduce fragmentation
would have to reconsider this position.
The CJEU has applied international law in three ways
• Direct Effect of treaties and other elements of international law341
• Consistent interpretation (although the application of such principles
may be limited –see Kadi) 342
• Substantive borrowing, where the EU uses international law in a non-
structured way to fill gaps in EU law343
The CJEU has held, however, that in applying common principles of international
law any review would be limited to ‘manifest errors of assessment…as a principle of
customary international law does not have the same degree of precision as a
provision of an international agreement’.344
Furthermore, Article 351 TFEU allows for international obligations predating
a member state’s accession to the EU to be maintained, provided the member state
eliminates incompatibilities. This obligation to eliminate incompatibilities effectively
requires member states now to include a ‘terminate for incompatibility clause’345 into
339
Case 6/64, Flaminio Costa v Ente Nazionale Energia Elettrica (Enel) ECLI:EU:C:1964:66; See also Case
340
Case C-459/03 Commission v Ireland (MOX plant) ECLI:EU:C:2006:345; See also Nikos Lavranos, ‘The
Epilogue in the Mox Plant Dispute: An End Without Findings’ (2009) European Energy and Environmental Law
Review
341
Case C-181/73 Haegeman v Belgium ECLI:EU:C:1974:41, para 5; Case 104/81 Kupferberg v Hauptzollamt
Mainz ECLI:EU:C:1982:362, para 13; See Also Pieter Kuijper, ‘Customary International Law, Decisions of
International Organisations and Other Techniques for Ensuring Respect for International Legal Rules in Jan
Wouters, André Nollkaemper and Erika de Wet (eds.) European Community Law’ in The Europeanisation of
International Law: The Status of International Law in the EU and its Member States, (Asser Press, 2008), 87
342
Joined Cases 402 & 415/05 Yassin Abdullah Kadi and Al Barakaat International Foundation v Council and
Commission of EU ECLI:EU:C:2008:461
343
EU human rights norms were developed in this way by the Court; See Andrew Williams EU Human Rights
Policies. A Study in Irony (Oxford University Press, 2004), 145–57
344
Case C-366/10 Air Transport Association of America v Secretary of State for Energy and Climate Change
ECLI:EU:C:2011:864; See Also Eileen Denza, ‘International Aviation and the EU Carbon Trading Scheme:
Comment on the Air Transport Association of America Case’ (2012) 37 European Law Review, 314, 324
345
Case C-205/06 Commission v Austria ECLI:EU:C:2009:118, para 36; See also Case C-249/06 Commission v
Sweden ECLI:EU:C:2009:119; Case C-118/07 Commission v Finland ECLI:EU:C:2009:715

their existing treaties as well as the more traditional renegotiate, suspend or
terminate incompatible obligations.346
In seeking a compatible system as to the rule of law the CJEU has stated
that if the EU is party to an international treaty, including a mixed agreement, EU
secondary legislation will be interpreted ‘as far as possible’ in the light of the
international obligations of the EU, 347 thus placing international law in a space
between EU primary law (Treaty) and secondary law.
Where, however, international law supports the enforcement of EU law (as
is the case with direct effect of trade and association agreements), the CJEU has
adopted, selectively, a more open approach.348
Moreover, in relation to renewable electricity regulation, the EU and CJEU
have implemented a lex specialis349 (the special status outlined above) 350 approach
to resolving the conflict between the renewable electricity regulatory framework and
the provisions of the TFEU, the method being confirmed in Parliament v Council.351
Thus the CJEU seems to be following Dworkin in that there is a 21st century higher
objective than the EU’s free trade principles and that being climate change
abatement.
Therefore in considering the conflicts outlined in this Chapter 2 and the case
law analysis in Chapter 3 this should be done in the light of concerns with regards
to the fragmentation of international law, the proliferation of international tribunals
and instances when international law lacks a clear normative and institutional
hierarchy.352 The problem is how EU institutions such as the Commission and the
CJEU use the international law concepts outlined to further new interests such as
the abatement of climate change.
Within international law, courts can be seen to undertake judicial
interpretation primarily using a text-based approach which minimises judicial
discretion. However, the CJEU has traditionally used a teleological353 and policy-
346
Case C-473/93 Commission v Luxembourg ECLI:EU:C:1996:263; Case C-62/98 Commission v Portugal
ECLI:EU:C:2000:358
347
Case C-53/96 Hermès International v FHT Marketing Choice BV ECLI:EU:C:1998:292, para 28; Case C-61/94
Commission v Germany ECLI:EU:C:1996:313, para 52
348
Katja Ziegler, 'The Relationship Between EU Law and International Law', in D Patterson and A Soderston (eds)
A Companion to EU and International Law (Wiley Blackwell, 2016), 16
349
Lex specialis is a method of resolving legal conflicts where specialist legal provisions take precedence over more
general provisions
350
351
Case C-490/10 Parliament v Council ECLI:EU:C:2012:525 para 65 to 67
352
Martti Koskenniemi, ‘Fragmentation of International Law: Difficulties Arising From the Diversification and
Expansion of International Law’ [2006] International Law Commission
353
A teleological Court would be activitist in approach, fill gaps in the rules beyond necessarily simple linguistic
interpretation – the CJEU being an example – See Joost Pauwelyn and Manfred Elsig, ‘The Politics of Treaty
Interpretation: Variations and Explanations across International Tribunals’, in Jeffrey Dunoff and Mark Pollack

based approach which widens judicial discretion.354 The CJEU is said to interpret
the treaties a living and not static instruments,355 leading to a cumulative or variable
approach.356 The classic constitutional cases357 clearly show the CJEU has always
simply ‘filled the gaps’ in a manner to enhance supremacy of EU law and the manage
the competence of the EU and its institutions. The Euro Crisis cases continuing this
theme with the separation of monetary and economic policy being blurred.358 The
free movement of people, however, has seen narrower (more literal) interpretations
of EU law recently, allowing more national discretion.359 Thus the CJEU can be said
to be undertaking judicial interpretation in the light of current political or economic
need.
The CJEU has held that its interpretative norm would be to find against any
interpretation that would ‘lead to a result contrary both to the spirit of the Treaty […]
and to its system’.360 Therefore it would be reasonable to assume that the provisions
of the TFEU would prevail in a lex superior approach, however, as will be shown the
CJEU consistently applies a lex specialis approach to cases related to renewable
electricity.
The CJEU summarising its approach as
in interpreting a provision of [EU] law it is necessary to
consider not only its wording, but also the context in
which it occurs and the objects of the rules of which it is
part.361
The analysis set out in Chapters 2 and 3 demonstrates the lex specialis approach
has been used consistently in relation to renewable electricity. This approach allows
the CJEU to resolve the diagonal conflict between the renewable electricity
regulatory framework and the EU’s free trade principles by simply prioritising the
renewables framework. However, the consistent application of this legal conflict
(eds) Interdisciplinary Perspectives on International Law and International Relations The State of the Art
(Cambridge University Press, 2012), 445
354
Koen Lenaerts and José Gutiérrez-Fons, ‘To Say What the Law of the EU Is: Methods of Interpretation and the
European Court of Justice’ [2013] EUI Working Paper AEL 2013/9; See also Ellen Vos, ‘Making Informal
International Law Accountable: Lessons from the EU’ in Joost Pauwelyn, Ramses Wessel and Jan Wouters (eds)
Informal Law Making (Oxford University Press, 2012)
355
Gunnar Beck The Legal Reasoning of the Court of Justice of the EU (Hart Publishing, 2013), 287
356
Violeta Moreno-Lax, ‘Systematising Systemic Integration: “War Refugees", Regime Relations, and a Proposal
for a Cumulative Approach to International Commitments’ (2014) 12 Journal of International Criminal Justice, 907,
analysing the interpretative methodology of the CJEU in Case C-285/12 Diakite´ ECLI:EU:C:2014:39 and building
on Article 31(3)(c) VCLT; using ‘cumulative’ to mean the outcome of the interpretative processes in cases of
concurrent obligations
357
Belastinger, ECLI:EU:C:1963:1; Case C-11/70 Internationale Handelsgesellschaft mbH v Einfuhr- und
Vorratsstelle fu¨r Getreide und Futtermittel; ECLI:EU:C:1970:114 ; Case C-4/73 J. Nold, Kohlen-und
Baustoffgroßhandlung v Ruhrkohle Aktiengesellschaf ECLI:EU:C:1975:114 Case C-6/90 Andrea Francovich and
Danila Bonifaci and others v Italian Republic ECLI:EU:C:1991:428
358
For example see 8 Case C-62/14 Gauweiler and Others ECLI:EU:C:2015:7
359
Daniel Carter and Moritz Jesse, ‘The “Dano Evolution”: Assessing Legal Integration and Access to Social
Benefits for EU Citizens’ (2018) 3(3) European Papers , 1179
360
Case C-294/83 Les Verts v Parliament ECLI:EU:C:1986:166, para 25
361
Case C-292/82 Merck v Hauptzollamt Hamburg-Jonas ECLI:EU:C:1983:335, para 12

resolution method simply reinforces the member state focused support schemes
rather than incentivising the EU and its member states to find a harmonised solution.
With such a solution more likely to facilitate the development of renewable electricity
facilities where wind and solar resources are plentiful, rather than perpetuating a
C&C target-based system devoid of economic efficiency. The empirical research
also reported the Developer Operators to be concerned that the lex specialis
approach could be over turned in a paradigm shift undermining the economics of the
whole renewable sector.
2.4 Theoretical Research Framework
In analysing the EU Treaty Articles and Directives forming the renewable electricity
regulatory framework two criteria are used, (i) the competence 362 of the EU
institutions in relation to the Treaty Article or Directive and (ii) whether the Article or
Directive is a ‘command and control’363 or market type.
The EU is granted competence to develop, undertake and control activities
in specified areas by the member states via the terms of the Treaty (the principle of
conferral).364 As competence not conferred on the EU is retained by the member
states, it is imperative to define the competence holder in relation to an EU objective
or policy area, as this determines who has operational control over a particular field.
Lastly it being known that when a measure involves the competence granted to the
EU’s institutions, such a measure is required to have a basis in the Treaty365 and be
subject to judicial review.366
362
363
Sustainability
364
Conferral is laid down in Article 13(2) TFEU (Previously Art 5 TEU). The institutions of the EU act only within
the limits of the powers (competences) that EU member states have conferred upon them via the Treaties. These
competences are defined in Articles 2–6 TFEU. Competences not conferred on the EU Institutions by the Treaties
remain with EU member states. While the principle of conferral governs the limits to EU competences, the use of
those competences is governed by the principles of subsidiarity and proportionality: See Olivier Beaud ‘The
Allocation of Competences in a Federation’ in Loïc Azoulai (ed) The Question of Competence in the European
Union (Oxford University Press, 2014); Also Inge Govaere ‘To Give or to Grab: The Principle of Full, Crippled and
Split Conferral of Powers Post-Lisbon’ (2016) 4 College of Europe Reseach Papers in Law
365
Case C-91/05 Commission v Council ECLI:EU:C:2008:288
366
Case C-295/90 Parliament v Council ECLI:EU:C:1992:294

Thus, to analyse the diagonal conflict between the renewable energy
regulatory framework and the Treaty, competence is considered a key criterion. The
analysis framework seeks to understand if the extent of the conflict between an
element of the regulatory framework and the Treaty is correlated to the holder of the
competence or if the nature, exclusive or shared, of the competence has a bearing
on the number of conflicts found.
Specifically considering the renewable energy regulatory framework the
TFEU sets out three types of competences – exclusive to the EU, exclusive to the
member states or shared367 between the EU and the member states. The Directives
within the renewable electricity regulatory framework are a mixture of EU exclusive
and shared competence types.
Additionally, the status of the Treaty Article or Directive as ‘command and
control’ (C&C) or one which employs a market-based solution, is also considered.
Command and Control (C&C) Regulation can be defined as ‘the direct
regulation of an activity by legislation that states what is permitted’. 368 The
‘command’ element is signified by the legal enforcement of environmental
standards/targets by a governing authority, with ‘control’ signifying the sanctions
element for non-compliance.369
An example of such a regulatory style in the renewables regulatory
framework would be the imposition of permitted levels of emissions and requiring
strict compliance with those levels (e.g. Effort Sharing Decision). 370 This type of
regulatory style has the positive of setting fixed standards or compliance criteria,371
with the ability to speedily enforce compliance by regulatory bodies or courts.372 The
main criticisms are (i) ‘inefficiency’: 373 with the cost of compliance for some market
374
operators potentially being considerably higher than for others, and (ii)
367
‘Shared competence’ means that both the EU and its member states may adopt legally binding acts in the area
concerned. However, the member states can do so only where the EU has not exercised its competence or has
explicitly ceased to do so. Article 4 TFEU - http://ec.europa.eu/citizens-initiative/public/competences/faq#q3
368
Sustainability
369
Robert Baldwin, Martin Cave and Martin Lodge Understanding Regulation: Theory, Strategy and Practice (2nd
ed. Oxford University Press, 2011)
370
371
Olaf Dilling, ‘From Compliance to Rulemaking: How Global Corporate Norms Emerge from Interplay with
States and Stakeholders’ (2012) 13 German Law Journal, 381, 404
372
Robert Baldwin, Martin Cave and Martin Lodge Understanding Regulation: Theory, Strategy and Practice (2nd
ed. Oxford University Press, 2011)
373
David Driesen, Robert Adler and Kirstin Engel Environmental Law: Conceptual and Pragmatic Approach
(Aspen, 2011), 267
374
Robert Stavins ‘Experience with Market-Based Environmental Policy Instruments’ in Karl-Göran Mäler and
Jeffrey Vincent (eds) Handbook of Environmental Economics (Elsevier Science, 2003)

compliance being seen as the limit of the requirement irrespective of what could
actually be achieved.375
In contrast a market-based regulatory style uses ‘market forces’,376 price
discovery,377 and other economic instruments to provide incentives for polluters to
reduce or eliminate negative environmental externalities.378 The common processes
used are either progressive taxation or trading mechanisms where a property right
is created379 and then, via market processes, a ‘price’ is placed on pollution so that
market participants are able to rank investments against the cost of non-compliance
(for example the EU-ETS creates a property right in emissions via the allowances
and facilitates the trading of those allowances).380 It has been stated that market-
based solutions allow any desired level of emissions to be realised at the lowest
overall cost to society, by providing reductions at the lowest cost.381
Market-based regulations which do not prescribe specific technologies
achieve compliance at the lowest cost, as all undertakings do not reduce emissions
by the same amount but reduce emission in accordance only with economic
justification. This approach allows greater flexibility in the abatement of emissions.
In developing the renewables regulatory framework the EU has declared a
departure from a ‘command and control’382 approach to one of ‘shared responsibility
between various actors: government, industry and the public’. 383 This has been
nuanced to be ‘a more inclusive approach including more specific targets and an
increased use of market-based measures’.384 The need to move from C&C to market
375
Neil Gunningham and Darren Sinclair Leaders and Laggards: Next Generation Environmental Regulation
(Greenleaf Publishing, 2002)
376
Jeffrey Vincent (eds) Handbook of Environmental Economics (Elsevier Science, 2003), 358
377
Price discovery is the overall process, whether explicit or inferred, of setting the spot price of an asset or
service but most commonly the proper price of a security, commodity, or currency based on many factors. These
include supply and demand, intangible factors such as investor risk attitudes and the overall economic and
geopolitical environment. Simply put, it is where a buyer and a seller agree on a price and a transaction occurs.
Definition from https://www.investopedia.com/terms/p/pricediscovery.asp#ixzz5BR9NKHyG accessed 30 March
2018
378
Leigh Raymond Private Rights in Public Resources Equity and Property Allocation in Market-Based
Environmental Policy (Routledge, 2014)
379
Santiago Moreno-Bromberg and Luca Taschini ‘Pollution permits, strategic trading and dynamic technology
adoption’ [2011] Grantham Research Institute on Climate Change and the Environment Working Paper No. 45
380
Carolyn Fischer ‘Technical innovation and design choices for emissions trading and other climate policies, in:
Brend Hansjürgens (Ed) Emissions Trading for Climate Policy - US and European Perspectives (Cambridge
University Press, 2005), 40
381
Jeffrey Vincent (eds) Handbook of Environmental Economics (Elsevier Science, 2003), 359; see also Patricia
Birnie, Alan Boyle, and Catherine Redgwell, International Law and the Environment (3rd Ed, Oxford University
Press, 2009); David Driesen, ‘Free Lunch or Cheap Fix?: The Emissions Trading Idea and the Climate Change
Convention’ (1998) 26(1) Boston College Environmental Affairs Law Review
382
Sustainability
383
EU Comm ‘Fifth European Community Environment Programme: Towards Sustainability’ available at
<http://europa.eu/scadplus/leg/en/lvb/128062.htm>
384
EU Comm ‘Sixth Environment Action Programme, Environment 2010: Our future, Our Choice’, available at
<http:Europa.eu.int/comm/environment/newprg>

based regulatory styles emerged as a theme from the Developer Operators
respondents during the empirical research phase.
385
The table below sets out the analysis pairs of competence and
C&C/market; Exclusive EU Competence and Market, Exclusive EU Competence
and C&C, Shared Competence and Market and finally Shared Competence and
C&C.
This analysis framework can also be correlated to the trilemma criteria of
reliability, sustainability and affordability,386 with the C&C Directive seen to be driving
for the reliable achievement of the EU’s sustainability goals, whereas market-based
Directives are seen to seek lowest cost solutions, with achieving the goal being left
to the market.
The Directives are divided in this manner to highlight the difference in the
number and areas of conflict between the Directives and the EU’s free trade
principles. The assignment between exclusive and shared competence is
undertaken via a combination of declaration of the competence in the Treaty (TEU
and or TFEU) or by the CJEU.
Exclusive EU Competence + Market Exclusive EU Competence + C&C
Energy Efficiency Directive388

Emissions Trading Directive387 Industrial Emissions Directive389
Effort Sharing Decision390
Carbon Capture & Storage Directive391
Shared Competence + Market Shared Competence + C&C
Renewable Energy Directive393
Electricity Market Directive392
385
386
387
388
389
390
391
Council Directive 2009/31/EC 23 April 2009 on the geological storage of carbon dioxide OJ L140/114
392
Council Directive 2009/72/EC 13 July 2009 Concerning common rules for the internal market in electricity OJ L
211/55 (Electricity Markets Directive) available at https://eur-lex.europa.eu/legal-
content/EN/TXT/PDF/?uri=CELEX:32009L0072&from=en
393

It is acknowledged that the full renewables regulatory framework also contains
Directives related to bio-fuels in the form of the Bio-fuels Directive 394 and Fuel
Quality Directive;395 however, these are outside the scope of this research.
2.5 UN Framework Convention on Climate Change (UNFCCC), Kyoto

Protocol and COP 21 Paris Global Climate Change Agreement
To illustrate that the EU’s carbon emissions reduction framework is not enacted in
isolation the wider international climate change abatement programme is set out
below.
In 1988, the Intergovernmental Panel on Climate Change (IPCC) was
established to provide scientific information on climate change and assist with the
formulation of response strategies to climate change.396 The IPPC in its 1990 first
assessment report stated that the greenhouse effect397 was real, increasing and
caused by human activity.398
Based on the successful implementation of a ban on the use of
chlorofluorocarbons (CFC’s)399 signatories to the UNFCCC400 sought in the same
way global undertakings 401 related to greenhouse gases 402 and international
agreement to the Kyoto Protocol403 However, certain countries failed to ratify the
394
EU Directive (2003/30/EC) 8 May 2003 ‘The promotion of the use of bio-fuels or other renewable fuels for
transport’ OJ L 123/42
395
Council Directive 98/07/EC 23 April 2009 The specification of petrol, diesel and gas-oil and introducing a
mechanism to monitor and reduce carbon emissions (Fuel Quality Directive) OJ L140/88
396
Preface to The Intergovernmental Panel on Climate Change ‘Report Prepared for IPCC by Working Group 1’
Intergovernmental Panel on Climate Change (IPCC) -; Also known as John Houghton, Gareth Jenkins and J
Ephraums (Eds.), Climate Change: The IPCC Scientific Assessment, (Cambridge University Press, 1990),
available www.ipcc.ch/ipcreports/far/wg_i/ippc_far_wg_i_full_report.pdf accessed 10 September 2015
397
Gases such as water vapour, carbon dioxide, nitrous oxide, methane, hydrofluorocarbons (HFCs),
perfluorocarbons (PFCs) and sulphur hexafluoride, that are transparent to solar (short-wave) radiation but opaque
to long-wave (infrared) radiation, prevent long-wave radiant energy from leaving the earth’s atmosphere. The net
effect is a trapping of absorbed radiation and a tendency to warm the planet's surface. definition contained in Dag
Klackenberg, Christian Egenhofer and Kyriakos Gialoglou ‘Rethinking the EU Regulatory Strategy for the Internal
Energy Market’ (2004) Task Force Report No 52, Centre for European Policy Studies; See Also Catherine
Redgwell, ‘International Regulation of Energy Activities’ in Martha Roggenkamp, Catherine Redgwell, Anita
Ronne, and Inigo del Guayo (eds) Energy Law in Europe National, EU and International Regulation (Oxford
University Press, 2016)
398
The Intergovernmental Panel on Climate Change ‘Report Prepared for IPCC by Working Group 1’
Intergovernmental Panel on Climate Change (IPCC) -; Also known as John Houghton, Gareth Jenkins, J
Ephraums (Eds.), Climate Change: The IPCC Scientific Assessment, (Cambridge University Press, 1990), pXI
available www.ipcc.ch/ipcreports/far/wg_i/ippc_far_wg_i_full_report.pdf accessed 10 September 2015; See Also
Spencer Weart The Discovery of Global Warming (Harvard University Press, 2008)
399
Jutta Brunnée ‘Environment, Multilateral Agreements’ in R Wolfrum (ed) Max Planck Encyclopedia of Public
International Law (Oxford University Press, 2011)
400
United Nations Framework Concention for Climate Change
https://unfccc.int/sites/default/files/convention_text_with_annexes_english_for_posting.pdf
401
Joanna Depledge The Organization of Global Negotiations: Constructing he Climate Change Regime
(Earthscan, 2015) t
402
Scott Barrett Environment and Statecraft: The Strategy of Environmental Treaty-Making (Oxford University
Press, 2003)
403

Protocol,404 others dropped out405 and no limits were placed on other developing
countries. 406 Lastly, there is no enforcement mechanism if targets are not
achieved,407 thus the Kyoto Protocol can be regarded as non-binding ‘soft-law’408
that does not cover all of the major carbon emitting countries.
However, the legally binding EU renewable electricity regulatory framework
developed from the obligations 409 contained in the UNFCCC, 410 the Kyoto
Protocol411 and the Paris COP 21 Agreement.412
As stated above, the objectives of international energy and environmental
law have traditionally been based on the Brundtland Report 413 concept of
sustainability, which sought to consider present and future generations’ needs for
energy, 414 whereas the EU’s objectives are emissions reduction and security of
supply. Thus, the EU and the UN frameworks can be considered as aiming at
different targets.415 However, the EU’s framework is designed to comply with, and in
certain cases exceed, the EU’s obligations contained in the UN’s climate change
framework. 416
The Kyoto Protocol placed obligations on each signatory as a sovereign
state, as well as creating three multilateral mechanisms to fulfil obligations which
404
USA, Canada & Australia - See Irene Lorenzoni and Nick Pidgeon ‘Public Views on Climate Change:
European and USA Perspectives’ (2006) 77(1) Climate Change 73
405
Russia – See David Victor The Collapse of the Kyoto Protocol and the Struggle to Slow Global Warming
(Princeton University press, 2004); Igor Shishlov, Romain Morel and Valentin Bellassen, ‘Compliance of the
Parties to the Kyoto Protocol in the first commitment period’ (2016) 16(6) Climate Policy, 768; See Also Fiona
Harvey ‘The Kyoto Protocol is not quite dead’ (2012) http://www.theguardian.com/environ
ment/2012/nov/26/kyoto-protocol-not-dead (accessed 3 September 2015)
406
China & India - Valentina Bosetti and Jeffrey Frankel ‘Politically feasible emissions targets to attain 460 ppm
CO2 concentrations’ (2012) 6 Review of Environmental Economics and Policy; see also Sheila Olmstead and
Robert Stavins ‘Three key elements of a post-2012 international climate policy architecture’ (2012) 6 Review of
Environmental Economics and Policy
407
Scott Barrett Environment and Statecraft: The Strategy of Environmental Treaty-Making (Oxford University
Press, 2003)
408
Soft-Law can be defined as any instrument other than a Treaty or a Statute, containing principles, norms,
standards or other statements of expected behaviour, it can also be market rules developed from an instrument –
See Dinah Shelton, ‘International Law and Relative Normativity’ in Malcom Evans (ed) International Law (4th
Edition Oxford University Press, 2014), 137, 159
409
The terms of the UNFCCC, the Kyoto Protocol and the Paris COP 21 Agreement can be considered to produce
binding obligations as their terms fall within the Vienna Convention on the Law of Treaties 1969 Article 2.1 (a) as
they are drafted such as to be governed by international law. See Duncan Hollis ‘Defining Treaties’ in Duncan
Hollis (ed) The Oxford Guide To Treaties (Oxford University Press, 2013); See Also David Freestone ‘The United
Nations Framework Convention on Climate Change—The Basis for the Climate Change Regime’ in Kevin Gray,
Richard Tarasofsky, and Cinnamon Carlarne (eds) The Oxford Handbook of International Climate Change Law
411
https://unfccc.int/sites/default/files/kpeng.pdf
412
https://unfccc.int/sites/default/files/english_paris_agreement.pdf - for a discussion of the Paris Agreement see -
Lavanya Rajamani and Emmanuel Guérin ‘Central Concepts in the Paris Agreement and How They Evolved’ in
Daniel Klein, María Pía Carazo, Meinhard Doelle, Jane Bulmer, Andrew Higham, Emmanuel Guérin (eds) The
Paris Climate Agreement: Analysis and Commentary (Oxford University Press, 2017)
413
World Commission on Environment & Development, ‘Our Common Future’, 4 August 1987, UN, GA res,
A/42/427 (1987), Chapter 2, para 1
414
Edith Brown Weiss In Fairness to Future Genertions: International Law, Common Patrimony and
Intergenerational Equity (Transnational Publishers, 1989)
415
Lakshman Guruswamy, ‘Energy Justice and Sustainable Development’ (2010) 21 Colorado Journal of
International Environmental Law and Policy 231
416
Olaf Dilling and Till Markus, ‘The Transnationalisation of Environmental Law’ (2018) 30(2) Journal of
Environmental Law, 179

can be seen to have been directly implemented within the EU’s renewable energy
regulatory framework, (i) joint implementation of projects by the parties (allowed
within the Renewable Energy Directive),417 (ii) the clean development mechanism
(with parties which did not sign the Protocol),418 and (iii) emissions trading between
parties who signed the Protocol (analogous to the Emissions Trading Directive).419
The Kyoto Protocol also requires the monitoring and reporting of emissions, which
the EU has adopted via the annual Kyoto and EU 2020 Progress Report.420
Despite the UN’s framework’s shortcomings, the fact that some countries
have fully complied is a significant step towards a binding multilateral Treaty, 421
422
raising expectations of full adherence to climate agreements. The UN’s
framework has a normative power leading to the gradual emergence by mutual
consensus.423 Also there was a ‘euphoria’424 that followed the Kyoto conference that
has continued to pervade international climate change agreements.
Therefore, it is put forward that the political and social legacy of Kyoto is its
catalysing effect on the EU to implement a comprehensive climate change
abatement regulatory framework.425 The EU’s climate change regime is therefore
made possible by the post Kyoto ‘euphoria’426 and its normative power.427
The Paris Climate Change Agreement, the first legally binding global climate
change mitigation agreement,428 reached at the 21st Conference of the Parties429
417
Article 6 Kyoto Protocol
418
419
420
European Environment Agency Report 17/2017 ‘Trends and projections in Europe 2017: Tracking progress
towards Europe's climate and energy targets’ available at https://www.eea.europa.eu//publications/trends-and-
projections-in-europe-2017 accessed 21 May 2018
421
Alan Boyle, ‘Soft Law in International Law-Making’ in Malcolm Evans (ed) International Law (4th Edition Oxford
University Press, 2014), 118, 123
422
Jorge Viñuales ‘The rise and fall of sustainable development’ (2013) 22(1) Review of European, Comparative &
International Environmental Law
423
Marie-Claire Cordonier Segger, Ashfaq Khalfan and Salim Nakjavani, ‘Weaving the Rules for our Common
Future: Principles, Practices and Prospects for International Sustainable Development Law’ (2002)
www.cisdl.org/wtr/pdf/WeavingtheRulesOct2002.pdf 20 accessed 25 July 2017
424
conference’ (2017) 17(1) Climate Policy 1, 7
425
Hooi Hooi Lean and Russel Smyth, ‘Will Policies to Promote Renewable Electricity Generation be Effective?
Evidence from Panel Stationarity and Unit Root Tests for 115 Countries’ (2013) 22 Renewable and Sustainable
Energy Reviews 371
426
conference’ (2017) 17(1) Climate Policy, 1, 7
427
Sebastien Oberthür ‘The Climate Change Regime: Interactions With ICAO, IMO and the EU Burden-Sharing
Agreement’ in Sebastian Oberthür and Thomas Gehring (eds) Institutional Interaction in Global Environmental
Governance: Synergy and Conflict Among International and EU Policies (MIT Press, 2006)
428
Daniel Bodansky, ‘The Legal Character of the Paris Agreement’ (2016) 25(2) Review of European,
Comparative, and International Environmental Law 142; See Also Lavanya Rajamani, ‘The 2015 Paris
Agreement: Interplay Between Hard, Soft and Non-Obligations’ (2016) 28(2) Journal of Environmental Law 337
429
A Conference of the Parties (COP) serves as the formal meeting of the parties to the UNFCCC. The COP is
the supreme decision-making body of the Convention, are undertaken to assess progress in dealing with climate
change, and to negotiate protocols and other legally binding obligations for the reduction of greenhouse gas
emissions - https://unfccc.int/process/bodies/supreme-bodies/conference-of-the-parties-cop accessed 21 August
2018. In effect the COP is an autonomous decision making body - Robin Churchill and Geir Ulfstein ,
‘‘Autonomous Institutional Arrangements in Multilateral Environmental Agreements: A Little-Noticed Phenomenon
in International Law’ (2000) 94 American Journal o f International Law 623

(COP 21) in December 2015, took a very different approach 430 to the previous
conferences. COP 21 sought to gain agreement to a binding target for temperature
growth compared to pre-industrial temperatures of no more than 2oC (with an
aspiration of 1.5oC) and then set out to pick up country by county contributions
(known as ‘Nationally Determined Contributions’)431 such that this target could be
achieved. The Parties set aside the top down approach of Kyoto, moving ‘from a
commitments to a contributions’ acceptance model,432 making COP 21 a diplomatic
success.433
In effect COP 21 was ‘pragmatic and effective’434 and has implemented a
‘naming and shaming’ enforcement mechanism 435 which has turned out to be
effective.436
The ’contributions’ model is important for the EU in its long-term goal of
complying with COP 21. 437 This leading to consideration of carbon emissions
reductions in sectors outside electricity and transport, such as the built environment,
438 439 440
agriculture and forestry as a mid-century sequestration strategy
(transforming land use from carbon source to sink).441 The COP 21 targets also
430
431
A Jordan, D Huitema, M Hildén, H van Asselt, T Rayner, J Schoenefeld, and E Boasson, ‘Emergence of
polycentric climate governance and its future prospects’ (2015) 5 Nature Climate Change, 977
432
Rafael Leal-Arcas and Luigi Carafa ‘Road to Paris COP21: Towards Soft Global Governance for Climate
Change’ (2014) 2 Renewable Energy Law and Policy
433
Richard Kinley ‘Climate change after Paris: from turning point to transformation’ (2016) 17 Climate Policy’; See
Also Fiona Harvey ‘Paris climate change agreement: the world's greatest diplomatic success’ The Guardian (14
December 2015) https://www.theguardian.com/environment/2015/dec/13/paris-climate-deal-cop-diplomacy-
developing-united-nations accessed 8 October 2018; Raphael Heffron and Peter Cameron, ‘The Future of EU
Energy Law’ in Peter Cameron and Raphael Heffron (eds) Legal Aspects of EU Energy Regulation (Oxford
434
D Victor, J House and S Joy, ‘A Madisonian approach to climate policy’ (2005) 309(16) Science, 1820, 1820
435
Joanna Caytas, ‘The COP21 Negotiations: One Step Forward, Two Steps Back’ (2018) 19(1) Consilience: The
Journal of Sustainable Development, 1
436
Guri Bang, Jon Hovi and Tora Skodvin, ‘The Paris Agreement: Short-Term and Long-Term Effectiveness’
(2016) 4(3) Politics and Governance 209
437
J Sterman, A Jones, E Johnston and L Siegel, ’Climate Interactive Ratchet Success Pathway: Assumptions
and Results’ (2015) Climate Interactive, 4, https://www.climateinteractive.org/wp-
content/uploads/2015/12/Ratchet-Success-14-December-2015.pdf accessed 5 Apr. 2016
438
Deep Decarbonization Pathways Project (DDPP) (2015), ‘”Pathways to deep decarbonisation”, Sustainable
Development Solutions Network & the Institute for Sustainable Development & International Relations,
http://deepdecarbonization.org/wpcontent/uploads/2016/03/DDPP_2015_REPORT.pdf
accessed 5 April 2016
439
Article 4 of ‘Paris Climate Change Agreement of Parties to United Nations Framework Convention on Climate
Change’ (COP 21) available at
https://unfccc.int/files/essential_background/convention/application/pdf/english_paris_agreement.pdf accessed 30
October 2016
440
Sabina Hyseni ‘Carbon Capture and Storage as a Method to Mitigate Climate Change’ (2017) 9(3) Inquiries
Journal; see also D Leung, G Caramanna, and M Maroto-Valer ‘An overview of current status of carbon dioxide
capture and storage technologies’ (2014) 39 Renewable and Sustainable Energy Reviews, 426
441
B Caldecott, G Lomax, and M Workman, ’Stranded Carbon Assets and Negative Emissions Technologies:
Working Paper’ (2015) Smith School of Enterprise & the Environment, University of Oxford,
http://www.smithschool.ox.ac.uk/research-programmes/stranded-
assets/Stranded%20Carbon%20Assets%20and%20NETs%20-%2006.02.15.pdf (accessed 5 April 2016); See
also Lalisa Dugumar, Peter Minang and Meine van Noordwijk ‘Climate Change Mitigation and Adaptation in the
Land Use Sector: From Complementarity to Synergy’ (2014) Journal of Environmental Management; see also
Göran Berndes, Neil Bird and Annette Cowie ‘Bioenergy, Land Use Change and Climate Change Mitigation’
[2010] IEA Bioenergy

result in a greater emphasis being given to the Carbon Capture and Storage
Directive.442
Despite certain countries (specifically the USA443 and China) being unlikely
to maintain their international commitments, France has proposed to include climate
change abatement within its constitution.444
Any failure to maintain the COP 21 commitments is likely to result in carbon
emitting forms of generation (coal and gas) operating for longer than anticipated.
Once these additional emissions are fed into the EU’s modelling for the 2030 and
2050445 climate change targets it is likely that the targets will need to increase (see
Section 2.10) and thus the EU must develop its future regulatory framework with
suitable mitigation strategies to guard against commitment failure by others.446
2.6 EU’s Definition of Renewable Energy – Environmental Lunacy
As described above the EU’s renewable energy policy was formulated to allow it to
discharge its UNFCCC obligations. In 1995 the UN defined renewable energy such
that its needs to be replaceable within the broad span of a human lifetime.447
In developing its 1995 Green Paper for a ‘European Union Energy Policy’448
the EU largely followed the UN drafting.
The EU’s definition has changed little since that time. However, the most
recent incarnation set out in the 2014 Guidelines on state aid for environmental
protection and energy449 states renewable energy is that derived from:-
UN 1995 Definition EU 2014 Guidelines Definition

Wind, solar, biomass, geothermal, wind, solar, aero-thermal, geothermal,
hydropower and ocean (wave) hydrothermal and ocean energy,
hydropower, biomass, landfill gas,
sewage treatment plant gas and
biogases450
442
Council Directive 2009/31/EC of the European Parliament and of the Council of 23 April 2009 on the geological
storage of carbon dioxide OJ L140/114
443
V McGrane, ‘Trump’s Greatest Mission: Erasing Obama’s Legacy’ 16 December 2017 The Boston Globe;
Available at https://www.bostonglobe.com/news/nation/2017/12/16/trump-greatestmission-erasing-obama-
legacy/OA9M4qwS2hHlOj3MGLxGxK/story.html Accessed 28 December 2017
444
http://www2.assemblee-nationale.fr/langues/welcome-to-the-english-website-of-the-french-national-assembly
445
446
Luke Kemp ‘US Proofing the Paris Climate Agreement’ (2017) 17(1) Climate Policy
447
http://unfccc.int/resource/cd_roms/na1/mitigation/Resource_materials/Greenhouse_Gas_Mitigation_Assessment_
Guidebook_1995/chap09.pdf accessed 27 August 2018
448
EU COM(94) 659 'Green Paper for a European Union energy policy’
449
EU COM (2014/C 200/01)’Guidelines on State aid for environmental protection and energy 2014-2020’ -
450
The inclusion of aero-thermal and hydrothermal energy reflects the extension of the renewables’ regulatory
framework to include not just electricity and transportation, but heating and cooling, as air conditioning within
buildings becomes more important across the EU – See Angus Johnston and Guy Block, EU Energy Law, (1st
edn. Oxford University Press, 2012), 309: Also The Renewable Energy Directive’s Article 5(3) allows multi-fuel

Continuing to define renewable energy largely based on the 1995 UN definition this
has led to the EU (in addition to the UN) allowing several energy sources that emit
carbon in the production of electricity (biomass, landfill gas, sewage treatment plant
gas, biogases and multi-fuel plants) to be reported as renewable. It should be noted
that the EUs definition does not contain nuclear which is carbon emission free in the
production of electricity.
It is argued here that within an EU context it is ‘environmental lunacy’451 to
continue to the use a definition of renewable energy that includes energy sources
that produce carbon in their production of electricity. Therefore, in looking to the
2030 and 2050 periods (described in Sections 2.11) the definition of renewable
energy must focus on eliminating carbon emissions and developing renewable
energy from sources such as hydro, wind and solar (the currently most popular forms
of renewable energy in the EU being hydro and wind)452 to fully decarbonise the
electricity sector. Therefore biomass, landfill gas, sewage treatment plant gas and
biogases should be removed from the definition and to fail to do so is an opportunity
lost.
2.7 Renewables – Costs of Production & the Need for Revenue Support
The UN places obligations on the EU and its member states to transition 453 the
electricity sector from a largely coal and nuclear based sector to one based on
renewables.454
It should be noted that the price of electricity produced by any generating
facility is a combination of the cost of the fuel, maintenance and the recovery of the
capital build costs. 455 When the ‘transition’ commenced in the 1990s renewable
plants (hybrid-plants) to also be reported as renewable, as considered in Case C- 209/09 Lahti Energia Oy
ECLI:EU:C:2010:98
451
The Economist ‘Wood: The fuel of the future. Environmental lunacy in Europe’ (2013)
http://www.economist.com/news/business/21575771-environmental-lunacy-europe-fuelfuture Accessed 17 May
2017
452
http://ec.europa.eu/eurostat/web/energy/data/shares accessed 14 June 2018
453
Stuart Bruce ‘The sustainable energy transition through international and EU law’ in Stephen Minas
and Vassilis Ntousas (eds) EU Climate Diplomacy Politics, Law and Negotiations (Routledge, 2018); see also
Manuel Welsch Europe’s Energy Transition: Insights for Policy Making (Elsevier, 2017), Thomas Pellerin-Carlin,
Jean-Arnold Vinois, Eulalia Rubio, Sofia Fernandes Making the Energy Transition a European Success tackling
the Democratic Innovation, Financing and Social Chalaneges of the Energy Union (Jacques Delors Institute,
2017)
454
Sandra Enkhardt ‘Germany: Renewables beat coal for the first time’ [2018] pv magazine Deutschland; See
also Silvio Marcacci ‘Uneconomic coal could be squeezed out of European Union power markets by 2030’ [2018]
Energy Post
455
Monica Greer Electricity Cost Modeling Calculations (Elsevier, 2010)

electricity generating technology was in its infancy456 and thus renewable electricity
was more expensive to produce (caused by increased capital and operational costs)
than electricity derived from classical thermal sources (coal and gas).457 Additionally,
as a result of their higher capital cost per unit of installed capacity than coal and gas
fuelled plants, renewable installations were and are more exposed to capital
rationing 458 and cost of capital 459 issues, which means that financing 460 and tax
management461 are particularly important for renewables. Despite these cost issues
the technology was considered worthy of financial support462 at the EU and member
state level (most of the financial support being derived from member states via what
is called a ‘support scheme’463 within the Renewable Energy Directive). 464
456
Sergey Mityakov and Margarita Portnykh, ‘The Infant Industry Argument and Renewable Energy Production’
(2012) Marshall Institute Working Paper
457
Attila Hajos, Paget Fulcher, Ian Johnson, Goran Strbac and Danny Pudjianto ‘Supporting investments into
renewable electricity in context of deep market integration of RES-e after 2020: Study on EU-, regional- and
national-level options’, (2015) CEPA London, ENER/C1/2015-39
458
Capital rationing is essentially a management approach to allocating available funds across multiple
investment opportunities, increasing a company's bottom line. The combination of projects with the highest total
net present value (NPV) is accepted by the company. The number one goal of capital rationing is to ensure that a
company does not over-invest in assets. Without adequate rationing, a company might start realizing decreasingly
low returns on investments and may even face financial insolvency.
www.investopedia.com/terms/c/capitalrationing.asp#ixzz5Pkx7mwcb accessed 31 August 2018
459
Cost of capital is the required return necessary to make a project worthwhile. Cost of capital includes the cost
of debt and the cost of equity. Another way to describe cost of capital is the cost of funds used for financing a
business. Cost of capital depends on the mode of financing used — it refers to the cost of equity if the business is
financed solely through equity, or to the cost of debt if it is financed solely through debt. Many companies use a
combination of debt and equity to finance their businesses and, for such companies, the overall cost of capital is
derived from a weighted average of all capital sources, widely known as the weighted average cost of capital
(WACC). Since the cost of capital represents a hurdle rate that a company must overcome before it can generate
value, it is extensively used in the capital budgeting process to determine whether the company should proceed
with a project. https://www.investopedia.com/terms/c/costofcapital.asp#ixzz5Pky4NTyQ Accessed 31 August
2018
460
As the ‘fuel’ for renewable electricity (wind and solar) is free, ongoing costs are composed of financing and
operational costs. Therefore reducing the cost of capital (combination of equity and debt forms the weighted
average cost of capital or WACC) is important to ensure applicable rates of return are achieved; See J
Ondraczek, N Komendantova.and A Patt, ‘WACC the dog: The effect of financing costs on the levelised cost of
solar PV power’ (2015) 75, Renewable Energy, 888
461
Ensuring that maximum capital allowance are accrued during the development and construction phase
followed by minimisation of ongoing tax is important to minimise revenue leakage during the operational phase of
a project; See C Donovan, Renewable energy finance: powering the future, (Imperial College Press, 2015)
462
The concept of an industry in its infancy which is worthy of support should satisfy the two following conditions:
(1) the costs of production should eventually be below the costs of technologies currently utilised; and (2) future
savings in costs (compared to existing technologies) should compensate for the initial cost of supporting the infant
industry. More importantly, the infant industry argument requires some form of market failure, e.g., externalities or
imperfect financial markets; otherwise free markets would deliver the efficient outcome. Even in cases where such
imperfections exist, support in the form of production subsidies is an inappropriate policy instrument, since it is
unlikely to solve these market failures. – the so called Mill-Bastable test – Charles Bastable The Commerce of
Nations (Wentworth Press, 2016) – outline of the test contained in Sergey Mityakov and Margarita Portnykh, ‘The
Infant Industry Argument and Renewable Energy Production’ (2012) Marshall Institute Working Paper; For a
counter argument see Robert Baldwin, ‘The Case against Infant-Industry Tariff Protection’ (1969) 77(3) Journal of
Political Economy, 295
463
‘support scheme’ means ‘any instrument, scheme or mechanism applied by a Member State or a group of
Member States, that promotes the use of energy from renewable sources by reducing the cost of that energy,
increasing the price at which it can be sold, or increasing, by means of a renewable energy obligation or
otherwise, the volume of such energy purchased. This includes, but is not restricted to, investment aid, tax
exemptions or reductions, tax refunds, renewable energy obligation support schemes including those using green
certificates, and direct price support schemes including feed-in tariffs and premium payments’ – Article 2
Renewable Energy Directive (2009/28/EC)
464

It should be noted that the ‘support schemes’ are not declared state aid under
465
the State Aid - General Block Exemption Regulation (GBER) and the
Commission’s 2014 Guidelines on State Aid for Environmental Protection &
Energy,466 however, as the case law analysis in Sections 3.5.9 to 3.5.12 will show
support scheme design is key to it not being declared state aid.
The wholesale price of electricity is set by the most expensive generating
facility operating at any particular time467 (known as the ‘marginal cost’ – See Annex
2). 468 In most EU countries the marginal generating facility and thus setting the
wholesale is gas fired generation, which has a price point broadly 50% to 60%469
that of currently operating wind generated renewable facilities. 470 This price
differential resulting from lower capital costs and the incomplete internalisation into
the output price of the generating facilities of costs such as carbon emissions,
energy security 471 and a partial implementation of the ‘polluter pays’ 472 principle
(Article 191(2) TFEU).
These omissions from the output price of generating facilities allows gas and
coal fuelled generation to emit greenhouse gases without being forced to fully pay
for the abatement of these emissions, despite the ‘polluter pays’ principle being said
to be mandatory in the EU473 (see Raffinerie Mediterranee).474
In considering potential mechanisms to internalise the costs of carbon
emissions, energy security 475 and the like across coal and gas fired generating
465
EU Regulation No 1588/2015 on the application of Articles 107 and 108 of the Treaty on the Functioning of the
European Union to certain categories of horizontal State aid, OJ 2015 L 248/1, and European Commission,
Regulation (EU) No651/2014 declaring certain categories of aid compatible with the internal market in application
of Articles 107 and 108 of the Treaty,OJ 2014 L 187/1. General Block Exemption Regulations for State aid
('GBER')
466
European Commission Communication ‘Guidelines on state aid for Environmental Protection and Energy 2014
– 2020, 2014/C OJ 200/01.
467
The wholesale price is dynamic, changing half hourly based on the demand for electricity and the availability of
generating facilities. Generators submit ‘offers’ to the market operator indicating the amount of energy they are
willing to supply and at what price. http://www.rwe.com/web/cms/en/403722/rwe/press-news/how-the-electricity-
price-is-determined/
468
Paul Deane, Seán Collins, Brian Ó’Gallachóir, Cherrelle Eid, Rupert Hartel, Dogan Keles and Wolf Fichtner
‘Impact on Electricity Markets: Merit Order Effect of Renewable Energies’ in Manuel Welsch, Steve Pye, Dogan
Keles, Aurélie Faure-Schuyer, Audrey Dobbins, Abhishek Shivakumar, Paul Deane, Mark Howells (eds)
Europe's Energy Transition - Insights for Policy Making Findings (Elsevier, 2017)
469
European Power Exchange - https://www.epexspot.com/en/ - accessed 11 August 2016
470
Dieter Helm, ‘Cost of Energy Review’, 25 October 2017, Table 12, p. 104 available at
http://www.biee.org/wpcms/wp-content/uploads/Cost_of_Energy_Review.pdf.
471
W J Nuttall, Nuclear Renaissance: Technologies and Policies for the Future of Nuclear Power (CRC Press,
2004), 42; See Also Penelope Crossley, ‘The role of renewable energy law and policy in meeting the EU’s energy
security challenges’ in Rafael Leal-Arcas and Jan Wouters (eds) Research Handbook on EU Energy Law and
Policy (Elgar, 2017)
472
J Krzeminska, ‘Are Support Schemes for Renewable Energies Compatible with Competition Objectives? An
Assessment of National and Community Rules’ (2007) 7 Yearbook of European Environmental Law 132
473
G Winter, ‘The legal nature of environmental principles in international, EC and German law’ in R Macrory (ed.)
Principles of European Environmental Law (Europa Law Publishing, 2004), 19
474
Case C-378/08 Raffinerie Mediterranee (ERG) SpA, Polimeri Europa SpA and Syndial SpA v Ministero dello
Sviluppo economico and Others ECLI:EU:C:2010:126, para 46
475
(Elgar, 2017)

facilities, what must be remembered is that this will increase the cost of electricity
that is not renewables based (increasing electricity bills for all, including those
currently in fuel poverty, 476 in 2016 48.7% of electricity produced in the EU was from
combustion sources - coal and gas etc.).477 Hence putting in place a legal structure
that would internalise these costs is considered simplistic. 478 It always being
remembered that having access to electricity supplies increases the consumer’s
ability to become self-reliant, enabling the individual to become a socially and
economically active participant in society.479
Before a legal structure can be determined legislators will need to balance
the social and economic implications480of the outcome. A significant price increase
across the whole of the electricity sector is believed to merely result in the shift of
industrial production to jurisdictions where carbon emissions are not internalised into
electricity prices481 (so called ‘carbon leakage’).482 Thus legislators and regulators
476
fuel poverty is: where fuel costs to that individual or consumer are such that post expenditure that individual or
consumer would be left with a residual income below the official poverty line – See ‘Fuel Poverty: a framework for
future action’ (2013) Department of Energy & Climate Change
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/211180/FuelPo
vFramework.pdf accessed 21 August 2018
477
https://ec.europa.eu/eurostat/statistics-
explained/index.php/Electricity_production,_consumption_and_market_overview#Electricity_generation accessed
31 August 2018
478
Peter Brown, ‘Lessons for Carbon Capture and Storage from the Rollout of Flue-gas Desulphurisation
Technology’ (2015) 2 Transform - Institute of Environmental Management & Assessment Working Paper
479
Stefan Bouzarovski and Saska Petrov, ‘A global perspective on domestic energy deprivation: Overcoming the
energy poverty–fuel poverty binary’ (2015) 10 Energy Research & Social Science, 31; See Also Steve Pye and
Audrey Dobbins, ‘Energy poverty and vulnerable consumers in the energy sector across the EU: analysis of
policies and measures’ (2015) INSIGHT_- European Commission 7th Framework Programme
480
Jesse Jenkins,’ Political economy constraints on carbon pricing policies: What are the implications for
economic efficiency, environmental efficacy, and climate policy design?’ (2014) 69 Energy Policy, 467
481
M Babiker, ‘Climate change policy, market structure, and carbon leakage’ (2005). 65 Journal of International
Economics, 421; See Also Mohamed Amine Boutabba and Sandrine Lardic,’ EU Emissions Trading Scheme,
Competitiveness and carbon leakage: new evidence from cement and steel industries’ (2017) 255(1) Annals of
Operations Research, 47; See Also Hui Zhou and Jichuan Sheng,’Has EU ETS caused carbon leakage in the EU
carbon-intensive industries? A study from the perspective of bilateral trade’ (2015) 13(2) Chinese Journal of
Population Resources and Environment, 132
482
The EU defines carbon leakage as the prospect of an increase in global greenhouse gas emissions when
companies shift production outside the Union because they cannot pass on the cost increases induced by the EU
ETS to their customers without significant loss of market share’ para 7 - Commission Communication 5 June
2012 ‘Guidelines on certain State aid measures in the context of the greenhouse gas emission allowance trading
scheme post-2012’ OJ 2012/C 158/04; Considering the issue more widely; carbon leakage theory postulates that
in the absence of a globally co-ordinated climate change policy, production of goods and services based on fossil
fuels will move to countries with less stringent environmental regulation therefore offsetting the carbon emission
savings realised in countries where climate change policy is in place. - Edward Foster, Marcello Contestabile,
Jorge Blazquez, Baltasar Manzano, Mark Workman, Nilay Shah, ‘The unstudied barriers to widespread renewable
energy deployment: Fossil fuel price responses’ (2017) 103 Energy Policy, 258: See Also Jean Tirole, ‘Some
Political Economy of Global Warming’. (2012) 1(1) Economics of Energy & Environmental Policy, 1; Mohamed
Amine Boutabba and Sandrine Lardic,’ EU Emissions Trading Scheme, Competitiveness and carbon leakage:
new evidence from cement and steel industries’ (2017) 255(1) Annals of Operations Research, 47; See Also Hui
Zhou and Jichuan Sheng,’Has EU ETS caused carbon leakage in the EU carbon-intensive industries? A study
from the perspective of bilateral trade’ (2015) 13(2) Chinese Journal of Population Resources and Environment,
132

need to recognise that interventions in the electricity market need to be well
designed and proportionate483 to avoid additional market distortions.484
Looking to the future of renewable electricity, however, this price differential
may not be as significant an issue as it has been historically or currently. The recent
auction process for offshore renewable sites in the UK (known as a ‘concession
auction’) resulted in the UK’s Hornsea 3 Project bidding an output price broadly
equal to the output price of coal and gas generation and as such the wholesale
electricity market – a price point known as ‘grid parity’.485 Also German developer
EnergieKontor has announced that two UK onshore sites ‘Pines Burn’ and
‘Withernwick II’ would be built ‘subsidy-free’.486
With revenue support for renewable electricity becoming less of a feature
moving forward and the EU should change its focus to one focussed on carbon
emissions reduction which does not favour one technology as a means of production
(e.g. wind based renewables).
2.8 EU & Member State Renewable Energy Regulatory Institutions –

Commission, CJEU, ACER and National Regulators
In seeking to fulfil its obligation of reduced carbon emissions under the UNFCCC
(See Section 2.5) the EU, and its member states, set a proxy objective relating to
the installation of renewable electricity generating capacity. The conclusions of the
EU Council of 26 November 2015487 recognised that the governance of the ‘energy
union’488 will be an essential tool for the achievement of its objectives. To this end
an understanding of the three EU organisations providing governance within the
renewable energy sector is required.
483
Meaning that ‘measures should not exceed the limits of what is appropriate and necessary for attaining the
objective pursued, and that where is a choice between several appropriate measures must be had to the least
onerous’ Case T-419/03 Altsoff Recycling Austria v Commission ECLI:EU:T:2011:102, para 134; Also
‘proportionality’ or ‘being proportionate’ can be considered an ideal or a goal rather than being a principle with the
same status as ‘polluter pays’ or the ‘precautionary’ principle. – see Jonathon Verschuuren, ‘Sustainable
Development and the Nature of Environmental Legal Principles’ (2006) (1)9 Potschefstroom Electricity Law
Journal, 17; See Also Jurian Langer and Wolf Sauter ‘The Consistency Requirement in EU Law’ (2017) 39 Journal
of European Law
484
European Commission SWD(2013) 439 ‘European Commission guidance for the design of renewables support
schemes’
485
Daniel Radov, Alon Carmel and Clemens Koenig, ’Offshore Revolution? Decoding the UK Offshore Wind
Auctions & What the Results Means for a “Zero-Subsidy” Future’ (2017) NERA Economic Consulting
486
Energiekontor AG company press release 31 August 2018 – available at https://www.energiekontor.co.uk/news
accessed 31 August 2018
487
Conclusions of the Council of 26 November 2015 (14632/15)
488
Commission (Comm 2015) 25 February 2015 ‘A Framework Strategy for a Resilient Energy Union with a
Forward-Looking Climate Change Policy’; outlines the five pillars of the Energy Union (i) Energy security, solidarity
and trust; (ii) A fully integrated European energy market; (iii) Energy efficiency contributing to moderation of
demand; (iv) Decarbonising the economy, and (v) Research, innovation and competitiveness

In relation to renewable electricity the main EU institution charged with the
day to day governance of the renewable electricity regulatory framework is the
Commission.489 The Commission has a duty to ensure the provisions of the Treaty
and other aspects of EU law are upheld, which can require the Commission initiating
judicial processes against member states or other institutions490 (the Commission
has thus been called the ‘guardian of the treaties’).491
The Commission, in accordance with Article 3(3) TEU, has competence
around environmental protection. Furthermore, in accordance with Article 4 TEU
areas of policy not specifically conferred upon an EU institution remain with member
states (e.g. energy). Therefore, in areas where competence remains with the
member states, in accordance with subsidiarity,492 the Commission has no need to
intervene when member states can deal with the issue effectively.
Based on the principle of conferral and the Commission’s competences, it
has an important regulatory role within the renewable electricity sector. The
Commission’s most regular intervention in a governance or adjudicative capacity in
the renewable electricity sector relates to state aid, either via the allocation of
emission allowances as part of the EU-ETS or the application of feed-in tariffs via
the Renewable Energy Directive. 493 The Commission has extensive state aid
decision making and enforcement powers conferred by Article 106 TFEU. The use
of these powers by the Commission in the context of environment and energy are
set out in the Guidelines on State Aid for Environmental Protection and Energy.494
The Guidelines are nonbinding expressions of policy by the Commission (essentially
'soft-law') however, they are normative and the CJEU has held guidelines developed
by the Commission are binding on the Commission.495
The Commission can also deliver reasoned opinions against a member state
where it believes that the member state has failed to fulfil an obligation under the
489
https://web.archive.org/web/20070623104055/http://europa.eu/institutions/inst/comm/index_en.htm
490
Anne Bonnie, ‘The Evolving Role of the European Commission in the Enforcement of Community Law: From
Negotiating Compliance to Prosecuting Member States?’ (2010) 1(2) Journal of Consciousness Exploration &
Research
491
European Parliament resolution of 15 December 2010 on the situation of fundamental rights in the European
Union (2009) – effective implementation after the entry into force of the Treaty of Lisbon (2009/2161(INI)) 2012/C
169 E/07https://eur-lex.europa.eu/legal-content/EN/TXT/?qid=1551216984520&uri=CELEX:52010IP0483 –
accessed 1 October 2018
492
The principle of subsidiarity confirms which EU party (member states or European institutions) should act
where competence is shared (where the EU does not have exclusive competence). The principle acts where EU
objectives cannot be effectively achieved by member states, but can be better achieved at EU level – See Article
5 TFEU and Protocol 2 TFEU.
493
494
– 2020, 2014/C OJ 200/01
495
Case C-313/90 Comité International de la Rayonne et des Fibres Synthétiques v Commission
ECLI:EU:C:1993:111, para. 36; See Also Case C-351/98 Spain v Commission ECLI:EU:C:2002:530, para 53

Treaty (Article 258 TFEU). Failure to comply with a reasoned opinion can result in a
referral by the Commission of the member state to the CJEU.
The number of decisions or opinions issued by the Commission, and the
normative, legitimising and binding nature of the Commission’s policy guidelines and
other pronouncements496 create a history of decision making that is a track record.
As such it is argued that the Commission has a governance and regulatory
personality acting similarly in similar circumstances. Therefore, a change in policy
(as can be seen between 2008 and the 2014 Guidelines Related to State Aid, where
the 2014 Guidelines focuses almost exclusively on the economic-effectiveness of
the support mechanisms, requiring member states to use only auction processes for
awarding renewables support, whereas the 2008 Guidelines allowed a more
technology focussed and thus differentiated approach) is an example of a shift in the
regulatory paradigm which is not universally welcomed.497
Despite the many shortcomings of the Commission in the exercise of a
regulatory role, its normative and legitimising position, with a desire to do the best
for all EU members,498 gives it a unique opportunity to shape outcomes by setting
the regulatory agenda rather than reacting to it.499 An example of this kind of practice
is the Commission’s attempt to replace the national allocation plans for emissions
allowances when the ‘plans’ were considered to be conferring an advantage on
certain undertakings. Although censured by the CJEU for doing so it is argued that
the Commission was trying to do the right thing by preserving the EU-ETS and apply
best environmental and economic practice (See Section 2.10.1).
Additionally, the CJEU is given a governance role via a series of powers
conferred upon it within TFEU, an example being Article 267 TFEU, the preliminary
ruling procedure. Article 267 TFEU allows national courts faced with a question over
the interpretation or validity of EU legislation to seek interpretive guidance from the
CJEU, or to request the CJEU to determine the validity of the actions of the EU’s
institutions (e.g. Commission). The CJEU’s case law guides EU institutions, member
states, commercial undertakings and EU citizens, but especially national courts that
must follow legal interpretation of EU law provided by the CJEU. From a predictive
standpoint the number of judgements from the CJEU creates a history of decision
making that can again be seen as a track record.
496
Neil Nugent and Mark Rhinard, ‘The political roles of the European Commission’ [2019] Journal of European
Integration
497
Randy Mott, ‘New State Aid Guidelines for Renewable Energy Discourage Competition, Green Energy and
Energy Security’ (2015) 5(2) European Energy Journal
498
EU COM(2016) 615 ‘Better Regulation: Delivering better results for a stronger Union’
499
Neil Nugent and Mark Rhinard The European Commission (Palgrave Macmillan, 2105)

An EU institution that has only recently been brought into the sphere of
governance of renewable electricity is the Agency for the Cooperation of Energy
Regulators (ACER - created in 2011, as part of the Third Energy Package to further
progress the completion of the internal energy market for both electricity and natural
gas).500 As an independent EU organisation ACER’s role is to foster cooperation
between energy regulators across the EU. ACER seeks to enhance market
integration and the harmonisation of national regulatory frameworks within the EU’s
framework, thus creating a more competitive integrated market, guaranteeing free
movement and deterring abusive practices.501
It is asserted that ACER, like the Commission, is developing an increasingly
political role502 and therefore it is likely that the future will see more appeals against
ACER’s decisions. The political focus of ACER’s work brings with it different risks
for the operators of renewable electricity facilities as there is little history on how
ACER will determine issues before it. As the work of ACER is not purely confined to
one country, there is likely to be an increased number of multi-national regulatory
decisions. The development of the technical rules relating to running the electricity
market will increasingly come within the purview of ACER.503 As such these rules
500
The development of Agencies such as ACER within the EU had been restricted due to what is known as the
‘Meroni Doctrine’ (developed from Case C-9/56 Meroni v High Authority ECLI:EU:C:1958:7). ‘The doctrine states
that competencies conferred on EU institutions cannot in turn be delegated to an EU agency without an explicit
decision, although an explicit Treaty base is not indispensable. If powers are delegated, they cannot be
‘discretionary’ to such an extent that the ‘wide margin of discretion’ might enable the ‘execution of actual economic
policy’. The latter would mean an illegal transfer of responsibility (it is the delegator, not the delegate, making the
policy choices) and would alter the balance of powers, later interpreted as the ‘institutional balance’ between the
EU institutions. Any delegated powers should be embedded in or accompanied by guarantees of judicial review,
transparency and active consultation. To this end, it is also required to delegate powers under precise rules and
within boundaries carefully defined by the EU legislator.’ – derived from Jacques Pelkmans and Marta Simoncini
‘Mellowing Meroni: How ESMA can help build the single market’ [2014] Centre for European Policy Studies
available at https://www.ceps.eu/system/files/Mellowing%20Meroni.pdf Accessed 12 February 2019. Following the
judgment of the CJEU in Case C-270/12 UK v Parliament & Council ECLI:EU:C:2014:18 (so called ESMA case)
the Meroni Doctrine has been softened such that reasonable delegation of power and discretion can be made to
agencies such as ACER. ;See Also Herman Lelieveldt and Sebastiaan Princen The Politics of the European
Union (Cambridge University Press, 2011), 271; Vassilis Hatzopoulos Regulating Services in the European Union
(Oxford University Press, 2012), 325
501
https://www.acer.europa.eu/en/The_agency/Pages/default.aspx
502
Briefing EU Legislation in Progress ‘New rules for the Agency for the Cooperation of Energy Regulators
(ACER)’ (2 May 2018)
http://www.europarl.europa.eu/RegData/etudes/BRIE/2017/599300/EPRS_BRI(2017)599300_EN.pdf accessed
22 June 2018
503
ACER/CEER - Annual Report on the Results of Monitoring the Internal Electricity and Gas Markets in 2016
(October 2017)
https://www.acer.europa.eu/Official_documents/Acts_of_the_Agency/Publication/ACER%20Market%20Monitoring
%20Report%202016%20-%20ELECTRICITY.pdf accessed 23 July 2018

(e.g. REMIT) 504 may thus become more harmonised, assisting in the increase of
cross-border trades.505
The increasing role of ACER as a regulatory body across the EU was
highlighted as a regulatory risk during the empirical research due to the lack of a
history of regulatory determinations.
National regulators are usually set up by an appropriate statute within the
member state. The national regulators therefore undertake the day to day regulation
of renewable electricity facilities in the member states. The national regulators are
key to ensuring that utility companies within each member state meet their
obligations under both EU and national law and energy policy. Across the EU,
national regulators are generally charged with actively ensuring compliance with the
regulatory framework, usually in the interest of consumers.506 National regulators
are therefore implementers and enforcers of regulation and thus their role should
not be political. However, it has been said that national regulators are liable to
capture by the industry which they regulate, can develop a political bias, and are
prone to behavioural failures. 507 Despite these supposed failures, the empirical
research showed that the utility companies across the EU spend a considerable
amount of time and resources in managing their relationship with the both EU and
national regulators, seeking to influence the development of these bodies. The
empirical research also showed that in some instances the utility companies will
seek to hold the regulators to account via judicial review (See Theme 1.3 UK Judicial
Review).508
As a last point, the number of regulatory decisions made by national
regulators in the electricity field creates a track record that undertakings use as a
means of predicting the regulatory future within the member state; again, this was
an issue which emerged as a theme in the empirical research.
504
REMIT is the EU Regulation ‘On energy market integrity and transparency (No 1227/2011). It provides a
consistent EU-wide regulatory framework specific to wholesale energy markets that: (i) defines market abuse,
including market manipulation, attempted market manipulation or insider trading , (ii) explicitly prohibits market
abuse (iii) requires effective and timely public disclosure of inside information by market participants (for all
practical purposes this relates to generating plant outage information), and (iv) obliges firms professionally
arranging transactions to report suspicious transactions - Regulation (1348/2014/EC) on data reporting
implementing Article 8(2) and Article 8(6) of Regulation (EU) No 1227/2011 OJ L336
505
Ana Stanic ‘An Overview of EU Energy Law’ in Peter Cameron and Raphael Heffron (eds) Legal Aspects of
EU Energy Regulation (Oxford University Press, 2016), 46
506
Olaf Dilling, ‘Proactive Compliance? – Repercussions of National Product Regulation in Standards of
Transnational Business Networks’ in Olaf Dilling, Martin Herberg and Gerd Winter (eds), Responsible Business:
Self-Governance and Law in Transnational Economic Transactions (Hart, 2008) 118–119
507
Damien Geradin and Nicolas Petit, ‘Judicial Review in European Union Competition Law: A Quantitative and
Qualitative Assessment’ (2011) 8 Tilburg Law and Economics Center, 7
508
Peak Gen Top Co Ltd & Ors, R (on the application of) v The Gas And Electricity Markets Authority & Anor,
Court of Appeal - Administrative Court, June 22, 2018, [2018] EWHC 1583 (Admin) - relating the process the
regulator had followed, where the UK administrative court found in Ofgem’s [UK Energy Markets Regulator] favour

2.9 Treaty Provisions - Environmental and Energy Regulatory Framework
Since the execution of the Treaty of Rome the priorities of the EU have developed,
because of the accession of several new member states 509 and the changing
objectives of society, 510 especially with regards to the environment and climate
change.511
Environmental and energy provisions are set out for the EU within the TEU
when it states in Article 3(3) that the EU shall implement measures that provide ‘a
high level of protection and improvement of the quality of the environment’.512 With
Article 6(3) TEU stating that ‘protection and improvement of human health’ is an EU
competence alone.513 The TFEU is differently drafted, stating in Article 4(2) that
environment, transport (in the renewable energy context bio-diesel), trans-European
networks and energy are shared competences between member states and the
EU.514
The EU is also required by Article 11 TFEU to integrate environmental
protection and sustainable development into the definition and implementation of its
policies. This requirement seems to be placed on the organisations of the EU and
not to the same extent on member states. 515 (See Section 2.9.1)
The EU and its member states are additionally required by the provisions of
the Articles 170 to 172 TFEU to update and increase the capacity of Europe’s energy
infrastructure (Article 170(1) TFEU), to link island, land locked and peripheral
regions with central regions of the EU (Article 170(2)). This is a requirement that has
significance for the findings of the CJEU within Ålands Vindkraft516 (See Section
3.5.2).
509
Finn Laursen, The Treaty of Nice: Actor Preferences, Bargaining and Institutional Choice (Martinus Nijhoff,
2005), 393
510
Willem Maas, ’The Origins, Evolution, and Political Objectives of EU Citizenship’, (2014) 15(5) German Law
Journal, 797 ; See also European Commission ‘EU in Brief’, https://europa.eu/european-union/about-eu/eu-in-
brief_en accessed 25 July 2017; See Also Joris Larik, ’From Speciality to a Constitutional Sense of Purpose: the
Changing Role of the Objectives of the European Union’ (2014) 63(4) International & Comparative Law Quarterly,
935; See Also European Centre for Development Management and Policy, ‘Evaluation Study on the EU
Institutions & member states’ Mechanisms for Promoting Policy Coherence for Development. Final Report’, May
2007
511
D Benson and A Jordan, ‘Grand bargain or ‘incomplete contract’? Environmental implications of the EU Reform
Treaty’ (2008) 17(5) European Energy and Environmental Law Review, 280; See also Saylor Academy Paper
available at https://www.saylor.org/site/wp-content/uploads/2011/05/Treaty-of-Lisbon.pdf accessed 15 September
2015; Roger Goebel, Eleanor Fox, George Bermann, Jeffery Atik, Frank Emmert and Damien Gerard Cases and
Materials on European Union Law 4th Edition (West Academic, 2016)
512
Treaty of the European Union, 2008 OJ (C 115) 16, article 3(3)
513
Alexander Proelss ‘The Scope of the EU’s Competences on the Field of the Environment’ In: Yumiko Nakanishi
(ed) Contemporary Issues in Environmental Law. Environmental Protection in the European Union, vol 5
(Springer, 2016)
514
Sanam Haghighi, ‘Energy Security and the Division of Competences between the European Community and its
member states’ (2008) 14(4) European Law Journal, 461
515
Beate Sjåfjell, ‘The Legal Significance of Article 11 TFEU for EU Institutions and Member States’ in Beate
Sjåfjell and Anja Wiesbrock (eds) The Greening of European Business under EU Law: Taking Article 11 TFEU
Seriously (Routledge 2015)
516
Case C-573/12, Ålands Vindkraft AB v Energimyndigheten ECLI:EU:C:2014:2037

The main Treaty articles which outline the provisions related to environmental
protection and energy are 191 to 194 TFEU, with the objectives having an all-or-
nothing implementation strategy due to their interrelated nature. Also, due to the mix
of competences outlined above, and thus to avoid implementation issues of
Directives and Regulations in this area, the legislative process is important and set
out within the Treaty Articles. These are the Articles which are at the heart of the
EU’s attempt to resolve the trilemma of reliability, sustainability and affordability,517
as well as reducing climate change and achieving market liberalisation.518
The following sections analyse the main features of the Treaty Articles
outlined and the implications they have for diagonal and supplementary conflicts
with other parts of the TFEU relating to free movement, undistorted competition and
other elements of state aid. It will also be considered if the Articles currently resolve
or may resolve in the future the reliability, sustainability and affordability trilemma.
2.9.1 Article 11 TFEU – Implementation of Environmental Protection within

the EU
Article 11 is the first of a series of Treaty Articles which seeks to implement

environmental objectives via the institutions of the EU – based on the Commission’s
competences. 519 Article 11 TFEU states that environmental protection must be
integrated into the definition and implementation of the EU's policies and activities,
with a view to promoting sustainable development. Article 11 TFEU sets out an all-
encompassing duty enshrined in EU primary legislation to integrate environmental
protection requirements in the policies and activities of the EU.520 It has been argued
that Article 11 TFEU places obligations on the institutions of the EU, entailing direct
517
518
519
520
Beate Sjåfjell, ‘The Legal Significance of Article 11 TFEU for EU Institutions and member states’ in Beate
Seriously, (Routledge 2015; University of Oslo Faculty of Law Research Paper No. 2014-38; Nordic & European
Company Law Working Paper No. 14-08)

obligations on all levels: administration, supervision and judicial control. 521 In
compliance with this integration obligation, the EU has published a considerable
number of environmental policy documents and pieces of secondary legislation522 in
addition to the numerous Directives and Regulations forming the renewable energy
regulatory framework. However, the EU has not sought to ensure that all areas of
its activity are undertaken through the lens of carbon emission reduction such as
fiscal policy, foreign or security policy.
Looking at the EU’s use of Article 11 to resolve the ‘trilemma’523 the first
consideration is that the EU has traditionally not had a consistent definition of
sustainable development and thus has allowed itself, and the member states, a wide
discretion in defining policies as sustainable, following the definition used in the
Brundtland Report. 524 Therefore the EU has sought to integrate the principle of
sustainability with the requirements of economic and social development, 525
although ‘sustainability’ in the financial sense is different from that understood in the
context of Article 11 TFEU.
Thus, economic growth and perceived needs, such as socially- and
culturally-determined patterns of energy use, have created a divergence of
understanding across the EU. Hence products and activities considered sustainable
in one-member state would not be so labelled in another.526 Also the EU’s neoliberal
view of trade policy527 has allowed technologies to emerge rather than being driven
in an EU champion manner.528
521
Ibid
522
For example Directive 92/43 15 May 1992 ‘the conservation of natural habitats and of wild fauna and flora’ OJ
L206/7; Directive 2009/125 31 October 2009 ‘establishing a framework for the setting of eco-design requirements
for energy-related products’ OJ L285/10; Directive 2008/56 17 June 2008 ‘establishing a framework for community
action on marine water quality in the field of marine environmental policy’ OJ L164/19; Directive 2009/147 30
November 2009 ‘the conservation of wild birds’ OJ L20/7; Regulation 2493/2000/EC 7 November 2000 ‘measures
to promote the full integration of the environmental dimension in the development process of developing countries’
OJ L288/1
523
Trilemma of reliability, sustainability and affordability – See David Newbury ‘Questioning the EU Target
Electricity Model – how should it be adapter to deliver the Trilemma’ [2016] Cambridge University, Energy Policy
Research Group Working Paper See Also Raphael Heffron Energy Law: An Introduction (Springer, 2014)
524
EU Regulation (2018) 353 Final 24 May 2018 ‘Establishment to facilitate a Framework for Sustainable
Investment’ Explanatory Memorandum 2; See also David Barnhizer, ‘Waking From Sustainability's "Impossible
Dream": The Decision Making Realities of Business and Government’ (2006) 8 Geo. International Environmental
Law Review, 595
525
World Commission of Environment and Development (WCED), Our Common Future, Chapter 2: Towards
Sustainable Development, From A/42/427. Our Common Future: Report of the World Commission on
Environment and Development, known as the Brundtland Report (available at http://www.un-documents.net/ocf-
02.htm#IV)
526
K van Hende, ‘Internal and External Policy and Legal Challenges in the EU in Achieving a Sustainable,
Competitive and Secure Internal Energy Market and the Integration of Electricity from Renewable Energy Sources
into the Energy system’ (2011) 2 Nordic Environmental Law Journal, 53
527
Ferdi De Ville and Jan Orbie, ‘The European Commission's Neoliberal Trade Discourse since the Crisis:
Legitimizing Continuity through Subtle Discursive Change’ (2014) 16(1) British Journal of Politics and International
Relations, 149
528
Per Ove Eikeland and Ingvild Andreassen Sæverud, ‘Market Diffusion of New Renewable Energy in Europe:
Explaining Front-runner and Laggard Positions’ (2007) 18(1) Energy and Environment, 13

Therefore, in order to avoid the traditional conflicts between the different
implementations of the sustainable development principle by member states, the
EU, under the provisions of Article 114 TFEU (Approximation of Laws), issued a
Regulation setting out a Framework for Sustainable Investment.529 However, this
has done little to resolve the reliability and affordability aspects of the trilemma530 as
diversity of technologies, and thus manufacturers involved, has not historically
created economies of scale which would have reduced capital costs (See Section
2.7).
The integration principle contained in Article 11 TFEU, is key to extending
the legal role of Article 191 [Environment] TFEU and the renewable aspects of Article
194 [Energy] TFEU to other policy areas covered by the Treaty. It has integrated (as
a minimum) the areas of public health, agriculture and the environment, by extending
its binding policy principles to have legal functions in constraining and interpreting
measures in these areas.531
The integration principle’s (Article 11 TFEU the Court referring to Article 6
TEC) scope was expanded by the CJEU in the Environmental Crime532 case, where
it was held that the EU’s institutions should have introduced measures under Articles
191 and 192 TFEU to allow the enforcement of environmental requirements via
criminal action, despite criminal action traditionally being left to member states. 533
This position being reached on the basis that environmental protection was a
fundamental objective of the EU.534
Article 11 only addresses the EU and its institutions and does not seem to
place the same obligations on member states. However, the Article is still potentially
highly persuasive in the interpretation and application of EU law, the justification for
member state initiatives that restrict free movement, entailing a possible duty to act
to promote the EU’s overriding objective535 to reduce carbon emissions and perhaps
also indicating a coming general principle of sustainable development at member
529
EU Regulation (2018/353/EC) ‘Establishment to facilitate a Framework for Sustainable Investment’
530
531
Case T-141/00 Artegodan v Commission ECLI:EU:T:2002:283
532
Case 176/03 Commission v Council (Ship-Source Pollution) ECLI:EU:C:2005:542
533
Ibid, para 42 to 48
534
Ibid, para 41
535

state level, even though there is minimal specificity regarding the definition of
sustainable development in the Treaty.536
Although the Treaty does not place an integration obligation on the member
states using a Regulation 537 structure to publish the sustainable investment
framework538 therefore means it is directly effective on member states and thus will
enhance harmonisation of the criteria for declaring products and investments as
sustainable.539 Being directly effective will reduce the differences and the complexity
of rules across member states.540 However, this may cause differences in economic
outcome for different member states as the C&C style of rules contained in the
Framework for Sustainable Investment Regulation are unlikely to have the same
cost of implementation across all EU member states. 541
2.9.2 Energy Network Requirements – Article 170 to 172 TFEU
Whilst Article 11 places general obligations to implement and integrate the need to
reduce carbon emissions, Articles 170 to 172 TFEU are operative and place an
obligation on the EU to contribute to the establishment and development of trans-
European networks in the areas of transport, telecommunications and energy
infrastructures (the ‘network provisions’).542 The network provisions state their aim
is to link islanded, landlocked and peripheral regions with the central regions of the
543
EU to enhance the functioning of competitive markets. Additionally the
development of energy networks is stated as a means to increase energy security544
536
Sjåfjell, Beate ‘The Legal Significance of Article 11 TFEU for EU Institutions and Member States’ in Beate
Seriously, (Routledge 2015; University of Oslo Faculty of Law Research Paper No. 2014-38; Nordic & European
Company Law Working Paper No. 14-08)
537
Regulations are directly effective . As Article 288 TFEU states that Regulations "Shall be binding in its entirety
and directly applicable in all Member States" the CJEU has confirmed that they are directly effective stating
‘Owing to their very nature and their place in the system of sources of Union law, regulations operate to confer
rights on individuals which the national courts have a duty to protect’ Case C-253/00 Antonio Muñoz y Cia SA
and Superior Fruiticola SA v Frumar Ltd and Redbridge Produce Marketing ECLI:EU:C:2002:497, para 27; Also if
a specific right is conferred therefore a regulation can be both vertically and horizontally directly effective. All
regulations are directly effective – Case C-43/71 Politi s.a.s. v Italian Ministry for Finance ECLI:EU:C:1971:122
538
EU Regulation (2018) 353 Final 24 May 2018 ‘Establishment to facilitate a Framework for Sustainable
Investment’
539
540
Julian Nowag, ‘The Environmental Integration Obligation of Article 11 TFEU’ in Julian Nowag (ed)
Environmental Integration in Competition and Free-Movement Laws (Oxford University Press, 2017)
541
Julian Nowag, ‘The Environmental Integration Obligation of Article 11 TFEU’ in Julian Nowag (ed)
Environmental Integration in Competition and Free-Movement Laws (Oxford University Press, 2017); See Also
Claire Dupont and Sebastian Oberthür ‘Insufficient Climate Policy Integration in EU Energy Policy: The
Importance of the Long-Term Perspective’ (2012) 8 Journal of Contemporary European Research, 228; See also
Camilla Adelle and Duncan Russel Climate Policy Integration: A Case of Déjà Vu?’ (2013) 23,1 Environmental
Policy and Governance, 1
542
Article 170 (1) TFEU
543
Article 170 (2) TFEU
544
COM(2014) 330 28 May 2014 ‘European Energy Security Strategy’ ; See also Directive 2005/89/EC
18 January 2006 ‘measures to safeguard security of electricity supply and infrastructure investment’ OJ L 33/4

(a key justification for the development of renewable energy within the EU)545 and
network resilience.546
In making these network investments547 it could be argued that the electricity
transmission systems across the EU would allow a more optimal exploitation of the
best locations for renewable electricity facilities, which is not simply an economic
justification 548 but also seeks to implement the overriding objective 549 of carbon
emissions reduction by allowing sites with optimal wind and solar resources to be
developed. Moreover, they assist in the resolution of the ‘trilemma’, 550 in that
additional transmission capacity increases the reliability of the network and as such
should allow renewable electricity from the lowest cost producers to be transmitted
to consumers across the EU.
Thus, as the cost effectiveness of renewable generation is enhanced, due to
exploitation of optimal sites and capital cost reductions,551 a larger number of sites
will become economically viable and hence the exploitation of renewables will
increase without the need for high levels of revenue support via feed-in tariffs.
However, network infrastructure investment will be needed in abundance.552
There is a growing recognition that modern demand patterns and the
expansion of renewable energy sources, raises the need to reshape the electricity
networks, 553 as the networks generally have a topology to transmit energy from the
sources of the 1960s and 1970s to end-users of that time.554 In confirming this point,
the 2014 Guidelines on State Aid for Renewables state that appropriate
545
Commission ‘The European Union Leading In Renewables’ Dec 2015, 7; see also Dejan Đorđević and Milan
546
Jonathan Gaventa, Nick Mabey, Sandrine Dixonde-Cleve, Helen Spence-Jackson and Dries Acke, ‘EU Energy
Union Assessment 2015 –Towards a Resilient Energy Union with a Forward-Looking Climate Policy’ Briefing
Paper November 2015
547
Article 171 (1) TFEU - which will be undertaken largely by member states and market operators – with EU
contributing via the Cohesion Fund set up pursuant to Article 177 TFEU
548
Nicholas Stern, ‘Europe can Grow by Unleashing a Low Carbon Economy’ (2012) Social Europe Journal
http://www.social-europe.eu/2012/05/22821/ accessed on 16 September 2017
549
550
See Also Raphael Heffron Energy Law: An Introduction (Springer, 2014)
551
The Hornsea 2 Project was found to bid 57.5£/MWh in the 2017 UK Renewable Auction – a price comparable
with coal and gas generation, however, this is very much a future price and not the cost derived from operational
wind farms - Daniel Radov, Alon Carmel and Clemens Koenig, ‘Offshore Revolution? Decoding the UK Offshore
Wind Auctions & What the Results Means for a “Zero-Subsidy” Future’ (2017) NERA Economic Consulting
552
Christof van Agt ‘The energy infrastructure challenge’ in Katinka Barysch (ed) Green, safe, cheap: Where next
for EU energy policy? (Centre for European Reform, 2011)
553
COM(2011)112 final ‘A roadmap for moving to a competitive low carbon economy’; COM(2011) 571 final
‘Roadmap to a Resource Efficient Europe’
554
SWD(2014) 330 ‘In-depth study of European Energy Security’

infrastructure is a precondition for a functioning energy market, enhancing economic
development and objectives of common interest.555
The need for network interconnection has been recognised by the EU as it
has stated that at least 15% of generation capacity in adjacent member states is to
be represented as transmission network capacity between them by 2030.556 This
level of interconnection will require an investment in the region of €180 bn, leading
to a €40-70 bn per annum reduction in generation costs.557 As an example, the UK
has five new schemes with a capacity of 5,700MW which have been confirmed as
receiving state support,558 in addition to its existing 4,000MW of interconnection,
giving a total interconnection capacity of circa 9,700MW or 16% of peak demand.559
An example of the Commission’s view that interconnection capacity should
be made fully available can be seen in its investigation of the Tennet network
restriction between Denmark and Germany. If proven, the restriction will be regarded
as an abuse of a dominant market position (Article 102 TFEU), as it would amount
to discrimination against non-German electricity producers and a segmentation of
the Single Market for energy.560
Despite the stated importance561 of the need for network interconnection the
failure of the CJEU to take such considerations into account in the Ålands
Vindkraft562 case is a major omission and is discussed in Section 3.5.2.
2.9.3 Energy & Environment - Articles 191 to 194 TFEU
The core of the energy and environmental Treaty Articles are found in Articles 191
to 194 TFEU. These Articles place competency on the institutions of the EU and
member states for different aspects of the implementation of the provisions related
555
Communication from the Commission ‘Guidelines on State aid for environmental protection and energy 2014-
2020’ - (2014/C 200/01), para 202 – aid granted for objectives of the common interest is compatible with Article
107(3)(c) Case T-177/07 Mediaset v Commission ECLI:EU:T:2010:233 para 125
556
COM(2017) 718 final 23 November 2017 ‘Communication on strengthening Europe's energy networks’ Article
4.2
557
Booz & Co ‘Study on the benefits of an integrated European energy market’ [2013] available at
https://ec.europa.eu/energy/sites/ener/files/documents/20130902_energy_integration_benefits.pdf accessed 28
October 2017
558
NSL (Norway) 1,400MW, FAB Link (France) 1,400MW, IFA2 (France) 1,000MW, Viking (Denmark)
1,400MWand Greenlink (Ireland) 500MW -
https://www.ofgem.gov.uk/system/files/docs/2018/10/w1_fpa_update_letter.pdf accessed 3 October 2018
559
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/736152/Ch5.pd
f accessed 3 October 2018
560
IP/18/2122 Commission Investigation TenneT TSO GmbH's – 19 March 2018 available at
http://europa.eu/rapid/press-release_IP-18-2122_en.htm accessed 4 April 2018
561
Raphael Heffron and Peter Cameron, ‘The Future of EU Energy Law’ in Peter Cameron and Raphael Heffron
(eds) Legal Aspects of EU Energy Regulation (Oxford University Press, 2016)
562

to environmental protection, energy efficiency and the development of renewable
energy.
The drafting of the Articles allows environmental regulation to take either a C&C (e.g.
Effort Sharing Decision) 563 or market based (e.g. European Emissions Trading
Scheme)564 form as is applicable to the circumstance.565
Article 191 TFEU states that the EU shall contribute to the preservation,
protection and improvement of the quality of the environment, combat climate
change, the protection of human health, the prudent and rational utilisation of natural
resources and the promotion of measures internationally (Article 191(4)).566 It being
567
stated in Re Peralta that whilst Article 191 TFEU defines the general
environmental objectives of the EU, the specific implementation is contained in the
associated Directives and Regulations.
The necessary powers and competence to pursue the Article 191 TFEU
(environmental) objectives is conferred upon the institutions of the EU (in effect the
Commission) by Article 192 (1) and (2) TFEU.568 Article 192 TFEU, sets out the
general frameworks for environmental legislation in the EU and touches upon energy
issues (lex specialis).569
As member states are reluctant to relinquish the decision-making power over
energy policy, 570 Article 192(2)(c) TFEU, states that ‘measures significantly affecting
a Member State’s choice between different energy sources and the general structure
of its energy supply’ require unanimity of member states.
563
564
trading within the Community OJ L275, 25.10.2003 the Directive was amended by Directive 2009/29 ‘To improve
and extend the carbon emission trading scheme of the Community’ OJ L140/63
565
David Driesen, Robert Adler and Kirstin Engel Environmental Law: Conceptual and Pragmatic Approach
(Aspen, 2011), 267
566
Opinion C-2/00 Cartagena Protocol ECLI:EU:C:2001:664, para 43-44; Thomas Delreux, ‘The EU as an Actor
in global environmental politics’ in Andrew Jordan and Camilla Adelle (eds), Environmental Policy in the European
Union: Contexts, Actors and Policy Dynamics (3rd edn, Earthscan 2012); Catherine Barnard and Steve Peers
European Union Law (Oxford University Press, 2014)
567
Case C-379/92, Re Paralta ECLI:EU:C:1994:296, para 57
568
Alexander Proelss ‘The Scope of the EU’s Competences on the Field of the Environment’ In: Yumiko Nakanishi
(ed) Contemporary Issues in Environmental Law. Environmental Protection in the European Union, vol 5
(Springer, 2016)
569
These objectives are given in Article 191 TFEU. The original environmental competence article was
article 130 of the European Economic Community Treaty, introduced by the Single European Act in
1987. The Maastricht Treaty amended this article and introduced qualified majority voting as a general rule for
environmental legislation.
570
Jutta Brunnée ‘Sources of International Environmental Law: Interactional Law’ in Samantha Besson and Jean
d’Aspremont (eds) The Oxford Handbook of the Sources of International Law (Oxford University Press, 2017)

In addition, Article 194(1) TFEU seeks to ensure the functioning of the energy
571
market (Electricity Market Directive), energy security 572 (Electricity Security
Directive) 573 promote energy efficiency (Energy Efficiency Directive) 574 and the
development of renewable energy production (Renewable Energy Directive) 575and
promote the interconnection of energy networks. Therefore, as outlined, Article
194(1) can be said to the Treaty basis for much of the renewable electricity
regulatory framework.
The obvious outcome of the provisions of Articles 191 and 194 TFEU is the
conferral of the competence 576 to put in place measures which change the
generation portfolio in each member state, by increasing the installed capacity based
on renewables. The Articles also facilitate how property rights are conferred over
emissions, such that they can be traded within the EU-ETS.
The judgment in Poland v Commission (2013)577 gives an indication of the

potential for the CJEU to grant the Commission a wide discretion in the application
of its environmental competences. Poland argued the assumption, outlined in the
Commission Decision,578 on the rules for the harmonised free allocation of emission
allowances was discriminatory, as it assigned free emission allowances on the basis
of a gas fuelled579 combined cycle plant (CCGT) 580 rather than on the basis of the
571
572
(Elgar, 2017)
573
EU Directive 2005/89/EC ‘Measures to safeguard security of electricity supply and infrastructure investment’
OJ L 33/22
574
575
576
577
Case T-370/11 Poland v Commission, ECLI:EU:T:2013:113
578
Commission Decision 2011/278/EU determining transitional Union-wide rules for harmonised free allocation of
emission allowances pursuant to Article 10a of Directive 2003/87/EC of the European Parliament of the Council
OJ 2011 L 130, 1
579
Article 10a(6) of the Emissions Trading Directive requires that product benchmarks correspond to the most
efficient methods of electricity production
580
A combined cycle gas turbine generating plant (CCGT) uses waste heat from the gas turbine to run a steam
turbine to form a combined cycle both of which are used to provide motive force for the electricity generator
increasing the efficiency from circa 35% for coal to 55% to 62% for CCGT -
http://www.powerplantccs.com/ref/glos/combined_cycle_gas_turbine__ccgt_.html &
https://www.gepower.com/about/insights/articles/2016/04/power-plant-efficiency-record accessed 19 April 2018

actual plant. 581 The Decision thus dis-advantaging member states where coal
predominates.582 Poland stated that the Commission did not have the competence
to decide energy matters, as energy was a shared competence in accordance with
Article 4 TEU. The Court held that the Decision583 was environmental and not energy
related and as such the Commission’s competence had not been exceeded. In line
with its decision in Parliament v Council (2012),584 the Court explained that there is
no reason to suppose that the second sub-paragraph of Article 194(2) 585 TFEU
establishes a general prohibition on the Commission deciding matters in the
environment even when this relates to an energy asset.
Articles 191 to 194 TFEU progress the resolution of the ‘trilemma’,586 by
putting in place a framework that seeks to protect and improve the environment,
reduce carbon emissions, support renewable energy, facilitate the formation of a
carbon trading market and promote energy efficiency, all of which can be seen to
satisfy the need for sustainability. The Articles also seek to enhance energy security
and the interconnectedness of energy networks, both of which will enhance
reliability. Lastly the support for renewable energy, whilst initially allowing the putting
in place of ‘support schemes’ which paid a premium above the wholesale market
price to renewable electricity facilities has allowed the technology to mature such
that current projects are being built at prices close the those of conventional
generation (See Section 2.7 and the UK’s Hornsea 3 Project).587
The detailed analysis of the individual Directives in Section 2.10 will show
how effective the EU has been in the implementation of these concepts and the
resolution of the trilemma.
It should be noted that Article 194(2) states that the rights in Article 194(1)
(the choice of energy sources or the general structure of energy supply) apply
581
Ibid. para. 10
582
Case T-370/11 Poland v Commission, ECLI:EU:T:2013:113. para. 24
583
Commission Decision 2011/278/EU determining transitional Union-wide rules for harmonised free allocation of
OJ 2011 L 130, 1
584
585
Article 194(2) TFEU – ‘Without prejudice to the application of other provisions of the Treaties, the European
Parliament and the Council, acting in accordance with the ordinary legislative procedure, shall establish the
measures necessary to achieve the objectives in paragraph 1. Such measures shall be adopted after consultation
of the Economic and Social Committee and the Committee of the Regions’ For ease of reference Article 194 (1)
state ‘In the context of the establishment and functioning of the internal market and with regard for the need to
preserve and improve the environment, Union policy on energy shall aim, in a spirit of solidarity between Member
States, to: (a) ensure the functioning of the energy market; (b) ensure security of energy supply in the Union; (c)
promote energy efficiency and energy saving and the development of new and renewable forms of energy; and
(d) promote the interconnection of energy networks.
586
587

provided they do not infringe other parts of EU law and are therefore conditional.588
This is a point that is referred to in the case law analysis in Chapter 3.
The combination of Articles 191 to 194 TFEU has led to the implementation
of a considerable number of Directives and Regulations to manage energy and
environmental issues within the EU. The Directives which relate to the renewable
energy regulatory framework are outlined below.589
2.10 Directives forming the Renewables Regulatory Framework
The EU renewable energy regulatory framework is composed of a complex series

of Directives and Regulations. The regulatory framework is composed of market-
based solutions, such as the European Emissions Trading Directive590 as well as
C&C based directives such as the Renewable Energy Directive. 591 As has been
explained above, the EU and the member states have differing competences592 with
regards to energy and environmental matters. Therefore, the analysis of the
regulatory framework is undertaken using both the competence related to the overall
Directive and the style of directive (C&C or market based) and competence basis as
outlined in the table below. The analysis will also consider whether either of these
criteria produces directives with an increased number of areas of conflict between
the directive and principles of EU law – free movement, undistorted competition and
other elements of state aid. The table below sets out the categorisation of each of
the main Directives contained within the renewable electricity regulatory framework,
illustrating that the clear majority of Directives are within the EU’s competence and
are C&C in style and hence market forces are only brought to bear in relation to
carbon trading.
588
Angus Johnston and Eva van der Marel, ‘Ad Lucem? Interpreting the New EU Energy provision and in
particular the Meaning of Article 194 (2) TFEU’ (2013) European Energy and Environmental Law Review, 181;
See Also H Schmitt von Sydow, ‘The Dancing Procession of Lisbon: Legal Bases for European Energy Policy’
(2011) 1 European Energy Journal, 33
589
Phil McManus Environmental Regulation (Elsevier, 2009); See also Beatriz Junquera and Jesús Ángel Del
Brío ‘Preventive Command and Control Regulation: A Case Analysis’ (2016) 99(8) Journal of Sustainability
590
591
592

Exclusive EU Competence + Market Exclusive EU Competence + C&C
Effort Sharing Decision594

593
Emissions Trading Directive Industrial Emissions Directive595
Energy Efficiency Directive596
Carbon Capture & Storage Directive597
Shared Competence + Market Shared Competence + C&C
Renewable Energy Directive599

598
Electricity Market Directive
2.10.1 EU Emissions Trading Scheme (EU-ETS) 600 – Directive 2003/87 &

2009/39
The trading of emissions rights promises the achievement of a pre-defined

environmental outcome at least cost. All assumptions being seen to hold good, it
would be an ‘optimal’ carbon emissions policy instrument. 601
The EU-ETS is stated to be the ‘jewel in the crown’602 and ‘one of the most
exciting and important initiatives ever taken to limit the carbon emissions’ thus able
to ‘provide the cornerstone for an eventual global trading regime’.603 The EU-ETS is
said to efficiently price carbon emission reductions,604 thus the emissions abatement
593
594
595
596
597
598
599
600
601
Benjamin Görlacha ‘Emissions Trading in the Climate Policy Instrument Mix: understanding and Managing
Interactions with other Policy Instruments’, (2014) 25(34) Energy & Environment 733-49
602
Jørgen Wettestad, ‘The Making of the 2003 EU Emissions Trading Directive: An Ultra-Quick Process due to
Entrepreneurial Proficiency?’ (2005) 5(1) Global Environmental Politics, 1, 17; See Also Jon Birger Skjærseth and
Jørgen Wettestad ' Making the EU Emissions Trading System: The European Commission as an entrepreneurial
epistemic leader' (2010) 20(2) Global Environmental Change, 314; Also Stavros Dimas, ‘Climate Change –
International and EU Action’ (31 October 2008) Speech of the EU Environment Commissioner at the Climate
Change Conference in Prague. Available at: http:/europa.eu/rapid/press-release_SPEECH-07-199_en.pdf
Accessed 21 March 2017
603
Denny Ellerman, Frank Convery and Christian de Perthuis, Pricing Carbon: The European Union Emissions
Trading Scheme (Cambridge University Press, 2010)
604
Case C-41/11 Inter-Environnement Wallonie and Terre wallonne ECLI:EU:C:2012:103, para 61 ; Case C-
127/07 Arcelor Atlantique and Lorraine ECLI:EU:C:2008:728, para 31

is achieved at relatively low cost.605 The emissions reduction being achieved with
no negative effect on the overall economy and minimal effects on energy-intensive
sectors (e.g. steel and paper),606 although this result is more likely to be derived from
the low cost of carbon allowance on the emissions trading hub due to over allocation
of allowance be member states than market design – explained further below.607
In the immediately post-Kyoto period several carbon pricing systems
emerged,608 however, only a few have survived,609 with the EU-ETS being regarded
as one of the most important carbon markets globally.610 The failure of these trading
systems is said611 to increase ‘carbon leakage’ which was a matter of concern for
respondents within the empirical research.
The Emissions Trading Directive (established in accordance with Article
191(1) TFEU) and the EU emissions trading scheme which is set up in accordance
with its provisions provides a market mechanism to determine a harmonised price
for carbon emissions across the EU. The Emissions Trading Directive is within the
environmental competence of the Commission (See Section 2.9.3 Poland v
Commission (2013).612 This market mechanism means that coal and gas generation
have a simple means of internalising the costs of carbon emissions and thus
reducing the price differential between coal and gas generation and renewable
electricity generating facilities. The reduction in the differential means that renewable
support schemes613 can be reduced in value and as such the potential for renewable
605
Ibid, 191; See also European Commission, ‘Climate change: Progress report shows EU on track to meet or
over-achieve Kyoto emissions target,’ press release, Brussels, November 12, 2009, available at
europa.eu/rapid/pressReleasesActiondo?reference=IP/09/1703&format=HTML&aged=0&language=EN&guiLangu
age=en accessed 17 January 2017
606
Christian Egenhofer, Monica Alessi, Anton Georgiev, and Noriko Fujiwara, ‘The EU Emissions Trading System
and Climate Policy towards 2050: Real incentives to reduce emissions and drive innovation?’ CEPS Special
Report, January 2011, available at papers.ssrn.com/sol3/papers.cfm?abstract_id=1756736&. accessed 17
January 2018 See also ‘Emissions from the EU ETS down 3% in 2008’ New Carbon Finance, 16 February 2009,
press release, available at bnef.com/Downloads/pressreleases/38/pdffile; accessed 17 January 2018; Frank
Watson, ‘EC CO2 data shows that EU carbon trading is working: analysts’ (2011) Platts, available at
platts.com/NewsFeature/2011/emissionsdata/index; See also Jan Abrell, Anta Ndoye Faye, and Georg
Zachmann, ‘Assessing the impact of the EU ETS using firm level data’ (2011), available at
bruegel.org/publications/publication-detail/publication/579-assessing-the-impact-of-the-eu-ets-using-firm-level-
data/ accessed 17 January 2018
607
Johanna Arlinghaus, Luisa Dressler, Florans Flues, Michelle Harding and Kurt van Dender Effective Carbon
Rates Pricing CO2 through Taxes and Emissions Trading Systems (OECD Publishing, 2016) 15
608
Anja Kollmuss, Helge Zink and Clifford Polycarp, ‘'Making Sense of the Voluntary Carbon Market: A
Comparison of Carbon Offset Standards’ [2008] Stockholm Environmental Institute Working Paper
609
Jessica Green, ‘Order out of Chaos: Public and Private Rules for Managing Carbon’ (2013) 13(2) Global
Environmental Politics 2
610
Sabine Fuss, Christian Flachsland, Nicolas Koch, Ulrike Kornek, Brigitte Knopf and Ottmar Edenhofer, ‘A
Framework for Assessing the Performance of Cap-and-Trade Systems: Insights from the European Union
Emissions Trading System’ (2018) 12(2) Review of Environmental Economics and Policy 220
;See Also A Denny Ellerman, Claudio Marcantonini and Aleksandar Zaklan, ‘The European Union Emissions
Trading System: Ten Years and Counting’ (2016) 10(1) Review of Environmental Economics and Policy 89
611
Kati Kulovesi, ‘EU Emissions Trading Scheme: preventing carbon leakage before and after the Paris
Agreement’ in Rafael Leal-Arcas and Jan Wouters (eds.) Research Handbook on EU Energy Law and Policy
(Elgar, 2017)
612
613

electricity facilities to be developed without the need for renewable support schemes
is brought closer. This is also accelerated by reducing capital costs of renewable
generation. 614
The EU-ETS fulfils the EU’s Kyoto Protocol obligations, with minimal
economic effect615 (emission trading being a cost-effective means of environmental
regulation since the 1960s)616 and covers 45% to 50% of the carbon emissions in
the EU.617
To initiate a trading mechanism, the ability to emit certain pollutants must be
turned into a ‘right’ and such ‘right’ must be tradeable. 618 Should an undertaking not
produce a volume of actual emissions large enough to require the emissions rights
(with the EU known as ‘allowances’) that it holds, it may sell those rights to an
organisation with emissions in excess of the rights it holds. Generally emissions
trading schemes fall into one of three main categories
• Cap & trade:619 A cap on emissions is allocated to emitters (either for free or
at a set price) for a time. As the time ends, those with lower emissions will
sell their excess credits to those needing to purchase the credits or they will
have to pay the cash-out620 price for exceeding their emission credits.
• Performance standard emissions trading: 621 This refers to the trading of
emission credits based on a performance standard for the type of industry
the entity is deemed to be within. The advantage of this scheme compared
to ‘cap and trade’ is that emission levels are correlated to energy consumed
and are not simply static overtime.
certificates, and direct price support schemes including feed-in tariffs and premium payments’ – Definition from
Article 2 Renewable Energy Directive (2009/28/EC)
614
615
Preamble, para 5 of Emission Trading Directive; see also Article 1 of Emissions Trading Directive related to
economic efficiency of operation; See Also David Driesen, Robert Adler and Kirstin Engel Environmental Law:
Conceptual and Pragmatic Approach (Aspen, 2011), 267
616
Ronald Coase, ‘The problem of social costs’ (1960), 3 Journal of Law & Economics, 1
617
European Commission ‘Analysis of the use of Auction Revenues by the member states’ (March 2017), 6; see
also Tim Laing, Misato Sato, Michael Grubb and Claudia Comberti, ‘Assessing the effectiveness of the EU
Emissions Trading Scheme’ (January 2013) Grantham Research Institute on Climate Change and the
Environment Working Paper No. 106
618
Ronald Coase, ‘The Problem of Social Cost’ (1960) 3 Journal of Law and Economics 1; See also Thomas
Tietenberg, Emissions Trading: Principles and Practice (2nd Ed, Earthscan, 2006)
619
Article 6 Emission Trading Directive - EC Directive 2003/87/EC 13 October 2003 ‘A scheme for carbon
emission allowance trading within the Community’ OJ L275/32 (Emissions Trading Directive)
620
Cash-out prices are designed to provide market participants with commercial incentives to balance their
contractual and physical positions and therefore avoid exposure to cash out price. Hence if actual emissions were
higher than the allowances held by an undertaking and it was not able to purchase additional allowances then it
would have the pay the cash-out price. - https://www.ofgem.gov.uk/gas/wholesale-market/market-efficiency-
review-and-reform/cash-out-arrangements accessed 31 August 2018
621
Rabah Amir, Adriana Gama and Katarzyna Werner ‘On Environmental Regulation of Oligopoly Markets:
Emission versus Performance Standards’ (2018) 70(1) Environmental Resource Economics, 147

• Project based emissions credit trading:622 Here trading of credits is based
on the entitlement gained by an individual project. Emission credits available
for trading are gained by lowering actual emissions against project baseline
allowances. This is a more sophisticated form of cap and trade.
The EU-ETS is a hybrid of the cap and trade and project-based trading, with
performance standards included for some schemes.623
The EU-ETS has been amended several times over the years to include
different market sectors, including aviation (although the enforcement of this element
has been delayed).624
The EU emission trading scheme is divided into 4 phases (i) Phase 1 2005-
2007, (ii) Phase 2: 2008-2012, (iii) Phase 3: 2013-2020 and (iv) Phase 4: 2021-2028.
Phase 1 was an initial phase to test the system, very much ‘learning by
doing’. 625 EU member states were free to allocate emission allowances to
installations within their territory in accordance with national allocation plans (NAPs).
Almost all allowances were allocated free on the basis of historic emission patterns
(so called ‘grandfathering’),626 resulting in allowances exceeding emissions across
the EU by broadly 4%.627 With nearly 60% of the allowances being allocated to the
electricity sector there was a reported potential for windfall profits.628 Such profits
were not realised within Phase 1 by generating companies due to (i) the expectation
that emissions would be used to determine future allowances, (ii) voluntary
622
Carolyn Fischer ‘Project-Based Mechanisms for Emissions Reductions: Balancing Trade-offs with Baselines’
(2004) Discussion Paper, Resources for the Future
623
E Woerdman and A Nentjes, ‘The European Union Emissions Trading Hybrid: Inefficiencies in the Revised
Rules After 2013’, University of Groningen working paper series
624
30 April 2014 - Consolidated version of Directive 2003/87/EC of the European Parliament and of the Council
establishing a scheme for carbon emission allowance trading within the Community and amending Council
Directive 96/61/EC; 23 April 2009 - Directive 2009/29/EC of the European Parliament and of the Council
amending Directive 2003/87/EC so as to improve and extend the carbon emission allowance trading scheme of
the Community; 19 November 2008 - Directive 2008/101/EC of the European Parliament and of the Council
amending Directive 2003/87/EC so as to include aviation activities in the scheme for carbon emission allowance
trading within the Community; 27 October 2004 - Directive 2004/101/EC of the European Parliament and of the
Council amending Directive 2003/87/EC establishing a scheme for carbon emission allowance trading within the
Community, in respect of the Kyoto Protocol's project mechanisms
625
Nick Feinstein, ‘Learning from Past Mistakes: Future Regulation to Prevent Greenwashing’ (2013) 40(1)
Boston College Environmental Affairs Law Review, 229
626
The allocation for free of EU-ETS allowance on the basis of historic emission patterns. With the view that prior
emissions increased entitlements to future emissions allowances - Carl Knight, ‘What is grandfathering?’ (2013)
22(3) Environmental Politics, 410 See Also Mehdy Abbas Khayli ‘The Roles Played by the Polluter Pays Principle
in state aid Law’ (2013) 6 Jean Monnet Working Paper Series available at www.tradevenvironment.eu accessed
28 October 2017
627
D Ellerman and B Buchner, ‘Over-allocation or Abatement? A Preliminary Analysis of the EU ETS based on the
2005-06 Emissions Data’, (2008) 41(2) Environmental & Resource Economics 267
628
Jos Sijm, Karsten Neuhoff and Yihsu Chen, ‘CO2 Cost Pass Through and Windfall Profits in the Power Sector’
(May 2006) 1Energy research Centre of the Netherlands & Energy Policy Research Group 0617, Cambridge
University Press; See Also Michael Grubb and Karsten Neuhoff, Emissions Trading & Competitiveness, ( Taylor &
Francis, 2006)

agreements or the threat of regulatory intervention relating to windfall profits and (iii)
market imperfections and the lack of transparency within the carbon market.629
Since Phase 2 was concurrent with the first commitment period of the Kyoto
Protocol, the EU imposed a tighter emissions cap by reducing the total volume of
allowances by 6.5% compared to 2005. The emission trading scheme was meant to
offer cost-effective mitigation options to businesses. However, with the volume of
emissions credits in the system and the economic crisis of 2008, which reduced
actual emissions, a large surplus of emissions credits resulted, causing a fall of the
price from €30 to less than €7.630 Put simply, the cost of emissions was just too low
to be an effective inducement to justify investment in emissions reducing equipment
or changing operational processes.631
The third phase of the emissions trading scheme was initiated with an
amending Directive (2009/29/EC).632The emissions trading scheme was extensively
harmonised across the EU, with all fundamental decisions made centrally.633 The
most significant change in the third trading phase is the reduction in free allowances
from 80% in 2013 to 30% by 2020.634
The scheme, however, has not operated as planned and in the most part has
failed to incentivise the promotion of emissions reduction and the development of
renewable electricity facilities as a means of resolving the electricity ‘trilemma’,635
due to the low price for carbon emissions which has occurred as a result of the large
number of emission allowances available.636 The system used to allocate emission
allowances became politically motivated with the NAP generated by each member
state637 being seen as complex, dysfunctional, not transparent and thus creating
distortions to competition.638
Subsequently the Commission sought to reduce the over allocation639 of free
allowances in circulation during the second trading period (2008-12). The
629
Jos Sijm, Stefan Bakker, Yishu Chen, Henk Harmsen, and Wietze Lise, ‘CO 2 price dynamics: the implications
of EU emissions trading for the price of electricity’ (2005) ECN-C--05-081, Energy Research Centre of the
Netherlands
630
http://markets.businessinsider.com/commodities/co2-emissionsrechte accessed 17 January 2018
631
Johanna Arlinghaus, Luisa Dressler, Florans Flues, Michelle Harding and Kurt van Dender Effective Carbon
Rates Pricing CO2 through Taxes and Emissions Trading Systems (OECD Publishing, 2016) 15
632
European Directive 23 April 2009, ‘Amending Directive 2003/87/EC so as to improve and extend the carbon
emission allowance trading scheme’ OJ L 140/71
633
Ibid, Article 9(2)
634
Ibid, Preamble Para 21
635
636
Dieter Helm, ‘The European framework for energy and climate policies’ (2014) 64 Energy Policy 29
637
Article 9 of Emission Trading Directive
638
Sanja Bogojević, ‘The EU ETS Directive Revised: Yet Another Stepping Stone’ (2009) 11(4) Environmental
Law Review
639
Sara Segura, Luis Ferruz, Pilar Gargallo and Manuel Salvador ‘Environmental versus economic performance in
the EU ETS from the point of view of policy makers: A statistical analysis based on copulas’ (2018) 176 Journal of
Cleaner Production, 1111; See Also Jan Jans and Hans Vedder. European Environmental Law, (4th Ed Europa

Commission opted for a centralised allocation system.640 However, the CJEU stated
that the Commission had exceeded its competence641 in so doing and the scheme
remained much the same. The Court’s finding that whilst the Commission had the
regulatory competence over the EU-ETS as a market it did not have competence to
annul the NAP, which were the root cause of the over allocation simply because the
642
Commission believed a centrally co-ordinated allocation plan was better.
Therefore although the Commission retains its environmental competence even
over energy assets,643 where a Directive places an obligation (or competence) on a
member state the Commission is not able to override the drafting of the Directive.
644
In 2012, via the adoption of Regulation (600/2012) 645 relating to the

verification of carbon emissions and Regulation (601/2012) 646 relating to the
monitoring and reporting of carbon emissions the Commission was given exemplars
and further tools to support the understanding of the requirements of the EU-ETS
market as well as promoting a more harmonised and cost-effective allocation of
emissions credits.647
In the current third phase of the trading scheme it is hoped that the over
allocation of allowances will be corrected with the establishment of the Stability
Reserve, which will start operating in January 2019,648 whereby ‘adding’ allowances
to a reserve account by deducting them from future auction volumes. It has also
been stated that imposing stringent ex-ante limits on the volume of allowances
available will enhance confidence in the market and thus increase its price and
Law Publisher, 2011), 32; Joelle de Sepibus, ‘The European Emission Trading Scheme Put to the Test of state
aid Rules’ (2007) NCCR Trade Working Paper 12; Angus Johnson ‘Free Allocation of Allowances Under the EU
Emissions Trading Scheme – Legal Issues’ (2006) 6 Journal of Climate Policy, 115
640
EU Commission ‘EU ETS Handbook’ (2015), 43 available at
https://ec.europa.eu/clima/sites/clima/files/docs/ets_handbook_en.pdf accessed 21 December 2017
641
Case T-183/07 Poland v Commission ECLI:EU:T:2009:350 para 120 & 131, the appeal C-504/09P
Commission v Poland ECLI:EU:C:2012:178 para 78 was unsuccessful; See also C-505/09 Commission v Estonia
ECLI:EU:C:2012:179 para 80 & 81
642
Case T-387/04, EnBW Energie Baden-Württemberg v Commission ECLI:EU:T:2007:117; Case C-295/14 DOW
Benelux BV v Staatssecretaris van Infrastructuur en Milieu ; Case T-233/04 Netherlands v Commission
ECLI:EU:T:2008:102; Case C-279/08 Commission v Netherlands ECLI:EU:C:2011:551; Joined Cases C-191/14
and C-192/14 Borealis Polyolefine GmbH v Bundesminister für Land- und Forstwirtschaft, Umwelt und
Wasserwirtschaft ECLI:EU:C:2016:311; Case 540/14 DK Recycling und Roheisen GmbH v Commission
ECLI:EU:C:2016:469
643
644
Case C-239/01 Germany v Commission ECLI:EU:C:2003:514 para 37 and Case C-244/03 France v Parliament
& Council ECLI:EU:C:2005:299, para 14
645
Commission Regulation 600/2012 (21 June 2012) ‘the verification of carbon emission reports and tonne-
kilometre reports and the accreditation of verifiers pursuant to Directive 2003/87/EC’ OJ L 181/1
646
Commission Regulation 601/2012 (21 June 2012) ‘the monitoring and reporting of carbon emissions pursuant
to Directive 2003/87/EC’ OJ L 181/30
647
Article 4, European Directive 23 April 2009, ‘Amending Directive 2003/87/EC so as to improve and extend the
carbon emission allowance trading scheme’ OJ L 140/71
648
COM (2014) 20/2 ‘concerning the establishment and operation of a market stability reserve for the Union
carbon emission trading scheme and amending Directive 2003/87/EC’ available at
www.ec.europa.eu/clima/policies/ets/reform/docs/com_2014_20_en.pdf accessed on 5 April, 2016

incentive effect. 649 Following further amendments to the Emissions Trading
Directive, during the trading period (2013-20) the Commission now undertakes the
distribution of allowances centrally.650
As stated above, 60% of emission allowances were allocated to utility
companies, hence they hold a central position in the EU-ETS, emitting a cocktail of
greenhouse gases651 which not only contribute to climate change but can form ‘acid
652
rain’. Despite initially receiving many of the allowances for free
(grandfathering),653 by the third trading period the utility companies had less concern
over the potential for EU or national regulators to take action if they added the traded
market price of the allowances to the price of electricity sold, realising any windfall
profits in the process. 654
Therefore, from a legal conflicts perspective the EU-ETS conflicts with two
main elements of primary EU law, (i) the ‘polluter pays’ principle in Article 191(2)
TFEU,655 and (ii) due to the allocation of free allowances which can be traded, state
aid – Article 107 TFEU.656
Initially looking at the conflict with the ‘polluter pays’ principle it can be argued
that the provisions contained in Article 191(2) TFEU are absolute. The drafting of
Article 191(2) TFEU states that ‘the polluter should pay’657 therefore any EU scheme
which has allocated free allowances which can then be sold is in direct conflict with
649
Jing Hu, Wina Crijns-Graus, Long Lam and Alyssa Gilbert, ‘Ex-ante Evaluation of EU ETS During 2013-2030:
EU Internal Abatement’ (2015) 77 Energy Policy 152
650
Commission Regulation (1031/2010/EU) ‘the timing, administration and other aspects of auctioning of carbon
emission allowances pursuant to Directive 2003/87/EC’ http://ec.europa.eu/clima/pol accessed 12 January 2018
651
carbon dioxide (CO2), carbon monoxide (CO), nitrogen dioxide (NO 2) – which combines with rain to form nitric
acid, sulphur dioxide (SO 2) – which combines with rain to form sulphuric acid – so called acid rain - European
Commission, ‘EU ETS Handbook’ (2015) https://ec.europa.eu/clima/sites/clima/files/docs/ets_handbook_en.pdf
652
Acid Rain is mainly caused by combustion of fossil fuels which results in emissions of sulphur dioxide (SO2)
and nitrogen oxides (NOx) - https://www.conserve-energy-future.com/causes-and-effects-of-acid-rain.php
653
28 October 2017
654
J Bushnell, H Chong and E Mansur, ‘Profiting from regulation: Evidence from the European Carbon Market’
(2013) 5(4) American Economic Journal: Economic Policy, 78; see also Ulrich Wagner, Mirabelle Muûls, Ralph
Martin and Jonathan Colmer, ’An evaluation of the impact of the EU emissions trading system on the industrial
sector. Plant-level evidence from France’ (6 June 2015) AERE Conference, Canada
655
E Woerdman A Arcuri and S Clo, ‘Emissions Trading and the Polluter Pay Principle: Do Polluters Pay under
Grandfathering’ (2008) 4(2) Review of Law & Economics, 565
656
Opinion of Advocate General Kokott delivered on 21 March 2013, Joined cases C-566/11, C-567/11, C-580/11,
C-591/11, C-620/11 and C-640/11, Iberdrola, SA and Others v Administración del Estado ECLI:EU:C:2013:191,
para. 2. On windfall profits, also with regard to their State aid implications, see, Stefan Weishaar, ‘Auctions – The
Solution To Windfall Profits and End of All state aid Problems?’ (2010) Amsterdam Law Forum; See also Stefan
Weishaar and W. Woerdman, ‘Does Auctioning Emission Rights Avoid state aid? Empirical Evidence from
Germany’ (2012) 6(2) Carbon and Climate Law Review, 114; See Also C Egenhoffer, M Alessi, A Georgiev, N
Fujiwara, ‘The EU ETS and Climate Policy towards 2050: Real Incentives to Reduce Emissions and Drive
Innovation?’ (2011) CEPS Special Report 14; See Also Angus Johnston, ‘Free Allocation of Allowances Under the
EU Emissions Trading Scheme - legal Issues’ (2006) Climate Policy, 115; Joëlle de Sepibus, ‘The European
Emissions Trading Scheme Put to the Test of state aid Rules’ (2007) NCCR Working Paper, 1
657
Case C-1/03 Van de Walle ECLI:EU:C:2004:490 para 42-53; See also Case C-188/07 Commune de Mesquer
v Total France SA and Total International Ltd ECLI:EU:C:2008:359 para 49-63

the principle. It should be noted that as from January 2017 coal and gas electricity
generating plant are required to purchase carbon allowances.658 However, other
sectors which also received free allowances have not been required to purchase
their required allowances.
It is argued that having an emissions trading mechanism without a floor price
equal to the cost of carbon sequestration659 means that the polluter has not paid the
true cost for the emissions and these costs have been socialised (spread across
society).660
The ultimate position in relation to a conflict with Article 191(2) TFEU is that
an emissions trading scheme of any sort assumes that emissions will occur.
Therefore, the Emissions Trading Directive conflicts with the ‘rectified at source’ and
‘polluter pays’ principles contained within Article 191(2) TFEU.
Despite the above conflicts the most widely adjudicated661 conflict for the EU-
ETS is state aid (Article 107 TFEU) resulting from the free allocation by the state as
part of the NAP something which was tradeable 662 and the over allocation of
emission allowances which caused a distortion to competition.663
Furthermore, the pass-through of the costs of emissions allowances to end
users became an issue within many trade bodies and intensive energy users.664 As
a result of this lobbying, the Commission has published state aid guidelines665 which
allow the exemption of certain industry sectors from the payment of the carbon price
– allowing many of these consumers to buy electricity on the basis of a ‘dirty’ spread
658
Article 10(a) Emissions Trading Directive
659
Carbon sequestration describes long-term storage of carbon dioxide or other forms of carbon to either mitigate
or defer global warming and avoid dangerous climate change – Roger Sedjo and Brent Sohngen, ‘Carbon
Sequestration in Forests and Soils; (2012) 4 Annual Review of Resource Economics, 127
660
C-293/97 R v Minister of Agriculture, Fisheries and Food, ex parte Standley ECLI:EU:C:1999:215 para 51-52;
See Also Case C-254/08 Futura Immobiliare srl Hotel Futura v Comune di Casoria ECLI:EU:C:2009:479 para 64-
67
661
ECLI:EU:C:2012:179 para 80 & 81
661
Case T-387/04, EnBW Energie Baden-Württemberg v Commission ECLI:EU:T:2007:117; Case C295/14 DOW
ECLI:EU:C:2016:469
662
Jan Jans & Hans Vedder. European Environmental Law, (4th Ed Europa Law Pub, 2011), 321; Joelle de
Sepibus, ‘The European Emission Trading Scheme Put to the Test of state aid Rules’ (2007) NCCR Trade
Working Paper 12; Angus Johnston ‘Free Allocation of Allowances Under the EU Emissions Trading Scheme –
Legal Issues’ (2006) 6(1) Journal of Climate Policy, 115
663
Joelle de Sepibus, ‘Scarcity and Allocation of Allowances in the EU Emissions Trading Scheme - A Legal
Analysis’ (2007) NCCR Trade Working Paper, 36
664
Wolf Sauter and Hans Vedder, ‘State Aid and Selectivity in the Context of Emissions Trading: Comment on the
NOx Case’ (2012) 3, European Law Review; See Also Commission decision 29 March 2000, Case N 653/1999,
‘Denmark - CO2-quota system’ OJ C 322, 9; See Also Commission decision of 28 November 2001, Case N
416/2001, United Kingdom - Emission trading scheme OJ C 88, 16; Commission decision of 25 Jul 2001, Case N
550/2000, ‘Belgium, Green Electricity Certificates’ OJ C 330, 3
665
Commission Communication C158/4, ‘Guidelines on Certain state aid Measures in the Context of the Carbon
Emission Allowance Trading Scheme Post 2012’ 5 June 2012

price rather than a ‘clean’ spread price666 and as such is seen, within certain limits,
as justifiable state aid.667 The aid intensity (amount of the additional costs which can
be granted as state aid) for the additional costs of purchasing carbon credits started
at 85% in 2013 and will fall to 75% by 2020. Currently Germany, the United Kingdom,
the Netherlands, Belgium and Norway (an EEA country but still part of the trading
scheme) provide such aid. Although allowed by the Commission this type of state
aid is argued to be a clear case of the Commission giving way to industry lobbying
at the expense of other consumers who are less able to induce the Commission to
find in their favour.
The conclusion from the above is that due to the over allocation of emission
allowances the EU-ETS has also failed to promote sustainability with the EU
electricity sector. It is also clear that the EU-ETS conflicts with the state aid and the
polluter pays principles. Thus, to avoid these conflicts with primary EU law, the EU-
ETS only works as part of a consistent framework of policy instruments, with
allowances being either allocated due to need or purchased in their entirety.668
2.10.2 Effort Sharing Decision669 – Regulating the Kyoto Protocol Gases

Scheme
The Effort sharing Decision allows the EU to directly fulfil its obligations under the
Kyoto Protocol to manage the listed greenhouse gases. The Effort Sharing Decision
sets mandatory limits for the six Kyoto Protocol670 greenhouse gases not traded
within the EU-ETS. Due to the sectors which form part of the Decision’s scope they
influence the demand for electricity, thus the type of generation that is dispatched671
and hence the wholesale price for electricity. Any regulatory instrument which affects
the wholesale price for electricity has a feedback mechanism into the renewable
666
The ‘spread’ is the difference between the selling price for electricity and the cost of production – clean spread
includes the carbon allowance price and dirty spread does not include the carbon price
667
Case C-279/08 Commission v Netherlands ECLI:EU:C:2011:551
668
Interactions with other Policy Instruments’, (2014) 25(34) Energy & Environment 733-49
669
670
Kyoto Protocol to the United Nations Framework Convention on Climate Change (1998) Annex A - carbon
dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs) and
sulphur hexafluoride (SF6); available at http://unfccc.int/kyoto_protocol/items/2830.php
671
network, at the lowest possible cost, subject to transmission capacity and operational constraints.’ - P Palermo

electricity support schemes672 of member states and the amount of money which
flows through these schemes.
The Effort Sharing Decision provides a C&C based solution to emissions
abatement and is within the environmental competence of the Commission. The
Effort Sharing Decision forms part of the Third Energy Package.673
The Effort Sharing Decision consists of the following main elements: (i) a
definition of the greenhouse gas targets for 2020 for each member state as a
percentage of the 2005 emissions and a definition of how the annual targets for the
years 2013-2019 are to be calculated (Article 3); (ii) provisions relating to the general
principles on the flexibilities allowed to member states (Article 3 and 5), such as
banking,674 borrowing,675 the use of the Kyoto flexible mechanisms676 such as the
clean development mechanism, 677 joint implementation 678 and the inter-member
state transfer of allocated emission allowance units (the concepts of banking and
borrowing not being present in the EU-ETS this makes the Effort Sharing Decision
important for the future of the EU-ETS due to the coming together of the two
mechanisms in the 2020 – see below); (iii) compliance and inventory reporting
(Article 6); (iv) the penalties which may be imposed on member states in case of
non-compliance in any of the years until 2020 (Article 7). A member state which is
none-compliant for a specific year will see its emissions allowance amount decrease
by a volume equal to 1.08 times the shortfall of the previous year. Also, such a
member state will not be able to transfer its unused quota to another member state;
(v) the principles on how the Effort Sharing Decision should be adjusted if an
international agreement on climate change is reached679 which would result in the
EU taking a tighter overall 2020 target (Article 8); and (vi) the principles on how the
672
‘suport scheme’ means ‘any instrument, scheme or mechanism applied by a Member State or a group of
673
674
A Member State is allowed to carry over unused entitlement of a specific year to any future compliance year
until 2020 without limitations
675
A Member State is allowed to borrow up to 5% of its entitlements from its future compliance years
676
Kyoto units are Certified Emission Reductions issued from Clean Development Mechanism projects, Emission
Reduction Units issued from Joint Implementation projects, Removal Units generated from carbon sink activities,
Assigned Amount Units which are tradeable fractions of Annex 1 Countries’ to the Kyoto Protocol emission
allocations
677
A Member State is allowed to transfer its Kyoto unit quota to another Member State up to an amount
corresponding to 3% of its 2005 emissions
678
A project defined in Article 6 of the Kyoto Protocol, allows a country with an emission reduction or limitation
commitment under the Kyoto Protocol (Annex B Party) to earn emission reduction units (ERUs ) from an
emission-reduction or emission removal project in another Annex B Party
679
In the second commitment period of the Kyoto Protocol the EU did not commit to a tighter target, thus such a
review process has not been triggered to-date

scope of the Effort Sharing Decision would change according to possible changes
in the scope of the Emission Trading Directive (Article 10).680
In contrast to the EU-ETS where the majority of scheme participants were
initially allocated allowances for free in order to provide a form of protection from
sudden changes in the economic environment for scheme participants, no such
transitional arrangements were put in place within the Effort Sharing Decision
framework.681 The Effort sharing Decision manages this issue by setting limits on
the basis of a member states’ relative wealth with some counties being allowed to
increase their emissions (Romania and Bulgaria increase by 20%) as a result of
economic growth whilst others are to reduce emissions.
To bring market mechanisms to the abatement processes for the gases
controlled by the Effort Sharing Decision, in October 2014, the European Council
decided to enhance the availability and the use of existing flexibility instruments.682
Auctioning of annual emission allocations was one option proposed to enhance
flexibility, with the development of a permanent platform on which member states
683
could bid and sell their allocations. This auction process thus enhances the
potential to reduce the emission of greenhouse gases which are not included within
the EU-ETS and in so doing allowing fair price discovery,684 transparency and the
lowering of transaction costs.685 Regulatory outcomes could be seen to satisfy both
the sustainability and affordability elements of the electricity ‘trilemma’.686
This change makes the processes related to the gases regulated by the
Effort Sharing Decision more aligned with the EU-ETS, therefore, from 2020
onwards, the two schemes could share a common trading platform, simply focusing
on different gases from different players.
Studies687 have shown that not taking part in the EUs emissions reductions
schemes increases the cost of carbon emission reductions and therefore
680
Anja Kollmuss, ‘Tackling 60% of the EU’s Climate Problem the Legislative Framework of the Effort Sharing
Decision’ (May 2013) Carbon Market Watch Report, 4
681
Christina Hood, ‘Reviewing existing and proposed emissions trading systems’ (2010) OECD/IEA, Paris
682
European Council (2014): European Council Conclusions, 23/24 October 2014. EUCO 169/14, para. 2.12.
683
Frans Duijnhouwer, ‘Enhancing existing flexibility instruments to ensure cost-effectiveness, presentation’
(2015) Brussels; See also European Commission Auctioning,
http://ec.europa.eu/clima/policies/ets/cap/auctioning/index_en.htm.
684
2018
685
Nils Meyer-Ohlendorf, Benjamin Görlach and Ennid Roberts, ‘EU Effort Sharing Decision after 2020:
Auctioning of AEAs’ (19 January 2016) Ecological Institute, Berlin
686
687
Kirk Hamilton, Milan Brahnobhatt and Jiemei Lui ‘Multiple Benefits from Climate Change Mitigation’ (2017) LSE
Graham Research Institute for Climate Change Working Paper; See Also Kirk Hamilton, ‘ Economic co-benefits of

compliance. Hence the future scope of the management scheme for the Kyoto gases
is seen as core to the effective compliance with the EU’s Kyoto Protocol
commitments.688 Additionally, with the increased use of market mechanisms and the
ability to trade allowances, it is argued that the effect on the electricity demand due
to curtailed industrial output will be minimised and thus a more predictable demand
pattern will emerge which can be addressed readily by both renewable and other
forms of electricity generation.
As is known, in October 2014, the EU set a binding economy-wide domestic
emission reductions target of at least 40% by 2030 compared to 1990.689 As part of
this target it was stated that sectors not covered by the EU ETS must reduce
emissions by 30% by 2030 compared to 2005 as their contribution to the overall
target.690
On 20 July 2016, the European Commission presented a legislative
proposal, called the ‘Effort Sharing Regulation’, setting out binding annual carbon
emission targets for member states for the period 2021–2030 (targets for sectors
that fall outside the scope of the EU-ETS - including transport, buildings, agriculture
and waste management). 691 The regulation aimed to ensure that the non-ETS
emissions reduction target of 30% by 2030, compared to 2005 levels, is reached.
This agreement was said to bring closer the EU’s ability to fulfil its Paris climate
commitment (COP 21 – See Section 2.5) of at least a 40% cut in carbon emissions
by 2030 compared to 1990 levels.692
Following discussions at the EU’s Environmental Council during 2017, EU
ambassadors gave their support to the provisional text of the Effort Sharing
Regulation693 on 17 January 2018,694 and as such the Regulation was ratified on 18
May 2018.695
reducing CO2 emissions outweigh the cost of mitigation for most big emitters’ (2017) LSE Graham Research
Institute for Climate Change Working Paper
688
Frédéric Babonneau, Alain Haurie and Marc Vielle, ‘Welfare implications of EU effort sharing decision and
possible impact of a hard Brexit’ (May 2017) 5th International Symposium on Environment Energy Finance Issues,
Paris
689
690
Ibid, Recital 2
691
Ibid, Article 4
692
Femke de Jong, ‘The 2030 Effort Sharing Regulation: How can the EU’s largest climate tool spur Europe’s low-
carbon transition’ [2016] Carbon Market Watch Policy Briefing available at https://carbonmarketwatch.org/wp-
content/uploads/2016/09/CMW_THE-2030-EFFORT-SHARING-REGULATION_final2016_WEB.pdf accessed 21
May 2018
693
EU Regulation on binding annual greenhouse gas emission reductions by Member States from 2021 to 2030
contributing to climate action to meet commitments under the Paris Agreement and amending Regulation (EU) No
525/2013, 26 April 2018, 2016/0231 (COD), PE-CONS 3/18
694
http://www.consilium.europa.eu/en/press/press-releases/2018/01/17/effort-sharing-regulation/
695
http://www.consilium.europa.eu/en/press/press-releases/2018/05/14/effort-sharing-regulation-council-adopts-
emission-reduction-
targets/?amp;utm_medium=email&utm_campaign=Effort+sharing+regulation%3a+Council+adopts+emission+red
uction+targets

In terms of the conflict position of the current framework, it is believed to have
an identical conflict position related to the ‘polluter pays’ principle and the
requirement to rectify environmental damage at source as the EU-ETS.
As the Decision allows the emission of greenhouse gases within the limits
set, it can be argued that the ‘polluter pays’ principle has not been fully implemented
in relation to the gases regulated. The judgement in the GEMO696 case confirms that
where an undertaking is relieved of a cost that it would face in compliance with the
‘polluter pays’ principle (Article 191(2) TFEU) this is state aid.
697
However, applying the criteria set out in Pearle, that for an
intervention to be state aid it must be made by the State and through State
resources, it is unlikely that compliance by undertakings with the Effort Sharing
Decision would be considered by the CJEU to be state aid, as there were no
allowances granted for free or at a reduced price as was the case in the EU-ETS.
Therefore, other than a strict enforcement of the ‘polluter pays’ or rectified at source
principles of Article 191(2) TFEU in the future the conflict is likely to go untested by
the CJEU.
2.10.3 Industrial Emission Directive698 – Controlling Thermal Generation &

Setting Electricity Market Price
The Industrial Emissions Directive is a C&C style of regulatory instrument. It sets

clear limits on emissions for generating facilities, these emissions covering not only
gases but also materials such as dust and ash. The Directive can be considered an
environmental measure and as such falls within the competency of the Commission.
The analysis below considers the regulatory framework set out by the Directive as
well as how this framework conflicts with EU primary law.
As stated above, the EU has declared that 80%699 of its emissions come from
electricity generation and as such the control of such emissions sources is critical to
the meeting of emissions reduction targets. 700
696
Case C-126/01 Ministère de l'Économie, des Finances et de l'Industrie v GEMO ECLI:EU:C:2003:622, para. 31
to 34. AG Jacobs had considered that ‘the provision free of charge of a collection and disposal service for
dangerous animal waste [was relieving the] … farmers and slaughterhouses of an economic burden which would
normally, in accordance with the polluter-pays principle, have to be borne by those undertakings’. See Opinion AG
Jacobs in Case C-126/01 Ministère de l'Économie, des Finances et de l'Industrie v GEMO ECLI:EU:C:2002:273,
para. 64
697
Case C-345/02 Pearle BV, Hans Prijs Optiek Franchise BV and Rinck Opticiëns BV v Hoofdbedrijfschap
Ambachten ECLI:EU:C:2004:448para 33
698
European Directive 2010/75/EU (24 November 2010) ‘Industrial emissions (integrated pollution prevention and
control)’ OJ L 334/17
699
ibid para 1
700
To this end in November 2005, the European Commission launched a review of legislation on industrial
emissions (European Commission COM (2005) 540 ‘Report of the Commission on the implementation of Directive
96/61/EC concerning integrated pollution prevention and control’).This led to the Commission proposing an
Industrial Emissions Directive on 21 December 2007 (European Commission COM (2007) 844 ‘Industrial

The Industrial Emissions Directive is drafted to prevent, reduce and eliminate
pollution arising from industrial activities in compliance with the ‘polluter pays’701
(Article 191(2) TFEU).702 The Directive seeks to implement emissions reduction by
using (i) an integrated approach,703 (ii) best available techniques,704 (iii) flexibility,705
(iv) inspections 706 and (v) public participation, all very much C&C regulatory
features.707
Implementation of the Directive was carried out over several years, starting
in January 2013 with full implementation in January 2016.708 The Directive also takes
an integrated approach to industrial emissions, bringing seven separate directives
into one:709
• Large Combustion Plant Directive710

• Integrated Pollution Prevention and Control Directive711
• Waste Incineration Directive712
• Solvent Emissions Directive713
• Three existing directives on titanium dioxide714
emissions (integrated pollution prevention and control’). The Directive was ratified by the European Council on 8
November 2010 and came into force on 6 January 2011.
701
The polluter pays principle is set out in the Article 191(2) Treaty on the Functioning of the European Union and
Directive 2004/35/EC (21 April 2004) ‘environmental liability with regard to the prevention and remedying of
environmental damage is based on this principle’
702
European Directive 2010/75/EU (24 November 2010) ‘Industrial emissions (integrated pollution prevention and
control)’ OJ L 334/17, Preamble para 2
703
The integrated approach means that the permits must take into account the whole environmental performance
of the plant, covering e.g. emissions to air, water and land, generation of waste, use of raw materials, energy
efficiency, noise, prevention of accidents, and restoration of the site upon closure -
http://ec.europa.eu/environment/industry/stationary/ied/legislation.htm accessed 1 May 2018; See also Industrial
Emissions Directive Article 14
704
Best available techniques (BATs): the most effective techniques for preventing or reducing emissions that are
technically feasible and economically viable within the sector - http://eur-lex.europa.eu/legal-
content/EN/TXT/HTML/?uri=LEGISSUM:ev0027&from=EN accessed 1 May 2018; Industrial Emissions Directive
Article 11, 13, 14, 19, Annex III
705
Competent authorities have flexibility to set less strict emission limits, where an assessment shows that
achieving the emission levels associated with BAT leads to disproportionately high costs compared to the
environmental benefits: Till Bachmann and Jonathan van der Kamp, ‘Environmental cost-benefit analysis and the
EU Industrial Emissions Directive: Exploring the societal efficiency of a DeNOx retrofit at a coal-fired power plant’
(2014) 68 Energy, 125
706
Industrial Emissions Directive Articles 30(9) and 73
707
Industrial Emissions Directive Article 24
708
January 2013 – applied to all new installations, January 2014 – applied to installations already in existence and
regulated under the Integration Pollution Coordination & Control Directive before 6 January 2013 (except large
combustion plants), July 2015 – applied to existing industrial activities with newly prescribed activities that are not
subject to the Integration Pollution Coordination & Control Directive, January 2016 – applied to large combustion
plants (effectively thermal power stations) already in existence before 6 January 2013, thus effectively replacing
the Large Combustion Plan Directive from January 2016.
709
Industrial Emissions Directive, Recital 1
710
Directive 2001/80/EC of 23 October 2001 ‘on the limitation of emissions of certain pollutants into the air from
large combustion plants’ OJ L 309, 27.11.2001
711
Directive 2008/1/EC of 15 January 2008, ‘concerning integrated pollution prevention and control’ OJ L 24/8
29.1.2008
712
Directive 2000/76/EC of 4 December 2000, ‘on the incineration of waste’ OJ L 332, 28.12.2000,
713
Directive 1999/13/EC of 11 March 1999, ‘on the limitation of emissions of volatile organic compounds due to
the use of organic solvents in certain activities and installations’ OJ L85/1 29.3.1999
714
Directives on (i) disposal (Council Directive 78/176/EEC), (ii) monitoring and surveillance (Council Directive
82/883/EEC) and (iii) programs for the reduction of pollution (Council Directive 92/112/EEC)

With the Renewable Energy Directive715 effectively regulating 20% of the electricity
market, the Industrial Emissions Directive is very important as it regulates the
emissions from the remaining 80%.
Generation stations (defined in the Directive as ‘large combustion plants’)
which were in operation on 29 March 1999 or which were granted a permit (or
applied for one) before 1 April 2001 will have options under the Industrial Emission
Directive to choose one of the so called ‘Opt in’ options or the ‘Opt out’ option:
• ’Opt in’ Option 1 by committing to the emission limit values from 2016. So-
called ’peaking plants’ (i.e. those operating for no more than 1500 hours per
year on a 5 year rolling average) will be subject to higher (i.e. less stringent
than set out in the main body of the Directive) emission limits (relating to
nitrogen oxide, sulphur dioxide and dust716 – hence the reason many power
stations that have standby diesel generators for black start717 purposes have
started burning bio-diesel and increasing their running hours to just below
1500 per year (for reference there are 8760 hours in a year).
• ’Opt in’ Option 2 generation plant permitted before 27 November 2002 and
operating by 27 November 2003, can enter into a transitional plan from 2016
to June 2020 and agree to comply with set emission limits (nitrogen oxide,
sulphur dioxide and dust)718 from July 2020 can continue operation.719
• ’Opt out’ by committing to operate for a maximum of 17,500 hours between

2016 and 2023. These generating plants can comply with the less stringent
emission limits set out in the Large Combustion Plan Directive720 prior to
ceasing operations by the end of 2023.721
715
716
Ibid, Article 30(2)
717
Black Start is the technical term given to the process whereby a power system is restarted following a total
system failure. Many power plants are required to install diesel generators that can start and operate without the
need to have a functioning electricity system into which electricity can be transmitted. A generating plant has a
considerable “house” load in the form of pumps, fuel systems and control apparatus in order to operate, all of
which must be running prior to starting the main generating plant
718
Article 30(2) Industrial Emissions Directive
719
Article 32 Industrial Emissions Directive
720
EU Directive 2001/80/EC 23 October 2001 ‘on the limitation of emissions of certain pollutants into the air from
large combustion plants’ OJ L309/44
721
Article 33(1) Industrial Emissions Directive

To make these options work each member state is required to develop a Transitional
National Plan,722 which is intended to allow operators enough time to comply with
the Directive’s reduced emission limit values. The transitional national plan may set
emission limits above Large Combustion Plant Directive levels, with the requirement
that such limits become gradually stricter to build up to compliance with the Industrial
Emission Directive’s emission limit levels. 723 This is done to ensure that coal
generation, which forms a large section of the operating capacity in Poland724 and
Germany,725 can transition to a sustainable operating regime within the Industrial
Emissions Directive framework at the same time as other forms of generation are
constructed to make good the capacity shortfall726 – the so called ‘smart retirement
policy’.727
The continued operation of the smart retirement policy, as currently
envisaged, was highlighted as a business requirement during the empirical research
such that the transitional national plans need to be formulated to provide a
reasonable prospect of not causing a generation gap728 which is simply filled by
importing electricity from other member states. The Industrial Emission Directive
seeks to strengthen the concept of ‘best available technology’729 and, subject to a
722
Article 32 Industrial Emissions Directive
723
Industrial Emissions Directive, Article 32(2) using rates in Article
724
Bloomberg ‘Poland Faces Harsh EU Reality in Push for Coal Exemptions’, 17 May 2017, available at
www.bloomberg.com/news/articles/2017-05-16/poland-faces-harsh-eu-reality-in-its-push-for-coalexemptions
accessed 20 January 2018; See Also Michal Wierzbowski, Izabel Filipiak and Wojciech Lyzwa,’ Polish energy
policy 2050 – An instrument to develop a diversified and sustainable electricity generation mix in coal-based
energy system’ (2017) 74 Renewable and Sustainable Energy Reviews, 51
725
Mariana Heinrich and Phil Hare,’Outlook for New Coal Fired Power Stations in Germany, The Netherlands and
Spain’ [2013] Pöyry Management Consulting Report for DECC UK; See Also DW ‘Pressure on Germany to ditch
coal intensifies’, 2 October 2017 available at www.dw.com/en/pressure-on-germany-to-ditch-coal-intensifies/a-
40778356
726
Simone Tagliapietra, ’Beyond Coal: Facilitating the Transition in Europe’ (2017) 5 Bruegel Institute Policy Brief
727
Matthias Buck, Michael Hogan and Christian Redl, ’The Market Design Initiative and Path Dependency: Smart
retirement of old, high-carbon, inflexible capacity as a prerequisite for a successful market design’ [2015] Agora
Energiewende
728
A generation gap is simply a shortfall in available generating capacity to meet demand for electricity present on
the network
729
‘best available techniques’ Article 10 and 13 Industrial Emissions Directive; ‘Best’ is the most effective way of
achieving a ‘high general level of protection of the environment as a whole’. What this high general level may
mean is not defined in the directive, but defined in several other EU legislation (e.g. Birds and Habitats Directive,
Air Quality Framework Directive and the respective daughter directives, Water Framework Directive and daughter
directives, Waste Framework Directive, chemicals legislation such as REACH etc.). The quality of ‘Best’ depends
on the quality of legislative work of the EU and member states. ‘Available’ implies that several conditions be met:
scale, economic viability, efficiency and accessibility. Available techniques are already developed in terms of
scale; they are hence ‘ripe’ techniques and capable of being applied widely across Europe. They must have
proven the market test – that means they must have been applied under normal market conditions (economically
and technically viable conditions). Establishing the external financial costs of pollution and hence the benefits of
its reduction is still an ongoing methodological problem, which has produced many scientific controversies. In
determining whether or not a technology is really economically viable, the crucial factor is the choice of
methodology used to identify the external costs being defined. The Directive also states that the techniques need
to be ‘reasonable accessible to the operator’, irrespective of whether produced or used in the member state in
question. ‘Techniques’ is not to be limited to ‘technology used’, it also refers to the way in which the installation is
designed, built, maintained, operated and decommissioned. Christian Schaible ‘New Features under the Industrial
Emissions Directive: critical assessment of main provisions under the new IPPC framework’ (2011) European
Environmental Bureau

730
benefits analysis, to make its application more consistent between member
states.731
Respondents during the empirical research also made comment with
regards to their desire to see the timetable for plant closure set out in the Industrial
Emissions Directive732 maintained, as this gave a degree of regulatory certainty and
investment scenarios for new generating plant could be developed against this
background.
Whilst the Industrial Emission Directive allows large coal fired generating
facilities to continue operation, provided agreement can be reached with regards to
emission levels (nitrogen oxide, sulphur dioxide and dust), the Directive incentivises
electricity utilities to invest in reducing the emissions from their power plant and in
return to obtain life extension and additional running hours. 733 As most of the
generating plant in question is fully depreciated,734 the investment, and thus the net
book value,735 of the plant is only increased to the level of the emissions reducing
equipment, allowing the plant to keep running with minimal effect on the balance
sheet of a generating company, and thus the returns are seen to be higher than for
a new plant,736 at a time when power prices are low and thus investment is difficult
for many market participants.737 The exemptions have allowed a large amount of
Europe's power plants to exceed the set standards and continue to operate and this
730
Till Bachmann and Jonathan van der Kamp, ‘Environmental cost-benefit analysis and the EU (European Union)
Industrial Emissions Directive: Exploring the societal efficiency of a DeNOx retrofit at a coal-fired power plant’
(2015) Energy, 68
731
Article 52 (5) Industrial Emissions Directive
732
733
H Sithole, T Cockerill, K Hughes, D Ingham, L Ma, R Porter and M Pourkashanian, ’Developing a Sustainable
Electricity Generation Mix for the UK’s 2050 Future’ (2016) 100 Energy, 363
734
The accounting treatment for an asset that is fully depreciated and continues to be used in the business will be
to report it on the balance sheet at its cost along with its accumulated depreciation. There will be no depreciation
expense recorded after the asset is fully depreciated - www.accountingcoach.com/blog/fully-depreciated-assets
735
Net book value is the value at which a company carries an asset on its balance sheet. It is equal to the cost of
the asset minus accumulated depreciation. For a fully depreciated asset the net book value will be zero. Net book
value is one of the most popular financial measures, particularly when it comes to valuing companies. It is
important to note that net book value almost never equals market value. This happens when assets are listed on
the balance sheet at construction cost, meaning their balance sheet value is not updated as prices change. A
company that holds a lot of physical assets (like power stations) on its balance sheet will likely have a net book
value far below its market value. Also revenues are derived from the assets and placed in the profit and loss
account without the need to place a depreciation liability on the balance sheet. – Ray Ball, Joseph Gerakos,
Juhani Linnainmaa and Valeri Nikolaev ‘Earnings, Retained Earnings, and Book-to-Market in the Cross Section
of Expected Returns’ (2018) 17(3) Chicago Booth Research Paper
736
One of the elements of a Company’s balance sheet is the net book value of its assets. Net book value is
calculated as the original cost of an asset, minus any accumulated depreciation and other impairments required
by accounting standards. Utility companies tend to drive their business by the requirement to recover a certain
rate of return on the net book value of its assets, therefore with income determined by the wholesale price of
electricity a low network value company will have a higher reported return.
737
Diego García-Gusano, Diego Iribarren and Javier DuFour, ‘Is coal extension a sensible option for energy
planning? A combined energy systems modelling and life cycle assessment approach’ (2018) 114 Energy Policy,
413

is seen as a major loop-hole within the Directive and a conflict with the ‘polluter pays’
principle.738
Despite the exemptions mechanisms within the Industrial Emissions
Directive the overall incentive scheme is seen as positive as it increases the
sustainability of the generating plant, makes electricity more affordable and lastly
allows electricity generating plants which are not subject to intermittent wind or solar
resources to continue to operate.739 Therefore in contributing to the resolution of the
electricity trilemma the Industrial Emissions Directive is arguably a success, with the
level of success very much qualified by the legal conflict issues set out below.
Considering the conflicts between the Directive and the EU’s free trade
principles, it should be firstly noted that the European Environmental Bureau stated,
almost from the effective date of the Industrial Emissions Directive, 740 that the
system of derogations ‘is a clear contradiction’741 with the provisions of Article 191(2)
(polluter pays). Moreover, as the ‘polluter pays’ principle was a feature of the
Walloon Waste742 case, which was determined in 1992, the Industrial Emissions
Directive (effective over 20 years later in 2013) could be regarded as a missed
opportunity, even on a lex specialis basis, to not only implement a co-ordinated
approach to emissions control but to ensure this is implemented consistently across
the EU and not left to interpretation and implantation by member states individually.
This has meant that the Industrial Emissions Directive is also in direct conflict with
the Treaty provisions contained in Article 191(2) TFEU in relation to ‘rectified at
source’ as well as on the basis that the ‘polluter should pay’.
As has been stated, for the Effort Sharing Decision, 743 taking account of the
finding in the GEMO744 case which confirms that where an undertaking is relieved of
a cost that it would face in compliance with the ‘polluter pays’ principle (Article 191(2)
TFEU), this is state aid. However, unlike the Effort Sharing Decision, the Industrial
738
Julia Fioretti, ‘EU states approve plans for stricter limits on pollutants from power plants’ Reuters,
https://www.reuters.com/article/us-eu-coal-pollutants/eu-states-approve-plans-for-stricter-limits-on-pollutants-from-
power-plants-idUSKBN17U1ZO accessed 28 December 2017
739
Till Bachmann and Jonathanvan der Kamp, ‘Environmental cost-benefit analysis and the EU (European Union)
Industrial Emissions Directive: Exploring the societal efficiency of a DeNOx Retrofit at a coal-fired power plant’
(2014) 68 Energy, 125
740
741
Christian Schaible ‘New Features under the Industrial Emissions Directive: critical assessment of main
provisions under the new IPPC framework’ [2011] European Environmental Bureau
742
Case C-2/90 Commission v Belgium ECLI:EU:C:1992:310
743
744
Case C-126/01 Ministère de l'Économie, des Finances et de l'Industrie v GEMO ECLI:EU:C:2003:622, para. 31
to 34. AG Jacobs had considered that ‘the provision free of charge of a collection and disposal service for
para. 64

Emissions Directive is heavily reliant on the transitional national plans which are
determined by the member states and therefore state aid can be found to have been
applied where the transitional plans have conferred an advantage on an undertaking
not available to others, as exactly was the case in the EU-ETS and the over
allocation of emission allowances. 745
2.10.4 Energy Efficiency Directive746 – Reducing Electricity Demand &

Changing Demand Profile
The Energy Efficiency Directive is a key pillar of the Third Energy Package747 as it
seeks to reduce the overall demand for energy across the EU. The Directive is a
C&C regulatory framework rather than a market-based instrument. The Directive’s
objectives are highly interactive with those of the Emissions Trading Directive748 in
that when efficiency increases, energy demand decreases, and the need for
emissions allowances thus reduces. However, there is no feedback loop between
the two Directives, as reductions in electricity demand simply increases the number
of unrequired emission allowances, further depressing the price for carbon
emissions via the EU-ETS.
The promotion of energy efficiency is specifically set out in Article 194 (1)(c)
TFEU. In addition to the specific obligation set out in Article 194, energy efficiency
related acts have also been adopted on the legal basis of the Common Commercial
Policy, relating to external trade. 749 The EU has stated that ‘energy efficiency’
provides the most universally available source of energy. Hence putting energy
efficiency first means that the cheapest and cleanest source of energy is the energy
that does not need to be produced or used.750 Increasing the efficient use of energy
is seen to be a form of economic development751 which is a core EU objective.752
745
ECLI:EU:C:2012:179 para 80 & 81
745
Case T-387/04, EnBW Energie Baden-Württemberg v Commission ECLI:EU:T:2007:117; Case C295/14 DOW
ECLI:EU:C:2016:469
746
747
748
749
Case C-281/01 Commission v Council (Energy Star) ECLI:EU:C:2002:761
750
COM(2016) 860, ‘Clean Energy For All Europeans’, 4
751
Sanya Carley, ‘Energy-based Economic Development’ (2011) 15 Renewable and Sustainable Energy Reviews
282, 287
752
Pernille Schiellerup ‘Energy saving is the key to EU energy and climate goals’ in Katinka Barysch (ed) Green,
safe, cheap: Where next for EU energy policy? (Centre for European Reform, 2011)

753
The current (2012) Energy Efficiency Directive is seen to provide a
significantly more robust and ambitious instrument than its predecessors. 754 The
framework set out in the Energy Efficiency Directive aims to ensure the achievement
of the EU’s 20% energy efficiency target by 2020, and does this by (i) laying down
rules which remove barriers in the energy market and establishing ‘indicative’
national energy efficiency targets for 2020 (Article 1) and (ii) introducing the energy
efficiency obligation scheme (Article 7). Only certain key features of the scheme are
harmonised at EU level (targeted sectors, level of ambition and counting methods).
The current Energy Efficiency Directive sets out that member states
must implement national measures to ensure energy savings for consumers and
industry alike. For example:
• energy distributors or retail energy sales companies must achieve 1.5%

energy savings per year through the implementation of energy efficiency
measures755
• member states can opt to achieve the same level of savings through other
means such as improving the efficiency of heating systems, installing double
glazed windows or insulating roofs756
• the public sector in member states should purchase energy efficient
buildings, products and services – an example being energy efficient
buses757
• member states are to carry out energy efficient renovations on at least 3%
of the buildings they own and occupy by floor area758
• empowering energy consumers to better manage consumption. This
includes easy and free access to data on consumption through individual
metering (the installation smart metering is also regulated by Directive
2009/72 – The Electricity Directive Article 3(1)759 which is not specifically a
Directive within the renewable regulatory framework).
• national incentives for small and medium sized enterprises to undergo
energy audits760
753
754
Angus Johnston and Guy Block, EU Energy Law (OUP, Oxford, 2012), 408
755
Article 7 (1), Energy Efficiency Directive
756
Article 4, Energy Efficiency Directive
757
Case C-513/99 Concordia Bus Finland Oy Ab v Helsingin kaupunki and HKL-Bussiliikenne
ECLI:EU:C:2002:495 and Case C-448/01 EVN AG and Wienstrom GmbH v Austria ECLI:EU:C:2003:651
758
759
760

• large enterprises761 to undertake energy audits to identify ways to reduce
consumption762
• monitoring efficiency levels in new energy generation plants763
Energy Efficiency Directive Article 15(5) requires member states to ensure that
transmission and distribution system operators provide priority or guaranteed
764
access to the electricity network and priority dispatch for high-efficiency
cogeneration. These obligations are explicitly without prejudice to Article 16(2) of the
Renewable Energy Directive, which provides priority grid access and priority
dispatch for renewable generating facilities. The whole issue of priority dispatch and
its distortive effect on competition and thus status as state aid, is discussed in
Sections 2.10.6 (Electricity Markets Directive) and 2.10.7 (Renewable Energy
Directive).
The Energy Efficiency Directive also requires that certain large buildings
install photovoltaic cells or small wind turbines, within the building or nearby, to
reduce the energy demand of the building. This it is argued restricts free movement
of goods as it reduces the incentive to buy imported low-cost renewable energy –
also it being regarded as anti-competitive, as it is known that electricity generated
from photovoltaic cells is more expensive than that produced by largescale wind
farms, a conflict with Article 107(1) (state aid) as it is distortive of competition
(controlling production and markets by statute and hence the state).
The EU, in line with its climate and energy strategy, has presented a renewed
ambition for the post-2020 period, towards 2030, through the Clean Energy for All
Europeans765 package of proposals. The proposals include a new binding target
where a minimum 30% for energy efficiency improvements is suggested. However,
the need for a stronger governance framework to support the delivery of this target
is also considered necessary.766 The framework is stated to mean that on average
761
Large Enterprise has more than 250 employees and an annual turnover of more than €250m, Commission
Recommendation of the Definition of Small & Medium Enterprise (2003/361/EC), available at http://eur-
lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32003H0361&from=EN
762
763
764
765
COM(2016) 860 30 November 2016 ‘Clean Energy For All Europeans’
766
Guillermo Ivan Pereira and Patrícia Pereira da Silva, ‘Energy efficiency governance in the EU-28: analysis of
institutional, human, financial, and political dimensions’ (2017) 10(5), Energy Efficiency, 1279

the carbon intensity of the EU's economy will be 43% lower in 2030 than currently,767
with renewable electricity representing about half of the EU's electricity generation
mix.768
For energy efficiency measures to be effective, the Brundtland Report769
suggests that sustainable development requires the promotion of consumption
patterns that are within levels which are ecologically reasonable (so called
‘intergenerational energy justice’).770 The Directive is focussed on reducing energy
demand, establishing minimum energy efficiency requirements related to design
standards and labelling systems.771 These provisions may not, however, translate
directly into a change in consumption behaviour or patterns772 which is the focus of
the Brundtland Report.773 As such the Energy Efficiency Directive may not have the
long term success its initial results indicate.774
Overall, however, it has been stated that the Energy Efficiency Directive has
produced tangible economic benefits in terms of GDP growth and carbon emissions
reduction. Striving for more ambitious energy efficiency policies represents a win–
win strategy, which should be exploited to a much larger extent.775 The Energy
Efficiency Directive, which has a 20% energy reduction in energy consumption
target, has not achieved the success of the Renewable Energy Directive because of
a lack of binding national targets (the 20% target is only binding at the EU level).
To fully implement energy efficiency greater harmonisation across member
states is needed so that all member states have a proactive attitude to energy
efficiency, not just some.776
Also, the lack of clear financial criteria with which to model the installation of
energy efficiency measures, compares poorly to the clear process within the
Renewable Energy Directive. 777 Furthermore, the lack of clear time horizons for
767
SWD(2016) 405 ‘Impact Assessment for the amendment of the Energy Efficiency Directive’
768
SWD(2016) 418 ‘Impact Assessment for the recast of the Renewables Directive’
769
A/42/427 (1987), Chptr 2, para 1
770
Raphael Heffron, Darren McCauley and Gerardo Zarazua de Rubens, ‘Balancing the energy trilemma through
the Energy Justice Metric’ [2018] (Energy Justice Special Issue), Applied Energy
771
Itziar Martinez de Alegria Mancisidor, Pablo Díaz de Basurto Uraga Iñigo Martínez de Alegría Mancisidor and
Patxi Ruiz de Arbulo López., ‘European Union’s Renewable Energy Sources and Energy Efficiency Policy Review:
The Spanish Perspective’ (2009) 13 Renewable and Sustainable Energy Reviews 100, 112
772
Ibid
773
A/42/427 (1987), Chapter 2, para 1
774
Susan Baker, Maria Kousis, Dick Richardson and Ivor Gaber, Routledge, The Politics of Sustainable
Development: Theory, Politics and Practice within the European Union (Routledge 1997)
775
Marc Ringel, Barbara Schlomann, Michael Krail and Clemens Rohde, ‘Towards a green economy in Germany?
The role of energy efficiency policies’ (2016) 179 Applied Energy, 1293
776
Energy Efficiency Watch ;Good practice ways out of energy debt’ Available at www.energy-efficiency-
watch.org/fileadmin/eew_documents/Documents/EEW2/Good_practice_ways_out_of_energy_debt_BROCHURE.
pdf
777

investments means that facility owners are only able to put current energy market
prices into their investment models, with no clear mechanism with which to model
the longer term. This creates risk and uncertainty for investors as to when payback
will be achieved: a clear deficiency in the regulatory principles upon which the
Directive is drafted.
Additionally, the Energy Efficiency Directive in reducing energy demand has
a cannibalistic778 effect on the incentives within the Emissions Trading Directive. 779
Thus a feedback loop between the energy demand reductions achieved and the
number of emission allowances available is needed. Falling demand should be
directly correlated to emissions and therefore the number of allowances needed.
Therefore, it would seem reasonable for the volume of allowances placed into the
EU-ETS reserve account (See Section 2.10.1) to be increased as demand falls.
The Commission considers the demand side effect, derived from the Energy
Efficiency Directive, as a key driver for reduced consumption.780 Whilst the Energy
Efficiency Directive has reduced consumption it has also changed the shape of the
electricity demand across the day. 781 These changes, reportedly, are not ‘well
understood’. 782 They have, however, increased the requirement for electricity
production from flexible peaking capacity (mostly carbon emitting gas fuelled
generation), reducing asset utilisation and profitability783 and ultimately facilitating
carbon emissions when this type of plant is dispatched. 784 This puts the Energy
Efficiency Directive is direct conflict with the ‘polluter pays’ principle, as an
unintended consequence of the Directive is the increase in carbon emissions from
generating facilities only dispatched for a short period.
Hence the Energy Efficiency Directive and the other Directives forming the
renewable energy regulatory framework need to be co-ordinated to avoid a
horizontal conflict between the regulatory provisions. The clash between the Energy
Efficiency Directive and the EU-ETS outlined above creates a price and regulatory
778
Bianka Shoani-Tehrani and Pascal da Costa ‘ The Paradoxes of the Euopean Energy Market Regulation: A
Historical & Structural Analysis of the Electricity Mix’ in Pascal da Costa and Danielle Attias (eds) Towards
Sustainable Economy: Paradoxes & Trends in Energy & Transportation (Springer, 2018)
779
780
Comm (2017) 56 final ‘2016 assessment of the progress made by Member States in 2014 towards the national
energy efficiency targets for 2020 and towards the implementation of the Energy Efficiency Directive 2012/27/EU’;
This finding was confirmed by the International Energy Agency and the Odyssee-Mure decomposition analysis –
available at https://www.iea.org/eemr16/files/medium-term-energy-efficiency-2016_WEB.PDF and Annex 5 of
SWD (2016)405.
781
Tobias Bossmann and Iain Staffell, ‘ The shape of future electricity demand: Exploring load curves in 2050s
Germany and Britain’ (2015) 90 Journal of Energy, 1317
782
Ibid
783
Ibid
784

uncertainty for market operators which needs to be resolved (See Recommendation
2).
In terms of conflict with EU primary law the Energy Efficiency Directive not
only reduces the volume of demand available for all forms of electricity generation
to address, but also alters the disposition of that demand across the day. Such an
outcome is arguably in contravention with Article 107(1) TFEU as it is a practice
which limits and controls the electricity market, electricity production and is thus
distortive of competition.
The limiting of demand, irrespective of the economic justification for doing
so, reduces the opportunity for free movement of electricity from all types of
generating facilities to address the demand, and as such the Energy Efficiency
Directive could be said to conflict with primary EU law related to free movement of
goods, although this is a weaker argument.
2.10.5 Carbon Capture & Storage Directive785 – Coal Generation’s Future
Carbon capture and storage technology is not currently widely developed across the
EU; however, it is likely to be a feature of any future ‘coal renaissance’.786 A ‘coal
renaissance’ would occur where the costs of renewables do not reduce to a price
that would make European electricity compatible with the price of electricity in other
industrial regions of the world.787 Also the global warming phenomenon is really a
function of the volume (stock) of carbon emissions in the atmosphere rather than the
788
speed of flow of emissions from electricity generation and other sources.
Therefore deploying a technology which reduces the volume of carbon in the
atmosphere is likely to grow in importance in the future. It is argued that the EU’s
renewables regulatory framework does not adequately address the need to reduce
the volume of carbon emissions in the atmosphere.
785
786
‘Coal Renaissance’ is a term given to an increased use of coal generation due to pricing and the restriction of
other capacity types - Michael Le Page, ‘Coal renaissance means switching to plan B on climate change’ (2015)
3030 New Scientist; See Also Vanessa Mock, ‘Coal Renaissance Risks Tarnishing the EU’s Green-Energy
Credentials’ 2 Sept 2014 The Wall Street Journal; Iain Staffell, ‘Coal comeback pushes up UK’s carbon emissions’
[2018] Imperial College London Working Paper
787
Stephen Rackley Carbon capture and storage (Butterworth-Heinemann, 2017); See also Farahiyah Abdul
Rahman, Md Maniruzzaman Aziza, R Saidur, Wan Azelee Wan Abu Bakar, M.R Hainin, Ramadhansyah
Putrajaya, Norhidayah Abdul Hassana, ‘Pollution to solution: Capture and sequestration of carbon dioxide (CO2)
and its utilization as a renewable energy source for a sustainable future’ (2017) 71 Renewable and Sustainable
Energy Reviews, 112
788
of Economics (Palgrave Macmillan, 2008); See Also Daniel Bodansky, Jutta Brunnée and Lavanya Rajamani

The Directive does not illustrate a conflict with other primary or secondary
EU legislation, however, it is set out here to show the breadth of the renewables
A key feature of the permit-granting regime for thermal generating plant (coal
and gas) is the necessity to undertake the capture and storage of carbon emissions.
The stated purpose of the carbon capture and storage directive is to provide a
regulatory framework for the capture, transport and permanent storage of carbon-
based gases which are the result of combustion.789
The Carbon Capture & Storage Directive has been developed in no small
part from the Integrated Pollution Prevention and Control Directive (96/61) (IPPC) –
now superseded by the Industrial Emissions Directive. 790
The main economic incentive to deploy carbon storage technology should
be via the emission trading scheme (See Section 2.10.1 and 3.6). However, due to
the low carbon prices seen within the scheme since its inception, there has been
little drive to develop storage facilities.791
The incentive within the regulatory framework to develop such a facility would
be a generation company seeking to obtain consents for a new largescale coal fired
power station within the EU. As from January 2015, the Carbon Capture and Storage
Directive deems the maximum carbon output of a coal plant to be 500g CO2/kWh
therefore any emission above this level would need to be ‘captured and stored’.792
The recent Hinkley Point C case has confirmed the CJEU’s view of the potential
carbon emission ranges from different types of generation. The ranges considered
by the CJEU were related to life cycle793 emissions as clearly wind, solar and nuclear
have zero emissions during their operational life – wind and solar 13g/kWh, biomas
41g/kWh, gas 443 g/kWh and coal 1050g/kWh. 794
Due to the long-term liabilities795 for the operators of such technology there have not
been any serious investigations into permitting such a facility and as such the
Directive has not been tested as a viable regulatory framework.796 The Directive is
789
Directive 2009/31 – ‘Geological storage of carbon dioxide” April 2009; Recital 4
790
791
OECD ‘Effective Carbon Rates 2018 Pricing Carbon Emissions Through Taxes and Emissions Trading’ (2018)
available from http://www.oecd.org/tax/effective-carbon-rates-2018-9789264305304-en.htm accessed 18
September 2018
792
Comm (2008) 18, ‘Report on the amending proposal for Carbon Capture and Storage Directive’
793
Including manufacturing, construction and decommissioning
794
Case T-356/15 Austria v Commission ECLI:EU:T:2018:439, para 454
795
A Haan-Kamminga, ‘Long-term Liability for Geological Carbon Storage in the EU’ (2011) 29 Journal of Energy
& Natural Resources Law 309
796
S Brockett, ‘The EU Enabling Legal Framework for Carbon Capture & Storage and Geological Storage’ (2009)
Energy Procedia 4433

not currently particularly addressing any of the electricity ‘trilemma’797 criteria due to
the lack of an industrial scale test site in the EU.
2.10.6 Electricity Market Directive798 – The Market Structure
The Renewable Energy Directive 799 seeks to put a structure in place which will
support 20% of the EU’s energy being derived from renewables by 2020 (with higher
levels of renewable exploitation being proposed for 2030 and 2050 800 – See
Sections 2.11.1 and 2.11.2), the other 80% of demand in the market is supplied by
coal, gas, hydro and nuclear. Without the advantages of revenue support and priority
dispatch, 801 the structure of the electricity market and the price signals that it gives
are critical to this conventional generation.
Moreover, to reduce costs and liberalise the market the EU published a
series of regulatory packages. The First Energy Package802 was composed of only
one Directive related to electricity and one for gas. The Second803 Energy Package,
sought to strengthen the unbundling rules for transmission system operators and
sought to ensure consumers were free to choose their supplier. The Third, and most
recent, Energy Package brought together a series of measures based on two main
principles to develop a more competitive and better-functioning energy market (i)
unbundling,804 and (ii) third party access.805
One of the mainstays of the Third Energy Package is the 2009 Electricity
Market Directive, which is derived from the requirements of TFEU Article 194, and
sets out provisions in the following areas:
797
798
799
800
801
802
803
804
Regulation (EU) No 1227/ 2011 Regulation on Wholesale Energy Market Integrity and Transparency
805
Regulation (EU) No 347/2013 Regulation on Guidelines for Trans-European Energy Infrastructure

• Regulation of transmission network ownership by ensuring a clear
separation of supply and generation activities from network806 ;
• Ensuring more effective regulatory oversight from truly independent national
energy regulators, strengthening and harmonising the competences and the
independence of national regulators to allow effective and non-discriminatory
access to the transmission networks;807
• Reinforcing consumer protection and ensuring the protection of vulnerable
consumers;808
• Promoting regional solidarity809 by requiring member states to co-operate in
the event of severe disruptions of gas supply. This has a direct effect on the
electricity system as it can undermine the generation from gas fuelled
generating facilities.
The 2009 Electricity Market Directive recognises in Recital 3 and 4 that the free
movement of goods and the freedom to deliver electricity to customers are freedoms
outlined by the Treaty, however it being recognised that not all member states
provide the non-discriminatory network access and regulatory supervision
necessary to achieve these goals. These goals are in horizontal conflict with the
Article 3(3) of the 2009 Renewable Energy Directive which allows nationally
focussed renewable energy support schemes810 to be put in place by member states
which restrict free movement (See Section 3.5.1 to 3.5.5). 811
In principle, rules favouring one type of electricity generation over others
(renewables v coal – with revenue support and priority dispatch812 for renewables)
806
EU Directive 2009/72/EC 13 Jul 2009 – Electricity Market Directive, Article 9 to Article 14
807
EU Directive 2009/72/EC 13 Jul 2009 – Electricity Market Directive, Article 35
808
EU Directive 2009/72/EC 13 Jul 2009 – Electricity Market Directive, Annex 1
809
Eglė Dagilyte, ‘Solidarity - a General Principle of EU Law? Two Variations on the Solidarity Theme’ in A Biondi,
Egle Dagilyte and E Kucuk.(Eds.), Solidarity in EU Law: Legal Principle in the Making (Edward Elgar, 2018)
810
Renewable Enerrgy Directive
811
Peter Cramton ‘Electricity Market Design’ (2017) 33(4) Oxford Review of Economic Policy, 589;See Also Hans
Vedder, Anita Rønne, Martha M Roggenkamp and Íñigo del Guayo, ‘EU Energy Law’ in Martha Roggenkamp,
Catherine Redgwell, Anita Ronne, and Inigo del Guayo (eds) Energy Law in Europe National, EU and
International Regulation (Oxford University Press, 2016)
812

are distortive of competition and thus contrary to the principles at the heart of the
internal energy market. However, the Electricity Market Directive explicitly allows
member states to discriminate and thus support certain technologies and capacity
to be built.813 A conflict is thus created with the Treaty Article 107(1) TFEU which
prohibits the fixing of prices by the state as it is distortive of competition.
The Electricity Markets Directive is designed to coexist with the Renewable
Energy Directive and thus states in Article 15(3) that renewable generating capacity
shall enjoy priority dispatch. 814 This provision effectively removes renewable
generation capacity from the need to compete either on price or on technical
capability with gas and coal fuelled generation (discussed within the empirical
research).
Renewable electricity and other forms of generation are thus dispatched
using different rules. This practice is applying dissimilar conditions to equivalent
transactions in that the dispatching of coal and gas fuelled generation capacity is
based on price and certain technical characteristics of the capacity in question and
renewable electricity is not: a practice in conflict with Article 107(1) TFEU as it is
distortive of competition between electricity providers.
The Electricity Market Directive seeks to create conditions necessary for
robust cross-border trade and investments in electricity.815 Analysis has indicated
816
that without the benefit of the internal market, European customers would
probably face a much higher financial burden in fulfilling the 20% renewable energy
target,817 thus the internal market has become a top priority for ACER.818 The cross-
border trading of electricity would also ensure that technology development is truly
European and thus lead to a better utilisation of renewable energy sources.819
In looking at the opportunity afforded by increased interconnection of
transmission networks within the EU and potential harmonised trading rules
813
EU Directive 2009/72/– Electricity Market Directive, Article 7
814
815
Andreas Gunst, ‘Impact of European Law on the Validity and Tenure of National Support Schemes for Power
Generation from Renewable Energy Sources’ (2005) 23 Journal of Energy & Natural Resources Law 95, 97
816
capital is ensured - Case T-356/15 Austria v Commission ECLI:EU:T:2018:439, para 516
817
CEPS Task Force Report, ‘Energy Policy for Europe: Identifying the European Added-Value’ [2008] Centre for
European Policy Studies 61
818
819

facilitated by a revised Electricity Markets Directive, the importance of the ‘market
access test’ (Cassis de Dijon – See Section 3.2)820 becomes evident. The trading
of electricity at cross-border trading hubs821 can be dynamic in terms of time (time
spread)822 and delivery location.823 Also, in many instances, electricity can be simply
transiting a member state or region, and as such, prohibiting restrictions of goods in
transit is an advantage to cross-border trading of electricity (Ente Nationale Rissi).824
In recognition of the opportunity afforded by technology developments in
transmission assets and the market access test (Cassis de Dijon), 825 the Third
Energy Package contained Regulation (714/2009) on conditions for access to the
network for cross-border exchanges in electricity (Cross-border Network Access
Regulations). 826 The Cross-border Network Access Regulations, importantly for
cross-border trading of electricity, in Article 6 sets out the need for, and criteria to be
used in, developing common rules for network access to facilitate trades and, in
Article 16, also states that network charges must be transparent and non-
discriminatory.
The goal of this Regulation, and thus market model, is a trading system
focussed on open price discovery827 and market coupling (a means of linking zonal
day-ahead spot markets into an EU-wide virtual market), 828 with the market
simultaneously determining volumes and prices in all relevant zones, based on the
820
ECLI:EU:C:1979:42
821
822
The price differential, or spread, that may arise between differently dated futures contracts; Time spreads can
be mitigated by purchasing options on the difference between average annual prices. In effect, such options
provide protection against a reshaping of the forward price curve - Pricewaterhousecooper ‘glossary of oil and
gas, utilities and mining commodity trading and risk management terms’ 2008 https://www.pwc.com/gx/en/energy-
utilities-mining/pdf/eumcommoditiestradingriskmanagementglossary.pdf
823
A point on the grid where one electric utility can transfer its available energy to another utility’s system – Ibid
824
Case C-2/73 Geddo v Ente Nationale Rissi ECLI:EU:C:1973:89 para 7
825
ECLI:EU:C:1979:42
826
Regulation (EC) No 714/2009 of 13 July 2009 ‘on conditions for access to the network for cross-border
exchanges in electricity and repealing Regulation (EC) No 1228/2003’ OJ L 211/27
827
2018
828
Malcolm Keay, ‘The EU target model for electricity markets: fit for purpose?’ [2013] Oxford Institute for Energy
Supplies, 2

marginal pricing829 principle and supply and demand.830 The major impediment to
this regulatory goal is under-investment in cross-border transmission capacity.831
Hence the importance832 of the goal to have 15% of the EU’s generation capacity
reflected in interconnector capacity between member states as set out in the EU
Communication on ‘Strengthening Europe's Energy Network’.833
Lastly in considering the objective of integrated EU electricity market this
would seem to be facilitated by Dassonville834(the prohibition of measures actually
or potentially hindering trade) and the market access test (Cassis de Dijon).835
However, an issue to be aware of in relation to the Dassonville formula and
market access test is that they apply to the post production phase of the product
lifecycle. Therefore, member states could restrict the domestic production of a
product (e.g. electricity produced from coal, gas or nuclear), without breaching the
formula. The Court has already ruled that such a practice is allowed in Kramer836 by
allowing a restriction to the catching certain fish species. The use of this kind of
restriction could be used by a member state to reduce the production of electricity
produced by nuclear generation. This was an issue raised during the empirical phase
of the research, in that respondents saw as a risk the potential for national
governments to restrict the output or force the closure of certain capacity types
domestically, simply for other member states to see this as an opportunity to export
excess volumes of electricity produced by the very type of capacity that has been
restricted in the first member state.
829
The wholesale price of electricity is set by the most expensive generating facility operating at any particular
time - The wholesale price is dynamic, changing half hourly based on the demand for electricity and the
availability of generating facilities. Generators submit ‘offers’ to the market operator indicating the amount of
energy they are willing to supply and at what price. http://www.rwe.com/web/cms/en/403722/rwe/press-news/how-
the-electricity-price-is-determined. – a concept known as the ‘marginal cost’ - Paul Deane, Seán Collins, Brian
Ó’Gallachóir, Cherrelle Eid, Rupert Hartel, Dogan Keles and Wolf Fichtner ‘Impact on Electricity Markets: Merit
Order Effect of Renewable Energies’ in Manuel Welsch, Steve Pye, Dogan Keles, Aurélie Faure-Schuyer, Audrey
Dobbins, Abhishek Shivakumar, Paul Deane, Mark Howells (eds) Europe's Energy Transition - Insights for Policy
Making Findings (Elsevier, 2017)
830
Ibid
831
Madeleine Cuff,’ Explained: Why Europe's businesses enjoy cheaper energy than the UK - and how to fix it’ 5
Feb 2018 https://www.businessgreen.com/bg/analysis/3025947/explained-why-europes-businesses-enjoy-
cheaper-energy-than-the-uk-and-how-to-fix-it; See Also Jonathan Gaventa,’ Infrastructure networks and the 2030
climate and energy framework’ (2013) E3G Working Paper; A Henriot, ’Financing Investment in the European
Electricity Transmission Network: Consequences on Long-Term Sustainability of the TSOs Financial Structure’
(2013) FSR Policy Brief; Kim Talus Introduction to EU Energy Law (Oxford University Press, 2016),
832
833
Interconnection Levels of 15% by 2030 are set out in the EU’s ‘Communication on strengthening Europe's
energy networks’ – See Section 2.9.2 – available at
https://ec.europa.eu/energy/sites/ener/files/documents/communication_on_infrastructure_17.pdf accessed 10 July
2018
834
Case 8/74, Procureur du Roi v Dassonville ECLI:EU:C:1974:82, para 5
835
ECLI:EU:C:1979:42
836
Case C-3/76 Kramer ECLI:EU:C:1976:114

2.10.7 Renewable Energy Directive (2009)837 – Mandatory Targets &
Renewables Support Schemes: Renewables Investment Outcome
The Renewable Energy Directive838 is a C&C style instrument, set up under a shared
competence839 model between the commission and the member states,840 with the
national renewable capacity targets determined by the Commission, but with the
details of the support schemes841 left to member states.
In 2007 the Commission published a ‘Renewable Energy Road Map’ 842
setting out a strategy for the EU’s renewable energy sector. It confirmed the
importance of a robust and comprehensive regulatory framework to increase the
share of renewable energy consumption. After highlighting the absence of binding
capacity targets as an implementation failure of the 2001 Renewable Energy
Directive,843 the Commission proposed long-term binding targets on a member state
by member state basis in new legislation.844 The main outcome of these mandatory
national targets845 is certainty for investors in renewable energy facilities,846 which is
needed for long-term investments. 847 It being stated that, ‘without the member
837
838
It should be noted that TFEU was introduced by the Lisbon Treaty on 1 December 2009 – after the adoption of
the 2009 Renewable Energy Directive in April 2009. Thus to avoid any debate that might have arisen surrounding
the Renewable Energy Directive and its potential to significantly affect a member state’s choice of energy sources
it was passed unanimously by the EU Council. (See Council of the European Union, Interinstitutional File:
2008/0016 (COD), Brussels, 6 April 2009)
839
840
Case C-370/07 Commission v Council, ECLI :EU:C:2009:590, para 49
841
Renewable Enerrgy Directive
842
COM(2006) 848 ‘Renewable Energy Road Map: Renewable energies in the 21st century: building a more
sustainable future’
843
EU Directive (2001/77/EC) 27 September 2001 ‘The promotion of electricity produced from renewable energy
sources in the internal electricity market’ OJ L 283/33
844
Ibid, p. 5
845
The targets are based on final energy consumption, which avoids converting problems in view of the different
energy sources - Doerte Fouquet and Thomas Johannson, ‘European Renewable Energy Policy at Crossroads -
Focus on Electricity Support Mechanisms’ (2008) 36 Energy Policy, 4079
846
Evanthie Michalena and Jeremy Hills, ‘Renewable Energy Issues and Implementation of European Energy
Policy: The Missing Generation?’ (2012) 45 Energy Policy, 201
847
Danyel Reiche and Mischa Bechberger, ‘Policy Differences in the Promotion of Renewable Energies in the EU
Member States’ (2004) 32 Energy Policy 843, 847

states’ support schemes848 renewable targets would not be achieved’,849 which is
why the Directive allows different support schemes to focus on specific
technologies. 850 Also when the support schemes were being developed the
technology was in its infancy with no clear technology winner. 851
The core of the EU’s climate change policy (the so called ‘20/20/20’ goals
for 2020),852 is set out in the 2009 Renewable Energy Directive:
• A 20% share for renewable energy in the EU total energy mix (including
transport). 853 With each member state having an individual differentiated
target 854 (Set out in Annex I of the Directive) dependent on the deemed
potential of the member state to develop renewable energy schemes855 as
well as GDP per capita.856
• A uniform 10% target for the use of bio-fuels in the transport sector of each
member state (although on 28 April 2015, the European Parliament, in
plenary session, enacted a revision such that the target is revised to 7% for
conventional ‘food crop’ based bio-fuels).857
• A framework to provide certificates of origin so that end consumers could be
ensured as to the source of the energy consumed.858
As has been said, despite reductions in the capital cost of renewable sources,859
848
‘support shceme’ means any ‘instrument, scheme or mechanism applied by a Member State or a group of
849
Fernando Hervás and Soriano, Fulvio Mulatero, ‘EU Research and Innovation (R&I) in renewable energies:
The role of the Strategic Energy Technology Plan (SET-Plan)’ (2011) 39(6) Energy Policy, 3582; See also
Kyriakos Maniatis and Stefan Tostmann, ‘EU Technology Strategy on Bioenergy: From Blue-Sky Research to
Targeted Technology Development’ (2010) Renewable Energy Law & Policy Review 169, 173; See also Karl
Mallon, Renewable Energy Policy and Politics: A Handbook for Decision-Making (Earthscan, 2006) 1-2; See also
Com (2009) 519 ‘Investing in the Development of Low Carbon Technologies’ available at http://eur-
lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2009:0519:FIN;EN:PDF accessed on 9 August 2017.
850
Sophia Ruester, Sebastian Schwenen, Matthias Finger and Jean-MichelGlachant, ‘A Post-2020 EU Energy
Technology Policy: Revisiting the Strategic Energy Technology Plan’ (2014) 66 Energy Policy 209, 212 and 216
851
(2012) Marshall Institute Working Paper
852
COM (2008) 30, ‘2020 by 2020 Europe’s Climate Change Opportunity’ p 7-8; See Also COM(2007) 2 ‘Limiting
Global Climate Change to 2 degrees Celsius The way ahead for 2020 and beyond’; See also COCL 5 17271/1/08
‘Presidency Conclusions of the Brussels European Council (11 and 12 December 2008)’ para 5
853
Directive 2009/28/EC Renewable Energy Directive, Article 3(1)
854
Harald Winkler and Lavanya Rajamani ‘Common, but Differentiated, Responsibilities and Respective
Capabilities in a Regime Applicable to All’ (2014) 14(1) Climate Policy 50
855
Directive 2009/28/EC Renewable Energy Directive, Annex 1
856
Aviel Verbruggen and Volkmar Lauber, ‘Basic Concepts for Designing Renewable Electricity Support Aiming at
a Full-scale Transition by 2050’ (2009) 37 Energy Policy 5732, 5734
857
Directive 2009/28/EC Renewable Energy Directive, Article 3(4)
858
Directive 2009/28/EC Renewable Energy Directive Article 15
859

operational renewable energy, in most cases, costs more than energy from
conventional thermal sources (coal & gas). To transition to a position where
860
renewable sources predominate, the 2009 Renewable Energy Directive
continued with the themes set out in the 2001 Directive that, EU member states may
support the deployment of renewable energy using support schemes861 such as
quota obligations with green certificates, feed-in tariffs/premiums, tax exemptions
862
and investment grants, all designed to produce and increase ‘investor
confidence’.863
Although, in designing a support scheme, member states seem to have
followed the assertion that direct regulation and associated market rules are the
most effective means of facilitating any development.864 Member states are granted
a wide discretion in the implementation of renewable electricity support schemes.
Directive Article 3(2) simply requires that member states introduce measures
designed to ensure that energy from renewable sources reaches or exceeds the
Directive Article 3(3) binding capacity targets detailed in Annex I. Most states, like
Germany,865 have chosen a feed-in tariff approach, whilst a few, like Sweden, 866
have chosen a tradeable certificate scheme.
It should be noted that fixed feed-in tariff systems, where all generating
facilities accepted by a member state obtain the same price enhancement, have
been closed to new entrants across the EU from 2014,867 with an auction system
being put in place. With new schemes being asked to bid a generation price, only
the most efficient and cost-effective schemes will be constructed.868 It has been said
860
861
862
Directive 2009/28/EC Renewable Energy Directive Article 2(k)
863
864
Barry Solomon and Karthik Krishna, ‘The Coming Sustainable Energy Transition: Histories, Strategies and
Outlook’ (2011) 39(11) Energy Policy, 7422, 7428; See Also Staffan Jacobsson, Anna Bergek, Dominique Finon,
Volkmar Lauber, Catherine Mitchell, David Toke, Aviel Verbruggen, ‘EU Renewable Energy Support Policy: Faith
or Facts?’ (2009) 37 Energy Policy 2143
865
German Act, Erneuerbare Energien Gesetz (2000) - Renewable Energy Sources Act – Granting Priority to
Renewable Energy Sources (German Feed-in-Tariff)
866
Swedish Act - Electricity Certificates Act (2003)
867
European Commission Memo 14/276 (2014) – Requiring New Renewable Facilities to bid for a support
scheme contract
868
C Klessman, ‘Experience with renewable electricity (RES-E) support schemes in Europe: Current status and
recent trends Presentation’ (2014) http://www.leonardoenergy.org/sites/leonardo-energy/files/documents-and-
links/ecofyssupport_policies_2014_04.pdf (accessed 3 September 2016)

that this revised system could mean that some of ‘renewable energy’s pioneers’ may
leave the sector which would impact on further penetration of renewable energy and
EU competitiveness.869
The ability to put in place national renewable support schemes870 to suit the
achievement of the national capacity targets871 contrasts with the centrally organised
EU-ETS and the harmonised level of bio-diesel contained in the Directive. The
reason behind this contrast seems to be political: with member states reluctant to
shift their decision-making power to the EU in relation to electricity or allow a
universally applicable support mechanism. 872 This is evidenced by the fact that
some ten years on, member states are still highly supportive of nationally focussed
renewable support schemes.873
It should be noted that the renewables support schemes which all enhance
revenues, in one form or another, would be in direct conflict with EU state aid law
(Article 107(1)TFEU) as it is distortive of competition without the applicable
Commission practice guidelines allowing state aid for renewable electricity in certain
874
circumstances (General Block Exemption Regulation (GBER) and 2014
Guidelines on State Aid for Environmental Protection & Energy).875
Also the Renewable Energy Directive explicitly permits member states to
restrict their renewables support schemes 876 to projects within their sovereign
territory in direct contravention of the free movement of goods (a theme returned to
869
Jeremy Hills and Evanthie Michalena, ‘Renewable energy pioneers are threatened by EU policy reform’ (2017)
108 Renewable Energy, 26
870
871
Directive 2009/28/EC Renewable Energy Directive, Annex 1
872
Marjan Peeters, ‘Emissions trading as a new dimension to European Environmental Law: The political
agreement of the European Council on carbon allowance trading’, (2003) 12(3) European Environmental Law
Review, 82
873
EU Commissions’s consultation on the future Renewable Energy Directive showed little support for a
harmonised EU-wide support scheme: see the assessment at
https://ec.europa.eu/energy/en/consultations/preparation-new-renewable-energy-directive-period-after-2020,
accessed 7 July 2018
874
('GBER')
875
– 2020, 2014/C OJ 200/01
876
‘support scheme’ means any ‘instrument, scheme or mechanism applied by a Member State or a group of

in Section 3.5).877 This provision was considered necessary due to member states’
need to control the costs and effects of the support schemes according to their own
potential.878 Also the national implementation of the Renewable Energy Directive is
believed to facilitate a renewable electricity support scheme highly focussed on the
needs of that member state’s energy sector.879
The nationally focussed support scheme is the model chosen by member
states with only one exception, that being the joint green certificate scheme
(compliant with Directive Article 3(3)) operated by Norway and Sweden established
in January 2012,880 with a termination date of 2035. The scheme was put together
as Norway considered its market to be too small to function efficiently on its own.881
The joint scheme allows price discovery 882 over a wider number of renewable
facilities and as such is said to provide cost efficiency 883 and stability to
consumers.884
The Directive (Article 6) allows the transfer of renewable output from one-
member state to another. The Commission stating that this mechanism would
appeal to member states that were able to sell renewable energy that was found to
be above that member state’s target, to another member state.885 Directive Articles
7 to 10 provide for joint projects relating to the production of renewable energy. The
Directive in Article 7(4) makes it clear that the statistical transfer of energy and the
agreements surrounding the joint project should not extend beyond 2020. Due to the
long-term nature of most energy investment projects this would constrain the
payback period for investment, in that such schemes would not reach the investment
877
Directive 2009/28/EC Renewable Energy Directive, Article 3(3); See Also Hans Vedder, Anita Rønne, Martha
M Roggenkamp and Íñigo del Guayo, ‘EU Energy Law’ in Martha Roggenkamp, Catherine Redgwell, Anita
878
Ibid, Recital 25
879
Council of European Energy Regulators,’ Implications of Non-harmonised Renewable Support Schemes A
CEER Conclusions Paper’ (2012) C12-SDE-25-04b, 13
880
Corinna Klessmann, Erika de Visser, Fabian Wigand, Malte Gephart, Gustav Resch and Sebastian Busch,
‘Cooperation between EU Member States under the RES Directive. Task 1 Report (2014)’, available at
http://ec.europa.eu/energy/renewables/studies/doc/2014_design_features_of_support_schemes_task1.pdf
accessed 1 July 2016, 2; See also Henrik Klinge Jacobsen, Lise Lotte Pade, Sascha Thorsten, Schröder Lena
Kitzing, ‘Cooperation Mechanisms to Achieve EU Renewable Targets’ (2014) 63 Renewable Energy 345, 351;
See also Jean-Michel Glachant and Sophia Ruester, ‘The EU Internal Electricity Market: Done Forever?’ (2014)
31 Utilities Policy 221, 228
881
Ibid p 4
882
2018
883
Christian Bussarcd, Melchior Moosa, Ricardo Alvarez, Philipp Wolf, Tjark Thien, Hengsi Chen, Zhuang Cai,
Matthias Leutholda, Dirk Uwe Sauera and Albert Moser, ‘Optimal Allocation and Capacity of Energy Storage
Systems in a Future European Power System with 100% Renewable Energy Generation’ (2014) 46 Energy
Procedia, 40
884
Ibid p 7
885
COM (2011) ‘Review of European and National Financing of Renewable Energy in Accordance With Article
23(7) of Directive 2009/28’ SEC (2011) 131 Final 7-8

hurdle rates of most utility companies and therefore the Directive has effectively
rendered one of its own facilities useless for all but a very few existing projects.
The Directive does allow for co-operation with countries outside the EU
(Article 9(8)). An example of this kind of co-operation is the Mediterranean solar
plan. The plan has facilitated the construction of solar renewable plants in Morocco
with the electricity being exported to Spain.886 The detailed interpretation of these
provisions was examined in Green Network887 (See Section 3.5.3), where the CJEU
has effectively placed the Commission in the path of any cooperation scheme and
in so doing has again rendered such provisions useless as the 8 year term of the
Directive (2012 to 2020) means there is not really time for protracted international
treaty negotiations.
The establishment of renewable energy projects are often covered by many
EU and national laws intended to protect the environment against potential adverse
effects and exert development control.888 Article 13 of the Directive sets out that
member states must adopt administrative procedures that do not restrict the
development of renewables projects. Article 13 setting out specific objectives for the
national renewable regulations with regards to the streamlining of a proportionate889
permitting process, criteria confirmed by the CJEU in Regione Puglia.890
Directive Article 15 requires member states to put in place arrangements for

the issuing of certificates of origin. According to Directive Article 2(j) these
certificates provide ‘proof to a final customer that a share or quantity of energy was
produced by renewable sources’.
The provisions of Directive Article 16 are also significant, in so far as the
Article requires that the renewable generation facilities are given priority network
886
EU Neighbourhood information Centre, ‘The Mediterranean Solar Plan’, 2010 available at www.enpi-
infor.eu/files/interview/Mediterranean%20Solar%20Plan.pdf accessed 15 September 2015
887
Case C‑66/13 Green Network SpA v Autorità per l’energia elettrica e il gas ECLI:EU:C:2014:2399
888
For example Directive 92/43 15 May 1992 ‘the conservation of natural habitats and of wild fauna and flora’ OJ
L206/7; Directive 2009/125 31 October 2009 ‘establishing a framework for the setting of eco-design requirements
for energy-related products’ OJ L285/10; Directive 2008/56 17 June 2008 ‘establishing a framework for community
action on marine water quality in the field of marine environmental policy’ OJ L164/19; Directive 2009/147 30
November 2009 ‘the conservation of wild birds’ OJ L20/7; Regulation 2493/2000/EC 7 November 2000 ‘measures
to promote the full integration of the environmental dimension in the development process of developing countries’
OJ L288/1
889
of European Law
890
Case C-2/10 Azienda Agro-Zootecnica Franchini Sari, Eolica di Atlamura Srl v Regione Puglia
ECLI:EU:C:2011:502

access. 891 This obligation is split into two parts, (i) the right of priority network
connection 892 (this practice also being undertaken in conjunction with Directive
Article 13 and the establishment of transparent administrative procedures for the
conclusion of network connection processes), and (ii) the generation dispatch rules
for each member state are to give priority dispatch893 to renewable electricity. This
means that renewables and nuclear (for technical reasons regarding electron
propagation in the reactor) are effectively dispatched without the normal merit order
considerations. As has been stated above, this means that renewable generation is
outside the market and, due to priority despatch, is simply a reducing factor on the
amount of demand available over which conventional generation competes to supply
– for renewables the electricity market has no meaning.
Thus, priority dispatch is in direct conflict with state aid (Article 107(1) TFEU)
in that it segments the market to the detriment of competition (See Section 2.10.6).
Also, priority dispatch for renewables could be seen as applying dissimilar conditions
to equivalent transactions, in that the dispatching of coal and gas fuelled generation
capacity is based on price and certain technical characteristics of the capacity in
question, a direct conflict with state aid (Article 107(1) TFEU) as it is distortive of
competition favouring the production of certain goods (namely renewable electricity
compared to electricity produced by other technologies).
Directive Article 16 also states that member states are to ensure that
transmission and distribution system operators set up and make rules relating to the
bearing and sharing of the costs of adaptations of the network to accommodate
renewables.
This aspect of the Directive is where member states have diverged most
significantly, with some member states having a fully socialised 894 network
connection scheme with cost being borne exclusively by the end user (e.g.
891
Joel Eisen, Jim Rossi, David Spence and Hannah Wiseman Energy, Economics and the Environment: Cases
and Materials (West Academic, 2015), 625
892
Priority network access is the obligation placed on member states to establish transparent and proportionate
administrative procedures for the conclusion of network connection for renewable electricity facilities in
accordance with Article 13 and 16 of the Renewable Energy Directive
893
894
The term ‘socialisation’ within the electricity industry describes a process whereby costs of the function or
activity is spread across all consumers and as such is seen an activity of general economic interest - Michael
Rivier, Ignacio Pérez-Arriaga and Luis Almos ‘Electricity Transmission’ in Ignacio Pérez-Arriaga (ed) Regulation of
the Power Sector (Springer, 2014), 294

Germany), 895 whereas others employ a system whereby directly associated
connection assets are charged to the renewable facility developer with only deep
infrastructure assets being socialised (e.g. United Kingdom).896
Thus, Directive Article 16 can be seen to be in direct conflict with Article 107
TFEU (state aid) as the schemes of certain member states’ exempts renewable
generation from costs which they would be faced with in the normal course of
business (GEMO897 and Essent 2 (embedded benefits).898
Despite the Directive having several direct conflicts with the TFEU (free
movement, state aid etc.) the success of the 2009 Renewable Energy Directive was
displayed by the EU at COP 21.899 The EU stated that in 2015, 27% of the EU’s
electricity was derived from renewables,900 and this is expected to reach up to 50%
by 2030. 901 The EU also stated that its economy had grown since 1990 but
emissions of greenhouse gases have fallen thanks to renewable energy and energy
efficiency policies. Compared to 1990, European GDP had increased by 46% but
total carbon emissions decreased by over 23%,902 effectively halving the ‘emissions
intensity’ per euro of GDP. 903 Therefore, when assessed, against a criterion of
efficiency of distribution of costs between different stakeholder groups, the EU
considered the policy a success.904
On the other hand it has also been claimed that support for renewable
electricity deployment, negatively interacts with the EU-ETS, having a dampening
effect on carbon emission prices, which favours the dirtiest technologies (e.g.
coal).905 When this effect is combined with the similar effect of the Energy Efficiency
Directive in reducing overall energy demand and the over allocation of emissions
allowances with the EU-ETS, it can be seen that the Renewable Energy Directive,
whilst facilitating the development of renewable energy technology, is not the policy
895
Edith Bayer, ‘Report on the German power system’ (2015) Agora Energiewende, 25 available at
https://www.agora-
energiewende.de/fileadmin/downloads/publikationen/CountryProfiles/Agora_CP_Germany_web.pdf accessed 23
January 2018
896
National Grid Electricity Transmission, ‘The Statement of Use of System Charges’ - The levying of charges
associated with connection assets undertaken by the United Kingdom network charging model has, for example,
prevented the development of wide scale renewable projects in the western isles of Scotland; where wind
conditions are the same as would be found offshore, but development costs are lower being onshore yet with the
transmission reinforcement being priced at broadly £1bn this has effectively killed the project -
http://www.stornowaywind.co.uk/the-location/
897
Case C-126/01 Ministère de l'Économie, des Finances et de l'Industrie v GEMO ECLI:EU:C:2003:622
898
Case C-492/14 Essent Belgium NV v Vlaams Gewest ECLI:EU:C:2016:732
899
Miguel Arias Cañete (EU Commissioner for Climate Action & Energy). ‘The European Union Leading In
Renewables’ available at http://europa.eu/rapid/press-release_SPEECH-18-5909_en.htm accessed 2 July 2018
900
European Commission, ‘EU energy in figures, Statistical Pocketbook’, 2015
901
European Commission, ‘2030 Energy Efficiency Impact Assessment’ (SWD(2014) 255 final)
902
European Commission, ‘State of the Energy Union 2015’ (COM(2015) 572 final
903
European Commission, ‘EU energy in figures, Statistical Pocketbook’, 2015
904
Vicki Duscha and Pablo del Rıo, ‘An economic analysis of the interactions between renewable support and
other climate and energy policies’ (2017) 28(1–2) Energy & Environment, 11
905
Pablodel Río, ‘Why does the combination of the European Union Emissions Trading Scheme and a renewable
energy target makes economic sense?’ (2017) 74 Renewable and Sustainable Energy Reviews, 824

panacea it is held out to be by the Commission. This combination of policy objectives
brings their own problems with the negative interaction between renewable energy
deployment and the carbon price in the EU-ETS requiring appropriate coordination
of regulatory instruments to create a fully integrated regulatory framework.906
Thus, in considering the satisfaction of the ‘trilemma’ 907 criteria, the
Directive’s ability to pass the sustainability criteria is good in that it has facilitated the
development of a considerable volume of renewable generation capacity. The
Directive also can be seen to have made a qualified success of increasing energy
security and as such reliability of the electricity network as fuel supply chains are
shortened. The area where the Directive can be considered to have only limited
success is that of affordability, here the level of subsidy given to renewable electricity
has increased the overall cost of electricity due to the charging of levies to end
consumers (considered further in Section 3.5.9 to 3.5.13). Also, by its very nature
the Renewable Energy Directive is C&C in style and thus does not take account of
the cost for an individual member state to implement the renewable generation
capacity targets set out in the Directive.
2.11 Road Map to the Future of Climate Change
The future of EU renewable electricity is heavily influenced by the EU’s international

commitments via the UNFCCC,908 the Kyoto Protocol909 and the Paris COP 21910
Agreement (See Section 2.5). The section below considers the future of the
renewable electricity regulatory framework in the light of the EU’s commitments
under these instruments.
Issues surrounding renewable electricity investment levels brought about by
the EU’s commitments to COP 21 were a theme discussed by respondents to the
empirical research.
2.11.1 EU 2030 Climate Framework – COP 21 Commitments
EU has decoupled carbon emissions from economic growth as, compared to 1990,
European GDP had increased by 46% but total carbon emissions decreased by over
906
Ibid
907
908
https://unfccc.int/sites/default/files/convention_text_with_annexes_english_for_posting.pdf
909
https://unfccc.int/sites/default/files/kpeng.pdf
910
https://unfccc.int/sites/default/files/english_paris_agreement.pdf

23%. 911 The EU, has presented a renewed ambition 2030, through the ‘Clean
Energy for All Europeans’ policy package proposals.912
In setting out its goals for 2030, the EU has said that it seeks to reduce
emissions by a challenging 913 40% by 2030 914 and by 80% to 95% by 2050
compared to 1990, with peak emissions in 2020.915
Much of this reduction is forecast to come from a focussed carbon trading
scheme, with allowances being subject to frequent review against the then current
production levels. 916 A refocused EU-ETS will give the Commission a greater
influence in the governance of renewable electricity due its competence917 over the
EU-ETS and EU level activities. Also, the expansion of the EU-ETS will shift the
balance of the renewables regulatory framework to an increased use of market-
based instruments.
Additionally, the 2030 renewable energy target within the EU 2030
Framework is set at 27%, with a 27% target also being ascribed to energy efficiency.
However, this will be subject to review in 2020 to take account of then available
technology and the wider implementation of smart metering across the EU.
The EU has acknowledged that the energy sector requires a long-term stable
regulatory framework against which to undertake investments, 918 when the
industry’s perception of the long-term stability of the sector is negative. This being
due to the retrospective reductions of the feed-in tariff in the Spanish (Charanne),919
Italian (Scat Punti Vendita) 920 and UK (Breyer) 921 cases where it was held that
911
European Commission, ‘State of the Energy Union 2015’ (COM(2015) 572 final
912
913
914
915
SWD(2014) 15 final, ‘A policy framework for climate and energy in the period from 2020 up to 2030’ Section
2.11.1
916
Vicki Duscha, Arnaud Fougeyrollas, Carsten Nathani, Matthias Pfaff, Mario Ragwitz, Gustav Resch, Wolfgang
Schade, Barbara Breitschopf and Rainer Walz, ‘Renewable energy deployment in Europe up to 2030 and the aim
of a triple dividend’ (2016) 95 Energy Policy, 314
917
918
919
920
921
Department of Energy & Climate Change v Breyer Group PLC & Others, [2015] EWCA Civ 408

member states are free to determine the level of their support schemes922 and to
manage these schemes as they see best (See Section 3.5.8).923
The right to regulate and the constraints on this principle was a theme
brought out by several of the Developer Operator respondents during the empirical
research.
The EU’s 2020 to 2030 Road Map brings into sharp focus the concerns the
Commission has that investments will not be made and that many of the current
thermal coal and gas plants will still be operating in 2030 despite the requirements
of the Industrial Emissions Directive924 (see Section 2.10.1).925
The 2030 Road Map recognises that increased interconnectivity of energy
networks will be required. The EU has stated that interconnection is urgently
required in the Baltic States, Portugal and Spain. The remote member states of
Malta, Cyprus and Greece also need interconnection. However, their distance to the
rest of Europe means that the only credible way of achieving this is via HVDC links,
which will be expensive and potentially not justified by the resulting carbon
reductions.
The need for a robust programme, whereby interconnection capacity is
increased across the EU and the network operators fulfil their network development
obligations was a theme brought out by the Developer Operators during the
empirical research.
On 17 January 2018, the European Parliament adopted the 2030 revision of
the Renewable Energy Directive, which includes draft measures to raise the share
of renewable energy to 35% by 2030 on a capacity basis.926 On the 14 June 2018,
the EU announced a new provisional target for renewable energy to make up at least
32% of gross final energy consumption in 2030 (increased from 27% in the 2030
922
923
Graham Coop and Bernhard Maier ‘The External Relations of EU Energy Regulation’ in Peter Cameron and
Raphael Heffron (eds.), Legal Aspects of EU Energy Regulation, (2nd ed, Oxford University Press, 2016), 80
provides a discussion of the right to regulate and investor protection contained in the EU-Canada Comprehensive
Economic and Trade Agreement, the EU-Singapore Free Trade Agreement and the Transatlantic Trade and
Investment Partnership
924
925
SWD(2014) 15 final, “A policy framework for climate and energy in the period from 2020 up to 2030”, Section
2.11.1
926
It should be noted that generation capacity does not equate to energy production. A renewable facility will not
be able to operate 24/7 due to the need for maintenance and with regards to renewables generated output is
dependent on wind and solar resources being available – in borad terms a wind turbine operates for about 35% of
the year.

Road Map).927 The January 2018 plans also set an ‘energy-efficiency first’ principle,
meaning energy efficiency measures will be prioritised in all EU energy planning,
policy and investment decisions and outlined a 1.3% yearly increase of renewables
in heating and cooling installations starting from 2021.
The 2030 Framework is ambitious, especially if the renewable energy targets
are fully ratified. The 2030 targets will require considerable changes to electricity
network and market design,928 in that new transmission assets will need to take
account of the different locations renewable facilities have, compared to coal, gas
and nuclear sites, and the need to manage the dispatch of intermittent renewable
generation facilities.929
However, as indicted, fulfilling the EU’s 2030 targets might not be enough to
meet the commitments made by the EU in relation to the UNFCCC at COP 21.
It has been said that decarbonising electricity generation alone will not be
enough to meet COP 21 climate goals, with carbon emission reductions being
required from manufacturing industry, transport, building sectors, as well as a heavy
reliance being placed on removal technologies that extract CO2 from the
atmosphere, which are ‘uncertain and unproven on a large scale’930 and would be
regulated by the Carbon Capture & Storage Directive931 (See Section 2.10.5).
One of the biggest uncertainties is the potential electrification of heating
across the EU. Currently most of the space heating is undertaken by gas, 932
however, if this is prohibited or even significantly curtailed then electricity demand
growth will outstrip the demand reductions made possible by the Energy Efficiency
Directive several times over.933 The only credible solution to this level of demand
growth, whilst still maintaining COP 21 Paris Climate Agreement obligations is
renewable generation.934
927
http://europa.eu/rapid/press-release_STATEMENT-18-4155_en.htm accessed 15 June 2018
928
929
David Newbery, Michael Pollitt, Robert Ritz and Wadim Strielkowski, ‘Market design for a high-renewables
European electricity system’ (2018) 91 Renewable and Sustainable Energy Reviews, 695
930
Hayley Dunning, Joeri Rogelj and Gunnar Luderer, ‘Greener energy generation alone will not help us reach
climate goals’ [2018] Grantham Institute of Climate Change and Environment Working Paper
931
932
Ofgem ‘The Decarbonisation of Heat’ [2016] 3 available at
https://www.ofgem.gov.uk/system/files/docs/2016/11/ofgem_future_insights_programme_-
_the_decarbonisation_of_heat.pdf accessed 1 September 2018
933
Pranab Baruah, Nicholas Eyre, Meysam Qadrdan, Modassar Chaudry, Simon Blainey, Jim Hall, Nicholas
Jenkins and Martino Tran, ‘Energy system impacts from heat and transport electrification’ (2014) 167(3)
Proceedings of the Institution of Civil Engineers
934
Steve Pye, Francis Li, James Price and Brigit Fais, ‘Achieving net-zero emissions through the reframing of UK
national targets in the post-Paris Agreement era’ (2017) 2(3) Nature Energy

Therefore, a clear and concise renewables regulatory framework is vital to
the achievement of these targets and the enhanced potential for compliance in a co-
operative manner without the need for judicial action.935
2.11.2 EU 2050 Climate Policy Roadmap936 – 80% Renewables
The EU has developed a long-term decarbonisation vision for the period 2030 to
2050, with carbon reductions of 80% to 95% compared to 1990 levels by 2050937
without compromising growth and prosperity across the EU or energy security. 938
In order to achieve its 2050 targets the EU has set intermediate goals of a
60% reduction in carbon emissions by 2040.939 The Commission acknowledged the
development in generation technology that would be necessary to achieve the 2050
target and that in many respects this technology is not available today.940 The EU
also seeks to reduce its dependency on imported energy and increasing energy
security, therefore producing renewable electricity and transport fuel within the EU
will achieve this goal.941
To achieve the 2050 renewables production targets, it is important to start
preparations promptly as investors are considered to need a stable policy
framework, some 15-20 years ahead.942
The 2018 Special Report943 from the Intergovernmental Panel on Climate
Change (IPCC) has said that limiting global warming to 1.50C would require ‘rapid
and far-reaching’ 944 transitions and with the frequency of extreme weather
increasing if applicable steps are not taken now.
935
Jutta Brunnée, ‘Promoting compliance with multilateral environmental agreements’ in Jutta Brunnée, Meinhard
Doelle and Lavanya Rajamani (eds) Promoting Compliance in an Evolving Climate Regime (Cambrdige University
Press, 2012) 38
936
937
European Council & Presidency Conclusions 29 & 30 October 2009, available at
www.consilium.europa.eu/doc/srv?l=en&f=st%2015265%202009%20INIT accessed 15 September 2015
938
(Elgar, 2017)
939
940
Comm (2011) 112, ‘A roadmap for moving to a competitive low carbon economy in 2050’ p 6
941
Ibid, p 11
942
Jaap Jansen and Martine Uyterlinde, ‘A Fragmented Market on the Way to Harmonisation? EU Policy Making
on Renewable Energy Promotion’ (2004) 8(1) Energy for Sustainable Development 93, 105.; See also Dorte
Fouquet, ‘Policy Instruments for Renewable Energy – From a European Perspective’ (2013) 49 Renewable
Energy 15
943
IPCC Special Report ‘Global Warming of 1.5 °C an IPCC special report on the impacts of global warming of 1.5
°C above pre-industrial levels and related global greenhouse gas emission pathways’ 48th Session of the IPCC,
Incheon, Republic of Korea, 6 October 2018 available at http://www.ipcc.ch/report/sr15/ Accessed 8 October 2018
944
Ibid, Section C2

The IPCC has stated that by 2050 renewables will have to account for 70-
85% of global electricity generation, coal's share reducing ‘close to zero’.945 Such a
transition in the generation capacity portfolio will lead to investment in emissions
mitigating energy technology averaging around $900 bn/year from 2015 to 2050.946
The $900bn/year investment levels should be compared to the just over
$300bn/year invested for the period 2013 to 2018, with investment in wind increasing
and solar decreasing due to technology developments, indicating there is a
considerable amount of catching up to do.947
Again, the level of investment needed, and the certainty required by utility
companies to undertake this level of investment was a theme brought out by several
respondents during the empirical research.
2.12 Harmonisation of Renewables Regulatory Framework – Member States

Say No
An EU harmonised measure is a ‘top down’ form of regulation since the measures

are adopted by the EU’s institutions and member states in the form of legally binding
obligations – sometimes referred to as the ‘community method’,948 thus removing
obstacles to the single market.
The removal of national barriers to the cross-border trade in goods and
services is a long-term EU goal (Articles 34 and 36 TFEU).949
The CJEU defined harmonisation as regulation at the EU level that removes
the opportunity for member states to adopt further measures in national
legislation.950
The EU’s main harmonisation competences can be found in Articles 114 and
115 TFEU and have as their objective the establishment and functioning of the
internal market. 951
945
Ibid, Section C2.2
946
Ibid, Section C2.6
947
Bloomberg New Energy Finance 16 January 2019 available at
https://www.bloomberg.com/subscriptions?utm_source=google&utm_medium=cpc&utm_campaign=1494479466&
utm_term=%2Bbloomberg%20%2Bfinance&gclid=Cj0KCQiA-JXiBRCpARIsAGqF8wUJoL5wai3pNG69cQ-
A4u9Sh4UiBL-OSsF7yS6gbFUE9kk4MbbjSjMaAv1xEALw_wcB accessed 19 January 2019
948
P de Schoutheete, ‘The Evolution of Intergovernmental Cooperation in the European process’ [2006]
Challenge Europe 2 Egmont European Affairs Publication (Working Paper)
949
European Commission, ‘Guide to the implementation of directives based upon the New Approach and the
Global Approach’, Article 8, http://ec.europa.eu/enterprise/policies/single-market-goods/files/blue-
guide/guidepublic_en.pdf (accessed 15 September 2016)
950
Case 148/78 Pubblico Ministero v Ratti ECLI:EU:C:1979:110, para 26f
951
capital is ensured - Case T-356/15 Austria v Commission ECLI:EU:T:2018:439, para 516; See also Peter
Cameron, ‘The Internal Energy Market – Redefining Objectives’ Peter Cameron and Raphael Heffron (eds) Legal
Aspects of EU Energy Regulation (Oxford University Press, 2016), 5

An EU wide harmonised renewables support scheme952 would remove price
and regulatory distortions between member states.953 Via a single support scheme
across the EU, harmonisation would lead to an improved degree of standardisation
and clarity of renewable electricity costs (leaving only transmission costs on a cost
per distance travelled basis as the differentiator between renewable electricity
facilities) to facilitate investment decisions.954
It is argued that a non-harmonised support schemes adds unnecessary
complexity and uncertainty, leading to a higher cost of capital, less cost-
effectiveness and ultimately higher prices for the consumer. 955 Overall, non-
harmonisation is said to interfere with the functioning of the electricity market and to
distort the cross-border wholesale market price of electricity.956
Minimal harmonisation has been the modus operandi for environmental
regulation since environmental issues became part of the political and legal
landscape of the EU.957
The development of a harmonised EU renewables support scheme has been
considered for some time.958 In 2005 the EU published ‘The Support of Electricity
959
from Renewable Energy Sources’, which considered support scheme
harmonisation, concluding, that due to widely varying potentials for renewable
electricity facilities across member states harmonisation was unachievable in the
short term.960 Harmonisation also being considered unlikely for political reasons961
952
953
Jaap Jansen and Martine Uyterlinde, ‘A Fragmented Market on the Way to Harmonisation? EU Policy Making
on Renewable Energy Promotion’ (2004) 8(1) Energy for Sustainable Development 93, 103
954
CEER, ‘Implications of non-harmonised renewable support schemes’ (June 2012), available at:
http://www.energy-
regulators.eu/portal/page/portal/EER_HOME/EER_PUBLICATIONS/CEER_PAPERS/Electricity/Tab/C12-SDE-
25-04b_SDE%20NHSS-Conclusions_18-Jun-2012.pdf. (accessed 15 September 2016)
955
25-04b_SDE%20NHSS-Conclusions_18-Jun-2012.pdf, at 14 accessed 15 September 2016; See Also Hagenbuch
Tyler, ‘Establishing an Aggressive Legal Framework for the Future of Wind Energy in Europe’ (2012) 42
Vanderbilt Journal of Transnational Law 1595, 1620
956
Ibid, at 19
957
Nicolas de Sadeleer, ‘Principle of Subsidiarity and the EU Environmental Policy’ (2012) 9 Journal for European
Environmental & Planning Law 63, 69
958
Angus Johnston & Guy Block, EU Energy Law (1st edn. Oxford University Press, 2012), 338
959
Com (2005) 627, ‘The Support of Electricity from Renewable Energy Sources’ available at http://eur-
lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2005:0627:FIN:EN:PDF accessed on 31 July 2017;
960
Ibid, 11
961
Marc Ringel, ‘Fostering the use of Renewable Energies in the European Union: The Race between Feed-in-
Tariffs and Green Certificates’ (2006) 31(1) Renewable Energy, 13-14

and the difficulty in drafting an applicable support mechanism for the multiplicity of
renewable technologies, moving from specific to general.962
In 2013 France’s President Holland said there should be ‘co-ordination, co-
operation and harmonisation from renewable energy, with European rules and a
European framework’.963 The German Chancellor, Angela Merkel, indicated that
harmonisation should occur ‘at a later stage’,964 after closure of German nuclear
capacity and its replacement with renewables,965 overcoming the increased coal
generation this has caused.966
EU member states are reluctant to have a common energy policy due to
perceived loss of control issues, hence the use of the Directive structure requiring
individual country by country implementation.967
Thus, based on these considerations harmonisation of the EU’s renewable
968
energy regime seems unlikely in the near future. Therefore, this thesis
recommends the use of the EU-ETS to simplify and harmonise the renewable
electricity framework.
2.13 Conclusions & Key Lessons
As can be seen, the renewables regulatory framework is a multiplicity of Treaty

provisions, Directives, Regulations, EU policy documents and member state
implementation of the same. In addition to the legal instruments forming the
regulatory framework, the CJEU has been required to provide judicial interpretation
of the framework.
This multi-layered and multi-jurisdictional structure creates a difficult to
understand complex regulatory framework. The framework evolves rapidly
compared to the investment lifecycles of renewable electricity generating facilities.
For example, the EU-ETS has been through four phases of development, with free
allowances from phase 1 effectively collapsing the market price, an issue the market
962
Reinhard Haas, Wolfgang Eichhammer, Claus Huber, Ole Langniss, Arturo Lorenzonid, Reinhard Madlenere,
Phillipe Menanteau, P Morthorst, A Martinsh, A Oniszki, Joachim Schleich, Adrian Smith, Z Vassk and A
Verbruggen, ‘How to Promote Renewable Energy Systems Successfully and Effectively’ (2004) 32 Energy Policy
833, 838
963
EurActiv.com, “Hollande calls for EU ’harmonization’ on renewable energy”,
http://www.euractiv.com/energy/hollande-calls-eu-harmonization-news-519965
964
Ibid
965
M Karnitschnig, ‘Germany's Expensive Gamble on Renewable Energy’ The Wall Street Journal, 26 August
2014 http://online.wsj.com/articles/germanys-expensive-gamble-on-renewable-energy-1409106602 (accesses 1
September 2016)
966
967
Sanam Haghighi, Energy Security: The External Relations of the European Union with Major Oil and Gas
Supplying Countries (Hart, 2007), 46-53, 56-62
968
Angus Johnson and Guy Block, EU Energy Law (Oxford University Press, 2012) 4-6

still endures today. The Renewable Energy Directive itself has had two incarnations,
2001 and 2009. The post 2020 version of the Renewable Energy Directive, in a
paradigm shift, proposes not to have nationally binding targets, with capacity targets
only existing at EU level. Whilst the renewables regulatory framework has delivered
carbon emission reduction, the legislation is said to have significantly increased the
systematic risk exposure of the utility sector.969
Whilst in any legal framework a level of judicial interpretation is to be
expected, as well as the need for judicial processes to resolve drafting conflicts
within the legal instruments (courts resolve conflicts a posteriori), what has been
outlined is a regulatory structure not only in internal conflict, but in conflict with EU
free trade principles. As has been shown in seeking to resolve the conflicts between
the various parts of the regulatory framework the CJEU has used a lex specialis
protocol (An analysis of the case law is set out in Chapter 3). It can be seen that the
C&C and shared competence970 structure of the Renewable Energy Directive971 is
in diagonal conflict with four provisions of EU free trade law (free movement,
distortion to competition by enhancing the sales price of renewables and thus
favouring certain undertakings e.g. owners of renewable facilities, distorting
competition my manipulating market access and other elements of state aid),
whereas the other Directives are only in conflict with two or less areas of Treaty
based law. In seeking to find an explanation for the number of diagonal conflicts
between the Treaty and the Renewable Energy Directive the following suggestions
are made
• The desire for unanimity of voting in Council induced in the drafting
a need to be ‘all things to all people’
• The reluctance of member states to relinquish control over the
structure of their electricity markets brought about a highly
nationally focussed series of support schemes and hence the
conflict with free movement
969
Daniel Tulloch, Ivan Diaz-Rainey and I Premachandra, ‘The impact of regulatory change on EU energy utility
returns: the three liberalization packages’ (2018) 50(9) Applied Economics
970
971

• The lack of a regulatory institution with applicable powers at the EU
level over Directives crafted on a shared competency basis was
always going to end up with national regulators discussing the
regulatory framework with its national industry players, simply
reinforcing a national model, engendering free movement issues
• Almost any support scheme972which was part of a C&C framework
would end up fixing prices above the market norm to allow new
technology to be built. The need to create capacity sufficient to
allow 20% renewables at a time when the technology was still in its
infancy and not at a competitive price point always had the potential
for price fixing and state aid issue to develop.
Looking at the Emissions Trading Directive973 (established in accordance with Article

191(1) TFEU), as one of the other pillars of the renewables regulatory framework,
the Directive does not induce free movement issues as it is an EU wide market, also
as a traded market the very nature of the operational process allows the fair market
price to be determined without distortion to competition as would be prohibited in
accordance with state aid (Article 107(1) TFEU). The areas where the EU-ETS is in
diagonal conflict relates to distortion of competition (Article 107(1) TFEU) due to the
favouring of certain undertakings resulting from the over allocation and free
allocation of emissions allowances. The Directive is considered in vertical conflict
with the ‘polluter pays’ principle contained in Article 191(2) TFEU as by its nature it
allows emissions.
Also, certain Directives have a ‘cannibalistic’974 effect on other Directives,
therefore the Directives can be seen to be in horizontal conflict. For example, the
Energy Efficiency Directive reduces electricity demand, which reduces the carbon
allowances needed, depressing the price on the EU-ETS further. The prices
therefore resulting on the EU-ETS are too low to act as a driver for investment in
carbon emissions reducing technology.
972
973
974
Bianka Shoani-Tehrani and Pascal da Costa ‘ The Paradoxes of the Euopean Energy Market Regulation: A
Historical & Structural Analysis of the Electricity Mix’ in Pascal da Costa and Danielle Attias (eds) Towards
Sustainable Economy: Paradoxes & Trends in Energy & Transportation (Springer, 2018)

This position should be seen in the light of Article 7 TFEU which seeks to
ensure consistency by stating:
The Union shall ensure consistency between its policies

and activities, taking all of its objectives into account and
in accordance with the principle of conferral of powers.
An economic assessment of EU climate change policy show that the multiplicity of

instruments ‘generate substantial excess cost’.975 Therefore redesigning the policy
on economic grounds will improve the coherence and overall cost-effectiveness of
the policy initiatives.976 This could mean that C&C regulation is phased out and
market based regulatory solutions (e.g. Emissions Trading Scheme) are given a
greater emphasis. Such an emphasis would bring about the EU’s desire of ‘shared
responsibility between various actors: government, industry and the public’.977 The
approach should include specific targets within the market based measures.978 It
being known that properly designed market based regulatory frameworks allow their
implementation at the lowest overall cost, by providing incentives for the greatest
reductions in pollution by those firms that can achieve these reductions most
cheaply.979
Despite the above, the current regulatory framework has facilitated (i) a
considerable reduction in carbon emissions via the EU-ETS and other policies, (ii) a
reduction in overall energy demand and (iii) the construction of nearly 20% of the
EU’s electricity generating capacity from renewables. Therefore, in achieving the
‘20-20-20 by 2020’980 goals (Section 1.2), the regulatory framework is a success.
However, the regulatory framework has only partially resolved to the electricity
‘trilemma’.981 The framework has reduced carbon emissions and increased security
of supply / reliability; however, the framework has only achieved this at the expense
975
Christoph Böhringer, Andreas Keller, Markus Bortolamedi and Anelise Rahmeier Seyffarth, ’Good things do not
always come in threes: On the excess cost of overlapping regulation in EU climate policy’ (2016) 94 Energy Policy,
502
976
Ibid
977
978
979
Jeffrey Vincent (eds) Handbook of Environmental Economics (Elsevier Science, 2003), 359; see also Patricia
Birnie, Alan Boyle, and Catherine Redgwell, International Law and the Environment (3rd Ed, Oxford University
Press, 2009); David Driesen, ‘Free Lunch or Cheap Fix?: The Emissions Trading Idea and the Climate Change
Convention’ (1998) 26(1) Boston College Environmental Affairs Law Review
980
http://ec.europa.eu/eurostat/statistics-explained/index.php/Europe_2020_indicators_- limate_change_and_energy
981

of the electricity consumer via the levies to fund the various national renewables
support schemes.
From a diagonal conflict point of view all that has happened is that nationally
focused renewables support schemes have been prioritised irrespective of
economic justification or the provisions of the EU’s free trade principles. The case
law analysis set out in Chapter 3 shows that several member states have sought to
insulate their energy intensive industries from these levies. These practices being a
precursor to the failure of the political will to keep on supporting renewables. Thus,
the acceptability of the lex specialis approach could terminate as the political will
terminates.
Therefore, in terms of the legal conflicts considered in Chapter 3 via case
law analysis, this is undertaken using two Directives (i) the Renewable Energy
Directive982 and (ii) the Emissions Trading Directive. 983 These directives are chosen
due to their differing competence structure. The clear conflicts between these
Directives and the Treaty, are free movement, price fixing, state aid and ‘polluter
pays’.
982
983

Chapter 3 – Conflicts between the Renewable Electricity
Regulatory Framework & EU Free Trade Principles
3.1 Introduction
The EU renewables regulatory framework is a complex polycentric 984 series of

Treaty Articles, Directives, Regulations and member state provisions which are in
diagonal conflict with EU free trade principles on free movement of goods,
undistorted competition state aid, fiscal advantage state aid and in vertical conflict
with the ‘polluter pays’ principle. The research shows that the conflicts highlighted
are an example of the phenomenon of legal fragmentation985 in practice.
This Chapter provides an analysis, via case law, of the conflicts and apparent
prioritisation of environmental protection over the EU’s free trade principles.
In undertaking this analysis focus is given to two of the Directives highlighted
in Chapter 2 – the Renewable Energy Directive 986 and the Emissions Trading
Directive. 987
The Renewable Energy Directive is chosen as it is the core of the EU
renewables regulatory framework, was shown in Chapter 2 to have the highest
number of conflicts with EU free trade principles, is a C&C style shared competence
Directive derived from Article 194 TFEU.
The Emissions Trading Directive is chosen as it likewise is a key Directive
within the regulatory framework. However, it is a market style Directive, is within the
competence of the Commission and lastly it is derived from Article 191 TFEU.
In considering each Directive’s conflicts with EU free trade principles the
views of the CJEU will be analysed as set out in the table below
984
Giuseppe Bellantuono ‘Renewables, Investments, and State Aids: Exploring the Legal Side of Polycentricity’
985
‘The fragmentation of public international law is a long-observed phenomenon that demonstrates uneven
normative and institutional development and evolution in inter-state relations. Separate legal norms and
institutions have developed largely independently from one another, often instigated by non-identical groupings of
states and in response to specific functional issues.’ From Margrate Young, ‘Fragmentation’ Oxford
Bibliographies available at http://www.oxfordbibliographies.com/view/document/obo-9780199796953/obo-
9780199796953-0113.xml accessed 12 March 2019
986
987

Directive Conflict Case
Free Movement – cross- Essent 1989

border trading
Ålands Vindkraft990
Renewable Green Network991

Energy
Directive 988 Free Movement – public Stadtwerke992 system in Germany
procurement purchase
criteria
Free Movement - Energy Outokumpu Oy993

Taxation a measure of
equivalent effect
State Aid - Price Fixing – PreussenElektra994

distorting competition
Essent 1995 (thin markets)
State Aid, Legitimate Charanne996

expectation and the right to
regulate Scat Punti Vendita997
State Aid – state resources & PreussenElektra998

exempting consumers from
costs Vent De Colère999
988
989
C-204/12 Essent Belgium NV v Vlaamse Reguleringsinstantie voor de Elektriciteits- en Gasmarkt
ELCI:EU:C:2014:2192
990
991
992
Stadtwerke are communal companies, owned by a city or region, which offers public services for to the city
and/or the region. For example Stadtwerke München (Munich City Utilities) or SWM is a German communal
company, owned by the city of Munich, which offers public services for the city and the region of Munich. The
company supplies electricity for more than 95% of Munich's 750.000 households as well as natural gas, drinking
water and, through its stake in the M-net Telekommunikations, telecommunications services. SWM is Europe's
largest municipal utility company and ranks among Germany's principal energy providers. Expanding use of
renewable energy has been a central element in the company's strategy since 2008. – Sophie Vorrath, ‘Will
Munich be the world's first 'megacity' to reach 100% renewables?’ [2014] Renewable Economy available from
https://reneweconomy.com.au/will-munich-be-worlds-first-megacity-to-reach-100-renewables-28292/ ; See Also
the undertaking’s web site https://www.swm.de/english.html
993
Case C-213/96 Outokumpu Oy ECLI:EU:C:1998:155
994
Case C-379/98 PreussenElektra AG v Schleswag AG, in the presence of Windpark Reußenköge GmbH &
Land Schleswig-Holstein ECLI:EU:C:2001:160
995
ELCI:EU:C:2014:2192
996
997
998
999
ECLI:EU:C:2013:851

Austrian Green Levy1000
German Green Levy1001
State Aid Embedded Benefits Essent 21002

– exemption from legitimate
costs
Competency and national Commission v Estonia1004

allocation plans
Emissions Poland v Commission (2013)1005
Trading
Directive 1003 State Aid Over allocation Borealis Polyolefine1006
State Aid Hardship – DK Recycling1007

exempting undertakings from
payments to which they
would normally be liable
State Aid - Polluter Pays GEMO1008
Futura Immobiliare1009
Raffinerie Mediterranee1010
Paul van de Walle 1011
Amia 1012
Mesquer 1013
Standley 1014
1000
Case T-251/11 Austria v Commission ECLI:EU:T:2014:1060
1001
Commission Decision 2015/1585, Aid Scheme SA 33995 –“ implemented by Germany for the support of
renewable electricity and of energy-intensive users”, available at http://eur-lex.europa.eu/legal-
content/EN/TXT/?uri=uriserv%3AOJ.L_.2015.250.01.0122.01.ENG accessed 30 March 2018
1002
Case C-492/14 Essent Belgium NV v Vlaams Gewest and Others ECLI:EU:C:2016:732
1003
1004
Case C-505/09 Commission v Estonia ECLI:EU:C:2012:179
1005
1006
Joined Cases C-191/14 and C-192/14 Borealis Polyolefine GmbH v Bundesminister für Land- und
Forstwirtschaft, Umwelt und Wasserwirtschaft ECLI:EU:C:2016:311
1007
Case 540/14 DK Recycling und Roheisen GmbH v Commission ECLI:EU:C:2016:469
1008
1009
Case C-254/08 Futura Immobiliare srl Hotel Futura v Comune di Casoria ECLI:EU:C:2009:479
1010
Sviluppo economico ECLI:EU:C:2010:126
1011
Case C-1/03 Ministère public v Paul van de Walle ECLI:EU:C:2004:67
1012
Case C-97/11 Amia SpA, in liquidation v Provincia Regionale di Palermo ECLI:EU:C:2012:306
1013
Case C-188/07 Commune de Mesquer v Total France SA and Total International Ltd ECLI:EU:C:2008:359
1014
Case C-293/97 R v Secretary of State for the Environment and Ministry of Agriculture, Fisheries and Food,
exp Standley and Metson ECLI:EU:C:1999:215

The chapter will initially set out that electricity is ‘goods’ before moving to the main
conflicts analysis.
3.2 Introduction to Conflicts with Free Movement of Goods - Electricity is

Goods
The generation of electricity is essentially an activity very different from the supply
of electricity to consumers. Due to modern life’s reliance on the availability of
electricity these activities can be considered ‘Services of General Economic Interest’
and fall within the provisions of Article 106 (2) TFEU. Article 106 TFEU stipulates
that such services are subject to the other provisions in the Treaties, particularly the
rules on competition, if these rules do not prevent the operation of the service.
However, in relation to the analysis undertaken in this research it is not the provision
of the service that is important, but the status of electricity as a product and therefore
can it be considered ‘goods’ despite its intangible nature, even in physics where it
could be considered a flow of the fundamental particles called electrons or in fact
simply a standing node in a Schrödinger wave equation.1015
Prior to setting out the nature of electricity, a brief review of the principles of
free movement of goods will be undertaken.
The CJEU held Commission v Italy 1016 that ‘free movement of goods,
constitutes a fundamental rule which, without prejudice to the other provisions of the
Treaty, does not permit any exceptions’. Also, in Commission v France it was stated
that ‘free movement of goods is one of the fundamental principles of the Treaty’.1017
Therefore, confirming if these provisions apply to electricity is an important legal
issue. The scope of the term ‘goods’ was explained in the Italian Art Treasures1018
case as items ‘valued in money and which are capable, as such of forming the
subject of commercial transactions’ even if those transactions ascribe a negative
value to the items in question (Walloon Waste).1019
Interestingly, it has been argued that the transaction or exchange of goods
does not have to be part of an economic activity.1020 The cross-border requirement
1015
Erwin Schrödinger, ‘An Undulatory Theory of the Mechanics of Atoms and Molecules’ (1926) 28(6) Physical
Review 1049
1016
Case 24/68 Commission v Italy ECLI:EU:C:1969:29
1017
Case C-265/95 Commission v France (Spanish Strawberries) ECLI:EU:C:1997:595, para 24
1018
Case C-7/68 Commission v Italy (Re Art treasures 1) ECLI:EU:C:1968:51
1019
1020
Okeoghene Odudu, ‘Economic activity has a limit to Community law’ in Catherine Barnard & Okeoghene
Odudu (eds), The Outer Limits of European Union Law (Hart Publishing, 2009), 225, 238; See Also Vassilis

can be satisfied even when the goods are merely transiting the territory,1021 which is
important for electricity in relation to free movement considerations, when it is being
transmitted through a country or region.
In considering who is an addressee of the Treaty, the definition of member
state has been expanded to include local government,1022 as well as other arms of
government in whatever capacity they are acting,1023 which is significant where
electricity is purchased by municipalities or other government organisations and then
sold on to end users. The largest example of such a practice is via the Stadtwerke1024
system in Germany where many cities purchase electricity for users within their
franchise area.1025
Utility companies (public or private) have been held to be emanations of the
state1026 due to their finance or regulation via legislative means and are therefore
considered to be under the same duties and obligations as would be applicable to a
member state in EU law.
The status of electricity was settled in the case Gemeente Almelo v NV
Energiebedriif Ijsselmij.1027 The Court noted that it was accepted in EU law, and
indeed in the national laws of the member states, that electricity constitutes a ‘good’
within the meaning of Article 30 TFEU.
Additionally, the Commission v Netherlands 1028 confirmed the status of
electricity to be ’goods’ for the purposes of Articles 34 to 36.
With the status of electricity being held to be ‘goods’, the provisions of free
movement can be seen to apply.
Hatzopoulos, ‘The concept of ‘economic activity’ in the EU Treaty: From ideological dead-ends to workable judicial
concepts’ (2012) European Business Law Review
1021
Case C-320/03, Commission v Austria ECLI:EU:C:2005:684 , para 65
1022
Joined cases C-176/90, Aragonesa de Publicidad Exterior SA v Departmento de Sanidad y Seguridad Social
de la Generalitat de Cataluna ECLI:EU:C:1991:327 , para 8 & Case C-45/87 Commission v Ireland (Dundalk
Water) ECLI:EU:C:1988:435
1023
Case C-5/94 R v Ministry of Agriculture Fisheries & Food, exp Hedley Lomas (Ireland) Ltd
ECLI:EU:C:1996:205
1024
A Stadtwerke is a German communal company, owned by a city or regional government, which offers public
services for the city and the region
1025
https://www.cleanenergywire.org/factsheets/small-powerful-germanys-municipal-utilities accessed 24 April
2018: As Stadtwerke are public bodies their electricity procurement is undertaken in accordance with the Public
Procurement Direct (Directive 2014/24/EU of 26 February 2014 on public procurement) which allows within Article
43 for Eco-Certificates to be required on the electricity purchased, also environmental criteria can be set out in the
technical specification of the tender in accordance with Articles 62 and 67(3)
1026
v British Gas plc ECLI:EU:C:1990:313; See Also Case 6/64, Flaminio Costa v Ente Nazionale Energia Elettrica
(Enel) ECLI:EU:C:1964:66, In 1964 the European Court of Justice, ruling on the case indirectly suggested that
electricity could fall within the scope of Article 37 of the EEC Treaty, but it did not determine any change for the
national electricity monopolies
1027
Case C393/92, Gemeente Almelo v NV Energiebedriif Ijsselmij ECLI:EU:C:1994:171, para 28
1028
Case 157/94 Commission v Netherlands ECLI:EU:C:1997:499

The principles and obligations related to the customs union and free
movement of goods set out in Articles 28 to 36 TFEU are therefore mutually
supportive. 1029
The restrictions contained in Articles 34 and 35 TFEU (measures having
equivalent effect on imports and exports respectively) not only prohibit quantitative
restrictions, but also measures having an equivalent effect (See Italian Trailers).1030
Articles 34 and 35 TFEU have been held in Fra.bo1031 to be directly effective (such
that should a member state breach the provisions, a compensation claim may arise).
The general test was set out in the text book Dassonville1032 judgement as a
two-stage set of criteria being (i) trading rules enacted by a member state (also
extended to EU institutions), 1033 and (ii) rules capable of hindering intra-community
trade, directly or indirectly, actually or potentially. The Dassonville formula was
extended to Article 35 (exports) by the Court in the Bouhelier1034 case.
The CJEU also held in the Cassis de Dijon 1035 that a product lawfully
marketable in one-member state should be freely marketable in another member
state - the market access test. The judgement in Keck1036 confirmed and continued
the Cassis de Dijon criteria. However, the Court said that national provisions
restricting or prohibiting certain selling arrangements do not fall within the
Dassonville formula, and so unlike quantitative restrictions, distinctly applicable
measures of equivalent effect and product requirements do not breach Article 34
TFEU, provided they apply to all traders and the provisions are non-discriminatory –
same burden in law and in fact.
In relation to the consideration of the issues raised by Keck, AG Jacobs
emphasised in Leclerc-Siplec 1037 that there should be ‘unfettered access to the
whole Community market’, suggesting Keck did not satisfy the ‘underlying
principle’1038 of free movement of goods, deeming this to be the market access test
set out in Cassis de Dijon and also suggesting that the appropriate test is whether
1029
Nicolas Bernard ‘Discrimination and Free Movement in EC Law’ (1996) 45(1) International & Comparative Law
Quarterly, 82, 83
1030
Case C-110/05 Commission v Italy ECLI:EU:C:2009:66, para 37
1031
Case C-171-11, Fra.bo SpA v Deutsche Vereinigung des Gas- und Wasserfaches eV (DVGW) — Technisch-
Wissenschaftlicher Verei, ECLI:EU:C:2012:453
1032
Case C-8/74 Procureur du Roi v Benoît and Gustave Dassonville ECLI:EU:C:1974:837
1033
Case C-15/83 Denkavit Nederland ν Hoofdproduktschap voor Akkerbouwprodukten ECLI:EU:C:1984:183,
para 15
1034
Case C-53/76 Procureur de la Republique de Vesancon v Les Sieurs Bouhelier ECLI:EU:C:1977:17 ; Case C-
68/76 Commission v France ECLI:EU:C:1977:48, paras 15-16
1035
ECLI:EU:C:1979:42
1036
Cases C-267/91 & C-268/91, Keck & Mithouard CCLI:EU:C:1993:905
1037
Case C-412/93, Sociéte dÍmportation Edouard Leclerc-Siplec v TFI Publicité & M6 Publicéte
ECLI:EU:C:1995:26, para 41 ; AG Maduro also questioned the reasoning in Keck - Case C-158-159/04 Alfa Vita
Vassilopoulos ECLI:EU:C:2006:212
1038
Ibid, para 41

there is a ‘material restriction’ to market access, thereby introducing a ‘de-minimis
test’. 1039 AG Jacobs further suggested that it is possible that ‘certain selling
arrangements’ may hinder market access and therefore prevent the development of
the internal market.1040 In disagreeing with the reasoning in Keck, the AG stated: ‘If
an obstacle to inter-State trade exists, it cannot cease to exist simply because an
identical obstacle affects domestic trade’.1041
Therefore, the AG submitted that arrangements which cause a ‘substantial
hindrance’ to market access should also come within the scope of Article 34,
meaning that insignificant measures may not be prohibited. 1042 This formulation
introduces an economic element to the test relating to free movement, not merely a
prohibition or discrimination.1043 The CJEU confirmed the market access tests in
Åklagaren v Mickelsson and Roos.1044
In the cases Commission v Poland1045 and Commission v Lithuania,1046 the
CJEU held the framework put in place to be a measure equivalent to a quantitative
restriction if its effect was to ‘hinder access to the market’.1047 The market access
test was also adopted in Commission v Spain,1048 with the CJEU referring only to
Commission v Italy. 1049 The Court adopted a wide interpretation in finding any
‘obstacle to trade’ to be a measure equivalent to a quantitative restriction; regardless
of whether or not the objective of the framework put in place was to treat less
favourably foreign compared to domestic goods.1050 In light of these recent cases1051
it appears that the Keck jurisprudence has been superseded.1052
1039
Ibid, para 42
1040
S Weatherill, Cases and Materials on EU Law (10th Edition, Oxford University Press 2012) 332.
1041
Case C-412/93 Leclerc-Siplec ECLI:EU:C:1994:393; para 39
1042
Jukka Snell, ‘The Notion of Market Access: A Concept or a Slogan?’ (2010) 47 Common Market Law Review
437, 450
1043
G Davies, ’Understanding Market Access: Exploring the economic rationality of different conceptions of free
movement law’ (2010) 11 German Law Journal 671, 673.
1044
Case C-142/05, Åklagaren v Mickelsson and Roos ECLI:EU:C:2009:336
1045
Case C-639/11 Commission v Poland ECLI:EU:C:2014:173
1046
Case C-61/12 Commission v Lithuania ECLI:EU:C:2014:172
1047
Case C-629/11 Commission v Poland ECLI:EU:C:2014:173, para 52; Case C-61/12 Commission v Lithuania
ECLI:EU:C:2014:172, para 57
1048
Case C-428/12 Commission v Spain ECLI:EU:C:2014:2018
1049
Case C-110/05 Commission v Italy ECLI:EU:C:2009:66
1050
Ionnis Lianos, ‘In Memoriam Keck: The reformation of the EU law on the free movement of goods’ [2015]
European Law Review 225, 237
1051
Case C-639/11 Commission v Poland ECLI:EU:C:2014:173; Case C-16/12 Commission v Lithuania
ECLI:EU:C:2012:426; Case C-428/12 Commission v Spain ECLI:EU:C:2014:218; Additionally - The last time the
Keck case law was found to be cited by the CJEU as good law dates from 2010: Case C-108/09, Ker-Optika bt v
ÀNTSZ Dél-dunántúli Regionális Intézete ECLI:EU:C:2010:725, para 51
1052
Eleanor Spaventa, ‘Leaving Keck behind? The free movement of goods after the rulings in the Commission v
Italy and Micklesson and Roos’ (2009) 34 European Law Review, 914, 928; See Also Ionnis Lianos, ‘In Memoriam
Keck: The reformation of the EU law on the free movement of goods’ [2015] European Law Review 225, 236.

The market access issue in relation to renewable electricity is analysed
below in Sections 3.5.1 to 3.5.3 in relation to the Essent 11053 Ålands Vindkraft1054
and Green Network1055 cases.
3.3 Exceptions & Derogations from Free Movement
The EUs free movement of goods provisions create a market place where willing
buyers and sellers can trade without the interference of national governments.
However, Article 36 TFEU provides a list of exceptions to the mandatory
application of free movement being public morality,1056 security,1057 public policy,1058
protection of human life, animals & plants,1059 the protection of national treasures
possessing artistic, historic or archaeological value,1060 or the protection of industrial
and commercial property.1061
Initially the ECJ held in Commission v Ireland1062 that the Article 36 TFEU list
was exhaustive and only capable of being invoked if the national measure in
question does not constitute ‘a means of arbitrary discrimination or a disguised
restriction on trade between member states’.1063
As the list within Article 36 TFEU does not take account of every possible
scenario, the Court developed additional exceptions in Cassis de Dijon1064 which
could be evoked as necessary – the so called ’mandatory’ or ’imperative’
requirements.1065 Additionally, the Court saw the need to balance the competing
interests of traders and national technical requirements for products. The result of
Cassis de Dijon is to replace dual regulation of a product by exporting and importing
1053
ELCI:EU:C:2014:2192
1054
1055
1056
Lorna Woods, Free Movement of Goods and Services within the European Community (Ashgate Publishing
2004)115; see also pornography cases Case 34/79 R v Henn and Darby ECLI:EU:C:1979:295 & Case 121/85
Conegate Ltd v Commissioners of Customs and Excise ECLI:EU:C:1986:114
1057
Case 72/83 Campus Oil Ltd v Minister for Industry and Energy ECLI:EU:C:1984:256
1058
Case 231/83 Cullet v Centre Leclerc ECLI:EU:C:1985:29 Case 30/77 R v Bouchereau ECLI:EU:C:1977:172;
see also Case 7/78 R v Thompson, Johnson and Woodiwiss ECLI:EU:C:1978:209; Lorna Woods and Philippa
Watson EU Law (Oxford University Press 2014) 409; Peter Oliver, Free Movement of Goods in the European
Community (Hart Publishing 2003) 248
1059
Case 40/82 Commission v UK ECLI:EU:C:1984:33; Case 16/74, Centrafarm BV et Adriaan de Peijper v
Winthrop B, ECLI:EU:C:1974:115; Case C-420/01 Commission v Italy ECLI:EU:C:2003:363
1060
Case C-7/68 Commission v Italy (Art Treasures) ECLI:EU:C:1968:51
1061
Case C-78/70 Deutsche Grammophon Gesellschaft mbH v Metro-SB-GrolmArkte GmbH & Co. KG
ECLI:EU:C:1971:59; See Also Case C-62/79 S.A. Compagnie Gdndral pour la Diffusion de la Tldvision v Cin6
Vog Films ECLI:EU:C:1980:84; Case C-55/80 Musik-Vertrieb Membran GmbH v Gesellschaft Fur Musikalische
Auffuhrungs und Mechanische Verviel-Faligungsrechte (GEMA) ECLI:EU:C:1981:10
1062
Case 113/80 Commission v Ireland ECLI:EU:C:1981:139, para 7
1063
TFEU Article 36
1064
ECLI:EU:C:1979:42
1065
Ibid, para 8

member states with a single regulation,1066 such that under the ‘mutual recognition’
principle the importing state is required to respect the exporting country’s
regulations.
The implication with regards to the export and import of electricity is that the
importing utility is now in control of the purchase decision based on the configuration
of the indigenous generation portfolio to allow the import of electricity.
The Commission was quick to see the implications of ‘mutual recognition’
and issued a communication which recognised the presumption of equivalence,
obviating the need for harmonisation of legislation and therefore launched a
‘Package on the internal market of goods’ in February 2007.1067 In relation to the
electricity market the more important part of the package is Regulation 764/20081068
which lays down rules relating to the application of national technical rules for
products lawfully marketed in other member states. In an interconnected electricity
market, the need to make things work drives the need to harmonise technical
standards. These technical standards owe more to the laws of physics than statute
law. The process of aligning technical standards has been ongoing by utility
companies since Nikola Tesla’s design for an alternating current electricity system
was found to be technically superior to Thomas Edison’s direct current system.1069
The alignment and development of technical standards is conducted via a series of
standard’s institutes which undertake development and alignment practices by
bringing together technical experts to consider the details of a particular product or
process, publishing the result as a standard.1070
The CJEU has expanded the free movement of goods derogations by adding
‘effectiveness of fiscal supervision, the protection of public health, the fairness of
commercial transactions and the defence of the consumer’ (the Cassis de Dijon so
called ‘rule of reason’).1071 The Commission has also added – improved working
conditions, cultural purposes, road safety, press diversity and crime prevention.1072
1066
Nick Bernard, ‘Flexibility in the European Single Market’ in Catherine Barnard and Joanne Scott (eds), The
Law of the Single European Market: Unpacking the Premises (Hart Publishing, 2002)
1067
Commission Communication (2007) 35 – ‘Package on the internal market of goods’
1068
Regulation (EC) No 764/2008 of 9 July 2008 ‘Laying down procedures relating to the application of certain
national technical rules to products lawfully marketed in another member state and repealing Decision No
3052/95/EC OJ L 218/21’
1069
https://teslaresearch.jimdo.com/war-of-currents/
1070
Examples of standards institutes being - ISO (International Organization for Standardization) a worldwide
federation of national standards bodies, The International Electrotechnical Commission (IEC) is the international
standards and conformity assessment body for all fields of electrotechnology..
1071
Case C-120/78, REWE-Zentrale AG v Bundesmonopolverwaltung für Branntweien (Cassis de Dijon)
ECLI:EU:C:1979:42, para
1072
Santiago Barón-Escámez, Sylvia Ferretti, Juliana Frendo, Octavien Ginalski, Maciej Górka, Hans Ingels,
Christos Kyriatzis, Florian Schmidt, Carolina Stege, Laura Stočkutė and Yiannos Tolias ’Free movement of goods:
Guide to the application of Treaty provisions governing the free movement of goods’ EU DirectorateGeneral for
Enterprise and Industry 29-30

In February 1985, the CJEU delivered its judgement in ADBHU.1073 The case
considered whether a Directive regulating the disposal of waste oils was compatible
with the principles of freedom of trade, free movement of goods and freedom of
competition established by the Treaty. The CJEU held that the principles of free
movement of goods and free competition are not, (emphasis added)
to be viewed in absolute terms but are subject to certain

limits justified by the objectives of general interest
pursued by the Community provided that the rights in
question are not substantively impaired. Environmental
protection can be described as one of the Community’s
essential objectives
This case is significant as it was decided two years before the entry into force of the
Single European Act, which brought into the Treaty for the first time an explicit legal
basis on which to develop an EU/Community environmental policy (Title VII, headed
‘Environment).1074
Following the ADBHU case the CJEU went on to hold in Danish Bottle1075
that environmental protection could be added to the list of potential exceptions to the
application of free movement of goods:
protection of the environment is "one of the

Community's essential objectives", which may as such
justify certain limitations of the principle of the free
movement of goods…
In seeking to apply an explanation and justification of an exemption on

environmental grounds the Commission1076 has also stated that a precautionary1077
approach should be taken.
1073
Case C-240/83 Procureur de la République v Association de Défense des Brûleurs d'Huiles Usagées
1074
Francis Jacobs,’The Role of the European Court of Justice in the Protection of the Environment’ (2006) 18(2)
Journal of Environmental Law, 185
1075
Case C-302/86, Commission v Denmark ECLI:EU:C:1988:421, para 8 & 9
1076
EU Communication (COM(2000) 1‘on the precautionary principle’ – see also Case C-157/96 R v Ministry of
Agriculture Fisheries & Food Exp NFU ECLI:EU:C:1998:191
1077
The precautionary principle presupposes that potentially dangerous effects deriving from a
phenomenon, product or process have been identified, and that scientific evaluation does not allow the risk to be
determined with sufficient certainty. The implementation of an approach based on the precautionary principle
should start with a scientific evaluation, as complete as possible, and where possible, dentifying at each stage the
degree of scientific uncertainty – EU Communication (COM(2000) 1‘on the precautionary principle’

The Court has held that in seeking to apply an Article 36 exception (including
environmental protection) the justification must be proportionate1078 to the facts at
hand (Walter Rau1079 and Campus Oil1080).
In the case of Åklagaren v Mickelsson & Roos 1081 the Court developed
sophisticated reasoning in assessing the proportionality of the measures in question,
essentially being that the measures must be adopted in good time and that any
restrictions should be made in terms of the application of the most favourable law
and the most lenient penalty.
Also, in the case Nationale Radd van Dierenwerkers en Liefhebbers, 1082
further guidance was given as to (i) choose the least restrictive measure with regards
to intra-Community trade, (ii) ensure the measure is accessible and (iii) allow for
review. The Court also held in Commission v Italy1083 that to invoke an exception to
the free movement of goods, the exception must be appropriate and necessary to
obtain the objective. This does not require the member state to ‘prove, positively,
that no other conceivable measure could enable that objective to be attained under
the same conditions’.1084
The reasoning in ADBHU and Danish Bottles was subsequently used in
Walloon Waste, 1085Dusseldorp1086 and Aher-Waggon,1087 before being referenced
in renewable electricity specific cases commencing with Outokumpu Oy1088 (import
tax harmonisation) and progressing to PreussenElektra1089 and others outlined in
Section 3.5.1090
However, this line of cases seems to have focussed on the combined
reasoning of ADBHU and Danish Bottles and the status of environmental protection,
but not considered the potential substantial impairment of rights which was the
1078
Development and the Nature of Environmental Legal Principles’ (2006) 9(1) Potschefstroom Electricity Law
of European Law
1079
Case C-261/81Walter Rau Lebensmittelwerke v De Smedt ECLI:EU:C:1982:382 para 12
1080
Case C-72/83, Campus Oil Limited v Minister for Industry and Energy, ECLI:EU:C:1984:256
1081
Case C-142/05 Åklagaren v Mickelsson & Roos ECLI:EU:C:2009:336 para 39
1082
Case C-219/07 Nationale Radd van Dierenwerkers en Liefhebber v Belgische Staat ECLI:EU:C:2008:353,
para 41
1083
Case 110/05, Commission v Italy ECLI:EU:C:2009:66, para 62
1084
Ibid, para 66
1085
1086
Case C-203/96 Chemische Afvalstoffen Dusseldorp BV and Others v Minister van Volkshuisvesting,
Ruimtelijke Ordening en Milieubeheer ECLI:EU:C:1998:316
1087
Case C-389/96 Aher-Waggon GmbH ν Germany ECLI:EU:C:1998:357
1088
Case C-213/96 Outokumpu Oy, ECLI:EU:C:1998:155
1089
Case C-379/98 PreussenElektra AG v Schleswag AG, in the presence of Windpark Reußenköge GmbH & Land
Schleswig-Holstein ECLI:EU:C:2001:160
1090
David Edward, ‘Judging Environmental Law’ in Gil Carlos and Rodríguez Iglesias (eds) Une communauté de
droit (BWV Berliner Wissenshafts, 2003) 487,491

limiting condition in ADBHU. A justification for the CJEU’s failure to consider the
potential substantial impairment of rights can be found in R v MAFF, ex parte
Fedesa1091 where it was held that the importance of the objectives pursued may
justify restrictions which have adverse consequences, and even substantial adverse
consequences, for certain traders. However, the impairment of the free movement
right in many of the environmental/renewable electricity cases (Essent 11092 Ålands
Vindkraft 1093 Green Network 1094 ) seems to go beyond substantial impairment to
complete impairment and as such it is argued that the judgements fall outside what
was intended in ADBHU, creating a conflict between the renewable energy
regulatory framework and free movement of goods that is total.
It is the line of judicial justification outlined in ADBHU and Danish Bottles that
has led to the cases outlined in the analysis of the conflicts between the EU’s free
trade principles and the provisions of the Renewable Energy Directive1095 and the
Emissions Trading Directive1096 outlined in Sections 3.5 and 3.6 below.
3.4 State Aid Policy and its Conflict with Renewable Energy
The prohibition of state aid is set out in Article 107 TFEU. The CJEU has clarified
state aid to be an advantage of any nature (cash or kind) conferred on a selective
basis to the recipient1097 by a member state1098 or through State resources1099 which
distorts, or threatens to distort, competition1100 and as such is ‘incompatible with the
1091
Case C-331/88 R v Ministry of Agriculture Fisheries & Food, ex parte Fedesa ECLI:EU:C:1990:391, para 17
1092
ELCI:EU:C:2014:2192
1093
1094
1095
1096
1097
Case C-173/73 Italy v Commission ECLI:EU:C:1974:71 ; See Also Defined by the CJEU as ‘entities engaged
in an economic activity, regardless of their legal status and the way in which they are financed’ Joined Cases C-
180/98 to C-184/98, Pavlov v Stichting Pensioenfonds Medische Specialisten ECLI:EU:C:2000:428 para 74; See
also Case C-222/04, Ministero dell'Economia e delle Finanze v Cassa di Risparmio di Firenze SpA, Fondazione
Cassa di Risparmio di San Miniato and Cassa di Risparmio di San Miniato SpA ECLI:EU:C:2006:8, para 107
1098
Case C-39/94 SFEI v La Poste ECLI:EU:C:1996:285, para 58
1099
Ambachten ECLI:EU:C:2004:448; Case T-351/02 Deutsche Bahn v Commission ECLI:EU:T:2006:104; Case C-
173/73 Italy v Commission ECLI:EU:C:1974:71; Case 82/77 Van Tiggele, ECLI:EU:C:1978:10, paras 25 and 26;
Case T-358/94 Air France v Commission, ECLI:EU:T:1996:194, para 63; See Also
http://ec.europa.eu/competition/state_aid/overview/index_en.html
1100
Case C-173/73 Italy v Commission ECLI:EU:C:1974:71

internal market’. 1101 State aid may take a series of different forms, 1102 each
manifesting as an advantage.1103
The focus of state aid policy has become increasingly centred on the energy
sector as the EU seeks to address the joint issues of security of supply and the
reduction in carbon emissions. 1104 Within the EU, the environment and energy
savings sector is the most subsidised with €54.8 bn of aid.1105 The EU has suggested
that state aid should be targeted at residual energy market failures; that is, failures
that remain unaddressed by any other policies and measures.1106
The CJEU has stated that ‘environmental protection, however legitimate’ cannot
justify the lack of assessment of such measures as state aid1107 and therefore a state
aid assessment is a barrier to distortions of competition brought about within the
member state renewable support schemes.1108
Support or aid granted by member states may distort competition because it
unfairly strengthens the position of companies that benefit from it, compared to their
competitors. However, as stated in Danish Bottles1109 protection of the environment
is ‘one of the Community's essential objectives’, which, in certain circumstances,
may justify the granting of state aid. State aid can provide incentives to reach the
EU’s targets for a low carbon and energy-efficient economy (the so called ‘circular
economy’).1110 The EU has stated that the rules for environmental state aid allow a
1101
Article 107 (1) TFEU; See Also Case C-487/06 British Aggregates Association v Commission and UK
ECLI:EU:C:2008:757, para 111; See Also Case C-730/79 Philip Morris ECLI:EU:C:1980:209
1102
Subsidies and direct payments (a mechanism which is very important in the renewable energy sector due to the
wide use of feed-in tariffs and other incentives) - Case C-30/59 Steenkolenmijnem v High Authority
ECLI:EU:C:1961:2; Exemption from duties and taxes - Case C-492/14 Essent Belgium NV v Vlaams Gewest and
Others ECLI:EU:C:2016:732; Exemption from para-fiscal charges - Cases C-128/03 and C-129/03 AEM and AEM
Torino v Autorità per l'energia elettrica e per il gas ECLI:EU:C:2005:224, para 38 to 51; Preferential interest rates
– Joined Cases C-278/92 to 280/92 Spain v Commission ECLI:EU:C:1994:325; Guarantees of loans at favourable
rates - Case C-323/82, Intermills SA v Commission ECLI:EU:C:1984:345; Making land or buildings available for
free or at reduced rates – Case C-239/09 Seydaland Vereinnigte Agrabetriebe v BVVG Bodenverwertungs-
undverwaltungs ECLI:EU:C:2010:778; cancelling property and other debts Case C-150/16 Fondul Proprietatea SA
v Complexul Energetic Oltenia SA ECLI:EU:C:2017:388
1103
Case C-39/94 SFEI v La Poste ECLI:EU:C:1996:285, para 60; Case C-342/ 96 Spain v Commission,
1104
Nicole Robins and Tridevi Chakma, ’State Aid in Energy under the Spotlight: The implications of the Hinkley
Point Decision’ (2016) 2 European state aid Quarterly, 247
1105
EU Commission's state aid Scoreboard, available at:
http://ec.europa.eu/competition/state_aid/scoreboard/index_en.html, accessed 29 March 2019
1106
Commission, Decision 2013/269 of 18 December 2013 'State aid SA34947 (2013/C) (ex 2013/N)-United
Kingdom, Investment Contract (early Contract for Difference) for the Hinkley Point C New Nuclear Power Station',
OJ L/109/2015, 269; See also Case T-356/15 Austria v Commission ECLI:EU:T:2018:439
1107
Case C-487/06 British Aggregates Association v Commission and UK ECLI:EU:C:2008:757 para 92
1108
1109
Case 302/86, Commission v Denmark, ECLI:EU:C:1988:421, para 8 & 9
1110
The Circular Economy within the EU is composed of a set of ten key indicators which cover each phase – i.e.
production, consumption, waste management and secondary raw materials – as well as economic aspects –
investments and jobs - and innovation. EU Communication Com(2018) 29 ‘on a monitoring framework for the
circular economy’

broad range of aid measures for environmental protection, whilst ensuring that any
distortions of competition brought about by such measures do not go beyond what
is necessary and acceptable.1111 It has been stated that any market intervention by
public authorities that may affect competition or the internal market1112 should be
assessed against the state aid principles and the requirements sets out in Articles
107-109 TFEU.1113
The 2014 case of Pearle, 1114 set out four criteria to define state aid, these
being an intervention (i) by the State and through State resources, (ii) liable to affect
trade between member states, (iii) conferring an advantage on the recipient and (iv)
distort, or threaten to distort, competition. The application of the Pearle conditions
was refined in Deutsche Bahn v Commission, 1115 where the four criteria were
declared to be separate and cumulative conditions. The General Court reconfirmed
the state aid principles in Alcoa Trasformazioni,1116as follows: -
• the existence of an advantage is not ruled out by the mere fact that
competing undertakings in other member states are in a more favourable
position1117
• that the existence of an advantage must be assessed irrespective of the
competitive playing field in other member states1118
• the very nature of the preferential tariff or payment is enough to conclude
that the undertaking concerned was not bearing all the charges which
should have normally burdened its budget1119
• the existence of an advantage results from the simple description of the
price differentiation mechanism (a compensation mechanism), the purpose
of which is to exonerate a company from the payment of a part of the price
of materials necessary for producing goods that are sold within the EU1120
1111
http://ec.europa.eu/competition/sectors/energy/environment_en.html accessed 30 March 2018
1112
Internal Market is an area without internal frontiers in which the free movement of goods, persons, services
and capital is ensured - Case T-356/15 Austria v Commission ECLI:EU:T:2018:439, para 516
1113
Kaisa Huhta, James Kroeger, Tade Oyewunmi and Piti Eiamchamroonlarp , ‘Legal and Policy issues for
Capacity Remuneration Mechanisms in the Evolving European Internal Market’ (2014) European Energy &
Environmental Law Review, 76, 87
1114
Ambachten ECLI:EU:C:2004:448 para 33
1115
Case T-351/02, Deutsche Bahn v Commission, EU:T:2006:104, para 103
1116
Case T-177/10, Alcoa Trasformazioni v Commission, ECLI:EU:T:2014:897
1117
Ibid, para 85
1118
Ibid, para 82 to 85
1119
Ibid, para 82
1120
Ibid, para 84

• state aid must be assessed on its own merits and not in the light of its
objectives, such as the remediation of imperfect competition on a certain
market1121
A distortion of competition is assumed to exist as soon as the State grants a financial

advantage to an undertaking in a liberalised sector where there is, or could be,
competition – such as the renewable electricity sector.1122 This has been assumed
because the aid improves the competitive position of the recipient compared to other
undertakings with which it competes.1123
In relation to renewable electricity it has been held in Essent1124 that the state
aid needs to comply with the provisions of Articles 30 TFEU [Customs Union] and
110 TFEU [Energy Taxation].
Furthermore, the actions of a member state can be considered state aid
where the State seeks to approximate, by unilateral measures, the conditions of
competition in a particular sector of the economy to those prevailing in other member
states, considering the effect of the measures1125 – Heiser.1126 The Heiser case
gives a good example of the kind of measures that a member state could consider
legitimate in trying to bring about a market where domestic industry faces the same
business environment as foreign competitors. In Heiser the State sought to reduce
energy costs to intensive energy users to the level faced by their major competitors
in the Far East and China (this issue will be considered in detail in Sections 3.5.10
to 3.5.12 using the recent cases of - Vent De Colère,1127 Austrian Green Levy1128
and German Green Levy1129).
The CJEU stated in British Aggregates,1130 that state aid is more than a
simple subsidy or payment, it includes not only positive benefits, but also State
measures which, in various forms, mitigate the charges that are normally included
in the budget of an undertaking and which thus, without the benefit being a subsidy,
1121
Ibid, para 85
1122
Joined Cases T-298/97, T-312/97, T-313/97, T-315/97, T-600/97 to 607/97, T-1/98, T-3/98 to T-6/98 and T-
23/98 Alzetta v Commission ECLI:EU:T:2000:151, para 141-147;Case C-280/00 Altmark Trans GmbH and
Regierungspräsidium Magdeburg v Nahverkehrsgesellschaft Altmark GmbH, and Oberbundesanwalt beim
Bundesverwaltungsgericht ECLI:EU:C:2003:415
1123
Case 730/79 Phillip Morris Holland BV v Commission ECLI:EU:C:1980:209, para 11
1124
Case C-206/06 Essent Netwerk Noord BV v Nederlands Elektriciteit Administratiekantoor BV and Saranne BV
ECLI:EU:C:2008:413, para 40 to 59
1125
Case C-71/09, C-73/09 & C-76/09 Comitato “Venezia vuole vivere” & Others v Commission,
1126
Case C-172/03, Heiser, ECLI:EU:C:2005:130, para 54
1127
ECLI:EU:C:2013:851
1128
Case T-251/11 Austria v Commission, ECLI:EU:T:2014:1060
1129
Case T-47/15 Germany v Commission, ECLI:EU:T:2016:281
1130
Case T-210/02 British Aggregates v Commission ECLI:EU:T:2012:110 para 46

are similar in character or have a similar effect. Therefore, reducing the tax rate,
providing low or zero cost loans, reducing levies or simply paying more for
government contracts could all be defined as state aid.
It is important to understand that state aid need not always be granted
directly by the State (national, region or local government), but can also be found to
exist where aid is provided by public or private bodies designated or established by
the State – Steinike & Weinlig1131 and Sloman Neptun.1132 The rules of state aid are
not circumvented merely through the creation of autonomous institutions charged
with the allocation of aid – France v Commission.1133
It has been held that where an organisation is required to collect funds by
statute or order of the State, and where those funds are held separately and are not
available for the normal activities of the undertaking prior to those funds being
administered as aid to itself or other undertakings for strictly defined purposes and
where those purposes are defined by the State, those funds can be characterised
as state aid – Ladbroke Racing v Commission. 1134 This is an issue which was
considered in relation to renewable electricity in PreussenElektra1135 (See Section
3.5.9).
Specifically, in relation to renewable electricity the Commission has
established state aid for renewable energy to be compatible with Articles 107(3)(c)
TFEU, and as such has published both the General Block Exemption Regulation
(GBER)1136 and the Guidelines on state aid Regarding Environmental Protection and
Energy 2014 to 2020 (EEAG)1137 (outlined in Annex 4 and 5).
The Commission has also declared in relation to investment in network
infrastructure which provides a general benefit, rather than to a specific set of
organisations, such investment is to be regarded as a general measure which does
not amount to state aid.1138
1131
Case 78/76 Steinike & Weinlig v Germany ECLI:EU:C:1977:52, para 21
1132
Case 72/91 & 73/91 Sloman Neptun ECLI:EU:C:1993:97, para 19
1133
Case C-482/99 France v Commission ECLI :EU:C:2002:294, para 23
1134
Case T-67/94, Ladbroke Racing v Commission ECLI:EU:T:1998:7, para 106 to 108
1135
1136
European Union to certain categories of horizontal State aid, OJ 2015 L 248/1, Article 1 (1), a, iii) environmental
protection; and European Commission, Regulation (EU) No651/2014 declaring certain categories of aid
compatible with the internal market in application of Articles 107 and 108 of the Treaty, OJ 2014 L 187/1. ('GBER')
1137
European Commission, Guidelines on State aid for environmental protection and energy 2014-2020, OJ 2014
C 200/1. ('EEAG')
1138
Conor Quigley and Anthony Collins EC state aid Law and Policy (2nd Ed Hart, 2009), 48; See also Case C-
164/02 Netherlands v Commission ECLI:EU:C:2004:54, para 7

3.5 Renewable Energy Directive1139 & Conflicts with EU Free Trade Principles
The main features of the Renewable Energy Directive were outlined in Section
2.10.7. Also set out were the basic conflicts with Treaty provisions that the
Renewable Energy Directive has. It should be recalled that the Renewable Energy
Directive is C&C in style and falls within a shared competency1140 model between
the Commission and the member states. The Directive grants member states a wide
discretion as to the renewables support scheme1141 implemented by the member
state to meet their target within the overall 20% target for renewables across the
EU.1142
This section undertakes a detailed analysis of the conflicts outlined above
using case law and seeks to ascertain if it is the Directive’s style or the nature of the
competency framework which creates conflicts that would not otherwise exist. The
analysis commences with free movement of goods, continues with price fixing and
concludes with various other aspects of state aid.
3.5.1 Free Movement – Flemish1143 Renewables Essent 11144
The Essent 1 case illustrates the conflict between the national renewables support
scheme set up under the Renewables Energy Directive and free movement of
goods.
The Essent 1 case concerned the nature of the Flemish support scheme for
renewable electricity, which issued renewable energy certificates to generators of
renewable electricity only if they were in the Flemish Region of Belgium, and
1139
EU Directive 2009/28/EC 23 April 2009 Promotion of the use of energy from renewable sources OJ L140/16
(Renewable Energy Directive) available at http://eur-lex.europa.eu/legal-
1140
1141
1142
Case C-195/12 IBV & Cie ECLI:EU:C:2013:598
1143
For an introduction to the Belgium electricity market see Damien Verhoeven and Guillaume Possoz, ‘Belgium’
in Peter Cameron and Raphael Heffron (eds) Legal Aspects of EU Energy Regulation (Oxford University Press,
2016)
1144
ELCI:EU:C:2014:2192

subsequently obliged electricity distributors to surrender a minimum amount of such
certificates without being able to offer equivalent certificates obtained in other EU
member states as an alternative. Essent, as an electricity utility, was currently also
sourcing renewable energy from Norway, Denmark, Sweden and the Netherlands.
However, the renewable nature of this imported electricity could not be factored into
any calculations on the amount of electricity supplied due to restrictions within the
Flemish support scheme.
In Essent 1, Advocate General Bot stated the issue to be determined was:
whether the Flemish renewables support scheme is compatible with the free
movement of goods and with the non-discrimination principle. The then in place
Renewable Energy Directive 2001/7716 regulated the framework for the issue of
renewable energy certificates which could be used by a member state to show it
was meeting its obligations to produce a minimum amount of electricity from
renewable sources and the certificates of origin, which allowed electricity distributors
to prove that a required amount of the electricity it was distributing originated from
renewable sources.
Electricity suppliers could purchase renewable energy from other member
states, but, such electricity was often more expensive, and suppliers would still have
to submit the necessary Flemish based ’green’ certificates.
The AG noted that the Court in PreussenElektra 1145 allowed the German
support scheme via a justification under Article 36 TFEU, despite its potentially
discriminatory nature, it also being an implicit reversal of the finding in Cassis de
Dijon,1146 which only allows restrictions to the free movement of goods, where such
restrictions do not discriminate between domestic and imported goods.1147 It might
have been this reversal that led the AG to suggest, finding support in the integration
principle,1148 that the Court in Essent 1 should not make that reversal explicit. The
AG put forward the following as arguments for rejecting the Flemish scheme: -
1145
1146
ECLI:EU:C:1979:42
1147
G van Calster International and EC trade law - The environmental challenge (Cameron May, 2000) 564
1148
Principle 13 ‘In order to achieve a more rational management of resources and thus to improve the
environment, States should adopt an integrated and co-ordinated approach to their development planning so as to
ensure that development is compatible with the need to protect and improve environment for the benefit of their
population’ UN General Assembly, United Nations Conference on the Human Environment, 15 December 1972,
A/RES/2994, available at: http://www.refworld.org/docid/3b00f1c840.html accessed 22 September 2018; See Also
André Nollkaemper ‘Three Conceptions of the Integration Principle in International Environmental Law’ in Andrea
Lenschow (ed) Environmental Policy Integration Greening Sectoral Policies in Europe (Routledge, 2002)

• The Flemish Region violated a promise made at the time the relevant scheme
was approved by the European Commission under state aid rules to develop
and operate an effective market for the certificates
• The scheme contained a 'local production' requirement
• Most importantly the scheme was contrary to the finding in Dassonville that any
trading rules enacted by member states which are capable of hindering, directly
or indirectly, actually or potentially, trade within the EU are measures having an
effect equivalent to quantitative restrictions and thus prohibited by Article 34
TFEU.1149
The Renewable Energy Directive (Directive Article 3(2)) simply requires member
states to put in place a renewables support scheme1150 to ensure the development
of sufficient renewable electricity capacity to reach or exceed the member state’s
national energy target contained in Directive Article 3(3) (See Section 2.10.7). This
fact was used by proponents of support schemes such as the Flemish one, to argue
that discriminative support may be required to assist the industry to work towards
the development of the renewable sector and that a national or regional support
scheme can focus on the needs of renewable generation in a particular country or
region.
The CJEU did not rule on the qualification of the certificates of origin as being
'goods' in their own right or not (despite the Court finding that the certificates were
traded on a market – ‘valued in money and subject of commercial transactions’
criteria to be held as goods (Italian Art Treasures)1151 – finding in a similar manner
to Dassonville1152 that the whisky was the goods and not the certificate of origin),1153
but held that the legislation hinders the free movement of the electricity underlying
the certificates.1154
The CJEU confirmed the following:
1149
Case C-8/74 Procureur du Roi v Benoît and Gustave Dassonville ECLI:EU:C:1974:837, para 5
1150
1151
1152
1153
1154
The following cases showing that the CJEU, on numerous occations has held that Article 34 TFEU prohibits
national legislation which, even at the most simple level, requires a licence for the import of goods from another
member state. Joined Cases C-51/71 to C-54/71 International Fruit Company NV v Produktschap voor groenten
en fruit ECLI:EU:C:1971:128, para 9; Case C-124/81 Commission v UK (UHT milk) ECLI:EU:C:1983:30, para 9;
Case 40/82 Commission v UK ECLI:EU:C:1984:33, para 24; Case C‑304/88 Commission v Belgium
ECLI:EU:C:1990:122, para 9; Case C‑235/91 Commission v Ireland ECLI:EU:C:1992:443, para 5

• The absence of an express reversal of the non-applicability of the ‘Rule of
Reason’ (Cassis de Dijon)1155 to discriminatory measures
• The applicability of the proportionality test1156
• The regime does restrict trade but can, in principle, be justified for
environmental reasons (A justification with a simple application of
ADBHU1157and Danish Bottle)1158
In Essent 1, the final judgement was left to the national court. The CJEU referred
back to the national court the criteria with which the assessment was to be made:
• For the Flemish scheme to meet the proportionality test, it is important that
mechanisms be established which ensure the creation of a genuine market
for certificates in which supply can match demand, reaching some kind of
balance, so that it is possible for the relevant suppliers to obtain certificates
under fair terms.1159
• Furthermore, the fine in the absence of certificate quota fulfilment must not
impose excessive penalties on the traders concerned.1160
The CJEU found there to be an imbalance between foreign and domestic suppliers.
Most of the larger electricity suppliers in the Flemish Region also operate as
generators.1161 This makes the market and its prices subject to the overall corporate
strategy of these supplier/generator undertakings. They choose whether their
producers' certificates are kept for meeting their own obligation to surrender
certificates, being a supplier; or whether these are sold (to competitor suppliers),
via the energy exchange, or via the grid operator, who guarantees a legal minimum
price for certificates. Such varieties of strategies in managing one's certificates stock
are not open to suppliers producing outside of the Flemish Region. Such suppliers
can only buy certificates and must do so to a considerable extent from competitors
on the supply market. These criteria mean that the market is effectively closed, or
servery restricted, for undertakings outside the Flemish region, meaning that
renewable generators within the region are protected from competition in
contravention of one of the core principles of EU law. The market framework put in
1155
ECLI:EU:C:1979:42, para
1156
ECLI:EU:C:2014:2192, para 103
1157
Case 240/83 Procureur de la République v Association de Défense des Brûleurs d'Huiles Usagées
1158
Case 302/86, Commission v Denmark ECLI:EU:C:1988:421, para 8 & 9
1159
Ibid, para 112
1160
Ibid, para 114
1161
Ibid, para 115

place has allowed these generators to have the potential to abuse their dominant
position within the region in contravention with Article 102 TFEU.1162
Alongside the observation that previously the Belgian energy regulator had
refused the surrender of any non-Flemish certificates in satisfaction of the balancing
requirement, it is doubtful that the Flemish regime functions as an open, transparent
and effective market which the CJEU also required in Ålands Vindkraft.1163
In many ways the mechanism is very similar to a standard feed-in tariff
scheme, arguably falling far short of the requirements of the CJEU. However, the
support scheme1164 was allowed and a restriction to free movement upheld by the
Court.1165 The case justified a conflict between the free movement of goods and the
need to implement a nationally focussed scheme which supports the development
of renewable electricity. This and other similar judgements (PreussenElektra,1166
Ålands Vindkraft,1167 Green Network1168 and Essent 21169) raised concerns that a
series of nationally focussed renewables support schemes could lead to sub-
optimal deployment of renewables. Such a topology of support schemes could
increase development in some regions that are not necessarily corresponding to
those best placed in terms of wind or solar resources, thereby increasing energy
costs within the sub-optimal countries and as such leading to higher support
payments.1170 In the face of these higher support payments member states may be
less willing to support optimal schemes in other jurisdictions, leading to further
entrenchment of the nationally focussed regulatory structure.
Overall the Essent 1 case demonstrates a conflict between the Flemish
renewables support scheme set up in accordance with the Renewable Energy
Directive and the free movement of goods. The finding of the CJEU is a simple direct
1162
Renato Nazzini Foundations of European Competition Law: The Objective & Principles of Article 102 (Oxford
1163
1164
1165
ECLI:EU:C:2014:2192, para 131
1166
1167
1168
1169
Case C-492/14 Essent Belgium NV v Vlaams Gewest ECLI:EU:C:2016:732
1170
Fabien Roques,’European Electricity Markets in Crisis: Diagnostic and Way Forward’ (2013) Mission du
Commissariat Général à la Stratégie et à la Prospective available at
http://www.strategie.gouv.fr/sites/strategie.gouv.fr/files/atoms/files/Roques_CGSPreport_12November20131.pdf

application of the ADBHU1171 and Danish Bottle1172 derogation from the requirement
to enforce free movement of goods and in that respect, is easy to understand, as it
is an application of the proportionality rule. In summary the CJEU sought to show
that a free movement restriction had occurred, however, the justification of the
restriction in terms of support for renewable electricity and emissions reduction was
proportionate.
The CJEU has applied a lex specialis approach to resolving the conflict
between the renewable electricity support scheme and EU free trade principles. The
CJEU has therefore dis-applied its interpretative norm which would be to find
against any interpretation that would ‘lead to a result contrary both to the spirit of
the Treaty […] and to its system’.1173
The CJEU seems to have turned away from considering the difference
between discrimination de jure and discrimination de facto.1174What the CJEU has
in effect done is applied a protectionist ring around, what was at the time an
emerging technology, based on the overriding objective 1175 of carbon emissions
reduction, on a lesser of two evils justification, which in an EU context is tested by
proportionality. Thus, the CJEU could be following a Dworkin constructive approach
to interpretation looking at political or moral concerns, related to climate change.1176
It is argued that the C&C nature of the Renewable Energy Directive, in
terms of a national renewables installed capacity target, has driven the need to find
a national solution. As the 2009 Renewable Energy Directive1177 effectively only left
8 years from its effective date in 2012 to the 2020 mandatory target end date, it did
not leave enough time for multilateral discussions in relation to a joint development
agreement and statistical transfer of renewables capacity, followed by a
construction programme. Also, with the 2008 economic crisis still being managed
by most EU member states, putting in place a solution that focussed on the local
1171
1172
1173
Case C-294/83 Les Verts v Parliament ECLI:EU:C:1986:166, para 25
1174
De facto means a situation true in fact, but that is not legally required or sanctioned. In contrast, de jure means
a situation that is in accordance with law.
1175
1176
1177

market and did not involve cash flows external to the national economy was
politically and economically expedient.1178
The Essent 1 case also has implications in relation to the trading of the
certificates and ‘thin’1179 markets which are discussed on Section 3.5.7 below.
3.5.2 Swedish1180 Renewables & Free Movement – Ålands Vindkraft1181
Building from the Essent 1 case the CJEU sought to determine the related Ålands
Vindkraft case. The Ålands Vindkraft case is one of the most academically
discussed1182 of the renewable energy cases and relates to the Swedish authority’s
refusal to allow access to its national renewables support certificate scheme to a
wind farm on an island in Finish sovereign territory in contravention of Article 34
TFEU. 1183 The case illustrates the conflict of the national renewables support
scheme set up under Articles 3(2) and 3(3) of the Renewables Energy Directive with
free movement of goods.
Sweden promotes renewable electricity through a series of different legal
incentives, the most important of which is a quota system for renewable electricity
produced in Sweden, based on a certificate trading system. 1184 The Ålands
1178
David Florysiak and Vidhan Goyal ‘Capital Market Access and Cash Flow Allocation during the Financial
Crisis’ [2016] Asian Finance Association (AsianFA) 2016 Conference ; See Also Victoria Ivashina and David
Scharfstein ‘Bank lending during the financial crisis of 2008’ (2010) 97(3) Journal of Financial Economics, 319;
See Also Manju Puri, Jörg Rocholl and Sascha Steffen ‘Global retail lending in the aftermath of the US financial
crisis: Distinguishing between supply and demand effects’ (2011) 100(3) Journal of Financial Economics 556
1179
A thin market is a market with a low number of buyers and sellers. Since few transactions take place in a thin
market, prices are often more volatile and assets are less liquid. The low number of bids and asks will also
typically result in a larger spread between the two quotes. - https://www.investopedia.com/terms/t/thinmarket.as
1180
For an introduction to the Swedish electricity market see Hans Andreasson, ‘Sweden’ in Peter Cameron and
Raphael Heffron (eds) Legal Aspects of EU Energy Regulation (Oxford University Press, 2016)
1181
1182
Marek Szydło, 'How to reconcile national support for renewable energy with internal market obligations? The
task for the EU legislature after Ålands Vindkraft and Essent' (2015) 52(2) Common Market Law Review, 489;
Anouk van Der Wansem, 'Judgment of the European Court of Justice, 1 July 2014: Case C-573/12, Ålands Vindkraft
AB v. Energimyndigheten' (2015) 42(4) Legal Issues of Economic Integration, 401; Armin Steinbach and Robert
Brückmann, ‘Renewable Energy and the Free Movement of Goods’ (2015) 27(1) Journal of Environmental Law, 1;
Eirini Tsifopoulou, ‘Renewable-Energy Support Schemes in the Case Law of the Court of Justice of the EU:
Tensions Between Trade and Climate Objectives’ (2016) 6(3-4) Climate Law, 264; Dorte Fouquet and Angela
Guarrata, ‘Judgment of 1 st July 2014 in Alands Vindkraft AB v Energimyndigheten Comments on Case C-573/12’
(2014) 1 Renewable Energy Law and Policy Review, 52; Étienne Durand and Malcolm Keay,’ National support for
renewable electricity and the single market in Europe: the Ålands Vindkraft case’ [2014] Oxford Institute for Energy
Studies; Geert van Calster, Climate change and renewable energy as a super trump for EU trade law’ (2014) 1
Renewable Energy Law and Policy Review; Dorte Fouquet and J Nysten, ‘Guarantees of Origin and Green
Electricity Certificates in Flanders and in Sweden national design weaknesses or violation of European rules?
(2013) 3(3) ,European Energy Journal, 72; Alex McLean,’ The ECJ / Ålands case – Implications for National
Renewables Support Systems’ [2014] Energy & Resources; A Sánchez Graells, ’CJEU protects discriminatory
green energy schemes and keeps inconsistency in EU free movement of goods law (C-573/12)’ (2014)
http://howtocrackanut.blogspot.no/2014/07/cjeu-protects-discriminatory-green.html (accessed 10 May 2016); C
Ryckman, “EU Court Allows Discriminatory Green Energy Support Schemes”, National Law Review (2014),
www.natlawreview.com/article/eu-court-allows-discriminatory-green-energy-support-schemes (accessed 1 April
2016); C Banet, ’The EU Court Of Justice rules in favour of Sweden in the Åland Vindkraft Case’ July 2014,
www.ecohz.com/facts-news/news/aaland-case (accessed 1 September 2016)
1183
Laurens Ankersmit, ’Facilitating” Infringments of Article 34TFEU and the Territorial Nature of Green Electricity
Support schemes: Case C-573/12 Ålands Vindkraft v Energimyndigheten’ [2014] European Law
1184
Swedish legal Act No. 2011:1200 imposes on electricity suppliers, certain electricity consumers and energy-
intensive companies to annually acquire renewable energy certificates in relation to the proportion to their
electricity sales and their consumption within a specific time frame (Chapter 4 §§ 1 and 4 Act No. 2011:1200)

Vindkraft case presented the CJEU with a fresh opportunity to rule on the
consistency of EU law with national support schemes for energies produced from
renewable sources.
The Swedish scheme awarded certificates to renewable generation located
in the country. The certificates could be sold to electricity suppliers or to certain
users which are obliged to provide proof of the acquisition of a quota of certificates,
corresponding to a proportion of the electricity supplied. Should the number of
certificates presented be lower than the quota obligation, a balancing fee or cash
out price was levied to make up the shortfall.
Ålands Vindkraft is the operator of a wind farm located on an island in the
sovereign territory of Finland. The island is, however, connected to the Swedish
electricity distribution system, and thus Ålands Vindkraft applied to the Swedish
authorities to obtain green certificates pursuant to the Swedish scheme. The
application was refused by the Swedish energy regulator (Energimyndigheten)
because the scheme is open solely to electricity generation installations located in
Sweden.
In the annulment proceedings brought by Ålands Vindkraft it argued that the
Swedish scheme runs counter to the principle of free movement of goods.
According to Ålands Vindkraft, the effect of the scheme was that approximately 18%
of Swedish electricity consumption was reserved for renewable electricity producers
located in Sweden, to the detriment of imported electricity.
In formulating his opinion Advocate General Bot1185 set out the principles
upon which the renewables regulation regime should be derived and therefore set
out from the preamble of the Renewables Energy Directive that the EU’s renewables
regulatory framework puts together a series of measures which seek to reduce
overall energy consumption, increase efficiency of energy usage and in so doing
reduce carbon emissions. 1186 The AG noted that member states have a wide
discretion when it comes to implementing the policies to support renewable
generation and that the directive simply lays down a common framework.1187 The
AG was clear that the Renewable Energy Directive does permit territorial restrictions
on schemes to support renewable energy, this being demonstrated by a literal
interpretation1188 of the Directive and by its general structure and objectives.1189
1185
Opinion of AG Bot in Case C-573/12 Ålands Vindkraft AB v Energimyndigheten ECLI:EU:C:2014:37, para 10
1186
Recital 1, Renewable Energy Directive 2009/28
1187
SWD(2012) 164 final, “Commission staff working document — Renewable energy: a major player in the
European energy market “, para 3.1 pg 8
1188
Interpretation of legal instruments based on their wording in the ordinary meaning of the text, sometimes
known as the ligiustic approach – Giulio Itzcovich, ‘The Interpretation of Community Law by the European Court of
Justice’ (2009) 10(5) German Law Journal, 537
1189
Opinion of AG Bot in Case C-573/12 Ålands Vindkraft AB v Energimyndigheten ECLI:EU:C:2014:37 para 44
and 51

The AG further considered the limited effects attributed to guarantees of
origin. Although the Directive lays down an obligation of mutual recognition in
respect of such guarantees, it expressly limits the effect of guarantees issued by
other member states, noting in Article 15(9) of the Directive, that certificates are
guarantees of origin and do not by themselves confer a right to benefit from national
support schemes.1190
The AG also considered if Directive Article 3(3) and thus nationally focussed
renewables support arrangements are compatible with the provisions of Article 34
TFEU (quantitative restrictions on free movement) and to what extent primary EU
law contained in the Treaty takes precedence over the secondary law contained in
the Renewable Energy Directive. 1191
The AG confirmed his view of the primacy of the Treaty by stating that
secondary law must be assessed by reference to the rules of primary law and
specifically freedom of movement in this case. 1192
The AG, however, did not consider that Article 194(1) TFEU obliges member
states to promote the development of renewable energy and that there is not a
hierarchy of Treaty articles. Hence the Renewable Energy Directive in its drafting
did not give equal weight to the free movement Articles (28 to 35 TFEU) and the
energy Article (194 TFEU). It therefore seems that the Directive has failed to take
account of the case-law that the prohibition, laid down in Article 34 TFEU,
(quantitative restrictions and of measures having equivalent effect) ‘applies not only
to national measures but also to measures adopted by the institutions of the EU’,1193
which ‘themselves must also have due regard to freedom of trade [between member
states], which is a fundamental principle of the common market’.1194 In other words,
interpretation should be such, that provisions of the Treaty take precedence. 1195
The AG also went on to confirm1196 that any national measure in a sphere
which has been the subject of exhaustive harmonisation at EU level must be
assessed in the light of that harmonisation measure and not in the light of primary
law.1197 It should be noted, however, that in practice the renewable support schemes
are not harmonised across the EU and that this may be some time away (see
1190
Ibid para 48
1191
Ibid para 45
1192
1193
Case C-59/11 Association Kokopelli v Graines Baumaux SAS ECLI:EU:C:2012:447, para 80
1194
Case C-37/83 Rewe-Zentral AG v Direktor der Landwirtschaftskammer Rheinland ECLI:EU:C:1984:89, para
18
1195
Case C-305/05 Ordre des barreaux francophones et germanophone and Others v Conseil des Ministres
1196
1197
Case C-216/11 Commission v France ECLI:EU:C:2013:162, para 27

Section 2.12). It has been argued that this lack of harmonisation is the justification
for the imposition of strict territorial boundaries to renewable support schemes so
that producers do not simply apply for support from the most advantageous scheme
whilst locating in the cheapest country to develop renewable schemes (with
transport losses or constraints on the electricity transmission system dissipating the
benefit).1198
1199
The AG ultimately finding that the Dassonville formula was
persuasive.1200 The AG pointed1201 out that the Swedish renewable scheme granted
renewable certificates which were tradeable and as such conferred an advantage
to domestically produced electricity, when electricity producers located in other
member states did not have access to the green certificate scheme when they
export renewable electricity therefore this constitutes a discriminatory restriction on
the free movement of goods, which, as such, is prohibited by Article 34 TFEU. The
AG did not, however, consider if such an allocation of certificates could also be
considered an advantage conferred on certain undertakings in contravention of
Article 107(1) TFEU and as such be considered state aid and thus prohibited.
Consistent with the AG’s opinion in Essent 1, 1202 he argued 1203 that a
renewables regime which is in breach of Article 34 TFEU may be justified under
environmental policy provided the regime is able to pass a particularly rigorous
proportionality test.
The AG concluded that an attempt to justify infringement of the provisions of
the TFEU relating to the free movement of goods by reference to the wording of a
lower-ranking rule of law is not justified.1204 The AG stated that one of the four
elements of the EU’s environmental policy, set out in Article 191(1) TFEU, is
’prudent and rational utilisation of natural resources’ and as such the development
of cross-border trade in renewable electricity which would result from making
national support schemes accessible to optimally priced facilities.1205
Despite the AG not pointing out that Norway and Sweden already have a
joint certificate scheme which could have been expanded to include Finland, he
1198
Ingg Margrete Ydersbond and Thea Sveen, ‘The Aland Case and the Future of Renewables in Europe’. Energi
Klima. Available at www.energiogklima.no/kommentar/the-aland-case-and-the-future-of-renewables-in-Europe.
Accessed on 26 April, 2016
1199
Case C-8/74 Procureur du Roi v Benoît and Gustave Dassonville ECLI:EU:C :1974:837, para 5 - capable of
hindering, directly or indirectly, actually or potentially, trade are prohibited
1200
1201
1202
Case C-204/12, Essent Belgium NV v Vlaamse Reguleringsinstantie voor de Elektriciteits- en Gasmarkt -
ECLI:EU:C:2014:2192
1203
1204
Opinion of AG Bot in Case C-573/12 Ålands Vindkraft AB v Energimyndigheten, ECLI:EU:C:2014:37, para 90
1205
Ibid para 104

concluded that allowing a scheme which prohibited free movements could not be
justified.1206
Overall the AG has applied a lex superior approach to the interpretation and
resolution of the dispute, holding that the dispute had to be determined in favour of
the provisions of the Treaty and not a lex specialis approach finding the Directive to
be the instrument with more weight in the resolution of the legal conflict.
The CJEU agreed with the AG in holding that limiting renewable energy
support schemes to renewable energy generators on a national basis constitutes a
restriction in accordance with the provisions of free movement of goods. 1207 The
Court holding that, as specified under Article 3(3) of the Renewable Energy
Directive, member states have the right to decide, in accordance with Article 5 and
11 of the Directive, to what extent they will support energy from renewable sources
located in other member states.1208
Additionally, the Court held that Recital 25 of the Renewables Directive
allows member states to limit their support schemes 1209 to nationally produced
electricity to focus the support schemes to help meet the national renewable targets
set out in the Directive. The Court held it essential that member states can
determine whether, and to what extent, their national support schemes are to
include renewable energy produced in other member states.1210
The Court confirmed it to be established case law1211 that Article 34 TFEU
applies to, and prohibits any national measure capable of hindering, directly or
indirectly, actually or potentially, intra EU trade. 1212 The Court stating that the
Swedish legislation had hindered imports of renewable electricity from other member
states and as such was in conflict with Article 34 TFEU.1213 However, in the absence
of an international agreement allowing certificates from other countries to be used,
only certificates awarded under the national scheme can be used to meet the
obligation.1214 The Court also held that the scheme allowed the supply of electricity
1206
Ibid para 128
1207
Case C-573/12, Ålands Vindkraft AB v Energimyndigheten ECLI:EU:C:2014:2037, para 67
1208
Ibid para 54
1209
1210 I
bid para 50
1211
Case C-8/74 Procureur du Roi v Benoît and Gustave Dassonville ECLI:EU:C:1974:837,para. 5, and Case C-
379/98 PreussenElektra, para. 69.
1212
Case C-573/12, Ålands Vindkraft AB v Energimyndigheten ECLI:EU:C:2014:2037, para. 66.
1213
Ibid, para. 67
1214
Ibid, para. 67 70

to users in combination with renewable certificates as a package, a commercial
opportunity not available to suppliers from outside Sweden.1215
The Court noted that the Swedish legislation contains an annual obligation
to surrender to the regulatory authority a number of electricity certificates
corresponding to the total volume of electricity supplied or consumed, failing which
a balancing fee is payable.1216 The CJEU held a market existed where certificates
could be traded on fair terms and as such was proportionate.1217
The Court stated that the Swedish legislation constituted a quantitative
restriction on imports, and potentially incompatible with Article 34 TFEU. 1218
However, the Court went on to justify the quantitative restriction, finding that it was
necessary and proportionate to attain the objective of promoting the development of
renewable electricity facilities.1219
The Court summarised its reasons in favour of the support scheme,1220
• due to a lack of support scheme harmonisation at EU level and as such

member states can limit access to support schemes to renewable electricity
being produced in their territory,1221
• it is reasonable for a national support scheme to be designed to directly
favour the production of renewable electricity rather than the consumption,
as it is at the production stage that the environmental objectives in terms of
carbon emission reduction can be pursued,1222
• the EU's international climate commitments require the maximising of the
use of renewable energy, therefore justifying the development of a
renewables regime in each member state,1223
• that it is essential for member states to be able to control the costs of their
renewables support schemes, whilst maintaining investor confidence; 1224
and
• that there are various mechanisms to enable member states to co-operate,
so far as is possible, to achieve their mandatory targets under the Renewable
1215
Ibid, para 71 -73
1216
Ibid, para 105-106
1217
Ibid, para 115
1218
Ibid, para 75
1219
Ibid, para 92
1220
Ibid, para 104
1221
Ibid, para 94
1222
Ibid, para 95
1223
Ibid, para 98
1224
Ibid, para 99

Energy Directive, which would not be invalidated, if an opening of support
schemes was made mandatory by the CJEU.1225
The Court again used a lex specialis approach to resolve the conflict between the
Renewable Energy Directive and the provisions of the Treaty by simply applying the
ADBHU1226and Danish Bottle1227 findings as was done in Essent 11228 – renewable
energy is an EU ‘overriding objective’, which may justify certain limitations of the
principle of free movement of goods.
Accordingly, it seems that the Court's general position regarding the
possibility of justifying restrictions on trade within the EU is that they can be justified
as an express derogation – the lex specialis approach. 1229 The Court simply
confirmed that situations capable of hindering intra-EU trade may be justified by the
overriding objective1230 of environmental protection. Consequently, case law seems
to have put in place an extension of the grounds for a derogation related to free
movement of goods.1231 This extension to the grounds for derogation was seen as a
long-term regulatory risk by Developer Operators during the empirical research.
In looking at the judgement, wider EU law must be considered. An example
of the issues, not considered by the AG or the CJEU, would be the implications of
the network development provisions contained in Articles 170 to 172 TFEU. The
network development provisions are put in place to facilitate the objectives of Article
26 TFEU (internal market) 1232 and Article 174 (social cohesion) again issues not
considered by the AG or the CJEU. As the proposed renewables facility was on a
remote island not connected to the electricity network of its host country,
incentivising the facility to be developed would have complied with the policy
objectives of integrating remote islands and peripheral regions to the central regions
of the EU contained in Article 170(2) TFEU. Additionally, the facility would have
complied with the objectives set out in the Electricity Market Directive where it states
1225
Ibid, para 100
1226
1227
Case 302/86 Commission v Denmark ECLI:EU:C:1988:421, para 8 & 9
1228
C-204/12 Essent Belgium NV v Vlaamse Reguleringsinstantie voor de Elektriciteits- en Gasmarkt ELCI:EU:
C:2014:2192
1229
Opinion of Advocate General Bot (2013), Joined Cases C-204/12 to C-208/12, Essent Belgium NV v Vlaamse
Reguleringsinstantie voor de Elektriciteits- en Gasmarkt ECLI:EU:C:2013:294 , para. 87 and relevant case law
such as e.g. the Judgment in Case C-17/92 Federación de Distribuidores Cinematográficos v Estado Español
and Unión de Productores de Cine y Televisión ECLI:EU:C:1993:172, para 16
1230
1231
Opinion of AG Bot in Essent 1, para. 88.
1232

‘cross-border interconnections should be further developed in order to secure the
supply of all energy sources at the most competitive prices to consumers and
industry within the Community’ and ‘paying special attention to the most isolated
countries and regions’.1233 In an economic study conducted for the Commission in
2013 it was stated that the annual net economic returns from the completion of the
integration of the electricity market are in the range of EUR 12.5-40 billion per year
by 2030.1234 In relation to Ålands Vindkraft as a company the lack of consideration
of the network provisions and the failure of the Courts to consider these provisions
in any proportionality test could be grounds for an appeal.
Within the empirical phase of this research many of the respondents referred
to the need to enhance interconnection as a requirement for the future of renewable
generation and as such the CJEU’s findings on a simple ADBHU1235and Danish
Bottle,1236 lex specialis basis as was done in Essent 1,1237 is considered a definite
opportunity missed.
This failure is all the more important when consideration is given to the
comments from Commissioner Margrethe Vestager, in charge of competition policy,
in the context of a restriction in transmission capacity when it was said:
Energy should flow freely in Europe so that the
electricity produced by a wind mill in one country can
reach the consumers in another.1238
Also, in determining Ålands case the CJEU has ignored EU Commission 2010
decision rendering legally binding commitments offered by Svenska Kraftnät (SvK)
that increased trade in electricity between Sweden and neighbouring countries
contributing to a better allocation of resources and, ultimately, to lower prices for
customers and end consumers.1239 The development of the Ålands Vindkraft wind
farm would have brought about benefits in the form of financial and material
contributions1240 to the local community’s interconnection with the central regions of
the EU (Article 170(2) TFEU).
1233
EU Directive 2009/72 (Electricity Markets Directive), Recitals 5 and 6
1234
Directorate-General Energy European Commission, Booz & Co, “Benefits of an Integrated European Energy
Market”, July 2013 – available at
https://ec.europa.eu/energy/sites/ener/files/documents/20130902_energy_integration_benefits.pdf
1235
1236
1237
C:2014:2192
1238
P/18/2122 Commission Investigation TenneT TSO GmbH's – 19 March 2018 available at
1239
IP/10/425 Commission Decision Transmission Capacity from Svenska Kraftnät for Sweeden – 14 April 2010
available at http://europa.eu/rapid/press-release_IP-10-425_en.htm#top-page accessed 4 April 2018
1240
Gillian Bristow, Richard Cowell and Max Munday,’Windfalls for Whom? The Evolving Notion of “Community” in
Community Benefits Provisions from Wind Farms’ (2012) 43 Geoforum, 1108,1108

Furthermore, the Court failed to find a solution to the issue by building on the
already established Norwegian-Swedish 1241 electricity ‘green certificate’ trading
scheme, operational since January 2012, by seeking to either include Finland or
simply including externally interconnected electricity facilities such as those on the
island. This is seen as all the more of a failure, as several cooperation activities and
trading schemes had been in consideration prior to 2012.1242 As an example, Italy
1243
imports renewable electricity from Serbia, thereby covering part of its
renewables production target as specified under the Renewable Energy
Directive. 1244 It has been argued that additional benefits can be achieved by
cooperation between member states and neighbouring countries under the EU’s
renewables energy framework, either as a harmonised set of regulations across all
1245
EU member states or via cooperation schemes. Such a framework would
address barriers to expansion of renewable facilities more economically and
effectively than an unco-ordinated approach at member state level. 1246 Another
benefit of such a structure is that it effectively exports EU technical standards and
a regulatory model for the renewables sector to its neighbours.1247
However, the judgement does nothing to move the EU or member states to
seek a harmonised regulatory framework for renewable energy which would provide
a clear and predictable legal framework for investors in renewable energy
facilities. 1248 The desire for a harmonised renewable support scheme 1249 was a
1241
Corinna Klessmann, Erika de Visser, Fabian Wigand, Malte Gephart, Gustav Resch and Sebastian Busch,
‘Cooperation between EU member states under the RES Directive. Task 1 Report (2014)’,
accessed 1 July 2016, 2; See also Henrik Klinge Jacobsen, Lise Lotte Pade, Sascha Thorsten, Schröder Lena
Kitzing, ‘Cooperation Mechanisms to Achieve EU Renewable Targets’ (2014) 63 Renewable Energy 345, 351
1242
Lena Kitzing, Catherine Mitchell and Poul Erik Morthorst, ‘Renewable Energy Policies in Europe: Converging
or Diverging?’ (2012) 51 Energy Policy, 192, 199
1243
Ibid
1244
1245
Jan Steinbach, Mario Ragwitz, Veit Bürger, Liv Becker, Lukas Kranzl, Marcus Hummel, Andreas Müller,
‘Analysis of Harmonisation Options for Renewable Heating Support Policies in the European Union’ (2013) 59
Energy Policy 59
1246
Ibid, 61; See Also Peter Cameron, ‘The Internal Energy Market – Redefining Objectives’ Peter Cameron and
Raphael Heffron (eds) Legal Aspects of EU Energy Regulation (Oxford University Press, 2016), 16
1247
Tom Casier, ’The Geopolitics of the EU’s Decarbonization Strategy: A Bird’s Eye Perspective’, in Claire
Dupont and Sebastian Oberthür (eds) Decarbonization in the European Union: Internal Policies and External
Strategies (Palgrave Macmillan, 2015), 159; See Also Alexander Mirtchev ‘The Greening of Geopolitics’ [2013]
European Energy Review, 2
1248
Laurens Ankersmit, ‘”Facilitating” Infringments of Article 34TFEU and the Territorial Nature of Green Electricity
Support schemes: Case C-573/12 Ålands Vindkraft v Energimyndigheten’ [2014] European Law
1249

theme which emerged from the Developer Operator respondents during the
empirical research.
Additionally, the Ålands Vindkraft judgement is significant for the future
development of renewable support schemes as it expands the Court's previous
findings with regards to the proportionality of nationally restricted support
schemes 1250 as well as the possibility of using the overriding objective of
environmental protection1251 to justify restrictions on the free movement of goods,
which has already been accepted in several other cases.1252 Thus the CJEU could
in using this lex specialis approach could be following a Dworkin constructive
approach to interpretation looking at political or moral concerns, related to climate
change.1253
The focus of the case, as presented to the CJEU, was on the interaction of
the national renewables regime and the free movement of goods. However,
reflecting on the potentially large capital flows needed to develop renewable
electricity facilities in the coming years, neither party seems to have considered that
the restriction on the developer is also a restriction on the free movement of capital.
Article 63 TFEU protects the free movement of capital, thus aiming at a situation in
which business owners can obtain capital and investors can offer their disposable
capital in the country where conditions are best, without restriction.1254
Ultimately it is capital flows and the willingness to invest which will determine
the success in achieving the EU’s climate change objectives. Simply allowing
undertakings to develop renewable generation in locations with the best wind and
solar resources, and therefore low cost, which can be transmitted to consumers was
also a theme brought out during the empirical research.1255 The CJEU has therefore
reinforced the diagonal conflict between the provisions of the Renewable Energy
1250
Case C-573/12, Ålands Vindkraft AB v Energimyndigheten, ECLI:EU:C:2014:2037 para 84
1251
1252
Example cases covering free movement, competition and state aid - Case C-379/98 PreussenElektra AG v
Schleswag AG, in the presence of Windpark Reußenköge GmbH & Land Schleswig-Holstein
ECLI:EU:C:2001:160 ; C-204/12 Essent Belgium NV v Vlaamse Reguleringsinstantie voor de Elektriciteits- en
Gasmarkt ECLI;U:C:2014:2192 ; Case C-573/12, Ålands Vindkraft AB v Energimyndigheten ECLI:EU:C:2014:203;
Case C-492/14 Essent Belgium NV v Vlaams Gewest ECLI:EU:C:2016:732; Case C-262/12, Association Vent De
Colère Fédération nationale v Ministre de l’Écologie, du Développement durable, des Transports et du Logement,
Ministre de l’Économie, des Finances et de l’Industrie, ECLI:EU:C:2013:85; Case T-251/11 Austria v
Commission, ECLI:EU:T:2014:1060 ; Case C-275/13, Elcogas SA v Adminstracion del Estado & Iberdrola SA,
ECLI:EU:C:2014:2314; Case T-47/15 Germany v Commission, ECLI:EU:T:2016:281; Case C-393/92, Gemeente
Almelo v NV Energiebedriif Ijsselmij ECLI:EU:C:1994:171
1253
1254
W Molle, The Economics of European Integration: Theory, practice, policy (Ashgate, 2006), 218
1255
A Sánchez Graells, ‘CJEU protects discriminatory green energy schemes and keeps inconsistency in EU free
movement of goods law (C-573/12), (2014) http://howtocrackanut.blogspot.no/2014/07/cjeu-protects-
discriminatory-green.html (accessed 10 May 2016)

Directive1256 and free movement; rather than breaking the conflict down to assist in
the development of renewable energy schemes in the most appropriate location
from a wind and solar resources point of view.
The Court’s considerations relating to proportionality can be seen as
focusing on how the current system operates, rather than considering if there are
better alternative schemes that could be put in place.1257 The judgement placed
considerable emphasis on the market mechanisms for the green certificates and as
such the proportionality test was specific to the facts of the case creating long-term
regulatory uncertainty due to the need to develop renewable resources wherever
possible to meet the Paris COP 21 obligations. It is argued that the judgement should
not form a precedent that can be applied generally,1258 however, it has been used
as a precedent in German Green Levy,1259 and Essent 21260 to name but two.
Also, the restriction in obtaining access to another member state’s
renewables support scheme, such as was appealed in Ålands Vindkraft, remains
widespread across the EU in 2018, with this model being used in the 2018
‘concession’1261 tendering round taking place in, of all places, Finland, where access
to the renewables support scheme is restricted to projects within Finland or Finnish
territorial waters.1262
The ‘law’ of unintended consequences can be seen to be in operation
generally with regards to the provision of subsidies within the renewable energy
sector. It seems clear that EU member states do not want electricity which has
received a subsidy, paid for by their domestic consumers, to be exported. This issue
can be regarded as creating a regulatory volatility as the potential change in the
regulatory position is not readily forecastable.1263
1256
1257
C Ryckman, ‘EU Court Allows Discriminatory Green Energy Support Schemes’, (2014) National Law Review
http://www.natlawreview.com/article/eu-court-allows-discriminatory-green-energy-support-schemes (accessed 1
April 2016)
1258
Catherine Banet, ‘The EU Court Of Justice rules in favour of Sweden in the Åland Vindkraft Case’, July 2014,
http://www.ecohz.com/facts-news/news/aaland-case (accessed 1 September 2016)
1259
Case T-47/15 Germany v Commission ECLI:EU:T:2016:281
1260
1261
From 2016 renewable electricity projects are required to enter an auction process such that the lowest cost
projects would receive price support at the price the project has bid into the auction. The resulting renewables
support scheme instrument is a contract for difference in accordance with Renewable Energy Directive Article
3(2); See European Commission guidance for the design of renewables support schemes, SWD(2013) 439 final;
COM(2015)80 final; http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=COM:2015:80:FIN
1262
The concession tendering round established in accordance with the Finnish Electricity Produced from
Renewable Energy Sources Act (1396/2010): See Sanna-Mari Seppälä ‘Renewable Energy Tenders are Won by
Well-Planned Projects’ [2018] Castrén & Snellman available at https://www.castren.fi/blogandnews/news-
2018/renewable-energy-tenders-are-won-by-well-planned-projects/ accessed 25 October 2018
1263
Svenn Jensen, Kristina Mohliny, Karen Pittelz, and Thomas Sterner, ‘An introduction to the green paradox: the
unintended consequences of climate policies’ (2015) 9 Review of Environmental Economics and Policy, 246

In a wider context, a series of organisations have made comments on the
judgement, to the effect that the EU should develop a regulatory framework which
supports renewables through an increased use of ‘cooperation mechanisms and
better market integration in line with the energy and environment state aid
guidelines’.1264 It has also been pointed out that the judgement in Ålands Vindkraft
allows the ‘continuation of protectionist electricity support schemes which encourage
electricity producers to go for the highest subsidies and not the most cost-efficient
new renewables’.1265 The European Wind Energy Association in contrast supported
the judgement, by stating the ruling brought clarity to the EU’s regulatory framework
for renewable wind power.1266 However, the European Wind Energy Association
does not make mention of the diagonal conflicts with wider EU law and the potential
for the ‘overriding requirement of environmental protection’1267 to be superseded,
thereby bringing an end to the regulatory framework that has effectively removed
renewable electricity from the need to compete for dispatch, or, on price, with the
rest of the electricity industry.
Such a situation may well be sustainable when the objective of the
Renewable Energy Directive1268 is the achievement of a target 20% of generation
from renewable sources by 2020. However, with the need to increase this level by
20301269 and 20501270 to achieve the Paris COP 21 agreement target of restricting
temperature rise to 20C, renewables will be the modal generation form. The empirical
research set out in Chapter 5 outlines the concerns of market operators related to a
paradigm shift in the regulatory framework – this is regarded as regulatory volatility
in that the change in the regulatory framework is not forecastable. Therefore, the
outcome in this case is not seen as positive in terms of regulatory certainty by
respondents to this research.
1264
EURELECTRIC Secretary General Hans ten Berge http://www.eurelectric.org/news/2014/efforts-towards-
europeanisation-of-res-policies-remain-crucial,-eurelectric-reaffirms/
1265
Renewable Energy CS International http://www.recs.org/news/european-court-of-justice-rules-against-the-
advocate-general-s-opinion-in-alands-vindkraft-case
1266
Justin Wilkes Deputy Executive Officer of The European Wind Energy Association
1267
Case C-573/12, Ålands Vindkraft AB v Energimyndigheten, ECLI:EU:C:2014:2037 para 76 and 80
1268
1269
1270

3.5.3 Acceptance of Foreign Certificates & External competence of EU -
Green Network1271
A third case related to the diagonal conflict between the Renewable Energy
Directive1272 and free movement of goods and very much building on the findings in
Essent 11273 and Ålands Vindkraft1274 is Green Network. The Green Network case
relates to the recognition of a certificate of origin similar to Dassonville.1275 Whilst
Ålands Vindkraft1276 related to the refusal by a member state to allow renewable
electricity from another member state to have access to its green certificate scheme,
Green Network looks at the refusal of the Commission to allow recognition of a
certificate of origin for renewable electricity from non-EU member country
(Switzerland) to be recognised by a utility company in a member state, namely Italy.
The case is important as at the time Italy was also importing renewable electricity
from Serbia, a practice which manged to be unaffected by this dispute. 1277
An Italian energy company, Green Network SpA (‘Green Network’), imported
renewable electricity from Switzerland. Under Italian law, energy companies were
required to purchase a certain number of green certificates each year but could
seek an exemption where they imported renewable energy from countries with
analogous laws promoting renewable energy. Where the exporting country was not
a member of the EU, the exemption was available only upon prior agreement
between the importing and exporting countries regarding recognition of guarantees
of origin. When Green Network requested an exemption from its obligation to
purchase green certificates, the Italian transmission system operator rejected the
request because there was no agreement regarding guarantees of origin between
Italy and Switzerland at the time the renewable energy was imported. Green
Network brought an action via the Italian courts, which was dismissed. Green
Network appealed the dismissal, because the Italian grid operator had a technical
1271
1272
1273
ELCI:EU:C:2014:2192
1274
1275
1276
1277
Lena Kitzing, Catherine Mitchell and Poul Erik Morthorst, ‘Renewable Energy Policies in Europe: Converging
or Diverging?’ (2012) 51 Energy Policy, 192, 199; See Also http://www.balkaninsight.com/en/article/serbia-italy-
sign-energy-deal

cooperation agreement in place with Switzerland in relation to flows across the
electricity network interconnections between the two countries.
The Italian appeals court sought a preliminary ruling from the CJEU, inter
alia, whether the Italian law related to the recognition of the green certificates from
a non-EU country conflicted with Renewable Energy Directive 1278 and other
elements of the EU’s renewable energy regulatory framework.
The CJEU firstly held that the exclusive competence 1279 to put in place
external agreements for the recognition of renewable schemes from third countries
1280
rested with the Commission, even though a free trade agreement existed
between Switzerland and the EU.1281
Secondly the CJEU held that a technical support agreement related to
electricity dispatch1282 between transmission system operators did not constitute an
intention between the two countries to form a binding renewable electricity origins
recognition agreement,1283 which in any case would be void as the member state
had no competence in this area.
This judgement seems to have misplaced the ‘overriding objective’1284 of
reducing carbon emissions in favour of a legal technical requirement to put in place
a recognition agreement. Never-the-less the CJEU has confirmed that the
Commission holds the competence to put in place renewable electricity origin
recognition agreements with the EU’s neighbours. It is known that the Renewable
Energy Directive has a shared competence structure and is C&C in nature, this
judgement confirms an element of the competence split between the Commission
and the member state. This judgement shows that whilst the member states have
1278
1279
1280
Ibid, para 65
1281
Switzerland & EU Free Trade Agreement, 22 July 1972 OJ L 300, 31/12/1972 available at
http://trade.ec.europa.eu/doclib/docs/2007/january/tradoc_133045.pdf accessed 20 August 2018
1282
1283
Case C‑66/13 Green Network SpA v Autorità per l’energia elettrica e il gas ECLI:EU:C:2014:2399, para 74;
the Court stating the issue was the same as was analysed in Case C-22/70 Commission v Council (European
Road Transport Agreement) ECLI:EU:C:1971:32
1284

competence to determine renewable electricity support schemes within their
sovereign territory, should member states seek to support renewable electricity
facilities in non-member states the Commission has the competence to put in place
the recognition agreement.
This judgement has also failed to take account of the duty to promote the
development of renewable energy contained in Article 194(1)(c) TFEU. Also, the
CJEU has fettered the member state’s competence to determine between different
energy sources and the general structure of its energy supply contained in Article
194(2) TFEU.
The requirement for recognition agreements being all the more pressing as
the Paris COP 21 commitments become effective upon the EU and its member
states.
Most importantly the CJEU has failed to recognise the member state’s
competence to conclude international agreements set out in Article 191(4) TFEU in
relation to environmental protection, which could extend to the promotion of
renewable electricity generation.
The outcome of this case is unsatisfactory on several levels. Firstly, the
confirmation of the Commission’s exclusive competence to put in place renewables
recognition agreements with non-EU countries seems to place an unnecessary layer
of administration into the process. Secondly the Commission is not known to have
in place a protocol or guidance document on how a member state should request
such a recognition agreement and how the Commission will then seek to negotiate
such an agreement. Thirdly the negotiation of such an agreement by national or EU
institutions is suggested to place an unnecessary delay into the system, when
speedy recognition is needed to allow the conclusion of applicable renewable
support schemes on a utility company to utility company basis. This bilateral utility
to utility negotiation is believed to become increasingly important for an industry that
is likely to move to a position where renewable electricity facilities are developed on
the back of power purchase agreements (PPA) between the facility’s owner and the
consumer of the electricity (the so called corporate PPA), 1285 especially as the
1285
The fact of the numerous corporate law firms that have reports (‘how to documents’) on this subject on their
web sites shows how important this is to the developers of renewable electricity - Baker McKenzie ‘The Rise of
Corporate PPAs; A New Driver for Renewables’ [2018] https://www.bakermckenzie.com/-/media/...corporate-
ppas/risecorporateppas.pdf?; Norton Rose Fulbright ‘Corporate renewable PPAs – a framework for the future?’
[2017] http://www.nortonrosefulbright.com/knowledge/publications/149117/corporate-renewable-ppas-a-
framework-for-the-future; DLA Piper ‘Corporate Power Purchase Agreements (PPAs): What are they?’ [2016]
https://www.dlapiper.com/en/uk/insights/publications/2016/06/renewable-energy-global-paper/what-are-corporate-
power-purchase-agreements-ppa/; Bird & Bird ‘Corporate PPAs: An International Perspective’ [2017]
https://www.twobirds.com/~/media/articles/international-corporate-ppas-brochure.pdf?la=en; CMS ‘Unlocking the
Corporate PPA Market’ [2018] https://cms.law/en/GBR/Events/Breakfast-Seminar-Unlocking-the-Corporate-PPAs-
Market

industry moves to a subsidy free future and the importance of revenue enhancing
support schemes recedes.1286
3.5.4 Free Movement of Goods – purchase criteria – Public Procurement &

the German Stadtwerke1287 System
The procurement of electricity by public bodies either for their own consumption or
consumption by others is an increasingly important issue. The purchase of electricity
by public bodies falls within the EU’s public procurement regulatory framework. A
very important group in this context is the German Stadtwerke system as they can
directly support the development of renewable electricity facilities via the purchase
criteria and pricing mechanisms applied – especially important as renewables
moves from a regulatory regime of state intervention via member state sponsored
support scheme, to a corporate power purchase agreement regime. As an example
of the volume of wind energy being sold via the corporate power purchase
agreement route it has been reported that some 235MW of capacity is subject to this
arrangement in the UK.1288
Public procurement rules have the same basic objectives as the rules
prohibiting state aid (Article 107 TFEU): both seek to prevent distortions to
competition caused by the behaviour of public authorities, 1289 yet they protect
competition by preventing different kinds of behaviour. Public procurement rules
prohibit the granting of discriminatory rights and privileges in the form of contracts,
1286
1287
Stadtwerke are communal companies, owned by a city or region, which offers public services for to the city
and/or the region. For example Stadtwerke München (Munich City Utilities) or SWM is a German communal
company, owned by the city of Munich, which offers public services for the city and the region of Munich. The
company supplies electricity for more than 95% of Munich's 750.000 households[3] as well as natural gas,
drinking water and, through its stake in the M-net Telekommunikations, telecommunications services. SWM is
Europe's largest municipal utility company and ranks among Germany's principal energy providers. Expanding
use of renewable energy has been a central element in the company's strategy since 2008. – Sophie Vorrath, ‘Will
Munich be world's first 'megacity' to reach 100% renewables?’ [2014] Renewable Economy available from
https://reneweconomy.com.au/will-munich-be-worlds-first-megacity-to-reach-100-renewables-28292/ ; See Also
the undertaking’s web site https://www.swm.de/english.html
1288
The capacity is composed of EDF 72MW, BSR 61MW, Eneco 60MW, Pennant Walters 23MW, Baywa 15MW
and Shanks 4MW – Ben Hall, ‘ Stready as she goes: the rise of the Corporate PPA’ [2018] Energy Perspectives
Cornwall Consulting Market Report 24 September 2018; See also Baker MacKenzie ‘The rise of corporate PPAs:
A new driver for renewables’ [2015] available at https://www.bakermckenzie.com/-
/media/files/insight/publications/2015/12/the-rise-of-corporate-ppas/risecorporateppas.pdf?la=en accessed 24
September 2018; Norton Rose Fulbright ‘Corporate renewable PPAs – a framework for the future?’ [2017]
http://www.nortonrosefulbright.com/knowledge/publications/149117/corporate-renewable-ppas-a-framework-for-
the-future; DLA Piper ‘Corporate Power Purchase Agreements (PPAs): What are they?’ [2016]
power-purchase-agreements-ppa/; Bird & Bird ‘Corporate PPAs: An International Perspective’ [2017]
https://www.twobirds.com/~/media/articles/international-corporate-ppas-brochure.pdf?la=en; CMS ‘Unlocking the
Corporate PPA Market’ [2018] https://cms.law/en/GBR/Events/Breakfast-Seminar-Unlocking-the-Corporate-PPAs-
Market
1289
Phedon Nicolaides, ‘Public Procurement and State Aid’ [2018] State Aid Hub
http://stateaidhub.eu/blogs/stateaiduncovered/post/9299

while state aid rules prohibit the discriminatory granting of public resources and thus
they must be considered as a separate area of conflict with EU primary law.
As electricity has been declared ‘goods’, the purchase of electricity by the
State or organs of the state falls within the Public Procurement Directive,1290 such
that all contracts for electricity above an annual amount of €207,000,1291 purchased
by Governmental organisations, must be tendered.
The Public Procurement Directive allows the inclusion of procurement criteria
relating to renewable energy - for example environmental criteria in any technical
specification (Article 42(3)(a)) and the use of eco-labels (Article 43(1)). Additionally,
Annex XII of the Procurement Directive states the technical specification can require
the seller to prove the origin of the electricity in terms of its environmental criteria as
it is an invisible ‘good’ and can only be determined by origin rather than its nature
on delivery (all electrons are the same when they arrive at the consumer’s
premises).
The Directive in Recital 1 states procurement on behalf of member states’ or
public authorities has to comply with the free movement of goods. Additionally, the
Directive prohibits the specification of a ‘specific origin’ of the electricity in Directive
Article 42.
Therefore, the requirement placed on member states or public authorities to
comply with the free movement of goods in the purchase or electricity either for own
use or onward selling conflicts with the ability within the Renewable Energy Directive
to put in place nationally focussed renewables support schemes.1292
Thus, a difference is opened between the production of renewable electricity
where free movement can be restricted and supply by public authorities where it
cannot. This difference, can be seen as an internal conflict within the renewables
regulatory regime as a member state can restrict the application of its renewables
support scheme only to generating facilities within national boundaries. However,
where the state purchases electricity for itself or others it can set out stringent
renewable criteria in its technical requirements but not a restriction on origin.
This creates a regulatory uncertainty, as in many cases the same company
will be involved in both activities.
1290
EU Directive 2014/24/EU ‘Directive on Public Procurement’ OJ L 94
1291
Ibid Directive Article 4
1292

3.5.5 Free Movement & State Aid: Energy Taxation – equivalent effect &
Selective Measure - Outokumpu Oy1293
Another area which potentially restricts the free movement of goods and is
incompatible with the single market, is cross-border energy taxation.1294 Whilst tax
authorities enjoy considerable discretion in schemes of taxation, the other side of
that coin is that tax is a selective measure and thus potentially state aid.1295
Energy taxation is a member state competence1296 (a measure of a fiscal
nature Article 194(3) TFEU), 1297 however, coordination is necessary, as energy
traded in one country can be used in another. Hence when neighbouring member
states put in place different energy taxation systems, this induces sub-optimal
decisions with regards to the development of renewable electricity generating
facilities, especially as the interactions with the wider economy and industrial policies
are considered.1298
In certain instances such tax outcomes discourage the development of
renewable electricity as a conflict exists between the desires of the Renewable
Energy Directive1299 and general energy taxation. Noting the EU can only act where
such nationally imposed taxes distort the internal market, 1300 and in any event the
Council has to act unanimously in accordance with Article 113 TFEU to put in place
a harmonised energy tax regime which seems to be unlikely in the near future.1301
1293
1294
Gloria Marín Benítez, ‘The European Union, the State Competence in Tax Matters and Abuse of
the EU Freedoms’ in José Manuel Almudí Cid, Jorge Ferreras Gutierrez and Pablo Hernandez Gonzalez-Barreda
(eds) Combating Tax Avoidance in the EU: Harmonization and Cooperation in Direct Taxation (Wolters Kluwer,
2019)_
1295
Cases T‑131/16, Belgium v Commission ECLI:EU:T:2019:91 and T‑263/16, Magnetrol International v
Commission ECLI:EU:T:2019:9 - annulled Commission decision 2016/1699
1296
1297
Ian Parry and Herman Vollebergh, ‘ Reforming the EU Energy Tax Directive: Assessing to Options’ (2016)
CESIFO Working Paper No 5749, 2 ; See Also Dörte Fouquet and Jana Viktoria Nysten, ‘The Legal Helpdesk
Energy Taxation in the EU’ Becker, Butner and Held
1298
Edward Foster, Marcello Contestabile, Jorge Blazquez, Baltasar Manzano, Mark Workman and Nilay Shah,
’The unstudied barriers to widespread renewable energy deployment: Fossil fuel price responses’ (2017) 103
Energy Policy, 258
1299
1300
1301
Article 113 TFEU, specifically provides for the Council, acting unanimously in accordance with a special
legislative procedure and after consulting the European Parliament and the Economic and Social Committee, to
adopt provisions for the harmonisation of member states' rules in the area of indirect taxation because indirect

Increasingly environmental priorities, and international commitments to
abate carbon emissions, have led to the heightened use of progressive energy
taxation 1302 encouraging the use of renewable energy by levying lower taxes on
environmentally friendly forms of energy1303 (the EU does not directly use energy
taxation to incentivise the development of renewable electricity).1304
What applicable energy taxes there are within the EU are levied on
generation facilities, as one cannot distinguish the method of production by an
analysis of the final product, 1305 as the source of electricity on the transmission
system is not determinable (‘non-product related production processes and
methods’ all electrons are the same).1306
Despite the issues outlined, it has been stated that carbon taxes would be
more efficient in reducing global warming than the current emissions trading system,
whilst taxes also recycle the tax revenues generated into the economy of the
collecting country rather than simply transferring revenues between emissions
generating and credit selling companies. 1307 Although the tax regime can be
designed to be progressive related to the amount of carbon emitted, it is hard to
design a regime that is fully reflective of the costs of carbon reduction at source
across a number of producers or consumers. If carbon taxes are levied entirely on
producers then all consumers are incentivised to reduce consumption to the extent
the producer taxes are passed through, which may not be to the same extent. Rather
than those who can reduce further doing so and reaping additional benefits in the
carbon market.
To be neutral, carbon taxes must be recycled into general taxation facilitating
a reduction in corporation taxes and the like. Recent French experience, however,
indicates that carbon tax increases not based on substantial revenue and
taxes may create an immediate obstacle to the free movement of goods. Directives related to environmental and
energy taxation have established the EU’s position: available https://ec.europa.eu/taxation_customs/general-
information-taxation/eu-tax-policy-strategy/lisbon-Treaty-tax-legislation-eu_en accessed 30 March 2018
1302
Sanja Filipović, and Mirjana Golušin, ‘Environmental taxation policy in the EU—New methodology approach’
(2015) 88 Journal of Clean Products, 308; See Also Ernst von Weizsäcker ‘Ecological Tax Reform’ in Ernst von
Weizsäcker (eds) A Pioneer on Environmental, Climate and Energy Policies (Springer, 2014), 99; Mikael Skou
Andersen, ‘Towards a level playing field for EU’s energy-related taxation’ in Karen Pittel, Ian Parry and Herman
Vollebergh (eds) Energy Tax and Regulatory Policy in Europe: Reform Priorities (MIT Press, 2017)
1303
Friedemann Polzin, Michael Migendt, Florian Täube and Paschenvon Flotow, ‘Public policy influence on
renewable energy investments—A panel data study across OECD countries’ (2015) 80 Energy Policy, 98
1304
Directive (2003/96/EC) 27 October 2003 ‘Restructuring the Community framework for the taxation of energy
products and electricity’ (Energy Taxation Directive) (OJ L 283, 31.10.2003, pp. 51–70)
1305
1306
Maria Alejandra Calle Saldarriaga, ‘Non-product related environmental process and production methods
(NPR-PPMs): a view from international trade law and international environmental governance’ (2014) PhD Thesis,
University College Cork; See Also Erich Vranes, ‘Processes and Production Methods: A Special Case under the
GATT and the TBT Agreement?’ in Erich Vranes (ed) Trade and the Environment Fundamental Issues in
International Law, WTO Law, and Legal Theory (Oxford University Press, 2009)
1307
Jeremy Carl and David Fedor, ’Tracking global carbon revenues: A survey of carbon taxes versus cap-and-
trade in the real world’ (2016) 96 Energy Policy, 50; See Also Ian Parry, Dirk Heine, Shanjun Li and Eliza Lis,
‘Getting Energy Prices Right From Principle to Practice’ (2014) International Monetary Fund

distributional neutrality may not be viable.1308 Hence carbon trading removes these
issues and allows both producer and consumer to participate in market activities.
The EU’s system of minimum tax rates is applied to coal; natural gas and
electricity, but energy products and electricity are only taxed when used as motor or
heating fuel.1309
The Energy Tax Directive is motivated by concerns related to the
environment and energy dependence as well as tax competition between member
states (e.g. one country setting excessively low tax to attract mobile tax bases from
other countries).1310 As a result of the limited scope of the Energy Taxation Directive,
member states have a wide margin of discretion in relation to energy taxation.1311
There are limits, however, to this discretion as outlined by the Council’s ability to act
in accordance with Article 113 TFEU and the findings within Outokumpu Oy 1312
case.
The CJEU illustrated the difficulties associated with the cross-border energy
taxation of electricity in Outokumpu Oy. The Outokumpu case also shows that
discrimination against electricity imports would indeed be caught by the
Commission’s competence in this area.1313
In Outokumpu Oy, the ECJ adopted a strict approach to member states' use
of tax instruments to distinguish between renewable, fossil and nuclear generation
capacity. Under Finnish tax law, excise duty on electricity was levied on electricity
produced domestically, the amount of the duty depending on the method of
production (highest tax for electricity produced by nuclear plant, lower for
hydroelectricity, with small generating stations being exempt). 1314 In relation to
imported electricity, the excise duty charged, regardless of the method of production,
was a set duty – the amount being set broadly mid-range for domestic production.
1308
Steven Geroe, ‘Addressing Climate Change Through a Low-Cost, High-Impact Carbon Tax’ (2019) 28(1)
Journal of Environment & Development, 3
1309
Energy Taxation Directive, Article 4
1310
CESIFO Working Paper No 5749, 2
1311
In moving the EU’s climate change forward the EU has a commitment to bring energy taxation more closely in
line with its energy and climate change objectives (See March 2008 European Council Conclusion - European
Council of 13-14 March 2008, Presidency conclusions (7652/1/08 rev.1, 20/05/2008). In 2012 a proposal to
amend the Energy Taxation Directive (2003/96/EC) was made to implement the 2008 Council resolution
(European Parliament, Legislative resolution of 19 April 2012 on the proposal for a Council Directive amending
Directive 2003/96/EC restructuring the Community framework for the taxation of energy products and electricity,
2011/0092(CNS)), such that tax rates would be aligned to a fuel’s carbon content and develop a minimum price
for carbon emissions to create a floor price within the European Emission Trading System. However, in 2015 the
Commission issued a notice of withdrawal of the proposals related to tax harmonisation (European Commission,
Withdrawal of Commission proposals, 2015/C 80/08), due to practical difficulties of implementation and concerns
related to the damage a carbon floor price would have on the economies of new accession countries. – See Ian
Parry and Herman Vollebergh, ‘ Reforming the EU Energy Tax Directive: Assessing to Options’ (2016) CESIFO
Working Paper No 5749, 2
1312
1313
Étienne Durand and Malcolm Keay,’ National support for renewable electricity and the single market in
Europe: the Ålands Vindkraft case’ [2014] Oxford Institute for Energy Studies
1314
Law No 1473/94 Excise Duty, Para 4

This average system of tax was used as the generation source could not be
determined at the border.
This called into question the application of Article 110 TFEU (at the time,
Article 90 TEC) where it states that member states may not impose discriminatory
taxation on imported goods and that taxes may not afford a form of trade protection
to domestic goods. With regards to the outcome of the case, AG Jacobs and the
Finnish Government had suggested leniency, in the light of the ecological objectives
of the regulations, and of technical difficulties of determining the source of the
electricity.1315
The Court accepted that the tax on electricity may vary according to the way
the electricity is produced,1316 in so far as the variation is consistently based on
environmental considerations.1317 However, the Court referred to earlier case law
which stated that Article 110 TFEU is infringed where the taxation on the imported
product and that on the similar domestic product are calculated in a different manner
and this leads to higher taxation being imposed on the imported product.1318
The Court held that practical considerations in levying the same kind of tax,
particularly due to the difficulty in determining the method of production of imported
electricity, could not justify the use of an average tax rate and thus the
infringement.1319 The Court dismissed all issues with regards to the determination of
the source of the electricity and rather than imposing a tax, calculated as a national
average it held that Finland should have imposed the lowest tax rate on imported
products.1320 The Court stated that the measure was disproportionate, as the Finnish
authorities did not allow importers the opportunity to present certificates of origin.1321
The ECJ applied the principle of non-discrimination strictly. This was an
approach used in previous case law, such as Haahr Petroleum,1322 where Article
110 TFEU was applied. Here, the Court held that national legislation can only be
compatible with Article 110 if it excludes higher taxation of imported products in all
instances. However, Article 110 TFEU, which Alfons Lutticke 1323 has declared to be
directly effective, states that taxes imposed on imported goods in excess of those
imposed on the same or similar domestic products are discriminatory. Given the
1315
Case C-213/96 Outokumpu Oy ECLI:EU:C:1998:155, para 33
1316
Case C-213/96 Outokumpu Oy ECLI:EU:C:1998:155, para 31
1317
Ibid, para 24
1318
Case C-152/89, Commission v Luxembourg ECLI:EU:C:1991:272 , para 20
1319
Case C-213/96 Outokumpu Oy ECLI:EU:C:1998:155, para, 37
1320
Ibid, para 36
1321
Ibid, para 39-41
1322
Case C-90/94 Haahr Petroleum v Åbenrå Havn, Ålborg Havn, Horsens Havn, Kastrup Havn NKE A/S,
Næstved Havn, Odense Havn, Struer Havn and Vejle Havn, and Trafikministeriet. ECLI:EU:C:1997:368
1323
Case C-57/65 Alfons Lütticke GmbH v Hauptzollamt Sarrelouis ECLI:EU:C:1966:34

importance placed on the functioning of the internal market 1324 the Court has
interpreted Article 110 TFEU widely when it stated in Stadtgemeinde Frohnleiten ‘so
as to cover all procedures which, directly or indirectly, undermine the equal
treatment of domestic products and imported products’. 1325 This approach seems to
have confirmed the stance in Grundig.1326
In the Outokumpu case the ECJ held that Article 110 does not restrict the
freedom of each member state to put in place tax regimes which differentiate
between certain products (i) based on consistently applied objective criteria and (ii)
if it pursues economic or social policy objectives which are themselves compatible
with the requirements of the Treaty and secondary law. Additionally, the Court held
such a system was allowed if the regime is free from any form of discrimination,
direct or indirect, regarding imports from other member states or any form of
protection of domestic products. The Court’s decision in Outokumpu Oy confirmed
the earlier finding in DaimlerChrysler v Land Baden-Württemberg1327 (within the
context of self-sufficiency, proximity and priority for recovery) that extraterritorial
application of a member state’s environmental framework is prohibited.
The Court's ruling that environmental taxes should be non-discriminatory and
have an absence of protective effect for domestically produced energy, is important
for the development of feed-in tariffs and the development of cross-border traded
electricity markets. Therefore, if the aim of an environmental tax regime is the
elimination or limiting of the production of a form of electricity generation it must not
do so at the expense of treating imported products differentially. Some form of
differential tax regime could be viewed as reasonable to maintain the
competitiveness of domestic energy industries who are responding to global
environmental problems via emissions reduction efforts, which raise energy prices
to overcome the ‘free rider’1328 issue, provided it is not discriminatory. However,
despite renewable energy guarantees of origin (REGO)1329 schemes which provide
transparency as to the origin of electricity supplied, the Outokumpu case
demonstrates the practical difficulties in determining the source of electricity flowing
1324
and capital is ensured - Case T-356/15 Austria v Commission ECLI:EU:T:2018:439, para 516; See Also Peter
Cameron, ‘The Internal Energy Market – Redefining Objectives’ Peter Cameron and Raphael Heffron (eds) Legal
Aspects of EU Energy Regulation (Oxford University Press, 2016), 5
1325
Case C-221/06 Stadtgemeinde Frohnleiten and Gemeindebetriebe Frohnleiten GmbH v Bundesminister für
Land- und Forstwirtschaft, Umwelt und Wasserwirtschaft ECLI:EU:C:2007:657 , para 40
1326
Case C-68/96 Crundig Italiana SpA v Minestero delle Finanze, ECLI:EU:C:1998:299
1327
Case C-324/99 DaimlerChrysler AG v Land Baden-Württemberg ECLI:EU:C:2001:682
1328
CESIFO Working Paper No 5749, 2
1329
Renewable Energy Directive Article 15

between member states (once on the transmission network electrons are
indistinguishable).
The significance of the Outokumpu Oy case is not just the effective ending
of energy taxation at the border but is the simplification of the contractual and
regulatory framework surrounding cross-border electricity trading hub terms (a form
of market-based solution).1330
It being known that the nationally focussed renewable electricity support
mechanism restrict the effective functioning of the single market in electricity; it being
further argued that the many different national support schemes 1331 hamper the
development of a potentially unified market for deploying and developing renewable
energy technologies.1332 Therefore, removing the burden to collect differential levels
of tax based on a REGO,1333 means that prices quoted on trading hubs need only
specify volumes to be traded, delivery location and the term of the trade. It is known
that increasing simplicity and transparency are determinants of increased market
liquidity, 1334 which in turn increases efficiency of price discovery 1335 and market
efficacy. 1336 This is especially important (i) as the costs of renewable electricity
transition to a price point compatible with the wholesale price of thermal
generation 1337 and (ii) the removal of the need for renewable electricity support
1330
1331
1332
European Federation of Energy Traders ‘Towards a single European energy market’ (2012), 15 available at
http://www.efet.org/Files/Documents/Energy%20Background/Highlights-II-Final.pdf accessed 30 March 2018
1333
renewable energy guarantees of origin – EU COM ‘The Energy community Legal Framework 2018’ 4th Edition
OJ L198, 20/07/2006, p 18 available at https://www.energy-community.org/legal/Treaty.html accessed 30 March
2018
1334
Karsten Neuhoff, Carlos Batlle, Gert Brunekreeft, Christos Konstantinidis, Christian Nabe, Giogia Oggioni,
Pablo Rodilla, Sebastian Schwenen, Tomasz Siewierski and Goran Strbac, ‘Flexible Short-Term Power Trading:
Gathering Experience in EU Countries’ (2015). DIW Berlin Discussion Paper No. 1494.
1335
2018
1336
Craig Holden, Stacey Jacobsen and Avanidhar Subrahmanyam, ‘The Empirical Analysis of Liquidity’ (2014)
8(4) Foundations and Trends in Finance, 263
1337
Hornsea Project Two: offshore wind farm supply chain plan: available at
https://www.gov.uk/government/publications/contracts-for-difference-2nd-allocation-round-supply-chain-plans-for-
projects-over-300mw-which-secured-contracts-2017 accessed 30 March 2018

mechanisms1338 (in which case renewable electricity will need to rely on the normal
mechanisms of price discovery), forward long-term carbon price contracts or power
price hedging.1339 It is also likely that regulated support mechanisms will be replaced
by bilateral, corporate to corporate power purchase agreements (PPA)1340 which will
provide price certainty over the long-term and provide consumers with renewable
electricity to meet their regulatory obligations from other Directives outside the scope
of this research.
The Outokumpu Oy findings were confirmed in a series of cases1341 and most
recently in Sucrerie de Toury1342 where is was again held that in accordance with
Article 14(1)(a) of the Energy Taxation Directive1343 in relation to energy products
used for the generation of electricity, and electricity itself, there is an obligation to
exempt the same from taxation and also in accordance with Article 15(1)(c), energy
products used for combined heat and power generation should also be exempt, as
should gas intended for use in the cogeneration of heat and electricity. This is
effectively ensuring a single layer of electricity taxation focussed on the point of
consumption by the end user. Rather that taxing the fuel used for generation as well
as the resulting electricity.
The removal of energy taxation on electricity provides a clear focus on the
EU-ETS (See Section 2.10.1) preventing a potential split or conflicting focus within
the regulatory framework. Setting aside any considerations of the failures of the EU-
ETS, the removal of border taxation of electricity flows has been successful in
focusing the general abatement of emissions and simplifying the regulatory
framework.
Additionally, the findings in the Outokumpu Oy, and subsequent cases, have
facilitated the conclusion of arrangements for intraday continuous trading across 10
1338
Trine Krogh Boomsma and Kristin Linnerud, ‘Market and policy risk under different renewable electricity
support schemes (2015) 89 Energy, 435
1339
Daniel Radov, Alon Carmel and Clemens Koenig, ‘Offshore Revolution? Decoding the UK Offshore Wind
1340
Carsten Bartholl and Markus Böhme, ‘Corporate PPAs - A future financing model for renewable energies’
[2018] Taylor Wessing
1341
Joined Cases C-145/06 and C-146/06 Fendt Italiana Srl v Agenzia Dogane - Ufficio Dogane di Trento
ECLI:EU:C:2007:411, para 36; Case C-5/14 Kernkraftwerke Lippe-Ems GmbH v Hauptzollamt Osnabrück
ECLI:EU:C:2015:354, para 45; Joined Cases C-43/13 and C-44/13 Hauptzollamt Köln v Kronos Titan GmbH and
Hauptzollamt Krefeld v Rhein-Ruhr Beschichtungs-Service GmbH, ECLI:EU:C:2014:216, para 31 and 33; Case
C-418/14 ROZ-ŚWIT Zakład Produkcyjno-Handlowo-Usługowy Henryk Ciurko, Adam Pawłowski spółka jawna v
Dyrektor Izby Celnej we Wrocławiu, ECLI:EU:C:2016:400, para 32; Case C-465/15 Hüttenwerke Krupp
Mannesmann GmbH v Hauptzollamt Duisburg , ECLI:EU:C:2017:640, para 2
1342
Case C-31/17 Cristal Union (legal successor) Sucrerie de Toury SA v Ministre de l'Économie et des Finances
ECLI:EU:C:2018:168
1343
EC Directive 2003/96/EC 27 October 2003 ‘Taxation of Energy Products and Electricity’ OJ L 283/51

EU countries1344 from June 2018.1345 The trading hub uses a shared order book,1346
capacity management and single shipping model. 1347 It allows for ‘buy orders’
entered by market participants to be continuously matched with ‘supply offers’ is the
same as any other bidding zone provided transmission capacity is available. The
market simply focuses on the traded price of electricity and the costs of transport
rather than having the complexity of being a fiscal system for tax collection as well.
3.5.6 Price Fixing – distortion of competition state aid - PreussenElektra1348
PreussenElektra is a significant case in relation to the understanding of the conflicts

between EU free trade principles and the renewable electricity legislative framework.
The PreussenElektra case was decided prior to Essent 1,1349 Ålands Vindkraft1350
and Green Network 1351 and contains free movement, price fixing and market
distortion issues which can be considered state aid.
PreussenElektra is analysed here in relation to price fixing rather than free
movement as it does not bring out different issues to those highlighted by the pure
free movement cases discussed above. In many respects the free movement aspect
of PreussenElektra is a simple application of the ADBHU 1352 / Danish Bottle 1353
justification for an exception and thus not significant.
The use of state resources aspects of state aid contained in PreussenElektra
are analysed in Section 3.5.9 below as they bring out an issue that is worthy of note
1344
Austria, Belgium, Denmark, Estonia, Finland, France, Germany, Latvia, Lithuania, Norway, The Netherlands,
Portugal, Spain and Sweden. Most other European countries are due to take part in a second ‘wave’ go -live with
XBID in Summer 2019 - https://www.epexspot.com/en/press-media/press/details/press/European_Cross-
Border_Intraday_XBID_Solution_and_10_Local_Implementation_Projects_confirm_go-live_date_for_June_2018_
accessed 30 May 2018
1345
The delay from 1998 until 2016 to implement this kind of solution is in no small part a reflection of the need to
to put in place computing power to model ten country's transmission constraints in real time
1346
An order book is an electronic list of buy and sell orders for a specific financial instrument, organised by price
level. An order book lists the quantity of energy being bid or offered at each price point. -
https://www.investopedia.com/terms/o/order-book.asp accessed 30 May 2018
1347
All electricity flowing from one selling (or exporting point) to one consignee or intermediate consignee on the
same transmission system is modelled in a single system
1348
1349
ELCI:EU:C:2014:2192
1350
1351
1352
1353

in comparison to the state aid cases of Vent De Colère,1354 Austrian Green Levy1355
and Germans Green Levy.1356
PreussenElektra concerned German legislation1357 setting out the ‘feed-in
tariff regime’ for renewable generation. Electricity network operators were obliged,
within certain limits, to purchase the renewable electricity produced in their franchise
area and to pay for the electricity in accordance with a number of parameters.1358
The minimum price paid to the renewable generators varied between 65% and 90%
of the average sale price1359 of electricity supplied to all final customers (renewables
wind and solar were remunerated at 90% of the average sales price). 1360 As a
consequence of the purchase obligation for renewable electricity the additional costs
accruing to electricity network owners for renewable support schemes rose from
DEM 5.8 million in 1991 to an estimated DEM 111.5 million in 1998.1361
The Commission had regarded the regime as acceptable and a form of
compliant state aid, in view of the regime’s relatively small impact (given the limited
share of renewable energy compared to the overall electricity market – renewable
electricity was circa 5% of the installed generation capacity at the time and due to
the natural intermittency of renewables (no wind, no output) the volume compared
to electricity distributed to end users was less).1362 However, in view of the increase
in the market share of renewables, the Commission was in the process of reviewing
this decision at the time of the referral to the CJEU.1363
The supplier of electricity to end users, Schleswag,1364 sourced almost its
entire supply of electricity from PreussenElektra. From an original 0.77% in 1991,
1354
ECLI:EU:C:2013:851
1355
1356
Commission Decision 2015/1585, Aid Scheme SA 33995 –‘implemented by Germany for the support of
renewable electricity and of energy-intensive users’ available at http://eur-lex.europa.eu/legal-
1357
The Gesetz zur Sicherung des Einsatzes von Steinkohle in der Verstromung und zur Änderung des
Atomgesetzes und des Stromeinspeisungsgesetzes (Law ensuring the supply of coal to power stations and
amending the Law on Nuclear Energy and the Stromeinspeisungsgesetz) of 19 July 1994 (BGBl. 19941, p. 1618;
'the 1994 Law')
1358
Land Schleswig-Holstein ECLI:EU:C:2001:160, para 3
1359
The sale price to end users was composed of the costs of generation plus the costs of transmission and
distribution and as such was considerably above the cost of generation. In 2015 the end user sales price in
Germany was circa 13.89 €cents / kWh compared to a generation costs of 4.69 €cents/ kWh - Electricity Costs of
Energy Intensive Industries An International Comparison [2015] for the German Ministry of Economic Affairs and
Energy – available at https://www.isi.fraunhofer.de/content/dam/isi/dokumente/ccx/2015/Electricity-Costs-of-
Energy-Intensive-Industries.pdf accessed 22 August 2018
1360
Land Schleswig-Holstein ECLI:EU:C:2001:160, para 3(2) and 3(3)
1361
Ibid, para 20
1362
Ibid, para 11
1363
Ibid
1364
Schleswag is the electricity network operator in Schleswig-Holstein and Northern Lower Saxony region of
Germany. They are one of the largest energy service providers in the north of Germany, offering municipal utilities
(Stadtwerke)and other companies a wide range of connection and network services. See www.sh-
netz.com/&prev=search accessed 22 August 2018; Peter Cameron, ‘The Internal Energy Market – Redefining

the share of wind energy rose to 15% by 1998. 1365 The renewables support
scheme 1366 contained a ‘hardship clause’ which allowed for excess costs to be
reclaimed by the supplier (Schleswag) from the network owner (PreussenElektra).
PreussenElektra, however, in declining the claim argued that the relevant part of the
Act amounted to a change in the state aid regime, which had not been separately
notified to the Commission.1367 As the network operators were obliged to purchase
renewable electricity produced within their franchise territory there is no doubt that
intra EU trade was affected.1368 However, the CJEU found these restrictions to be
justified on two grounds (i) the aim of the regime being environmental protection,1369
including the development of an environmentally conscious Internal Market1370 (a
straight ADBHU1371/ Danish Bottle1372 justification) and (ii) building on the finding in
Campus Oil,1373 there was limited cross-border interconnection at the time resulting
in curtailment of an internal market in electricity. 1374
The Court also used the proposal, for what would become the 2001 Renewable
Energy Directive1375 where each member state would issue certificates of origin,
capable of being the subject of mutual recognition, essentially making trade in
renewable electricity both reliable and possible, as a justification for finding that the
restriction of free movement and price enhancement proportionate.1376
The PreussenElektra case is noteworthy in that the Court's evaluation of the
national renewable support scheme granted Germany a wide margin of discretion in
relation to the putting in place of a renewables support scheme which provided
renewable facilities considerable revenue enhancement above the wholesale
Objectives’ Peter Cameron and Raphael Heffron (eds) Legal Aspects of EU Energy Regulation (Oxford University
Press, 2016), 13
1365
1366
1367
Ibid, para 30
1368
Ibid, para 71
1369
Ibid, para 75 and 81
1370
Ibid, para 77
1371
1372
1373
Case C-72/83, Campus Oil Limited v Minister for Industry and Energy, ECLI:EU:C:1984:256, para 16
1374
Land Schleswig-Holstein ECLI:EU:C:2001:160 para 75
1375
1376
Land Schleswig-Holstein ECLI:EU:C:2001:160 para 81

market price determined via open price discovery1377 trading methods. This kind of
revenue support can therefore be considered as state aid in accordance with Article
107(1) as it favours one segment of the market over another. Hence the price
support places the Renewable Energy in diagonal conflict with the state aid
provisions of the Treaty (Article 107 TFEU). The CJEU, however, found the support
scheme put in place to be proportionate in its support of the overriding objective of
developing renewable electricity, again potentially applying the Dworkin constructive
change.1378
The case has effectively been used as the precedent for all the renewables
support cases where revenue support mechanisms are an issue in the proceedings.
It is also clear that in granting this discretion to member states in relation to the
renewables support schemes, 1379 the CJEU has confirmed the competency that
member states have over this aspect of the Renewable Energy Directive.
The Court went on to consider the structure of the feed-in tariff regime, the
collection of the levy to fund it and its payment by a private body in relation to state
aid, which will be discussed below in Section 3.5.9.
3.5.7 Essent 11380 Price Fixing and Thin Markets
The Essent 1 case was discussed above in terms of the justifications used by the
CJEU for finding in favour of the nationally focussed renewables support scheme
which effectively excluded renewable facilities not in the target area – diagonal
conflict with free movement.
In this section, that part of the justification for this derogation from the
application of free movement which relates to the trading of the green certificates is
analysed.
1377
2018
1378
1379
1380
ELCI:EU:C:2014:2192

The CJEU, as part of its reasoning on free movement, stated that provided
the market developed to trade the green certificates, which was at the heart of the
1381
Flemish renewables support scheme, allowed trading ‘under fair terms’
(although no real objective test as to how to determine the fairness of the terms was
offered by the CJEU) the proportionality criteria was fulfilled. What the CJEU failed
to consider was that the value of Flemish certificates was not subject to open normal
price discovery1382 mechanisms present in traded markets, with the potential for
such certificates to have an artificial price. 1383 This could be considered a market
distorted by protectionism, with local renewable energy treated more favourably
than that from out of region competitors. The market could be an attempt to control
quantities (and indirectly prices) of renewable electricity therefore depriving
‘competition of its power’.1384
The CJEU also failed to take account of the problem of information
asymmetries where the Flemish vertically integrated utilities (generator and supplier
functions being contained in one company) have an advantage over the other
traders in the market, with the potential for opportunistic behaviour.1385 Thus the
potential for ‘thin’1386 markets and the mispricing of trades is present with so few
traders operating in the market.1387
The Essent 1 renewables support scheme therefore also reveals a conflict
between the trading of the green certificates, a mechanism set out in Article 3(2)(a)
of the Renewable Energy Directive, and the provisions within Article 107(1) TFEU
[state aid] which prohibits practices which distort competition. It reveals that the
CJEU simply stating that traded markets must operate under fair terms does not
automatically create a fully functioning market where price discovery and
competitive practices are present. To ensure a fully functioning market the CJEU
must look at the potential number of players in the market and the ability/willingness
1381
ECLI:EU:C:2014:2192, para 111
1382
2018
1383
J Krzeminska, ‘Are Support Schemes for Renewable Energies Compatible with Competition Objectives? An
Assessment of National and Community Rules’ (2007) 7 Yearbook of European Environmental Law
1384
Richard Bronk, ‘Hayek on the wisdom of prices: a reassessment’ (2013) 6(1) Erasmus Journal for Philosophy
and Economics 82, 91
1385
Richard Bronk,’ Hayek on the wisdom of prices: a reassessment’ (2013) 6(1) Erasmus Journal for Philosophy
and Economics, 82, 103
1386
A thin market is a market with a low number of buyers and sellers. Since few transactions take place in a thin
market, prices are often more volatile and assets are less liquid. The low number of bids and asks will also
typically result in a larger spread between the two quotes. - https://www.investopedia.com/terms/t/thinmarket.as
1387
George Akerlof, ‘The market for “lemons”: quality uncertainty and the market mechanism’ (1970) 84(3) The
Quarterly Journal of Economics, 488

of these undertakings to participate in an efficient-market.1388 In essence the CJEU
must consider the economic operators within the market and the overall potential
size of the market. Belgium itself is a small country with only 82GWh of electricity
demand (for comparison Germany has 517GWh, France 442GWh and the UK
304GWh),1389 therefore the market within the Flemish region would be even smaller.
Hence, even without information asymmetries and the presence of vertically
integrated utilities the market was going to attract few non-incumbent traders.
Should these criteria not be present the renewables support scheme is in
diagonal conflict with Article 107(1) TFEU in relation to the potential fixing of prices
which distorts competition.
3.5.8 Legitimate expectation, the right to regulate and State Aid
The 2008 financial crisis saw many EU countries experience deflation and reduced
economic activity. 1390 One of the outcomes of the financial crisis was reduced
demand for electricity which caused deficits and dispatch1391 issues in a series of
electricity markets across the EU. 1392 In the ensuing judicial and arbitrational
processes that followed the retrospective reductions in renewable electricity support
schemes1393 in certain member states, three issues were brought to the fore (i) state
aid, (ii) legitimate expectation and (iii) the right of member states to regulate within
their competency. What also became clear was that international investment law
conflicted with EU law generally and EU environmental law specifically, challenging
the legitimacy and utility of the investor-state arbitral system.1394
1388
Eugene Fama and Kenneth French, ‘Size, value, and momentum in international stock returns’ (2012) 105(3)
Journal of Financial Economics, 457; See Also Zhe Lu, ZhaoYang Dong and Penelope Sanderson ‘The Efficient
Market Hypothesis and Electricity Market Efficiency Test’ [2008] Third International Conference on Electric Utility
Deregulation and Restructuring and Power Technologies, 436;
1389
Electricity Consumption by EU member state https://ec.europa.eu/eurostat/statistics-
explained/index.php?title=File:Electricity_consumption_and_trade,_GWh,_2016_new.png
1390
Murillo Campello, John Graham and Campbell Harvey, ‘The real effects of financial constraints: Evidence from
a financial crisis’ (2010) 97(3) Journal of Financial Economics, 470
1391
1392
Germà Bel and Stephan Joseph, ‘Emission abatement: Untangling the impacts of the EU ETS and the
economic crisis’ (2015) 49 Energy Economics, 531
1393
1394
Ahmad Ghouri Interaction and conflict of treaties in investment arbitration (Wolters Kluwer, 2015)

Two of the most prominent cases surrounding the change in renewable
support frameworks were those from Spain1395 and Italy,1396 outlined below.
To reduce the deficit present in its electricity sector, in 2010 Spain reduced
its feed-in tariff for grid scale photovoltaic solar installations (Royal Decree 14/2010).
The reduction in feed-in tariff produced a series of adjudication cases focusing on
legitimate expectation1397 and investment protection via the Energy Charter Treaty
1398
1994. These claims were made despite the finding in cases such as
Electrabel1399 that investors registered in the EU cannot rely on the Energy Charter
Treaty. The finding of the Spanish arbitrational court in Charanne1400 was that the
obligation to provide fair and equitable treatment to foreign investors1401 under the
Energy Charter Treaty does not prevent a State from amending its national support
scheme for renewables and therefore the member state retains at all times the right
to regulate1402 and thus the competence over the details of the renewables support
scheme put in place.
The interaction between the Energy Charter Treaty and EU law is an
example of fragmentation (See Section 2.2) within international law, 1403 resulting
from the proliferation of specialised commitments entered into by the EU. The
dispute resolution tribunal in relation to the Energy Charter Treaty has no jurisdiction
over the EU or member state regulatory commitments. 1404 In general the EU’s
1395
For an introduction to the electricity market in Spain see Iñigo del Guayo, ‘Energy Law in Spain’ in Martha
and International Regulation (Oxford University Press, 2016); See Also Alberto Artés and Gonzalo Olivera,
‘Renewable Energy in Spain’ [2019] King & Wood Mallesons
1396
For an introduction to the electricity market in Italy see Giuseppe Franco Ferrari, ‘Energy Law in Italy’ in
Martha Roggenkamp, Catherine Redgwell, Anita Ronne, and Inigo del Guayo (eds) Energy Law in Europe
1397
Case T-347/03 Branco v Commission ECLI:EU:T:2005:265, para 102
1398
1399
Electrabel SA v Hungary ICSID Case No ARB/07/19; See also Kaj Hober, ‘Investment Arbitration and the
Energy Charter Treaty’ (2010) 1(1) Journal of International Dispute Settlement 153, 155; See Also Anatole Boute,
‘Energy Trade & Investment Law: International Limits to EU Energy Law & Policy’ in Martha Roggenkamp,
1400
Available At http://www.italaw.com/sites/default/files/case-documents/italaw7097_0.pdf accessed 20 January
2017
1401
Daniel Behn, Ole Fauchald and Laura Letourneau-Tremblay ‘Promoting Renewable Energy in the EU: Shifting
trends in Member State policy space’ (2017) 28(2) European Business Law Review, 217
1402
1403
1404
Gokce Mete and Ernesto Bonafé, ‘Construction of Regional Energy Market Within a Multilateral Regulatory
Framework: Escalated interactions between EU energy law and the Energy Charter Treaty’ (2016) 9(3) The
Journal of World Energy Law & Business

Courts and the arbitrational tribunals can regard themselves as autonomous judicial
bodies with an unwillingness to withdraw jurisdictional claims.1405
The finding in Charanne is said to have been based on the fact that the
reduction in profitability was only 10%. When the same issue was considered in
Eiser, 1406 where the profitability reduction was in the range of 48% to 75%, the
arbitrational tribunal did find an infringement of Article 10(1) of the Energy Charter
Treaty. Therefore, whilst the ‘right to regulate’ and member state competence seems
clear, when it comes to compensation and judicial process at the practical level the
quantum of reduction seems to be a factor in reaching a decision.
A similar situation occurred in Italy in 2011, when the referendum regarding
new power in Italy resulted in a majority voting against the Government’s plans for
nuclear power generation. This result further exacerbated Italy’s energy security
issues, as it imports 12.5% of its total electricity consumption, totalling 45 TWh from
neighbours including France, Switzerland and Slovenia making it the largest
electricity importer in the EU after Denmark.1407 Renewables therefore serve as an
important source of domestic generation. 1408 As a result of the Italian economic
crisis, Italian Law no. 116 (August 2014), reduced feed-in tariffs for renewables. In
a test case, developer Scat Punti Vendita 1409 sought redress via the Italian
Constitutional Court claiming that the cuts were irrational and unforeseeable and
hence Law 116 should be annulled. The reduction in the feed-in tariff was not
annulled, however, a corporation tax accommodation was reached such that the
profitability of Italian renewable projects has stayed broadly equal to pre-2014 levels.
What is really at stake in the two cases outlined is the competence1410 of the
member states to develop, manage and administer renewables support schemes1411
1405
Daryl Mundis, ‘ICTY (Appeals Chamber): Prosecutor v. Delalić (Čelebići Case)’ (2001) 40(3) International
Legal Materials, 626
1406
Eiser Infrastructure Limited and Energía Solar Luxembourg SARL v Kingdom of Spain, ICSID Case No.
ARB/13/36 available at https://www.italaw.com/cases/5721 accessed 20 January 2017
1407
Eurostat (2015). Eurostat data explorer - http://ec.europa.eu/eurostat. (accessed 15 May 2016)
1408
Arjun Mahalingam and David Reiner, ‘Energy subsidies at times of economic crisis: A comparative study and
scenario analysis of Italy and Spain’, (2016) EPRG Working Paper 1603, Cambridge Working Paper in Economics
1608 – 23 Jan 2016, www.eprg.group.cam.ac.uk (accessed 15 July 2016)
1409
1410
1411

in accordance with the Renewable Energy Directive1412 and if this competence has
a limit such as ‘fair and equitable treatment’, and if there is a limit, has it substance
at law.1413 Analysis of the TFEU does not indicate any means to fetter the member
state competence to put in place renewable support schemes in accordance with
the Renewable Energy Directive. In term of the Renewable Energy Directive,
Directive Article 3(1) simply places an obligation on the member state to put in place
a renewables support scheme in accordance with the national renewable action plan
(developed in accordance with Directive Article 4). The Commission has a
monitoring and reporting role to ensure the member state is on target (Directive
Article 23), but the Directive makes it clear that this reporting and monitoring role
does not affect the member state’s control over the national support scheme (Article
23(8)).
The only limit there seems to be on a member state’s control over their
support schemes is in the need to achieve the national mandatory target for
renewable capacity set out in the Renewable Energy Directive. Hence the member
state must consider the affect any changes in the renewables support scheme will
have on investor confidence and the ability that member states will have to attract
investment going forward.1414
It is in the sphere of state aid that a potential solution lies in helping a member
state to exit an expensive support scheme by having the Commission declare the
scheme distortive of competition in contravention of Articles 107(1) TFEU [state
aid].1415 Such action, however, must be seen as a high-risk strategy as during the
empirical research respondents declared that retrospective changes in the
renewables support scheme could make a country un-investable.
Another issue with this kind of case, is the possibility that any arbitrational
award will be declared state aid, as was the case in Micula.1416 The Commission
held that the award was in effect state aid and ordered recovery of the arbitrational
1412
1413
Alexander Reuter ‘Retroactive Reduction of Support for Renewable Energy and Investment Treaty Protection
from the Perspective of Shareholders and Lenders’ (2015) 13(3) Oil, Gas & Energy Law, 36
1414
Gus Van Harten, Sovereign Choices and Sovereign Constraints: Judicial Restraint in Investment Treaty
Arbitration (Oxford University Press, 2013)
1415
Tim Maxian Rusche, EU Renewable Electricity Law and Policy: From National Targets to a Common Market
(Cambridge University Press, 2015), 226; See Also See Also Daniel Pérez Rodriguez, ‘Electricity Generation and
State Aid: Compatibility is the Question’ (2016) 15 European State Aid Law Quarterly, 207
1416
Ioan Micula v Romania, ICSID Case No. ARB/05/20 (http://www.italaw.com/cases/697); See Also Hanno
Wehland ‘The Enforcement of Intra-EU BIT Awards: Micula v Romania and Beyond’ (2016) 17(6) Journal World
Investment and Trade, 942 (2016)

compensation awarded.1417 Again this is a situation that has done nothing to give
investors’ confidence in the process and their ability to gain fair return on investment.
It should also be noted that the CJEU in 2018 has clarified in Achmea1418
that Articles 267 and 344 TFEU preclude the use of arbitral tribunals to determine
issues within the jurisdiction of a bilateral investment Treaty between member states
and have therefore brought the situation back to national courts and the CJEU as
applicable.
As a result of the industry’s concerns at the lack of any fair and equitable
treatment conditions within the regulatory framework, the post 2020 Renewable
Energy Directive in Article 6 states that support schemes may not be revised in a
way that negatively impacts the rights conferred and the economics of renewable
projects. Additionally, Article 15(3) of the revised Renewable Energy Directive states
that to give investors sufficient predictability of planned changes to renewables
support schemes, member states are to publish a 3 year look ahead.
These Directive Articles are far from perfect as they provide no criteria with
which to assess negative impacts on projects of regulatory change and thus it is
likely to take the CJEU to define the principles. Also, a 3 year look ahead is short
compared to a typical renewable project’s asset life of 30 to 40 years. Moreover, the
drafting on the right to regulate and investor protection is seen to be much more
explicit in the EU’s trade and investment agreements.1419 But the revised Directive
Articles are a start and an acknowledgment by policy makers that stability of the
investment landscape is critical for the renewables developer community.
The last issue the Charanne and Scat Punti Vendita cases illustrate is the
reach of the Ålands Vindkraft1420 case and the restriction in seeking a renewables
support scheme in other EU countries which this case enforces. No application is
known to have been made by the developers to other EU members states to be
included within their renewable support frameworks. The Ålands Vindkraft case
therefore simply extends its reach into renewable electricity support policies of the
member states, which is contrary to the free movement rationale of EU free trade
1417
Commission Decision (EU) 2015/1470 of 30 March 2015, OJ L232/43 of 4 April 2015. Appeals against this
decision are pending Cases T-624/15 European Food v Commission, T-694/15 Micula v Commission and T-
704/15 Micula v Commission
1418
Case C-284/16 Slowakische Republik v Achmea BV ECLI:EU:C:2018:158, para 60; See Also Andrea Pinna
‘The Incompatibility of Intra-EU BITs with European Union Law, Annotation Following ECJ, 6 March 2018, Case
284/16, Slovak Republic v Achmea BV’ (2018) 1 Paris Journal of International Arbitration, 73
1419
1420

principles, causing problems of regulatory uncertainty for the industry as it is not
possible to diversify regulatory risk.
3.5.9 State Aid – state resources - PreussenElektra1421
The third area of conflict between the Renewable Energy Directive1422 and primary
EU law concerns aid provided to renewable electricity facilities via state resources.
With renewable electricity facilities generally receiving some form of revenue
support, the potential for this support to be state aid is easily apparent. What the
cases analysed show, is that the design of the renewables support scheme is key
to it being declared compatible with the internal market1423 and not found to be
distortive and thus state aid.
The first situation analysed in relation to state aid is PreussenElektra where
the CJEU considered the structure of the support scheme (a feed-in tariff regime),
the collection of the levy to fund it and its payment by a private body. The Court
confirmed that the finding of monies paid as prohibited state aid is a two stage
cumulative process (i) aid granted by the State (even via statute only) and (ii) being
granted through state resources.1424 As the applicable Minister of State had refused
to allow the increase in tariffs to end users,1425 meaning that the network companies
effectively funded the monies paid to the renewable generators, the AG1426 opined
and the Court1427 held that no state resources were involved and thus the payments
were not state aid.
The findings in PreussenElektra are significant for the renewables sector as
following the case, the Commission issued several decisions where it recognised
1421
1422
1423
1424
1425
Ibid, para 22
1426
Opinion of Advocate General Jacobs Case C-379/98 PreussenElektra AG v Schleswag AG, in the presence of
Windpark Reußenköge GmbH & Land Schleswig-Holstein ECLI:EU:C:2000:585, para 177
1427

the renewables support schemes1428 in Holland,1429 other parts of Germany1430 and
Denmark1431 as not constituting state aid and being proportionate. Based on the
PreussenElektra process the Commission also determined that stranded costs in
Spain,1432 Austria1433 and Belgium1434 were compatible with the internal market1435
and not state aid.
The Commission also went on to decide a series of cases where the costs
of funding the feed-in tariffs were met by electricity consumers.1436 The Commission
then progressed decisions related to tax rebates for certain technologies, which
could not be considered part of the normal scheme of tax,1437 but as relief from
paying these taxes which resulted in a loss of State funds1438 and found the rebates
not to be state aid.
In conclusion the PreussenElektra case has significance for member states
and their design of renewables support schemes, as well as the Commission in
applying its lessons widely via its decisions in relation to renewables support.
The industry and member states took what they believed to be the lessons
learnt from PreussenElektra and applied them to the design of other renewable
1428
1429
Commission Decision, state aid NN/30/B/2000 - The Netherlands, Zero tariff for green electricity, OJ C 30, 2
February 2002
1430
Commission Decision, state aid NN 27/2000 - Germany, Act on granting priority to renewable energy sources,
in force since 1 April 2000, OJ C 164, 10 July 2002; NN 68/2000 - Germany, Law on the protection of electricity
generated from combined heat and power, OJ C 164, 10July 2002
1431
In the context of the liberalisation of electricity markets, Article 24 of Directive 96/92/EC provided for the
possibility of establishing transitional regimes to respect previous commitments or guarantees of operation given
to operators before the entry into force of the Directive.
1432
Commission Decision, state aid NN 49/99 -Spain, 25 July 2001, SG (2001) D/290553
1433
EU COM 2001, 'Commission gives Green light to "stranded costs" compensation by Spain, Austria and The
Netherlands', Press Release, Brussels, 25 July 2001, IP/01/1 079
1434
Commission Decision, state aid C 31/2000 - Belgium, Transitory Regime of the electricity market, OJ C 222,
18 Sept 2002
1435
1436
European Commission, state aid N 74/C/2002 - Finland, Aid to power plants, OJ C 148, 25 June 2003 (see
also European Commission, Decision in state aid N 515/98); European Commission, state aid N 175a/2005 -
Germany, Support of demonstration projects for use of energy from renewable sources, OJ C 89, 12 April 2006;
European Commission, Decision of 24 April 2007 concerning state aid granted by Slovenia in the framework of its
legislation concerning qualified energy producers, COM (2007) 1181 final; European Commission, state aid N
567/2007 - Denmark, Modification of electricity production grant, Brussels, 21 December 2007, K (2007) 6876
1437
European Commission, state aid NN/30/B/2000 - The Netherlands, Zero tariff for green electricity, OJ C 30, 2
February 2002 - As it would be the case of renewables not paying a carbon emissions tax, due to the fact that
they do not deliver those emission to the atmosphere
1438
For example: European Commission, state aid N 239/2001 The Netherlands, Partial Exemption of the energy
tax for waste incineration units, OJ C 32, 5 February 2002; European Commission, state aid N 56/2006 - United
Kingdom, climate change levy rebate extension, Brussels, 4 April 2006, C (2006) 1536; European Commission,
state aid N 907/2006 - Hungary, Aid to Mitrai Eromu Zrt - MSF 2002 , Brussels, 10 July 2007, C(2007)3254 final;
European Commission, state aid N391/2006 - Denmark, Tax rate reductions: heat produced in CHPs, heat
produced by electricity and process heat, Brussels, 9 November 2007, C (2007) 5520; European Commission,
state aid N394/2007 - Denmark, non-appliance to wind power plants of lower depreciation rate, Brussels, 13
March 2008, C(2008)1083

electricity support schemes. Three resulting cases are analysed below showing
PreussenElektra is far from a situation applicable for general application but is a
special case.
3.5.10 French1439 Renewables & the State Management of Funds - Vent De

Colère1440
Following the CJEU’s finding in PreussenElektra, 1441 the French Government in

2008 enacted a regime to support on-shore wind renewable generation. The Vent
De Colère case which resulted from the renewables support scheme1442 highlights
how design of the scheme is critical to the findings of state aid and looks very
squarely at the issues of state control.
The French law empowered the appropriate ministers to lay down the tariffs
for the purchase of renewable electricity. 1443 The renewables support scheme
allowed compensation for the additional costs imposed on the distributors of
electricity generated by wind power due to their obligation to purchase such
electricity at a price higher than the market price. The mechanism provided that
distribution companies could claim full compensation for the additional costs
(considered as costs derived from public service obligations) from the Caisse des
Depots Group (the ‘CDC’), a public body put in place to administer certain activities
relating to economic development. The payments made by the CDC were ultimately
financed by electricity consumers, via their electricity bills. The method of calculating
the tariff was set out by ministerial orders after consulting the Commission de
Regulation de l'Energie (‘CRE’), the French energy regulator.
Advocate General Jääskinen started his analysis by focusing on the control
exercised by the State and the nature of the resources in question. The AG stated
that case law has passed from an institutional approach to an attribution approach,
1439
For an introduction to the French electricity market see Mathias Dantin, Christophe Lefort, Thomas Herman
and Raphaelle Buot de L'Epine, ‘France’ in Peter Cameron and Raphael Heffron (eds) Legal Aspects of EU
Energy Regulation (Oxford University Press, 2016); See Also Thierry Lauriol, ‘Energy Law in France’ in Martha
1440
ECLI:EU:C:2013:851
1441
1442
1443
Adrien Giraud,’Vents De Colère! – Testing the Limits of PreussenElektra’ (2014) 13(2) European state aid Law
Quarterly 345, 345

such that consideration must be given to the fact that the measure in question was
adopted by a public undertaking.1444 However, it is not necessary to apply the test
relating to state control if the public authorities form a constituent part of the State
itself.1445 Accordingly, as long as the resources continuously remain under public
control, and are thus available to public authorities, this is sufficient for them to fall
within the scope of Article 107(1) TFEU. This is the situation found in the Vent De
Colère case, where (i) the amount of the levy is determined annually by ministerial
decree upon a proposal of the CRE,1446 (ii) the funds are collected and administered
by the CDC, using a balancing account,1447 and (iii) the CDC pays the relevant
operators the balancing amount four times a year.1448
As the balancing monies pass through a body established by statute and
authorised by the State to undertake the collection and distribution functions, the AG
considered the CDC a public establishment ‘par excellence’1449 and the monies in
question were left at the disposal of national authorities, hence there was no need
for an in-depth analysis of the functions of the CDC.1450
The AG distinguished the payment mechanism put in place by the statute
and the mechanism assessed in Pearle. The AG pointed out that, in Pearle,1451 the
public-law body served only as a vehicle for levying and allocating resources
collected for a purely commercial objective previously determined by industrial
operators and did not take part in the decision-making process as to the amounts to
be recovered and paid to industry players.1452
The AG disagreed with a general assertion that the public nature of a body
means that the resources available to it must be categorised as state resources.1453
He considered, however, that the function of the CDC (a public law body) in the
collection and payment of the monies necessary to fund the feed-in tariff meant that
they were resources within the control and disposition of a public body.1454
1444
Case C-305/89 Italy v Commission ECLI:EU:C:1991:142, para. 14.
1445
AG Jääskinen Opinion - Case C-262/12, Association Vent De Colère! Fédération nationale and Others v
Ministre de l’Écologie, du Développement durable, des Transports et du Logement and Ministre de l’Économie,
des Finances et de l’Industrie ECLI:EU:C:2013:469, Para 31.
1446
Ibid, para 10
1447
Ibid, para 10
1448
Ibid, para 11
1449
Ibid, para 41 & 44
1450
Ibid, para 44
1451
Ambachten ECLI:EU:C:2004:448, concerning the finding of an advertising campaign decided upon by the
members of a professional organisation
1452
AG Jääskinen Opinion - Case C-262/12, Association Vent De Colère! Fédération nationale and Others v
Ministre de l’Écologie, du Développement durable, des Transports et du Logement and Ministre de l’Économie,
des Finances et de l’Industrie ECLI:EU:C:2013:469, para 45
1453
Ibid, para 46
1454
Ibid, para 47

The AG concluded that the mechanism established falls within the scope of
Article 107(1) TFEU and is thus state aid. The AG stating the primary factor in
reaching this conclusion was that the ‘burden of financing the obligation to purchase
electricity from wind power at a price higher than the market price applies to all
consumers of electricity in France, irrespective of whether they purchase green
energy or not’.1455
The French Government pointed out, along the lines of PreussenElektra, that
the obligation to purchase did not have any impact on the State budget. It was merely
a way to recover the additional costs borne by the organisations within the electricity
market. Additionally, it was stated that the use of a public-law entity, the CDC, to
collect and distribute monies associated with the market mechanism was only due
to practical considerations relating to the number of undertakings with a purchase
obligation.1456 The AG, in finding little merit in this assertion, pointed out that the form
of the charge ruled it out of being categorised as being controlled by ‘private
operators’.1457
The French Government had also sought to time limit the effects of the
judgement, should the CJEU find that the mechanism was in fact state aid. Again,
the AG found little merit in this, stating that the application could not succeed in view
of the scope of the issues referred focusing simply on the concept of state aid. 1458
Therefore the AG found that the scheme was state aid.
The judgement from the CJEU followed the opinion of the AG and confirmed
that the French support for renewable electricity was funded by State resources and
hence state aid (Article 107(1) TFEU). 1459 The Court confirmed that to classify
advantages as state aid, they must be attributable to the state and be granted
directly or indirectly through state resources.1460 In considering the criteria that the
payment regime must be attributable to the state, the Court referred to France v
Commission, 1461 which held that a member state cannot circumvent the rules
regarding state aid by simply creating an autonomous undertaking to administer
collections and payments.1462 The Court therefore considered public authorities had
1455
Ibid, para 50
1456
Ibid, para 56
1457
Ibid, para 54
1458
Ibid, para 60
1459
ECLI:EU:C:2013:851 para. 45
1460
Ibid, para 16
1461
Case C-482/99, France v Commission, ECLI:EU:C:2002:294, para 23
1462
ECLI:EU:C:2013:851 para 34

been involved in the adoption of the framework in question and that organs of the
state were involved in the administration and control of the payments as a result of,
(i) the offset mechanism being established by law, (ii) the applicable Minister
providing an annual ruling regarding a cap on payments, 1463 (iii) the energy
regulator, another government body, overseeing the day to day activities of the
settlement organisation, 1464 (iv) the CDC being seen as ‘an intermediary in the
management of those funds’,1465 (v) CDC’s general manager being appointed by the
President of France with the Council of Ministers acting as its Supervisory Board
and that its supervising committees were composed of persons appointed by the
French Chamber of Deputies, its Senate and other public institutions.1466 The Court
also noted that the French State provided a payment/credit guarantee, requiring the
State to discharge past debts and to cover in full the additional costs imposed on
the companies should the charges collected be insufficient to cover those additional
costs.1467
Vent De Colère's epilogue can be found in Elcogas,1468 relating to a Spanish
special funding regime for a power station which generated electricity by the
gasification of coal and other fuels. The Court analysed the elements of the funding
regime associated with the additional costs of generation. As in Vent De Colère,
analysis focussed on the funding being conferred using State resources, with
compatibility not being considered. The Court again held (i) the funding level for
Elcogas was set by Ministerial Order concerning the 'permanent costs of the
system’, 1469 (ii) the mechanism was financed through the electricity bills of all
consumers 1470 and (iii) payments were made by the Comision Nacional de la
Energia, with no discretionary powers in their administration. 1471 Hence, the
measure constituted state aid,1472 with the fact that the measure was financed by
electricity consumers in general, and not a specific tax, not altering the finding.1473
The significant finding of the Court in Vent De Colère, was that as a state
entity had control of the funding at all material times, this is a distinct contrast to the
funding scheme in PreussenElektra (See Section 3.5.9) where the funds were
1463
Ibid, para 23
1464
Ibid, para 30
1465
Ibid, para 28
1466
Ibid, para 29
1467
Ibid, para 27
1468
Case C-275/13 Elcogas S.A. v Administracion del Estado ECLI:EU:C:2014:2314
1469
Ibid, para 27
1470
Ibid, para 28
1471
Ibid, para 29
1472
Ibid, para 30
1473
Ibid, para 31

managed by private companies and the state had no control at any time.1474 The
case is a lesson that the design of the renewables support scheme is key to it being
found compatible with Article 107 TFEU and not state aid.
The case clearly shows, as did PreussenElektra, that provided a renewables
support scheme is designed correctly without the state control of the funds, that
revenue support for renewable electricity can be allowed by the CJEU on the
grounds of environmental protection being an overriding objective. 1475 It was not the
level of support provided to renewables that was at issue but the level of state
control.
3.5.11 Austria1476 - Intensive Energy Users & Exemption from Austrian Green
Levy1477
The case of Austrian Green Levy is another example of a case showing that
renewable support scheme1478 design is critical to the compatibility of the scheme
with the provisions against state aid (Article 107 TFEU). The CJEU in
PreussenElektra1479 showed that a renewables support scheme could be compatible
with state aid provided it was designed and operated correctly. The Vent De
Colère1480case showed that seeking to manage a renewable support scheme via
government-controlled entities was not an appropriate design to allow a finding of
compatibility with state aid for the support scheme. The Austrian Green Levy case
looks at a different aspect of support scheme design, namely the conferral of a
differential advantage due to the exemption of certain users from paying the
applicable green levy to support the payments made to renewable electricity facilities
via the support scheme.
1474
Ibid, para 32
1475
1476
For an introduction to the Austrian electricity market see Thomas Starlinger ‘Austria’ in Peter Cameron and
Raphael Heffron (eds) Legal Aspects of EU Energy Regulation (Oxford University Press, 2016
1477
1478
1479
1480
ECLI:EU:C:2013:851

The Commission within Decision SA.26036, 1481 relating to the Austrian
Green Electricity Act (2009) (GEA 2009), raised doubts in relation to the compatibility
1482
of the mechanisms put in place by the Act and the internal market. The
1483
Commission subsequently publish Decision SA. 33384, declaring incompatible
with the internal market, several mechanisms set out within the Austrian Green
Electricity Act (2012) (GEA 2012).
The GEA 2009 and 2012, were designed to support the production of
renewable electricity via a feed-in tariff, which is financed by the Austrian electricity
consumers through a clearance or settlement mechanism. The funding of the
support mechanism is based on two pillars: (i) a fixed transfer price is to be paid by
the electricity traders on the (mandatory) purchase of green electricity and (ii) a fixed
lump sum paid by Austrian electricity consumers depending on the grid level to
which they are connected.
In accordance with that Act, the guaranteed fixed price, which is higher than
the market price of electricity, is fixed each year by the Austrian Minister for the
Economy and Employment.1484
The Austrian GEA 2009 contains a provision that intends to exempt
companies in energy intensive industries from the obligation to purchase green
electricity, if expenses for green electricity are larger than 0.5 % of their respective
production costs.1485 The Commission expressed doubts as to the compatibility of
this exemption with the rules on state aid, and as such expressed in its decision that
Austria should recover the state aid given and amend its GEA 2009. The Austrian
Government rejected the Commission’s decision and made referral to the CJEU.1486
As part of its consideration of the renewables support scheme the Court held
that two aspects of GEA 2009 were significant, firstly that any undertaking could be
exempted from paying the levy if an application to the Austrian energy regulator is
successful (Article 22(c)(5) of the GEA 2009),1487 and secondly that any energy-
intensive business which has been granted an exemption from the purchase
obligation is required to pay directly to the Government controlled settlement
1481
Commission Decision (2008) SA.26036 Aid to energy intensive businesses, Green Electricity Act
(Ökostromgesetznovelle 2008)
1482
1483
Commission Decision (2013) state aid SA.33384 Green Electricity Act 2012, Austria
1484
subsequently the Austrian Federal Minister for the Economy, the Family and Young Persons and then the
Austrian Federal Minister for Science, Research and the Economy
1485
The Green Electricity Act (Ökostromgesetz 2009; Federal Gazette No. 114/2008) - Para 22c (5)
1486
1487
Ibid, para 37

organisation (ÖMAG), 1488 and not to the electricity suppliers, a ‘compensatory
amount’.1489
The Court went on to declare the levy as a ‘para-fiscal levy’ on electricity in
Austria, which is set by a public authority. 1490 Additionally, the Court held that,
despite the state owning less than 50% of the shares in ÖMAG, this was not
sufficient to prevent a finding of state control and that state resources were present
in the context of the GEA 2009.1491
The Court held that the funds were administered as ‘special resources’,1492
the use of which was for strictly defined purposes by the Austrian legislature and
thus the same type of funds as had been held to be state resources in Ladbroke
Racing v Commission.1493 As the mechanism of aid for renewable electricity, and the
mechanism of the exemption for energy-intensive businesses, was established by
law, it must therefore be regarded as being attributable to the state.1494
The Court stated that in accordance with the judgement in British Aggregates
v Commission,1495 it was not for member states to freely decide which undertakings
were to pay the green levy, as the exemption was a form of selective advantage and
thus state aid.1496
As was the situation in Vent De Colère1497 the case confirmed that the CJEU
is prioritising the development of renewable electricity over the provisions of EU law
(again free movement and state aid). The case is however, a further lesson that the
design of the renewables support scheme is key to it being found compatible with
Article 107 TFEU and not state aid.
1488
The ÖMAG was set up by the Austrian Government in 2006 with the express purpose of undertaking the
settlement function with regards to the green levy and the organisation was considered a state concession - Ibid,
para 67
1489
Ibid, para 38
1490
Ibid, para 68
1491
Ibid, para 69
1492
Ibid, para 71
1493
Case T-67/94 Ladbrook Racing v Commission, ECLI:EU:T:1998:7, para 105
1494
Case T-251/11 Austria v Commission, ECLI:EU:T:2014:1060- para 87
1495
C-487/06, British Aggregates Association v Commission and United Kingdom ECLI:EU:C:2008:757, para 86
1496
Case T-251/11 Austria v Commission, ECLI:EU:T:2014:1060- para 118
1497
ECLI:EU:C:2013:851

3.5.12 German1498 Intensive Energy Users & Exemption from Green Levy1499
The case of German Green Levy is the third in a line of state aid cases in the post
PreussenElektra 1500 era where in a similar manner to that in the Austrian Green
Levy1501case the German State sought to exempt certain of its intensive energy
users from the requirement to pay the levy on electricity supplied to end users used
to fund the renewables support scheme. 1502
The promotion of renewable electricity has been one of the cornerstones
of German energy policy since the 1980s.1503 However, the increase in the use of
renewable electricity has not been universally welcomed due to its impact on the
economy and cost structure of intensive energy users.1504
Since PreussenElektra1505 (See Section 3.5.9) German Renewable Energy
law has undergone a number of changes, with the entry into force of the Renewable
Energy Sources Act 2012 (Erneuerbare Energien Gesetz – ‘EEG’).
As outlined above, resulting from lobbying, the Commission published state
aid guidelines 1506 allowing the exemption of certain industry sectors from the
payment of the carbon price. The content of the Commission’s state aid guidelines
is thought to have contributed to the belief within Germany that it could go further in
its renewable energy regulations and exempt intensive energy users from paying
the green levy.1507
1498
For an introduction to the German electricity market see Kai Pritzsche and Sebastian Pooschke, ‘Germany’ in
Peter Cameron and Raphael Heffron (eds) Legal Aspects of EU Energy Regulation (Oxford University Press,
2016); See Also Johann-Christian Pielow and Hans-Martin Koopmann, ‘Energy Law in Germany’ in Martha
1499
Commission Decision 2015/1585, Aid Scheme SA 33995 – ‘implemented by Germany for the support of
renewable electricity and of energy-intensive users’, available at http://eur-lex.europa.eu/legal-
1500
1501
1502
1503
Staffan Jacobsson and Volkmar Lauber,’ The politics and policy of energy system transformation – explaining
the German diffusion of renewable energy technology’ (2006) 34(3) Energy Policy, 256, 256 – use of Enquete
Commission to define energy policy
1504
Andreas Haak and Michael Brüggemann, ‘Compatibility of Germany’s Renewable Energy Support Scheme with
European state aid Law – Recent Developments and Political Background’ (2016), 15(1) European State Aid Law
Quarterly, 91
1505
Schleswig-Holstein
1506
EU Commission Communication C158/4, ‘Guidelines on Certain state aid Measures in the Context of the
Carbon Emission Allowance Trading Scheme Post 2012’ 5 June 2012
1507
Christian Rammer, Sandra Gottschalk, Michael Peneder, Martin Wörter, Tobias Stucki and Spyros Arvanitis,
‘Does energy policy hurt international competitiveness of firms? A comparative study for Germany, Switzerland
and Austria’ (2017) 109 Energy Policy 154; See Also Ortwin Renna and Jonathan Marshall, ‘Coal, nuclear and
renewable energy policies in Germany: From the 1950s to the “Energiewende”’ (2016) 99 Energy Policy 224;

The EEG 2012 regime is a complex mechanism providing a renewable
electricity support scheme. The Act requires all network operators to connect
renewable generating capacity to their networks,1508 to transmit this electricity as a
priority1509 and to make renewable generators support payments as set out in the
EEG 2012 1510 - generally a premium above the market price for electricity. In
essence, the distribution network operators sell the renewable electricity to the
regional transmission system operator,1511 receiving a payment equivalent to the
sum paid to renewable generators. 1512 The transmission operators sell the
renewable electricity on the power exchange and if the price recovered for the
renewable electricity is not equal to that paid to the distribution company, the
transmission operator is able to recover the applicable amount from suppliers (via
final customer’s tariffs – the so called ’EEG Surcharge’).1513 Suppliers may receive
a reduced EEG Surcharge (the ‘Green Electricity Privilege’) if they can show that at
least 50% of the electricity the supplier sells is from renewables and that at least
20% of this is from wind or solar.1514
Each year the Federal Office for Economic Affairs & Export Control sets
a cap for the EEG Surcharge that may be passed on to ‘electricity intensive users’
and railways,1515 with the reduction levied on electricity intensive users and railways
passed on to domestic consumers. 1516 The regime is subject to information
publication and transparency provisions between the industry players and the
industry regulator – Bundesnetzagentur (Federal Network Agency – ’BNetA’), with
the BNetA having a supervisory role as set out in the EEG 2012.1517
As a result of a complaint by the German Association of Energy Consumers
to the Commission that EEG 2012 was state aid and incompatible with the internal
market, 1518 the Commission undertook a two-stage investigation, finally reporting in
2014.1519
Bernice Lee, ‘Managing the Interlocking Climate and Resource Challenges’ (2009) 85(6) International Affairs
1101, 1111; See also M Kanellakis, G Martinopoulos and T Zachariadis, ‘European Energy Policy – A Review’
(2013) 62(c) European Energy Policy, 1020, 1029
1508
Erneuerbare Energien Gesetz – “EEG 2012” para 5-7
1509
Ibid para 8-12
1510
Ibid para 16-33
1511
Ibid para 34
1512
Ibid para 35
1513
Ibid para 37
1514
Ibid para 39
1515
Ibid para 40
1516
Ibid para 50
1517
Ibid para 61
1518
1519
Commission Decision 2015/1585, on the aid scheme SA.33995 (2013/C - ex 2013/NN) implemented by
Germany for the support of renewable electricity and of energy-intensive users, C(2014) 8786 final

Following the publication of the Commission’s Decision, Germany brought
an action Germany v Commission1520 (German Green Levy). The case set out by
Germany was that there was an absence of selective economic advantage, because
the support for renewable electricity meets the criteria in Altmark,1521 namely that the
reductions for energy-intensive users merely sought to mitigate existing fiscal1522
and structural disadvantages to German industry.1523
Moreover there was an absence of State resources and State control, due
to the incomparability of the legal and factual situation in the EEG-Act 2012 with the
situations examined by the Court in cases Vent de Colère1524 and Austrian Green
Levy.1525 Additionally, it was stated that if the reduction to intensive energy users
constitute state aid at all, the EEG-Act 2012 constituted existing aid in the light of
the Commission’s decision on state aid declaring the previous German Renewable
Act to be compatible with the state aid rules and thus any aid granted was compatible
with the internal market 1526 on the basis of Article 107(3)(b)TFEU (remedy of
economic disturbance) and 107(3)(c)TFEU (the aid does not adversely affect
trading).1527 Germany further claimed that the scheme should be allowed on the
‘ability to pay’ principle, whereby the energy intensive users would remain in
Germany and contribute to some extent to the funding of renewable electricity
production. 1528 Germany lastly claimed that the flow of funds relating to the
renewable scheme did not become, directly or indirectly, state funds and that the
oversight of the BNetzA was merely to prevent an infringement of the regulations by
one of the operators in the supply chain.1529
In considering the issues the Court looked at the compatibility of the
structure of EEG 2012 with the four criteria set out in Pearle.1530
The Court held that the state did intervene in the market and that the level of
monies and the flow of the renewable surcharge were controlled by the State.1531
The Court also considered the reduction in EEG 2012 surcharge was a
deferential and distortive benefit received by the energy intensive users. 1532 The
1520
1521
Case 280/00, Altmark Trans ECLI:EU:C:2008;413
1522
Case T-47/15 Germany v Commission ECLI:EU:T:2016:281, para 46 to 48
1523
Case T-47/15 Germany v Commission ECLI:EU:T:2016:281, para 58
1524
Case 262/12, Associated Vent de Colère ECLI:EU:C:2013:851
1525
1526
1527
Ibid, para 62
1528
Ibid para 66
1529
1530
Ambachten ECLI:EU:C:2004:448 para 33 - an intervention by the State, through State resources, affect trade
between member states, conferring an advantage on the recipient, distorts, or threaten to distort, competition
1531
1532
Ibid, para 112

Court used the criteria set out in British Aggregates v Commission 1533 whereby
holding that the reduction in the surcharge was similar in nature to a subsidy and as
such has the same effect and therefore is a form of state aid incompatible with Article
107 TFEU. 1534 The Court held that the EEG 2012 sought to compensate for a
perceived competitive disadvantage, and was consistent with the finding in Heiser v
Finanzamt Innsbruck,1535 that should a measure favour an undertaking by conferring
an economic advantage 1536 it is state aid. The Court also maintained that the
important issue was the effect of the measures in question and as such it was state
aid (Camitato v Commission).1537
The Court stated that the measures put in place by EEG 2012, did not
constitute a service of general economic interest1538 and as such could not be held
to be exempt from being prohibited as state aid (Altmark 1539 and Orange v
Commission),1540 thus the EEG 2012 support scheme is state aid.1541
The Court dismissed any assertion that the support scheme should be
allowed on an ability to pay principle 1542 based on the previous findings in
Commission & Spain v Gibraltar & UK1543 where such considerations in relation to
state aid were held to be invalid.1544
The Court held in relation to the flow of funds, that case law set out that state
aid was not only derived from funds provided by the State but was also aid granted
through state resources.1545 The surcharge put in place by EEG 2012 remained at
all material times under the dominant influence of public authorities, in that the
electricity network operators were administering a state concession,1546 the Court
1533
Case T-210/02, British Aggregates v Commission, ECLI:EU:T:2012:110, para 46
1534
1535
Case C-172/03, Heiser v Finanzamt Innsbruck , ECLI:EU:C:2005:130 para 54
1536
Case C-399/08, Commission v Deutsche Post, ECLI:EU:C:2010:481, para 40
1537
Case C-71/09, Comitato ‘Venezia vuole vivere’ v Commission, ECLI:C:2011:368 para 94
1538
Services of general economic interest are economic activities that public authorities identify as being of
particular importance to citizens and that would not be supplied (or would be supplied under different conditions) if
there were no public intervention - examples being transport networks, postal services and social services - EU
Communication 2012/C 8/02, ‘State aid rules to compensation granted for the provision of services of general
economic interest’OJ C8/4; See Also EU Communication ‘Services of General Interest In Europe’ OJ 2001 C17 –
this was confirmed in April 2018 via Case C-91/17 Cellnex Telecom v Commission ECLI:EU:C:2018:284 – where
is was held that (i) state intervention is justified only when there is market failure, meaning that before a public
service obligation (PSO) is imposed, the market failure must be demonstrated with objective evidence, (ii) A PSO
must be clearly defined, (iii) one or more undertakings must be made responsible, by law or through contract, to
supply the service, and (iv) the selection of the supplier(s) and well as their compensation must be determined
according to the procedures laid down in the 2012 Services of General Economic Interest EU Framework; See
Also Giulio Napolitano,’Towards a European Legal Order for Services of General Economic Interest’ (2005) 11(4)
European. Public Law, 565
1539
Case C280/00, Altmark Trans GmbH and Regierungspräsidium Magdeburg v Nahverkehrsgesellschaft
Altmark GmbH, and Oberbundesanwalt beim Bundesverwaltungsgericht ECLI:EC:C:2003:415
1540
Case T-385/12 Orange v Commission, ECLI:EU:T:2015:117, para 43
1541
1542
Ibid para 68
1543
Case C-106/09 Commission & Spain v Gibraltar & UK, ECLI:EU:C:2011:732 para 146
1544
1545
Case C-482/99, France v Commission, EU:C:2002:294 para 23
1546

using the judgements in Essent Netwerk Noord1547 and Austrian Green Levy1548 to
justify its position. The Court therefore held that the network operators in collecting,
holding separately from general funds and distributing as directed by EEG 2012 and
with the oversight of the BNetzA and other Governmental Ministries, means that the
mechanism set up by EEG 2012 was state resources,1549 the court again using the
judgement in Ladbroke Racing v Commission, 1550 where the facts were similar.
Therefore, the reduction in surcharge to energy intensive users was held to be state
aid to those consumers and that such users were required to make good the
reduction enjoyed.1551
It seems clear that the German authorities believed the relationship between
environmental goals and industrial competitiveness to be a struggle between
environmental benefits and industrial costs, whereas it has been stated1552 that well
framed environmental regulation would drive innovation and in a changing social
and environmental paradigm the benefits/cost balance would not be static overtime.
The German legislator, however, failed to take account of the position
reached in R v MAFF ex parte Hedley Lomas,1553 where it was held that a member
state putting in place laws to redress a perceived economic imbalance or unfair
practice of another member state, was prohibited and that the proper route for such
redress should be through the European Court. This line of judicial reasoning,
equally ignored by the German legislator, seems to have been following in a series
of cases from the late 1990s where the granting of operating aid intended to maintain
a fiscal position was held to be state aid and prohibited by Article 107(3)(c).1554
As a result of the CJEU finding the German authorities imposed the EEG
surcharge on all consumers procuring their electricity from the grid. Electricity
generated by self-suppliers (usually generation embedded within a factory or other
such facility for self-supply) was exempt from this surcharge. This exemption under
German law for self-suppliers of electricity is said to have created an artificial 'boom'
in self-supply, with many companies switching to self-supply to avoid the EEG-
surcharge. This undermined the financial sustainability of public support for
1547
Case C-206/06 Essent Netwerk Noord BV v Nederlands Elektriciteit Administratiekantoor BV and Saranne BV,
EU:C:2008:413 para 43 to 47
1548
Case T-251/11, Austria v Commission, ECLI:EU:T:2014:1060
1549
1550
Case T-67/94, Ladbroke Racing v Commission, EU:T:1998:7, para 106 to 108
1551
1552
M E Porter and C van der Lind, ’Toward a new conception of the Environmental-Competitiveness Relationship’
(1995) 9(4) The Journal of Economic Perspectives, 97
1553
Case C-5/94 R v Ministry of Agriculture Fisheries & Food ex parte Hedley Lomas ECLI:EU:C:1996:205, para
20
1554
Case C-288/96 Germany v Commission ECLI: EU:C:2000:537, para 88 to 91; Case C-156/98 Germany v
Commission ECLI: EU:C:2000:467, para 30; Case C-459/10P Freistaat Sachsen and Land Sachsen-Anhalt v
Commission ECLI:EU:C:2011:515, para 33 to 36

renewable electricity and threatened the stability of the electricity grid. Therefore, in
August 2014, Germany decided to impose the EEG-surcharge also on self-supplied
electricity. 1555 In December 2017 the Commission determined that in order to
maintain industrial stability an exemption from EEG-surcharges for self-supply would
not be regarded as state aid, provided the equipment used for the self-supply met
certain carbon emissions targets.1556 The Commission went on, in March 2018, to
declare other EEG-surcharge reductions for railways and ‘electro-intensive
undertakings’ were also allowable state aid.1557
As was the case in Vent De Colère1558 and Austrian Green Levy1559 the case
is confirmation that the CJEU is prioritising the development of renewable energy
over the provisions of EU law (again free movement and state aid) and thus a
diagonal conflict exists. These findings again leading to the clear lesson that design
of the scheme is key to its compatibility with the provisions of the 2014 Guidelines
1560
on state aid for Renewables and the findings in Pearle and Alcoa
1561 1562
Trasformazioni generally, and Altmark Trans for renewable electricity
specifically.
The legacy of the case, however, is not the fact that support scheme1563
design must be such that state management and control of the monies is to be
avoided and that differential exemption from the payment of the levy is state aid, but
is that continued lobbying of the Commission can bring about changes in state aid
practice. The CJEU in its finding applied EU law as it stood at the time in question,
but the Commission Decision in 2017,1564 that self-supply could be exempt from the
1555
Renewable Energy Sources Act 2014 (Erneuerbare Energien Gesetz – ‘EEG 2014’)
1556
European Commission, Decision of 19 December 2017 Reduced surcharge for self-generation under EEG
2017 SA.38632
1557
Commission Decision of 28 March 2018 relating to the offshore-surcharge reduction for railway undertakings in
Germany SA.50395; See also Commission Decision of 28 March 2018 relating to reductions in the offshore
surcharge for electro-intensive undertakings and reductions on the CHP surcharge for electricity produced from
waste gases in Germany SA.49416
1558
ECLI:EU:C:2013:851
1559
1560
Ambachten ECLI:EU:C:2004:448 para 33
1561
Case T-177/10, Alcoa Trasformazioni v Commission, ECLI:EU:T:2014:897
1562
Case C-280/00 Altmark Trans GmbH and Regierungspräsidium Magdeburg v Nahverkehrsgesellschaft
Altmark GmbH, and Oberbundesanwalt beim Bundesverwaltungsgericht ECLI:EU:C:2003:415.
1563
1564
2017 SA.38632

green levy surcharge, and the 2018 Decision,1565 that reductions in levy charges for
‘electro-intensive undertakings’ were also allowable state aid, have effectively
ensured that the position put forward by Germany at the time of the CJEU
proceedings is now allowable state aid. Nothing has fundamentally changed in
relation to network flows of electricity, or the costs imposed on end users of electricity
by the renewables support scheme. With the now allowable state aid it is argued
that exempting the intensive energy users and transferring the costs which they
would have paid to other consumers of electricity (usually small industrial,
commercial and domestic) is a breach of Article 107(1)TFEU, as the practice
distinctly favours the intensive users.
Additionally, the practice conflicts with Article 107(1)TFEU in that it applies
dissimilar conditions to different end users for the equivalent transaction of buying
electricity and it is thus distortive of competition.
3.5.13 State Aid Embedded Benefits & Network Access - Essent 21566
The Essent 2 case shows the difference in approach taken by the CJEU in relation
to network access1567 compared to access to the national support scheme from
renewable electricity. The judgement held that legislation of the Flemish Region in
Belgium, limiting distribution of renewable electricity to that produced by generators
connected to distribution systems in Belgium, was in breach of EU Treaty rules on
free movement, as well as the provisions of the 1996 and 2003 Electricity
Liberalisation Directives and the 2001 Renewable Energy Directive1568 (the version
of the Directive in force at the applicable time).The judgement contrasts with the
Court's judgements in Essent 11569 (Section 3.5.1) and Ålands Vindkraft1570 (Section
3.5.2) which held that limiting the national renewables support scheme to
domestically generated renewable electricity was not in breach of the free movement
of goods. This judgment sets out a wider principle that national transmission and
1565
1566
1567
1568
1569
ELCI:EU:C:2014:2192
1570

distribution regimes, and in particular rules on third party access, 1571 must not
discriminate against power imported from other member states.
The Legislation of the Flemish Region from 2003 provided that distribution
of electricity from renewable sources in the Flemish region was free for renewable
electricity generators in the Region. In 2004, free distribution was extended to
renewable electricity generated by generators connected to a distribution system
anywhere in Belgium. Essent, which supplied renewable electricity, imported from
the Netherlands to customers in Belgium,1572 via distribution networks in the Flemish
Region, sought compensation from the Flemish Region totalling nearly €15.9 million
for being excluded from these free distribution arrangements.1573
The Belgian court sought a preliminary ruling from the CJEU, essentially
asking whether the Flemish legislation was in breach of (i) Article 34 TFEU (free
movement), (ii) of relevant provisions of the Electricity Market Liberalisation
Directives 96/92 and 2003/54 and (iii) the Renewable Energy Directive 2001/77.1574
The CJEU noted that the purpose of the 2001 Renewable Energy Directive
(still in force at the time) was to promote the production of renewable energy.1575 The
Directive therefore outlined various mechanisms seen as supporting renewable
electricity production. 1576 The CJEU noted that the 2001 Renewable Energy
Directive allows member states considerable latitude in the decision as to the design
of the renewable support scheme implemented.1577 However, the Court noted that
the Flemish legislation did not directly support renewable electricity production, ’the
regional legislation….constitutes neither an advantage nor direct support to green
electricity producers, since that free distribution primarily benefits suppliers and
therefore, in principle, the consumer’.1578 The Flemish legislation could therefore
only provide indirect support to producers of renewable electricity. While the
measures set out in the Flemish legislation would in principle lead to an increase in
national production of renewable electricity, at the same time they must comply with
the Treaty rules on free movement.1579 The Court also noted that Article 7(6) of the
1571
Third Party Access (TPA) is a legally enforceable right of independent undertakings to access and use, in
certain circumstances, various energy network facilities owned by other companies.
1572
Case C-492/14 Essent Belgium NV v Vlaams Gewest and Others ECLI:EU:C:2016:732, para 33
1573
Ibid, para 34
1574
Ibid, para 36
1575
Ibid, para 53
1576
Ibid, para 58 – referring to Recital 14 of 2001 renewable Energy Directive and Case C-66/13 Green Network
SpA v Autorità per l’energia elettrica e il gas ECLI:EU:C:2014:2399, para 52 confirming the Recital was simply a
list and not a mandatory obligation to implement all features listed
1577
Ibid, para 60
1578
Ibid, para 61
1579
Ibid, para 65

2001 Renewable Energy Directive required member states to ensure that grid
charges do not discriminate against electricity from renewable energy sources.1580
The Court then turned to the Electricity Market Directives 96/92 and
2003/541581 relating to non-discriminatory access to the distribution network. The
Court held that Article 16 of the 1992 Directive and Article 20(1) of the 2003 Directive
required member states to ensure non-discriminatory access to the transmission
and distribution systems.1582 The Court confirmed that the concept of access to the
system covered the use of the system as well as connection to it, and applied to
suppliers as well as producers.1583 The principle of non-discrimination meant that
comparable situations must not be treated differently unless the difference in
treatment was objectively justified.1584 The Flemish legislation granted exemption
from the distribution fees only for electricity originating in Belgium, this therefore
amounting to different treatment.1585
The Court rejected the argument by the Flemish Region and the Flemish
energy regulator that the rules on priority dispatch1586 of renewable generation set
out in Article 11(3) of the 1996 Electricity Market Directive and Article 14(4) of the
2003 Electricity Markets Directive provided justification for the difference in
treatment of nationally-generated renewable energy.1587 However, it recognised that
the objective supposedly pursued by the Flemish legislation, namely the promotion
of renewable electricity, was legitimate.1588
The Court noted that the Directives permitted member states to impose
public service obligations on electricity undertakings, namely ‘environmental
protection, including climate protection’,1589 which was interpreted as the obligation
to distribute renewable electricity without charge. However, these obligations must
be applied proportionately and in compliance with the rules on free movement in
accordance with Articles 28 to 34 TFEU.1590 The Flemish legislation encouraged
1580
Ibid, para 68
1581
Directive 2003/54 concerning common rules for the internal market in electricity and repealing Directive 96/92
[2003] OJ L176/37
1582
1583
Ibid, para 70 to 75
1584
Ibid, para 80 – confirming Case C-17/03 Vereniging voor Energie Milieu en Water v Directeur van de Dienst
Uitvoering en Toezicht Energie para 47
1585
Ibid, para 82 to 85
1586
1587
Ibid, para 83
1588
Ibid, para 84
1589
Ibid, para 87
1590
Ibid, para 96

electricity suppliers to buy renewable electricity generated locally and was therefore
capable of hindering imports of electricity from other member states. 1591 It was
therefore a measure equivalent to a quantitative restriction prohibited by Article 34
TFEU (the Article 28 TEC).1592 It could nevertheless be justified on one of the public
interest grounds set out in Article 30 TEC or by overriding objective, 1593 and must in
either case be proportionate.1594 The protection of the environment and the objective
of increasing the use of renewable energy sources were an overriding objective. The
increased use of renewable energy sources was also useful for the protection of the
health and life of animals, plants and humans, and therefore fell within Article 30
TEC (now Article 36 TFEU), as the Court held in its judgement in Ålands
Vindkraft.1595
The Court then turned to the issue of proportionality, which was critical to the
question of whether the Flemish legislation was compatible with Directives 96/92,
2003/54 and 2001/77, and with the derogation to the requirement to allow free
movement of goods.1596
To be proportionate, the national legislation must be appropriate to the
achievement of the objective of promoting an increase in the production of
renewable electricity, and must be necessary for that purpose as well. The Court
acknowledged that national support schemes for renewable electricity are targeted
at the production of electricity rather than its consumption because reductions in
emissions are realised in the production of electricity rather than its consumption.1597
That, together with the fact that EU law had not harmonised national support
schemes for renewable electricity, justified the limitation of the Swedish renewable
certificates scheme to renewable energy sources located in Sweden to the exclusion
of sources in Finland in Ålands Vindkraft. Similarly, in Essent 1,1598 the renewable
certificates were intended to incentivise an increase in the production of renewable
electricity.1599
However, the Court noted that in this case free distribution of nationally-
generated renewable electricity was not intended to give direct support to producers,
1591
Ibid, para 98
1592
Ibid, para 92
1593
1594
1595
Ibid, para 101
1596
Ibid, para 104
1597
Ibid, para 105
1598
Joined cases C-204–208/12 Essent Belgium NV v Vlaamse Reguleringsinstantie voor de Elektriciteits- en
Gasmarkt ECLI:EU:C:2014:2192
1599

as it primarily benefited suppliers,1600 with no guarantee that the benefit would be
passed on to producers.1601 The Court stated that the passing on of these benefits
would depend on other factors such as electricity prices, supply and demand and
relative bargaining strengths of the producers and suppliers, with support being
‘indirect, uncertain and risky’.1602 The Court stated that more certain and effective
ways of supporting the production of renewable electricity, without discriminatory
third party network access, were available thus the Flemish scheme was not
proportionate and thus state aid.1603
The significance of this case is not as another confirmation of the conflict
between the renewable energy regulatory framework and free movement of goods,
but the finding that the failure to charge renewable generators for network access
(so called ‘embedded benefits’) is a form of state aid.
Upon review of the Essent 1, 1604 Ålands Vindkraft1605 and Essent 21606 cases
together it is clear that some important principles emerge. Essent 1 shows that
supporting renewable generation via revenue enhancing support schemes can be
justified using the simply overriding objective1607 of renewable electricity set out in
ADBHU1608 and Danish Bottle.1609 The Ålands Vindkraft case shows a very clear
limitation of access to the nationally focussed renewable electricity support scheme
to renewable electricity facilities within that member state. The Essent 2 case
however, shows two new issues that expend the understanding of the EU’s
renewables regulatory framework. Essent 2 shows that limiting access to the
network for electricity from other member states is a breach of free movement.
Hence it can be seen that access to a renewable electricity ‘support scheme’ is
different from access to the electricity network.
Secondly, that seeking to exempt local renewable generation from network
charges on the basis that these costs are part of a cost base to which renewable
generation undertakings would normally be exposed, is a simple application of the
1600
Ibid, para 112
1601
Ibid, para 113
1602
Ibid, para 116
1603
Ibid, para 117
1604
ELCI:EU:C:2014:2192
1605
1606
1607
1608
1609

principle set out in GEMO 1610 where an undertaking relieved of costs it would
normally face is state aid.
3.5.14 Summary of Conflicts between Renewable Energy Directive1611 & EU

Free Trade Principles
Free Movement
The three cases outlined (Essent 11612 Ålands Vindkraft1613 and Green Network1614)
show a progression from the simple application of the ADBHU 1615 and Danish
Bottle1616 justification for applying an exception to the requirement to enforce free
movement of goods, to a subtler application of a restriction to only access to the
renewable electricity support scheme rather than a free movement restriction, to
actual flows of renewable electricity in Essent 2.1617
. The Ålands Vindkraft1618case shows that the CJEU is willing to enforce a
member state by member state focussed renewable support scheme rather than
applying a wider interpretation of the need to support renewables. The case is a
missed opportunity to give equal weight to the network provisions (Article 170TFEU
and 194(1)(d)TFEU) and provide the widest support to renewables required by
Article 194(1)(c)TFEU.
The Green Network 1619 case brings out the competence issue related to
renewable electricity origin recognition agreements. The case confirms that the
Commission has exclusive competence to negotiate a renewable electricity original
recognition agreement with third countries.
1610
Case C-126/01 Ministère de l'Économie, des Finances et de l'Industrie v GEMO ECLI:EU:C:2003:622, para.
31 to 34. AG Jacobs had considered that ‘the provision free of charge of a collection and disposal service for
para. 64
1611
1612
ELCI:EU:C:2014:2192
1613
1614
1615
1616
1617
1618
1619

The analysis of the Public Procurement Directive 1620 shows that it strictly
applies the free movement criteria for the purchase of electricity by public bodies.
The analysis further confirms that the free movement restrictions only relate to the
ability to access the renewable electricity support mechanism of a member state and
not the access to the electricity network and flows of electricity thereupon.
Irrespective of the subtly of the free movement restriction it still shows that
the Renewable Energy Directive is in diagonal conflict with the Treaty provisions
relating to the free movement of goods.
State Aid - Price Fixing
The PreussenElektra1621 and the Essent 11622 judgements show that the CJEU is
prepared to apply an overriding objective criterion in the support of renewable
electricity in terms of price in conflict with the provisions of Article 107(1)TFEU which
restricts the fixing of prices or other trading conditions which would be distortive of
competition.
State Resources - State Aid
Environmental protection and sustainable development are general principles of law

that articulate a series of sub-principles contained in the Treaty - including the
‘precautionary principle’, ‘rectification at source’ and the ‘polluter-pays principle’.1623
However, the lack of consistency in using these sub-principles in secondary EU
legislation weakens the CJEU’s coherent handling of the concept in its decisions.1624
This research thus suggests this inconsistency brought an initial perception amongst
member states that their discretion to put in place national renewable electricity
support schemes was wider than it has been held to be in more recent judgments.
This initial perception, built on the PreussenElektra1625case, led to the renewable
1620
EU Directive 2014/24/EU ‘Directive on Public Procurement’ OJ L 94
1621
1622
ELCI:EU:C:2014:2192
1623
Luis Avilés, ‘Sustainable development and environmental legal protection in the European Union: A model for
Mexican courts to follow?’ (2014) 6(2) Mexican Law Review, 251
1624
Luis Avilés, ‘Sustainable development and environmental legal protection in the European Union: A model for
Mexican courts to follow?’ (2014) 6(2) Mexican Law Review, 251 Ibid
1625

electricity support schemes put in place in France (Vent De Colère), 1626 Austria
(Austrian Green Levy)1627 and Germany (German Green Levy).1628 What these later
cases show is that PreussenElektra was not the general rule, but a special case,
due the responsible German Minister prohibiting the transfer of funds from a state
entity to fund the renewable electricity support scheme.
Additionally, the cases show that irrespective of assurances of national
authorities that the support scheme in question is not prohibited state aid it is for the
undertaking to be satisfied that the aid granted follows Article 107 TFEU and the
Commission’s guidelines, assurances of national authorities or even the commission
are no defence.1629
The cases show that the design of the renewables support scheme is critical to it not
being found to be prohibited state aid.
The PreussenElektra case is significant as it really led the way with the CJEU
finding that a price enhancing renewables support scheme was not state aid.
The cases have led to the Commission essentially deciding that support for
renewables is to be allowed via the provisions of the General Block Exemption
Regulation (GBER) 1630 and the 2014 Guidelines on State Aid for Environmental
Protection & Energy.1631
Additionally, the legacy of the German Green Levy1632 case is that continued
lobbying of the Commission has led to the exemption of intensive energy users from
the requirement to pay green levies to fund renewable electricity support schemes,
despite this situation being found by the CJEU to be state aid. Hence the
Commission has essentially changed EU law and placed itself above the CJEU.
As the Commission has exclusive competence in the determination of state
aid, it being known that Commission Decisions and guidelines are normative and
the CJEU has held them to be binding on the Commission, 1633 this means that
1626
ECLI:EU:C:2013:851
1627
1628
Commission Decision 2015/1585, Aid Scheme SA 33995 ‘implemented by Germany for the support of
renewable electricity and of energy-intensive users’, available at http://eur-lex.europa.eu/legal-
1629
Case C‑349/17 Eesti Pagar v Ettevõtluse Arendamise Sihtasutus,ECLI:EU:C:2019:172
1630
('GBER')
1631
– 2020, 2014/C OJ 200/01
1632
1633

renewable support schemes are only required to comply with the Commissions
decisions and not the Treaty Articles. This is a considerable area of diagonal conflict
between the renewable electricity regulatory regime and the Treaty, and also shows
how the competence granted to the Commission has been used to develop the law
in this area.
Therefore, in summary, the Renewable Energy Directive, and the national
renewable support schemes which it requires, are only put in place by allowing
indigenous renewable generation access to such schemes in a diagonal conflict with
free movement. Additionally, the price fixing processes of the renewable support
schemes enhance revenues for renewable generation, the cost recovery
mechanisms of these support schemes being focussed on consumers and due to
the level of control exercised by the state, the schemes, if not designed correctly,
can be held to be state aid.
3.6 Emissions Trading Directive 1634 & Conflicts with EU Free trade Principles
The main features of the Emissions Trading Directive were outlined in Section
2.10.1. The Directive has facilitated the setting up of the EU emissions trading
scheme (EU-ETS). The EU-ETS is a cap and trade system which works by setting
limits on overall emissions in line with the emissions allowances available, with the
number of allowances reducing overtime. Within the limit of emissions, companies
may buy and sell allowances as needed to match their actual emissions. The market
mechanism provided by the EU-ETS as well as providing a market to trade
emissions allowances, has the overall aim of reducing emissions overtime.
This section sets out the basic conflicts between the Directive, the Treaty
and elements of the EU’s free trade principles. It should be recalled that the Directive
is market in style and falls within the competency1635 of the Commission, 1636 except
for the national emissions allowance allocation plans which are within the
competence of the member states. 1637
1634
1635
1636
1637

This section also undertakes a detailed analysis of the conflicts outlined
using case law and in so doing seeks to ascertain if it is the Directive’s style or its
competency framework adds to these conflicts. The analysis commences with the
state aid implications of over allocation of emission allowances before moving on to
the conflicts with the ‘polluter pays’ principle.
3.6.1 Competency and National Allocation Plans of Emission Allowances -

Commission v Estonia1638
The Commission has the overall competence for the Emission Trading Directive1639
and the EU-ETS.1640 However, during the initial trading period the Directive required
the allocation of emission allowances in accordance with the national allocation
plans (NAP - Directive Article 11(2)). Following the development of an allocation plan
by Estonia, the Commission undertook a review of the plan in accordance with
Directive Article 9(3) and sought a reduction in the allocation of allowances by
47.8%.1641 The Commission then sought to substitute an allocation plan of its own
to manage what it saw as an over allocation of allowances.
The CJEU subsequently determined the limit of the competence of the
Commission and the member state in relation to the EU-ETS and the NAP. It was
held by the CJEU that the Commission was required to undertake a review of the
NAP in accordance with the provisions of Annex III of the Directive, essentially a
legal review, 1642 and that the review was to consider, firstly, if the volume of
allowances in the national plan were consistent with the actual and projected
emissions such as to allow the EU as a whole to meet its Kyoto commitments, and
secondly, if the plan had been made in such a manner that it did not discriminate
between undertakings so as to favour certain market participants and especially in
the context of Articles 87 and 88 TEC (now 107 and 108 TFEU – state aid).1643
The CJEU held that the Commission as part of its review, or as an outcome
of the review, does not have the competence to substitute its own allocation plan for
that of the member state.1644 The CJEU went on to say that the member state has
1638
1639
1640
1641
Case C-505/09 Commission v Estonia ECLI:EU:C:2012:179, para 8
1642
Ibid, para 49 and 82
1643
Ibid, para 7
1644
Ibid, para 63

the competence to develop an allocation plan of its choosing, using methods of its
choosing.1645
Lastly the CJEU stated that the Commission is not able to determine and
then substitute what it believes the EU legislator wanted to say in an EU legal
instrument or, in this instance, what would be more compliant with the EU’s
commitments in accordance with the Kyoto Protocol.1646
The Estonia 1647 case is in many respects a simple determination of
competence between the Commission and the member state. However, it also
shows the conflict between the overall objectives of carbon emissions reduction and
nationally determined emission allowance allocation plans. In the arguments about
the competencies of the Commission and the member state what was overlooked
was the considerable volume of over allocated allowances. The Directive, in giving
guidance on the development of the NAP specifically required that the plan should
not favour one undertaking over another such that state aid is conferred.1648 Had the
Commission simply accepted, even with comments, the allocation method and the
Estonian NAP, it could then have brought a case related to state aid, and the large
volume of allowances available in the EU-ETS during the initial phase may well have
been avoided. What occurred, was that the Commission exceeded its competence,
sought to implement an allowance volume it thought best, this was rejected by the
CJEU, and over allocation by member states continued. Thus, the EU-ETS is in
diagonal conflict with the Treaty provisions related to state aid, as the NAP did
provide an advantage to certain undertakings in contravention with Article 107
TFEU.
The case also makes a more general point about the competencies of the
Commission related to its requirement to administer the legal framework in place.
The Estonia case also confirmed two earlier findings1649 (i) that it was not for the
Commission to seek to determine what legislative drafting would be better to abate
climate change or other obligations of the EU or (ii) seek to follow that ‘better’
drafting; the Commission must follow the drafting of the legislation as executed. The
Commission simply receives the competencies conferred upon it.
1645
Ibid, para 66
1646
Ibid, para 121
1647
1648
Annex III - Council Directive 2003/87 13 October 2003 Establishing a scheme for carbon emission trading
allowance trading within the Community OJ L 275, 25.10.2003 the Directive was amended by Directive 2009/29
‘To improve and extend the carbon emission trading scheme of the Community’ OJ L140/63
1649
Case C-239/01 Germany v Commission ECLI:EU:C:2003:514 para 37 and Case C-244/03 France v
Parliament & Council ECLI:EU:C:2005:299, para 14

Additionally, the EU-ETS can be seen to conflict with the provisions of the
TFEU related to the polluter pays principle. With the allocation of allowances for free
at no level can it be considered that the polluter has paid.
Even if the allocation of free allowance could be considered a temporary
measure to allow the EU-ETS to get started, and thus proportionate to an overall
objective of emissions reduction once the allowances allocated exceeded the actual
level of emissions the system could no longer be considered proportionate and
simply a means of certain member states providing additional income to its industrial
base at the expense of undertakings from other member states also trading in the
market.
3.6.2 State Aid Over Allocation of Emission Allowances - Borealis

Polyolefine1650
The Borealis Polyolefine case can at one level be considered to be going over the
same ground as that analysed in Estonia,1651that being one of competence and over
allocation. However, this later case shows that the Commission’s Guidelines on
state aid from Emissions Allowances1652 had moved on from the Estonia period and
were now very much focussed on the EU-ETS as it was operating at the time
following considerable lobbying by member states and industry players.
From the commencement of the third EU-ETS trading period in 2013 the
Commission undertook the allocation of emissions allowances in a top down
process. The Borealis Polyolefine case concerns a preliminary ruling relating to the
validity of a Commission Decision 1653 determining the transitional EU-wide and
national rules for the harmonised free allocation of emission allowances pursuant to
Articles 9(3), 10(a) and 11(2) of the Emission Trading Directive.1654
Within the context of the EU-ETS, Borealis maintained it was eligible for a
free allocation of allowances for the period from 2013 to 2020 as the operator of a
cogeneration 1655 plant. Borealis maintained that the Commission should have
1650
1651
1652
Commission Communication 5 June 2012 ‘Guidelines on certain State aid measures in the context of the
greenhouse gas emission allowance trading scheme post-2012’ OJ 2012/C 158/04
1653
Commission Decision 2011/278/EU of 27 April 2011 determining transitional Union-wide rules for harmonised
free allocation of emission allowances pursuant to Article 10a of Directive 2003/87/EC (Emissions Trading
Directive)
1654
trading within the Community OJ L275, 25.10.2003 the Directive was amended by Directive 2009/29 ‘To improve
and extend the carbon emission trading scheme of the Community’ OJ L140/63
1655
Cogeneration is the production electricity and heat from the same facility

included emissions from this type of electricity generator in the maximum annual
volume of allowances, furthermore submitting, that the exclusion of emissions
associated with the generation of electricity and with heat produced in cogeneration
is contrary to the Directive.1656
The CJEU confirmed the understanding of the Emissions Trading Directive
by stating that in accordance with Directive Articles 10(1) and 10(a)(3) that full
auctioning of allowances is required for electricity generators from 20131657 and that
in accordance with Directive Article 10(a)(11) the quantity of free allowances is to
decrease gradually, with a view to reaching zero free allocation by 2027.1658 The
CJEU also confirmed that cogeneration plant is able to receive free emission
allowances in accordance with the Directive.1659
The Court held that the Directive is drafted to ensure that the final number of
allowances to be allocated free of charge to industrial installations does not include
emissions from the general generation of electricity (only allowing free allowance for
electricity generated from waste gases and for heat produced in cogeneration plant)
and thus the Commission’s Decision on the allocation process had to be
modified.1660
The ruling makes it clear that emissions from electricity generation are to be
excluded from the calculation of free allowances, therefore reducing their amount.
However, the ruling confirms that free allowances generally will not be phased out
completely until 2027,1661 meaning that the weighted average price of emissions
allowances within the emissions trading mechanism will be a hybrid of free
(grandfathered allocation) 1662 and those which have been purchased.
The Borealis Polyolefine case shows that certain types of electricity
generator were still receiving free allowances in 2013 and beyond. It is known from
1663
the Stardust case that when public authorities grant aid directly to an
undertaking, such behaviour is attributable to the State. It is also known from
EnBW1664 that should the State grant emission allowances for free or below market
value there is a foregoing of public revenue and the practice being state aid. The
1656
Forstwirtschaft, Umwelt und Wasserwirtschaft ECLI:EU:C:2016:311, para 61
1657
Recital 19 to the Emission Trading Directive 2009/29/EC
1658
Ibid, para 82
1659
Ibid, para 76
1660
Ibid, para 83
1661
Ibid, para 92
1662
28 October 2017
1663
Case C-482/99, France v Commission, ELCI:EU:C:2002:294, para 52
1664
Case T-387/04, EnBW Energie Baden-Württemberg v Commission ECLI:EU:T:2007:117, para 23

Emissions Trading Directive allowed the allocation of allowances for free, up to 95%
of emissions during the initial trading phase and then decreasingly over the
subsequent trading periods. It is therefore clear that the Emissions Trading Directive
is in diagonal conflict with Article 107(1)TFEU in that allowances granted to certain
undertakings favour those undertakings. In fact, the Commission Guidelines on
State Aid for Emissions Allowances1665 confirms in paragraph 3 that the allocation of
allowances for free is incompatible with Article 107(1)TFEU (state aid). However,
the allocation, once notified to the Commission will be assessed in accordance with
the Guidelines. It has also been stated that the advantage is attributable to the
undertaking at the point the allocation is made, as the undertaking is not required to
purchase allowances it would otherwise be required to do; thus, the state aid is
irrespective of any trading activity to accrue a windfall profit.1666
As the Commission has competence over state aid,1667 the Commission’s
transparency and legal certainty obligations require the publication of the
Guidelines1668 to explain the compatibility criteria for state aid in the context of the
allocation of emission allowances. These Guidelines, although nonbinding 'soft-
law'1669 they are normative and the CJEU has held Commission guidelines to be
binding on the Commission. 1670 Therefore it is argued that the Commission is
‘making the law up’ as needed to manage the political and social environment in a
‘complex governance structure, embedded with legal complexities’1671 and the sub-
objectives to carbon reduction of the ‘safeguarding of economic development and
employment and the preservation of the integrity of the internal market1672 and of
conditions of competition’.1673
1665
1666
Guendalina Catti De Gasperi, ‘Making State Aid Control “Greener”: The EU Emissions Trading System and its
Compatibility with Article 107 TFEU’ (2010) 9(4) European State Aid Law Quarterly, 785,792-793
1667
Case T-459/93 Siemens v Commission ECLI:EU:T:1995:100, para 52
1668
1669
Soft-Law can be defined as any instrument other than a Treaty or a Statute, containing principles, norms,
standards or other statements of expected behaviour, it can also be market rules developed from an instrument –
See Dinah Shelton, ‘International Law and Relative Normativity’ in Malcom Evans (ed) International Law (4th
Edition Oxford University Press, 2014), 137, 159
1670
1671
Sanja Bogojević EU Climate Change Litigation, the Role of the European Courts, and the Importance of Legal
Culture (Wiley, 2013), 50
1672
1673
Case 540/14 DK Recycling und Roheisen GmbH v Commission ECLI:EU:C:2016:469; para 49

3.6.3 Emissions Trading – Hardship & Lack of Harmonisation - DK
Recycling1674
The Borealis Polyolefine 1675 case outlined the issues surrounding the state aid
implications of a general position of free allocation of emissions allowances. The DK
Recycling case looks at the position due to the introduction of a hardship clause,
and the consequent ‘case-by-case’ approach that this would entail, which could be
argued to increase the diversity of state aid issues in relation to the EU-ETS rather
than progressing to a harmonised position.
Germany implemented Commission Decision 1676 2011/27843 on the
transitional EU rules for harmonised free allocation of emission allowances via a law
on carbon emissions trading (Treibhausgas-Emissionshandelsgesetz, ‘TEHG’) in
2011. Within TEHG, Article 9(5) allowed for the allocation of additional free emission
allowances to organisations for which the allocation based on Article 10 of the
Emission Trading Directive, without the additional free allowances, would result in
‘undue hardship’. Emissions Directive Article 11 requires member states to submit
to the Commission a list of organisations to which free allowances will be allocated
and the quantity of such. In accordance with this requirement, Germany submitted
its national allocation plan, which included DK Recycling on the basis of ‘undue
hardship’. The Commission rejected the allocation plan in Decision 2013/448.1677
The Commission stating that the Emissions Trading Directive was drafted to ensure
harmonisation of the rules relating to free allocation. This harmonised approach
would thus be undermined by an individual analysis of ‘hardship’. The Commission
going on to submit that assigning extra-allowances to certain installations would
distort, or threaten to distort, competition, hence would have an EU-wide effect on
trade, in violation of the principle of equal treatment1678 and be state aid due to the
conferral of this advantage by the state.
1674
1675
1676
Commission Decision (2011/278/EU) of 27 April 2011 ‘determining transitional Union-wide rules for
harmonised free allocation of emission allowances pursuant to Article 10a of Directive 2003/87/EC [Emissions
Trading Directive]’ OJ L 130/1
1677
Commission Decision 2013/448/EU of 5 September 2013 concerning national implementation measures for
the transitional free allocation of carbon emission allowances in accordance with Article 11(3) of Directive
2003/87/EC
1678
Recital 11 of Decision 2013/448

An action seeking annulment of the Commission’s Decision was brought
before the General Court.1679 The finding of the General Court was subsequently
appealed to the CJEU.1680
The CJEU’s analysis sought to understand the basis of the ability of the
Commission to conclude harmonisation measures relating to the rules of free
allocation of emission allowances. Hence the Court went on to hold that the
Commission’s ability to harmonise the rules on free allocation were meant to amend
‘non-essential elements’ of the Directive (Article 10a of the Directive), and that
‘essential elements’ of legislation cannot be amended by the Commission simply
implementing new ‘measures’.1681 This finding goes straight back to the finding of
the CJEU in the Estonia 1682 case (See Section 3.6.1) where it held that the
Commission is not able to determine and then substitute what it believes the EU
legislator wanted to say in an EU legal instrument or, in this instance, what would be
a better process.
The CJEU’s analysis focussed on the inclusion of drafting within the statute
which allowed allocation of emission allowances based on ‘hardship’ and whether
such an allocation amounted to amending an ‘essential’ element of the Directive.
The Court stated that the determination of an ‘essential’ or ‘non-essential’ element,
‘must be based on objective factors amenable to judicial review, and requires
account to be taken of the characteristics and particular features of the field
concerned’.1683 The Court was clear that the core objective of the Emissions Trading
Directive was the reduction in carbon emission. However, it was able to determine
a series of sub-objectives such as ‘the safeguarding of economic development and
employment and the preservation of the integrity of the internal market and of
conditions of competition’.1684 The Court then went on to analyse the objectives of
the Directive in relation to potential distortions to competition across the EU as a
whole, and within sub-sectors, as a result of a non-harmonised approach to the
allocation of emission allowances, concluding that a harmonised sectorial approach
is a ‘concrete expression’ of the objective of avoiding distortions of competition.1685
Therefore, inclusion of a ‘hardship’ clause within the consideration of the allocation
of free allowances would have amounted to the amending of an essential element
1679
Case T- 630/13 DK Recycling und Roheisen GmbH v Commission ECLI:EU:T:2014:833
1680
1681
Ibid, para 46-47
1682
Case C-505/09 Commission v Estonia ECLI:EU:C:2012:179, para 121
1683
Case 540/14 DK Recycling und Roheisen GmbH v Commission ECLI:EU:C:2016:469, para 48
1684
Ibid, para 49
1685
Ibid, para 50-53

of the Emissions Trading Directive.1686 On this basis the appeal was dismissed and
harmonisation of allocation was regarded as essential to prevent distortions of
competition and also potentially state aid in the process.
Following this judgement, three similar appeals were decided by reasoned
order on 13 September 2016.1687
The DK Recycling1688case demonstrates the need for clear criteria that flow
from the EU level down to the national implementation of the renewables energy
regulatory framework. The case further illustrates the potential for the distortion of
competition in the same sector resulting from differing national implementations of
the emissions trading scheme. The competence of the Commission in relation to the
assessment of the national allocation plans is also confirmed and can thus be a
harmonising factor.
The case once again illustrates the clear diagonal conflict between the EU-
ETS and the Treaty provisions relating to state aid (Article 107TFEU). The DK
Recycling and the Borealis Polyolefine1689 cases also illustrate that simply employing
an auctioning or market-based Directive structure does not of itself remove
distortions of competition and state aid in contravention of Article 107(1) TFEU – the
detailed drafting and processes within the Directive need to be considered before a
conclusion can be reached.1690
3.6.4 Emissions Trading Conflicts with Polluter Pays Principle (Article

191(2)TFEU)
This section outlines the conflicts between the Emissions Trading Directive1691 and
the ‘polluter pays’ principle as well as how relief from the principle can be regarded
as state aid.
The ‘polluter pays principle’ is one of the cornerstones of international as well
as EU environmental law.1692 The principle being articulated by the OECD in 1972
and 1974 as a means of allocating costs to encourage rational use of scarce
environmental resources such that the costs of pollution are internalised by the
1686
Ibid, para 55
1687
Case C-551/14 Arctic Paper Mochenwangen v Commission ECLI:EU:C:2016:684; Case C-564/14 Raffinerie
Heide GmbH v Commission ECLI:EU:C:2016:685; Case C-565/14 Romonta v Commission ECLI:EU:C:2016:698
1688
1689
1690
Stefan Weishaar and Edwin Woerdman ‘Does Auctioning Emission Rights Avoid State Aid? Empirical
Evidence from Germany’ (2012) 6(2) Carbon & Climate Law Review, 114, 115
1691
1692
Kleoniki Pouikli ‘The Polluter Pays Principle and the EU State Aid Law for Environmental Protection’ (2016) 55
Journal of Law, Policy and Globalization, 19, 19

polluter. 1693 Moreover, the polluter should bear the expense of carrying out the
measures ‘decided by public authorities to ensure that the environment is in an
acceptable state’.1694 In terms of the EU primary legislation the principle is contained
in Article 191(2)TFEU.
The ‘polluter pays’ principle is not defined in the Treaty, therefore member
states are given discretion in assessing the polluter and the pollution.1695 However,
the CJEU has held that the undertaking which has contributed to the pollution1696
and has led to the harm should be charged with its remediation.1697 In assigning
‘harm’, the CJEU has held that the method should be sufficiently precise to show a
direct effect,1698 a matter that can easily be determined for a coal or gas fuelled
power station by measurement of the constituent gases of the combustion1699 by-
products in the flue.1700 In any event the CJEU has stated that the costs attributed to
the polluter should be those related to the cost of elimination of the waste1701 and
the environmental damage the polluter has caused.1702
The Estonia,1703 Borealis Polyolefine1704 and DK Recycling1705 cases have all
shown the historic and ongoing nature of allocating emissions allowances for free in
accordance with the Emissions Trading Directive. Therefore, by the very nature of
being in receipt of free emission allowances the polluter has failed to pay and in
addition emissions trading allows the wealthy to evade their responsibilities to fully
abate their emission. 1706 Also by the practice of over allocation of emission
1693
Muhammad Munir, ‘History and Evolution of the Polluter Pays Principle: How an economic idea became a
legal principle?’ (2013) Social Science Research Network
1694
OECD ‘The Polluter Pays Principle: Definition, Analysis, Implementation’ [1975] OCED Publishing, 117, 12
1695
Kleoniki Pouikli ‘The Polluter Pays Principle and the EU State Aid Law for Environmental Protection’ (2016) 55
Journal of Law, Policy and Globalization, 19, 21
1696
Case C-254/08 Futura Immobiliare srl Hotel Futura v Comune di Casoria ECLI:EU:C:2009:479, para 45; See
Also Case C-378/08 Raffinerie Mediterranee (ERG) SpA, Polimeri Europa SpA and Syndial SpA v Ministero dello
Sviluppo economico ECLI:EU:C:2010:126, paras 57 and 67
1697
Case C-1/03 Ministère public v Paul van de Walle ECLI:EU:C:2004:67, para 60
1698
Case C-97/11 Amia SpA, in liquidation v Provincia Regionale di Palermo ECLI:EU:C:2012:306, paras 35 and
37
1699
Combustion (burning), is a high-temperature exothermic chemical reaction between a fuel and oxygen (usually
from air), that produces oxidised gaseous products and some particulates (soot), in a mixture termed as smoke -
Klaus Schmidt-Rohr, ‘Why Combustions Are Always Exothermic, Yielding About 418 kJ per Mole of O2’ (2015)
92(12) Journal of Chemical Education, 2094
1700
Timo Korpela, Tomas Björkqvist, Yrjö Majanne and Pentti Lautala ‘Online monitoring of flue gas emissions in
power plants having multiple fuels’ (2014) 47(3) International Federation of Automatic Control, 1355
1701
Case C-1/03 Ministère public v Paul van de Walle ECLI:EU:C:2004:67, para 42-53 ; See Also Case C-188/07
Commune de Mesquer v Total France SA and Total International Ltd ECLI:EU:C:2008:359 par 49-63 ; For an
introduction to the issue of energy waste management, see Raphael Heffron and Kim Talus. ‘The evolution of
energy law and energy jurisprudence: Insights for energy analysts and researchers’ (2016) 19 Energy Research &
Social Science 1
1702
Case C-254/08 Futura Immobiliare srl Hotel Futura v Comune di Casoria ECLI:EU:C:2009:479, para 64-67;
See also Case C-293/97 R v Secretary of State for the Environment and Ministry of Agriculture, Fisheries and
Food, exp Standley and Metson ECLI:EU:C:1999:215 para 51-52
1703
1704
1705
1706
Simon Caney and Cameron Hepburn, ‘Carbon trading: unethical, unjust and ineffective?’ [2011] Grantham
Research Institute on Climate Change and the Environment Working Paper No. 49

allowances, the price within the emissions market has been seen to be well below
the cost of emissions abatement. Therefore, on a series of counts the polluter has
failed to pay costs related to the elimination of the waste or the environmental
damage incurred. Thus, the conclusion can be reached that the EU-ETS conflicts
with the ‘polluter pays’ principle.
As outlined by Advocate General Jacobs, ‘a given measure will constitute
State aid where it relieves those liable under the ‘polluter pays’ principle from their
primary responsibility to bear the costs’.1707 Without referring to this environmental
principle, the Court ruled that the disposal of waste had to be ‘considered to be an
inherent cost’1708 of the undertakings in question. As a result, an advantage was
granted to these undertakings and thus state aid. Hence it can be argued that failure
to enforce the ‘polluter pays’ principle for coal and gas fuelled electricity generating
facilities is also a form of state aid, or a hidden subsidy.1709
Lastly it could be said that emissions trading is morally objectionable,
because it ‘commodifies’1710 the atmosphere and is thus potentially unethical.1711
3.6.5 Summary of Conflicts between Emission Trading Directive & EU Free

Trade Principles
As set out above, the EU-ETS which is established in accordance with the Article
191(1) TFEU is in diagonal conflict (See Section 1.2) with the state aid and vertical
conflict with the ‘polluter pays’ principle. The findings in relation to these conflicts are
outlined below.
State Aid
The EU-ETS1712 as a market based instrument had the ability to form a harmonised,
EU-wide trading platform for emissions. However, during the EU-ETS’s initial two
trading periods the vast majority of the allowances were issued for free and also
1707
Opinion of Advocate General Jacobs Case C-126/01 Ministère de l'Économie, des Finances et de l'Industrie v
GEMO ECLI:EU:C:2002:273, para 69
1708
Case C-126/01 Ministère de l'Économie, des Finances et de l'Industrie v GEMO ECLI:EU:C:2003:622, para.
31. AG Jacobs had considered that ‘the provision free of charge of a collection and disposal service for dangerous
animal waste [was relieving the] … farmers and slaughterhouses of an economic burden which would normally, in
accordance with the polluter-pays principle, have to be borne by those undertakings’. See Opinion AG Jacobs in
Case C-126/01 Ministère de l'Économie, des Finances et de l'Industrie v GEMO ECLI:EU:C:2002:273, para. 64).
1709
Benjamin Sovacool, ‘Reviewing, Reforming, and Rethinking Global Energy Subsidies: Towards a Political
Economy Research Agenda’ (2017) 135 Ecological Economics, 150; Also on energy subsidies in general see
Angus Johnston, Raphael Heffron and Darren McCauley, ‘Rethinking the scope and necessity of energy subsidies
in the United Kingdom’ (2014) 3 Energy Research & Social Science, 1
1710
Jonathan Aldred ‘The Ethics of Emissions Trading’ (2012) 17(3) New Political Economy; See also Edward
Page ‘The hidden costs of carbon commodification: emissions trading, political legitimacy and procedural justice’
(2012) 19(5) Democratization, 932
1711
Edward Page Ethics of Emissions Trading (Wiley, 2013)
1712

certain member states over allocated the allowances to provide an economic
cushion to the imposition of the emissions allowance system. The allocation of the
allowances for free or below the market price, is distortive to competition as it confers
an advantage on the undertakings to which the allowances were allocated in
diagonal conflict with Article 107(1) TFEU – state aid. Similarly, the over allocation
of allowances conflicts with the state aid provisions of the Treaty (Article 107(1)
TFEU), as the undertakings to which allowances were over allocated were given an
advantage, in that the practice favoured these undertakings compared to others.
Polluter Pays
It is argued that the ‘polluter pays’ principle is a mandatory requirement contained in
Article 191(2) TFEU. Therefore, any instrument of secondary EU legislation which
provides a means of not complying with the ‘polluter pays’ principle conflicts with the
Article 191(2) TFEU. The analysis undertaken above shows that the EU-ETS
conflicts with the ‘polluter pays’ principle and thus Article 191(2) TFEU. Additionally,
the EU-ETS has been shown to conflict with the previous judgements of the CJEU.
3.7 Conclusion
An individual analysis of the conflicts related to each of the two Directives has been
given in Sections 3.5.14 (Renewable Energy Directive)1713 and 3.6.5 (Emissions
Trading Directive) 1714 and as such will not be repeated here.
The use of the lex specialis approach seems to be consistently applied by
the CJEU, however, as we will see from the empirical findings, practitioners within
the sector are concerned with the longevity of this approach, given that the CJEU
once held1715 that any kind of measure put in place by the Commission must not be
contrary to the specific provisions of the Treaty, in particular free movement of goods
or state aid.
The CJEU could thus be seen to be following a Dworkin constructive
change.1716
1713
1714
1715
Case C-225 Matra v Commission ECLI:EU:C:1993:239, para 41
1716

The analysis of the diagonal and vertical conflicts between the Renewable
Energy Directive, the Emissions Trading Directive and Treaty based EU free trade
principles shows that conflicts are found in the areas of free movement, state aid (by
conferring a price and revenue advantage, thus distorting competition) and the
‘polluter pays’ principle.
The Renewable Energy Directive is shown to be in diagonal conflict with a
greater number of areas of the TFEU than the Emissions Trading Directive.
However, this could be in no small part due to the nationally focussed nature of the
renewables support schemes put in place and the need to obtain unanimity of voting
in the EU Council at its adoption, and as such it tries to be all things to all people.
As set out in the empirical research (especially the Developer Operators of
renewable facilities) these conflicts create regulatory and business risks, such as
uncertain investment returns and the potential early closure of generating facilities.
This perception of regulatory risk brought about reluctance to invest in new
renewable electricity facilities, thus undermining the EU’s objective of climate
change mitigation.

Chapter 4 – Findings from Empirical Research
4.1 Introduction to Empirical Research Phase
Empirical research was undertaken to gain an understanding of the complex

phenomena1717 present in the EU’s electricity market.
This research builds on other empirical investigations of the renewable
sector. This research differentiates itself from other studies which looked at the
electricity sector generally, 1718 or how investment decisions are made in the
renewables sector,1719 what behavioural factors are important,1720 or have used both
industry and non-industry interviews,1721 by focusing on the conflict between the
renewables regulatory framework and the EU’s free trade principles.
The empirical research looks to highlight the constructivist ontological
position of industry players as they search for the meaning that allows them to make
sense of the European renewables sector and shape developments rather than
having events shape them.1722
As has been set out in case law examples 1723 in Chapter 3, renewable
electricity has been granted a ‘special status’1724 having been brought within an
extension of the exception from the application of free movement rules contained in
Article 36 TFEU, as well as having been provided with a derogation from practices
which would distort competition and other anti-state aid provisions also contained in
TFEU.1725 This special status thus places the renewables regulatory framework in
diagonal conflict with EU primary law, which was an issue raised by the respondents
as creating regulatory uncertainty and therefore risk.
This empirical chapter presents the views of market participants1726 as to the
form of renewable electricity’s ‘special status’ and how it affects their role within the
industry. Additionally, the empirical research phase was designed to elucidate
market participants’ views on the robustness (long-term legal sustainability) of the
1717
Norman Denzin and Yvonna Lincoln Handbook of Qualitative Research (5th edn, Sage, 2018)
1718
Gregor Kungl and Frank Geels, ‘The Destabilisation of the German Electricity Industry (1998-2015):
Application and Extension of a Multi-dimensional Framework’ [2016] SOI Discussion Paper 2016-02 – including
22 interviews, considering all industry sectors not just renewables
1719
Anna Bergek, Ingrid Mignon and Gunnel Sundberg, ‘Who invests in renewable electricity production?
Empirical evidence and suggestions for further research’ (2013) 56 Energy Policy, 568
1720
Andrea Masini and Emanuela Menichetti, ‘The impact of behavioural factors in the renewable energy
investment decision making process: Conceptual frame work and empirical findings’ (2012) 40 Energy Policy, 28
1721
Ingrid Mignon and Anna Bergek, ‘Investments in renewable electricity production: The importance of policy
revisited’ (2016) 88 Renewable Energy, 307
1722
Sotirios Sarantakos Social Research (Palgrave Macmillan, 2005)
1723
Case C-573/12, Ålands Vindkraft AB v Energimyndigheten ECLI:EU:C:2014:2037, para 76 and 80
1724
1725
1726
M Sandelowski, ‘Using qualitative research’ (2004) 14 Qualitative Health Research, 1366

renewables regulatory framework due to the conflicts between it and EU free trade
principles.
The doctrinal research in Chapters 2 and 3 has illustrated the nature of the
conflicts between the renewable electricity regulatory framework and EU free trade
principles. These conflicts being diagonal in nature as the secondary legislation
(Directives forming the framework) prevents the implementation of free movement
of goods, facilitates the granting of revenue enhancements (renewables ‘support
schemes’) which, when not designed properly, has been found to be state aid. The
regulatory framework is also found to be in vertical conflict with principles such as
the ‘polluter pays’ and horizontal conflict between itself due to the lack of a feedback
loop between the Energy Efficiency Directive and the EU-ETS. Although the
doctrinal research can set out an analyse these issues, it cannot give any
understanding as to the importance to market participants of these issues and how
they affect the way the industry operates.
Therefore, this research project seeks to use empirical research to contribute
to knowledge by setting out the importance of the conflicts outlined to market
operators and how they seek to mitigate the risk these conflicts represent.
The research will assist legislators and regulators (both national and
European) by setting out the effects of regulatory volatility due to lack of regulatory
change forecastability, as seen by renewables project developers and financiers,
looking at the mitigation measures they put in place to manage this risk. This element
of the research will also assist project developers to gain an understanding of these
issues before entering the renewables market.
The empirical research consisted of qualitative semi-structured interviews
with 16 business directors, managers and company general counsel over 22
interviews. 1727 The data obtained was analysed using a thematic 1728 approach.
Respondents of this type would normally be difficult to access and therefore the
industry knowledge and contacts of the researcher facilitated the access adding
value to the empirical phase of the research.
1727
William Harvey, ‘Strategies for Conducting Elite Interviews’ (2011) 11(4) Qualitative Research, 431; See Also
Joseph Hair, Arthur Money, Phillip Samouel and Mike Page Research Methods for Business (Wiley, 2007), 295
1728
David Silverman Interpreting Qualitative Data (SAGE, 2014); See Also Lorelli Nowell, Jill Norris, Deborah
White and Nancy Moules, ‘Thematic Analysis: Striving to Meet the Trustworthiness Criteria’ (2017) 16(1)
International Journal of Qualitative Methods; See also Moira Maguire and Brid Delahunt, ‘Doing a Thematic
Analysis: A Practical, Step-by-Step Guide for Learning and Teaching Scholars’ (2017) 8(3) All Ireland Journal of
Teaching and Learning in Higher Education

4.2 Process for Conducting Empirical Research
Following consideration of potential techniques (e.g. archival, surveys, focus groups

or ethnography) 1729 empirical research was undertaken using semi-structured
interviews,1730 as the technique allows the development and understanding of the
themes1731 which emerge as concerns with the renewables regulatory framework.
The themes developed, capture important findings contained in the data in relation
to the research question, and represent a level of response pattern or meaning
within the data. 1732
The semi-structured interview technique was selected over a simple
questionnaire as the interviews were more likely to gain industry insights as
interactive follow-up questions could be asked.1733 Additionally, this technique was
chosen as it allowed the collection of views from market operators on similar topics
whilst allowing room to pursue topics of particular interest or expertise of the
respondent, 1734 as well as the development of additional or complementary
issues, 1735 encouraging depth and vitality. 1736 The interviews also provided a
contextual account of the respondent’s experiences and a means of exploring wider
views.1737
The interviews were conducted with persons who have (i) specialist technical
knowledge to implement policy, (ii) are able to advise on policy, or (iii) are in the
position of authority such that they can determine policy (together considered as an
‘elite’).1738
1729
Dvora Yanow and Peregrine Schwartz-Shea Interpretation and Method: Empirical Research Methods and the
Interpretive Turn (Routledge, 2014); See also Alan Bryman Social Reseach Methods (Oxford Univeristy Press,
2012)
1730
Robert Yin Case study research: design and methods ( 2nd ed., Sage, 1994)
1731
A theme being defined as a coherent synthesis of the data that constitute a finding – M Sandelowski and J
Leeman, ‘Writing usable qualitative health research findings; (2012) 22 Qualitative Health Research, 1404
1732
Liam McHugh-Russell, ‘Qualitative Methods for Law and Society Research—An EUI Research Guide’ [2016]
University of Edinburgh Working Paper; See Also Liz Spencer, Jane Ritchie and William O’Connor, ‘Analysis:
Practices, principles and processes’ in Jane Ritchie and Jane Lewis (eds). Qualitative Research Practice: A Guide
for Social Sciences Students and Researchers (1st edn. Sage, 2003), 199; See Also Michael Bloor and Fiona
Wood , Keywords in Qualitative Methods: A Vocabulary of Research Concepts (1st edn, SAGE, 2006); See Also
Virginia Braun and Victoria Clarke, ‘Using thematic analysis in psychology’ (2006) 3(2) Qualitative Research in
Psychology, 77; David Silverman Interpreting Qualitative Data (SAGE, 2014)
1733
Martyn Hammersley and Paul Atkinson Ethnography: Principles in Practice (3rd ed, Routledge, 2007)
1734
Herbert Rubin and Irene Rubin Keeping on Target while Hanging Loose Designing Qualitative Interviews in
Herbert Rubin and Irene Rubin (eds) Qualitative Interviewings: the Art of Hearing Data (SAGE, 1995); See Also
Alan Bryman Social Research Methods (4th Ed, Oxford University Press, 2012), 471; See Also Reza Banakar, ‘On
the Paradox of Contextualisation’, in Reza Banakar (ed.), Normativity in Legal Sociology: Methodological
Reflections on Law and Regulation in Late Modernity (Springer, 2014), 91; Robin Leidner Fast Food, Fast Talk
Service Work and the Routinization of Everyday Life (University of California Press, 1993), 238
1735
Alan Beardsworth and Teresa Keil, ‘The vegetarian option: varieties, conversions, motives and careers’ (1992)
40(2) The Sociological Review, 253
1736
Christine Dearnley, ‘A reflection on the use of semi-structured interviews’ (2005) 13(1) Nurse Researcher, 19
1737
H Sommerland ‘Researching and Theorising the Processes of Professional Idenitity Formation’ (2007) 34(2)
Journal of Law of Society, 190; See also Owen Doody and Maria Noonan, ‘Preparing and conducting interviews to
collect data’ (2013) 20(5) Nurse Researcher 28
1738
William Harvey, ‘Strategies for conducting elite interviews’ (2011) 11(4) Qualitative Research, 431, 433; See
also Ursula Plesner, ‘Studying sideways: Displacing the problem of power in research interviews with sociologists
and journalists’ (2011) 17(6) Qualitative Inquiry, 471, 473

Traditional concerns with regards to the viability of empirical research via
elites focus on access and the willingness of respondents to openly discuss
issues 1739 and to go beyond the ‘official line’. 1740 However, due to the industrial
position of the researcher,1741 access issues were overcome and based on known
contact details, hence so called ‘gate keeper’ issues were also avoided. 1742
Additionally the market knowledge of the researcher assisted in building a rapport1743
with the respondents leading to full and frank disclosure.1744
Respondents were invited for interview on the basis of providing a stratified
approach to the market by seeking interviews with those from different sections of
the market as described above – so called ‘purposeful sampling’.1745 In order to
overcome the criticism of such selection methods,1746 that respondents are in reality
invited purely because of previous contact with the researcher and as such are not
representative, a general invitation was issued at a post experience energy sector
conference1747 and another general invitation was issued via ‘LinkedIn’.1748 The 16
respondents were obtained via all of the contact and invitation channels (the majority
from direct contact with the researcher) and were from the UK, Germany and
France, giving a perspective based on their host country as well as of wider EU
regulatory issues. In seeking respondents, there was no targeting of these countries
as part of the research: a simple case of persons accepting one of the invitation
channels.
1739
Peter Burnham, Karin Gill Lutz, Wyn Grant and Zig Layton-Henry Elite Interviewing (Palgrave Macmillan,
2008); Jeffery Berry, 'Validity and Reliability Issues in Elite Interviewing' (2002) 35(4) Political Science and
Politics, 679; Catherine Marshall, 'Elites, Bureaucrats, Ostriches, and Pussycats: Managing Research in Policy
Settings' (1984) 15(3) Anthropology and Education Quarterly, 235; Linda McDowell, 'Elites in the City of London:
some methodological considerations' (1998) 30 Environment and Planning, 2133
1740
Karen Duke, ‘Getting beyond the ‘Official Line’: Reflections on dilemmas of access, knowledge and power in
researching policy networks’ (2002) 31(1) Journal of Social Policy, 39
1741
The researcher was at all times during the research a manager within EDF Renewables offshore wind
construction division
1742
William Harvey, ‘Strategies for conducting elite interviews’ (2011) 11(4) Qualitative Research, 431; See also
Catherine Welch, Rebecca Marschan-Piekkari, Heli Penttinen and Marja Tahvanainen, ‘Corporate Elites as
Informants in Qualitative International Business Research’ (2002) 11(5) International Business Review, 611;
Robert Thomas, ‘Interviewing Important People in Big Companies’ in Rosanna Hertz and Jonathan Imber (eds.)
Studying elites using qualitative methods (SAGE, 1995), 3-17
1743
Carla Willig Introducing Qualitative Research in Psychology Adventures in Theory and Method (Open
1744
Catherine Welch, Rebecca Marschan-Piekkari, Heli Penttinen and Marja Tahvanainen ’Corporate elites as
informants in qualitative international business research’ (2002) 11(5) International Business Review, 611
1745
Michael Patton Qualitative Research and Evaluation Methods (3rd edn, Sage, 2002), 45
1746
Thomas Diefenbach,’ Are case studies more than sophisticated storytelling?: Methodological problems of
qualitative empirical research mainly based on semi-structured interviews’ (2009) 43(6) Quality and Quantity,
876, 879; See Also David Wainwright, ‘Can sociological research be qualitative, critical and valid?’ (1997) 3(2)
Qualitative Report; See Also Rosaline Barbour, ’The newfound credibility of qualitative research? Tales of
technical essentialism and co-option’ (2003) 13(7) Qualitative Health Research, 1019, 1021
1747
Global EPC Contract and Risk Management Conference (London / 12-13 OCT 2017)
1748
Robert Yin Case Study Research: Design and Methods (5th edn SAGE,2014), 59; See Also Bent Flyvbjerg,
‘Case study’, in Norman Denzin and Yvonna Lincoln (eds.) The Sage Handbook of Qualitative Research (SAGE,
2011), 301, 302; See Also John Gerring, ‘What is a case study and what is it good for?’, (2004) 98(2) The
American Political Science Review, 341

Prior to contact being made with potential respondents, template questions
were developed, 1749 to allow consistent information to be obtained, facilitating
comparison between the findings from the various market operators. In seeking an
insight into how important the respondents’ viewed the findings of the doctrinal
phase of the research the empirical questions ask respondents to outline (i) the
regulatory framework, (ii) their perception of the legal conflicts outlined above, (iii)
what respondents regard as the most important regulatory issues, (iv) what
mitigation techniques are used to minimise the effect of the regulatory issues
outlined, and (v) their understanding of the future path for the electricity regulatory
framework.1750
The respondents were provided with an ethics approved information sheet
(dealing with anonymity 1751 and confidentiality) 1752 and a consent form prior to
interview. The consent of the respondents was also confirmed verbally at the time
of the interview.1753
The interviews were conducted using the template questions developed, with
the answers from the respondents spurring follow up question.1754 The primary and
secondary responses were subjected to thematic analysis.1755
Additionally, some ‘citing’ from earlier interviews, on an anonymous basis
was used to establish credibility and to allow cross-checking of data received.1756
Also follow up interviews were undertaken with certain respondents to gain
additional information following the raising of themes by other respondents, for
example the closure of thermal generating facilities causing the need to import from
other member states the very form of electricity that had just been decommissioned
(Theme 1.2). Thus, although there were 16 respondents within the empirical
research there were actually 22 interviews.
1749
Nigel King, ‘Using templates in the thematic analysis of text’, in Catherine Cassell and Gillian Symon (eds.),
Essential guide to qualitative methods in organizational research (SAGE, 2004) 427
1750
The questions followed the 9 question framework – introducting, probing, follow-up, specifying, direct, indirect,
structural, interpreting and silence – Sven Brinkmann and Steinar Kvale InterViews: An Introduction to Qualitative
Research Interviewing (3rd ed SAGE, 2015); as well as Kathy Charmaz ‘Constructionism and the Grounded
Theory Method’ in Jaber Gubrium, James Holstein (eds.) Handbook of Interview Research: Context and Method,
(Sage, 2002), 397
1751
Annukka Vainio, ‘Beyond research ethics: Anonymity as ‘ontology’, ‘analysis’ and ‘independence’’ (2013) 13(6)
Qualitative Research, 685
1752
Kari Lancaster, ‘Confidentiality, anonymity and power relations in elite interviewing: conducting qualitative
policy research in a politicised domain’ (2017) 20(1) International Journal of Social Research Methodology, 93
1753
Trustworthiness Criteria’ (2017) 16(1) International Journal of Qualitative Methods
1754
William Harvey, ‘Strategies for Conducting Elite Interviews’ (2011) 11(4) Qualitative Research, 431
1755
David Silverman Interpreting Qualitative Data (SAGE, 2014)
1756
D Richards, ‘Elite Interviewing: Approaches and Pitfalls’ (1996) 16(3) Politics, 199, 203

Following the interviews, the research notes were developed into a
transcript. The transcripts do not capture every detail of the verbal data (e.g.
intonation and laughter) as this was not important in progressing the research.1757
As stated, the transcripts were analysed using a thematic approach.1758 This
approach was chosen as it can produce ‘trustworthy and insightful findings’ as well
as examining the perspectives of the respondents, highlighting ‘similarities and
differences’. 1759
The first step in the analysis was to code1760 the data.1761 During the coding
process important sections of the text were ascribed labels to index the data for
future grouping into themes.1762 The analysis of the data was undertaken using a
predominantly exploratory approach, focussed around content driven analysis,
seeking codes and themes which were not predetermined.1763
Following an initial analysis of the potential codes, codes were defined to
have explicit boundaries, ensuring overlaps were eliminated and gaps closed.1764
The final coding scheme and definitions can be found in Annex 6.
Points raised by respondents that departed from the dominant theme were
not ignored as outliers in the coding process, as these responses gave significant
insight to the breadth of undertakings and respondents within the electricity
market.1765 The data was subjected to a deductive analysis, as this is driven by the
research’s analytic focus and provides a more detailed analysis of data. 1766
However, in order to maintain the descriptive richness of the data, a substantial
number of quotes are used from the respondents.1767
Use of coding or thematic analysis software (e.g. NVivo) was not considered
appropriate in this research as the data set was not unmanageably large and such
1757
Virginia Braun and Victoria Clarke, ‘Using thematic analysis in psychology’ (2006) 3(2) Qualitative Research
in Psychology, 77
1758
Lisa Webley, ‘Qualitative Approaches to Empirical Legal Research’ in Peter Cane and Herbert Kritzer (eds)
The Oxford Handbook of Empirical Legal Research (Oxford University Press, 2010), 926
1759
Virginia Braun and Victoria Clarke, ‘Using thematic analysis in psychology’ (2006) 3(2) Qualitative Research in
Psychology, 77
1760
Coding is an analysis process whereby the transcripts of the interviews are broken down by phrase, verb or
noun and by so doing labelling it (a ‘code’) and grouping these parts into a more meaningful expression which can
be developed into a theme or finding. Code is a tag or label to give meaningful expression to a parcel of text –
developed from Matthew Miles and Michael Huberman Qualitative Data Analysis (SAGE, 1994)
1761
Qualitative coding is a process of reflection on the data and is the first step in understanding what themes the
data brings out – J Savage, ‘One voice, different tunes: Issues raised by dual analysis of a segment of qualitative
data’ (2000) 31(6) Journal of Advanced Nursing, 1493
1762
N King, ‘Using templates in the thematic analysis of text’ in C Cassell and G Symon (eds) Essential guide to
qualitative methods in organizational research (SAGE, 2004), 257
1763
Greg Guest, Kathleen MacQueen and Emily Namey Applied Thematic Analysis (SAGE, 2012) 52
1764
Johnny Saldaña The Coding Manual for Qualitative Researchers (3rd ed SAGE, 2015); See Also John Creswell
Research design: Qualitative, quantitative, and mixed methods approaches (4th ed Sage, 2014); Also Jennifer
Attride-Stirling, ‘Thematic networks: An analytic tool for qualitative research’ (2001) 1(3) Qualitative Research, 385
1765
Virginia Braun and Victoria Clarke, ‘Using thematic analysis in psychology’ (2006) 3(2) Qualitative Research
in Psychology, 77
1766
Ibid
1767
Ibid; See Also N King, ‘Using templates in the thematic analysis of text’ in C Cassell and G Symon (eds)
Essential guide to qualitative methods in organizational research (SAGE, 2004), 257

software is not capable of the conceptualising processes to transform the data or
make critical judgement. 1768 Additionally, respondents used different terms to
explain the same issue, which could not be robustly analysed by the software and
as such a series of different codes would be generated which would need to be
reconciled manually.1769
The codes were then organised into themes by using a ‘thematic map’,1770
which was reorganised on several occasions to reflect the themes stemming from
the theoretical findings, as well as unexpected themes derived from the
interviews.1771 Prior to final use, the themes were assessed for internal homogeneity
and external heterogeneity.1772
4.3 Sample Size and Saturation of Research Findings
In seeking to determine the appropriate sample size, the concept of ‘saturation’ was
relied upon, this being the point at which no new information or themes are observed
in the data.1773 Equally, care was taken to ensure the sample was not too large,
making analysis difficult.1774
As stated, the empirical research was conducted within a sample that can be
described as ‘elite’. It has also been demonstrated that for interview research
amongst ‘elite’ populations saturation can occur within a data set of only twelve
interviews, with basic elements of meta-themes being present with as few as six
interviews.1775 As such, by 12 interviews, 88% of all emergent themes had been
developed, and 97% of all important themes were developed; therefore, the
codebook structure had stabilised by 12 interviews with few changes or additions
thereafter the nature of the information provided and sample size allowed the
1768
Trustworthiness Criteria’ (2017) 16(1) International Journal of Qualitative Methods; See also N King, ‘Using
templates in the thematic analysis of text’ in C Cassell and G Symon (eds) Essential guide to qualitative methods
in organizational research (SAGE, 2004), 257; Also Virginia Braun and Victoria Clarke, ‘Using thematic analysis
in psychology’ (2006) 3(2) Qualitative Research in Psychology, 77
1769
David Snow, Leon Anderson, John Lofland and Lyn Lofland Analyzing Social Settings: A Guide to Qualitative
Observation and Analysis (4th End Wadsworth, 2005)
1770
Stephen Stehman and Raymond Czaplewski, ‘Design and Analysis for Thematic Map Accuracy Assessment:
Fundamental Principles’ (1998) 64(3) Remote Sensing of Environment, 331
1771
Liz Spencer, Jane Ritchie, Jane Lewis and Lucy Dillon, ‘Quality in Qualitative Evaluation: A framework for
assessing research evidence’ [2003] National Centre for Social Research
1772
Michael Patton Qualitative research and evaluation methods (SAGE, 2002)
1773
Sarah Baker and Rosalind Edwards, ‘How many qualitative interviews is enough’ (2012) Discussion Paper
NCRM; See Also Steward Oppong, ‘The problem of sampling in qualitative research’ (2013) 2(2) Asian Journal of
Management Science and Education, 202; See also P DePaulo, ‘How large should the sample size be in a
qualitative study?’ (2002) DePaulo Research Consulting
http://www.quirks.com/articles/a2000/20001202.aspx?searchID=383113850
1774
A Onweugbuzie and K Collins, ‘A Typology of Mixed Method Sampling Designs in Social Sciences Research’
(2007) 12 The Qualitative Report, 281
1775
Greg Guest, Arwen Bunce and Laura Johnson, ‘How Many Interviews Are Enough? An Experiment with Data

research to deem the saturation criterion satisfied.1776 In considering more widely
sample size and saturation a review considered 54 studies, finding that the ‘average
sample size was 19.3, and this fell to 13.2 when separated into the population-
representing groups’ was taken into account, additionally the review found that
within the 54 studies the modal size was actually between 11 and 15 interviews.1777
Therefore, in this study, using a largely homogeneous group based on
knowledge and experience criteria, which can be considered an analogous criterion
to elite interviews in the European electricity sector, forty-four of the forty-five
thematic codes had emerged after fifteen interviews.1778
In determining data saturation, a numerical method was used (the details of
which are set out in Annex 8). The method thus set out shows that for elite groups
a sample of 16 will give over 80% confidence that should any additional themes
emerge the view will be held by only 1 in 10 of the renewable electricity sector’s
managers.1779 If the number of interviews is used as the marker, it can be seen
that,broadly 90% confidence can be gained should any additional themes emerge
the view will be held by less than 1 in 10 of the renewable electricity sector’s
managers. This method therefore shows that the 16 respondents and the 22
interviews held in this study is an appropriate number to gain meaningful thematic
saturation.
4.4 Respondents by Categories & Data Management Issues
The table below presents the different respondents categorised by experience type.
The categorisation into experience types was undertaken post data collection and
is done to simply give a better understanding of the nature of the respondents’
experience and their function type. All respondents were either senior managers or
directors within their respective organisations. The organisations cover commercial
developers and operators of renewable electricity facilities, regulators, both internal
and external legal counsel to developer and operator organisations, as well as an
investment fund manager, an insurance provider and a climate scientist. The table
also outlines how this experience helps to elucidate the research issues.
To retain the anonymity of respondents they are simply referred to as
Developer Operator 1 or External Legal Counsel 1 as appropriate.
1776
Ibid
1777
1778
Monique Hennink, Bonnie Kaiser and Vincent Marconi, ‘Code Saturation Versus Meaning Saturation: How
Many Interviews Are Enough?’ (2016) 27(4) Qualitative Health Research, 591
1779

Title Number Details Reason for Approaching
Respondent Type
Developer 7 Respondents who When taking business

Operator currently work for investment or operational
companies that develop decisions this type of
and operate renewable respondent is charged with
electricity facilities. The assessing regulatory risk
respondents are able to and the robustness of the
take business decisions in asset business plan.
relation to the
Therefore, they will assess if
development and
the conflicts between the
operation of the assets in
renewables regulatory
question rather than being
framework and wider EU
in advisory roles such as
free trade principles are
Internal Legal Counsel
likely to remain and thus
who would provide legal
maintain asset revenues.
and regulatory advice
Investment 1 Respondent who currently This type of respondent

Fund works for an investment gives a purely investment
Manager fund. As an organisation focussed view of renewable
the investment fund will assets. The respondent can
make investments in set out how the risks and
renewable energy facilities uncertainties present in the
without necessarily renewable sector feed
developing or operating through into asset values
the facilities (cost of purchase or sale).
Examples of such
organisations are
Macquarie Renewables,
Greencoat Capital, or
Dalmore Capital who paid
£701m for 49% of EDF
Renewables UK wind farm

portfolio on 29 June
20181780
Regulators 1 Respondent who currently Regulators are public

works for a regulator. bodies usually set up by
statute and are the
implementers of EU and
national policy and as such
are key to achieving policy
goals.
A UK example would be the

Office of Gas and Electricity
Markets (Ofgem) or in
Germany the network
regulator the
Bundesnetzagentur
Internal 2 Respondents who Internal Legal Counsel is a

Legal currently work for key part of the risk advisory
Counsel companies that develop team used by Developer
and operate renewable Operators in reaching
electricity facilities. The business decisions. Such
respondents hold the persons are also key
position of internal lawyer implementers of the
and as such would provide regulatory framework within
legal and regulatory any company
advice
External 3 Are respondents who External Legal Counsel is

Legal currently work for law firms part of the risk advisory
Counsel providing legal and team used by Developer
regulatory advice to Operators in reaching
market participants business decisions.
1780
https://www.edfenergy.com/media-centre/news-releases/edf-renewables-signs-new-partnership-twenty-four-
uk-wind-farms

Insurance 1 Respondent who operates Insurance providers
Provider in the insurance market, develop and implement
providing insurance business risk mitigation
products to the renewable products. They also price
energy sector risk via insurance
premiums and are a key
indicator of the perceived
probability of a risk
occurring.
Examples being Canopius,

Chaucer or Liberty
Climate 1 Respondent who operates This type of respondent is

Change as a full-time academic able to give a perspective
Academic and researcher in the field on the need for carbon
of climate change. emissions abatement, but
more importantly in the
It should be noted that this
context of this research the
respondent from time to
application of regulatory
time acts as a consultant
imperatives
to major utility companies.
4.5 Research Hypothesis
As stated above, studies related to wind energy in Germany1781 and Denmark,1782

as well as biomass energy in Finland and Sweden1783 all emphasised the need for
regulatory stability to maintain investment levels.1784
1781
Staffan Jacobsson and Volkmar Lauber, ‘The politics and policy of energy system transformation: Explaining
the German diffusion of renewable energy technology’, (2006) 34 Energy Policy, 256
1782
Niels I Meyer, ‘Influence of government policy on the promotion of wind power’, (2006) 25 International Journal
of Global Energy Issues, 204; see also Paolo Agnolucci, ‘Wind electricity in Denmark: A survey of policies, their
effectiveness and factors motivating their introduction’, (2007) 11 Renewable and Sustainable Energy Reviews,
951
1783
Karin Ericsson, Suvi Huttunen, Lars J Nilsson and Per Svenningsson, ‘Bioenergy policy and market
development in Finland and Sweden’, (2004) 32 Energy Policy, 1707; See also Staffan Jacobsson, ‘The
emergence and troubled growth of a “bio-power” innovation system in Sweden’, (2008) 36 Energy Policy, 1491
1784
Joel Smith and Johannes Urpelainen, ‘Removing fuel subsidies: How can international organizations support
national policy reforms?’ (2017) 17(3) International Environmental Agreements: Politics, Law and Economics, 327;
Margaret Young, ‘Energy Transitions and Trade Law: Lessons from the Reform of Fisheries Subsidies’ (2017)
International Environmental Agreements: Politics, Law and Economics (Forthcoming); University of Melbourne
Legal Studies Research Paper No. 746. Available at https://ssrn.com/abstract=2930693; Ambrus Bárány and
Dalia Grigonytė, ‘Measuring Fossil Fuel Subsidies’, European Commission, available at
http://ec.europa.eu/economy_finance/publications/economic_briefs/2015/pdf/eb40_en.pdf, accessed 15

Therefore, a clear research hypothesis was that Developer Operator
respondents would report a desire for regulatory stability, or at the very least
forecastable change in the regulatory framework. The empirical research therefore
sets out to understand the views of market operators as to the potential for the
regulatory framework which provides the renewable support schemes across the EU
to be removed because of the diagonal conflict between free movement, practices
distortive of competition and other elements of state aid law
Additionally it was felt that all respondents would report the tracking of
regulatory volatility as a project or other risk factor - being the probability that the
‘rules of the game’ existing at the time of the investment decision change during the
operational life of the asset in a manner that is not forecastable.1785 This means the
views of market participants to concepts such as legitimate expectation 1786 in
relation to regulatory stability were also sought, it being believed that all respondents
would report regulatory volatility as a negative.
In undertaking the empirical research, it is also acknowledged that there are
likely to be other causes of regulatory volatility, such as changes to the economic
environment inducing changes to banking and corporate governance as well as
1787 1788
legislative priorities, technological developments, and the changed
composition of governments with reduced belief in climate change,1789 being only a
few. Therefore, in relation to changes in governmental composition and economic
changes, questions on this subject were asked directly of respondents.
Lastly, it was believed that all respondents would seek to mitigate the effects
of any regulatory volatility and the effects such events have on the down side of
project returns or regulatory perception.
The questions asked, and therefore the initial direction of the interviews,
were based on the desire to understand responses related to these issues.
October 2016; David Victor, ‘The Politics of Fossil-Fuel Subsidies’ (2009) Available at
https://ssrn.com/abstract=1520984 accessed 20 October 2016; See Also Euroelectric, Ensuring investments in a
Liberalised Electricity Sector, (Euroelectric, 2004), 53; International Energy Agency, Power Generation Investment
in Electricity Markets (International Energy Agency, 2003),12
1785
The World Bank Group-Multilateral Investment Guarantee Agency, World Investment & Political Risk (The
World Bank Group, 2009) 28; See also Anatole Boute, ‘Regulatory Stability Under Russian and EU Energy Law’
(2015) 22 (4) Maastricht Journal of European & Comparative Law
1786
Eleanor Sharpston, ‘European Community Law and the Doctrine of Legitimate Expectations: How Legitimate,
and for Whom’ , (1990) Volume 11(1) Northwestern Journal of International Law & Business; see also Takis
Tridimas, The General Principles of EU Law (2nd edition, Oxford University Press, 2007), 242
1787
David Erkens, Mingyi Hung and Pedro Matos, ‘Corporate governance in the 2007–2008 financial crisis:
Evidence from financial institutions worldwide’ (2012) 18 Journal of Corporate Finance, 389
1788
Felix Creutzig, Peter Agoston, Jan-Christoph Goldschmidt, Gunnar Luderer, Gregory Nemet and Robert
Pietzcker, ‘The underestimated potential of solar energy to mitigate climate change’ (2017) 2 Nature Energy
1789
Public Employees for Environmental Responsibility v U.S. Environmental Protection Agency – 5 June 2018
Civil Action No. 17-652 available at https://cdn.arstechnica.net/wp-content/uploads/2018/06/epa.pdf accessed 16
July 2018

4.6 Research Findings
In seeking to address directly the research questions as outlined, the respondents

were asked about their experience of operating in a regulatory framework that was
essentially in diagonal conflict with the pillars of EU free trade and the Treaty. Having
gained empirical data from the interviews, the themes that emerged are discussed
below. Following the thematic analysis four main themes were found to exist (i) what
is regulatory risk and why is it important, (ii) the origins of regulatory risk, (iii)
regulatory risk management and mitigation and (iv) the future of regulation. Each of
these main themes was composed of sub-themes as are set out. The sub-themes
are discussed in order of importance as reported by the respondents to the empirical
research.
In certain cases, considering the empirical findings, it is important to define
a lexicon surrounding the views of the regulatory framework. This lexicon is either
set out in the abbreviations section at the beginning of this thesis or in foot notes
where sector specific terminology is used.
Theme 1 – What is Regulatory Risk and Why is it Important
The respondents were asked about their perception of the diagonal conflicts outlined
in Chapters 3 and 4. It became clear, however, that many of the respondents
articulated their perception and concern related to the conflicts not as a legal risk but
as a regulatory1790 and economic risk, thus articulating their understanding of the
conflicts using that lexicon. As a result, the following themes emerged from the
responses.
Theme 1.1 – Regulatory Volatility and Why its Reduction is Important
In seeking to address directly the research question, the respondents were all asked
specifically about the economic, social and regulatory effect of regulatory
volatility1791 and why operating in a regulatory framework that is volatile, compared
to stable and forecastable, is important for the future of renewable electricity. As
such the respondents were asked to set out and discuss their perception of the
diagonal conflict between the renewables regulatory framework and the Treaty
1790
Regulatory Risk is defined in this thesis as changes in the regulatory framework that were not forecastable at
the time of the asset investment decision and therefore will include Regulatory Volatility, as well as regulatory
changes that only become forecastable after the asset investment decision is made. See Abbreviations section
above
1791
Regulatory Volatility is defined in this theis as regulatory change that is or has not been forecast by Developer
Operators as investors in the industry and as necessary by legislators and regulators

based free trade principles. Respondents were also asked to reflect on the main
regulatory changes, issues or risks they saw within their own business or the
business of their clients (essentially forecastable risks) and then to outline their
concerns for unforeseeable risk which could be considered volatility.
The respondents all stated that they foresaw regulatory risks – meaning a
change of regulation that would negatively impact the revenue of renewable
electricity facilities. Going on to state that appropriately engaging on the main
regulatory risk to their business or the business of their clients was the focus of their
regulatory analysis and mitigation processes. The main regulatory risks, outlined
below, reported by the respondents are dependent on the business division and
context in which the respondents operate as individuals. Also, it is clear that the
Developer Operators see regulatory and commercial risks as being completely
intertwined and hence did not, in the main, distinguish between diagonal or other
types of conflicts in EU law. The Developer Operator respondents stating in one form
or another than considering regulatory risk and seeking to manage this risk was
about enabling the delivery of the business plan, going on to state that consistency,
with no surprises was at the core of their interaction with regulators and legislators
(all 7 Developer Operators).
As an example of how market operatives see regulatory and commercial
risks as being one and the same, External Legal Counsel 3 and Developer Operator
5 both listed Brexit1792 and the lack of regulatory history, as the single event creating
the highest level of regulatory volatility in nearly 30 years. As an origin of regulatory
volatility, with both respondents stating that whilst the starting regulatory framework
at the point of Brexit might be the same for the EU and the UK, the future is unknown
for the UK.
The responses are informed by the need to consider not only current
business risks but also risks, but also future developments in the regulatory
framework ‘so far as that is foreseeable at the time of that analysis’ (Green
Network), 1793 with several respondents stating that should a claim be made the
CJEU may consider not only the current framework, but potential developments in
any compensation claim (Developer Operators, External and Internal Legal
Counsel). The nature of ‘foreseeable’ therefore being critical and giving an edge to
the analysis of regulatory issues. If ‘foreseeable’ was held in future judicial
processes to only be those changes that could be foreseen from EU consultation
1792
A term in common usage to describe the process by which the UK will leave the EU, having issued a notice in
accordance with Article 50 TEC
1793
Case C-66/13 Green Network SpA v Autorità per l’energia elettrica e il gas ECLI:EU:C:2014:2399, para 61; See
also CJEU Case Opinion 1/13 ECLI:EU:C:2014:2303, para 74; Opinion 1/03, ECLI:EU:C:2006:81, para 126, 128
and 133; Case C‑114/12 Commission v Council, ECLI:EU:C:2014:2151, para 74

documents or other formal communications this is a manageable, however, if it is
expanded for include ‘what the respondent should have known’ then this gives
considerably more importance to future regulatory scenarios and their interpretation.
The Internal Legal Counsel 1 highlighted a series of current issues, all of
which were very much focussed on the operation of the asset portfolio owned by the
company for which the respondent works. The answer also indicates that the
operation of assets is a key focus of the company and that it potentially has a
dominant market position thus any failures in its submissions would be easily seen
by a number of market players. The respondent listed REMIT1794 and MIFID1795 as
the main risk, as it related to potential fines for failures to declare maintenance
outages and operational restrictions.1796 The REMIT and MIFID regulations require
generating companies to declare their operational assets and their future
maintenance outage plans to third parties so that the trading functions of these
companies have no greater information in this regard than other traders in the
market. This risk relates to the complexity of the regulatory framework and the fact
that by its very polycentric nature something can be missed. Internal Legal Counsel
2 further explaining that asset managers charged with the safety and availability of
the assets within a generating company’s portfolio are also asked to provide
information for a regulatory compliance obligation.
External Legal Counsel 2 continued by stating that it is a priority for the
electricity generation industry to gain greater acceptance by the public, as this will
enhance the industry’s ability to gain construction and operating permits for
renewable energy and also in relation to the price of renewable electricity, although
with the reduction in capital costs this might be a short-lived concern.1797
1794
REMIT is the EU Regulation ‘On energy market integrity and transparency (No 1227/2011). It provides a
consistent EU-wide regulatory framework specific to wholesale energy markets that: (i) defines market abuse,
including market manipulation, attempted market manipulation or insider trading , (ii) explicitly prohibits market
abuse (iii) requires effective and timely public disclosure of inside information by market participants (for all
practical purposes this relates to generating plant outage information), and (iv) obliges firms professionally
arranging transactions to report suspicious transactions - Regulation (1348/2014/EC) on data reporting
implementing Article 8(2) and Article 8(6) of Regulation (EU) No 1227/2011 OJ L336
1795
MIFID is the Markets in Financial Instruments Directive (2014/65/EC). It has been applicable across the
European Union since November 2007, with a revised Directive in 2014, which became fully effective on 1
January 2018. It is a cornerstone of the EU's regulation of financial markets seeking to improve their
competitiveness. This includes trading on energy trading hubs / exchanges – EU Directive (2014/65/EU) on
markets in financial instruments and amending Directive 2002/92/EC and Directive 2011/61/EU Text with EEA
relevance OJ L 173
1796
For example the Dispute Settlement and Sanctions Committee (CoRDiS) of French Energy Regulator fined
VITOL S.A. € 5 million for engaging in ‘market manipulation’ between 1 June 2013 and 31 March 2014 via the
REMIT Regulations, (9 October 2018) – available at https://www.cre.fr/en/News/The-Dispute-Settlement-and-
Sanctions-Committee-CoRDiS-imposes-a-penalty-for-market-manipulations-on-the-wholesale-energy-market
1797
UK’s Hornsea 3 Project bidding an auction price of 57.5 £/MWh during the 2017 CfD auction – a price
comparable with thermal generation and the wholesale market – known as grid party pricing – See Daniel Radov,
Alon Carmel and Clemens Koenig, ‘Offshore Revolution? Decoding the UK Offshore Wind Auctions & What the
Results Means for a “Zero-Subsidy” Future’ (2017) NERA Economic Consulting

External Legal Counsel 2 went on to state that there is a risk that generation
assets would be nationalised in one or more-member states with little or no
compensation for investors, hence making those countries ‘uninvestable’ especially
as it is known that the ‘legitimate expectation’ provisions within the Energy Charger
Treaty are unlikely to be prioritised over the ‘right to regulate’ (see Section 3.5.8).
The above responses show the concern market participants have for the
actions of national governments and national regulators, as it is these bodies that
provide the day to day governance function.
The External Legal Counsel (1, 2 and 3) respondents highlight the loss of
revenue certainty in a business environment with no feed-in tariffs. They saw
business environment as having almost no forecastability and thus high levels of
regulatory volatility. Going on to highlight this risk, as a funding issue, increasing the
cost of capital, showing the vulnerability of their clients to debt finance.
External Legal Counsel 1 simply outlined a series of risks as being a concern,
ranging from the cancelling of sovereign guarantees to state aid issues related to
feed-in tariffs. The concern being highlighted by the issues outlined in
PreussenElektra1798 Vent De Colère1799 Austrian Green Levy1800 and German Green
Levy1801 where design of the renewables support scheme was found to be critical to
a finding of compatible state aid.
External Legal Counsel 2 also added the change in renewables support from
the renewable obligation certificate1802 to the contract for difference1803 regime as a
risk to be managed. The concern was stated as not simply a process point but one
focused on the viability of small renewable electricity projects and their ability to
achieve output price parity in any contract for difference auction with larger projects
on a simple economies of scale basis. As can be seen from the recent auction
1798
1799
ECLI:EU:C:2013:851
1800
1801
1802
Renewables Obligation Certificates (ROCs) ROCs are certificates issued to operators of accredited renewable
generating stations for the eligible renewable electricity they generate. Operators can trade ROCs with other
parties. ROCs are ultimately used by suppliers to demonstrate that they have met their obligation -
https://www.ofgem.gov.uk/environmental-programmes/ro/about-ro accessed 16 July 2018
1803
A Contract for Difference (CFD) is a private law contract between a low carbon electricity generator and the
Low Carbon Contracts Company (LCCC), a government-owned company. A generator party to a CFD is paid the
difference between the ‘strike price’ – a price for electricity reflecting the cost of investing in a particular low
carbon technology – and the ‘reference price’– a measure of the average market price for electricity in the GB
market. It gives greater certainty and stability of revenues to electricity generators by reducing their exposure to
volatile wholesale prices, whilst protecting consumers from paying for higher support costs when electricity prices
are high - https://www.gov.uk/government/collections/electricity-market-reform-contracts-for-difference accessed
16 July 2018

process for offshore renewable sites in the UK (known as a ‘concession auction’)
where the UK’s Hornsea 3 Project bid an output price broadly equal to the output
price of coal and gas generation and as such the wholesale electricity market – a
price point known as ‘grid parity’.1804 The economic element of the transition to a
contract for difference auction process is that the Hornsea project is able to achieve
economies of scale as it has a capacity of 2,400MW.1805
Lastly, External Legal Counsel 3 lists the lack of a detailed understanding as
to the continuation of regulations and market mechanisms such as the EU-ETS as
being an investment risk. The lack of clarity meaning that cost of capital for a project
will increase and thus projects which might have become operational in a clearer
regulatory environment will now not.
All the Developer Operator respondents stated, in one form or another, that
price uncertainty with future contract for difference and concession auction
processes was a preeminent risk.1806 The Developer Operator respondents putting
forward their view that over the life cycle of electricity generation assets, it is not
possible to robustly forecast the forward curve for electricity wholesale prices.
Therefore, the Developer Operator respondents state that any uncertainty over the
revenues available to renewable generation in the concession auctions or regulatory
volatility causing negative movements in those revenues, is their number one risk.
The Developer Operator respondents indicated that they see the churn in the design
in renewable support schemes as a source of regulatory risk, in that it is clear that a
poorly designed support scheme can be declared to be state aid thereby placing the
support scheme in diagonal conflict with Article 107 TFEU, with a potential to have
monies paid reclaimed.1807 Internal Legal Counsel 1 directly illustrated this point
using the example of the German renewable support scheme which was revised
following the German Green Levy1808 case and the Commission’s decision that the
revised scheme was allowable.1809
In highlighting the regulatory instability issue and its effect on investment in
the renewables sector, several of the respondents (Internal Legal Counsel,
1804
1805
http://hornseaproject3.co.uk/en/About-the-Project#0 accessed 1 September 2018
1806
From 2016 renewable electricity projects are required to enter an auction process such that the lowest cost
projects would receive price support at the price the project has bid into the auction. The resulting renewables
support scheme instrument is a contract for difference in accordance with Renewable Energy Directive Article
3(2); See European Commission guidance for the design of renewables support schemes, SWD(2013) 439 final;
COM(2015)80 final; http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=COM:2015:80:FIN
1807
Case T-131/16 Belgium & Magnetrol International v Commission ECLI:EU:T:2019:91
1808
1809
Commission Decision SA.45461 EEG 2017 - Reform of the Renewable Energy Law -
http://ec.europa.eu/competition/elojade/isef/case_details.cfm?proc_code=3_SA_45461

Developer Operator 1, 4, 5, 6 and 7, the Investment Fund Manager and Insurance
respondent) brought up the retrospective feed-in tariff reductions in
Charanne1810(Spain) and Scat Punti Vendita1811(Italy) (Section 3.5.8).
Internal Legal Counsel 1 illustrated this point by saying that a developer can
always choose not to invest in a particular asset if the economics do not work, but
existing assets have been approved based on a set of regulations and as such
becoming aware that there is effectively no redress for retrospective changes is a
major risk.
Developer Operator 5 made an insightful response by stating that in a
regulatory environment post the retrospective reductions in renewables support the
only incentive on EU member states to maintain any semblance of regulatory
stability is the need for future investment in generating assets by renewables
developers and as such without this pressure the regulatory environment would be
highly volatile.
The Investment Fund Manager also made the statement that retrospective
changes can not only make a sector uninvestable, but can make a country
uninvestable.
The Insurance Manager stated that following the [Italy and Spain style]1812
1813
changes in tariff, most [insurance] policy documents would now exclude
Government imposed tariff change. The Insurance Manager then went on to give a
further example of the UK OFTO1814 income adjusting events, where it was stated
that insurance providers would look for clients to put mitigation in place for such
events. The Insurance Manager went on to say that in a 2012 KPMG report1815 it
states that regulatory change insurance is available for a direct change in a Licence
Condition1816 where the renewable support framework is specifically stated within
the licence, although market practice shows such policies not to be readily available.
1810
2017
1811
1812
Specific project reference redacted to preserve anonymity
1813
Specific project reference redacted to preserve anonymity
1814
OFTO – is an offshore transmission operator - OFTO assets link offshore generation to the onshore network.
OFTO assets will normally have ownership of offshore electricity transmission infrastructure (such as offshore
substation platforms, subsea export cabling and onshore cabling), an onshore substation, and the electrical
equipment relating to the operation thereof - https://www.ofgem.gov.uk/ofgem-
publications/85943/offshoretransmission-aninvestorperspective-updatereport.pdf accessed 25 June 2018
1815
Andy Cox, David Gascoigne, Matt Firla-Cuchra, Yoon Chong, Adrian Scholtz and Hylton Millar, ‘Offshore
Transmission: An Investor Perspective’ [2012] KPMG available at https://www.ofgem.gov.uk/ofgem-
publications/79347/ofto-aninvestorperspective.pdf accessed 25 June 2018
1816
Generating facilities (renewables or otherwise) are usually granted a Licence to operate by their national
regulatory body. The licecnes will contain a number of duties and obligations – For examples of current UK
licence conditions see https://www.ofgem.gov.uk/licences-industry-codes-and-standards/licences/licence-
conditions accessed 23 September 2018

Whilst it is not surprising that any entity investing in assets to provide goods
or services to a market would seek to understand the process by which the
regulatory framework of the market may change and in so doing reduce the returns
from those assets, it is the diversity of issues reported which shows the variety of
concerns with which market operators contend.
The balance of responses made show that respondents are highly focused
on the design of the regulatory framework and how this might change overtime. The
broad sweep of comments related to the design of the support schemes in place in
the member states and how a poorly designed scheme could be declared state aid
and thus leave the operators considerably out of pocket as monies are recovered
and not repaid once a revised scheme is put in place. 1817
Theme 1.2 Diagonal Conflict between the Renewable Energy Regulatory

Framework and Free Movement of Goods
The respondents overall saw the free movement of goods restriction, relating to
renewable electricity, in a spectrum from (i) a problem that was a factor relating to
ongoing legal ‘issues’ on which External Legal Counsel 1 and 2 were advising and
as such they could not offer a response due to professional ethics restrictions, (ii)
an issue of regulatory volatility (Internal Legal Counsel 1) and finally (iii) a factor
within the national renewables legislative framework that had to be complied with
and managed accordingly (Developer Operators 4 and 5). Three of the Developer
Operator respondents had not come across the issue in a business context and as
such were not able to offer a response on the issue.
External Legal Counsel 1 and 2 are senior partners at international law firms
(either being or being akin to magic circle firms)1818 and the fact that they reported
an inability to answer questions on the topic of the regulatory conflict with free
movement due to ongoing litigation or advice being given in contemplation of
litigation, shows the importance of this issue and that it is an issue currently in
contemplation of litigation.
Internal Legal Counsel 1 stated the conflict between the renewable energy
regulatory framework, be it at member state or at EU level, 1819 and EU primary law
was a ‘significant business risk’. Internal Legal Counsel 1 in response to the question
went straight to the nationally focussed renewable electricity support schemes which
are set up in accordance with the Renewable Energy Directive (Article 3(3)) which
1817
1818
https://www.lawgazette.co.uk/news/its-a-kind-of-magic/42082.fullarticle
1819

restricts the free movement of renewable electricity. The respondent stated that such
a position is inconsistent with EU primary law (Treaty provisions). As a result of the
export restriction surrounding renewable electricity Internal Legal Counsel 1 also
stated that another aspect of the business risk was that
‘it may not be possible to import/export renewable
electricity when nuclear closes, thus requiring
generators to seek asset life extensions to ensure
continuity of supply’
Internal Legal Counsel 1 stating that the export restriction surrounding renewable
electricity is not simply an academic issue, or one related to the access to renewable
support schemes outside the renewable electricity facility’s host country, but an
operational issue in conflict with other parts of a member state’s energy policy, in
this case the closure of nuclear. 1820 It being noted by additional respondents
(Developer Operator 4, 5 and 7) that in other member states the closure of coal
generation, in accordance with the requirements of the Industrial Emissions
Directive,1821 will create the same issue such that a power gap may ensue as this
will not be filled with renewable electricity but potentially carbon emitting forms of
generation, effectively importing from other member states the same form of
electricity that had just been decommissioned in the host country.
External Legal Counsel 3 was able to discuss conflict issues related to the
free movement of renewable electricity and stated that the case law reconciling free
movement and the details of the member states’ renewable regulatory frameworks
is ‘not satisfactory in the long-term’. The respondent suggesting that the current
situation where member states can restrict the export of renewable electricity which
has received revenue support either (or both) by a feed-in tariff or a tradeable
renewable certificate, should not be viewed as creating regulatory stability. The
respondent suggested that the case law supporting this framework ((e.g.
PreussenElektra,1822 Essent 1,1823 and Ålands Vindkraft1824 as set out above) could
be removed.
1820
Vattenfall AB and others v Federal Republic of Germany, ICSID Case No. ARB/12/12; See Also Anatole
Boute, ‘Energy Trade & Investment Law: International Limits to EU Energy Law & Policy’ in Martha Roggenkamp,
1821
1822
1823
C:2014:2192
1824

External Legal Counsel 3 argued this line of case law and its failure to
enforce free movement serves to further reinforce the competence1825 of member
states to determine their renewables support schemes within the Renewable Energy
Directive. The clear vertical line within the regulatory framework that is headed by
Article 194(1) TFEU, which requires the EU, in solidarity with the member states, to
support the development of renewable energy, implemented by the Renewable
Energy Directive and ultimately the member states was in diagonal conflict with
Articles 28 to 35 TFEU (free movement). With this as a background External Legal
Counsel 3 went on to state that ‘national renewable support schemes are out of step
with wider EU law and thus need to be modified’ so that renewable generation
facilities can be built where the climatic conditions best suit renewables without free
movement restrictions, thus allowing the development of the lowest cost projects.
The point made by External Legal Counsel 3, that the free movement
restriction within national renewable support schemes is hindering the development
of renewable facilities in areas that would allow low cost projects to be developed,
was also made by Developer Operator 4 and 5.
Developer Operator 4 and 5 saw the free movement restrictions within the
national support schemes for renewable electricity as a ‘cost to serve’1826 issue,
where the capital and on-going revenue costs of operations and maintenance were
not minimised and output maximised. Developer Operator 4 going on to state that
as an organisation they had within one of their future regulatory scenarios the
potential for the regulator1827 to seek to claw back part of the revenue support where
it was found that output costs from renewable electricity facilities were not in
accordance with the best practice levelised cost of energy.1828 Developer Operator
4 saw the restriction of movement as an event of regulatory volatility, as additional
costs are created in the generation of renewable electricity resulting from facilities
1825
1826
Cost to serve in this context is the summation of the costs to produce electricity from the renewable generation
facility, based on actual business costs such as capital, maintenance, repair, operational overhead and other
costs incurred in operating the facility
1827
Details of the exact national regulator redacted to maintain anonymity
1828
Levelised Cost of Energy (LCOE), measures lifetime asset costs (Capex and Opex) divided by energy
production - International Renewable Energy Agency ‘Renewable Power Generation Costs in 2017’
https://www.irena.org/-/media/Files/IRENA/Agency/Publication/2018/Jan/IRENA_2017_Power_Costs_2018.pdf

not being located where wind or solar resources are optimal, which could be
disallowed by regulators (either national or potentially ACER)1829 in the future.
In response to questions related to the restriction of free movement for
renewable electricity, Developer Operator 5 stated that the conflict is not only with
free movement of goods, but is distortive of competition and other elements of
prohibitions of state aid [Article 107 TFEU] due to the enhanced revenue paid to
renewable electricity facilities. With Developer Operator 5 going on to state that
‘climate change is predominant, so other issues seem to be ignored’.
Developer Operator 6 stated that not developing renewable facilities where
wind and solar resources were maximised meant that electricity market costs are
not always optimal, as the costs of production is a combination of the capital and
operational costs on one hand and the level of output on the other.
Developer Operator 7 also echoed this point stating that renewables facilities
should be given every support in being developed in locations with the highest wind
and solar resources.
Developer Operator 7 made an important point about the development of
renewable facilities by stating
the real issue is not about the export of renewable
electricity in the operational phase, but the ability to
seek renewable support from a country outside the
host country
The Investment Fund Manager, in response to questions on the restriction of free

movement for renewable electricity, simply stated this to be an issue that should be
monitored going forward.
The statement from two of the three External Legal Counsel respondents that
they could not answer questions related to the renewable electricity support schemes
and free movement due to ongoing advice in contemplation of litigation is a clear
indication of the importance of this issue.
Furthermore, having Internal Legal Counsel indicating their awareness of the
free movement issue in the context of a power system dispatch and operational
shortage scenario shows that utilities with the EU are discussing this issue widely
and are seeking legal advice on the matter – having lawyers aware of, and being
able to discuss effectively a power system dispatch issue shows this is an important
business concern.
1829
ACER - Agency for the Cooperation of Energy Regulators - https://www.acer.europa.eu/en/Pages/default.aspx

The responses from the Developer Operators show the fear of utility
companies relates to their ability to effectively develop facilities in the most effective
locations. Also, that renewables support schemes may be curtailed in future on the
grounds of not providing best value.
The Developer Operator and Investment Fund Manager responses are
believed to reflect the fact that renewable generating companies (and also
generating companies which own a portfolio of generation types – coal, gas and
nuclear) are very focussed on the needs of the electricity market in front of them.
Theme 1.3 Removal of Priority
Renewable electricity currently enjoys priority dispatch1830 within the EU, such that
when a renewable electricity facility can generate it is allowed to do so and if required
other forms of generation will be shut down – known in the industry as ‘curtailed’. 1831
Internal Legal Counsel 2 stated that potential changes to the practice of
priority dispatch1832 as proposed by ACER1833 and others in relation to renewable
electricity, would mean that competitors would change the way they operate and as
such this was unforecastable due to the lack of history in running a merit order
dispatch process1834 including renewable generation. These proposals leading to not
only regulatory uncertainty but also unforecastable changes in the operational
1830
1831
Curtailment is a forced reduction in the output of an electricity generation facility from what it could otherwise
produce given available resources, typically as a result of capacity constraints in the transmission system - Lori
Bird, Jaquelin Cochran, and Xi Wang, ‘Wind and Solar Energy Curtailment: Experience and Practices in the
United States’ [2014] National Renewable Energy Laboratory Working Paper; See Also Henrik Klinge Jacobsen
and Sascha Thorsten Schröder, ‘Curtailment of renewable generation: Economic optimality and incentives’ (2012)
49 Energy Policy, 663
1832
1833
https://acer.europa.eu/Media/News/Pages/Regulators-call-for-priority-dispatch-of-existing-Renewables-to-be-
removed.aspx; See also European Energy Regulators’ Overview Paper Initial Reactions to the European
Commission’s proposals on Clean Energy available from https://acer.europa.eu/Media/News/Pages/European-
Energy-Regulators_Overview-Paper-Initial-Reactions-to-the-European-Commission_s-proposals-on-Clean-
Energy.aspx
1834
Merrit Order Dispatch of generating facilities means ‘the short-term determination of the economically optimal
output of a series of electricity generation facilities connected to an electricity network to meet the electicity
demand on that network, at the lowest possible cost, subject to transmission capacity and operational constraints.’
- P Palermo ‘Approaches to Generation Dispatch in Transmission Planning’ (2009) 135 CIGRE

practice of authorities responsible for generation dispatch and the market practice
of generating companies with several different plant types within their portfolios.
In continuing this theme, External Legal Counsel 3 stated that the loss of
priority dispatch for renewables would have implications for within country and cross-
border trades, as renewable generation will have to account for curtailment (also
known as transmission constraints) within the network in its dispatch decisions and
the way renewable facilities place output bids1835 into the trading system. External
Legal Counsel 3 also makes an important point about the practical implications of
the loss of priority dispatch for renewables, in that for the first time renewable
generation facilities will become ‘balancing responsible parties’1836 (BRP) and will
have to contract with other generators to make good any short fall in dispatch or pay
the market cash out price.1837 This places renewables at a distinct disadvantage
compared to other generation types, as renewable output is dependent on wind and
solar resources and is therefore intermittent.
Many of the respondents discussed the regulation of priority network
access 1838 and priority dispatch 1839 for renewable electricity. The Developer
Operators (Developer Operator 1, 4, 6 and 7) were supportive of the continuation of
priority network access and priority dispatch for renewable electricity facilities and
were broadly satisfied with the current regulatory regime. Developer Operator 4 also
raised the point that should renewable generation facilities have their output
curtailed due to the loss of priority dispatch, this could only mean that carbon emitting
generation is being dispatched to make up the shortfall in generation output to the
1835
In order to be dispatched conventional generation will bid a level of output and price into the applicable market
mechanism. The transmission system operator will then dispatch generating plant against a merit order – with
cheapest plant dispatched first and then plant in increasing price increments until demand is met. The
transmission system operator will also take account of any constraints in transmission capacity in making a
dispatch instruction. A transmission constraint is caused by the transmission system not having enough capacity
to allow free flow of electricity and as such electricity is routed differently than the route it would seek to take
naturally. See Juan Morales and Salvador Pineda, ‘On the inefficiency of the merit order in forward electricity
markets with uncertain supply’ (2017) 261(2) European Journal of Operational Research, 789; Pieter
Schavemaker and Lou van der Sluis Electrical Power System Essentials (Wiley, 2016) 261
1836
A technical term given to generators who are part of the merit order dispatch process such that they balance
the actual output at any time during the market dispatch period and what the generator stated it would dispatch at
the time it bid its output and price.; See Balancing & Settlement Code https://www.elexon.co.uk/wp-
content/uploads/2018/04/GB_BSC.pdf accessed 17 July 2018
1837
A technical term given to the price and ultimately the payment that is made by generators who have a miss-
match between the electricity actually dispatched and the volume of electricity the generator stated it would
dispatch at the time it bid its output and price.; See Balancing & Settlement Code https://www.elexon.co.uk/wp-
content/uploads/2018/04/GB_BSC.pdf accessed 17 July 2018
1838
1839

network and therefore this would seem to conflict as a policy with the EU’s overriding
objective1840 of reducing carbon emissions from electricity generation.
However, Developer Operator 3 and 5 were concerned at the negative effect
on market prices that priority dispatch for renewables has during periods of reduced
electricity demand, going on to state that priority dispatch for renewables can
undermine the market price for electricity and as such otherwise economic
generating facilities are forced to close, such closure therefore having a destructive
effect on energy security.1841 As an example of the concern a study found that the
incorporation of renewables into electricity market processes as ‘negative’ demand
had resulted in solar renewable electricity facilities reducing the price of electricity
on the German electricity exchange by 10% on average, and by as much as 40% in
the early afternoon in summer.1842
Therefore, the situation is seen differently by different market operators. This
difference is almost certainly to do with the proportion of renewables and other plant
types in the generation portfolio of the particular undertaking.
The Investment Fund Manager was also concerned about the loss of priority
dispatch and draws a direct link between its loss, increased risk and increased rates
of return required on investments in renewable electricity facilities. The Investment
Fund Manager stated that the removal of priority dispatch and embedded benefits
from renewables makes such generation more closely aligned to the merchant risk
of conventional power plants and therefore for some investment funds this will make
the asset class uninvestable. In so doing the asset class will move away from the
classic 5% to 7% return sought by pension funds, to funds that require higher rates
of return. In other words, if renewables are required to comply with the day to day
dispatch rules, then they are going to move into the double digit return general
investment fund sector. As the dispatch price of renewable generation is dominated
by capital and financing costs effectively doubling the cost of capital will further delay
the ability of renewable generation to reach ‘grid parity’ pricing.
1840
1841
Solar renewables being seen to reduce prices on the German energy exchange by 10% on average, and by
as much as 40% in the early afternoon in summer – See Frank Sensfusß, Mario Ragwitz and Massimo Genoese,
‘The Merit-order effect: A detailed analysis of the price effect of renewable electricity generation on spot market
prices in Germany’ [2007] Working Paper Sustainability and Innovation No. S 7/2007, Fraunhofer Institute for
Systems and Innovation Research
1842
Frank Sensfusß, Mario Ragwitz and Massimo Genoese, ‘The Merit-order effect: A detailed analysis of the
price effect of renewable electricity generation on spot market prices in Germany’ [2007] Working Paper
Sustainability and Innovation No. S 7/2007, Fraunhofer Institute for Systems and Innovation Research

The Regulator respondent (a national regulatory) was supportive of the
ACER view that the removal of priority dispatch should be examined to bring
renewable generation in line with wider market practice. In relation to the costs
imposed on consumers due to the curtailment1843 of generation assets, which are
part of the normal generation dispatch processes,1844 the Regulatory respondent
did acknowledge that the ‘connect and manage’ 1845 regime, creates curtailment
costs for wind generation, as when electricity network capacity is such that
renewable generation cannot be dispatched, the renewable generating facilities will
not receive compensation at the level of the price contained in their support
mechanism, but simply at wholesale market price levels, which may make certain
sites uneconomic. However, the Regulatory respondent did go on to state that as a
regulator, reducing curtailment costs, either through encouraging network innovation
or new prioritisation mechanisms, was an important issue, without really being able
to offer any specific ideas or potential policies in this area.
Theme 1.4 Removal of Embedded Benefits
Embedded benefits (See Section 3.5,13) exist as the electricity produced by

generators connected to the distribution system offset costs incurred by the
distribution and transmission network operators, as flows are reduced across
distribution and transmission networks.1846 These offset costs are either paid to the
renewable generator as a subsidy or renewable generators are simply exempted
from paying the costs of moving electricity across the distribution network. This issue
was considered in the Essent 21847 case where it was held that any use of distribution
network offset costs was a subsidy and simply being exempted from distribution
costs is state aid.
1843
1844
1845
Underlying principle is that generators would acquire firm access rights from a particular date and be allowed
to generate or receive compensation from that date, subject to; local network upgrading being complete and the
renewable facility being commissioned and available -
https://www.ofgem.gov.uk/sites/default/files/docs/2007/11/connect-and-manage_phil_0.pdf accessed 23
September 2018
1846
Andy Pace, Jo Lord, Tom Edwards and Jonathan Davison, ‘A Review of the Embedded Benefits accruing to
Distribution Connected Generation in GB’ [2016] Cornwall Energy for De-centralised Energy Association
1847
Case C-492/14 Essent Belgium NV v Vlaams Gewest ECLI:EU:C:2016:732 - where it was determined by the
CJEU that renewable generation should not be exempted from the obligation to pay distribution and transmission
cost

.
As would be expected Developer Operators were concerned at their loss of
embedded benefits. Four of the Developer Operator respondents showed significant
concern with regards to the issue (Developer Operator 1, 5, 6 and 7), seeing it as a
loss of revenue. The Developer Operator respondents felt that the network costs for
transmission and distribution which they offset and thus share as a revenue source
were more predictable than the market price for generation and, although a
secondary income source, was reliable, predictable and thus important.
The Regulator respondent’s comments focused on the need to put an end to
the practice of granting renewable facilities embedded benefits, relating the issue to
an equitable placement of the costs of development and maintenance of the
distribution network on all market participants, including renewable generation. This
would end free riding practices enjoyed by renewable generating facilities in relation
to distribution network costs.
The Regulator respondent noting that the issue had been the subject of two
cases Essent 21848 and a UK Judicial Review1849 and that the court had determined
that renewable generation should pay the costs of transporting electricity across the
distribution and transmission network. However, irrespective of the loss of
embedded benefits, it is the total cost of transporting electricity that is important for
the industry and as such initiatives such as the joint venture between four1850 UK
electricity network companies to accommodate the increase in renewable power
flowing onto local networks is welcomed, as it reduces the total cost of electricity
distribution.1851
The removal of embedded benefits is a clear example of unforecastable
regulatory change. The loss of embedded benefits is estimated to result in a 6%
reduction in revenues which for many projects will require cost cutting to maintain
project margins.1852
1848
Case C-492/14 Essent Belgium NV v Vlaams Gewest ECLI:EU:C:2016:732 - where it was determined by the
CJEU that renewable generation should not be exempted from the obligation to pay distribution and transmission
cost
1849
1850
UK Power Networks, Scottish and Southern Electricity Networks, Western Power Distribution and National
Grid
1851
UK Power Network Announcement - https://www.ukpowernetworks.co.uk/internet/en/news-and-press/press-
releases/Electricity-networks-unite-to-boost-renewable-energy-and-save-customers-40million.html#art-top
1852
Merlin Hyman, ‘The Future Revenue Stack Driving Value in an Uncertain Future’ [2019] Smartest Energy
available at https://www.smartestenergy.com/info-hub/reports-and-guides/the-future-revenue-stack/

Theme 1.5 Discontinuity between Generation Waste (Ash) and Carbon
Emissions – Polluter Pays Uncertainties
As stated above, Article 191(2) TFEU states that as a priority environmental damage
should be rectified at source on the basis that the polluter should pay for the
remediation of any pollution or emissions. The drafting of Article 191(2) is an
absolute obligation on polluters, whereas the Industrial Emissions Directive1853 (a
C&C style directive within the environmental competence1854 of the Commission)
and the Emissions Trading Directive 1855 (a market style directive within the
environmental competence of the Commission) allow carbon (plus other gasses)
emissions, thus the Directives conflict with the Treaty. As the environmental and
energy articles of the TFEU (191 and 194 TFEU respectively) are so interrelated,
this conflict should really be regarded as vertical.
Also, the explicit ability for coal and gas generation plant to emit (within limits)
carbon-based gases 1856 contained in the Industrial Emissions Directive and the
Emissions Trading Directive, creates a direct discrimination against coal fuelled
generating plant. On a unit of output basis, coal is more carbon intensive and less
energy intensive that gas, therefore coal generation is required to have available a
larger number of emissions credits. Additionally, the burning of coal produces ash,
whereas gas has almost no solid residual waste. The Industrial Emission Directive
makes no allowance for the emission of ash and also sets limits on dust emissions
(mostly coal soot)1857 as part of the combustion process.
The respondents (Internal Legal Counsel 1, Developer Operators 5 & 6)
made the comment that emission allowances were issued for free in association with
the EU-ETS, whereas there was no free mechanism for ash. This creating a
discontinuity between gas and coal generation, with carbon emissions being
tradable at a price below the costs of rectification at source, whereas there is an
1853
1854
1855
1856
Any carbon based fuel (coal, methane – commonly known as gas, or oil) combusted in an oxygen atmosphere
will result in carbon dioxide and other carbon based gases being produced post combustion
1857
Soot is a substance consisting largely of amorphous carbon, produced by the incomplete burning of organic
matter - coal

absolute obligation to manage ash type wastes at the full costs of waste
management.
The respondents commented that these conflicts and discriminations
created a risk of regulatory change - forecastable or not.
Internal Legal Counsel 1 also reported that the Industrial Emissions Directive
is not easy to comprehend, let alone its incorporation into the national law of EU
member states. The incorporation into national laws was reported as creating a
further layer of complexity and potential for inconsistency.
Three of the respondents (Internal Legal Counsel 1 and Developer Operators
5 and 6) reported that the Industrial Emissions Directive sets a timetable for the
closure of coal plant and that any inconsistency in its incorporation into or
enforcement within national law cab that changes this timetable will have a
detrimental effect on the closure programme of generation companies with a
portfolio of plant types (coal, gas, nuclear). The respondents also stated that there
was no point in closing plant domestically to only import electricity from other
member states where the Industrial Emissions Directive is not being enforced so
robustly.
Developer Operators 5 and 6 also made note of the potential for the Industrial
Emissions Directive to be modified should the COP 21 Paris Climate Agreement be
modified or certain significant players (USA and or China) not ratifying the
agreement. Developer Operators 5 and 6 stated this to have the ability to place the
investment made in generating plant emission abatement, at risk of being
unremunerated or rendered obsolete should the Industrial Emission Directive be
subject to regulatory volatility and the resulting modified Directive, force plant
closure.
The discontinuity between the treatment of solid combustion waste (ash) and
gaseous emissions, or the robustness in the enforcement of the Industrial Emissions
Directive is an internal conflict within the electricity regulatory framework. The
conflict is likely to reduce the willingness of Developer Operators to invest in carbon
abatement assets, or to simply opt out of the continuity of generation scheme within
the Industrial Emissions Directive (for an explanation of opt out and opt in schemes
see Section 2.10.3). This will mean that the opt out generation plant with only
generate for a limited number of hours, with the likelihood that the generation gap
will be filled by other carbon emitting generating plant operating for longer or within
other member states and importing the electricity.

Theme 2 Origins of Regulatory Risk
The respondents were asked what they considered the origins of regulatory
uncertainty or volatility and how this affects their business, the advice they give, or
regulations put in place.
A general definition and measurement of ‘uncertainty’, whether this relates
to a regulatory framework or other business risks is not straightforward since it is
ultimately an unobservable variable. 1858 However, it is known that uncertainty
increases the option value of waiting before committing to an investment,1859 and
additionally it is known that the hurdle rate1860 an investment must reach before an
investment commitment is made increases.1861 The perception of uncertainty in the
business environment can originate simply from rapid economic changes such as
the financial crisis of 2008.1862
The themes which emerged in relation to the origin of regulatory risk can be
summarised as (i) political, (ii) un-forecasted regulatory change and (iii) regulatory
inconsistencies, each set out below
Theme 2.1 Political Risk
As has been stated widely, investors require confidence that when investment
decisions are made, the regulatory authority (national regulators, the Commission
or other EU institutions) will not cancel commitments made or significantly alter the
rules governing the business case (An almost universal theme of respondents).1863
This is an effect which was also brought out with regards to the UK specifically
1858
Marko Melolinna, Helen Miller and Srdan Tatomir, ‘Business investment, cost of capital and
uncertainty in the United Kingdom - evidence from firm-level analysis’ (2018) 17 Bank of England Staff Working
Paper
1859
Knut Are Aastveit, Gisle James Natvik and Sergio Sola, ‘Economic uncertainty and the effectiveness of
monetary policy’ [2013] Norges Bank Working Paper No. 2013/17
1860
‘hurdle rate’ is the minimum rate that a company expects to earn when investing in a project. Hence the hurdle
rate is also referred to as the company's required rate of return or target rate. In order for a project to be accepted,
its internal rate of return must equal or exceed the hurdle rate - https://www.accountingcoach.com/blog/what-is-
hurdle-rate
1861
Nicholas Bloom, ‘Fluctuations in Uncertainty’ (2014) 28(2) Journal of Economic Perspectives, 153
1862
Patrick Bolton, Neng Wang and Jinqiang Yang, ‘Investment under Uncertainty and the Value of Real and
Financial Flexibility’ [2014] American Finance Association;See Also Avinash Dixit and Robert Pindyck Investment
under Uncertainty (Princeton University Press, 1994)
1863
Cameron Hepburn, ‘Regulation by Prices, Quantities, or Both: A Review of Instrument Choice’, (2006) 22 (2)
Oxford Review of Economic Policy, 225; See also Harri Kalimo, Filip Sedefov and Max Jansson, ‘Market definition
as value reconciliation: The case of renewable energy promotion under the WTO Agreement on Subsidies and
Countervailing Measures’, (2017) 17(3) International Environmental Agreements: Politics, Law and Economics;
Colin Kirkpatrick, David Parker and Yin-Fang Zhang, ‘Foreign Direct Investment in Infrastructure in Developing
Countries: Does Regulation Make a Difference?’, (2006) 15(1) Transnational Corporations; Dieter Helm, Cameron
Hepburn and Richard Mash, ‘Credible Carbon Policy’, (2003) 19(3) Oxford Review of Economic Policy, 438;
Henok Birhanu Asmelash, ‘Energy subsidies and WTO dispute settlement: Why only renewable energy subsidies
are challenged’, (2015) 18 (2) Journal of International Economic Law, 261;

(Brexit) with reference being made to the 2018 Energy Barometer1864 (Developer
Operator 5 & External Legal Counsel 3).
Developer Operator 6 gave a useful summary of the origins of regulatory and
business risk by stating that such risks really all circulate around political and policy
issues. Political risks being reported as occurring in different timescales depending
if the political issues are at national or EU level. Developer Operator 6 stated that
issues occurring at national level can present more immediately than those at EU
level. However, EU political and policy issues tend to be of a more fundamental
nature. Developer Operator 6 finally stated that rule changes and changes in
renewables support instruments (feed-in tariff and tradeable certificates) lower the
predictability of the future and thus create a feeling of uncertainty.
Both Internal Legal Counsels reported a wider political concern present
within the industry regarding the composition of national governments and that as
the composition changes, so does their regulatory priorities. Internal Legal Counsel
1 stated that changes to Government ministers presented a regulatory risk at the
national level saying,
‘the concern is always brought into focus by [changes
in Government]. With the rise of the Green Party
[across the EU] there is a higher probability of
Government priorities changing to a stricter
enforcement of nuclear and coal closures.’
An example of this concern being the German government’s declared policy to

phase out nuclear power.1865 With different coalition partners the phase out concept
could be extended to coal and even gas fuelled power plant. The respondents
therefore raised an overall concern at the competence 1866 still held by member
states to determine the choice between energy sources set out in Article
194(2)TFEU. The Developer Operators (1, 4, and 6) stated a view that the
competence to determine their national energy mix gave the individual member
states considerable discretion in this area, a discretion that was not always used for
objective reasons. An example given was the inability to obtain access to a
1864
Malcolm Brinded, ‘Energy Barometer’ [2018] Energy Institute - listing the key issues as uncertainty around
Brexit and the diversion of attention it is causing away from domestic policy; and investment and cost concerns as
a result of political issues and oil price volatility
1865
Norbert Rottgen Environment Minister ‘The Federal Government's energy concept of 2010 and the
transformation of the energy system of 2011’
1866

renewables support scheme is England for onshore facilities (Developer Operator
1, 4, 5, 6 and 7). Another example being the French Government’s
requirement/request for certain offshore renewable facilities to reduce their support
tariff level by 30% or effectively have their support contracts cancelled (Internal
Legal Counsel 2 Developer Operator 4, 6 and 7).
It is clear that respondents view regulatory change as highly political in origin,
with regulatory practice and direction being dictated by political priorities. The
responses show that the Developer Operators view elections and even changes in
ministerial appointments as potential sources of regulatory change.
Theme 2.2 Regulatory Volatility – Rapid Unforecastable Regulatory Change
All respondents, other than the Regulatory respondent who would not express a
view, reported unforecastable regulatory change at either the national or EU level
as a negative, and issues of most concern are those which occur rapidly without
giving utility companies time to mitigate the potential revenue impact. To this end
some respondents stated that they believed that regulatory change could be made
faster, based on the exclusive competence of the Commission. The respondents
stated as an example the development of the state aid guidelines by the
Commission, effectively driving the legal basis of the assessment of state aid
(Internal Legal Counsel 1, External Legal Counsel 3, Developer Operator 5 and 7).
As a further example of how fast things can change and that issues can come
from ‘nowhere’ to be a top environmental concern, the current concerns over plastic
was outlined (Developer Operator 4, 6 and 7 and Climate Change Scientist). The
issue of marine plastic as an environmental concern has been known from the early
2000’s,1867 but with little public perception of the issue. As a result of the issue being
given publicity by Sir David Attenborough 1868 and others, companies are now
shunning plastic across multiple business sectors to such an extent that the EU has
published a communication1869 on the subject to provide a framework within which
the Commission and the other institutions of the EU can work to reduce single use
plastic.1870
1867
S Sheavly and K Register , ‘Marine Debris & Plastics: Environmental Concerns, Sources, Impacts and
Solutions’ (2007) 15(4) Journal of Polymers and the Environment, 301; James Coe and Donald Rogers Marine
debris: sources, impacts, and solutions (Springer, 2012); Birgitta Gatersleben, Linda Steg and Charles Vlek,
‘Measurement and Determinants of Environmentally Significant Consumer Behavior’ (2002) 34(3) Environment
and Behavior, 335
1868
Binoy Kampmark, ‘From Plastic to Drastic’ (2018) available https://www.thenews.com.pk/print/271322-from-
plastic-to-drastic; Sir David Attenborough: 'I'm astonished' by Blue Planet plastic impact -
https://www.bbc.co.uk/newsround/44586290
1869
EU Communication Com(2018) 28 ‘A European Strategy for Plastics in a Circular Economy’
1870
On 28 May 2018, the Commission issued a proposal for a Directive banning or reducing

Therefore, by extension, if a similar concern was to be raised with regards to
any aspect of renewable or other forms of electricity generation, a considerable
number of facilities could be rendered operationally and economically untenable
(Operator Developer 3 Internal Legal Council 1). Another example given was air
quality, where a few years ago little was heard on the subject, whereas now the UK
Government has already been the subject of a domestic Supreme Court case on the
subject.1871 Developer Operator 4 and 6 reported that should the same focus be
levied on climate change and carbon emissions, the policy landscape at both EU
and member state level could change rapidly and in unpredictable ways.
Both Internal Legal Counsels went on to raise concerns with regards to plant
closures, predominately coal and nuclear in the respondents’ host countries without
a clear route as to how new generation capacity is to be put in place to fulfil this
generation gap. These respondents stated that such a programme may require the
importation of additional electricity from external parties with the logical generation
type being renewables to fill this generation gap. However, at the same time an
export/import restriction is in place between member states due to the nationally
focussed renewable energy support schemes. The Internal Legal Counsel 1 stating:
there is no point closing [coal]1872 plants, without a plan as
to how the generation gap will be filled. There is also no
point closing nuclear plants [domestically] 1873 to import
nuclear power from France.
The finding of a general restriction related to the flows of renewable energy between
member states outlined in Essent 11874 and Ålands Vindkraft1875 clearly underlines a
concern that any shortfall is electricity will need to be made up from coal or gas
which is carbon emitting.
Additionally, the finding in Green Network1876the Commission’s competence
to negotiate renewable recognition agreements with third countries simply made
both the Internal Legal Counsel and Developer Operator respondents concerned
over the timescale and reactivity of the Commission in this regard (Internal Legal
Counsel 1 and 2, Developer Operators 4, 5 and 7).
10 single-use plastics causing marine litter - EU Strategy on Single Use Plastic -

https://ec.europa.eu/commission/news/single-use-plastics-2018-may-28_en accessed 1 July 2018
1871
R (on the application of ClientEarth) (Appellant) v Secretary of State for the Environment, Food and Rural
Affairs (Respondent) [2015] UKSC 28 – following a preliminary reference to the CJEU Case C-404/13 R (on the
application of ClientEarth) v The Secretary of State for the Environment, Food and Rural Affairs
ECLI:EU:C:2013:805
1872
Names of coal plants redacted to preserve anonymity
1873
Name of country redacted to preserve anonymity
1874
C:2014:2192
1875
1876

The finding in Essent 21877 that restricting network flows is a conflict with the
free movement of goods obligations in the TFEU was seen as a positive position by
the Developer Operators. However, this only reinforced their view that it would be
coal, gas and nuclear that would be used to fill any power gap which was seen as
counter to the overriding objective1878 of carbon emissions reduction (Internal Legal
Counsel 1, Developer Operators 4, 5 and 7).
Respondents also reported the Industrial Emissions Directive 1879 as a
source of regulatory volatility, due to the potential to apply enhanced criteria within
any best available techniques assessment 1880 (Internal Legal Counsel 1 and
Developer Operator 4 and 7). Respondents stating that the concept of best available
techniques is likely to develop and evolve overtime thus enhancing the requirement
to abate emissions. Developer Operator 5 made an insightful point regarding the
use of a single style of renewables support scheme, namely a feed-in tariff based
on generated output, with the scheme’s support price determined using a fixed set
of criteria and how such a practice is an origin for risk as the effect of doing so
focusses the generation portfolio on a single technology by stating
increasingly supporting generating capacity via one
type of support mechanism brings about a mono-
culture in terms of the generating plant that is
developed, which is sub-optimal as it is not robust to a
paradigm shift in fuel price or regulation.
This means that technological innovation is focussed down a single track. Also, with
only one type of generating facility being supported should the regulatory framework
change due to an internal or external policy paradigm shift, utility companies may
well find that a major part of their asset portfolio is economically or operationally
stranded. Developer Operator 7 stating that a mix of technologies spreads regulatory
risk and allows the generation function to better match demand both at peak and
demand shape which after all was its raison d’etre.
In looking at the development of generating technology Developer Operator
4 discussed the concept of ‘regulatory lag’, in that the regulatory framework seems
to lag technology or market practice. Meaning that industry regulation is responsive
1877
1878
1879
1880
A best available technique assessment is an assessment of appropriate emission levels from a generating
asset should that asset be using best available techniques to monitor and remediation emissions – Article 13
Industrial Emissions Directive

to change and not leading change or putting in place, ahead of need, the framework
required – stating that regulators, both at the EU and national level, always seem to
be ‘fighting the previous war’. Developer Operator 4 stated that photovoltaic modules
(solar panels) which have reduced in price considerably, however, national
regulators across the EU seem to be at odds with the industry’s view of the timeline
for the continued reduction in capital costs. Also the EU’s tariff barriers and
protectionist approach to the import of solar panels has not protected a panel
manufacturing industry in the EU as none existed, but has simply increased the
capital cost of these items making solar renewable facilities less likely to be
developed.1881 Developer Operator 4 stating that the EU’s undertaking to end the
anti-dumping measures (tariff barriers) on solar panels from 3 September 2018 was
a measure which took nearly two years for the Commission to complete and as such
simply delayed the development of renewable generation.1882 Developer Operator 4
closed this point by saying that when consideration is given to the pace of
technological change in module1883 design and the regulatory timing mismatch this
is a combination only likely to be a source of regulatory volatility.
Several of the Developer Operator respondents (1, 3 and 6) stated that
regulatory volatility, be that at an EU or member state level, was an issue that would
lead to higher rates of return being required before an investment in a renewable
generating facility would be approved. Thus, reducing in the number of sites where
wind and solar resources would be such that these rates of return will be achieved
and hence having a detrimental effect on the development of renewable generating
facilities.
Theme 2.3 Poorly Drafted Framework & Regulatory Inconsistencies
Regulatory inconsistencies are instances where different elements of the regulatory

framework have either conflicting goals or practices. The inconsistences therefore
undermine the ability of either or both parts of the regulatory framework to achieve
their objectives.
This theme initially considers the effects of a poorly drafted regulatory
framework before looking at the inconsistencies between parts of the framework.
1881
Article 8 of EU Regulation 1225/2009 ‘on protection against dumped imports from countries not members of
the European Community’ OJ L 343/51, allows anti-dumping enquiries to be conducted by the Commission – tariff
barriers put in place for solar panels from China was equal 64.9%.
1882
EU Notice (2018/C 95/06) of the impending expiry of certain anti-dumping measures related to Crystalline
silicon photovoltaic modules and key component OJ C 95/6
1883
When used for commercial facilities photovoltaic cells are grouped into a component called a module -
https://www.jinkosolar.com/product_256.html?lan=en accessed 23 Spetember 2018

Developer Operator 2 stated, as an example of how poor regulatory drafting
can undermine an industry, that Germany had initially progressed its renewables
construction programme with haste. Developer Operator 2 reporting that the initial
prices within the renewable support mechanisms were too high and thus a rush of
potential and actual projects ensued. Germany via its competence to determine the
details of the support scheme then restricted its renewables support programme to
700MW of new capacity per year and the economies of scale were lost and the
output cost of renewables increased. Germany then took measures to suppress the
price increases again within the competence granted to member states within Article
194(1) TFEU. Thus, a poorly conceived and drafted initial national support
framework caused rapid redrafting of the framework, whereupon further problems
occurred resulting in regulatory volatility.
Internal Legal Counsel 1 and External Legal Counsel 3 gave a further
example of how poorly conceived EU instruments lead to perverse investment
signals. They used the EU’s guidelines on state aid which led to a rush for
cogeneration plants within industrial facilities, as intensive energy users sought to
avoid network changes and green levies following the CJEU’s judgements in
Austrian Green Levy 1884 and German Green Levy 1885 (See Sections 3.5.11 and
3.5.12). Within a few years of the judgments the Commission’s state aid guidance
documents allowed a reduced surcharge for self-generation1886 and an exemption
for intensive energy users from green levies1887 (See Section 3.5.12). Therefore,
the Commission has changed the legal understanding of state aid and how it will
apply Article 107 TFEU. The Commission has put in place an element of the
regulatory framework that is once again in diagonal conflict with the EU’s free trade
principles.
Developer Operator 5 gives an interesting counter perspective regarding the
pace of regulatory change within the EU and how, due to the number of countries
and the decision-making process, regulatory change is in reality slow, which creates
a form of regulatory stability not to be overlooked.
1884
1885
1886
2017 SA.38632
1887

Both Internal Legal Counsels and External Legal Counsel 1 stated in
summary that inconsistencies within the regulatory framework bring about regulatory
risk and thus regulatory volatility, as changes can be made at short notice to
patch 1888 over these inconsistencies. The respondents on this point gave the
examples of (i) the number of free allowances made available to industrial and utility
companies under the EU-ETS (See Section 2.10.1) and the need for the reserve
account1889 to reduce the number of allowances available in the EU-ETS (a practice
which, if not undertaken correctly, has been found by the Commission and the CJEU
to be state aid and thus in diagonal conflict with Article 107 TFEU) and (ii) the
removal of embedded benefits from distribution connected renewable generation as
it was both EU and national regulators that had encouraged the spread of the
practice in the first place (See Section 3.5.13).
Theme 3 Regulatory Risk Management & Mitigation
The management of regulatory risk is a process led by the developer operators to

ensure that both forecastable and unforecastable regulatory change are undertaken
in a manner that does not undermine the returns forecast in the investment business
model of a generating asset.
The management process therefore takes the form of monitoring and tracking
regulatory risk as well as mitigating against such risks. The overall theme is divided
into sub-themes such as tracking, forecasting, lobbying and mitigation measures,
each analysed below.
Theme 3.1 Tracking and Articulating Regulatory Risk
It is clear from the research undertaken that the renewable electricity sector confronts
an evolving regulatory landscape.1890 Therefore market participants (e.g. developer
operators, regulators, investors) would generally be considered as having a
requirement to monitor and track this landscape.
As stated in responding to the evolving regulatory landscape the
respondents all described the phenomenon of regulatory change as ‘regulatory risk’
1888
patching, are policies and regulatory instruments enacted in order to correct flaws or allow the regulatory
framework toadapt to changing circumstances - Michael Howlett and Jeremy Rayner, ‘Patching v packaging in
policy formulation: assessing policy portfolio design’ (2013) 1(2) Politics & Governance, 170, 177
1889
The reserve account is a mechanism whereby the Commission places emissions allowances in an account
effectively outside the normal market mechanism – Described in Section 2.10.1
1890
Daniel Tulloch, Ivan Diaz-Rainey and I Premachandra, ‘The impact of regulatory change on EU energy utility
returns: the three liberalization packages’ (2018) 50(9) Applied Economics; See Also David Coen and Chris
Doyle, ‘Liberalisation of Utilities and Evolving European Regulation’ (2003) Economic Outlook

and thus negative. Developer Operator respondents distinguished between risks at
EU and member state level, however, they track and seek to manage these events
as part of a co-ordinated regulatory management task.
The respondents stated that in articulating a risk in a register and in the
assessment of mitigation measures, consideration would be given to the source of
the governance of the risk, be that at the EU or member state level.
Interestingly, no respondents in any category stated they tracked or
considered changes in the regulatory framework as an upside, with several of the
Developer Operators (Developer Operator 1, 2, 4, 6 and 7) simply stating that if
enhanced revenues occurred within a project because of regulatory change this was
not something they needed to worry about or account for in a financial model.
When asked if respondents were concerned that regulators might seek the
refunding of enhanced returns as part of a ‘gain-share’ mechanism to mitigate
against over-compensation, as was done for Electricity de France’s (EDF) Hinkley
Point C nuclear project,1891 all except one of the respondents simply stated they had
not thought about it. Developer Operator 6, however, considered that a gain-
share 1892 mechanism was likely to become an increasing feature of renewables
support schemes given the current expectation amongst national regulators is that
wind-based renewables will have an operational price comparable with coal and gas
fuelled generation (See Section 2.7 and the UK’s Hornsea 3 Project) 1893 and
therefore anything above reasonable returns could be clawed back by the regulator.
Developer Operator 6 went on to state that future renewables support schemes are
likely to have both an operational and rate of return gain-share mechanism to
mitigate against over-compensation by individual national.
In seeking to understand how market participants define and seek to quantify
regulatory risk, respondents were asked what elements of the regulatory framework
they track and what issues they look at as a determinant of risk. Respondents were
also asked about how they go about seeking to bring the many disparate pieces of
information gathered into a clear articulation of the risk they evidently seek to
manage and mitigate.
1891
Nicole Robins and Tridevi Chakma, ‘State Aid in Energy under the Spotlight: The Implications of the Hinkley
Point Decision’ (2016) 2 European State Aid Law Quarterly, 247
1892
A gain-share mechism is where the price within the generation support scheme, which is calculated on the basis
of projected construction and operating costs, including a reasonable profit, will be compared to the weighted
average of wholesale prices for electricity and monies received. Within the Hinkley Point C support scheme there
are two ‘gain-share’ mechanisms, the first of which concerns the costs of production, and the second, the rate of
return on equity. Therefore should actual monies received or costs incurred mean that the operator of the plant
receives returns above those envisaged at the point of investment it is required that monies are returned to the
support scheme management undertaking in the UK. - Case T-356/15 Austria v Commission ECLI:EU:T:2018:439,
para 5
1893

The respondents firstly stated that analysis was undertaken by bringing
together advice from a series of sources, with each looking at a different timescale
(Internal Legal Counsel 1 and 2). The most pressing matters will be considered and
managed by specialist in-house regulation teams, with these teams being composed
of lawyers, economists and engineers (Internal Legal Counsel 1 and 2; Developer
Operators 1, 3, 4, 5, 6 and 7). Additionally, External Legal Counsel respondents also
reported that they would be asked to provide specific pieces of written advice on
topics instructed by their clients (Internal Legal Counsel 1 and 2 as well as External
Legal Counsel 1, 2 and 3). In fact, the situation was summarised by the responses
from the External Legal Counsel when they said, ‘as a law firm, an analysis of current
and potential future regulations is the main reason clients seek our advice’ (External
Legal Counsel 1) and ‘regulatory risk as a down side is at the core of the advice
given.’ (External Legal Counsel 2), and lastly ‘regulatory risk assessment is our
raison d'être’ (External Legal Counsel 3).
In looking to the longer term, factors associated with regulatory risk advice is
taken from academics and economic consultancies (Internal Legal Counsel 1 and 2)
and seem to be sought based on a slightly more speculative ‘think piece’ on potential
future regulations.
In seeking to understand why such effort is put into understanding the future
of regulation by the asset developing and owning side of the industry, the response
from Developer Operator 5 provides a good summary of why and how regulatory
change is tracked by
undertaking regulatory studies to determine potential
futures. This is done so that we can see the effect of
the regulatory change coming early enough to do
something about it.
The responses also indicated that the articulation of regulatory risk was done via the
development of a series of scenarios (Developer Operator 1, 3, 4, 5, 6 and 7;
Investment Fund Manager), with the scenarios taking account of the legal changes
to the regulatory framework at both EU and national level and then translating these
changes into economic outcomes for the assets involved. The Developer Operator
respondents also confirmed that the scenarios were effectively translated into a
series of ‘forward price curves and cash flows’ (Developer Operator 1, 3, 4, 5, 6 and
7; Investment Fund Manager). It was also made clear that the price curves allowed
generating facilities to be ‘economically assessed at any point in the life cycle of the
asset from pre-investment to late life closure’ (Developer Operator 5). Developer
Operator 5 went on to give a note of caution with regards to the development of

forward price curves from the regulatory scenarios, stating, ‘by effectively reducing
everything to a price curve these scenarios get blurred at the edges’. This meaning
that irrespective of the exact details of the regulatory scenario, economic modelling
may develop the same market price level and as such the same or similar plant
portfolio outcomes, in terms of investment and plant closure.
In terms of taking business decisions based on the articulation of regulatory
risk, External Legal Counsel 1 and Developer Operator 6 stated that the subject was
a standing feature of the company’s board agenda (it should be noted that these two
respondents are not from the same company).
This level of risk identification is believed to be part of a strong risk
1894
governance culture within the Operator Developer community, with the
aggregation and articulation of the risks of conducting business in a highly regulated
market seen as key to maintaining returns and asset remuneration levels when those
very things are governed by the regulatory framework.
It is also clear from the fact that regulatory change is always perceived to be
negative, and the language of ‘risk’ being constantly used when questioned about
regulatory change indicates a low risk appetite. The reliance on external legal advice
for specific elements of the articulation of the regulatory risks shows that Developer
Operators see the source of risk to be effectively legal (legislative and case law
driven).
Theme 3.2 Management Frameworks for Regulatory Risk
In addition to the process of regulatory risk identification, outlined in Theme 3.1

above, several respondents stated that they seek to use a structured approach to
the management of regulatory risks.
The responses from Internal Legal Counsel 2 and Developer Operator 7 were
the most detailed and as such their comments are relied upon in what is set out
below.
Internal Legal Counsel 2 stated that ‘regulatory issues’ were logged, and the
issues were then assessed by a risk assessment team to understand if the ‘issue’
was a risk, with potential downside potential for revenues, and the magnitude of the
downside. It was reported that the risks are considered in terms of their potential for
revenue reduction (low, medium or high), with an associated probability of the event
occurring (low, medium or high). Therefore, events that were categorised as ‘high,
1894
Thematic Review on Risk Governance - http://www.fsb.org/wp-content/uploads/r_130212.pdf accessed 21
July 2018

high’ [high impact on revenues and high probability of occurring] were managed as
a business priority.
Developer Operator 7 stated that each risk identified is assigned to a
category, (i) track, (ii) monitor or (iii) engage, with each assigned to a member of
staff. For those marked as ‘engage’, a management and mitigation strategy is
developed which is dependent on the drivers for the regulatory change and the body
within which control rests for such change (competency1895 should the measure be
regarded as being controlled by an EU institution or member state). Developer
Operator 7 also stated that applicable meetings with Government at the levels of
Director and working level were held dependent on who holds the competency. The
initial contact would be to confirm the intent of the policy or regulatory change,
understand the thinking behind the policy and then make suggestions.
The Insurance provider also stated that regulatory issues would be logged
and managed by compliance teams. The Insurance provider stated that this was
done to ensure that insurance policy terms were based on knowledge of the current
and future regulatory framework.
This structured approach is a clear indication of the effort that the Developer
Operator and Investment sectors of the industry expend in the management of
regulatory issues and asset revenues. The respondents made no distinction with
regards to the need to identify the issue, as to whether it was at the EU or national
level. The only distinction came from who internally the issue would be assigned to
manage, and technical details related to the regulatory change, such as whether the
issue related to a C&C or market-based structure and who holds the competency for
the regulatory instrument. Although not looking to maintain revenues flowing from
generation assets, the response from the Insurance provider was also indicative of
the need to be aware of regulatory risks so that insurance policies were not based
on assumptions about the regulatory frameworks that are no longer valid and
therefore create a risk profile within the insurance policy that is not appropriately
funded by the insurance premium.
1895

Theme 3.3 Active Management of Regulatory Risk - Lobbying
One of the clear outputs of the assessment, reporting and articulation of regulatory
risk is the management of that risk. The management is undertaken in several ways
from active lobbying of regulators and legislators (EU and national), to the
responding to industry consultation documents and participation in industry wide
consultative bodies at both the EU and national level.
Internal Legal Counsel 1 and 2 both reported that their respective
organisations have offices in both their national capitals and Brussels with the
specific purpose of ‘holding discussions’ 1896 with regulators and legislators, with
these activities being undertaken at EU and national level dependent on the issue or
risk at hand. A dual office structure was also reported by Developer Operator 1, 4, 5,
6 and 7, with the express purpose of influencing regulators and legislators -
‘lobbying’.
The three External Legal Counsel respondents disclosed having offices in
almost all national capitals across the EU (not surprising given their status as large
international law firms). However, importantly the three External Legal Counsel
respondents all indicated their office size in Brussels was larger than would be
justified by the volume of work generated by transactions purely focussed on the
Belgium market, and that the increased size of the office resulted from work
specifically associated with the EU legislators, the Commission, CJEU and
increasingly ACER.1897 Client instructions were received either directly from the EU,
and its various institutions, or from corporate clients, to either produce specialist
advice on the interpretation of EU law or assist in the drafting of materials submitted
by these clients to EU institutions. As an example of the types of response given in
this area External Legal Counsel 1 stated
we seek to stay close to all our clients and work for all
sides of the industry so that a rounded view can be
taken. In staying at the forefront of the regulatory
debate allows early warning of changes to be
understood by us as a business as early as possible.
The level of client instructions for the External Legal Counsel 1 and 3 via their
Brussels office was reported to be as a direct result of the complexity of the
1896
Both of the Internal Legal Counsel respondents were very careful not to use the word ‘lobbying’ and made it
clear that they regarded the use of such phraseology as holding a negative business connotation and could, with
regards to certain jurisdictions, be regarded as a legally prohibited activity (e.g. the UK’s ‘Transparency of
Lobbying, Non-Party Campaigning and Trade Union Administration Act 2014’).
1897
ACER - Agency for the Cooperation of Energy Regulators -
https://www.acer.europa.eu/en/Pages/default.aspx accessed 16 July 2018

renewables regulatory framework – simply the number of Directives and Regulations
involved. As a result of this, corporate clients sought written advice on how to
interpret the legislation in relation to different business issues. Additionally, as set
out above in Theme 1.1 the External Legal Counsel 1 and 2 were actively engaged
in providing advice on issues related to the conflict between primary EU law and the
renewables regulatory framework.
Both Internal Legal Counsel respondents indicated that they would be
involved in the development and delivery of targeted ‘business discussions’ with EU
and national legislators and regulators.
The Developer Operator respondents were less guarded when it came to
openly discussing lobbying to describe what they thought they were doing. The
Developer Operator respondents generally stated that they lobby EU legislators, the
Commission, national governments and EU and national regulators to ‘highlight the
importance of regulatory change’ (Developer Operator 1). The Developer Operator
respondents also stated that they consider directly the political dimension, looking at
the impact on investment, jobs and public opinion of any change. They also stated
they would prepare any response or policy statement by looking at the core principles
of carbon emission abatement, security of supply, effect on consumers and long-
term jobs. Developer Operator 5 put it simply by stating that any policy statement
cannot be purely a ‘renewables is best or narrow self-interest approach as this can
be easily discounted at all levels from the EU to a local authority’.
The submission of a legal or regulatory position to EU and national legislators
and regulators, related to applicable matters, was also reported to take place using
industry trade associations such as the European Wind Energy Association1898 or
Energy UK1899 (Internal Legal Counsel 1 and 2, Developer Operator 1, 4, 5, 6 and 7).
Certain Developer Operators also stated that they can take a public affairs
angle to an issue if needed using both local and national media to project messages
(Developer Operator 1, 4, 5, 6 and 7) as did Internal Legal Counsel 2.
Irrespective of what it is called (lobbying or business discussions) the
business focus that is given to developing and managing the delivery of applicable
regulatory positions of the Developer Operator community is very high.
The clear use made by the Developer Operator community of External Legal
Counsel to develop a regulatory position and to respond to positions developed by
EU and national legislators and regulators gives an indication of the importance of
the issues involved.
1898
http://www.ewea.org
1899
https://www.energy-uk.org.uk/

The Investment Fund Manager was less focussed on lobbying activities and
simply reported a focus on receiving indemnities against regulatory changes that
would have a negative effect on asset or transaction values from the vendors of the
assets purchased and managed. Similarly, the Insurance respondent reported that
they do little with regards to lobbying on the renewable electricity regulatory
framework.
The Regulator respondent stated on the other side of the industry that they
will hold both bilateral and multilateral discussions with the renewable electricity
industry on the operation and development of the renewable regulatory framework.
As a national regulator, most of this interaction was focussed on the national
regulatory framework. The Regulator respondent reported that they take the views
of industry into account via responses to formal consultation documents and industry
wide consultative forums which operate on most important issues. The use of
responses to formal consultation documents and industry consultative forums was
also seen as a valuable means of engaging with the regulator by the two Internal
Legal Counsel and all seven Developer Operators respondents.
The Regulator respondent stated that as a national regulator they do not
negotiate and do not respond to lobbying. However, the effort put in by the Developer
Operators to what they call lobbying, must mean some exchange is taking place –
see Theme 3.4.
Theme 3.4 Active Management of Regulatory Risk - Negotiation
As a special form of lobbying, several of the Developer Operators reported

themselves as undertaking specific negotiations with EU and national regulators, as
well as the Commission.
Developer Operator 1 reported that in relation to [a recent novel
technology]1900 investment the regulations were heavily negotiated to shape those
very regulations. Developer Operator 5 reported that in seeking to negotiate with the
regulator there was a requirement to ‘pick your battles, such that [company name]1901
strengths can be brought to the fore’. Direct negotiation of regulations with EU or
national regulators is seen by Developer Operators to have the advantage of being
a one on one discussion about revenue and services to be provided. Developer
Operator 7 gave an insight as to how these negotiations / discussions take place by
stating that they occur at both Director and working level. It is also clear that such
discussions occur directly with the Commission in relation to decisions to be made
1900
Exact project type and location redacted to preserve anonymity
1901
Company name redacted to preserve anonymity

related to specific business. Furthermore, Internal Legal Counsel 2 reported direct
negotiation with the Commission in relation to the feed-in tariff for [name of power
facility]1902 In relation to its state aid status.
The Regulator respondent however, reported a very different view of these
discussions and sought to be clear that negotiations were not taking place by stating
discussions were undertaken ‘by the holding of formal and informal consultations
with industry players’. The Regulatory respondent also sought to explain that the
industry forums/workshops are not negotiating panels but are in place to gather
knowledge and build consensus for change. Additionally, stating that:-
there is no real negotiation as this would be the same
as a commercial contract, but the [regulator] 1903 can
take the views of industry players into account on the
operation of regulations.
Lastly, [Respondent]1904 reported the considerable negotiations that took place with
the French government with regards to the renegotiation of the feed-in tariff level of
certain French offshore wind farm projects.1905 The negotiations reported as bringing
together legal, regulatory and economic arguments. In pursuing the discussions,
these were held at both national and local government levels in relation to the amount
of inward investment, the readiness of the developer operator to use the domestic
supply chain and job creation.
Irrespective of the ‘negotiations’ label, it is clear that one on one discussions
with the regulators (both EU and national), the Commission and governments are
taking place. The Developer Operators and Regulatory respondents have made it
clear that between written consultations and industry forums a considerable amount
of information flows and number of discussions are held relating to the future of
regulatory policy. It is also apparent that the Developer Operators see these
discussions and information flows as a tool for managing and mitigating regulatory
risk.
Theme 3.5 Active Management of Regulatory Risk – Forecasting Future

Regulations
The forecasting of future regulations is reported by most respondents to be a key

mitigation tool with regards to regulatory risk.
1902
Name of power plant redacted to preserve anonymity
1903
The exact nature of the regulator redacted to maintain anonymity
1904
Respondent redacted to preserve anonymity
1905
https://www.offshorewind.biz/2018/06/20/france-reduces-feed-in-tariffs-for-6-offshore-wind-projects/

The Internal Legal Counsel both declared that they seek to manage the
development of legal advice as to the future of regulation such that this can be used
in the maturing of long-term regulatory scenarios. Internal Legal Counsel 2 stated
that a certain level of regulatory risk and importantly regulatory volatility needed to
be recognised in any long-term scenario.
Internal Legal Counsel 1 and External Legal Counsel 3 specifically reported
that the ending of the diagonal conflict between free movement and the renewable
regulatory framework was a clear part of their view of the future.
The Developer Operators (Developer Operator 4, 5, 7 and Investment Fund
Manager) reported that the forecasting of the future regulatory framework should
have a duration similar to the design life of the assets in which they invest. With the
design life of a generating plant being 25 to 40 years, it is clear that the Developer
Operators are seeking to articulate their understanding of the regulatory future for a
considerable period.
Therefore, in looking to foster forecasts of regulatory frameworks over that
period, the Developer Operators reported that they look to (i) certain fundamental
principles continuing, such as – carbon reduction in line with the Paris COP 21
climate agreement (Developer Operator 5, 6 and Climate Scientist), (ii) market forces
and market based regulation replacing command and control 1906 regulation, to
ensure economic investment in generating plant (Developer Operator 1, 5, 6 and 7
and Climate Scientist) and (iii) renewables regulatory framework focusing on
emission trading (e.g. EU-ETS) (Internal Legal Counsel 1, 2 Developer Operator 1,
4, 5, 6 and 7).
Theme 3.6 Active Management of Regulatory Risk – Rate of Return
In seeking to understand the perception of long-term price risk, Developer Operator

1 summarised the situation, stating the price of electricity was unforecastable over a
timescale equivalent to the operational life of generation assets.1907 Therefore, in
order to continue to invest in generation assets using a single digit rate of return, a
revenue support mechanism is required. Developer Operator 1 maintained that the
difference between the electricity industry and other capital-intensive industries
1906
Sustainability
1907
The operational life of generating assets can be over 40 years (55yrs assumed for financial planning
purposes) - [Sabrina Schulz and Julian Schwartzkopff, ‘G7 Coal Phase Out Germany’ [(2015] available
https://www.e3g.org/docs/Germany_G7_coal_analysis_September_2015.pdf accessed 2 October 2018] when the
forward price curve on traded markets is broadly 3 to 5 years.
https://www.energymarketprice.com/sitepage.asp?act=ps&pid=93&prid=12

where prices are also not known over the long-term, is that in these industries the
rate of return is much higher. [Note: oil Company investments are reported to obtain
circa 80% return on investment although the risk structure in much higher;1908 with
mining ranging from 12% to 14%]1909
In response to the perceived regulatory risks, most respondents declared that
a higher rate of return should be applied in asset financial models at the time of the
investment decision (both Internal Legal Counsel, all 3 External Legal Counsel,
Developer Operator 1, 3, 4, 5, 6 and 7, Investment Fund Manager). The specific
regulatory risks reported in this context were (i) diagonal conflict between the
renewable regulatory framework and free movement (both Internal Legal Counsel,
External Legal Counsel 2 and 3, Developer Operator 1, 4, 5, 6 and 7, Investment
Fund Manager); (ii) the ending of the feed-in tariff system in the context of a state aid
funding – another diagonal conflict (Internal Legal Counsel 2, External Legal Counsel
3, Developer Operator 5, 6 and 7), (iii) the ending of priority dispatch1910 (both Internal
Legal Counsel, all 3 External Legal Counsel, all 7 Developer Operators, Investment
Fund Manager) and (iv) ending of embedded benefits ((both Internal Legal Counsel,
all 3 External Legal Counsel, Developer Operators 1, 4, 5, 6 and 7).
Additionally, the respondents reported that the feed-in tariffs granted to
currently operating facilities were at a price above the current and forecast future
spot price for the wholesale market (with a few using a phrase of regulatory
contango 1911 - Developer Operator 4, 5, 6, 7). This was reported by several
respondents to create a risk that retrospective price reductions could occur to the
feed-in tariff because of regulatory determination, this having occurred in Spain1912
and Italy1913 and as such could become more widespread. As such a higher initial
rate of return would be necessary for renewable generation (both Internal Legal
Counsel, Operator Developer 1, 3, 4, 5, 6, 7 and Investment Fund Manager).
1908
Sam Carmalt The Economics of Oil: A primer including, geology, economics, energy, politics (Springer, 2017)
1909
Aneta Michalak, ‘Expected Return on Capital in Mining Industry’ in Ali Al-Juboury (ed) Contributions to
Mineralization (InTeach, 2018)
1910
1911
A market is said to be in Contango if the price of a feed-in tariff is above the expected future wholesale market
price
1912
2017
1913

The Regulator respondent, however, maintained that higher rates of return
across renewable assets generally is not something the [Regulator] 1914 would
‘support’ as it has the tendency to increase returns across all operational assets as
price matching tends to occur as part of a process, whereby all assets in the sector
simply increase the prices bid into the wholesale market. The Regulatory respondent,
however, stated that in order to increase certainty of returns and thus maintain lower
rates of return on transmission assets, a shorter depreciation period 1915 [asset’s
economic life] had been allowed and as such by extension a similar situation could
be applied in the renewable energy sector. By effectively allowing assets owners to
depreciate their assets over a shorter period, the level of price and regulatory
certainty increases, as the economic model has a reduced forecast period.
Theme 4 – Future of Regulation
Across the respondents, comments were made relating to the future direction of the
renewables regulatory framework. These comments covered the following areas,
with each analysed in turn (i) focussing the regulatory framework on a market based
carbon trading system which also focusses the oversight on the competency of the
Commission (also discussed as Recommendation 1), (ii) increasing investment in
the transmission system to change the network topology facilitating greater
interconnection between member states, and (iii) development in how the industry is
regulated and who has the competence1916 of regulatory oversight via the institutions
of the EU and member states.
1914
Name of regulator redacted to preserve anonymity
1915
Depreciation is an accounting method of allocating the cost of a tangible asset over its useful life and is used
to account for declines in value over time. Businesses depreciate long-term assets for both tax and accounting
purposes. For tax purposes, businesses can deduct the cost of the tangible assets they purchase as business
expenses; however, businesses must depreciate these assets in accordance with tax law relating to how and
when the deduction deductions may be taken -
https://www.investopedia.com/terms/d/depreciation.asp#ixzz5MvOCjj5N
1916

Theme 4.1 – Focus Renewable Energy Regulatory Framework & Carbon
Emission Pricing
Resulting from the need to increase renewable capacity to comply with the COP 21
Paris climate change agreement, several respondents proposed changing the focus
of the regulatory framework from command and control 1917 based regulatory
structures to market based structures. The suggestion being that this would increase
the cost efficiency of emission abatement solutions (Internal Legal Counsel 2,
External Legal Counsel, Developer Operator 1, 5, 6 and 7, Climate Scientist). This
proposal being made, as it is known that market operators will comply with C&C
regulation irrespective of costs, whereas market-based regulation allows those best
placed to make the largest changes for the least cost to do so and still derive
applicable returns on any investment. Therefore, acknowledging that a cost-efficient
renewable electricity facility in an EU country that can transport electricity across
borders reduces carbon emissions in a more cost-efficient manner, than a facility
built irrespective of cost to comply with a target. Hence, removing the free movement
diagonal conflict within the renewable energy regulatory framework allows a higher
level of carbon abatement for the same level of capital expenditure.
The suggestion is to strengthen the EU-ETS and the initiation of market
mechanisms for the gases currently regulated via the Effort Sharing Decision. 1918
This means that the EU-ETS is not simply carbon focussed, but is able to allow price
discovery for a basket of gaseous emissions that more accurately reflect the
emissions from thermal generation (Developer Operator 1, 5, 6 and 7, Climate
Scientist). In making this change the regulatory framework is not focussed on a
particular generation type but on a desired effect – carbon emission abatement. This
means that the most effective generation type to reduce carbon emissions can be
developed, based on the application of a market-based solution (Developer Operator
1, 4, 5, 6 and 7). Such a solution could potentially remove the need for feed-in tariff
revenue support for renewable assets, as coal and gas fuelled generation fail to
internalise the cost of carbon emission. Hence the regulatory framework’s conflict
with anti-state aid provisions (Article 107 TFEU) would be removed.
Using the EU-ETS as the primary focus of the regulatory framework is
believed to harmonise and simplify the framework with immediate effect (Developer
Operator 6 and 7). Additionally, a price for carbon emission allowances which is
1917
Sustainability
1918

reflective of the true cost of emissions abatement automatically gives a signal to low
carbon generation and differentially makes electricity derived from high carbon fuels
(e.g. coal) more expensive and thus less likely to be dispatched (Developer Operator
7).
The EU-ETS is an environmental measure and falls within the competence
of the Commission. As the pricing and details of the EU-ETS are harmonised across
the EU, the diagonal conflict with free movement is removed. Should also the
member state focussed allocation of emissions allowances be removed, and all
allowances be auctioned, the diagonal conflict with the provisions of state aid (Article
107 TFEU) would also be removed.
Although the Developer Operator respondents make the claim for market-
based solutions to be brought to the fore, the Climate Change Scientist in following
the theme put forward a three-point plan (i) as a priority, pursue energy efficiency
measures as they reduce demand for energy, (ii) focussing on the carbon markets
and enforcing a price no less than 20 $ per tonne, and (iii) keep the pressure on the
political class.
The Regulatory respondent was asked about the increased use of market-
based mechanisms and in response stated that the regulator always ‘seeks to
introduce competition where possible.’ The Regulatory respondent, however, would
not be drawn further on this theme.
The responses show that a sound body of opinion amongst the respondents
seek a greater emphasis on market based on solution and that these solutions
should be implemented at an EU level. The respondents seek a greater use of
market-based solutions as they provide efficiency in the costing of any investment
made.
What was not brought out by the respondents is that the C&C based
instruments, where developers are given a guaranteed income via a feed in tariff,
allows smaller developers to enter the market as they are able to access the debt
market on the back of the feed in tariff. This means that the number of renewable
schemes will increase as these smaller developers can implement niche projects
which larger utilities would find uneconomic. Also, these smaller projects developed
outside the corporate structure of the large utility foster a greater ability for
community engagement which may well have benefits in terms of energy use
reduction beyond the pure diffusion of technology.

Therefore, whilst traded market solutions will bring costs efficiencies to bear
they tend to concentrate the ability to develop facilities into the hands of large utility
companies who can finance their activities at a corporate level.1919
Such a solution is therefore an issue for social policy, where a choice should
be made between a regulatory structure which drives for the lowest cost solution to
carbon abatement, knowing this will concentrate development in the hands of a few
companies, or a regulatory structure which desires a level of community
involvement.1920
Theme 4.2 – Change Topology of Transmission Network
As an industry, the respondents recognised that the structure and location of the
transmission networks was built for the coal and nuclear generation of the last
century. Therefore, respondents stated that the industry will need to change the
topology of the transmission network in order to allow the free flow of renewable
electricity which is located very differently from coal and nuclear (Developer
Operator 4 and 6) and thus make the removal of the diagonal conflict with free
movement a reality.
Funding of the construction programme and the need to build acceptance of
power lines within the general public are issues of importance for the industry
(however, the detail of such is outside the scope of this research). It was
acknowledged that network assets are a focus of the latest amendments to the state
aid block exemption regulations (GBER) set out in Annex 4 (Internal Legal Counsel
2, Developer Operator 6) and therefore respondents stated that the design of the
funding arrangements is critical to ensure that they do not conflict with the anti-state
aid provisions in Article 107 TFEU.
In terms of financing the development of transmission assets, some
respondents proposed the socialisation1921 of grid construction costs (Internal Legal
Counsel 1, Developer Operator 1, 2, 5 and 7). Although the call for socialisation of
these costs was stated clearly by some, this request is not universally accepted
1919
Colin Nolden, ‘Governing community energy—Feed-in tariffs and the development of community wind energy
schemes in the United Kingdom and Germany’ (2013) 63 Energy Policy, 543; See Also David Toke and Aikaterini
Fragaki, ‘Do liberalised electricity markets help or hinder CHP and district heating? The case of the UK’ (2008)
36(4) Energy Policy, 1448
1920
Tim O’Riordan, ‘Cultures of Community Energy: A Policy Report’ [2016] The British Academy
1921
The term ‘socialisation’ within the electricity industry describes a process whereby costs of the function or
activity is spread across all consumers and as such is seen an activity of general economic interest - Michael
Rivier, Ignacio Pérez-Arriaga and Luis Almos ‘Electricity Transmission’ in Ignacio Pérez-Arriaga (ed) Regulation of
the Power Sector (Springer, 2014), 294

across the industry, with others calling for increased cost reflectivity1922 (Developer
Operator 3 and 4).
The Regulatory respondent acknowledged the need to change the topology
of the transmission network and that such changes may bring about the need to
recast the way transmission systems are regulated. The example of such a change
being the split of UK’s National Grid Electricity Transmission’s (NGET) transmission
licence such the system operation1923 obligations will be undertaken by a new entity
National Grid Electricity System Operator (NGESO) and the asset management1924
obligations remaining with NGET.1925
The Regulatory respondent went on to speak specifically about network
tariffs by stating,
electricity network charging is an area of ongoing
reform. Current work is examining how residual
charges on the electricity network can be reformed.
Network connection and access are also being
reviewed in the light of potential system developments
such as greater uptake of electric vehicles and heat
pumps. The other issue is the development of grid level
battery storage,1926 as this will need a fully developed
set of regulations.
It is believed that regulators will need to rely heavily on industry experts to develop
these regulations because of the novel assets being deployed and the fast pace of
technology development.
The Regulatory respondent acknowledged that transmission networks will
have to evolve most noticeably because of the introduction of a 15% target for
interconnection levels1927 between EU countries. The increase in interconnection
capacity should have a direct correlation on the ability of transmission operators to
increase cross-border flows and as such allow the development of renewable
facilities in the most efficient locations in terms of wind and solar resources. The
1922
Sean Gammons, Richard Druce and Peter Davies, ‘Assessing the Cost Reflectivity of Alternative TNUoS
Methodologies’ [2014] NERA Report available at
http://www.nera.com/content/dam/nera/publications/2014/CostReflectivityReport.pdf
1923
These obligations include - managing system dispatch of generation assets, system balancing, network
switching and operations and facilitating competitive markets - https://www.nationalgrid.com/uk/about-grid/our-
role-industry/future-electricity-system-operator accessed 26 August 2018
1924
These obligations include – maintenance, repair and construction of new assets - Ibid
1925
PM0102: National Grid Legal Separation - consequential changes to STCPs to reference NGESO – April 2018
available at https://www.nationalgrid.com/sites/default/files/documents/PM0102-
%20STCP%20Mod%20Prop%20NGESO%20170418_0.pdf accessed 26 August 2018
1926
An example being EDF Energy’s 49 megawatt battery at West Burton, Nottinghamshire. This is part of a €8bn
storage investment programme by EDF across the EU – 27 March 2018 https://uk.reuters.com/article/uk-edf-
renewables-storage/edf-to-invest-8-billion-euros-in-power-storage-business-idUKKBN1H31CE accessed 10 July
2018
1927
Interconnection Levels of 15% by 2030 are set out in the EU’s ‘Communication on strengthening Europe's
energy networks’ – See Section 2.9.2 – available at
https://ec.europa.eu/energy/sites/ener/files/documents/communication_on_infrastructure_17.pdf accessed 10 July
2018

Regulatory respondent suggested that regulatory competence over transmission
network developments (Article 171(1) TFEU) is focussed on member states rather
than it being a shared competence as currently shaped. _
Lastly, the Regulatory respondent confirmed the evolution of price and tariff
structure regulation such that transmission companies are incentivised to invest in
assets. This evolutionary regulatory approach is consistent with the need to develop
15% interconnection capacity between member states by 2030 (Section 2.10.1). The
Regulatory respondent therefore proposed to change from the traditional approach
of return on capital employed to an innovation, incentives and outputs approach.
This approach to funding being based on total expenditure (capital and revenue),
placing a greater emphasis on incentives which drive network innovation needed to
deliver a sustainable energy network.
The respondents made it clear that with the potential for electric vehicles and
electrification of heat (most premises are heated by gas – which is a carbon
emissions source in every home, factory and office in the EU) the level of electricity
demand is set to increase rapidly (Internal Legal Counsel 1, 2 Developer Operator
1,2,4,5,7). This overall demand growth will create the need to further expand the use
of renewable electricity generation. Thus, whilst the focus of the last several years
has been on the development of renewable generation technology the focus of the
coming years in likely to be on network developments.1928
Theme 4.3 – Future of Regulatory Oversight
In considering the comments made by the respondents in this section an

understanding of the competence of the EU’s institutions should be obtained via a
review of Section 2.4.
Certain respondents raised concerns as to the development of regulatory
oversight and which bodies would provide it going forward (Internal Legal Counsel
2, External Legal Counsel 3, and Developer Operator 7).
A concern was raised as to the role of ACER in that it seems to be developing
an increasingly political role and as such its decisions and recommendation could
be subject to judicial challenge (Developer Operator 7 and External Legal Counsel
3). This development seems to be transferring certain of the EU’s competence to
ACER. Therefore, with an increased pan-EU regulatory focus, ACER is said to bring
1928
Matthias Huber, Desislava Dimkova and Thomas Hamacher, ‘Integration of wind and solar power in Europe:
Assessment of flexibility requirements’ (2014) 69 Energy, 236; Paul Denholm and Maureen Hand, ‘Grid flexibility
and storage required to achieve very high penetration of variable renewable electricity ‘ (2011) 39(3) Energy
Policy, 1817

with it a perception of regulatory volatility, as there is little regulatory history with
which to forecast decisions or how its decisions will be interpreted by the CJEU. It
was felt that the regulation of the electricity market, at the EU level, will become the
role of ACER and thus the rules may become more harmonised, this assisting with
increasing cross-border trades. This is felt to reduce any diagonal conflict issues
with free movement and state aid issues, as the most economically efficient
renewable facilities will be developed (Developer Operator 4, 5, 7 Internal Legal
Counsel 2).
It was reported, however, that the Commission will hold onto the regulatory
oversight of rules around the EU-ETS and therefore its competence (Developer
Operator 4, 7).
With two different regulatory bodies regulating important, but different parts
of the renewables regulatory framework, the potential for conflict and inconsistent
rules and proposals is increased (Internal Legal Counsel 2 and External Legal
Counsel 3) and therefore causing a horizontal conflict to develop between different
parts of the regulatory framework. Several respondents stating that there is no point
replacing a diagonal conflict surrounding free movement and state aid with a
horizontal conflict within the regulatory framework – thus the limits of the
competence of each organisation needs to be defined well and each given a duty to
co-ordinate and co-operate (Internal Legal Counsel 1, External Legal Counsel 3,
Developer Operator 4, 5, 6, 7).
A potential future for carbon emitting generating plant and the companies
that own and operate them could be that of class action litigation. Some respondents
(Internal Legal Counsel 1, External Legal Counsel 3, Developer Operators 4, 6, 7)
highlighted that carbon emitting coal generators in Europe and the USA were seen
as legitimate targets for litigation by certain individuals and countries whose
existence is threatened by rising sea levels. 1929 The respondents acknowledged that
this kind of litigation could be dismissed as fanciful. However, then went on to list
the litigation surrounding the tobacco industry and the class action litigation for the
effects of cancer decades after health warnings were compulsory on packets of
cigarettes (Internal Legal Counsel 1, External Legal Counsel 3, Developer Operators
4, 6, 7).1930
1929
Case C/09/456689 - Urgenda Foundation v Government of the Netherlands (June 2015), Available at
https://uitspraken.rechtspraak.nl/inziendocument?id=ECLI:NL:RBDHA:2015:7196&keyword=urgenda (accessed 3
February 2017) – the Dutch Court took as a persuasive authority the Intergovernmental Panel on Climate Change
(IPCC) reports on climate change due the multi-national consensus on the subject
1930
In 1998 the largest US tobacco companies and 46 US states signed the Tobacco Master Settlement
Agreement, whereby manufacturers agreed to pay an estimated $206 billion over the first 25 years of the

The respondents were concerned that companies and their CEOs could
become the focus of litigation despite compliance with the EU’s regulatory
framework and international commitments via the UNFCCC1931 and the COP 21
Paris Climate Change Agreement.1932
The case of Prunéřov II power plant was given as an example by Internal
Legal Counsel 1, whereby Micronesia asserted the facility did not meet best
available technology (BAT) as required by the Industrial Emissions Directive.1933 The
case was not pursued; however, it shows that cross border environmental impact
may become a focus of litigation in the future.
4.6 Conclusions & Key Lessons
In relation to the core research questions of the conflict between renewable

regulation and the EU’s free trade principles the empirical research shows that the
Internal and External Legal Counsel were actively engaged in litigating cases related
to free movement showing the conflict outlined in the doctrinal phase of the research
has practical importance (Theme 1.2). Developer Operator respondents largely saw
the issue as one of regulatory risk and cost to serve.
Additionally, Theme 2.3 illustrated the concern market operators have with
the potential for the regulatory framework to conflict with the EU’s state aid
provisions. Respondents drawing specifically on cases set out in the doctrinal
analysis (Austrian Green Levy 1934 and German Green Levy) 1935 to illustrate how
poorly designed support schemes could lead to state aid issues.
In seeking to manage the returns from generating assets and track regulatory
change or regulatory risk, the responses from the Developer Operators can be seen
to reflect the composition of the sector, with different plant portfolios and different
business drivers owned by organisations with financial return expectations.
agreement: See State of California Department of Justice Office of the Attorney General,
https://oag.ca.gov/tobacco/msa (accessed 5 September 2016)
1931
1932
1933
Federated States of Micronesia v Czech Republic ; See Also Andrew Burke, ‘Federated States of Micronesia v
Czech Republic: greenhouse emissions as transboundary pollution’ (2011) 14(1-2). Asia Pacific Journal of
Environmental Law, 203 ; Paulo A Lopes, ‘FSM vs. Czech’: A New “Standing” for Climate Change?’ (2010) 10(2)
Sustainable Development Law & Policy 24
1934
1935

The regulatory issues are an engagement and management exercise with
the legislator and regulator seen to be playing the role of contract counterparty,
despite the Regulatory respondent stating there was no negotiation (Themes 3.2 &
3.3).
The Developer Operators were extremely concerned at the potential loss of
priority dispatch1936 and embedded benefits (Theme 1.2 & 1.3), which the doctrinal
phase illustrated to be contained in both the Electricity Markets Directive and the
Renewable Energy Directive (Sections 2.10.6 & 2.10.7) and thus key to the
development of renewable electricity capacity.
The Developer Operator, Internal and External Legal Counsel and Insurance
respondents all confirmed by one means or another that they track, quantify and
seek to mitigate regulatory risk (Theme 3.1 & 3.2).
Most respondents confirmed that they see higher levels of regulatory risk
being present in the industry going forward, compared to historically or currently,
and this is an issue which will require an increased rate of return from a project
before an investment can be made. This in effect makes new projects more
‘expensive’ and has the potential to reduce the number of sites where renewable
facilities can be developed, as only the most profitable will ever be commissioned.
The Regulatory respondent stated that as a function they seek to maintain rates of
return across assets on the network, as when higher costs assets start operating,
the majority of plant simply increase their output price knowing that the market is
likely to pay, a simple supply and demand issue.
The issue which the Developer Operators and the Investment Fund Manager
respondent feared most was a retrospective reduction in the level of renewables
support (Theme 1.1), as this could make their assets economically stranded, thus
illustrating the practical importance of cases Charanne1937(Spain) and Scat Punti
Vendita1938(Italy) (Section 3.5.8).
1936
renewable electricity generating installations, thus placing such installations outside the normal dispatch rules’ -
1937
2017
1938

Lastly, in looking to the future of regulations, respondents were generally in
favour of market-based solutions rather than command and control 1939 based
regulatory targets managing carbon abatement. They also saw the potential for a
conflict or inconsistency to appear between the regulatory determinations of the
Commission (with oversight of the EU-ETS) and ACER (with oversight of the inter
member state trades in electricity) as another source of regulatory volatility.
1939
Sustainability

Chapter 5 – Conclusions & Recommendations
5.1 Introduction
This chapter sets out the conclusions and recommendations arising out of the
research. This is done in the context of the two phases of the study, (i) doctrinal and
(ii) empirical. The recommendations made in this thesis are made based on the
views of the industry respondents and the practical findings these views represent.
The recommendations are thus made within the context of the analysis of the
conflicts analysed.
Following introductory sections relating to a thesis overview and key
contributions the chapter is divided into two parts. The first part details the
conclusions of the study and the second part is composed of recommendation for
regulatory change and refocus. There are also sections outlining limitations of the
research and recommendations related to further research to strengthen the
understanding of market participants and consumers.
5.2 Overview of Research Findings
This research focused on the diagonal conflicts between the renewable electricity
regulatory framework and wider EU free trade principles (e.g. free movement and
state aid). A conflict can be regarded as a diagonal conflict when different elements
of the regulatory framework are variously in conflict not with the Treaty Article from
which it is derived (which would be vertical conflict), but other Treaty Articles.
Chapter 2 initially considered the nature of legal conflicts and how they occur
and are resolved. The Chapter also set out how the increased specialism of
international law1940 has caused fragmentation and conflicts between differing legal
instruments. 1941 Chapter 2, in setting out the details of the various Treaty Articles
and Directives forming the renewable electricity regulatory framework showed the
framework to be complex, with several interlocking regulatory instruments. The
Chapter also showed that having nationally focused command and control style
Directives increased the areas of conflict with wider EU free trade principles. The
analysis showed that taken as a whole the Treaty Articles did resolve elements of
1940
1941
H.E. Judge Gilbert Guillaume, President of the International Court of Justice, Speech to the General
Assembly of the United Nations (30 Oct. 2001), http://www.icj-cij.org/files/press-releases/5/2995.pdf accessed 10
March 2019; See Also Mario Prost and Paul Clark, ‘Unity, Diversity and the Fragmentation of International Law:
How Much Does the Multiplication of International Organizations Really Matter?’ (2006) 5(2) Chinese Journal of

the electricity ‘trilemma’ (reliability, sustainability and affordability),1942 with reliability
addressed by both the network provisions (Article 170 TFEU – making the network
more robust to technical issues) and the environmental and energy articles (Article
192 to 194 TEFU – increasing sustainability of the installed generation capacity and
reducing energy demand). A similar finding can be derived from the analysis of the
Directives forming the regulatory framework.
The case law analysis contained in Chapter 3 showed that member state
implementation of the Directives set out in Chapter 2, variously conflicted with free
movement, state aid and the polluter pays principle. The analysis also revealed that
elements of the regulatory framework were in internal conflict (e.g. the Energy
Efficiency Directive and Emissions Trading Directive).
The empirical research (Chapter 4) presented the views of market operators
(using thematic analysis) and illustrated the commercial importance of the diagonal
conflicts set out during the doctrinal phase. The empirical research showed that
Developer Operators were willing to both lobby regulators and ultimately litigate to
manage the interpretation and development of the regulatory framework. The
empirical phase also illustrated the desire for a simplified regulatory structure
amongst market operators.
The conclusions and recommendations below outline the potential direction
of the regulatory structure and indicate the direction of future research.
5.3 Key Contribution
The five ways this research contributes to existing knowledge are outlined below.
Firstly, the research uses case law analysis to consider the interaction of EU
renewable electricity law1943 and free movement (Article 34 TFEU) 1944 and state aid
(Articles 107 TFEU). 1945 There is considerable academic literature surrounding both
vertical and horizontal conflict, 1946 however, there is little discussion of diagonal
1942
1943
1944
1945
Kamiel Mortelmans, 'Towards Convergence in the Application of the Rules on Free Movement and on
Competition?' (2001) 38,3 Common Market Law Review, 613, 613.
1946
European Public Policy, 1367;

conflicts in the context of renewable electricity and market operators perception of
regulatory risk. 1947 This is therefore a gap in academic literature which this research
seeks to fill.
In so doing this research builds on academic literature1948 and demonstrates
the consistent use of lex specialis by the CJEU in resolving the diagonal conflicts
between renewable electricity law and EU commercial legal principles. The research
looks at the diagonal conflicts highlighted by Ålands Vindkraft1949 litigation (as well
as other cases - Section 3.5) and the rich academic commentary, 1950 to better
understand the diagonal conflict between the renewable electricity regulatory
framework and free movement. 1951
Secondly, the research points out that the CJEU’s use of lex specialis in
favour of the renewable electricity law 1952 denies consistent application of other
provisions of the Treaty, such as the network provisions contained in Articles 170 to
172 TFEU. The research thus suggests other means of supporting renewable
electricity capacity that would temper the continued use of lex specialis. 1953
Thirdly the research builds on the considerable general academic literature
surrounding legal conflict resolution,1954 by looking at an analysis framework which
1947
Rike Krämer, ‘The Notion of Diagonal Conflicts as a Key Concept of European Conflicts Law’ in Christian
Joerges (ed) After Globalisation, New Patterns of Conflict and their Sociological and Legal Reconstructions (ARENA
Report No 4/11, 2011), 145, 158
1948
Angus Johnson and Guy Block, EU Energy Law (Oxford University Press, 2012); Michael Faure and Marjan
Peeters (eds) Climate Change Liability (Elgar, 2011); Martha Roggenkamp, Catherine Redgwell, Anita Ronne,
and Inigo del Guayo (eds) Energy Law in Europe (Oxford University Press, 2016); Peter Cameron and Raphael
Heffron (eds) Legal Aspects of EU Energy Regulation (Oxford University Press, 2016)
1949
1950
Marek Szydło, 'How to reconcile national support for renewable energy with internal market obligations? The
task for the EU legislature after Ålands Vindkraft and Essent' (2015) 52(2) Common Market Law Review, 489;
Anouk van Der Wansem, 'Judgment of the European Court of Justice, 1 July 2014: Case C-573/12, Ålands Vindkraft
AB v. Energimyndigheten' (2015) 42(4) Legal Issues of Economic Integration, 401; Armin Steinbach and Robert
Brückmann, ‘Renewable Energy and the Free Movement of Goods’ (2015) 27(1) Journal of Environmental Law, 1;
Eirini Tsifopoulou, ‘Renewable-Energy Support Schemes in the Case Law of the Court of Justice of the EU:
Tensions Between Trade and Climate Objectives’ (2016) 6(3-4) Climate Law, 264; Dorte Fouquet and Angela
Guarrata, ‘Judgment of 1 st July 2014 in Alands Vindkraft AB v Energimyndigheten Comments on Case C-573/12’
(2014) 1 Renewable Energy Law and Policy Review, 52; Étienne Durand and Malcolm Keay,’ National support for
renewable electricity and the single market in Europe: the Ålands Vindkraft case’ [2014] Oxford Institute for Energy
Studies; Geert van Calster, Climate change and renewable energy as a super trump for EU trade law’ (2014) 1
Renewable Energy Law and Policy Review; Dorte Fouquet and J Nysten, ‘Guarantees of Origin and Green
Electricity Certificates in Flanders and in Sweden national design weaknesses or violation of European rules?
(2013) 3(3) ,European Energy Journal, 72; Alex McLean,’ The ECJ / Ålands case – Implications for National
Renewables Support Systems’ [2014] Energy & Resources; A Sánchez Graells, ’CJEU protects discriminatory
green energy schemes and keeps inconsistency in EU free movement of goods law (C-573/12)’ (2014)
http://howtocrackanut.blogspot.no/2014/07/cjeu-protects-discriminatory-green.html (accessed 10 May 2016); C
Ryckman, “EU Court Allows Discriminatory Green Energy Support Schemes”, National Law Review (2014),
2016); C Banet, ’The EU Court Of Justice rules in favour of Sweden in the Åland Vindkraft Case’ July 2014,
1951
Rike Krämer, ‘The Notion of Diagonal Conflicts as a Key Concept of European Conflicts Law’ in Christian
Joerges (ed) After Globalisation, New Patterns of Conflict and their Sociological and Legal Reconstructions (ARENA
Report No 4/11, 2011), 145, 158
1952
1953
Aviel Verbruggen and Volkmar Lauber, ‘Basic Concepts for Designing Renewable Electricity Support Aiming
at a Full-scale Transition by 2050’ (2009) 37 Energy Policy 5732, 5734
1954

divides the Directives forming the renewables regulatory framework according to the
body with holds the competence 1955 for that area of EU law (e.g. Commission,
member state or a shared competence) and if the Directive is based on a command
and control (C&C)1956 or market-based structure. This original analysis framework
has allowed consideration to be given to which type of Directive C&C or market
based combined with the competence holding structure induces a higher number of
conflicts.
The research further showed that the Luxembourg Court had allowed
inconsistency to develop between its findings to the detriment of regulatory stability.
The Court had previously confirmed the principle non-retroactivity of legal acts
(Moravia Gas Storage1957 and VEMW1958); however, retrospective reductions were
allowed in national renewable support schemes1959 in Spain and Italy (Charanne1960
and Scat Punti1961). these cases highlight issues surrounding the interaction of EU
law, its primacy, 1962 (i) the right to regulate and non-EU Treaty commitments of
member states – in this case the Energy Charter Treaty,1963 (ii) consumer protection
1955
1956
Sustainability
1957
Case C-596/13 Commission v Moravia Gas Storage AS. (previously Globula AS.) ECLI:EU:C:2015:203,
para. 36; Ibid, para 46
1958
Case C-17/03 Vereniging voor Energie, Milieu en Water and Others (VEMW) v Directeur van de Dienst
uitvoering en toezicht energie,ECLI:EU:C:2005:362
1959
1960
1961
1962
1963

(RWE Vertrieb 1964 and Schulz-Egbringhoff 1965 - the ability of utility companies to
change supply conditions unilaterally were restricted), (iii) concessions for the
operation of network infrastructure (ASM Brescia) 1966 and (iv) the support for
renewable energy sources (Plantanol1967 – the Court restricting changes to support
for bio-diesel).
Fourthly, the empirical research contributes by setting out the importance to
market participants of the conflicts described. The empirical research was
undertaken to obtain the views of market participants on the justification and
robustness (long-term legal sustainability) of the granting to renewable electricity a
‘special status’1968 by way of a derogation from the application of free movement (as
an overriding objective); 1969 as well as providing a derogation from undistorted
competition and other anti-state aid provisions contained in Article 107(1) TFEU.1970
The empirical research also considered the derogations put in place from the
‘polluter pays’ principle.
The empirical research found, in contrast to the statements made by the
developer operator trade body (Section 3.5.2) that such market participants consider
the lex specialis approach to diagonal conflict resolution between EU free trade
principles and the renewable regulatory framework as a regulatory risk which
increases the rates of return necessary for projects to achieve ‘financial close’1971
(See Section 4.6, Theme 3.6).1972 The empirical research confirming that regulatory
stability is needed to ensure the necessary investments are made in renewable
electricity facilities.1973 A further contribution made by the empirical research is that
1964
1965
1966
1967
1968
1969
1970
1971
Financial close is a point in time when a project has reach a position where its forecast returns are such that
the equity providers are satisified with their returns and the financing agreements have been signed and any pre-
conditions contained in these agreements are satisfied. It enables funds (equity, loans, grants etc) to be made
available to the project.- See Scott Hoffman The Law and Business of International Project Finance: A Resource
for Governments, Sponsors, Lawyers, and Project Participants (Cambridge University Press, 2008); See Also Sue
Wright The Handbook of International Loan Documentation (Palgrave MacMillan, 2014)
1972
Ingmar Ritzenhofen and Stefan Spinler, ‘Optimal design of feed-in-tariffs to stimulate renewable energy
investments under regulatory uncertainty — A real options analysis’ (2016) 53 Energy Economics 76
1973
Joel Smith and Johannes Urpelainen, ‘Removing fuel subsidies: How can international organizations support
national policy reforms?’ (2017) 17(3) International Environmental Agreements: Politics, Law and Economics, 327;
Margaret Young, ‘Energy Transitions and Trade Law: Lessons from the Reform of Fisheries Subsidies’ (2017)
International Environmental Agreements: Politics, Law and Economics; University of Melbourne Legal Studies
Research Paper No. 746. Available at https://ssrn.com/abstract=2930693; Ambrus Bárány and Dalia Grigonytė,
‘Measuring Fossil Fuel Subsidies’, European Commission, available at

developer operators desire for a simpler and more focused regulatory framework,
with increased harmonisation at EU level (less discretion given to member states to
determine the details of the renewable energy regulatory framework).
The empirical research also found Developer Operator’s negative perception
on the value1974 of their investments in renewable generating facilities because of
intervention by national and EU regulatory functions in what is perceived to be a
liberalised electricity market. It being found that the Developer Operators have been
prepared to litigate in relation to the imposition of price caps (Federutility1975 and
1976
Enel) on the grounds of protection under, international investment law
(Commission v Slovakia)1977 and the right to property (Essent).1978
Lastly the recommendations for the reshaping of the regulatory framework
set out in Chapter 5 outline a requirement to increase transmission network
interconnectedness, simplifying and focusing the regulatory framework on
emissions trading and energy efficiency is not known to be suggested in academic
literature to date.
5.4 Conclusions
Conclusion 1 – Renewable Energy Regulatory Framework in Diagonal

Conflicts with EU Free Trade Principles
The theoretical framework and conflict analysis undertaken in Chapter 2 and case
law Chapter 3 shows that the renewables regulatory framework is in diagonal conflict
with EU free trade principles. Finding a conflict within a complex legal construct such
as the body of EU law is not unusual and therefore at its simplest this conclusion
could have almost been predicted, 1979 however, it is the number of conflicts and that
the conflicts are dependent on the nature of the legal instrument in question that was
not predictable.
Additionally, the CJEU is found to consistently apply a lex specialis approach to
resolving the resolving the legal conflict between the renewable’s regulatory
October 2016; David Victor, ‘The Politics of Fossil-Fuel Subsidies’ (2009) Available at
https://ssrn.com/abstract=1520984 accessed 20 October 2016; See Also Euroelectric, Ensuring investments in a
Liberalised Electricity Sector, (Euroelectric, 2004), 53; International Energy Agency, Power Generation Investment
in Electricity Markets (International Energy Agency, 2003),12
1974
Joanna Lewis, ‘The rise of renewable protectionism: Emerging trade conflicts and implications for low carbon
development’ (2014) 14(4) Global Environmental Politics, 10
1975
1976
1977
Case C-264/09 Commission v Slovak Republic, ECLI;EU:C:2011:580
1978
Joined Cases C-105/12 to C-107/12 Staat der Nederlanden v Essent NV, Essent Nederland BV, Eneco
Holding NV and Delta NV, ECLI:EU:C:2013:677
1979
484

framework and the EU’s free trade principles. As such the CJEU could be following
a Dworkin constructive approach to interpretation looking at the political or even
moral concerns, related to the abatement of climate change.1980
Additionally, during the empirical research, the market operators set out their
concern that the diagonal conflict between the renewable regulatory framework and
the EU’s free trade principles, will lead to regulatory change that is unforecastable
(regulatory volatility).
The diagonal conflict is in three parts with a fourth vertical conflict brought out
via the empirical research and listed below. The diagonal conflicts are:
• Free Movement of Goods (Articles 28 to 35 TFEU): the Renewable Energy
1981
Directive (Directive Article 3.3) allows the setting up of nationally
focussed renewable electricity support systems. Once the national
renewables support schemes are set up member states have restricted the
export of renewable electricity. These restrictions directly conflict with the
free movement of goods provisions set out in TFEU. Member states also
exclude renewable generating facilities from other member states from
gaining access to their support schemes. The findings of the empirical
research showed that the Developer Operators are concerned about this
diagonal conflict and as such are prepared to undertake judicial action to
clarify individual situations.
• State aid rules prohibiting market segmentation (Article 107(1) TFEU):
Furthermore renewable electricity enjoys the practice of priority dispatch1982
whereby it receives a derogation from compliance with the normal dispatch
processes and the competitive mechanisms contained therein.1983 As was
outlined above, the Developer Operators see the loss of priority dispatch1984
1980
1981
1982
1983
Ibid, Article 16(2)(b)
1984

for renewable assets as a revenue risk, as this will require renewables to
compete for dispatch in the same way as conventional generation. The
Developer Operators arguing the removal of priority dispatch may lead to
carbon emitting generation being dispatched instead of renewables, which is
contrary to the overriding objective of emission abatement,1985 however, the
removal of priority dispatch looks inevitable.
• State aid rules prohibiting anti-competitive pricing (Article 107 TFEU):
Renewable electricity facilities receive from the member states either a
tradeable green certificate1986 or a feed-in tariff,1987 which fixes the selling
price for renewable electricity above that available in the wholesale market.
Due to the collection by emanations of the state1988 of monies from electricity
consumers to pay the feed-in tariff to renewable electricity producers, and
sometimes the granting of tax incentives, state aid has been granted. The
consideration of this issue by the CJEU has shown that the design of the
renewables support scheme is key to it not being declared state aid
1989
(PreussenElektra, Vent De Colère, 1990 Austrian Green Levy 1991 and
German Green Levy).1992
In addition to the three areas of diagonal conflict the renewables regulatory

framework is also in vertical conflict with the ‘polluter pays’ principle as set out.
1985
1986
Green certificates are instruments certifying the production of electricity from renewable sources. Electricity
suppliers are expected to generate a given amount of electricity from renewable energy sources, an act which is
demonstrated by the possession of a green certificate which can be traded and thus revenues recovered -
Gestore Mercati Energetici, ‘About Green certificates’
<www.mercatoelettrico.org/en/mercati/cv/CosaSonoCv.aspx. accessed 25 January 2016
1987
‘Feed-in Tariff is a contract mechanism between the owner of the renewable electricity generating facility and
a purchasing organisation which provides a guaranteed price for generated output (usually providing an enhanced
price above wholesale market prices) to the owner. This is generally combined with a purchase obligation.
Typically the costs are borne either by consumers or by the public budget’ -See Bert Saveyn, Antonio Soria
Ramírez and Tobias Wiesentha ‘Renewable electricity policy: feed-in tariffs versus tradeable green certificates’
(2008) Institute for Prospective Technological Studies
1988
v British Gas plc ECLI:EU:C:1990:313
1989
1990
ECLI:EU:C:2013:851
1991
1992

• Polluter Pays Principle: due to the regulatory framework’s acquiescence to
emissions via the Emissions Trading Directive, 1993
the Effort Sharing
Decision1994 and the Industrial Emission Directive, the regulatory framework
does not enforce the ‘polluter pays’ principle contained in Article 191(2)
TFEU and therefore can be considered in vertical conflict with these Treaty
provisions.
Conclusion 2 - The Renewables Regulatory Framework Contains

Inconsistencies within Itself
The regulatory framework is composed of both C&C 1995 (e.g. Energy Efficiency
Directive) 1996 and market based (e.g. Emission Trading Directive) Directives, which
creates a complexity and in some cases inconsistencies. These inconsistencies
result from the layering1997 (new policy goals and instruments on top of what exists),
conversion (new instruments based on old goals) and drift1998 (new goals replacing
the old without change to the regulatory instruments) in the development of the
An example of the inconsistencies within the regulatory framework is the
Energy Efficiency Directive, a C&C style of directive, which reduces energy demand,
whilst the number of emissions certificates granted in accordance with the EU-ETS
remains the same. Although both Directives are within the operational
competency1999 of the Commission, the number of unused emissions allowances
simply grows as electricity demand is reduced. As the number of unused emission
allowances increases, the market price for the certificates falls and becomes a less
1993
1994
1995
Sustainability
1996
1997
Michael Howlett and Jeremy Rayner, ‘Patching v packaging in policy formulation: assessing policy portfolio
design’ (2013) 1(2) Politics & Governance, 170
1998
Florian Kern and Michael Howlett, ‘Implementing transition management as policy reforms:a case study of the
dutch energy sector’ (2009) 42(4) Policy Sciences, 391, 395
1999

efficient incentive to invest in carbon emission reducing technology. These two
Directives therefore illustrate a horizontal conflict within the renewable’s regulatory
framework.
The correction of this issue is set out within the recommendations section
below.
Conclusion 3 – The Complexity of the Renewable Electricity Regulatory

Framework
Whilst conclusions 1 and 2 considers diagonal and vertical conflicts between the
renewable energy regulatory framework and EU primary law, conclusion 3 looks at
the regulatory risks that come from within the regulatory structure.
The renewable energy regulatory framework has reduced carbon emissions
by facilitating the construction of renewable electricity generating facilities such that
nearly 20% of EU electricity is derived from renewables. Furthermore, the regulatory
framework is on course to achieve its 20% target by 2020. On this basis, the
framework can be considered a success. The regulatory framework satisfies the
EU’s commitments to global carbon emissions reductions contained in the
UNFCCC2000 and the COP 21 Paris Climate Change Agreement.2001
The scale and number of Directives forming the renewables regulatory
framework is set out in Chapter 2. The number of and ‘interconnectedness’ of the
Directives can be seen. This complexity is increased by the implementation of these
Directives at member state level in a non-harmonised manner, with each member
state having a different regulatory support scheme.
Moreover, this complexity often leads to an unco-ordinated 2002 series of
instruments with overlapping policy aims, 2003 because of the variety and diversity of
end-users 2004 and the development of the instruments incrementally over many
years.2005
The complexity was stated, during the empirical phase, to be an issue and a
source of regulatory uncertainty and thus risk for Developer Operators. The
complexity means that something can be missed and thus can be considered a
2000
2001
2015, https://unfccc.int/resource/docs/2015/cop21/eng/l09r01.pdf accessed 13 July 2016
2002
Peter Cameron, ‘The Internal Energy M arket – Redefining Object ives’ Peter Cameron and
Raphael Heffron (eds) Legal Aspects of EU Energy Regulation (Oxford University Press, 2016), 16
2003
Lorraine Murphy, Frits Meijer and Henk Visscher, ‘A qualitative evaluation of policyinstruments used to
improve energy performance of existing privatedwellings in the Netherlands’ (2012) 45 Energy Policy, 459
2004
Måns Nilsson, ‘Energy governance in the European Union: enabling conditionsfor a low carbon transition?’ in
Geert Verbong and Derk Loorbach (eds), Governing the Energy Transition: Reality, Illusion, or Necessity?,
(Routledge, 2012), 296
2005
dutch energy sector’ (2009) 42(4) Policy Sciences, 391, 395

compliance risk. This is therefore an issue returned to in the recommendations
section below.
Conclusion 4 – The Developer Operators Are Concerned with the Regulatory

Framework in Front of Them
From the empirical research it can be concluded that the industry tracks the detailed
form and content of the regulatory framework both at the EU and national level and
regards any change in the regulatory framework as a regulatory risk. The Developer
Operators on a day to day basis seem to apply a legal positivist approach dealing
with the regulatory framework as it is, devoid of moral or other overriding objectives.
2006
The Developer Operators see as a concern any amendment to the regulatory

framework that could reduce asset revenues below that assumed in the business
plan at the time of the investment decision. The Developer Operators seek to lobby
and negotiate as applicable with the Commission and national regulators in relation
to those elements of the regulatory framework put in place by either the EU or
member states.
As an example of this concern the Developer Operators highlighted the loss
of their share of embedded benefits. In contrast to reduced emissions abatement
arguments used over priority dispatch, 2007 or concerns over diagonal or other
conflicts, this concern is simply a monetary one. The loss of embedded benefits
seems to be inevitable because of the CJEU’s finding in Essent 22008 and even at
member state level with the finding in the UK Judicial Review2009on the point.
In contrast to their day to day approach when the Developer Operators took
to lobbying for development of the regulatory framework they applied a Dworkin
constructive approach looking at political or moral concerns, related to climate
change.2010
2006
2007
2008
2009
2010

This point is discussed further in the recommendations for further research
section below.
Conclusion 5 – Market Based Solutions Bring Economic Efficiency to Carbon

Emissions Abatement – Solving the Trilemma2011
The C&C Directives (such as the Renewable Energy Directive, 2012 Energy Efficiency
Directive 2013 and the Effort Sharing Decision) 2014
have been very efficient at
achieving the stated emissions reduction and renewable energy targets. However,
these Directives fail to take account of the costs of achieving the targets by different
organisations and therefore fail to bring the cost efficiencies that a market-based
Directives would seek to apply. The differing potential for member states to achieve
these targets is recognised to a certain extent by the differential renewable electricity
targets placed in the Renewable Energy Directive. 2015
However, this differing potential is static as it is set out within Annex I of the
Directive. As a result of this formulation within the Directive, no allowance is made
for the development of technology and pricing of solutions that might emerge over
the duration of the Directive making the targets for certain member states highly
economic to achieve, whilst causing other member states considerable hardship in
striving to meet the targets.
As has been shown the elements of the regulatory framework do not resolve
trilemma2016 on an individual basis, however, as a whole, they come closer, with, for
example, the Renewable Energy Directive increasing renewable generating
capacity and the Emissions Trading Directive reducing carbon emissions. The
renewables support schemes of the member states have, however, increased costs
for electricity consumers (German Green Levy2017 litigation being an example of the
issues).
However, if the COP 21 Paris Climate Change Agreement targets are to be
achieved, bringing cost efficiency and market forces to bear will be important, with
2011
2012
2013
2014
2015
2016
Heffron Energy Law: An Introduction (Springer, 2014) – Trilemma being reliability, sustainability and affordability
2017

the market favouring the technologies which will produce the largest emissions
reduction for the lowest capital outlay. Thus, developing the regulatory framework in
this manner will resolve the final element of the trilemma – affordability.
Market based regulations, such as the Emissions Trading Directive and the
merging of this carbon market with a new market for the Kyoto Protocol controlled
gases within the Effort Sharing Decision, are welcomed by the Developer Operators
as investors in the facilities.
It being therefore concluded that focussing on a smaller number of market-
based Directives would reduce the internal complexity and inconsistency within the
regulatory framework. Moreover, this simplification will minimise the diagonal conflict
between the regulatory framework and EU primary law. The regulatory framework
will not need to be all things to all parties and thus the multi-solution approach
employed in the Renewable Energy Directive2018 can be ended.
This is an issue discussed further in the recommendations section below.
Conclusion 6 – Energy Efficiency Measures Are the Best Form of Emissions

Abatement
Energy efficiency measures have reduced electricity demand across the EU, energy
not produced has no carbon emissions. Therefore, regulations that enhance energy
efficiency should be strengthened, provided they enhance efficiency at a lower cost
than the societal cost (including all capital, operating, pollution, and implementation
costs) for delivering the energy, thus representing a ‘public good’.2019
5.5 Renewables Regulatory Framework that is Not Working -

Recommendations for Change
As stated above, the EU’s renewable electricity regulatory framework is complex

and multi-dimensional. The framework is legally enforceable at both the EU and
member state level due to the national implementation of the various directives
which compose the framework.
2018
2019
Mark Levine, Jonathan Koomey, James Mcmahon, Alan Sanstad and Eric Hirst, ‘Energy Efficiency Policy and
Market Failures’ (2003) 20(1) Annual Review of Energy and the Environment, 535

Whilst this framework has been successful in facilitating the development of
renewable generating capacity, it must be reformed to move forward to achieve the
EU’s 2030 2020 and 2050 2021 renewables strategies. The recommendations below,
focussed at the EU level, set out a series of regulatory proposals to aid the
refocusing of the regulatory framework, thus reducing its diagonal conflict with EU
primary law and enhancing regulatory consistency.
The recommendations are meant to be a consistent and cumulative
package. Therefore, accepting and implementing certain of the recommendations
without the others would create further inconsistency and complexity within the
regulatory framework. The recommendations are made on the basis that the existing
framework of Directives is repealed, as it is concluded to be a framework that has
been patched, 2022 layered 2023
(often resulting in incoherence among goals and
inconsistency of instruments),2024 converted2025 and having undergone drift.2026
The first recommendation seeks to remove the diagonal conflicts by the
simplification of the regulatory framework. The subsequent recommendations
provide a supporting framework to this initial and core recommendation.
Recommendation 1 - EU Method for Legal Diagonal Conflict Resolution
The major conflicts outlined of free movement, distortions of competition and other
forms of state aid and the failure to implement the ‘polluter pays’ principle seem to
stem from (i) the payment by the renewable generating facility’s host country, of a
feed-in tariff or the granting of a tradeable certificate and (ii) the reluctance of the
host country to allow others to benefit from renewable electricity that has received
these benefits (See Section 2.9.3 and 2.10.7).
2020
SWD(2014) 15 final, “A policy framework for climate and energy in the period from 2020 up to 2030”, Section
2.11.1
2021
2022
patching, are policies and regulatory instruments enacted in order to correct flaws or allow the regulatory
framework toadapt to changing circumstances - Michael Howlett and Jeremy Rayner, ‘Patching v packaging in
policy formulation: assessing policy portfolio design’ (2013) 1(2) Politics & Governance, 170, 177
2023
Layering refers to the process of adding new policy goals andinstruments to existing policy mixes without
discarding previousmeasures - Michael Howlett and Jeremy Rayner, ‘Patching v packaging in policy formulation:
assessing policy portfolio design’ (2013) 1(2) Politics & Governance, 170
2024
Michael Howlett and Jeremy Rayner, ‘Design principles for policy mixes: cohesion andcoherence in “New
governance arrangements”’, (2007) 26(4) Policy & Society, 1
2025
Conversion is where new instrument mixes evolve while holding old goals constant. If the old goals lack
coherence, then changes in policy instruments may either reduce levels of implementation conflicts or enhance
them, but are unlikely to succeed in matching means and ends of policy - Florian Kern and Michael Howlett,
‘Implementing transition management as policy reforms:a case study of the dutch energy sector’ (2009) 42(4)
Policy Sciences 391, 395
2026
drift occurs when new goals replace old ones without chang-ing the instruments used to implement them.
These instruments thencan become inconsistent with the new goals and most likely ineffec-tive in achieving them
- Ibid

Therefore, to overcome the negatives of the conflicts set out in Conclusion 1
it is proposed to completely replace the regulatory framework. This replacement is
a process in which a fundamental restructuring of both the goals and regulatory
instruments takes place, to form a coherent and consistent new regulatory
framework. 2027 The political will to undertake such a process is not to be
underestimated, however, it is focused on economic efficiency to maximise carbon
emissions reduction that is the main driver. Thus, the foundations upon which the
political discussions can take place are simplification, economic efficiency and
harmonisation of regulatory structure across the EU.2028
Additionally, the need to have unanimity of voting in relation to this new
instrument is removed as it does not directly affect the choice between energy
resources as would be required by Article 194(2) and 194(3) TFEU. Therefore, the
issue of the Renewable Energy Directive2029 trying to be all things to all parties to
achieve this unanimity is removed. Also, the wide discretion granted to member
states, in relation to the national renewables support schemes put in place, is also
removed.
This proposal could be regarded as a fiscal measure and as such, in
accordance with Article 194(3) TFEU, require a unanimous decision in Council. Such
a unanimous position could be considered as placing a difficult legislative pathway
in front of any Directive amendments or new Directive to bring about this
recommendation. However, the simplicity of the regulatory framework and the
reduced burden on electricity consumers in many EU countries because of greater
capital efficiency in developing renewable electricity facilities are factors which would
draw the EU member states together.
In considering the political dimension as stated in Section 2.12 certain
member states have declared against harmonised renewable electricity regulatory
instruments; for example German Chancellor, Angela Merkel, indicated that
harmonisation should occur ‘at a later stage’.2030 However, this revised regulatory
structure removes the direct payment by German electricity consumers of a support
2027
dutch energy sector’ Policy Sciences (2009) 42(4) 391; See Also Michael Howlett and Jeremy Rayner, ‘Design
principles for policy mixes: cohesion andcoherence in “New governance arrangements”’ (2007) 26(4) Policy &
Society 1
2028
2029
2030
Ibid,

levy to electricity which has been a focus of the position pressed by Germany with
the Commission in relation to state aid in recent years.
This new measure is essentially environmental, and is an enhancement to
the existing Emissions Trading Directive, a Directive held by the CJEU2031 to be
within the competence2032 of the Commission (See Section 4.6.1). Therefore, should
the allocation of emissions allowance for free be removed and thus the need for a
national allocation plan, as set out in Sections 2.10.1 and 4.6, the interaction with
the multiplicity of member states is removed.
The goal is to focus on carbon emissions reduction rather than renewable
generation capacity (See Recommendation 2). The instrument to focus the
electricity industry on this goal is the EU-ETS, thereby bringing a market based
regulatory solution to the fore and allowing economic efficiency to be used rather
than command and control2033 regulation that seeks to achieve a target irrespective
of the costs of achieving the target for some member states and market operators.
By using an emissions trading market, the need for member state by member
state support schemes is removed. Therefore, the need to restrict free movement of
electricity is removed, Renewable electricity facilities no longer have their export or
sales price supported via specific instruments, put in place by the member state, not
generally available to other forms of generation. Lastly, as such support schemes
are put in place by the member state, should they distort competition they are
regarded as state aid. Thus, careful market design is not needed to ensure the state
aid does not distort competition as was found in the Vent De Colère,2034 Austrian
Green Levy2035 and German Green Levy2036 cases (See Sections 3.5.10 to 3.5.12)
because the member state is not involved in the market design or the flow of monies
within the market and such a finding that state resources have been used cannot
occur.
2031
2032
2033
Sustainability
2034
ECLI:EU:C:2013:851
2035
2036

All electricity industry players would purchase emissions credits on the same
harmonised market. With all EU member states using the same market, fair price
discovery, 2037 transparency and the lowering of transaction costs 2038 for carbon
emissions is seen as being highly likely.
This structure would result in the number of regulatory instruments being
reduced and thus the possibility of changes to the regulatory framework being
missed: a concern for some respondents during the empirical research, is removed.
With a reduced number of regulatory instruments, at both EU and member
state level, the potential for horizontal conflict, as was found between the Emissions
Trading Directive and the Energy Efficiency Directive, 2039 in Section 2.10.4, is also
removed.
Overall such a simplified regulatory framework is recommended.
Recommendation 2 - Call for Regulatory Clarity & Consistency – Reduction

in the Number of Directives
The use of electricity has undergone significant change since the need for climate
change abatement was recognised in the early 1990s and will most likely change in
the future. At the same time, governments are asked to steer electricity production
and consumption to solve the ‘trilemma’ of reliability, sustainability and
2040
affordability, as well as reducing climate change and achieving market
liberalisation.2041
Therefore, in seeking to address these high-level goals as well as some very
specific external targets contained in the UNFCCC’s2042 the Kyoto Protocol2043 and
the COP 21 2044 global climate change agreement, as set out in Chapter 2 and
2037
2018
2038
Nils Meyer-Ohlendorf, Benjamin Görlach and Ennid Roberts, ‘EU Effort Sharing Decision after 2020:
Auctioning of AEAs’ (19 January 2016) Ecological Institute, Berlin
2039
2040
2041
2042
2043
2044

Conclusion 2 the EU has put in place a complex and multifaceted regulatory
structure for renewable electricity,2045 that some consider unsustainable.2046
The empirical research found that market operators view the number of
Directives a risk, such that something could be missed, and mitigations are not put
in place early enough in an asset’s lifecycle to protect revenues (See Section 4.6
Theme 1.1). The empirical research also found that this inconsistency and
complexity risk was translated by the Developer Operators of renewable generating
facilities into higher rates of return and as such increased prices for consumers.
Therefore, to overcome the complexity and inconsistency issues set out in
Conclusions 2 and 3 respectively, it is proposed to reduce the number of Directives
and to focus the regulatory structure on only three key Directives. These Directives
being (i) the Industrial Emissions Directive, 2047 as this controls emissions of gases,
dust and ash, as well as applying best practice in plant design going forward, (ii) as
set out in in Conclusion 5, the Energy Efficiency Directive, as this will ensure that
energy used and produced is done in the best manner. Also, energy saved by the
consumer provides further free cash within the commercial and domestic consumer
setting for the purchase of additional energy efficient apparatus2048 and (iii) As set
out in Recommendation 1, the European Carbon Emissions Trading Directive, as
this allows price discovery of the price for carbon. The EU-ETS should be broadened
in scope to include the Kyoto gases, covered by the Effort Sharing Decision 2049
currently – this being in fact a current EU policy (See Section 2.10.2).
These Directives are chosen as they focus efforts on the reduction in energy
usage and emissions which is the key element of the whole regulatory framework
and directly correlated to global temperature risk. Hence such a simplified structure
is believed to remove the diagonal conflicts (Conclusion 1) outlined as all measures
can be harmonised across the EU (Conclusion 3). This structure works, as the
research has found that future renewable electricity facilities will have an output price
at or near grid parity with coal and gas generation, and therefore a renewable
support scheme that provides significant revenue uplift to renewable electricity
generation facilities is not needed for new facilities.
2045
Bruno Simma, ‘Bliateralism and Community Interest in the Law of State Responsibility’ in Yoram Dinstein (ed),
International Law at a Time of Perplexity: Essays in Honour of Shabtai Rosenne (Martinus Nijhoff 1989) 822-23
2046
2047
2048
Karen Turner and Antonios Katris, ‘A “Carbon Saving Multiplier” as an alternative to rebound in considering
reduced energy supply chain requirements from energy efficiency?’ (2017) 103 Energy Policy 249
2049

Recommendation 3 - Carbon Pricing as Regulatory Change
As stated above, the EU’s renewables regulatory framework is a complex scheme

of both C&C and market-based Directives. To bring market forces to bear on the
abatement of carbon emissions, as was set out in Conclusion 4, the regulatory
framework should be focussed on market-based mechanisms. Focusing on a carbon
trading mechanism will bring market forces to bear and will resolve the trilemma2050
with increased reliability due to the best technology being applied, sustainability
being increased by reduced carbon emissions and affordability as the most efficient
pricing will be applied.
It has been previously set out that policy analysis should look at the
performance of the entire regulatory framework and the mix of instruments, and not
analyse individual instruments in isolation. Additionally, it has been stated that fixed
feed-in tariff support schemes impact wholesale market prices and operation, whilst
more market-oriented renewables support schemes decrease the extent to which
markets are affected. 2051 Hence, as a traded instrument, an emissions trading
scheme is recommended to be the focus of the regulatory framework used to
achieve emissions reductions.2052
Section 3.6 has shown that the over-allocation of emission allowances has
undermined the EU-ETS price for carbon emission and therefore the effectiveness
of the market, 2053 such that more than a decade after its commencement, coal
generation was able to undergo a renaissance 2054 of output. Additionally, as the
function of global warming is really a feature of the volume (stock) of carbon
emissions in the atmosphere and not the flow rate of emissions from electricity
generation and other sources2055 it is argued that greater emphasis must be given
to the Carbon Capture and Storage Directive. 2056
2050
Heffron Energy Law: An Introduction (Springer, 2014) – Trilemma being reliability, sustainability and affordability
2051
Jenny Winkler, Alberto Gaio, Benjamin Pfluger and Mario Ragwitz, ‘Impact of renewables on electricity
markets – Do support schemes matter?’ (2016) 93 Energy Economics 157
2052
Interactions with other Policy Instruments’, (2014) 25(34) Energy & Environment 733
2053
Frank Maarten and Jan Venman, ’The effect of allocation above emissions and price uncertainty on
abatement investments under the EU ETS’ (2016) 125 Journal of Cleaner Production, 595
2054
The ‘Coal Renaissance’ is a term given to an increased use of coal generation due to pricing and the
restriction of other generation capacity types - Michael Le Page, ‘Coal renaissance means switching to plan B on
climate change’ (2015) 3030 New Scientist; See Also Vanessa Mock, ‘Coal Renaissance Risks Tarnishing the
EU’s Green-Energy Credentials’ 2 Sept 2014 The Wall Street Journal
2055
of Economics (Palgrave Macmillan, 2008); See Also Daniel Bodansky, Jutta Brunnée and Lavanya Rajamani
2056

Although these imperfect carbon prices can be concluded to have resulted
from political concerns regarding carbon’s effects on energy prices and the national
allocation plans set out in Section 3.6.1, they still exist and as such the market is
undermined, leaving renewable energy support schemes as the main driver for
renewable capacity.2057 Therefore the combination of the EU-ETS carbon prices and
renewable energy support schemes must be optimised to achieve mitigation targets
at a moderate additional energy price.2058
It is known that the EU has formed a long-term solution to the low and
ineffective market price via a market stability reserve, which starts operating in
January 2019. 2059 The reserve is designed to reduce the current surplus of
allowances and improve the system's robustness. The 900 million allowances that
were back-loaded in 2014-2016 will be transferred to the reserve rather than
auctioned in 2019-2020.2060 Hence it is recommended that as many unallocated
allowances are possible should be transferred to the stability reserve.
As pointed out in Section 2.7, renewable electricity is becoming cost-
competitive with fossil fuels and thus reaching grid parity pricing in the near
future.2061 As such, carbon pricing, via the EU-ETS, is argued to be a more cost-
effective way than subsidies or renewable support schemes, of cutting emissions by
engaging market based solutions.2062 Also carbon emissions reduction should be
the focus of the regulatory framework rather than seeking to achieve this goal via
the proxy of a volume of renewable generation.2063
As emissions trading promises the achievement of a pre-defined
environmental outcome of at least cost, it is recommended that the operation of the
reserve account is strengthened so that the carbon price becomes a true incentive
to investing in carbon emissions abatement assets.2064 It is known that between
2057
Matthias Kalkuhl, Ottmar Edenhofer and Kai Lessmann, ‘Renewable energy subsidies: Second-best policy or
fatal aberration for mitigation?’ (2013) 35(3) Resource and Energy Economics, 217
2058
Ibid
2059
EU Decision 2015/1814 of 6 October 2015 ‘the establishment and operation of a market stability reserve for
the Union carbon emission trading scheme and amending Directive 2003/87/EC’ OJ L 264/1
2060
EU Communication 2801 15 May 2018 ‘Publication of the total number of allowances in circulation in 2017 for
the purposes of the Market Stability Reserve under the EU Emissions Trading System established by Directive
2003/87/EC’
2061
2062
Samuela Bassi, Maria Carvalho, Baran Doda and Sam Fankhauser, ‘Credible, effective and publicly
acceptable policies to decarbonise the European Union’ [2017] The Grantham Research Institute on Climate
Change and the Environment, London School of Economics and Political Science Working Paper -
http://www.lse.ac.uk/GranthamInstitute/wp-content/uploads/2017/12/Credible-effective-and-publicly-acceptable-
policies-to-decarbonise-the-European-Union-Final-report-2.pdf accessed 12 July 2018
2063
YingFan, Jun-Jun Jia, XinWang and Jin-HuaXu, ‘What policy adjustments in the EU ETS truly affected the
carbon prices?’ (2017) 103 Energy Polict, 145
2064
Anne Schopp, William Acworth, Daniel Huppmann and Karsten Neuhoff, ‘Modelling a Market Stability Reserve
in Carbon Markets’ [2015] DIW Berlin Discussion Paper No. 1483; See also Raphael Heffron and Peter Cameron,
‘The Future of EU Energy Law’ in Peter Cameron and Raphael Heffron (eds) Legal Aspects of EU Energy
Regulation (Oxford University Press, 2016)

2019 and 2023, the number of allowances put into the reserve will double to 24% of
the allowances in circulation. 2065 It is, however, recommended that the reserve
account is refocussed to achieve a carbon price rather than a simple number of
allowances in free circulation, irrespective of resultant price for allowances.
Focussing on a carbon price will result in price stability, against which investments
may be undertaken.2066
Recommendation 4 – Electricity Grid Interconnection & Access to

Harmonised Regulation
To remove the transmission constraints that bring about the requirement for a series
of nationally focussed electricity markets across the EU and thus the diagonal
conflicts outlined in Conclusion 1, it is recommended that the level of transmission
interconnection between member states is increased. Increasing the level of
transmission interconnection capacity across the EU will reduce the level of
transmission curtailment 2067 and allow renewable energy to flow from source to
consumer. This recommendation would allow renewable facilities to be developed
in locations with the best wind and solar resources and in so doing produce the
lowest cost output.
This would help to fulfil the Commission’s stated aim of allowing energy to
flow ‘freely in Europe so that the electricity produced by a windmill in one country
can reach the consumers in another.’2068
It is recognised that moving to an integrated and interconnected transmission
system will require significant structural changes in the existing assets of the
transmission system operators. 2069 These changes may well only occur at the
instigation of EU and member state legislators and upon the changed perception of
EU citizens to transmission assets. 2070
2065
https://ec.europa.eu/clima/policies/ets/revision_en#tab-0-0
2066
Ottmar Edenhofer, Christian Flachsland, Christoph Wolff, Lisa Katharina Schmid, Anna Leipprand, Nicolas
Koch, Ulrike Kornek and Michael Pahle, ‘Decarbonisation and EU ETS Reform: Introducing a price floor to drive
low-carbon investments’ [2017] Mercator Research Institute on Global Commons and Climate Change Working
Paper
2067
2068
P/18/2122 Commission Investigation TenneT TSO GmbH's – 19 March 2018 available at
2069
2070
Frank Geels, Florian Kern, Gerhard Fuchs, Nele Hinderer, Gregor Kungl, Josephine Mylan, Mario Neukirch,
and Sandra Wassermann, ‘The enactment of socio-technical transition pathways: A reformulated typology and a
comparative multi-level analysis of the German and UK low-carbon electricity transitions (1990–2014)’ (2016)
45(4) Research Policy, 896

With a transmission network that can allow free flow care should be taken to
ensure transport losses or constraints on the electricity transmission system
dissipating the benefit2071 (See Recommendation 5).
The harmonised support system based on emissions trading would bring to
bear market forces by requiring projects to trade allowance via an auction system.
This means that the reductions in capital costs being brought about by economies
of scale and improved technology can be passed through to the consumer.
Recommendation 5 - Nodal Pricing & Transmission Losses to Manage Free

for All
Undertaking an electricity network optimisation allows the calculation of nodal

electricity prices (See Annex 2.10) on the basis of the opportunity costs of
exports. 2072 However, transmission losses and curtailment 2073 (technical capacity
constraints) give rise to large price differences between nodes and regions. 2074
These optimisation methods can be used to develop a long-run marginal cost2075 for
electricity including generation and transmission costs.2076 This means that the cost
of transmission will be included within the price so the further a unit of electricity is
transported the higher its price. In this way a rational purchase decision can be made
by the buyer at the point a trade is executed.
Including both generation and transmission costs in the price for electricity
will manage any free for all in seeking to transport electricity under a harmonised
renewables support mechanism. Such a method will also manage the costs or
allocation problem of transmission capacity.
This policy recommendation is made for consistency2077 reasons, to work
with the realities of the transmission network. A combination of a regulatory
framework based on a revised EU-ETS, increased transmission interconnection and
2071
David Jacobs Renewable Energy Policy Convergence in the EU The Evolution of Feed-in Tariffs in Germany,
Spain and France (Taylor & Frances, 2012)
2072
Fred Schweppe, Michael Caramanis, Richard Tabors and Roger Bohn Spot Pricing of Electricity (Springer,
1988); See Also Ignacio Perez-Arriaga, Luis Olmos, and Michel Rivier,’Transmission Pricing’ in Juan Rosellón
and Tarjei Kristiansen (eds.), Financial Transmission Rights, Lecture Notes in Energy (Springer, 2013)
2073
2074
Jean-Thomas Bernard and Chantal Guertin, ‘Nodal Pricing and Transmission Losses: An Application to a
Hydroelectric Power System’ [2002] Université Laval, Sainte-Foy, Québec, Canada Working Paper
2075
Longterm marginal cost is the increase in costs for meeting consumers’ future demand
2076
Yan Qing-you, Sun Yi-xin, Qin Chao and Tan Zhong-fu, ‘The Pricing model for Transmission and Distribution
Tariff Under Different Voltage Levels Based on the Long-run Marginal Cost Method’ (2015) 9 Electrical &
Electronic Engineering Journal, 347
2077
Consistency being seen as the ability of multiple policy tools to reinforce rather than undermine each other in
the pursuit of policy goals - Michael Howlett and Jeremy Rayner, ‘Patching v packaging in policy formulation:
assessing policy portfolio design’ (2013) 1(2) Politics & Governance, 170

the transmission pricing scheme outlined in this recommendation 5 will remove
diagonal conflict as renewable energy will be able to flow between member states
readily on a unified cost basis.
5.6 Limitations of the Research
The main strength of the study is the combination of the doctrinal research which
has identified several conflicts between EU free trade principles and the renewables
regulatory framework and the empirical research which showed the importance of
managing these conflicts to market operators.
The findings of this research should however, be seen in light of some
limitations, these being divided into the categories of ‘methodology’ and ‘researcher’.
The focus on renewable electricity makes a theoretical choice in the
development of the diagonal conflicts. Thus, other forms of renewable energy could
be considered as part of any future research.
The study has been able to set out and analyse a detailed description of the
methods used by developer operators to overcome the conflicts outlined. However,
in terms of methodology, additional empirical participants would increase the validity
of the study. In seeking additional participants these should be prioritised from
consumer organisations to give additional insights.
The theoretical sections focus on conflict resolution within judicial processes,
whereas the recommendations focus on conflict resolution by legislators. Thus,
further research could address the socio-political aspects of legal conflict resolution.
The ‘researcher’ limitations include, the time available to complete the
research means that the empirical research is essentially a snapshot in time and
thus the research contains limited longitudinal based data. This is a feature
discussed further in the further research section below.
Additionally, despite the industry knowledge of the researcher and thus clear
attempts to guard against such an outcome the interview technique used during the
empirical phase may have induced conservatism in the answers given by the
respondents as they wish to deal with the operational regulatory framework and
cannot discuss ongoing litigation. Therefore, this might underestimate the
importance to market participants of the conflicts outlined.2078
Lastly, whilst all empirical respondents had a high level of fluency in English,
this was not the native language of all respondents. Also, with respondents working
2078
Stéphane Brutus, Herman Aguinis and Ulrich Wassmer, ‘Self-Reported Limitations and Future Directions in
Scholarly Reports: Analysis and Recommendations’ (2013) 39(1) Journal of Management, 48

in Germany, France and the UK (it being noted that for some of the UK based
respondents English was not their native language) the colloquial meaning of certain
words needed to be checked during the interviews. Whilst care was taken to ensure
there was no misinterpretation due to colloquial usage, there may be one or two
instances where this has unknowingly occurred.
5.7 Where to Next
In any future developments of the renewables regulatory framework the EU and the
member states need to consider how the framework should or ought to regulate the
sector to provide a fair structure for society and not just the economic operators.
If this is achieved with true engagement of all stakeholders, to develop a
better and more stable regulatory framework, rather than engagement to achieve
acceptance, the developer operators with obtain the stable regulatory framework
they desire.2079
Any future research should seek to include additional empirical participants
from organisations associated with the consumption of renewable electricity to give
additional insights. Furthermore, any additional research should plan to include
follow up interviews to check the views of empirical respondents with regards to
issues that are important and if these issues have changed over time.
Based on the conclusion that the renewables regulatory framework conflicts
with several elements of EU free trade principles and the recommendation to simplify
the regulatory framework to remove these conflicts future work should detail this
simplified framework. In seeking to implement the streamlined regulatory framework
future research output should provide key drafting principles of the regulatory
framework, developing into elements of the future Directives.
Future research could diverge into an electro-technical stream which looks
at the potential for increased interconnection of electricity networks, considering
funding and state aid, as well as issues such as network capacity trading and
consent planning, to allow a single market to emerge. The second research path
could be to consider the future of the simplified and focused regulatory framework
and how this could be implemented.
2079
Frances Bowen, Aloysius Newenham-Kahindi and Irene Herremans, ‘When Suits Meet Roots: The
Antecedents and Consequences of Community Engagement Strategy’ (2010) 95(2) Journal of Business Ethics
297

Both future research streams should also measure themselves against the
need to resolve the electricity ‘trilemma’ 2080
and the robustness of the
recommendations from this future research against the EU’s goal of a 40% reduction
in carbon emissions by 20302081 and an 80% to 95%2082 reduction by 2050.2083
2080
2081
2082
European Council & Presidency Conclusions 29 & 30 October 2009, available at
www.consilium.europa.eu/doc/srv?l=en&f=st%2015265%202009%20INIT accessed 15 September 2015
2083

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ECLI:EU:C:1997:499
Case C-279/08 Commission v Netherlands ECLI:EU:C:2011:551
Case C-596/13 Commission v Moravia Gas Storage AS. (previously Globula AS.) ECLI:EU:C:2015:203
Case C-504/09P Commission v Poland ECLI:EU:C:2012:178
Case C-639/11 Commission v Poland ECLI:EU:C:2014:173
Case C-62/98 Commission v Portugal ECLI:EU:C:2000:358
Case C-264/09 Commission v Slovak Republic, ECLI:EU:C:2011:580

Case C-106/09 Commission & Spain v Gibraltar & UK, ECLI:EU:C:2011:732
Case C-428/12 Commission v Spain ECLI:EU:C:2014:218
Case C-249/06 Commission v Sweden ECLI:EU:C:2009:119
Case C-124/81 Commission v UK (UHT milk) ECLI:EU:C:1983:30

Case 40/82 Commission v UK ECLI:EU:C:1984:33
Case C-188/07 Commune de Mesquer v Total France SA and Total International Ltd ECLI:EU:C:2008
Case C-62/79 S.A. Compagnie Gdndral pour la Diffusion de la Tldvision v Cin6 Vog Films ECLI:EU:C:1980:84
Case C-513/99 Concordia Bus Finland Oy Ab v Helsingin kaupunki and HKL-Bussiliikenne ECLI:EU:C:2002:495
Case 121/85 Conegate Ltd v Commissioners of Customs and Excise ECLI:EU:C:1986:114
Cases C-56/64 and C-58/64 Consten S.à.R.L. and Grundig-Verkaufs-GmbH v Commission ECLI:EU:C:1966:41
Case 6/64 Costa v Ente Nazionale Energia Elettrica (Enel) ECLI:EU:C:1964:66
Case C-31/17 Cristal Union (legal successor) Sucrerie de Toury SA v Ministre de l'Économie et des Finances
ECLI:EU:C:2018:168
Case C-68/96 Crundig Italiana SpA v Minestero delle Finanze, ECLI:EU:C:1998:299
Case 231/83 Cullet v Centre Leclerc ECLI:EU:C:1985:29
Case C-324/99 DaimlerChrysler AG v Land Baden-Württemberg ECLI:EU:C:2001:682
Case C-15/83 Denkavit Nederland ν Hoofdproduktschap voor Akkerbouwprodukten ECLI:EU:C:1984:183
Case T-351/02 Deutsche Bahn v Commission ECLI:EU:T:2006:104
Case C-78/70 Deutsche Grammophon Gesellschaft mbH v Metro-SB-GrolmArkte GmbH & Co. KG
ECLI:EU:C:1971:59
Case T- 630/13 DK Recycling und Roheisen v Commission ECLI:EU:T:2014:833
Case C-295/14 DOW Benelux BV v Staatssecretaris van Infrastructuur en Milieu
Case C‑349/17 Eesti Pagar v Ettevõtluse Arendamise Sihtasutus,ECLI:EU:C:2019:172

Case T-387/04, EnBW Energie Baden-Württemberg v Commission ECLI:EU:T:2007
Case T-360/09 E.ON Ruhrgas and E.ON v Commission ECLI:EU:T:2012:332
Case C-275/13, Elcogas SA v Adminstracion del Estado & Iberdrola SA, ECLI:EU:C:2014:2314
Case C-206/06 Essent Netwerk Noord BV v Nederlands Elektriciteit Administratiekantoor BV and Saranne BV
ECLI:EU:C:2008:413
ELCI:EU:C:2014
Joined Cases C-204/12 to C-208/12, Essent Belgium NV v Vlaamse Reguleringsinstantie voor de Elektriciteits- en
Gasmarkt ECLI:EU:C:2013:294 Opinion of Advocate General Bot (2013)
Case T-263/07 Estonia v Commission ECLI:EU:T:2009:351
Case T-694/14 European Renewable Energies Federation v Commission ECLI:EU:T:2015:915
Case C-448/01 EVN AG and Wienstrom GmbH v Austria ECLI:EU:C:2003:65
Case C-62/87 Executif Regional Wallon & Glaverbel v Comission, ECLI:EU:C:1988:132Case C-17/92 Federación
de Distribuidores Cinematográficos v Estado Español and Unión de Productores de Cine y Televisión
ECLI:EU:C:1993:172Joined Cases C-145/06 and C-146/06 Fendt Italiana Srl v Agenzia Dogane - Ufficio Dogane
di Trento ECLI:EU:C:2007:411
Case C-482/99 France v Commission ECLI :EU:C:2002:294
Case C-244/03 France v Parliament & Council ECLI:EU:C:2005:299, para 14
Case C-150/16 Fondul Proprietatea SA v Complexul Energetic Oltenia SA ECLI:EU:C:2017:388
Case C-188/89 Foster v British Gas plc ECLI:EU:C:1990:313
Case C-171-11, Fra.bo SpA v Deutsche Vereinigung des Gas- und Wasserfaches eV (DVGW) — Technisch-
Wissenschaftlicher Verei, ECLI:EU:C:2012:453
Case C-6/90 Francovich and Bonifaci and others v Italian Republic ECLI:EU:C:1991:428
Case C-459/10P Freistaat Sachsen and Land Sachsen-Anhalt v Commission ECLI:EU:C:2011:515
Case C-254/08 Futura Immobiliare srl Hotel Futura v Comune di Casoria ECLI:EU:C:2009:479
Case T-370/09 GDF Suez v Commission ECLI:EU:T:2012:333; Case T-196/06 Edison v Commission
ECLI:EU:T:2011:281

Case C-393/92, Gemeente Almelo v NV Energiebedriif Ijsselmij ECLI:EU:C:1994:171
Case C-288/96 Germany v Commission ECLI: EU:C:2000:537
Case C-156/98 Germany v Commission ECLI: EU:C:2000:467
Case C-239/01 Germany v Commission ECLI:EU:C:2003:514
Case C-2/73 Geddo v Ente Nationale Rissi ECLI:EU:C:1973:89
Case C-164/17 Edel Grace and Peter Sweetman v An Bord Pleanala ECLI:EU:C:2018:593
Case C-90/94 Haahr Petroleum v Åbenrå Havn, Ålborg Havn, Horsens Havn, Kastrup Havn NKE A/S, Næstved
Havn, Odense Havn, Struer Havn and Vejle Havn, and Trafikministeriet. ECLI:EU:C:1997:368
Case C-181/73 Haegeman v Belgium ECLI:EU:C:1974:41
Joined Cases C-43/13 and C-44/13 Hauptzollamt Köln v Kronos Titan GmbH and Hauptzollamt Krefeld v Rhein-
Ruhr Beschichtungs-Service GmbH, ECLI:EU:C:2014:216
Case C-172/03, Heiser, ECLI:EU:C:2005:130
Case 34/79 R v Henn and Darby ECLI:EU:C:1979:295
Case C-53/96 Hermès International v FHT Marketing Choice BV ECLI:EU:C:1998:292
Case C-53/92 Hilti v Commission ECLI:EU:C:1994:77
Case C-292/92 Hunermund v Landesapothekerkammer Baden-Wurttenberg ECLI:EU:C:1993:932
Case C-465/15 Hüttenwerke Krupp Mannesmann GmbH v Hauptzollamt Duisburg , ECLI:EU:C:2017:640
Opinion of Advocate General Kokott delivered on 21 March 2013, Joined cases C-566/11, C-567/11, C-580/11, C-
591/11, C-620/11 and C-640/11, Iberdrola, SA and Others v Administración del Estado ECLI:EU:C:2013:191
Case C-195/12 IBV & Cie ECLI:EU:C:2013:598
Case C-41/11 Inter-Environnement Wallonie and Terre wallonne ECLI:EU:C:2012:103
Cases C-51/71 to C-54/71 International Fruit Company NV v Produktschap voor groenten en fruit
ECLI:EU:C:1971:128
Case C-323/82, Intermills SA v Commission ECLI:EU:C:1984:345
Case C-438/05 International Transport Workers’ Federation and Finnish Seamen’s Union v Viking Line ABP and
OÜ Viking Line Eest ECLI:EU:C:2007:772
Case C-11/70 Internationale Handelsgesellschaft mbH v Einfuhr- und Vorratsstelle fu¨r Getreide und Futtermittel;
ECLI:EU:C:1970:114
Joined Cases C-402 & C-415/05 Yassin Abdullah Kadi and Al Barakaat International Foundation v Council and
Commission ECLI:EU:C:2008:461 Case C-108/09, Ker-Optika bt v ÀNTSZ Dél-dunántúli Regionális Intézete
ECLI:EU:C:2010:725
Cases C-267/91 & C-268/91 Keck and Mithouard ECLI:EU:C:1993:905
Case C-5/14 Kernkraftwerke Lippe-Ems GmbH v Hauptzollamt Osnabrück ECLI:EU:C:2015:354
Case C-3/76 Kramer ECLI:EU:C:1976:114
Case 104/81 Kupferberg v Hauptzollamt Mainz ECLI:EU:C:1982:362, para 13
Case T-67/94, Ladbroke Racing v Commission ECLI:EU:T:1998:7
Case C- 209/09 Lahti Energia Oy ECLI:EU:C:2010:98
Case C-342/05 Laval un Partneri Ltd v Svenska Byggnadsarbetareförbundet ECLI:EU:C:2007:809Case C-412/93
Leclerc-Siplec ECLI:EU:C:1994:393
Case C-294/83 Les Verts v Parliament ECLI:EU:C:1986:166, para
Case C-225 Matra v Commission ECLI:EU:C:1993:239
Case T-177/07 Mediaset v Commission ECLI:EU:T:2010:233
Case C-292/82 Merck v Hauptzollamt Hamburg-Jonas ECLI:EU:C:1983:335, para 12
Case C-9/56 Meroni v High Authority ECLI:EU:C:1958:7
Case T-670/14 Milchindustrie-Verband v Commission ECLI:EU:T:2015 :906
Case C-157/96 R v Ministry of Agriculture Fisheries & Food ex parte NFU ECLI:EU:C:1998:191
Case C-293/97 R v Secretary of State for the Environment and Ministry of Agriculture, Fisheries and Food, exp
Standley and Metson ECLI:EU:C:1999:215

Case C-5/94 R v Ministry of Agriculture Fisheries & Food, exp Hedley Lomas (Ireland) Ltd ECLI:EU:C:1996:205
Case C-331/88 R v Ministry of Agriculture Fisheries & Food, ex parte Fedesa ECLI:EU:C:1990:391
Case C-126/01 Ministère de l'Économie, des Finances et de l'Industrie v GEMO ECLI:EU:C:2002:273 - Opinion
AG Jacobs
Case C-1/03 Ministère public v Paul van de Walle ECLI:EU:C:2004:67
Case C-222/04, Ministero dell'Economia e delle Finanze v Cassa di Risparmio di Firenze SpA, Fondazione Cassa
di Risparmio di San Miniato and Cassa di Risparmio di San Miniato SpA ECLI:EU:C:2006:8
Case T-788/14 to 793/14 MPF Holdings v Commission, application lodged on 28 November 2014 (withdrawn on
28 February 2017)
Case C-253/00 Antonio Muñoz y Cia SA and Superior Fruiticola SA v Frumar Ltd and Redbridge Produce
Marketing ECLI:EU:C:2002:497
Case C-55/80 Musik-Vertrieb Membran GmbH v Gesellschaft Fur Musikalische Auffuhrungs und Mechanische
Verviel-Faligungsrechte (GEMA) ECLI:EU:C:1981:10
Case C-164/02 Netherlands v Commission ECLI:EU:C:2004:54
Case T-233/04 Netherlands v Commission ECLI:EU:T:2008:102
Case C-219/07 Nationale Radd van Dierenwerkers en Liefhebber v Belgische Staat ECLI:EU:C:2008:353
Case C-4/73 J. Nold, Kohlen-und Baustoffgroßhandlung v Ruhrkohle Aktiengesellschaf ECLI:EU:C:1975:114
Case T-115/94 Opel Austria GmbH v Council ECLI:EU:T:1997:3

Case T-385/12 Orange v Commission, ECLI:EU:T:2015:117
Case C-305/05 Ordre des barreaux francophones et germanophone and Others v Conseil des Ministres
ECLI:EU:C:2007:383
Case C-379/92, Re Paralta ECLI:EU:C:1994:296
Case C-294/83, Parti écologiste ‘Les Verts’ v European Parliament ECLI:EU:C:1986:166, para 23
Cases C-180/98 to C-184/98, Pavlov v Stichting Pensioenfonds Medische Specialisten ECLI:EU:C:2000:428
Ambachten ECLI:EU:C:2004:448
Case 730/79 Phillip Morris Holland BV v Commission ECLI:EU:C:1980:209
Case C-43/71 Politi s.a.s. v Italian Ministry for Finance ECLI:EU:C:1971:122
Case T-183/07 Poland v Commission ECLI:EU:T:2009:350
Case 148/78 Pubblico Ministero v Ratti ECLI:EU:C:1979:110
Case C-8/74, Procureur du Roi v Dassonville ECLI:EU:C:1974:82
Case C-53/76 Procureur de la République de Vesancon v Les Sieurs Bouhelier ECLI:EU:C:1977:17
Case 240/83 Procureur de la République de Vesancon v Association de Défense des Brûleurs d'Huiles Usagées
ECLI:EU:C:1985:59
Case C-564/14 Raffinerie Heide GmbH v Commission ECLI:EU:C:2016:685
Sviluppo economico and Others ECLI:EU:C:2010:126
Case C-120/78, REWE-Zentrale AG v Bundesmonopolverwaltung für Branntweien (Cassis de Dijon)
ECLI:EU:C:1979:42
Case C-37/83 Rewe-Zentral AG v Direktor der Landwirtschaftskammer Rheinland.ECLI:EU:C:1984:89
Case C-565/14 Romonta v Commission ECLI:EU:C:2016:698
Case C-418/14 ROZ-ŚWIT Zakład Produkcyjno-Handlowo-Usługowy Henryk Ciurko, Adam Pawłowski spółka
jawna v Dyrektor Izby Celnej we Wrocławiu, ECLI:EU:C:2016:400

Case C-239/09 Seydaland Vereinnigte Agrabetriebe v BVVG Bodenverwertungs-undverwaltungs
ECLI:EU:C:2010:778
Case C-39/94 SFEI v La Poste ECLI:EU:C:1996:285
Case T-459/93 Siemens v Commission ECLI:EU:T:1995:100
Case 72/91 & 73/91 Sloman Neptun ECLI:EU:C:1993:97
Case C-284/16 Slowakische Republik v Achmea BV ECLI:EU:C:2018:158
Case C-412/93, Sociéte dÍmportation Edouard Leclerc-Siplec v TFI Publicité & M6 Publicéte ECLI:EU:C:1995:26
Case 56/65 Société Technique Minière v Société Maschinenbau Ulm GmbH ECLI:EU:C:1966:38
Case C-342/ 96 Spain v Commission, ECLI:EU:C:1999:210
Cases C-278/92 to 280/92 Spain v Commission ECLI:EU:C:1994:325
Case C-351/98 Spain v Commission ECLI:EU:C:2002:530
Joined Cases C-105/12 to C-107/12 Staat der Nederlanden v Essent NV, Essent Nederland BV, Eneco Holding
NV and Delta NV, ECLI:EU:C:2013:677
Case C-221/06 Stadtgemeinde Frohnleiten and Gemeindebetriebe Frohnleiten GmbH v Bundesminister für Land-
und Forstwirtschaft, Umwelt und Wasserwirtschaft ECLI:EU:C:2007:65
Case C-30/59 Steenkolenmijnem v High Authority ECLI:EU:C:1961:2
Case 78/76 Steinike & Weinlig v Germany ECLI:EU:C:1977:52
Case T-793/14 Tempus Energy and Tempus Energy Technology v Commission ECLI:EU:T:2018:790
Case C-7/78 R v Thompson, Johnson and Woodiwiss ECLI:EU:C:1978:209
Case C-270/12 UK v Parliament & Council ECLI:EU:C:2014:18
Case C-82/77 Van Tiggele, ECLI:EU:C:1978:10
Case C-1/03 Van de Walle ECLI:EU:C:2004:490
Case C-17/03 Vereniging voor Energie, Milieu en Water and Others (VEMW) v Directeur van de Dienst uitvoering
en toezicht energie,ECLI:EU:C:2005:362
Case C-261/81Walter Rau Lebensmittelwerke v De Smedt ECLI:EU:C:1982
Case C-266/16 Western Sahara Campaign UK v Commissioners for Her Majesty's Revenue and Customs and
Secretary of State for Environment, Food and Rural Affairs ECLI:EU:C:2018:118
Miscellaneous Cases
R (on the application of ClientEarth) (Appellant) v Secretary of State for the Environment, Food and Rural Affairs
(Respondent) [2015] UKSC 28 – following a preliminary reference to the CJEU Case C-404/13 R (on the
application of ClientEarth) v The Secretary of State for the Environment, Food and Rural Affairs
ECLI:EU:C:2013:805
Department of Energy & Climate Change v Breyer Group PLC & Others, [2015] EWCA Civ 408
Dispute Settlement and Sanctions Committee (CoRDiS) of French Energy Regulator fined VITOL S.A. € 5 million
for engaging in ‘market manipulation’ between 1 June 2013 and 31 March 2014 via the REMIT Regulations, (9
October 2018) – available at https://www.cre.fr/en/News/The-Dispute-Settlement-and-Sanctions-Committee-
CoRDiS-imposes-a-penalty-for-market-manipulations-on-the-wholesale-energy-market accessed 15 October 2018
EDE International v Hungary UNCITRAL, PCA, Award of 4 December 2014 available at
http://www.iareporter.com/articles/investigation-in-recent-briefs-europeancommission-casts-doubt-on-application-
of-energy-charter-treaty-to-any-intra-eudispute/ accessed 10 March 2019
Eiser Infrastructure Limited and Energía Solar Luxembourg SARL v Kingdom of Spain, ICSID Case No.
ARB/13/36
Electrabel SA v Republic of Hungary International Center for Settlement of Investment Disputes Case No.
ARB/07/19, Decision on Jurisdiction, Applicable Law and Liability, 30 November 2012, paras 27-34
Ioan Micula v Romania, International Center for Settlement of Investment Disputes Case No. ARB/05/20
LCW Europe Investments Limited v Czech Republic, PCA Case No. 2014-22, registered 8 May 2013

WTO Panel Report, Indonesia Certain Measures Affecting the Automobile Industry, WT/DS54/R, WT/DS59/R,
WT/DS64/R, adopted on 23 July 1998, at note 649
Peak Gen Top Co Ltd & Ors, R (on the application of) v The Gas And Electricity Markets Authority & Anor, Court
of Appeal - Administrative Court, June 22, 2018, [2018] EWHC 1583 (Admin)
Photovoltaic KnopfBetriebs-GmbH v Czech Republic, PCA, registered 8 May 2013
Pulp Mills on the River Uruguay, Argentina v Uruguay, International Court of Justice (2006) Rep 113
Public Employees for Environmental Responsibility v U.S. Environmental Protection Agency – 5 June 2018 Civil
Action No. 17-652
Trail Smelter Arbitration (United States v Canada) Arbitral Tribunal 3 UN Report of International Arbitration
Awards 1905 (1941)
Case C/09/456689 - Urgenda Foundation v Government of the Netherlands (June 2015), Available at
https://uitspraken.rechtspraak.nl/inziendocument?id=ECLI:NL:RBDHA:2015:7196&keyword=urgenda (accessed 3
February 2017)
Vattenfall v Germany International Center for Settlement of Investment Disputes Case No. Arb/09/06, 11 March
2011
Voltaic Network GmbH v Czech Republic, PCA Case No. 2014-20, registered 8 May 2013
WA Investments Europa Nova Limited v Czech Republic, PCA Case No. 2014-19, registered 8 May 2013
EU Commission Decisions
Commission Decision 1999/227/ECSC Georgsmarienhütte OJ L83/72

Commission Decision 1999/653, ‘Denmark - CO2-quota system’ OJ C 322
Commission Decision 2000/550, ‘Belgium, Green Electricity Certificates’ OJ C 330
Commission Decision, state aid NN 27/2000 - Germany, Act on granting priority to renewable energy sources, in
force since 1 April 2000, OJ C 164, 10 July 2002; NN 68/2000 - Germany, Law on the protection of electricity
generated from combined heat and power, OJ C 164
Commission Decision, state aid NN/30/B/2000 - The Netherlands, Zero tariff for green electricity, OJ C 30
Commission Decision, state aid C 31/2000 - Belgium, Transitory Regime of the electricity market, OJ C 222,
Commission Decision 2001/416, United Kingdom - Emission trading scheme OJ C 88
Commission Decision, state aid NN 49/99 -Spain, 25 July 2001, SG (2001) D/290553
Commission Decision, state aid NN/30/B/2000 - The Netherlands, Zero tariff for green electricity, OJ C 30, 2
February 2002
Commission Decision, state aid N 239/2001 The Netherlands, Partial Exemption of the energy tax for waste
incineration units, OJ C 32
Commission Decision, state aid N 74/C/2002 - Finland, Aid to power plants, OJ C 148, 25 June 2003
Commission Decision, state aid N 175a/2005 - Germany, Support of demonstration projects for use of energy
from renewable sources, OJ C 89, 12 April 2006
Commission Decision, state aid N 56/2006 - United Kingdom, climate change levy rebate extension
Commission Decision, state aid N391/2006 - Denmark, Tax rate reductions: heat produced in CHPs, heat
produced by electricity and process heat
Commission, state aid N 907/2006 - Hungary, Aid to Mitrai Eromu Zrt - MSF 2002
Commission Decision, state aid N394/2007 - Denmark, non-appliance to wind power plants of lower depreciation
rate
Commission, Decision N 567/2007 - Denmark, Modification of electricity production grant,
Commission Decision 1181/2007 ‘concerning state aid granted by Slovenia in the framework of its legislation
concerning qualified energy producers’
Commission Decision (2008) SA.26036 Aid to energy intensive businesses in Austria, Green Electricity Act
(Ökostromgesetznovelle 2008)
Commission Decision (2009) 409 23 April 2009 Reduction in carbon emissions to meet the Community’s carbon
emission reduction commitments up to 2020’ (Effort Sharing Decision) OJ L 40/136
Commission Decision (2011) 278/EU determining transitional Union-wide rules for harmonised free allocation of
OJ 2011 L 130
Commission Decision (2013) state aid SA.33384 Green Electricity Act 2012, Austria

Commission Decision (2013) concerning aid for all forms of biogas use in Denmark, SA.35485
Commission, Decision (2013) 269 'State aid SA34947 (2013/C) (ex 2013/N)-United Kingdom, Investment Contract
(early Contract for Difference) for the Hinkley Point C New Nuclear Power Station'
Commission Decision (2014) 200/01 ‘Guidelines on State aid for environmental protection and energy 2014-2020’
Commission, Decision ( 2014) concerning Electricity Market Reform, Contract for Difference for Renewables in
the United Kingdom, SA.36196
Commission Decision ( 2014) concerning aid to photovoltaic installations and other renewable energy installations
in Denmark, SA.36204
Commission Decision (2014) concerning Support for five offshore wind farms: Walney, Dudgeon,
Hornsea, Burbo Bank and Beatrice in the United Kingdom, SA.38758, SA38759, SA.38761, SA.38763 &
SA.388121
Commission Decision (2015) 1470 OJ L232/43 of 4 April 2015. Appeals against this decision are pending Cases
T-624/15 European Food v Commission, T-694/15 Micula v Commission and T-704/15 Micula v Commission
Commission, Decision (2015) concerning State aid SA.38762 (2014/N)-United Kingdom, Investment Contract for
Lynemouth Power Station Biomass Conversion, C/i 16/2015, 52
Commission Decision 2015/1585, Aid Scheme SA 33995 –‘implemented by Germany for the support of renewable
electricity and of energy-intensive users’
Commission Decision (2015) 201/5 -Germany, Support to 20 large offshore wind farms under the EEG Act 2014 :
state aid SA.39723, SA.39724, SA.39725, SA.39726, SA.39731, SA.39732, SA.39733, SA.39735, SA.39738,
SA.39739, SA.39741, SA.39742 (2014/N); SA.39722, SA.39727, SA.39728, SA.39729, SA.39730, SA.39734,
SA.39736, SA.39740 (2015/NN)
Commission Decision 2017 SA 38631 Reduced surcharge for self-generation under EEG 2017
Commission Decision 2018 SA.45461 EEG 2017 - Reform of the Renewable Energy Law
Commission Decision 2018 SA 49416 ‘relating to reductions in the offshore surcharge for electro-intensive
undertakings and reductions on the CHP surcharge for electricity produced from waste gases in Germany’
Commission Decision 2018 SA 50395 ‘relating to the offshore-surcharge reduction for railway undertakings in
Germany
EU Institutions Communication (Commission, ACER & Others)
ACER/CEER - Annual Report on the Results of Monitoring the Internal Electricity and Gas Markets in 2016
Barón-Escámez S, Sylvia Ferretti, Juliana Frendo, Octavien Ginalski, Maciej Górka, Hans Ingels,Christos
Kyriatzis, Florian Schmidt, Carolina Stege, Laura Stočkutė and Yiannos Tolias ‘Free movement of goods: Guide to
the application of Treaty provisions governing the free movement of goods’ [2010] EU Directorate General for
Enterprise and Industry . http://ec.europa.eu/enterprise/policies/single-market-goods/files/goods/docs/art34-
36/new_guide_en.pdf accessed 29 August 2016, 29-30
COCL 5 17271/1/08 ‘Presidency Conclusions of the Brussels European Council (11 and 12 December 2008)’
EU COM (1973) ‘Programme of Action of the European Communities on the Environment’, OJ 112
EU COM (1994) 659 'Green Paper for a European Union energy policy’
EU COM (2000) 1 ‘on the precautionary principle’
EU COM (2000) 769 ‘Towards a European Strategy for the Security of Energy Supply’ defines energy security as
‘The uninterrupted physical availability of energy products on the market, at a price which is affordable for all
consumers (private and industrial), while respecting environmental concerns and looking towards sustainable
development’
EU COM (2001), 'Commission gives Green light to "stranded costs" compensation by Spain, Austria and The
Netherlands', Press Release, Brussels, 25 July 2001, IP/01/1 079
EU Com (2005) 627, ‘The Support of Electricity from Renewable Energy Sources’
EU COM (2006) ‘The Energy community Legal Framework 2018’ 4th Edition OJ L198
EU COM (2007) 2 ‘Limiting Global Climate Change to 2 degrees Celsius The way ahead for 2020 and beyond’
EU COM (2007) 35 – ‘Package on the internal market of goods’
EU COM (2008) 30, ‘2020 by 2020 Europe’s Climate Change Opportunity’
EU COM (2009) 519 ‘Investing in the Development of Low Carbon Technologies’
EU COM (2010) 639, ‘Energy 2020 - A strategy for competitive, sustainable and secure energy’
EU COM (2011) 112: ‘A Roadmap for moving to a competitive low carbon economy in 2050’

EU COM (2011) 131 ‘Review of European and National Financing of Renewable Energy in Accordance With
Article 23(7) of Directive 2009/28’
EU COM (2012) C158/4, ‘Guidelines on Certain state aid Measures in the Context of the Carbon Emission
Allowance Trading Scheme Post 2012’
EU COMn (2012) C 8/02, ‘State aid rules to compensation granted for the provision of services of general
economic interest’OJ C8/4
EU COM (2013) 169 Green Paper ‘A 2030 framework for climate and energy policies’
EU COM (2013) 439 ‘Delivering the internal market in electricity and making the most of public intervention’
EU COM (2014) 01 ‘Guidelines on state aid for Environmental Protection and Energy 2014 – 2020’ OJ 200/01
EU COM (2014) 15 ‘A policy framework for climate and energy in the period from 2020 up to 2030’
EU COM (2014) 255 ‘2030 Energy Efficiency Impact Assessment’
EU COM (2014) 330 ‘European Energy Security Strategy’
EU COM(2015) ‘The European Union Leading In Renewables’
EU COM (2015) 80 ‘A Framework Strategy for a Resilient Energy Union with a Forward-Looking Climate Change
Policy’
EU COM (2015) 439 ‘guidance for the design of renewables support schemes’
EU COM (2015) 572 ‘State of the Energy Union 2015’
EU COM (2016) 482 ‘on binding annual carbon emission reductions by Member States from 2021 to 2030 for a
resilient Energy Union and to meet commitments under the Paris Agreement’
EU COM (2016) 860 30 November 2016 ‘Clean Energy For All Europeans’
EU COM (2016) 405 ‘Impact Assessment for the amendment of the Energy Efficiency Directive’
EU COM (2016) 418 ‘Impact Assessment for the recast of the Renewables Directive’
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Annex 1
A1.1 Sustainability
Building on the goal of carbon emissions reduction from electricity generation the
EU uses the concept of ‘sustainability’ as one of the principles upon which the
renewables regulatory framework is built.
Initially, the EU took inspiration from the definition of sustainability in the
Brundtland Report,2084 which sought to reconcile the energy needs of present and
future generations to find intergenerational equity 2085 in energy usage. The
Brundtland report suggests a reduction in current energy usage to leave a legacy of
energy sources for future generations rather than a change to energy technology.
This could reflect the date of the report (1987) in that coal was still readily available
in many countries2086 and renewable electricity generation technology was in its
infancy.2087
Although not defined in the TFEU, sustainable development is an umbrella
concept2088 with no hierarchy of objectives within this umbrella.2089 It has been stated
that ‘sustainability’ needs supporting principles 2090 such as the precautionary
principle, ‘polluter pays’ and the principle of integration.2091
The EU seems to use the concept of sustainability in the renewable electricity
context to mean the environmental impact of the energy source, rather than the need
2084
A/42/427 (1987), Chapter 2, para 1
2085
Erling Holden, Kristin Linnerud, David Banister, Valeria Jana Schwanitz and August Wierling The Imperatives
of Sustainable Development: Needs, Justice, Limits (Routledge, 2017); See Also Edith Brown Weiss,
‘Intergenerational equity: a legal framework for global environmental change’ in Edith Brown Weiss (ed)
Environmental change and international law: New challenges and dimensions (United Nations University Press,
1992)
2086
John Gillingham, Coal, Steel, and the Rebirth of Europe 1945-1955 (Cambridge University Press, 1991); see
also Richard Gordon, The Evolution of Energy Policy in Western Europe: the Reluctant Retreat From Coal
(Praeger Publishers, 1970); Ernst Haas The Uniting of Europe: Political, Economic and Social Forces 1950-1957
(Stanford University Press, 1958)
2087
(2012) Marshall Institute Working Paper; The maturing nature of the technology can be illustrated by the number
of patent applications in 1994 were a few tens per year, rising to broadly 12,200 in 2011 and as the technology
matures decreasing to 6,500 in 2015 - http://www.ren21.net/spotlight/topical-reports/REN21_10yr.pdf accessed 5
October 2018
2088
Jaye Ellis, ‘Sustainable Development as a Legal Principle: A Rhetorical Analysis’ (2008) available at
www.scribd.com/doc/51448971/Sustainable-Development-as-a-Legal-Principle-A-Rhetorical-Analysis, accessed 1
June 2017
2089
Ibid, 13; See also David Hodas, ‘The Role of Law in Defining Sustainable Development: NEPA Reconsidered’
(1998) 3 Widener Law Symposium, 1, 6
2090
John Danaher, ‘Protecting the Future or Compromising the Present? Sustainable Development and the Law’
(2006) 14 IS Law Review, 117, 119-120
2091
J Verschuuren, ‘Sustainable Development and the Nature of Environmental Legal Principles’ (2006) (1) 9
Potschefstroom Electricity Law Journal, 17

to meet current and future energy requirements as in the Brundtland Report. 2092
Therefore, the EU uses ‘sustainability’ as an environmental concept relating to
carbon emissions reductions rather than energy legacy considerations. The only
element of the EU’s renewables regulatory framework that is directly aligned to the
Brundtland Report is the Energy Efficiency Directive 2093 which seeks to reduce
present day demand.
Market operators, on the other hand, seem to use ‘sustainability’ in a
regulatory uncertainty context relating to regulatory change. This being a theme
brought out during the empirical research phase.2094
A1.2 Precautionary Principle
The precautionary principle2095 is core to the management of risk from events and
actions and again is within the sustainability limb of the EU’s energy and
environmental policy in so far as it seeks to reduce carbon emissions.
Within EU law the precautionary principle is subsidiary to sustainability. The
EU defined the ‘precautionary principle’ in its communication on the subject2096 as
the ‘reasonable grounds that an event or process was potentially dangerous to the
environment’. The precautionary principle therefore considers the long-run effects
of a decision and the well-being of future generations, similar to the Brundtland
Report. 2097 The EU states that the precautionary principle seeks to balance the
dilemma of freedoms and rights with the need to reduce the risk of adverse effects
on the environment of energy use, and as such in its application it should be
proportionate, non-discriminatory, transparent and coherent, with a structured
decision-making process based on scientific and other objective information.2098
The precautionary principle is mentioned only once within the Treaty in
Article 191(2) TFEU, although it can be considered a legally binding principle.2099
2092
A/42/427 (1987)
2093
Council Directive 2012/27/EU 25 October 2012 – Energy Efficiency Directive OJ L315/1
2094
Ricardo Barcelona Energy Investments: An Adaptive Approach to Profiting from Uncertainties (Palgrave
Macmillan, 2017)
2095
Miriam Haritz ‘Liability with and liability from the precautionary principle in climate change cases’ in Michael
Faure and Marjan Peeters (eds) Climate Change Liability (Elgar, 2011)
2096
Commission Communication COM(2000) on the Precautionary Principle available at https://eur-
lex.europa.eu/legal-content/EN/TXT/?uri=celex:52000DC0001 accessed
2097
A/42/427 (1987), Chapter 2, para 1
2098
Ibid, para 1
2099
Peter-Tobias Stoll, Wybe Douma, Nicolas de Sadeleer and Patrick Abel,’CETA, TTIP and the EU
precautionary principle. Legal analysis of selected parts of the draft CETA agreement and the EU TTIP proposals’
(2016) 4 Jean Monnet Working Paper Series

Despite this single mention within the TFEU, the principle’s scope is far reaching
covering circumstances where scientific evidence is insufficient, inconclusive or
uncertain. The CJEU has granted EU institutions a margin of discretion in
implementing the principle, when it stated in MAFF Exp NFU2100
Where there is uncertainty as to the existence or
extent of risks to human health, the institutions may
take protective measures without having to wait until
the reality and seriousness of those risks become
fully apparent.
The EU is therefore seen to be acting upon the precautionary principle in the

implementation of the renewables regulatory framework as it has not waited for the
case for climate change to be proven conclusively before taking action but has acted
in a preventative manner.
A1.3 Polluter Pays Principle
Another key supporting principle of sustainability is that the ‘polluter should pay’ and
therefore it is included within the first limb of the EU’s environmental and energy
objectives. Article 191(2) TFEU states ‘environmental damage should as a priority
be rectified at source and that the polluter should pay’.
The ‘polluter pays’ principle relates to the allocation of costs and
responsibilities for environmental pollution, implying the costs of environmental
protection should be borne by the polluter; potentially, its interpretation can be
extended to include the costs of measures to rectify or compensate for
environmental damage.2101
The ‘polluter pays’ principle has two origins. The first is the so called ‘no-
harm rule’ such that the right of a sovereign state to use its resources is curtailed by
the need to prevent environmental harm to its neighbours (based on the Trail
Smelter Arbitration). 2102 The second is stems from the economic theory of the
‘internalisation of externalities’, imposing on polluters the costs of inspecting,
monitoring and controlling pollution, rather than such costs being borne by the
2100
Case C-157/96 R v Ministry of Agriculture Fisheries & Food (MAFF) Exp NFU ECLI:EU:C:1998:191, para 63
2101
For an analysis of the principle see Nicolas de Sadeleer Environmental Principles. From Political Slogans to
Legal Rules (Oxford University Press, 2002)
2102
Trail Smelter Arbitration (United States v Canada) Arbitral Tribunal 3 UN Report of International Arbitration
Awards 1905 (1941)); See also Rebecca Bratspies and Russell Miller Transboundary Harm in International Law:
Lessons from the Trail Smelter Arbitration (Cambridge University Press, 2009)

state.2103 The OECD defined the principle in 1992 as the polluter should bear the
‘costs of pollution prevention and control measures’.2104
Moreover, the Commission subsequently stated in Georgsmarienhütte that
‘the responsibility of the polluter is in principle an obligation to act and not simply to
pay’.2105
The ‘polluter pays’ principle is highly intertwined with a principle of ‘proximity’,
such that wherever possible, environmental damage should be ‘rectified at source’
(also Article 191(2) TFEU).2106
The ‘polluter pays’ principle is one of the main drivers behind the
implementation of the Emissions Trading Directive (See Directive Recital 1)2107 and
the Industrial Emissions Directive2108 (See Recital 2 and 25). The conflict between
these two Directives and Article 191(2) TFEU is that the Directives allow the
emission of greenhouse gases, whereas the ‘polluter pays’ principle, as drafted in
TFEU, implies an absolute obligation to rectify emissions at source2109 on the basis
that the polluter should pay (confirmed in Raffinerie Mediterranee).2110
2103
Kleoniki Pouikli, ‘The Polluter Pays Principle and the EU State Aid Law for Environmental Protection’ (2016)
55 Journal of Law, Policy and Globalisation, 19, 20
2104
Organisation for Economic Co-operation and Development ‘The polluter-pays principle: OECD analyses and
recommendations’ (1992) Doc. OCDE/GD (92) 81; See Also Pulp Mills on the River Uruguay, Argentina v
Uruguay,International Court of Justice (2006) Rep 113 – See Also Plato on the principle ‘If anyone intentionally
spoils the water of another . . . let him not only pay damages, but purify the stream or cistern which contains the
water’ - B Jowett The Dialogues of Plato: The Laws, (vol. 4 Clarendon Press, 1953), 485
2105
Commission Decision 1999/227/ECSC Georgsmarienhütte OJ L83/72, part VI
2106
Ian Bailey New Environmental Policy Instruments in the European Union Politics, Economics, and the
Implementation of the Packaging Waste Directive (Taylor & Francis, 2003)
2107
2108
and control) OJ L334/17 (Industrial Emission Directive)
2109
G Winter, ‘The legal nature of environmental principles in international, EC and German law’
in R Macrory (ed.) Principles of European Environmental Law (Europa Law Publishing, 2004), 19
2110
Sviluppo economico and Others ECLI:EU:C:2010:126, para 46

Annex 2 – Introduction to Legal Theory
This Annex sets out an introduction to the debate and difference between legal
positivism 2111 and the view of law as a branch of political morality 2112 or natural
law.2113
According to positivism, law is a normative set of rules2114 and is a matter of
what has been posited (ordered, decided, practiced, tolerated, etc.); in other words,
a social construction. Human society has a social order, a means of regulating
behaviour, deterring anti-social behaviour, and resolving disputes. The theory is
also reductivist, 2115 maintaining that normative language used in describing and
stating the law (authority, rights, obligations, liabilities and so on) can be analysed
without the need for non-normative and concatenations of terms regarding power
and obedience. Positivism is considered to stem from a political system2116 with a
sovereign leader or ‘juridical power’.2117 It is stated that the authority of law is held in
the fact that it is a social rule that it is practiced, with primary and secondary rules.2118
The positivist theory separates the existence of law as a normative set of rules from
moral ideals. 2119
The countervailing view is that legal positivism fails to give law its moral
basis. Accordingly, positivism's opponents state that the driving feature of law is not
as a source-based system, but in its capacity to advance the common good.2120
Furthermore, the counterbalancing view to positivism would submit that there cannot
be any general theory of the existence and content of law; it being denied that local
theories of particular legal systems can identify law without recourse to its merits,
deciding legal issues as they ought to be decided. 2121
Inclusivists, however, would claim that moral considerations are part of the
law because legal instruments make it so, and thus Dworkin is right that the
existence and content of law turns on its merits, and wrong only in his explanation
2111
2112
Lon Fuller, ‘Positivism and Fidelity to Law: a Reply to Professor Hart’ (1958) 71 Harvard Law Review, 630;
See also Lon Fuller The Morality of Law (Yale University Press, 1969)
2113
2114
21152115
Jean d'Aspremont, ‘Reductionist Legal Positivism in International Law’ [2012] Proceedings of the 106th
Annual Meeting of the American Society of International Law
2116
Hans Morgenthau, ‘Positivism, Functionalism, and International Law’ in Gerry Simpson (ed) The Nature of
International Law (Routledge, 2017)
2117
Nick Fox, ‘Foucault, Foucauldians and Sociology’ (1998) 49(3) The British Journal of Sociology, 415
2118
Herbert L A Hart The Concept of Law (ed) Penelope Bulloch and Joseph Raz (Clarendon Press, 1994)
2119
2120
Lon Fuller, ‘Positivism and Fidelity to Law: a Reply to Professor Hart’ (1958) 71 Harvard Law Review, 630;
See also Lon Fuller The Morality of Law (Yale University Press, 1969)
2121

of this fact. 2122 Such legal theory would suggest that law is an open normative
system: adopting and including a series of other elements, including moral and
commercial norms and the rules of social groups.2123
Additionally, it is said that judges in exercising moral judgment in the
penumbra of legal rules in effect ‘revise our concept of what a legal rule is’. 2124
2122
Matthew Kramer, ‘How Moral Principles Can Enter Into The Law’ (2000) 6(1) Legal Theory, 83
2123
Joseph Raz Practical Reason and Norms (Princeton University Press, 1975), 152-154
2124
Hart (ed) Essays in Jurisprudence and Philosophy ( Clarendon Press, 1983), 72

Annex 3 – Practical Operation of the Electricity Market
A3.1 Introduction
The owners and operators of electricity generating facilities, be they renewable or

otherwise, go through the same market processes to get their ‘product’ (electricity)
to consumers. Therefore, to understand the regulatory framework (Chapter 2) and
the basis of comments made during empirical phase (Chapter 4), an outline of the
market processes is set out in this chapter.
The market values ‘predictability’ of outcome, of electricity generated (supply
side volume), of demand for electricity (buy side volume) and of price.2125 The market
therefore ‘punishes’ any deviations from the predicted outcome, via a process called
imbalance settlement (See Section A3.4).2126
Across the EU electricity is traded in a series of national markets which allow
the electricity produced to be variously transmitted and distributed to end
consumers. In addition to these national markets, developed within the
competence2127 of the member states, are a series of cross border exchanges where
electricity which is produced more than national need can be sold to other member
states which have produced insufficient electricity in that instant.
This chapter gives an overview of the operation of the EU’s many electricity
markets so that a better understanding can be gained of the regulatory framework
surrounding renewable electricity.
A3.2 Inability to Store Electricity on a Meaningful Scale
Electricity is a type of ‘goods’2128 that is difficult and expensive to store on a scale

suitable for the needs of a transmission system and thus the electricity needed in an
2125
Lars Dannecker Energy Time Series Forecasting Efficient and Accurate Forecasting of Evolving Time Series
from the Energy Domain (Springer, 2015) 11
2126
Simon Pezzutto, Gianluca Grilli, Stefano Zambotti and Stefan Dunjic, ‘Forecasting Electricity Market Price for
End Users in EU28 until 2020—Main Factors of Influence’ (2018) 11 Energies; See also Friedemann Polzin,
Michael Migendt, Florian Täube, Paschen von Flotow, ‘Public policy influence on renewable energy investments—
A panel data study across OECD countries’ (2015) 80 Energy Policy 98
2127
2128
Case C393/92 Gemeente Almelo v NV Energiebedriif Ijsselmij ECLI:EU:C:1994:171, para 28 also Case
157/94 Commission v Netherlands ECLI:EU:C:1997:499

instant must be produced in that instant. This feature of electricity is core to the
understanding of the need to balance flows and thus the market structure is about
achieving a balance at the point and time of delivery.
A3.3 The Electricity Grid – Transmission and Distribution Networks
The electricity grid is an interconnected network of overhead lines, cables, other

plant and apparatus connecting electricity generators and consumers. The network
is divided into transmission2129 and distribution networks,2130 usually by voltage, with
the lower voltage networks being designated as the distribution network.
Electricity networks throughout the EU operate based on what is known as
alternating current.2131 This allows the voltage of the electricity to be increased and
current decreased without a reduction in the power2132 transmitted via a process
known as transformation. The transformation of alternating current into a high
voltage low current form of electricity reduces the electricity’s transport losses.2133
All electricity networks have two technical properties, which dictate how
electricity markets operate in practice: (i) the need to balance generation and
demand, and (ii) The flow of electricity in a grid can only be controlled by
reconfiguring the network (switching in or out certain circuits), electricity simply
follows via the path of least resistance, so that consumers receive electricity from
mixed sources. Once on the grid one electron is the same as another, you cannot
tell at the consumer’s premises the source of the electricity.
The illustration below sets out this arrangement schematically.
2129
A network of electricity cables, overhead lines and other apparatus and plant operating at a voltage above
132kV. It is the network most readily associated with the bulk transport of electricity
2130
A network of electricity cables, overhead lines and other apparatus and plant operating at a voltage of 132kV
and below. It is the network most readily associated with the supply of electricity to consumers
2131
Alternating Current (AC) is a type of electrical current, in which the direction of the flow of electrons switches
back and forth at regular intervals or cycles. Current flowing in power lines and normal household electricity that
comes from a wall outlet is alternating current - https://www.greenfacts.org/glossary/abc/alternating-current.htm
2132
Power being the amount of energy transferred per unit of time. Rather than an informal use of the word to
mean electricity
2133
Transport losses are caused by the electrical resistance of the network, even although this is minimised due to
the design of the network and the material used within the plant forming the network, however, it is not practical to
reduce this to zero, and is directly correlated to the square of the current, thus reducing the current by increasing
the voltage further reduced losses.

A3.4 Operation of Electricity Markets
The electricity market operates as a series of separate but linked trading operations,
where the separation is both (i) in time and (ii) by member state. The markets in
most member states are composed of five trading periods (i) forward and futures
market, (ii) day ahead market, (iii) intra-day market (trading on the day of delivery)
(iv) balancing market and (v) imbalance settlement. The mechanisms associated
with each of these timescales are outlined and illustrated in the diagram below.
Electricity within the EU (renewable or otherwise) is traded via a series of national

markets, with almost each member state having its own market. Despite this highly
segmented structure most markets follow the same topology and schedule. To give
an understanding as to how electricity is traded across the EU this Annex gives a
general outline of the market structure and the various segments within the market
leading to a market that transfers electricity from generator to consumer.
The initial market is composed of a financial forward market, bringing
together buyers and sellers to conclude trades for agreed volumes of electricity. The
market operates from 2 to 3 years ahead of the delivery day up to the day-ahead of

the day of delivery. The trades are typically undertaken using standardised contract
terms via a recognised exchange trading or bilaterally on an over-the-counter2134
basis with no requirement to use standardised terms (although trades tend to be via
pre-agreed terms).2135
The trades in this initial ‘forward and future markets’, can be between
different market areas or zones or within a market zone, with such trades simply
specifying the delivery location, volume and price. The associated transmission
capacity is usually traded in parallel to the electricity as a commodity. The auctioning
of cross-border transmission capacity in Central Western Europe is organised by the
2136
Joint Allocation Office within the terms of the Joint Capacity Allocation
2137
Regulation which ensures non-discriminatory allocation of cross-border
transmission capacity.
A special case of the forwards and futures market is the day-ahead market,
where trades are undertaken one day before actual delivery. This market is highly
important as at the end of the market’s trading window each period and each
transmission zone where delivery is going to occur must have a balance between
forecast generation and demand (i.e. generation facilities scheduled to operate and
deliver electricity to the market must equal forecasted demand, net of imports and
exports to other markets).
Most member states require the day ahead market to trade both electricity
as a commodity and applicable transmission capacity jointly (a so called ‘stapled
trade’ with the two elements together).
At the end of the day-ahead market (gate closure)2138 traders effectively have
a change of status, from purely financial bodies seeking to manage revenues from
generation sales and purchasers of supply for their end customers, to a body
2134
Over-the-counter (OTC) or off-exchange trading - A deal that is a customised derivative contract, usually
arranged with an intermediary such as a major bank or the trading wing of an energy major, as opposed to a
standardised derivative contract traded on an exchange. – Price Waterhouse Coopers , ‘Glossary of of terms used
in the trading of oil and gas, utilities and mining commodities’
2135
Hans-Martin Koopmann and René Vanhaesendonck, ‘Standard Agreements in European Energy Trade’ in
Martha Roggenkamp, Catherine Redgwell, Anita Ronne, and Inigo del Guayo (eds) Energy Law in Europe
2136
The JAO is a joint service company of twenty transmission system operators (TSOs) from seventeen countries
(The TSOs involved in the initiative are Germany's TenneT, 50Hertz, Amprion, and TransnetBW, Greece's Admie,
Austria's APG, Czech CEPS, Luxembourg's CREOS, Slovenia's ELES, Belgium's ELIA, Denmark's EnerginetDK,
Croatia's HOPS, Hungary's MAVIR, Poland's PSE, France's RTE, Slovakia's SEPS, Norway's Statnett, Swissgrid,
Dutch TenneT, and Italy's Terna) - See more at: https://seenews.com/news/casceu-cao-to-launch-joint-allocation-
office-for-cross-border-electricity-trading-482444#sthash.eQf9HJyG.dpuf
2137
EU Regulation 2016/1719 of 26 September 2016 ‘establishing a guideline on forward capacity allocation’ OJ L
259/42
2138
Gate Closure is the deadline for the participation to a given market or mechanism by providing technical and
price data regarding a generating facility to either the transmission system operator or market operator, as the
case may be. For a particular market trading period usually within the balancing market. In the majority of cases
this is 60 minutes ahead of ‘real-time’ operations – Mott Macdonald ‘Impact Assessment on European Electricity
Balancing Market’ [2013] EC DG ENER/B2/524/2011

responsible for balancing the volume of electricity input to the grid and the electricity
removed from the grid – a status known as a ‘balancing responsible party’ (BRP). At
gate closure each BRP submits a balanced portfolio of generation and consumer
demand to the transmission system operator (i.e. so-called ‘nominations’).
After the time of gate closure the transmission system operator will undertake
to dispatch2139 the generation to meet demand.
The day of delivery (the intra-day market) allows the fine tuning of traded
positions due to better weather forecasts giving a better view of the renewable
electricity facility’s output, unexpected power plant outages and other changes to
their portfolio. The trading in the intra-day market of most EU member states is
based on standard exchange-based terms.
At the time of physical delivery any generator or supplier (individual BRP)
might face an imbalance in the amount of electricity available due to a failure of a
generation facility within their portfolio or a consumer to whom they supply electricity
increasing demand unpredictably. Thus, imbalance is the net difference between the
BRP’s total generation inflow to the market and its demand supplied (outflow). The
BRP pays a ‘cash out price’ for the imbalances to a settlement function. The whole
process is known as ‘imbalance settlement’.
The transmission system operator maintains the system balance by
managing the dispatch of generation to meet demand. With the management of
generation dispatch considering instantaneous demand fluctuations, transmission
constraints (discussed in Section A3.5 below) and the actual output of generating
facilities operating this is a highly technical operation. As renewable generation is
accorded ‘priority dispatch’ the fluctuation in renewable generation output due to the
intermittency of wind and sun also add to the transmission system operator’s system
balancing tasks.2140 With imbalance settlement complete the total cost of
electricity supplied to the end consumer can be calculated. Thus, depending on the
abilities of the supplier to purchase electricity via the traded markets and forecast
demand this will dictate if a profit is made on the sale.
As has been outlined, with wind and sun unpredictable in nature the
derogation from imbalance settlement is particularly important for renewable
electricity generation. Therefore, any potential for changes to this regulatory process
are an area of considerable concern for renewable electricity facility owners, a fact
brought out by the empirical research findings (Section 4.5 Theme 1.3).
2139
A dispatch instruction is an instrunction given by the transmissions system operator to a generation facility to
produce a certain level of generated output. Such instructions are usually consistent with the volume and price
nominations submitted at gate closure
2140

A3.5 Transmission System Operator – Duties & Obligations
Since the separation of functions within the electricity market across the EU because
of the First2141 and Second2142 Energy Packages into generation, transmission and
supply, the role of the transmission system operator has been as owner and operator
of the transmission system, which is usually undertaken for the whole of a member
state (in Germany, however, the function is undertaken regionally). This has meant
that the transmission system operator would develop and maintain the transmission
system and, in most instances, operate the electricity market, as well as dispatching
generation facilities to meet demand.2143
However, since the implementation of the Transmission System Operation
Regulation2144 in 2017 the obligations around ownership (development of the assets,
maintenance and charging for the transport of electricity across the network) and
operation of the transmission system have been split. The system operator role
therefore is responsible for the operational security of the network, dispatching of
generating facilities (merit order dispatch), managing network constraints via
dispatch curtailment, 2145 operational reserve2146 and other ancillary services.
A3.6 Merit Order Dispatch
Merit order dispatch has been a core principle of electricity markets almost from their
foundation at the start of the twentieth century.2147 Merit order dispatch is a system
in which generating facilities with the lowest short-run marginal costs are used first
2141
2142
2143
Articles 2 and 12 of Directive (2009/72/EC), ‘concerning common rules for the internal market in electricity’
(the Electricity Markets Directive)
2144
EU Regulation ( 2017/1485) of 2 August 2017 ‘establishing a guideline on electricity transmission system
operation’ (Network Code on System Operation)
2145
2146
In order to ensure that the flow of electricity is maintained the transmissions system operator will ensure that a
certain quantity of generating plant is kept in reserve such that it can be brought into operation and dispatch
electricity to the transmission system quickly. The transmission system operator will organise this resever into
different categories dependent upon the time within which the facility can be dispatched. Such categoties are
usually called (i) primary reserve; which would be operational almost immediately and (ii) secondary reserve
which would become operational in a few minutes if needed. Further information on operational reserve can be
obtained from https://www.nationalgrid.com/sites/default/files/documents/STOR%20v1.1.pdf accessed 24
September 2018; See Also Eirik Amundsen and Lars Bergmancle, ‘Provision of Operating Reserve Capacity:
Principles and Practices on the Nordic Electricity Market, (2007) 2(1) Competition and Regulation in Network
Industries
2147
Monopolies and Mergers Commission, ‘Central Electricity Generating Board: A Report on the Operation by the
Board of its System for the Generation and Supply of Electricity in Bulk’ (1981) HC 315, HMSO

to meet demand and more costly plants are only used as demand increases and
exceeds operating (dispatched) generating capacity.
This means that periods with lower electricity demand should have a lower
cost than periods with a higher demand, e.g. night is cheaper than day and summer
is cheaper than winter. Renewable electricity facilities currently hold a derogation
from participation in these mechanisms and the generated output is seen by merit
order dispatch mechanisms as negative demand. In other words, renewable
generating facilities simply generate when wind or solar resources are sufficient to
so allow, and the output is incorporated within the market as a demand reducing
mechanism. This can make the forecasting of demand, and thus generation capacity
to be dispatched to meet this demand, less predictable. The derogation from priority
dispatch mechanisms, as it relates to renewable electricity, is in diagonal conflict
with the market segmentation prohibition of the state aid provisions of the Treaty
(Article 107 TFEU & set out in Section 2.10.7).
The market mechanism composed of the traded markets outlined above,
leading to the day ahead and balancing market still employ the principles of the merit
order system. The principle is used by the transmission system operators when they
seek to balance system flows and optimise the flows on the network within the
dispatch timescale after ‘gate closure’. 2148
Various economic processes are used to determine the merit order in the
electricity markets across the EU, these processes are outside the scope of this
research.2149
A3.7 Transmission Constraints - Curtailment
Much of the electricity market is undertaken based on a deemed transmission

system of infinite capacity. However, this is not the case and constraints or
bottlenecks in the system need to be considered by the transmission system
operator in managing actual flows.
2148
Gate Closure is the deadline for the participation to a given market or mechanism by providing technical and
price data regarding a generating facility to either the transmission system operator or market operator, as the
case may be. For a particular market trading period usually within the balancing market. In the majority of cases
this is 60 minutes ahead of ‘real-time’ operations – Mott Macdonald ‘Impact Assessment on European Electricity
Balancing Market’ [2013] EC DG ENER/B2/524/2011
2149
For an introduction to the econmic principles of merit order dispatch see Arthus Mazer Electric Power Planning
for Regulated and Deregulated Markets (Wiley, 2006); Alexander Eydeland and Krzysztof Wolyniec Energy and
Power Risk Management: New Developments in Modeling, Pricing, and Hedging (Wiley, 2002)

These constraints mean that certain generating facilities will have to be shut
down or have their output pegged back (have their operation ‘curtailed’)2150 and
other facilities dispatched to manage the flows across the network. This is
undertaken via a process known as active network management (ANM), which is
the control of electricity generation, voltage and frequency within the network using
remote control and communication technologies.2151
When generating facilities have their operation curtailed in most European
electricity markets they will receive compensation equal to the price bid by the
generator to be shut down or curtailed. The amount of money paid to generators in
curtailment costs is a highly sensitive issue within most member states and
transmission system operators are usually incentivised to reduce these costs.2152
Historically renewable electricity facilities have been given priority dispatch,
meaning that they are dispatched first and thus any curtailment is managed by the
dispatch of coal and gas fuelled generation. This practice was put in place to
maximise the output of carbon emissions free renewable facilities (part of the
overriding objective2153 principle for renewables). The practice was also employed
such that renewable electricity facilities would not be penalised for transmission
network capacity inadequacies, as well as to protect them from possible anti-
competitive behaviour of imperfectly unbundled vertically integrated utilities. 2154
However, where renewable generation is curtailed it has received compensation at
the price contained in its feed-in tariff, which is usually considerably above the
wholesale market price for electricity.
The issue of priority dispatch and curtailment cost reforms for renewable
generation is set out in Section A3.8.
2150
Curtailment is a reduction in the output of a generator from what it could otherwise produce given available
resources, typically on an involuntary basis. Curtailment of generation has been a normal occurrence since the
beginning of the electricity industry - https://www.nrel.gov/docs/fy14osti/60983.pdf accessed 22 September 2018
2151
CIGRE Working Group C6.11, 2011. Development and Operation of Active Distribution Networks CIGRE
2152
Hans Schermeyer, Claudio Vergara and Wolf Fichtner, ‘Renewable energy curtailment: A case study on
today's and tomorrow's congestion management’ (2018) 112 Energy Policy, 427; Michael Joos and Iain Staffell,
‘Short-term integration costs of variable renewable energy: Wind curtailment and balancing in Britain and
Germany’ (2018) 86 Renewable and Sustainable Energy Reviews, 45; Jing Hu, Robert Harmsen, Wina Crijns-
Graus, Ernst Worrell and Machteld van den Broek, ‘Identifying barriers to large-scale integration of variable
renewable electricity into the electricity market: A literature review of market design’ (2018) 81 Renewable and
Sustainable Energy Reviews, 2181; Laura Kane and Graham Ault, ‘A review and analysis of renewable energy
curtailment schemes and Principles of Access: Transitioning towards business as usual’ (2014) 72 Energy Policy,
67
2153
2154
EU Commission SWD(2013) 439 ‘Delivering the internal market in electricity and making the most of public
intervention’ available at
https://ec.europa.eu/energy/sites/ener/files/documents/com_2013_public_intervention_swd04_en.pdf accessed
12 September 2017

A3.8 Renewable Generation & Priority Dispatch
For renewables the ability to predict generated output is limited due to its
reliance on the availability of wind and solar resources, hence renewable electricity
generation has hitherto been exempted (derogation) from merit order dispatch and
imbalance settlement to facilitate the development of this type of generation
capacity, rather than ‘punish’ it for issues that are out with its control.2155 Priority
dispatch for renewable electricity was introduced, at the EU level, within the first
Renewable Energy Directive2156 in 2001 and was further refined in Article 16(2)(c) of
the 2009 Renewable Energy Directive 2157 (See Section 2.10.7). Member states are
required to minimise the curtailment of electricity produced from renewable
sources.2158 Thus priority dispatch is a policy and legal choice driven by EU law.
The continuation of these derogations is now being questioned across the
EU.2159
The potential removal of priority dispatch by reform to market mechanisms,
initiated at both EU and member state level is an issue seen to be a significant
regulatory risk by the Developer Operator respondents to the empirical phase of the
research set out in Section 4.5 – Theme 1.3.
A3.9 Embedded Benefits
The final feature of the electricity market set out in this chapter is what is known as
embedded benefits. This is an issue of high significance for renewable electricity
facilities as they derive revenue from a share in the reduced costs imposed on the
electricity network. Thus, during the empirical research, any change to the
mechanisms surrounding the sharing of embedded benefits was seen by the
developer operators to be a regulatory risk, whereas the regulator respondent saw
the termination of the practice as simply restoring the equitable balance of cost-
sharing across the industry.
2155
Reinier van der Veen, Rudi Hakvoort, ‘The electricity balancing market: Exploring the design challenge’ (2016)
43(B) Utilities Policy 186
2156
2157
content/EN/TXT/PDF/?uri=CELEX:32009L0028&from=EN – ‘Member States shall ensure that when dispatching
electricity generating installations, transmission system operators shall give priority to generating installations
using renewable energy sources in so far as the secure operation of the national electricity system permits and
based on transparent and non-discriminatory criteria.’
2158
Article 16(2)(c)(7) of 2009 Renewable Energy Directive (2009/28/EC)
2159
Michael Joss and Iain Staffell ‘Short-term integration costs of variable renewable energy: Wind curtailment and
balancing in Britain and Germany’ (2018) 86 Renewable and Sustainable Energy Reviews 45; See Also Hans
Schermeyer, Claudio Vergara and Wolf Fichtner, ‘Renewable energy curtailment: A case study on today's and
tomorrow's congestion management’ (2018) 112 Energy Policy 427

Generating facilities (renewable and other forms) connected to the
distribution network (called ‘embedded generation’) do not pay charges related to
the transmission network as the output from such facilities is deemed to be used
within the distribution network to which the embedded generation is connected. The
output is considered to reduce the net electricity flows across the transmission
network (the ‘net power flows principle’).
As transmission charges are related to the amount of electricity on the
transmission network, any supplier which sells electricity to consumers within the
same distribution network as it has purchased the output of the embedded
generation, pays lower charges – it is billed ‘net’ of the generated output. The portion
of the saving passed on to the embedded generator depends on the terms of the
power purchase agreement between the generator and the supplier.
The net power flows principle also leads to a series of indirect benefits to the
embedded generator. There are several other charges that are calculated based on
the supplier’s ‘net’ electricity flows. These include transmission losses,2160 balancing
charges2161 and charges related to credit requirements. Again, the proportion of the
savings passed on to the embedded generator depends on the power purchase
agreement.
Separately, embedded generators allow electricity consumers to avoid so-
called transmission network charges 2162 – with the proportion passed on to the
embedded generator depending on the power purchase agreement.
The share of embedded benefits received by renewable electricity facilities
connected to the distribution system is regarded by the owners and operators of the
facilities during the empirical research (See Section 4.5 Theme 1.3) as a welcome
source of additional revenue. The practice was reviewed by the CJEU in the Essent
22163case (See Section 3.5.13), where it was found that the declaring and sharing of
embedded benefits should be prohibited as it was allowing certain market
participants to receive a benefit not open to others and thus discriminatory. The
practice can thus be considered a diagonal conflict with the anti-state aid (Article
107 TFEU) provisions of the Treaty.
2160
Transmission losses occur when electricity is transported across the transmission network. Therefore reducing
the flows across the transmission network reduces these losses and thus the cost savings can be shared with
embedded generation facilities.
2161
Balancing Costs is the cost imposed on generators and suppliers as a result of a miss-match between the
amount of electricity forecast to be made available at the time of physical delivery or the demand to be placed on
the transmission system.
2162
Transmission network charges are the largest of the embedded benefits as net flows reduce the electricity
flows on the transmission system, hence as a result of the embedded generation the savings can be shared with
the facility’s owners
2163

Developer operators, however, saw this as another example of regulatory
risk which required careful management.
A3.10 Nodal Pricing
The electricity market model outlined above, in the most part, assumes that each
member state will have its own electricity market and the market will cover all
generating facilities and demand points in the member state. A single market price
is derived and used in the financial settlement of the flows of electricity. Issues such
as transmission constraints and curtailment are managed as a separate process
within the imbalance settlement mechanism.
Nodal pricing 2164 would take each point where a generation facility or a
demand source was connected to the network as a separate point at which to derive
a price for electricity.2165 Thus instead of one price for the whole market or member
state, there would be a multiplicity of prices.2166 The use of nodal pricing makes
dealing with transmission constraints and curtailment easier and more
2167
transparent, as the price paid to generating facilities curtailed is the price at that
point in the electricity network (or node).2168 Also where electricity is being sent a
considerable distance from a generating facility to a demand point, the costs of the
transmission network flows can be calculated using a similar nodal method. 2169
Considerations such as ‘marginal nodal pricing’ or ‘pricing as bid’,2170 as well
as the various pricing algorithms to derive a nodal price are outside the scope of this
research.2171
2164
The technical implementation of nodal pricing is outside the scope of this research however, an introduction to
the subject can be obtained from Martin Weibelzahl, ‘Nodal, zonal, or uniform electricity pricing: how to deal with
network congestion’ (2017) 11(2) Frontiers in Energy 210
2165
Richard Green, ‘Nodal pricing of electricity: how much does it cost to get it wrong?’ (2007) 31 Journal of
Regulatory Economics 125
2166
Fred Schweppe, Michael Caramanis, Richard Tabors and Roger Bohn Spot Pricing of Electricity (Springer,
1988)
2167
Roger Bohn, Michael Caramanis and Fred Schweppe, ‘Optimal pricing in electrical networks over space and
time’ (1984) 15(3) Rand Journal of Economics 360; Martin Weibelzahl, ‘Nodal, zonal, or uniform electricity pricing:
how to deal with network congestion’ (2017) 11(2) Frontiers in Energy 220
2168
Endre Bjørndal, Mette Bjørndal and Victoria Gribkovskaia, ‘A Nodal Pricing Model for the Nordic Electricity
Market’ [2014] Norwegian School of Economics Working Paper
2169
R Kovacs and A Leverett, ‘A load flow based method for calculating embedded, incremental and marginal cost
of transmission capacity’ (1994) 9(1) IEEE Transactions on Power Systems
2170
Marginal nodal pricing is where all accepted offers in the same node are paid the same nodal price. The nodal
price is determined by the node's marginal offer. In a pay-as-bid nodal pricing model, all accepted offers are paid
according to their offer price - Pär Holmberg and Ewa Lazarczyk, ‘Congestion management in electricity networks:
Nodal, zonal and discriminatory pricing’ [2012] Electricity Policy Research Group- Working Paper 1209
2171
Karsten Neuhoff and Rodney Boyd ‘Technical Aspects of Nodal Pricing’ [2011] Climate Policy Initiative
Working Paper

A3.11 Conclusion
The structure and main features of the electricity market relating to renewable
electricity set out in this chapter show that the market does not simply operate in the
moment but is a process that starts several years before, with traded markets seeing
market operators undertaking initial trading activity some three to four years before
the actual dispatch of the asset.2172
Additionally, the advantages of priority dispatch and embedded benefits
enjoyed by renewable electricity are themes which will be returned to during the
empirical phase of this research. These practices must also be understood as they
are seen to be in diagonal conflict with various aspects of the requirements of Article
107 TFEU prohibiting state aid (See Section 2.10.7 and 3.5.13).
2172
https://business.nasdaq.com/trade/commodities/products/power-derivatives/UK-power.html

Annex 4 - Service of General Economic Interest & State Aid
There are areas which the TFEU has defined as allowable state aid. These are set
out in Article 107(2) TFEU as - aid having a social character, granted to individual
consumers (granted without discrimination related to the origin of products); aid
following natural disasters; aid granted following reunification of Germany.
Additionally, Article 107(3) TFEU, sets out activities which may be justified –
promoting economic development of depressed areas; promoting the execution of
an important project of common European interest; facilitating the development of
certain economic activities relating to the common interest;2173 promoting culture and
heritage conservation; other categories of aid specified by the Council on a proposal
from the Commission.
Therefore, payments which can be shown to be for a purpose of general
economic interest can be regarded as allowable forms of aid – Orange v
Commission.2174 Services of general economic interest are economic activities that
public authorities identify as being of particular importance to citizens and that would
not be supplied (or would be supplied under different conditions) if there were no
public intervention - examples being transport networks, postal services and social
services.2175
State aid control comes into play when these services are provided by a
company and financed through public resources, in particular because overly
generous compensation could enable the service providers to cross-subsidise their
other commercial activities, and thereby distort competition. 2176 In Wallon &
Glaverbel v Commission 2177 the court held that general economic interest, in
accordance with Article 107(3)(b), would include areas of cross-EU co-operation in
environmental protection or other projects:-
Common European interest is a scheme… that forms part

of a transnational European programme supported jointly
by a number of governments of the member states, or
2173
State aid granted for objectives of the common interest is compatible with Article 107(3)(c) Case T-177/07
Mediaset v Commission ECLI:EU:T:2010:233 para 125
2174
Case T-385/12, Orange v Commission, ECLI:EU:T:2015:117, para 43
2175
EU Communication 2012/C 8/02, ‘State aid rules to compensation granted for the provision of services of
general economic interest’OJ C8/4; See Also EU Communication ‘Services of General Interest In Europe’ OJ
2001 C17 – this was confirmed in April 2018 via Case C-91/17 Cellnex Telecom v Commission
ECLI:EU:C:2018:284 – where is was held that (i) state intervention is justified only when there is market failure,
meaning that before a public service obligation (PSO) is imposed, the market failure must be demonstrated with
objective evidence, (ii) A PSO must be clearly defined, (iii) one or more undertakings must be made responsible,
by law or through contract, to supply the service, and (iv) the selection of the supplier(s) and well as their
compensation must be determined according to the procedures laid down in the 2012 Services of General
Economic Interest EU Framework
2176
http://ec.europa.eu/competition/state_aid/overview/public_services_en.html
2177
Case C-62/87 Executif Regional Wallon & Glaverbel v Comission, ECLI:EU:C:1988:132, para 22

arises from concerted action by a number of member
states to combat a common threat such as environmental
pollution.

Annex 5 - State Aid - General Block Exemption Regulation
(GBER)2178
State funding meeting the criteria in Article 107(1) TFEU constitutes state aid and
requires notification to the Commission in accordance with Article 108(3) TFEU.
However, according to Article 109 TFEU, the Council may determine categories of
aid that are exempted from this notification requirement. In accordance with Article
108(4) TFEU the Commission may adopt regulations to this effect, these regulations
being the General Block Exemption Regulation (GBER). With this regulation, the
Commission can declare specific categories of state aid compatible with the Treaty
if they fulfil certain conditions, thus exempting them from the requirement of prior
notification and Commission approval. As reported in the June 2018 report on
competition policy, more than 97% of all new aid measures are implemented based
on the GBER.2179
The GBER allows member states to provide aid up to a threshold (known as
‘aid intensity’)2180 in a series of categories without the need to notify the Commission
that the aid has been granted. The GBER frees categories of state aid from reporting
requirements where the benefits of such aid are deemed to outweigh the possible
distortions of competition in the single market triggered by the public funding.2181 The
GBER empowers the Commission to declare, in accordance with Article 109 TFEU,
that certain categories of aid may, under certain conditions, be exempted from the
notification requirement, including aid in favour of environmental protection.2182
The GBER contains provisions to help member states meet their EU 2020
climate targets,2183 to gradually move to market based support for renewable energy,
2178
('GBER')
2179
EU COM(2018) 482 final 18 June 2018 ‘Annual Report on Competition Policy 2017’ - The Annual Report and
the Staff Working Paper can be accessed at:
http://ec.europa.eu/competition/publications/annual_report/index.html.
2180
‘aid intensity’ means the aid amount expressed as a percentage of the eligible costs – it is the means of
calculating the maximum amount of state aid that can be granted to a particular organisation operating in a
particular sector – The GBER specifies aid intensities for different sectors below which the notification of state aid
is not required. available at http://ec.europa.eu/competition/state_aid/studies_reports/sme_handbook.pdf access
10 April 2018
2181
European Commission Memo 14/369 21 May 2014 ‘State aid: Commission adopts new General Block
Exemption Regulation (GBER)’ available at www.europa.eu/rapid/press-release_MEMO-14-369_en.doc accessed
10 April 2018
2182
Ibid
2183
('GBER'), para 41

to incentivise companies to take early steps to meet EU standards,2184 provide aid
for up to 100% of the costs of remediating contaminated land,2185 allow operating aid
for the additional costs for production of renewable electricity2186 and operating aid
for small scale renewable energy installations. 2187 Also, aid in order to facilitate
environmental studies,2188 the rehabilitation of buildings,2189 and waste recycling is
included in the Regulation.2190 A recent example of the application of the GBER is
the finding of the Commission related to state aid support for the installation of solar
panels on buildings in Germany.2191 In the Commission’s reasoning for its approval
the scheme demonstrates an almost text book set of approved criteria (i)
contribution to a well-defined objective of general economic interest; (ii) need for
State intervention, as the measure is targeted towards a situation where aid can
bring about a material improvement that the market alone cannot deliver, remedying
a well-defined market failure; (iii) appropriateness of the aid measure, addressing
an objective of common interest 2192 of the EU – increasing the deployment of
renewable facilities; (iv) incentive effect, the aid changes the behaviour of the entity
concerned in such a way that it engages in additional activity which it would not be
carried out without the aid; (v) proportionality of the aid, the aid amount is limited to
the minimum needed to incentivise the investment; (vi) avoidance of undue negative
effects on competition – the incentive was focussed very much on the consumption
of the output from the solar facilities within the building on which they were mounted
and (vii) transparency.2193
Additionally, on 18 May 2018 the Commission made proposals to amend the
GBER to make it easier to ascribe aid given to projects enhancing energy networks,
combatting pollution and climate change as compatible with the internal market2194
(as well as other objectives outside the scope of this research).2195 These proposals
2184
Ibid, para 36(1)
2185
Ibid, para 45
2186
Ibid, para 42
2187
Ibid, para 43
2188
ibid, para 49
2189
Ibid, para 39
2190
Ibid, para 47
2191
Commission Decision SA 48327 - February 2018, available at
http://ec.europa.eu/competition/elojade/isef/case_details.cfm?proc_code=3_SA_48327 accesed 19 June 2018
2192
2193
Edwardo Cadette, ‘European Commission approves State aid scheme for solar panels in rented residential
buildings in Germany’ May 2018 Morais Leitão, Galvão Teles, Soares da Silva & Associados Newsletter available
at
https://www.mlgts.pt/xms/files/Publicacoes/Newsletters_Boletins/2018/Newsletter_Europeu_e_Concorrencia_28_
EN.PDF accessed 19 June 2018
2194
2195
EU COM(2018) 398/2 2018/0222 ‘amending Council Regulation (EU) 2015/1588 of 13 July 2015 on the
application of Articles 107 and 108 of the Treaty on the Functioning of the European Union to certain categories of
horizontal State aid’

were made in recognition of the need to align centrally managed EU funds and funds
from member states in the development of assets compatible with the stated priority
areas. This alignment will make it easier to develop much needed electricity
networks to enhance interconnectivity.2196 This is an issue set out in the empirical
research phase and in the recommendations for regulatory reform in Chapter 6.
2196
Ibid, explanitory memorandum

Annex 6 - 2014 Guidelines on State Aid for Environmental
Protection & Energy2197
Due to the feed-in tariff payments made to renewable energy generating facilities or
the granting of green certificate that can be traded to recover additional revenue,
there is potential for market distortion – examples of such cases being Vent De
Colère, 2198 Austrian Green Levy 2199 and German Green Levy 2200 (see Sections
3.5.10 to 3.5.12). As outlined above, the European Commission published
Guidelines2201 on public support for projects in the field of environmental protection
and renewable energy on 9 April 2014. These 2014 Guidelines allow the payment
of operating aid to renewable generating facilities to cover the difference between
production costs and wholesale market prices.2202 The 2014 Guidelines outline that
state aid is allowed ‘which does not adversely affect trading conditions to an extent
contrary to the common interest’.2203 The 2014 Guidelines were challenged in two
annulment cases, both of which were dismissed.2204
The 2014 Guidelines are stated to provide guidance on how member states
can reach their 2020 renewable energy and climate targets, while addressing the
market distortions that may result from subsidies granted to renewable energy
sources. To this end, the Guidelines promote a transition to market-based support
for renewable energy.2205 They also provide criteria on how member states can
relieve energy intensive companies that are particularly exposed to international
competition from charges levied for the support of renewables.2206 Furthermore, the
2014 Guidelines include new provisions on aid to energy infrastructure and
generation capacity to strengthen the internal energy market and ensure security of
supply.2207 The 2014 Guidelines have brought about the need for economic and
financial analysis in assessing the appropriateness of any state aid in the energy
2197
European Commission Communication ‘Guidelines on state aid for Environmental Protection and Energy
2014 – 2020, 2014/C OJ 200/01.
2198
durable, des Transports et du Logement, Ministre de l’Économie, des Finances et de l’Industrie, ECLI, 2013
2199
2200
2201
– 2020, 2014/C OJ 200/01
2202
Ibid, Article 3(23) provided the assessment criteria in Article 3(1) are satisfied
2203
Ibid, Article 2
2204
Case T-694/14 European Renewable Energies Federation v Commission ECLI:EU:T:2015:915 and Case T-
670/14 Milchindustrie-Verband v Commission ECLI:EU:T:2015 :906
2205
2014 – 2020, 2014/C OJ 200/01, Article 50 and 51; See also Pablo Del Rio and Pere Mir-Artigues, ‘Combinations
of Support Instruments for Renewable Electricity in Europe: A Review’ (2014) 40 Renewable and Sustainable
Energy Reviews, 287, 293; E Szyszczak, 'Time for Renewables to Join the Market: the New Guidelines on state
aid for Environmental Protection and Energy' (2014) 5(9) Journal of European Competition Law and Practice, 616
and 622.
2206
Ibid, Section 3(7), Articles 167-172
2207
Ibid, Section 3(8)

sector. An example of this kind of analysis is the state aid investigation relating to
the contract for difference (CfD),2208 for the conversion of RWE's Lynemouth power
plant from coal to biomass.2209
In granting aid to renewable projects, the 2014 Guidelines establish seven
criteria that must be satisfied.
1 Contribution to an objective of common interest
The 2014 Guidelines state that the objective in relation to energy is to develop ‘a
competitive, sustainable and secure energy system in a well-functioning Union
energy market’, 2210 where member states have effectively defined the pursuit of
renewable energy facilities and carbon emission reductions as the objectives of
common interest2211 in line with the decisions of the Commission in this area.2212
2 Need for State Intervention
The need for state intervention is considered accepted where a market failure exists
(positive or negative), such as the failure to internalise the costs of carbon
emissions, where the failure is not corrected by other elements of the renewables
energy regulatory framework (such as the emission trading scheme). 2213 An
example of such a market failure is the UK Contract for Difference for Renewables,
where the Commission accepted the residual carbon externality, as the carbon price
was not high enough to overcome the externality.2214
2208
A contract for difference (CFD) is essentially a contract between two parties, whereby the parties exchange
the difference between the market prices for electriity and the reference price in the CFD – in the context of
renewables in the UK a CfD is a private law contract between a low carbon electricity generator and the Low
Carbon Contracts Company (LCCC), a government-owned company – available at
https://www.gov.uk/government/collections/electricity-market-reform-contracts-for-difference accessed 9 July 2018
2209
December 2015, the Commission approved the CfD as compatible aid; See European Commission, Decision
of 10 April 2015 concerning State aid SA.38762 (201 5/C) (2014/N)-United Kingdom, Investment Contract for
Lynemouth Power Station Biomass Conversion, C/i 16/2015, 52
2210
– 2020, 2014/C OJ 200/01, Article 30
2211
2212
for example European Commission, Decision of 23 July 2014 concerning Electricity Market Reform, Contract
for Difference for Renewables in the United Kingdom, SA.36196, para 52-53; European Commission, Decision of
23 July 2014 concerning Support for five offshore wind farms: Walney, Dudgeon, Hornsea, Burbo Bank and
Beatrice in the United Kingdom, SA.38758, SA38759, SA.38761, SA.38763 & SA.388121, para 56-57; European
Commission, Decision of 28 October 2014 concerning aid to household wind turbines and offshore wind turbines
with an experimental aspect in Denmark, SA.37122, para 42
2213
– 2020, 2014/C OJ 200/01, Article 34-39
2214
European Commission, Decision of 23 July 2014 concerning Electricity Market Reform, Contract for Difference
for Renewables in the United Kingdom, SA.36196

3 Appropriateness of the Aid
In assessing the appropriateness of the aid, a two-step approach is set out (i) other
policy instruments must be considered, such as regulation, market-based
instruments or soft instruments like labelling and education campaigns2215 and (ii) if
aid is necessary, the aid mechanism implemented should be such that it generates
the minimal distortions to trade or competition.2216
4 Incentive Effect
The 2014 Guidelines state that the aid must incentivise ‘the beneficiary to change
its behaviour to increase the level of environmental protection or to improve the
2217
functioning of a secure, affordable and sustainable energy market’.
Demonstrating the incentive effect is straight forward and uncontroversial in relation
to renewable energies, whose generation costs tend to be higher than market
prices.2218
5 Proportionality of the Aid
There is a general presumption that any aid must be proportionate2219 and as such
limited to the amount required to achieve the defined objective.2220 When reviewing
an individual case the reasonable rate of return (10% being considered applicable
for electricity generation)2221 will be considered as compared to the rates of return
found for similar projects.2222 It is generally accepted by the Commission2223 that the
2215
– 2020, 2014/C OJ 200/01, Article 40-44
2216
Ibid, Article 45-48
2217
Ibid, Article 49
2218
European Commission, Decision of 23 July 2014 concerning Electricity Market Reform, Contract for Difference
for Renewables in the United Kingdom, SA.36196, para 60-62
2219
of European Law
2220
– 2020, 2014/C OJ 200/01, Article 69
2221
European Commission, Decision of 24 October 2014 concerning aid to photovoltaic installations and other
renewable energy installations in Denmark, SA.36204 para 41; European Commission, Decision of 14 January
2013 concerning aid for all forms of biogas use in Denmark, SA.35485, para 36 – However, the Commission has
gone as high as 12% (European Commission Decision of 28 October 2014 concerning support scheme for
electricity produced from renewable sources and efficient cogeneration in Estonia, SA.36023, para 111) and as
low as 6% (As part of the implementation of the German Support scheme, see also European Commission
decisions: state aid SA.39723, SA.39724, SA.39725, SA.39726, SA.39731, SA.39732, SA.39733, SA.39735,
SA.39738, SA.39739, SA.39741, SA.39742 (2014/N); SA.39722, SA.39727, SA.39728, SA.39729, SA.39730,
SA.39734, SA.39736, SA.39740 (2015/NN) -Germany, Support to 20 large offshore wind farms under the EEG
Act 2014, Brussels, 16.04.2015, C(201 5)2580 final.
2222
2014 – 2020, 2014/C OJ 200/01, Article 84
2223
Comission Decision of 23 July 2014 concerning Support for five offshore wind farms: Walney, Dudgeon,

proportionate obligation and requirement to limit aid to the minimum required, are
satisfied if any aid allocated follows an auction or competitive bidding processes.2224
From January 2016, renewable schemes were required to comply with the following
(i) selling their electricity directly to the market, with the aid allocated being in the
form of a premium to market prices; (ii) schemes are to be subject to standard
network balancing responsibilities; and (iii) generators are to have no incentive to
sell at negative prices.2225 Additionally, from 1 January 2017, competitive bidding
has become compulsory, unless member states can demonstrate that eligibility is
very limited, as this should provide the most competitive projects.2226 As has been
stated above, these processes have resulted in the UK’s Hornsea 3 Project bidding
an auction price of 57.5 £/MWh during the 2017 CfD auction – a price comparable
with thermal generation and the wholesale market – known as grid parity pricing.2227
6 Avoidance of Undue Negative Effects on Competition and Trade
This criterion requires that the negative effects of the aid on competition and the
market must be outweighed by the effects of achieving the common interest
objective,2228 being aware of locational effects2229 and the position of competitors.2230
7 Transparency
There is a requirement to be transparent by publishing the (i) full text of the

aid scheme of the undertaking/individual aid, (ii) identity of the granting authority, (iii)
identity of the beneficiaries, the form and amount of the aid, (iv) the date of granting,
(v) the type of undertaking, (vi) the region where the beneficiary is located and (vii)
the economic sector in which it is active.2231
In addition to the above steps for the analysis of the compatibility of state aid
with the requirements of Article 107 TFEU, the 2014 Guidelines sets out steps to
assess the compatibility of aid granted to ensure electricity generation capacity is
adequate, in general, via capacity mechanisms.2232 For example, it is a key feature
Hornsea, Burbo Bank and Beatrice in the United Kingdom, SA.38758, SA38759, SA.38761, SA.38763 &
SA.388121
2224
– 2020, 2014/C OJ 200/01, Article 109
2225
Ibid, Article 124
2226
Ibid, Article 126
2227
Daniel Radov, Alon Carmel and Clemens Koenig, ‘Offshore Revolution? Decoding the UK Offshore Wind
2228
– 2020, 2014/C OJ 200/01, Article 88 - State aid granted for objectives of the common interest is compatible with
Article 107(3)(c) Case T-177/07 Mediaset v Commission ECLI:EU:T:2010:233 para 125
2229
Ibid, Article 89
2230
Ibid, Article 90
2231
Ibid, article 104
2232
Ibid, Article 219

of the UK electricity market to ensure sufficiency of generation capacity to meet peak
demand.2233 The reserve margin2234 requirement, and therefore its effect on price as
the margin decreases, has traditionally been expected to provide a stronger and
earlier investment signal, thereby ensuring adequate electricity generation capacity
and more stable electricity prices; however this is not always the case.2235 Once
again, as has been stated with regards to renewables support schemes (Vent De
Colère,2236 Austrian Green Levy2237 and German Green Levy2238 Sections 3.5.10 to
3.5.12), the design of the capacity mechanism is key to it not being declared state
aid as the CJEU declared in the Tempus Energy2239 case.
It should be noted that the increase in network interconnection as
transmission technology develops, may well remove the need for capacity
mechanisms, as reserve capacity can be shared between member states more
readily.2240
The 2014 Guidelines also allow, under certain restrictions, the reduction of
exemption of intensive energy users from the obligation to pay ‘green’ levies or
environmental taxes.2241 (This being a key issue in the case relating to reductions in
the amount of ‘green levy’ paid by intensive energy users – see Vent De Colère,
Austrian Green Levy, and German Green Levy). It should be noted that in
accordance with a 2018 Decision2242 the Commission has declared reductions in
levy charges for ‘electro-intensive undertakings’ are also allowable state aid.
Lastly, the 2014 Guidelines set out the details of the instances of aid, above
which a notification must be sent to the Commission.2243 The three most important
2233
Pradyumna Bhagwat, Kaveri Lychettira, Jorn Richstein, Emile Chappin and Laurens De Vries, ‘The
effectiveness of capacity markets in the presence of a high portfolio share of renewable energy sources’ (2017) 48
Utilities Policy, 76; See Also Nicole Robins and Tridevi Chakma,’ state aid in Energy under the Spotlight:
The Implications of the Hinkley Point Decision’ (2016) 2 European state aid Quarterly, 247, 257
2234
reserve margin or capacity margin is defined as ‘the excess of installed generation capacity over demand’.
The de-rated capacity margin is defined as ‘the expected excess of available generation capacity over demand’ -
Socrates Mokkas and Karen Mayor,’ Electricity Capacity Assessment: Measuring and modelling the risk of supply
shortfalls’ (2011) Office of gas and electricity markets (Ofgem) https://www.ofgem.gov.uk/ofgem-
publications/40421/capacityassessmentconsultationdocument.pdf accessed 29 April 2018
2235
Cynthia Bothwell and Benjamin Hobbs, ‘Crediting wind and solar renewables in electricity capacity markets:
the effects of alternative definitions upon market efficiency’ (2017) Energy Journal, 38; The mechanism was
challenged by two cases Case T-788/14 to 793/14 MPF Holdings v Commission, application lodged on 28
November 2014 (withdrawn on 28 February 2017) and Case T-793/14 Tempus Energy and Tempus Energy
Technology v Commission, application lodged on 4 December 2014
2236
durable, des Transports et du Logement, Ministre de l’Économie, des Finances et de l’Industrie, ECLI, 2013
2237
2238
2239
Case T-793/14 Tempus Energy v Commission ECLI:EU:T:2018:790
2240
EU COM (2015) 80 'A Framework for a Resilient Energy Union with a Forward-Looking Climate Change
Policy'
2241
– 2020, 2014/C OJ 200/01, Section 3(7), Article 167-172
2242
2243
Guidelines on state aid for Environmental Protection and Energy 2014 – 2020, 2014/C 200/01, Article 2

notification criteria in relation to renewable energy are (i) investment aid which
exceeds €15m, (ii) operating aid for renewable generating capacity above 250MW,
and (iii) aid for energy infrastructure where the total amount of aid exceeds €50m.

Annex 7 – Thematic Analysis Coding Scheme
Code Title Code Definition
1 Asset Life Extension The extension of the operational life of the

generating facility beyond its original design life
2 Business Model A financial forecast of the revenues and costs of a

generating facility
3 Command and That form of regulation where limits and targets

Control Regulation are mandatory on those to whom the regulation is
addressed
4 Information Arbitrage The financial benefit to be gained by one player’s

more complete understanding of the market at any
point in time from investment decision to closure
5 Internal Rate of A discount rate that makes the net present value
Return (NPV) of all cash flows from a project equal to zero
6 Lobbying The declared use of a form of advocacy with the

intention of influencing decisions made by the
governments, regulators or industry groups
7 Long-term View Is the period over which regulatory risk and

scenario modelling are undertaken. The timescale
relating to the asset life.
8 Market Based That form of regulation where market

Regulation mechanisms such as price discovery and trading
are used to bring economic rigor to an outcome
9 Mitigation The reduction of the effect or risk of an event via

the putting in place of a contractual or operational
process to reduce the effect of the risk
10 Network The level of connection between the electricity

Interconnection networks of two adjacent member states
11 Network Use of The charges for the transport of electricity across

System (TNUoS) the transmission or distribution network

12 Rate of Return The annual income from an investment expressed
as a proportion (usually a percentage) of the
original investment
13 Regulatory The process of negotiating the regulatory

Negotiation framework with the EU, applicable governments
and regulators
14 Regulatory A state of the regulatory framework which shows

Complexity a level of intricacy and interactivity such that the
framework is multifaceted and acts at a series of
governance levels
15 Regulatory Risk The risk that the regulatory framework existing at

the time the investment decision is made is
substantially changed to the detriment of asset’s
cash flows during the operational life of the asset
16 Regulatory The level of volatility that surrounds the regulatory

Uncertainty framework such that the financial or operational
outcome for the asset materially changes during
the asset’s operational life. Volatility being the
speed and magnitude of change
17 Route to Market Access to a regulated support mechanism for

renewables or other forms of generating facility
such as CfD or ROC
18 Scenario Modelling A process by which a consistent picture of

possible future regulatory frameworks is defined
and used to analyse future business returns by
considering alternative possible outcomes.
19 Socialisation of costs A TNUoS tariff structure such that costs of

constructing and operating the electricity network
are spread across consumers
20 Topology The layout of the electricity network
21 Wind and solar The level of wind and solar energy at a location
resource availability

Page 378
Within the thematic map below the thematic codes appear in green and themes
Free M ovement
Generation
Facilit ies As Asset s
Market Based
Regulat io n
Wind & So lar Asset s

Resources
Prio rity Dispat ch & Track Regulatory

Embedded Benefit s Risk
Net w ork
Scenario
Interco nnect ion
Modelling
Netw ork Uo S
Net w ork
Topo logy
RoR
IRR
Information
Net w ork Topo lo gy Rgulat ory
Arbetrage
Uncert ainty
Annex 8 - Thematic Map
Long-View
Ret rospective
Change
Asset Life Regulatory

Lobbying
Ext ension Co mplexit y
Regulato ry
EU Renewable Energy Law

Uncert ianty
are set out in blue.
Mit igat ion Strategy
Focus On Main Risk

Annex 9 - Data Saturation and Sample Size
The numerical method to determine sample size is derived from the paper by Ray
Galvin, ‘How many interviews are enough? Do qualitative interviews in building
energy consumption research produce reliable knowledge?’ (2015) 1 Journal of
Building Engineering.
A9.1 Derivation of the Probability Table
If a theme was held by proportion R of a population. If a member of this population

is selected at random, the probability that he or she will have this belief is R. Now
suppose a number n of such people are selected at random. For each of them, the
probability that he or she has this belief will also be R.
If these n people are interviewed one by one in such a way that this theme, if person
has it, will emerge, the probability of it emerging in the first interview is R, and the
probability of it not emerging in this interview is 1-R.
Should the theme not emerge, and a second person is interviewed. The probability
that it does not emerge in this second interview is also 1–R. Therefore, the
probability that it will not have emerged after these first two interviews is
U2 = (1-R)(1-R)
The probability that it does not emerge on the third interview is also (1–R). Therefore,
the probability of it not emerging after three interviews is
U3 = (1-R)(1-R)(1-R)
Hence the probability of it not emerging after n interviews is
Un = (1-R)n
The probability that it does emerge in one or more interviews is therefore

P = 1-Un
This can be written as

P = 1-(1-R)n

A9.2 Number of Interviews is Sufficient
The above formula can be used to find the number of interviews required to have a
stated level of confidence (P) that all the relevant themes which are held by
proportion R of the population will occur within the interview sample
(1 − )
=
(1 − )
A9.3 Views and Interview Table
The table below shows the confidence that views (themes) will emerge during the
interviews should they be held by a certain percentage of the population. For
example, for 16 interviews there is 81.47% confidence that views will emerge only if
they were held by less than 1 in 10 (10%) of the population. As some of the
respondents were interviewed again to follow up on points raised by others, this
means that 22 interviews were actually undertaken, giving broadly 90% confidence
views will emerge only if they were held by less than 1 in 10 (10%) of the population.
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22
100% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
95% 95.00% 99.75% 99.99% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
90% 90.00% 99.00% 99.90% 99.99% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
85% 85.00% 97.75% 99.66% 99.95% 99.99% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
80% 80.00% 96.00% 99.20% 99.84% 99.97% 99.99% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
75% 75.00% 93.75% 98.44% 99.61% 99.90% 99.98% 99.99% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
70% 70.00% 91.00% 97.30% 99.19% 99.76% 99.93% 99.98% 99.99% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
65% 65.00% 87.75% 95.71% 98.50% 99.47% 99.82% 99.94% 99.98% 99.99% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
60% 60.00% 84.00% 93.60% 97.44% 98.98% 99.59% 99.84% 99.93% 99.97% 99.99% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
55% 55.00% 79.75% 90.89% 95.90% 98.15% 99.17% 99.63% 99.83% 99.92% 99.97% 99.98% 99.99% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
50% 50.00% 75.00% 87.50% 93.75% 96.88% 98.44% 99.22% 99.61% 99.80% 99.90% 99.95% 99.98% 99.99% 99.99% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
45% 45.00% 69.75% 83.36% 90.85% 94.97% 97.23% 98.48% 99.16% 99.54% 99.75% 99.86% 99.92% 99.96% 99.98% 99.99% 99.99% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
40% 40.00% 64.00% 78.40% 87.04% 92.22% 95.33% 97.20% 98.32% 98.99% 99.40% 99.64% 99.78% 99.87% 99.92% 99.95% 99.97% 99.98% 99.99% 99.99% 100.00% 100.00% 100.00%
35% 35.00% 57.75% 72.54% 82.15% 88.40% 92.46% 95.10% 96.81% 97.93% 98.65% 99.12% 99.43% 99.63% 99.76% 99.84% 99.90% 99.93% 99.96% 99.97% 99.98% 99.99% 99.99%
30% 30.00% 51.00% 65.70% 75.99% 83.19% 88.24% 91.76% 94.24% 95.96% 97.18% 98.02% 98.62% 99.03% 99.32% 99.53% 99.67% 99.77% 99.84% 99.89% 99.92% 99.94% 99.96%
25% 25.00% 43.75% 57.81% 68.36% 76.27% 82.20% 86.65% 89.99% 92.49% 94.37% 95.78% 96.83% 97.62% 98.22% 98.66% 99.00% 99.25% 99.44% 99.58% 99.68% 99.76% 99.82%
20% 20.00% 36.00% 48.80% 59.04% 67.23% 73.79% 79.03% 83.22% 86.58% 89.26% 91.41% 93.13% 94.50% 95.60% 96.48% 97.19% 97.75% 98.20% 98.56% 98.85% 99.08% 99.26%
15% 15.00% 27.75% 38.59% 47.80% 55.63% 62.29% 67.94% 72.75% 76.84% 80.31% 83.27% 85.78% 87.91% 89.72% 91.26% 92.57% 93.69% 94.64% 95.44% 96.12% 96.71% 97.20%
14% 14.00% 26.04% 36.39% 45.30% 52.96% 59.54% 65.21% 70.08% 74.27% 77.87% 80.97% 83.63% 85.92% 87.89% 89.59% 91.05% 92.30% 93.38% 94.31% 95.10% 95.79% 96.38%
13% 13.00% 24.31% 34.15% 42.71% 50.16% 56.64% 62.27% 67.18% 71.45% 75.16% 78.39% 81.20% 83.64% 85.77% 87.62% 89.23% 90.63% 91.85% 92.91% 93.83% 94.63% 95.33%
12% 12.00% 22.56% 31.85% 40.03% 47.23% 53.56% 59.13% 64.04% 68.35% 72.15% 75.49% 78.43% 81.02% 83.30% 85.30% 87.07% 88.62% 89.98% 91.19% 92.24% 93.17% 93.99%
11% 11.00% 20.79% 29.50% 37.26% 44.16% 50.30% 55.77% 60.63% 64.96% 68.82% 72.25% 75.30% 78.02% 80.44% 82.59% 84.50% 86.21% 87.73% 89.08% 90.28% 91.35% 92.30%
10% 10.00% 19.00% 27.10% 34.39% 40.95% 46.86% 52.17% 56.95% 61.26% 65.13% 68.62% 71.76% 74.58% 77.12% 79.41% 81.47% 83.32% 84.99% 86.49% 87.84% 89.06% 90.15%
5% 5.00% 9.75% 14.26% 18.55% 22.62% 26.49% 30.17% 33.66% 36.98% 40.13% 43.12% 45.96% 48.67% 51.23% 53.67% 55.99% 58.19% 60.28% 62.26% 64.15% 65.94% 67.65%
0% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%

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ANGLIA RUSKIN UNIVERSITY

ANGLIA LAW SCHOOL

The EU Renewable Electricity Regulatory

SCOTT ANDREW FOTHERINGHAM

A Thesis in partial fulfilment of the

Submitted: 31 October 2018

FACULTY OF BUSINESS & LAW

I would like to offer my profound thanks to my supervisors Dr Egle Dagilyte and Dr

EU Renewable Energy Law Page 1

FACULTY OF BUSINESS & LAW

This research fills a gap in academic literature by analysing the EU renewables

Key Words: Renewables Regulatory Framework, Free Movement of Goods, State

EU Renewable Energy Law Page 2

EU Renewable Energy Law Page 3

EU Renewable Energy Law Page 4

EU Renewable Energy Law Page 5

EU Renewable Energy Law Page 6

O ur problems are man-made. Therefore, they can be solved by man. And

EU Renewable Energy Law Page 7

(ii) Scott Andrew Fotheringham

EU Renewable Energy Law Page 8

ACER The Agency for the Co-operation of Energy Regulators

EU Renewable Energy Law Page 9

IRR A metric used in capital budgeting to estimate the profitability of

EU Renewable Energy Law Page 10

EU Renewable Energy Law Page 11

EU Renewable Energy Law Page 12

EU Renewable Energy Law Page 13

EU Renewable Energy Law Page 14

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1.2 Diagonal and Other Conflicts

EU Renewable Energy Law Page 17

EU Renewable Energy Law Page 18

EU Renewable Energy Law Page 19

EU Renewable Energy Law Page 20

EU Renewable Energy Law Page 21

EU Renewable Energy Law Page 22

1.3 Research Issues – Contribution to Knowledge

EU Renewable Energy Law Page 23

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1.4 Research Methods

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1.6 EU Renewable Electricity Law – Its Development and the Electricity

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1.7 EU Carbon Emissions Reduction Objective

EU Renewable Energy Law Page 34

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1.8 Security of Supply

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1.10 Fossil Fuel Subsidy

Energy subsidies are one policy instruments used by governments to attain

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