EU member states not required to subsidize non-domestic renewable energy production, court rules

The European Court of Justice ruled on Tuesday that European Union member states are not required to subsidize the production of renewable energy in other EU states.

While the EU’s Renewable Energy Directive allows member states to support the domestic production of green energy, the court has made it clear that renewable energy producers are not entitled to receive subsidies from other countries even if they export clean power to those markets.

Finnish company Alands Vindkraft took legal action in 2009 after the Swedish Energy Agency rejected an application by the company for electricity certificates for its wind farm in the Aland archipelago in Finland that was nevertheless connected directly to the Swedish power grid.

Swedish authorities said at the time that only green electricity production installations located in Sweden could be awarded support incentives.

The Court of Justice ruling came as a surprise in view of the fact that it contradicted the opinion of the court’s advocate general, who had argued that a clause in the EU’s renewable energy directive violated treaty rules on the free movement of goods across the 28-member bloc.

However, while the court agreed that subsidy schemes constitute "a restriction of the free movement of goods," it found that the restriction was justified by "the public interest objective of promoting the use of renewable energy sources in order to protect the environment and combat climate change."

"In today’s judgment, the Court finds, first of all, that the Swedish green certificates scheme is a support scheme which falls within the scope of the Renewable Energy Directive in so far as it supports the production of green electricity," the court said in a statement. "The Court notes that the directive does not require Member States which have opted for a support scheme to extend that scheme to cover green electricity produced on the territory of another Member State. Accordingly, the Swedish support scheme is compatible with the directive."

The ruling is seen as a blessing for Germany and its recently revamped renewable energy law (EEG), which the government would have had to completely overhaul if the court had ruled in favor of Alands Vindkraft — a move that would have also resulted in even higher costs for German consumers who are funding renewable energy through a surcharge. Germany’s renewable energy law already precludes foreign producers of green electricity from receiving subsidies.