1. In its preliminary ruling of 17 September 2020 [1] , the Court of Justice of the European Union (hereinafter the “ECJ”) ruled that Directive 2004/8/CE of 11 February 2004 does not preclude the Member States of the European Union from establishing support schemes, including financial support schemes, benefiting cogeneration units which do not qualify as a so-called “high-efficiency” unit.

2. In fact, Directive 2004/8/EC

– in its article 2, defines the concepts of

  • “cogeneration” as the simultaneous production, in a single process, of thermal and electrical and/or mechanical energy, and
  • “high-efficiency cogeneration” as cogeneration meeting the criteria listed in Annex III of the Directive;

– in its Article 5, requires the Member States to establish a mechanism to guarantee the origin of the power generated by high-efficiency cogeneration and lay down a framework governing this mechanism;

– in its Article 7, allows the Member States to set up support schemes for existing or future high-efficiency or non-high-efficiency cogeneration units and provides a framework governing these support schemes; and

– in its Annex III, lays down the required criteria that cogeneration units shall meet to be qualified as “high-efficiency cogeneration” under its Article 2, including an energy saving of a least ten per cent compared with the reference data for the production of separate heat and electricity.

3. Directive 2004/8/EC was repealed and replaced by Directive 2012/27/EU of 25 October 2012, which since its adoption, has been amended twice.  In its current drafting , Directive 2012/27/EU more or less repeats the concerned provisions of Directive 2004/8/EC, i.e.

– in its Article 2, the definitions of the concepts of “cogeneration” and “high efficiency cogeneration” provided in Article 2 of Directive 2004/8/EC;

– in its Article 14(10), the obligation for the Member States to establish a mechanism to guarantee the origin of the power generated by high-efficiency cogeneration and the framework governing this mechanism contained in Article 5 of Directive 2004/8/EC;

– in its Article 14(11), the possibility for the Member States to establish support schemes for high-efficiency and non-high-efficiency cogeneration units and the framework governing these support schemes resulting from Article 7 of Directive 2004/8/EC; and

– in its Annex II, the criteria to qualify a cogeneration as high-efficiency set out in Annex III of Directive 2004/8/EC.

4. In Italy, since 2011, Article 11 of Italian Legislative Decree (decreto legislativo) No. 79/1999 has requires importers and producers of non-renewable electricity to inject into the national electricity transmission network quotas determined individually each year, which they must purchase or produce to support the use of renewable energies.  This provision also offers to these importers or producers to fulfill this obligation by acquiring green certificates in numbers equivalent to their quotas from other producers.  Since its entry into force, Article 6(1) of Italian Legislative Decree No. 20/2007 has limited the benefit of the support scheme of Article 11 of Italian Legislative Decree No. 79/1999 to the sole high-efficiency cogeneration installations as defined by said Italian Legislative Decree No. 20/2007.  The main object of this Italian Legislative Decree is the transposition of Directive 2004/8/EC.

5. Burgo Group, which operates cogeneration plants in Italy, applied to the operator of the Italian national electricity transmission network for the renewal of the exemption from the obligation to purchase green certificates for the years 2011 to 2013, which it has enjoyed up to date.  All of its application were rejected on the grounds that Italian Legislative Decree No. 20/2007 restricts the benefit of this exemption to the sole high-efficiency cogeneration units within the meaning of Directive 2004/8/EC and that the applicant’s plants do not qualify as high-efficiency cogeneration facilities.

6. Burgo Group then lodged several actions for annulment against these refusals before the Regional Administrative Court for Lazio (Tribunale amministrativo regionale per il Lazio).  The latter court dismissed all of them considering that only high-efficiency cogeneration plants as defined by Directive 2004/8/EC could benefit the exemption from purchasing green certificates provided for by Legislative Decree No. 79/1999.  The applicant appealed these judgments to the Italian Council of State (Consiglio di Stato), which decided to stay the proceedings and refer four questions to the ECJ for a preliminary ruling.  These questions inter alia aimed at determining whether Directive 2004/8/EC precludes the application of the advantages provided for by Legislative Decree No. 79/1999, including the exemption from the acquisition of green certificates to cogeneration facilities which do not meet the criteria for high-efficiency units.

7. The ECJ replied to these questions in its ruling of 17 September 2020.  It recalled that it had already ruled in its decision of 26 September 2013 [2] that the scope of Article 7 of Directive 2004/8/EC was not limited to the sole high-efficiency cogeneration plants within the meaning of this Directive but also covered other cogeneration units.  For this reason in its decision of 17 September 2020, the ECJ considered that under the conditions set up by this Article 7 of Directive 2004/8/EC, the Member States can establish support schemes for cogeneration plants which do not meet the criteria for high-efficiency facilities provided for in Annex III of the same Directive.

8. Although constructing the provisions of Directive 2004/8/EC, this ruling of the ECJ of 17 September 2020 seems fully applicable to Directive 2012/27/EU which repealed and replaced Directive 2004/8/EC.  The latter Directive repeats more or less the relevant provisions of the former Directive concerned by the ECJ decision, as set out in paragraph 3 above.  Therefore, Directive 2012/27/EU can be interpreted as authorizing the Member States to implement support schemes for cogeneration plants which do not qualify as high efficiency cogeneration within the meaning of its Annex II.

9.The decision of 17 September 2020 of the ECJ confirms the Member States’ support schemes for cogeneration which scope is not limited to high-efficiency units and provide for aids benefiting units which do not meet the high-efficiency cogeneration criteria set by the European Union legislator.  This is the case with the French cogeneration support scheme, which relies on two branches.  The first branch is based on the call for competition procedure for the establishment of new production capacities which can be used to support the building and operation of a cogeneration plant regardless of its primary energy source and of whether it is or not with high-efficiency under Annex II of Directive 2012/27/EU [3]. The second branch is limited to cogeneration facilities using natural gas, whether high-efficiency or not, and make them eligible to (i) the purchase obligation mechanism when their installed capacity remains inferior to three hundred megawatts [4] and (ii) the additional income scheme when their installed capacity does not exceed one megawatt [5].

10. The French cogeneration support scheme is set to evolve.  The Multiannual Energy Programing (Programmation pluriannuelle de l’énergie) adopted by French Decree No. 2020-456 of 21st April 2020 recommends the repeal of Government support for cogeneration units using natural gas in favor of other forms of cogeneration, including the high-efficiency cogeneration under Annex II of Directive 2012/27/EU [6] . Therefore, the eligibility of these cogeneration units using natural gas tp the purchase obligation and the additional remuneration mechanisms will cease on 23 January 2021 at midnight without being replaced [7].  New cogeneration facilities using natural gas established in France after this date will be deprived of the benefit of the French support scheme for cogeneration.  The other cogeneration facilities will continue to benefit from a Government support through the call for competition procedure for the establishment of new production capacities.

11. Finally, in its ruling of 17 September 2020, the ECJ gave an interpretation of Directive 2004/8/EC and by extension of Directive 2012/27/EU which is subject to Articles 107 et seq. of the Treaty on the Functioning of the European Union.  These later provisions make State aids unlawful and establishes the regime allowing their authorization by the European Commission.  Articles 7 of Directive 2004/8/EC and 14(11) of Directive 2012/27/EU specify that where applicable, State aids distributed in application of Member States’ support schemes for cogeneration are subject to Article 107 et seq. of the Treaty.  In addition, the ECJ refused to decide whether Articles 107 et seq. of the Treaty preclude the implementation of national regulations ensuring support for cogeneration units which does not meet the criteria for high-efficiency plants, since this analysis can only be done on a case-by-case basis.

 

[1] ECJ, Burgo Group, aff. C-92/19 [17 September 2020 ]

[2] ECJ, IBV & Cie., Case C 195/12 [26 September 2013], para.36 to 38

[3] French Energy Code (Code de l’énergie), Art. L. 311-10 and R. 311-12 and R. 311-12-1

[4] French Energy Code, Art. D. 314-15, 9°

[5] French Code of energy, Art. D. 314-23, 6°, and D. 314-23-1, 2°

[6] Multiannual Energy Programming, para.1.2.4 and 4.3.6

[7] French Decree No. 2020-1079 of 21st August 2020, Art. 1 and 2

Jérémy BERNARD

Partner - Competition law
Attorney at the Paris Bar, Jérémy Bernard is a partner of Delcade Avocats & Solicitors.

He has developed a practice covering EU and French competition and distribution law as well as the regulation of liberalized sectors, litigation and arbitration.

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