Attack RDL14/2010 directly? A further analysis
Este articulo es un versión breve del articulo en castellano "Recurrir RDL14/2010 directo? El derecho Europeo nos lo permite". El articulo "RDL14/2010 infringes Directive 2009/28/EC" ya analizó el argumento central.
This article is further analysis of the key issues of the article "RDL14/2010 infringes Directive 2009/28/EC".
Permissibility of direct appeal against RDL14/2010
As we have seen already in the article quoted herein before, the famous ruling Costa/ENEL allows Spanish nationals to directly attach RDL14/2010. To do this, they have to raise a reasonable doubt on the interpretation of European law before the national judge. If this doubt is raised before a Spanish judge the rulings of whom cannot be appealed against, then this judge is obliged to ask the Court of Justice of the European Union (CJ) for a preliminary ruling, according to article 267 Treaty on the Functioning of the European Union. The question will then be resolved by the CJ and remitted to the national judge for its application.
Direct effect of the Directive 2009/28/EC on the promotion of the use of energy from renewable sources
We think that the Spanish judge will have reasonable doubts with regard to the compatibility of RDL14/2010 with Directive 2009/28/EC, which, amongst other things rules: "(···)2. Member States shall introduce measures effectively designed to ensure that the share of energy from renewable sources equals or exceeds that shown in the indicative trajectory set out in part B of Annex I. 3. In order to reach the targets set in paragraphs 1 and 2 of this Article. Member States may, inter alia, apply the following measures: (a) support schemes;(···)". The directive then continues in its article 13 with (partial quote): "1. Member States shall ensure that any national rules concerning the authorisation, certification and licensing procedures that are applied to plants and associated transmission and distribution network infrastructures for the production of electricity, heating or cooling from renewable energy sources, and to the process of transformation of biomass into biofuels or other energy products, are proportionate and necessary." and "Member States shall, in particular, take the appropriate steps to ensure that: (d) rules governing authorisation, certification and licensing are objective, transparent, proportionate, do not discriminate between applicants and take fully into account the particularities of individual renewable energy technologies;"
What the Directive says is that Member States shall introduce measures to guarantee achievement of the European Targets for electricity production from renewable sources. The Directive will be applicable to any of these measures adopted by the Member States after December 5th of 2010, the day on which the term for implementation of this Directive expires. In some cases it may even apply before this date, but that's a different story. What we are talking about here is the Standstill doctrine from the Van Gend & Loos ruling. To have direct effect, the preciseness of the terms, clarity and unconditional character of a Directive have to allow anticipation of the content of national implementation (Van Duyn).
The question is: What is a support system? The Spanish Government must have thought: who cares! The directive does care, in its second article, letter k: ‘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;
The Spanish measures are feed-in-tariffs and the rules governing their authorisation, certification and licensing shall be objective, transparent, proportionate, and shall not discriminate between applicants and take fully into account the particularities of individual renewable energy technologies.
The Directive is unconditional, Member States shall introduce measures, and Member States shall, in particular, take the appropriate steps to ensure that: (d) rules governing authorisation, certification and licensing are objective, transparent, proportionate, do not discriminate. Shall represents a mandatory legal obligation.
Precision and clarity: objective, transparent, proportionate, do not discriminate are clear and precise terms. Especially "do not discriminate" is very clear and precise, cf the Marshall ruling. These terms are sufficiently clear to establish whether RDL14/2010 is compatible with this directive.
Directive 2009/28/EC is not only applicable to measures that enter into force after the 5th of December 2010, but also to previous measures which are altered after that date. If the Kingdom of Spain modifies such measures, it shall do this in compliance with this directive.
In my preliminary question to the Court of Justice of the EU I would express my reasonable doubt with respect to the objectiveness, transparency and discriminatory character of the rules contained in RDL14/2010. Moreover I would express the same doubts as to whether this RDL takes fully into account the particularities of individual renewable energy technologies.
Discrimination between applicants
In its first additional disposition RDL14/2010 treats older projects with the same radiation conditions as newer projects different, without an objective ground, a discrimination which is not allowed. In its second transitory disposition RDL14/2010 treats projects with different radiation as if they were the same, again without an objective ground. Another discrimination which is not allowed. In my opinion, to the Spanish judge this should raise a reasonable doubt about the application of article 13, paragraph 1, letter d of the Directive.
The motivation of RDL14/2010
The retro active cut of Feed in Tariff for Photovoltaic energy of installations with an authorization obtained under RD661/2007 as such is disproportionate and not based on objective grounds. This cut is unjustly motivated.
Figure 109. Comparative evolution of the tariff deficit, the incentives received by the renewable and penetration of these in the national electricity system. Source: State of Renewable Energies (Ministry of Industry, Tourism and Trade), CNE (National Energy Regulator) From the study "Macroeconomical impact of renewable energies in Spain in 2009" carried out by Delloite, and commissioned by APPA. This study is available in Spanish, and will soon be available in English.
As can be seen in the graph hereinbefore, there is no correlation between the in Spain so called "Tariff Deficit" and Feed in Tariffs. The tariff deficit has its particular causes, which need to sweepingly addressed by the Spanish Government, no doubt. But arbitrarily cutting the Feed in Tariff for Photovoltaic energy lack objective grounds and at any rate it disproportional. RDL14/2010 might as well cut any of the other fixed costs in the Spanish electricity system, but should rather undertake a profound restructuring of the Spanish Electricity Pool to make it genuinely competitive.
Discrimination in the access to the Spanish electricity system. Another reasonable doubt, but hard to reason.
I say this not because I am not convinced of my point, but because the market not transparent.
Let's get back to the beginning of this article. What is the purpose of a feed-in-tariff? The objective of a feed-in-tariff is to grant a fixed return on production guaranteed by law in order to allow project finance to be obtained on the production facility. The tariff guarantee is the collateral. If the legal guarantee is taken away, no future project finance can be obtained, because of the tariff risk. If the tariff is altered for existing plants, the economic and financial feasibility may be threatened.
If, on the other hand, you finance plants with a collateral other than the feed-in-tariff, say, the balance sheet of the mother company, you will be less or not at all affected by changes in feed-in-tariff, as far as financing is concerned.
My point is that this cut is an indirect market distortion, because it discriminates small and medium sized energy enterprises against large utilities. Goodbye distributed generation. SME's generally only have access to project finance, whereas large energy companies finance their project through their balance sheets.
The strength of Photovoltaic energy is that it is very scalable in technical terms. In combination with a feed-in-tariff it is also very scalable in financial terms. This is a peculiarity of Photovoltaic energy, and RDL14/2010 does not take this into account. Instead it effectively discriminated against SME in the sector, taking away the "effet utile" of the feed-in-tariff as a measure allowed by the directive.
This post is still just a very broad outline, but the central issue should be clear: RDL14/2010 infringes Directive 2009/28/EC and can be both formally and materially challenged. It should be borne in mind that a sentence obtained in this case from the Court of Justice of the European Union will only have effect for the recurring parties. We still have a long way to go in refining the argumentation and adding more jurisprudence, but we will take this case to court.
if you are also affected by RDL14/2010, and would like to join the effort, please send us an email to recursoRDL@holtropslp.com. If you are an attorney at law engaged by your clients in similar litigation, please do not hesitate to contact us. It will improve our possibilities if we co-ordinate our litigation. At any rate, feel free to comment.
We have published a detailed analysis of article 194TFUE and the Directive here.
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