How I learned not be afraid

During a meeting we had last week in DG Financial Stability, Financial Services and Capital Markets Union (FISMA) in Brussels a colleague from the Czech republic called it a bad joke: the notification of the Czech support scheme for renewables as State Aid to DG Competition of the European Commission. Roughly two weeks ago it came to our knowledge that Spain also sent a notification of its most recent support scheme reform as State Aid to the European Commission. It must be a running gag in European government circles to do this.

The public and even specialized press often refers to renewable energys support schemes, more concretely Feed in Tariffs as government subsidies. This is a misconception: These schemes are almost without exception designed as a reshuffling of means in a closed market system in order to internalize negative externalities of Energy production system. This is done by allocating the cost of the negative externalities of conventional technologies in the form of cost compensation to renewable technologies. The reason for this is that we need to phase out negative externalities to avoid climate change, principally, and renewable energies are a means to achieve this.

Simplified, this reshuffling of means within a hermetic system does not involve State resources, in the sense that the system operates entirely outside the public Budget. It is not the tax payer who pays the Feed in Tariff. The involvement of the national governments normally is limited to the design of the regulatory framework in which the system operates.

This understanding was anchored in EU case law, such as Preussen Elektra, and in the Commission’s assessment of State aid intended to offset stranded costs arising from Directive 96/92/EC.  

Now recently this rationale has changed, although there is no 100% consensus on it. In EU case law Vents de Colére, and Elcogas for Spain, reshuffling systems have been considered state aid.

We think that most likely the Spanish system will be declared compatible State Aid, but that is not the real issue at stake. We have published various articles in different Spanish media, we will update our English blog in the coming weeks more frequently to allow you to follow the ins and outs of this dossier. My next post will be about the title of this one...