According to the opinion of Saugmandsgaard Øe, Advocate General at European Court of Justice (ECJ), delivered on 29 October 2020, European member States have the right to unilaterally modify renewable energy feed-in tariffs (FITs) or withdraw them entirely before the end of the contract terms.
Advocate General endorsed the decision of the Italian government in 2014, to amend the terms of FIT payments during their 20-year contract, concluding that it does not contradict European Law. The opinion remains to be considered by the court’s 27 judges before a final ruling is issued.
The case under review
In 2014, due to a rapid growth in the photovoltaic energy sector, Italian government decided to reduce feed-in tariff (FIT) payments under long-term contracts signed with the operators of photovoltaic installations within the State.
The Regional Administrative Court of Lazio referred the Italian case to the ECJ, following a complaint by the Federazione Nazionale Imprese Elettroniche ed Elettrotecniche (ANIE) and by solar plant operators Athesia Energy Srl against Ministero dello Sviluppo Economico and Gestore dei servizi energetici (GSE). The Italian Administrative Court ruled, in 2017, that, the decrees amending the FIT tariffs, were not incompatible with the Italian constitution and the dispute arose as to whether they are compatible with European Law.
In this case, ANIE and Athesia Energy argued that that certain articles of the national Decree Law No 91/2014 infringed their right to property, seeking to alter the amounts of the incentives payment of which they had been provided for in the agreements and concluded with GSE, but had not yet fallen due.
They stated that the Decree deprived them of their possessions, considering that the costs associated with the construction and commissioning of photovoltaic installations, on the basis of which those amounts were determined, have already been borne in their entirety by the operators. In that regard, they claimed that that the objectives of Directive 2009/28/EC underlined the need to provide ‘certainty’ for investors. Those factors lead them to conclude, essentially, that the decree law in question restricts the operators’ freedom to conduct a business.
According to the opinion of the Advocate General, such a reform does not infringe the freedom to conduct a business or the right to property provided by Articles 16 and 17 of the European Union Charter. He added that, even supposing that it did interfere with the rights protected by those provisions, such interference would – in any event – be justified and proportionate, having regard to the objectives pursued by the Union for the promotion of renewable energy.
Moreover, Advocate General indicated that the particular articles of the EU Charter, do not preclude a national provision by which a Member State seeks to reduce the incentives provided by a support scheme promoting RES on its territory. He also highlighted that they do not apply to private law agreements concluded between investors and a State – owned company.
In addition, Saugmandsgaard Øe noted that the beneficiaries had no legitimate expectation that the amount of the incentives will remain unchanged for the entire duration of those agreements.
The impact of the Italian case on the Greek RES market
The case came under the spotlight, as questions arise regarding its impact on the Greek RES market. Particularly, Greek government has provided input to the case and supported the right of EU member states to review renewables incentive programs.
The issue of a possible reduction in tariffs has been recently under discussion, considering that the deficit in the Special Renewable Energy Sources Account (ELAPE) is constantly increasing. ELAPE’s financing mainly derives from the Special Duty of Greenhouse Gas Emissions Reduction (ETMEAR) covered by consumers through electricity bills, with the purpose of remunerating renewable energy producers for their output.
Furthermore, the reduction of ETMEAR surcharge in 2019 to help offset an electricity tariff increase made by PPC, as well as the drop in electricity demand due to coronavirus pandemic, have subsequently led to an additional widening of the existing deficit. In addition to these, tariff cuts have already been imposed on existing RES contracts in Greece under the “new deal” in 2014. As of today, an introduction of a 6 percent tax on electricity producer total revenues for 2020 was decided, further deteriorating the conditions for RES producers.
It is obvious that retroactive feed-in tariff revisions, will create an environment of investment insecurity, thus increasing the country’s investment risk and limiting its potential for new RES expansion. Moreover, international RES investors are also affected or even reconsidering their investment plans for Greece. Up to present, four large foreign companies, namely the Italian Enel, the Spanish Iberdrola and the French EDF and Eren Total, have already expressed their oppositions to such revisions.
In conclusion, albeit a ruling is yet to be issued, Advocate General’s opinion clearly set a precedent, providing a path for additional retroactive feed-in tariff revisions in the already existing RES Contracts.
Edited by Dafni Sotirchou