BOOKS: HANCHER Leigh, de HAUTECLOCQUE Adrien and SALERNO Francesco Maria (dir.), Hart Publishing, 2018, 640 p.

State Aid and the Energy Sector, Leigh HANCHER, Adrien de HAUTECLOCQUE and Francesco Maria SALERNO (dir.)

This section selects books on themes related to competition laws and economics. This compilation does not attempt to be exhaustive but rather a survey of themes important in the area. The survey usually covers publication over the last three months after publication of the latest issue of Concurrences. Publishers, authors and editors are welcome to send books to stephane.rodrigues-domingues@univ-paris1.fr for review in this section.

State aid to the energy sector is currently the second-largest category of aid in the Member States of the EU. Therefore a book about State aid in the energy sector is, by implication, a book about State aid law generally speaking, although certain peculiarities differ from one sector to the other. State aid and the energy sector is a monograph which purports to fill a gap in scholarship and practitioners’ guides by systematically addressing the issues raised by the use of EU State aid control in the context of energy transition. The target audience is, however, more that of practitioners than that of academics.

The book—some of whose chapters are expanded and updated versions of a research seminar which has taken place on 27 October 2016—is divided into four parts, dedicated respectively to: the definition of State aid; compatibility issues; procedures and finally State aid and Energy in national courts, the European Economic Area and the Energy Community.

The first chapter of the part dedicated to the definition of State aid is entitled “What is State aid?” Falk Schöning and Clemens Ziegler reiterate the general rule that all State aid measures are illegal unless they have been notified to and authorised by the European Commission. The chapter explains that the amount of approved and block-exempted aid measures between 2009 and 2014 aimed at environmental protection including energy saving (but not including State aid in the nuclear sector) corresponds to nearly a quarter of the total EU-wide amount of all State aid published on the website of the Commission’s Directorate General for Competition. This is so because the energy sector is characterised by big infrastructure and industrial projects requiring considerable financial investments, and also because substantial investments are required to overcome the fragmentation of EU energy markets. In that respect, it would have been possible to mention in passing “Fusion for Energy,” the European Union’s joint undertaking for ITER and the Development of Fusion Energy. This organisation was set up under the Euratom Treaty by a decision of the Council of the European Union in order to demonstrate that fusion is as a viable and sustainable source of energy. ITER is the world’s most expensive investment project whose EU contribution could not have been assessed under State aid rules because the joint undertaking Fusion for Energy is a European project. As such, it does not amount to aid “granted by a Member State or through State resources.”

The first chapter clarifies that the legal definition of State aid differs from the economic concept of aid. Even if a State measure does not primarily aim at providing support to one or several undertakings and is presented as pursuing goals of public interest, it may nonetheless amount to a State aid as a legal concept. That concept being objective, the Commission cannot be bound by an earlier decision in which it may have assessed a measure differently. Besides, the chapter and the entire book submit that the notion of State aid pursuant to Article 107(1) TFEU applies to the entire energy sector, including nuclear energy.

The second chapter of the first part, entitled “State aid and Price Regulation in the Energy Sector,” is signed by Guillaume Dezobry and Adrien de Hauteclocque. It focuses on price distortion for renewable energy and through capacity mechanisms. The authors conclude that given the objectives of climate change mitigation and affordability, public intervention on energy prices at national level “is here to stay.”

The third chapter, “State Aid and Taxation: Special Focus on Energy and the Environment,” by Lena Sandberg, clarifies inter alia that the fact that the majority of potential taxpayers may be exempt from the full tax does not in and of itself remove the selective nature of the tax exemption. Thus, investment loan schemes exclusively available to SMEs may be characterised as selective measures despite the fact that SMEs comprise about 99% of the EU economy.

The fourth chapter, on “WTO Subsidy Rules: Implications for Energy,” is signed by Anna-Alexandra Marhold. The author explains that because of the nature of subsidies on fossil fuels, as opposed to those on renewables, the Agreement on Subsidies and Countervailing Measures makes it easier to trigger disputes against renewable energy subsidies schemes, while addressing fossil fuel subsidies in the WTO system proves more difficult.

The first chapter of the second part—dedicated to compatibility issues—analyses the compatibility of aid to renewable energy sources under a legal and economic approach. The second chapter of the second part is dedicated to capacity mechanisms and auctions. It analyses inter alia the Commission’s DG Energy Market Design Initiative, in particular its Impact Assessment Staff Working Document. The chapter concludes that the adoption of the “clean energy package” in November 2016 has confirmed the need for new market design proposals to deal with both market and regulatory failures and to trigger investment, but that the Commission is not always optimistic that this strategy will produce solutions in the short or near term. Then follows a chapter on cross-border participation in capacity mechanisms to comply with State aid rules.

Leigh Hancher and Max Klasse propose an important contribution about the recent developments in the nuclear sector in “Aid to Nuclear and Coal.” The authors admit that “EU Treaty rules cannot always be straightforwardly and directly applied” to assess aid in the nuclear sector. However the chapter does not purport to propose a new theory pending judicial guidance on that issue. It merely draws upon and summarises the recent Commission State aid decisions in the nuclear sector, without supplementing them with additional factual information. The second half of the chapter is devoted to State aid under the ECSC Treaty: that latter did not provide for an exemption from the State aid prohibition, but in practice the Commission adopted a series of special decisions about the Community coal sector.

Other chapters include developments on projects of common interest and energy infrastructure projects. In a chapter on “Services of General Economic Interest [SGEI] and EU State Aid Control in Energy Markets,” Adrien de Hauteclocque, Francisco Maria Salerno and Simina Suciu argue that Member States’ margin of appreciation in defining and entrusting SGEIs is not very wide. The Commission decisions in Hinkley Point C and the French CRM cases reportedly illustrate the fact that the relevant Member States argued first consistently with the SGEI approach, but later agreed to have their measures analysed and approved under Article 107 TFEU.

The first chapter of the third part deals with State aid recovery and the energy sector. The following chapter, by Johannes Koepp, Alejandro Escobar, Laurie Frey and Ernesto Feliz, is about State aid and arbitration. It concludes that the clash between investment treaty arbitration and EU State aid rules appears to arise out of the two regimes’ differing conceptions of the principle of legitimate expectations, in the sense that the interpretation and application of the concept of legitimate expectations by the EU courts and the European Commission is reportedly narrower than its interpretation and application by investment arbitration tribunals. The final chapter of the third part deals with common EU law principles of private enforcement of State aid, i.e., with the enforcement, before national courts, of the notification and standstill obligation pursuant to Article 108(3) TFEU.

The final part of the book summarises recent developments in Germany, France, the Netherlands, Austria, Italy, Greece, Belgium and Spain. A chapter deals specifically with State aid and the European Economic Area, where the principle of homogeneity with EU law applies. A final chapter deals with State aid enforcement in the Energy Community, based on the Energy Community Treaty. Every Energy Community Contracting Party has reportedly adopted a State aid law in accordance with its international obligations under the Energy Community Treaty and the relevant Association Agreement concluded with the EU. The chapter concludes that there is a general lack of enforcement of State aid rules in relation to subsidies granted by the Contracting Parties to their energy operators.

Les opinions exprimées sont personnelles et n’engagent pas l’institution qui emploie son auteur.

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Athanase Popov, State Aid and the Energy Sector, Leigh HANCHER, Adrien de HAUTECLOCQUE and Francesco Maria SALERNO (dir.), September 2018, Concurrences Review N° 3-2018, Art. N° 87407, pp. 215-216

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