Five years ago Ålands Vindkraft AB applied for support under the Swedish renewable electricity incentive scheme for its onshore wind farm Oskar.
The Åland Islands are situated in Finnish waters but their electricity grid is connected to the Swedish grid. Consequently, the company applied for support under the Swedish green electricity certificate scheme.
However, the Swedish Energy Agency rejected the company's application on the grounds that only renewable electricity generated within Sweden was eligible for support under the Swedish incentive scheme. Sweden's energy agency has refused to provide the power company with energy subsidies intended for local businesses, saying it would be unfair for Swedish taxpayers to help Finland meet its renewable energy goals, according to the Foundation for a Renewable Energy Transition, or FRET, an organization that bills itself as an advocacy group for open markets for renewable energy across Europe.
Ålands Vindkraft AB appealed against the decision, maintaining that the Swedish Energy Agency's decision was contrary to the EU treaty's provisions on the free movement of goods.
Two years ago Linköping administrative court referred the case to the European Court of Justice, which is due to reach a decision this month.
The Court's Advocate-General Yves Bot has already given his opinion on the case. He believes that the Swedish Energy Agency's decision unjustifiably excludes the Åland-based company from the Swedish green electricity certificate scheme.
The EU directive on renewable energy contains an article which gives member states the right to decide themselves to what extent electricity generated in another country is eligible for their country's incentive scheme. The Advocate-General believes that this article is invalid because it contradicts the EU treaty's provisions on the free movement of goods. Therefore, he maintains that that Ålands Vind is justified in appealing against the decision.
If the European Court of Justice takes the line taken by the Advocate-General, this may have consequences for the various renewable electricity incentive schemes in the EU member states.
"If the court takes the line taken by the Advocate-General the decision will be associated with a number of conditions and restrictions relating to cross-border trade and possibly regional markets, and member states will have two years to adjust to the new regulations. But I find it hard to believe that this would lead to full harmonisation. The joint electricity certificate scheme in Sweden and Norway is well equipped to cope with this change. Other countries, on the other hand, will have to make radical changes to their schemes," says Claes Hedenström, policy manager for hydro power and renewable energy at Vattenfall.
The European incentive schemes are currently extremely diverse. All, however, are required to achieve the EU's target of increasing the proportion of renewable energy to 20% of all energy consumption by 2020.
In Sweden, the electricity certificate scheme is designed to increase the generation of renewable electricity by 25 TWh between 2002 and 2020. In Germany, there is no specific target for how much renewable electricity generation is to be installed.
In Sweden, wind power owners are subsidised by 17-18 öre per Kwh, while the corresponding figure in Denmark is 60 öre or more.
The Alands Vindkraft case illustrates the tension between EU internal market rules and the current national support regimes for green energy, according to the Foundation for a Renewable Energy Transition.
National government subsidies to promote renewable power have been blamed for driving up costs, and the European Commission has been advocating for the establishment of harmonized subsidies across the continent and a unified energy market, to maximize available resources.
However, the critics say that if the court adopts Bot's assessment, it could have a negative effect on the EU's current framework for incentivizing renewable power and even frustrate the region’s efforts to reach its sustainable energy goals.
On a more positive note, it could mean that European power companies like Vattenfall might start building more offshore Swedish wind power and apply for support in Germany or Denmark, for instance.
Says Hedenström, "The conditions for Swedish offshore wind power would be better but I'm not sure they would be good enough. But our Swedish onshore projects would probably be more profitable and we could, for example, export renewable.”