In the late 1990s, the monopolies for energy supply and operation of the energy networks in Europe were abolished. Since then, the liberalization of the energy market has made big progress. Furthermore, the European Single Market for electricity and gas is developing more and more and the cross-border energy trade is also constantly increasing.
Libiration of the energy markets
The European markets are already largely coupled to each other and they will continue to grow closer together. In contrast, the renewable energy market is still highly segmented in the national territories of the Member States. Moreover, renewable energy is not yet competitive and therefore mostly dependent on state funding. However, member states usually limit their national supporting schemes to their own territory. For example, Germany has introduced the so-called “Inlandsvorbehalt” in Section 5 EEG 2017 which excludes renewable electricity generated in other European countries from receiving benefits in accordance with the German Renewable Energies Act (EEG 2017). Only 5 percent of the annual installed capacity can be allocated to power plants in other European countries. Because of these national limitations, the European Single Market for renewable energy is hindered in its development.
Nevertheless, the cross-border trade of renewable energy – such as green electricity, biomethane and biofuel – is steadily increasing, especially because renewable energy is increasingly marketed regardless of the state subsidies. For example, green electricity from Norwegian hydropower plants is sold to Germany and biomethane from German biogas plants is exported to Sweden.
The cross-border trade of renewable energy is steadily growing.
A legally secure processing of cross-border trade in green electricity and green gas involves special challenges, since the transport via the public network happens purely by way of mass-balance. Physical transport is not possible. Therefore, the exact product definition contained in energy delivery contracts is critical. The equipment, material and process related ecological criteria must be defined precisely. Additionally, a complete and abuse-proof verification of the product characteristics is of central importance for cross-border deliveries. Furthermore, in case of import and export, particularities on the energy tax and the VAT must also be observed. Furthermore, the network-based transport across national borders requires special contractual regulations with the grid operators. And of course, all additional special requirements for international contracts (such as questions of applicable law or regulations on dispute resolution) need to be met.
In view of the latest guidelines of the European Commission for state environmental and energy aid, the domestic subsidies for renewable energy will increasingly be opened for renewable energy imported from other European countries. This holds enormous potential for market participants. It may, therefore, be advisable to be informed early about new legislative proposals at an early stage and to adjust the corporate strategy accordingly. One example is the funding system pursuant to the German Renewable Energies Act (EEG 2017), which shall (partly) be opened Europe-wide; cf. Section 5 sec. 2 EEG 2017.
Importing and exporting green energy not only depends on the requirements of national support schemes for renewable energy, but at least as much on the cross-border verification management. A reliable system is required in order to prove that imported energy fulfills certain ecological criteria. For this purpose, the Renewable Energy Directive has opted for the standard of a mass balance system. This is currently especially relevant for biofuels, which are traded internationally and promoted for example by the biofuel quota of the German Federal Pollution Control Act (BImSchG); cf. Sections 37a et seq. BImSchG. For other types of renewable energy, it remains to be seen which system of verification management will prevail on the market.
Your contact person
Dr. Lukas Assmann