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The EU Renewable Electricity Regulatory Framework and Its Legal Conflicts With Free Trade Principles

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posted on 2023-08-30, 16:25 authored by Scott A. Fotheringham
This research considers the EU’s 21st century objective of mitigating climate change by promoting renewable electricity and the multiple legal conflicts between this objective and EU’s core legal principles of free movement, the prohibition of distortion of competition and other forms of state aid. This research fills a gap in academic literature by analysing the EU renewables regulatory framework. The research finds renewable electricity is accorded a ‘special’ status, allowing export restrictions, price enhancements, priority market access, tax exemptions and payment guarantees. This ‘special’ status is analysed via case law and empirical research data. The case law analysis confirms a lex specialis approach by the CJEU. This is considered problematic from a legal consistency point of view, as it leads to unclear investment signals and short-termism in an industry with long-term investment horizons. Uniquely, within the academic context, the empirical research considers how market operators view these conflicts, via the findings of semi-structured interviews. The research shows that market operators (i) prioritise regulatory stability to ensure longterm asset business case validity, (ii) mitigate against uncertainty via higher financial returns and (iii) lobby legislators and regulators to manage change. Market operators recognise that diagonal conflicts exist and see the CJEU’s use of lex specialis as a temporary expedient, surrounded by judicial and political risk. The research proposes regulatory change to remove the ‘special’ status and outlined diagonal conflicts, including carbon pricing mechanisms, removing fossil fuel subsidies and enforcing network access rules. These proposals align the regulatory framework with EU free trade principles - to create long-term regulatory stability, valued by market operators.



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