Mott's Blog

Any day now we expect the European Commission, DG Competition, to announce its decision of the Polish green certificate system as state aid.  Several issues will be addressed and possibly some complex cost recovery issues raised but not entirely answered. The thrust of the complaint in SA 37244 was that support of co-firing was too much and was out of line with the cost of production via that technology. This fact was admitted by the Ministry of Economy and even the former Prime Minister's website. In addition, the support for old hydro plants that were built many years ago was attacked as illegal or incompatible with the rules, since the law precludes providing operating support for projects already fully depreciated.  Much of the law is set out in earlier posts on this blog. Taking the incontrovertible facts about co-firing and old hydro, it appears that co-firing might get a 50% retroactive*  reduction (maybe more?) of aid already provided in line with the adjust...

At this point, there is a real shortage of organizations and people who want to discuss the European Commission enforcement case on green certificates and their review of the new law in Poland. Due to lack of sponsors and reluctance of folks to even agree to discuss the topics, the planned event to publicly explore all this stuff has to be cancelled. I am, however, able to discuss the issues and review what the decision means with individual clients willing to retain me for this purpose.  The consequences of the EC action will be sweeping and complex. I am sure that the professional conference companies will schedule something on these issues in the coming months, but they will likely have speakers without much in-depth knowledge of the subject and/or speakers not willing to honestly discuss the implications and issues.  

It will be necessary to re-write the Polish Renewable Energy Law that was adopted in April 2015 to meet the objections of the European Commission. Major provisions that will have to be changed to meet the Commission's consistent position in approving other certificate schemes include the following: 1. Prevention of Over-Accumulation :  This will require that certificates be used in a fixed time period. This could theoretically wipe out almost all of the accumulated certificates now being held. Note: the old hydro certificates will be null and void in any event under the depreciation rule. The co-firing certificates will otherwise likely be valued at 50% or less, even if they are allowed to accumulate. 2. Correction coefficients : The value of the certificates will have to be adjusted by the cost of production of electricity for each technology. The adjustment must assure that there is no over-compensation of technologies such as co-firing. Arguably, only the technologies in...

The European Commission's Directorate General for Competition is about to announce a decision on the Polish Green Certificate matter, SA.37224 (2013/CP). The complaint to the Commission alleged that the certificates were state aid and had to be notified and approved as such under the European Treaty, Articles 107 and 108. This same viewpoint was internally expressed to the Minister of Economy in 2013 by the head of the Office of Competition and Consumer Protection in Poland. The Commission has apparently told UOKiK that it contends that the certificates are state aid. [An obvious point since every certificate program since 2001 has been classified as state aid by the Commission]. See references in " Why Poland Urgently Needs a New Green Certificate Law," gramwzielone.com [PL]. [ English version] . The Commission has the authority to declare state aid unlawful and is required to do so if it is not notified. The failure to notify means that the certificates are null a...

While the Commission communicated to the Polish Government in 2013  that it considered the Polish Green Certificates to be state aid, requiring notification of the Commission and approval under the 2008 guidelines, the Polish Government has repeatedly denied this fact. Now in the new law on RES, Article 39.2 requires that certificates and other forms of support be added together to determine if the state aid limits on support for an individual project would be exceeded. This reflects the fact that the Polish Government has known for years that the Green Certificates are state aid. The Commission has decided that green certificates are state aid in every case before it (earlier based on the substitution fees in various Member State laws and later on the certificate as a valuable asset itself). See  DOUBLING DOWN ON A JUNK POKER HAND: THE POLISH GOVERNMENT APPARENTLY INTENDS TO IGNORE ITS TREATY OBLIGATIONS ON STATE AID , Mott's Blog, June 7, 2014 (detailed references and...

The Great Polish Train Wreck of 2015? At this point the Polish Government has apparently made a decision to not notify the Commission on the Green Certificate system. Since there is absolutely no doubt that it does constitute state aid and the Commission has informally signaled that to the Government, it is probably a good time to ask what will happen next. This will be such a disaster that the Government will have to back off its current stance. There is simply no alternative. State aid that is done without notification is unlawful and must be recovered from the recipients.  See CELF case (C-199/06) European Court of Justice, February 12, 2008. .   “ In cases where Member States do not notify the Commission of its plans to grant or alter aid prior to such aid being put into effect, the aid is unlawful in relation to Community law from the time that it is granted.”   Notice From The Commission , “Towards an effective implementation of Commission decisions orderin...