Opinion of Advocate General Tanchev delivered on 3 June 2021.

• Jurisdiction: European Union
• Court: Court of Justice (European Union)
• ECLI: ECLI:EU:C:2021:451
• Date: 03 June 2021

OPINION OF ADVOCATE GENERAL

TANCHEV

delivered on 3 June 2021(1)

Case C‑57/19 P

European Commission

v

Tempus Energy Ltd and

Tempus Energy Technology Ltd

(Appeal — State Aid — Great Britain electricity capacity market — Decision not to raise objections — Concept of serious difficulties — Standard of proof — Commission’s obligation to carry out a diligent and impartial examination of the information provided by the Member State concerned — Commission’s obligation to investigate a case of its own motion — Pre-notification contacts)

Table of contents

I. Legal framework

II. Background to the proceedings

III. Judgment under appeal

IV. Proceedings before the Court of Justice and forms of order sought

V. Analysis

A. The appeal

1. Arguments of the parties

2. Assessment

(a) The Commission’s request that the Court set aside the judgment under appeal in so far as it did not declare inadmissible Tempus’ allegation concerning the 2 MW de minimis participation threshold

(b) Admissibility of the appeal

(c) Substance

(1) Preliminary observations

(2) The first part of the single ground of appeal

(i) Whether, in order to show that serious difficulties existed, Tempus may rely on all the relevant information that was or could have been available to the Commission on the date of adoption of the decision at issue

(ii) Whether the number and origin of observations spontaneously made by third parties may be taken into account as an indication of the existence of serious difficulties

(iii) Whether the length of the pre-notification phase may be taken into account as an indication of the existence of serious difficulties

(iv) Whether the complexity and novelty of the measure at issue may be taken into account as an indication of the existence of serious difficulties

(3) The second part of the single ground of appeal

(i) Whether the Commission should have investigated the potential role of DSR operators within the capacity market

(ii) Whether there was sufficient examination of the discriminatory or disadvantageous treatment of DSR operators in respect of the length of capacity contracts

(iii) Whether there was sufficient examination of the discriminatory or disadvantageous treatment of DSR operators in respect of the cost recovery method adopted

(iv) Whether there was sufficient examination of the discriminatory or disadvantageous treatment of DSR operators in respect of the interplay between the T4 and the T1 auctions and of some conditions of participation in the capacity market

B. The action before the General Court

VI. Costs

VII. Conclusion

1. By this appeal, the European Commission requests the Court of Justice to set aside the judgment of 15 November 2018, Tempus Energy and Tempus Energy Technology v Commission (‘the judgment under appeal’), (2) by which the General Court annulled the Commission decision not to raise objections to an aid scheme adopted by the United Kingdom to support capacity providers in the electricity market in Great Britain (‘the decision at issue’). (3)

2. Because the United Kingdom estimated that around the years 2017/2018 the electricity capacity generation in Great Britain would no longer be sufficient to meet demand, it decided to establish, through the aid scheme referred to in the preceding point, a capacity market where auctions organised by the national authorities would allow procuring the level of capacity required to ensure generation adequacy. Under that scheme, successful participants in those auctions were to receive a steady payment in return for their commitment to deliver electricity at times of system stress. That payment was to be financed through a levy on electricity suppliers.

3. In the decision at issue, the Commission considered the aid scheme described above to be compatible with the internal market pursuant to Article 107(3)(c) TFEU, as it satisfied the criteria set out in the Guidelines on State aid for environmental protection and energy 2014-2020 (‘the Guidelines’) (4).

4. By the judgment under appeal, the General Court upheld the action for the annulment of the decision at issue brought by Tempus Energy Ltd and Tempus Energy Technology Ltd (together, ‘Tempus’), on the ground that the Commission could not adopt that decision on completion of a mere preliminary examination, and that it should have initiated the formal investigation procedure provided for in Article 108(2) TFEU. In the view of the General Court, a body of objective and consistent indications consisting in, first, the length and the characteristics of the pre-notification phase, and, second, the lack of appropriate investigation by the Commission with regard to certain aspects of the capacity market, demonstrated that the serious difficulties that arose from the assessment of the compatibility of the scheme with the internal market had not been overcome during the preliminary examination.

5. This case presents the Court with an opportunity to rule on the concept of ‘serious difficulties’, the existence of which on completion of a preliminary examination triggers the obligation for the Commission to initiate the second stage of the procedure for reviewing State aid, namely the formal investigation procedure.

I. Legal framework

6. Article 4 of Council Regulation (EC) No 659/1999, (5) entitled ‘Preliminary examination of the notification and decisions of the Commission’, provides:

‘…

3. Where the Commission, after a preliminary examination, finds that no doubts are raised as to the compatibility with the [internal] market of a notified measure, in so far as it falls within the scope of [Article 107(1) TFEU], it shall decide that the measure is compatible with the [internal] market (hereinafter referred to as a “decision not to raise objections”). The decision shall specify which exception under the Treaty has been applied.

4. Where the Commission, after a preliminary examination, finds that doubts are raised as to the compatibility with the [internal] market of a notified measure, it shall decide to initiate proceedings pursuant to [Article 108(2) TFEU] (hereinafter referred to as a “decision to initiate the formal investigation procedure”).

...’

II. Background to the proceedings

7. Tempus holds a licence to operate as an electricity supply business in the United Kingdom and sells electricity consumption management technology, also known as ‘demand-side response’ (‘DSR’), to individuals and professionals.

8. Tempus helps its customers to move their non-critical electricity usage to periods when wholesale prices are low, either because demand is low or because power from renewable sources is plentiful and therefore cheaper. For that purpose, like other demand-side response operators (‘DSR operators’), Tempus enters into contracts with energy customers, which are often industrial and commercial customers or small- to medium-sized enterprises, under which the customer agrees to be flexible in the consumption of their electricity at a particular time period. The DSR operator then calculates the total capacity available from all of the flexible customers at any one time and offers that capacity to the electricity network operator — National Grid (‘NG’) in the present case — in exchange for a payment, which it passes back to the flexible customer, whilst retaining a small profit margin for itself.

9. By relying on the United Kingdom Energy Act 2013 and the regulatory acts adopted on the basis of that Act, in particular the Electricity Capacity Regulations 2014 and the Capacity Market Rules 2014, the United Kingdom adopted an aid scheme to support capacity providers in the electricity market in Great Britain (‘the measure at issue’). Through that measure, the United Kingdom establishes an electricity capacity market involving centrally-managed auctions to procure the level of capacity required to ensure capacity adequacy. Capacity providers are remunerated in exchange for their commitment, otherwise penalties apply, to provide electricity or reduce or delay their electricity consumption during times of system stress.

10. The capacity market works as follows.

11. The amount of capacity required is decided centrally by the United Kingdom Government on NG’s recommendation. The decision on how much capacity to contract in each capacity auction is based on a reliability standard. A reliability standard is an objective level of security of electricity supply. The United Kingdom Government has set a reliability standard equal to a loss of load expectation of 3 hours/year, which translates as a system security level of 99.97%. The loss of load expectation is the number of hours/periods per annum in which, over the long term, it is statistically expected that supply will not meet demand.

12. Each year, the capacity to be delivered four years later is auctioned (‘the T‑4 auction’). The capacity that was auctioned in 2014, for example, was to be delivered in 2018/2019, the delivery period running from 1 October 2018 to 30 September 2019. However, another auction takes place during the year prior to the delivery year of the main auction (‘the T‑1 auction’). The T‑1 auction ensures that the right amount of capacity is procured when more accurate demand forecasts are available and is important for enabling DSR capacity to actively participate in the mechanism (as DSR operators find it difficult to participate in an auction four years ahead of delivery).

13. Some capacity is held back from the T‑4 auction and ‘reserved’ for the T‑1 auction. The amount of reserved capacity is to be based on an estimate of the ‘cost-effective’ DSR that could participate in the T‑1 auction. If demand falls between the T‑4 auction and the T‑1 auction, the amount of capacity auctioned in the T‑1 auction will be reduced. According to the decision at issue, the United Kingdom Government committed to procure in the T‑1 auctions at least 50% of the capacity ‘reserved’ four years earlier. T‑4 and T‑1 auctions form the...