Opinion of Advocate General Pitruzzella delivered on 13 July 2023.

• Jurisdiction: European Union
• ECLI: ECLI:EU:C:2023:591
• Date: 13 July 2023
• Celex Number: 62021CC0693
• Court: Court of Justice (European Union)

Provisional text

OPINION OF ADVOCATE GENERAL

PITRUZZELLA

delivered on 13 July 2023 (1)

Joined Cases C‑693/21 P and C‑698/21 P

EDP España, SA

v

Naturgy Energy Group, SA, formerly Gas Natural SDG, SA,

European Commission (C‑693/21 P)

and

Naturgy Energy Group, SA, formerly Gas Natural SDG, SA

v

European Commission (C‑698/21 P)

(Appeal – State aid – Environmental incentive adopted by Spain in favour of coal-fired power plants – Decision to initiate the formal investigation procedure – Duty to state reasons – Action for annulment)

1. In two joined appeals, EDP España (Case C‑693/21 P) and Naturgy Energy Group (Case C‑698/21 P) (‘the appellants’) ask the Court to set aside the judgment of the General Court of the European Union of 8 September 2021, Naturgy Energy Group v Commission (2) (the ‘judgment under appeal’), by which the General Court dismissed the application for annulment of Commission Decision C(2017) 7733 final of 27 November 2017 on State aid SA.47912 (2017/NN) – Environmental incentive measure adopted by Spain in favour of coal-fired power plants (‘the decision at issue’).

I. Legal framework

2. Article 4(4) of Council Regulation (EU) 2015/1589 of 13 July 2015 laying down detailed rules for the application of Article 108 of the Treaty on the Functioning of the European Union (3) provides:

‘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 (“decision to initiate the formal investigation procedure”).’

3. Article 6(1) of the regulation reads:

‘The decision to initiate the formal investigation procedure shall summarise the relevant issues of fact and law, shall include a preliminary assessment of the Commission as to the aid character of the proposed measure and shall set out the doubts as to its compatibility with the common market. The decision shall call upon the Member State concerned and upon other interested parties to submit comments within a prescribed period which shall normally not exceed 1 month. In duly justified cases, the Commission may extend the prescribed period.’

4. Article 9(1) and (2) of the regulation states:

‘1. Without prejudice to Article 10, the formal investigation procedure shall be closed by means of a decision as provided for in paragraphs 2 to 5 of this Article.

2. Where the Commission finds that, where appropriate following modification by the Member State concerned, the notified measure does not constitute aid, it shall record that finding by way of a decision.’

II. Background to the dispute

5. Between 1998 and 2007, every electricity generating plant in Spain was entitled to a remuneration known as the ‘power guarantee’, irrespective of the technology used, in order to encourage the establishment and maintenance of generation capacity in the electricity system and to guarantee a reliable supply. Renewable energy installations, however, did not benefit from that incentive, and received a specific award.

6. In 2007, the Spanish Government gave the Minister for Industry, Tourism and Trade the authority to replace the power guarantee with a new tax known as the ‘capacity tax’.

7. That decision was formalised by Royal Decree 871/2007, (4) which adjusted the electricity tariffs in force as from 1 July 2007. The decree, issued on 29 June 2007, (5) stipulated that the capacity tax would enter into force from 1 October 2007 onwards.

8. The regulation of electricity tariffs was outlined in Orden ITC/2794/2007, (6) which was issued on 27 September 2007 (7) and entered into force on 1 October 2007 (‘ITC/2794/2007’).

9. That order sets out the various measures that are to be taken to remunerate capacity by including an incentive to ensure the availability of installations and one to promote investment in production.

10. The availability incentive is intended to benefit production installations falling under the ordinary regime of the system for the peninsula, with a minimum installed capacity of 50 megawatts (MW). That applies to installations that entered into service after 1 January 1998 and that have not yet been in operation for 10 full years. The purpose of the incentive is to encourage the construction and commissioning of new installations by providing for payments which help to offset investment costs. The amount of remuneration is set at EUR 20 000 per MW per year.

11. Annex III to ITC/2794/2007 outlines the investment incentives: paragraph 10 states that the Minister for Industry, Tourism and Trade has the competence to approve such measures for investment in production installations that fall under the ordinary regime of the system for the Spanish peninsula and that have an installed capacity of 50 MW or more. Such incentives may be granted for significant investment necessary for the expansion or substantial modification of existing installations, or for investment in new installations in priority technologies in line with energy policy and security of supply objectives.

12. The measure contained in that text was applied in order to incentivise coal-fired power plants to make ‘environmental’ investments in desulphurisation installations. The conditions for that benefit were laid down in Orden ITC/3860/2007 (8) (‘the contested measure’) of 28 December 2007, (9) which revised the electricity tariffs as from 1 January 2008.

13. Only coal-fired power plants that are included in the National Emission Reduction Plan for Existing Large Combustion Plants (‘the PNRE-GIC’), approved by the Spanish Council of Ministers on 7 December 2007, and that are also included in the emissions ‘bubble’ defined by the PNRE-GIC, which prescribes the authorised emission quantities per company, are eligible for the above incentive.

14. In addition, the investments must have been made before 1 October 2007, the date of entry into force of ITC/2794/2007, or the application for approval must have been submitted at least three months before that date.

15. In 2011, the benefit of the contested measure was extended to cover coal-fired power plants that had made investments not only in desulphurisation installations, but also other ‘environmental’ investments to reduce sulphur oxide emissions, where they had been made before 1 January 2008.

16. On 29 April 2015 the European Commission started a sector inquiry in 11 Member States, including Spain. Following this inquiry, on 4 April 2017 the Commission informed the Spanish authorities that it had carried out an inquiry into the measure in question, and on 27 November 2017 it decided to initiate a formal investigation into the measure pursuant to Article 108(2) TFEU.

17. In that decision, the Commission states that it had reached the preliminary conclusion that the contested measure constitutes State aid and expresses doubts as to its compatibility with the internal market. Specifically, the Commission considers that the contested measure constitutes aid to investments made to bring coal-fired power plants into line with Directive 2001/80/EC of the European Parliament and of the Council of 23 October 2001 on the limitation of emissions of certain pollutants into the air from large combustion plants (OJ 2001 L 309, p.1).

III. The procedure before the General Court and the judgment under appeal

18. On 28 May 2018, Naturgy Energy Group, formerly known as Gas Natural SDG, a Spanish company active in the energy sector and involved in the generation of electricity from coal, filed an appeal with the General Court Registry. The appeal sought the annulment of the decision that had been challenged by the company.

19. In those proceedings, EDP España and Viesgo Producción intervened in support of the appellant at first instance.

20. In the judgment under appeal, the General Court dismissed the applications for annulment on the ground that the first plea, relating to the duty to state reasons for the selective nature of the measure in question, was unfounded.

21. In paragraph 60 of the judgment under appeal, the General Court drew attention to the fact that, pursuant to Regulation 2015/1589, the formal investigation procedure may be initiated by summarising the relevant issues of fact and law relating to the State measure, together with a preliminary assessment of the measure in question in order to identify whether it can be classified as aid and setting out the doubts as to its compatibility with the internal market.

22. In paragraph 61 of the judgment under appeal, the General Court added that the Commission was required to initiate the formal investigation procedure if a preliminary examination did not enable it to overcome all the difficulties raised by the question as to whether or not the measure at issue constituted aid for the purposes of Article 107(1) TFEU.

23. In paragraph 62 of the judgment under appeal, the General Court recalled that the purpose of the decision to initiate the formal investigation procedure was to allow the interested parties to actively participate in that procedure. It also clarified that the decision included preliminary assessments and that the Commission was not obliged to clarify all potential unresolved issues at that initial stage.

24. In paragraph 63 of the judgment under appeal, the General Court stated that it was important to remember that the classification of a State measure like that in such a decision is merely provisional. That is confirmed by Article 9(2) of Regulation 2015/1589, which provides that the Commission may determine, at the end of the formal investigation procedure, that the measure in question does not actually constitute aid. Thus, the classification of a State measure as State aid is subject to change and is not necessarily permanent.

25. The General Court rejected the appellant’s arguments relating to two previous cases (10) in paragraphs 64 and 65 of the judgment under...