Recover and repower?
REPowerEU, between crisis management, strategic autonomy, and constitutional constraints

1. REPowerEU and the management of the energy crisis by the EU
This blogpost engages with the implications of the legal measures that have been proposed or adopted by the European Union (EU) as part of its REPowerEU Plan. This plan is significant in that it seeks to rapidly reduce, and eventually end, the EU's dependence on Russian fossil fuel imports, particularly natural gas. Consequently, REPowerEU could be seen as a step in the direction of strengthening the strategic autonomy of the EU, which has been defined in the July 2022 Strategic Autonomy Monitor produced by the European Parliament’s in-house think tank, as “the capacity of the EU to act autonomously – that is, without being dependent on other countries – in strategically important policy areas”. However, as the Monitor also notes, strategic autonomy is subject not just to external, international constraints, but is also conditional upon Member States’ support of a common European agenda. In the context of this latter, internal constraint to EU strategic autonomy, we focus on two legal steps taken in pursuit of the realisation of REPowerEU, that is Council Regulation 2022/2576, through which the Union aims to coordinate its diversification of gas imports; and the Commission proposal to amend the Recovery and Resilience Facility (RRF) Regulation in order to integrate it with REPowerEU, on which Council and Parliament reached political agreement in late 2022.
REPowerEU is the heading under which the European Union groups its actions aimed at rapidly decreasing its dependence on Russian fossil fuel imports in light of the February 2022 invasion of Ukraine. Given the EU's historic heavy reliance on these resources, the diversification or substitution of energy imports poses an enormous challenge. The Union’s historic dependence on Russian fossil fuel imports, particularly gas, had previously led to tensions between Member States and between Member States and the European Commission, for both environmental and security-of-supply reasons. The most high-profile example of such disagreement prior to the start of the war in Ukraine is the controversy surrounding the Nord Stream 2 Pipeline. Despite open and often vociferous opposition by the Commission and several Member States, and long-running efforts by the Commission to gain more legal and political control over the pipeline, Germany and other advocates of the project, such as Austria, supported it until shortly before Russia launched its invasion of Ukraine.
The external shock of war in Europe and Russia’s overt use of gas exports as an instrument of geopolitical pressure provided the necessary momentum for the EU to tackle this import dependence head-on. REPowerEU is the strategic masterplan for how this watershed moment in the EU's internal and external energy relations should unfold in policy and law. The initial REPowerEU Communication was published by the Commission on 8 March 2022, less than two weeks after Russia launched its invasion of Ukraine. Spurred on by the European Council's 11 March Versailles Declaration, the Commission developed REPowerEU into a comprehensive plan for action by 18 May 2022. The Plan has the four interrelated main objectives of saving energy; diversifying supplies; compensating for reduced fossil fuel imports by scaling up the deployment of renewable energy; and “smartly [combining] investments and reforms”. Adding more detail to how these ambitious goals will be accomplished, the Plan was accompanied by a set of documents focusing on particular aspects of this shift in energy policy. These concern the estimated investment needs and additional costs, means for reducing energy consumption, emergency measures for the electricity market, a strategy for the swift deployment of solar energy, and a Joint Communication on the EU's external energy relations.
In the legislative sphere, too, REPowerEU actions have been remarkable in both scope and speed as discussed in an earlier contribution to this blog. To recapitulate briefly, the legal realisation of the REPowerEU Plan so far has consisted of  an amendment to the Gas Security Regulation establishing a minimum gas storage filling obligation, which was passed into law by the end of June 2022; Council Regulation 2022/1369 of 5 August 2022, which established a 15% gas demand reduction target for all Member States for the period between August 2022 and March 2023; Council Regulation 2022/1854 of 6 October 2022, which notably introduced measures such as a “revenue cap” for generators of electricity from inframarginal technologies, and a so-called “solidarity contribution” on excess profits for companies active in the fossil fuel sector; Council Regulation 2022/2577 of 22 December 2022, which aims to simplify the procedural requirement for the deployment of renewable energy; Council Regulation 2022/2578 of 22 December 2022, aiming to prevent excessive gas price spikes; and, significantly, Council Regulation 2022/2576 of 19 December 2022, which seeks to encourage greater solidarity among Member States in their gas import decisions by encouraging joint purchasing of gas. It is this latter act and its operation that we focus on below.


2. Joint Gas Purchasing under REPowerEU: Towards Greater EU Strategic Autonomy in the Energy Sphere?
The legislation on coordination of gas purchases builds on and further defines the so-called EU Energy Platform, a forum that was established on 7 April 2022 to facilitate communication on and coordination of strategic and secure gas supplies among Member States. Council Regulation 2022/2576 establishes (in Article 8) an ad hoc Steering Board for the Platform, composed of representatives from the Commission, all Member States, and, upon invitation from the Commission, also from the members of the Energy Community, an international organisation seeking to foster energy market integration between the European Union and its neighbours. According to the Commission, the Platform has already been instrumental in realising the abovementioned external energy relations strategy by facilitating the conclusion of recent Memoranda of Understanding on gas imports from Israel and Egypt, and Azerbaijan.
Regulation 2022/2576 seeks to give further momentum to the Platform as an instrument of a coordinated EU gas import policy by making it mandatory for Member States to participate in the aggregation of gas demand equal to 15% of their 2023 gas storage filling target (per Article 10). Once this demand is aggregated, a service provider appointed by the European Commission will seek offers to match this demand (Article 7). These measures adopted in pursuit of better coordination of EU gas imports certainly are remarkable steps taken to enhance EU strategic autonomy in the Union’s external energy relations, and indeed would have been unthinkable before the onset of the war in Ukraine. Yet, it is important to specify that, from a legal viewpoint, such autonomy remains largely dependent on the political support by Member States of the EU’s crisis response agenda.
As with other measures contained in the legislation adopted as part of the REPowerEU Plan, provisions that touch on the very core of the right of each Member State “to determine the conditions for exploiting its energy resources, its choice between different energy sources and the general structure of its energy supply”, enshrined in article 194(2) TFEU, remain largely unenforceable through the Court of Justice. For example, the 15% gas demand reduction target is voluntary and becomes binding only if the Council agrees that there is an acute gas supply emergency (as per articles 4 and 5 of Regulation 2022/1369). Even where the target itself is binding, such as with the gas storage filling target introduced by Regulation (EU) 2022/1032, complex procedural stipulations, such as introduced by Article 6a(11) of that instrument, render formal infringement proceedings an unlikely and impractical solution in case of a Member State falling short of its filling obligations. As for the demand aggregation mechanism introduced by Regulation 2022/2576, a recent commentary is rather critical of the measure, stating that Member States only being obliged to aggregate a small percentage of their demand, coupled with the fact that joint purchasing, as opposed to demand aggregation, is voluntary, render the chances of its successfully deployment slim. Despite the rapid and impressive pivot in the Union’s energy policy towards the reduction of fossil fuel imports from Russia, the Union is thus likely to remain, to a certain degree, an “engaged but constrained” actor.


3. REPowerEU and its funding: healing the fractures of Europe’s metabolic constitution or creeping supranational competences in the economic sphere?
Another element worth reflecting on is the funding of the new instrument, to be assessed in the perspective of the EU’s responsiveness to crises. Indeed, the funding of the REPowerEU Plan is axed on the Recovery and Resilience Facility (RRF) instrument, one of the pillars of the Next Generation EU. To this purpose, 225 billion euros in loans are already available under this line of funding. Additional RRF grants will be funded by the auctioning of the Emission Trading System (ETS) allowances, currently held in the Market Stability Reserve, worth 20 billion euros. The ETS is a key tool for reducing greenhouse gas emissions and is a cornerstone of the EU policy to combat climate change.
Next to it, other sources feed the financing of REPowerEU. Unspent resources from a line of subsidy under the Cohesion policy, the SAFE (Supporting Affordable Energy) funding, will be used to provide direct support to vulnerable families and small and medium-sized businesses (SMEs) to support climate equity objectives, one of the pillars of the energy trilemma.
An additional 5.4 billion euros of funds will come from the Brexit Adjustments Reserve that MSs will be able to voluntarily transfer to the RRF to finance REPowerEU measures, as reported in the Commission Factsheet on the funding of the REPowerEU plan.
As one can understand from this overview, the biggest share of the funding comes from the RRF instrument, which is one of the pillars of the Next Generation EU, an effective yet not unproblematic instrument adopted as a reaction to the COVID-19 pandemic. This means that REPowerEU is attracted under the umbrella of the governance innovations of Next Generation EU and what they represent for the EU as a polity.
The RRF is part of a complex legal construction, which has been devised as a solution for the creation of an innovative plan to support states in their effort to get out of the asymmetric crises caused by the pandemic. In this perspective, the fact that a core part of the funding of the Plan is coming through the RRF means that the energy transition in the EU is somehow coupled with the economic coordination policy of the EU, which appears to become a super-competence of the EU, developing beyond the black-letter of the Treaties, as argued recently by Chamon. Indirectly, this witnessed the growing bubble of the integration-through-funding approach pursued by the EU with the last crises, which deserves scrutiny for its implications on the constitutional setting of the EU.
To better understand this claim, one should look back at the RRF development. From this perspective, there is a growing role for Article 122 TFEU as a legal basis employed to expand the economic coordination competence of the EU beyond its actual legal basis. Some steps backward are needed to unpack the core of the question.
First, the RRF is the instrument that governs operationally the new scheme devised for the recovery of the EU from the pandemic. Though adopted on Article 175(3) TFEU, which provides the legal basis for the coordination of economic policies, yet the RRF is the operating branch of the Recovery Instrument Regulation, adopted on Art. 122(1) TFEU and referred to as the ‘control room’ of the RRF.
As suggested earlier, Article 122(1) TFEU, which is, therefore, the basis of a significant part of the funding used for the REPowerEU Plan, has been used as the passe-partout legal basis for emergency regulation, for any situation requiring urgent action at EU level, from supporting Greece during the refugee crisis to the SURE during the pandemic, and now to fund the REPowerEU Plan.
Secondly, the ‘method’ designed with the Next Generation EU implies a new system of close coordination between national and European institutions. As aptly framed by Nicola Lupo, the system designed with the EU RRF and the domestic Recovery and Resilience plans can be called a maxi ‘euro-national proceeding’, carving the governmental function of steering the domestic political agendas to the targets defined in recommendations of the European Semester and of the Stability and Growth Pact, “giving further teeth to those recommendations”, as rightly observed by Chamon.
Overall, this contributes to the growth of the ‘integration-through-funding bubble’, which questions the respect of the current constitutional setting, certainly one “of bits and pieces” but still one that is based on the principle of conferred competences.
From another perspective, it has also been questioned if this reliance on this line of funding, which are administered by MSs, can jeopardize the effective attainment of the strategic objectives of the REPowerEU Plan, also in relation to the different timeframes of the Plan and of the RRF, as it has been put forward by the European Court of Auditors.
To conclude, with the REPowerEU Plan the EU has engaged in a clean energy transition while it secures its energy supplies with more reliable international partners. However, this does seem to be going to heal the fractures of the European metabolic constitution, as explained by Fasone and Lindseth, since REPowerEU insists -for a good deal- on temporary solidarity measures like the RRF. From another perspective, the EU’s energy constitution constrains its strategic autonomy to respect the prerogatives of the MSs.


4. Conclusions: “Never let a good crisis go to waste”
REPowerEU represents a watershed moment in the management of the energy crisis. If ‘Never let a good crisis go to waste’ seems to be a lesson learned in the governance of past crises, some reflections are in place as to the implications of the measures, beyond the surface of political successes. If REPowerEU is certainly a step in the direction of breaking the energy dependence from Russia and moving forward in the direction of reaching the targets of the Green Deal, one must stress that the measures decided at the legislative level are not so intrusive to be developing a fully-fledged strategic autonomy for the EU, also viz-a-viz the Member States. Yet, demand aggregation, as many other measures of the REPowerEU, still need to respect competence division as per Article 194 TFEU, so that legally, the internal constraint on the strategic autonomy in energy is not lessened or ‘neutralised’: its actual achievement will depend on the Member States’ political will to realize it. Certainly, the solution of the knot concerning the funding of the Plan is also a success, and it consolidates the development of the ‘integration-though-funding’ approach. This must however take place in a way that does respect the constitutional setting of the EU and grants the power-legitimacy nexus, which requires the participation of the European and national parliaments.

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The principle of energy solidarity at its first stress test: the mitigation of the energy crisis between national sovereignty and supranational integration

“Ending our dependency on Russian fossil fuels is only the first step. The skyrocketing electricity prices are now exposing, for different reasons, the limitations of our current electricity market design. It was developed under completely different circumstances and for completely different purposes. It is no longer fit for purpose. That is why we, the Commission, are now working on an emergency intervention and a structural reform of the electricity market. We need a new market model for electricity that really functions and brings us back into balance.”
Ursula Von Der Leyen, Bled Strategic Forum, 29.9.2022


Introduction
The aim of this blogpost is to give a first analysis and assessment of the measures designed by the EU to react to the energy crisis, a crisis that is unfolding partly due to the pandemic (crisis), and later on also as a consequence of the weaponization of gas supply by Russia, as a counterreaction to the EU’s sanctions.
Starting from the famous OPAL case, which enshrined the principle of solidarity as a cornerstone of European energy law, this post will focus on the measures that have been adopted by the EU to mitigate the crisis, and will analyze them through the lens of the principle of solidarity.
The salience of this topic is multiple: on the one side, the energy crisis is one of the several crises the EU is tackling, right after the covid-19 crisis, the refugee and financial crises. This situation of ‘polycrisis’ – as framed by Zeitlin, Nicoli and Laffan – fractures the European political space across multiple and new cleavages. From a legal perspective, it is interesting to observe how the EU is reacting and forging solutions to these crises with the toolkit available to it, and if and how the reactions to these crises affect European governance in a more structural manner.
A second interesting element is the relation between the energy and climate crises, which concern two pillars of the so-called energy trilemma, consisting of energy sustainability, security, and competitiveness. Energy sustainability is one of the priorities of the European Commission and is embedded in the European Green Deal. These priorities, furthermore, touch on various different competences of the EU, in particular environment and energy, which have developed along different historical paths. In this context, the search for emergency solutions is intertwined with the pursuit of policies, e.g., on renewable energies, which have a more structural nature. It is therefore interesting to analyze if challenges can be raised against the legal basis adopted for these first reactions to the crisis by the EU.

 

The OPAL case and the principle of solidarity: a politically ‘sustainable’ legacy in EU energy law?
The competence of the EU in energy policy was introduced by the Treaty of Lisbon, albeit European integration, from the beginning, has been concerned with the creation of a progressively integrated market of production factors. When a specific energy competence was negotiated, it was Poland that lobbied for the inclusion of the principle of solidarity in Article 194 TFEU, considering its vulnerable position in relation to energy security: interestingly, it was the first country to rely on this principle in litigation.
The OPAL case represents a constitutional turning point in energy law: indeed, the CJEU affirmed that the principle of solidarity is a cornerstone of EU energy law.
In its judgment of the 15th of July 2021, the CJEU stated that the principle of solidarity of Article 194 TFEU is one of the specific expressions, in the field of energy, of the general principle of solidarity (para. 38), which is itself one of the fundamental principles of EU law. In doing so, the Court supports the idea that the principle of solidarity has a polymorphic nature, in the sense that, besides a core common to the whole EU system, the principle can be declined with several nuances across the different sectors where it is supposed to apply.
In asserting the binding nature of the principle, the Court relied on the case law on the principle of solidarity in the context of relocation decisions, where Poland and other Visegrad countries were defendants in the infringement proceedings brought against them by the Commission. This could be seen as a subtle message to Poland, hinting that the respect of the European legality can have both bitter and sweet fruits (para 42).
Another important element specified by the CJEU concerns the scope of the principle, which goes beyond security of energy supply. This means that it applies and intersects all four different objectives set out in Article 194 TFEU. These are: to (a) ensure the functioning of the energy market; to (b) ensure security of energy supply in the Union; to (c) promote energy efficiency and energy saving and the development of new and renewable forms of energy; and to (d) promote the interconnection of energy networks (para 37). Therefore, solidarity permeates all the different aspects of energy law and policies, as highlighted by Münchmeyer in his analysis of the case.
A fourth element stressed by the Court is the systemic nature of the principle, in the sense that solidarity entails rights and obligations both for the EU and for the Member States. The dimensions of solidarity are vertical, i.e., from the EU to States and vice versa, but also horizontal, between Member States. This is extremely important since it stresses an inescapable horizontal dimension of the principle, which might impact or even conflict upon national prerogatives in energy law.
The implications of the case are important. The principle of solidarity -as framed by the CJEU- goes beyond emergencies and entails a preventive dimension, in the sense that the EU can resort to it to avoid the occurrence of crises (para 69). Furthermore, solidarity requires that the Commission verifies if there is a danger for gas supply on the markets of the MS. It entails a duty “to conduct an analysis of the interests involved (…), taking into account the interests both of the Member State and of the EU as a whole (para 53). This has been stressed by the Court, with special comparison with Article 222 TFEU. In contrast, the Court did not address the relation between Article 122(1) and 194 TFEU. Interestingly, most of the measures adopted in the aftermath of the crisis, are based on Article 122(1) TFEU.
One of the questions left by the OPAL case is whether the integrated approach in the definition of solidarity by the CJEU has left its seeds, and which fruits it will bear, against the background of the energy crisis that unfolded in 2021 and 2022?

 

The reaction to the energy crisis in light of the principle of solidarity
Right after the Russian invasion of Ukraine, the EU has been active in finding solutions to the energy crisis, with several measures. The situation is dynamic, and several proposals are in the process of negotiation. From the outset, it should be observed that the word solidarity has been used in the legislative proposal, often in the meaning of solidarity between Member States but also in relation to social components, e.g., household and companies.
With REPowerEU – outlined on the 8th March, and adopted in May 2022 (Plan), the Commission has clearly formulated the targets of ending dependence from Russian fossil fuels, accelerating the shift toward clean energy transition, setting the foundation of a Union of Clean Energy.
Subsequently, the EU adopted binding measures, such as Regulation No. 2022/1032 on gas storage, that provided for gas storage minimums and provisions on storage infrastructures, with Article 194(2) TFEU as legal basis.
Furthermore, Council Regulation No. 2022/1369 of 5 August 2022 on coordinated demand-reduction measures for gas had the aim to reduce gas consumption by 15%, and had Art. 122(1) TFEU as legal basis. This Regulation aims at creating a mechanism for demand-reduction measures and a Union alert, triggering a mandatory demand-reduction obligation, to safeguard the security of gas supply, in a spirit of solidarity.
A third measure is  Council Regulation No. 2022/1854 focused on an Emergency Intervention to address high energy prices in the EU, and has Art. 122(1) TFEU as legal basis. It has the aim of ‘moderating’ the market, for example by capping the revenues for electricity generators using infra-marginal technologies, targeting renewable, nuclear, lignite, for example, with a duty of reinvestment to the benefit of the final consumers.
This Regulation provides for measures organizing forms of solidarity to mitigate the effects of the crisis, including a solidarity contribution on the profits of companies active in the crude petroleum, natural gas, coal, and refinery sectors. The solidarity contribution, additional to regular taxes, is calculated on taxable profits more than 20 per cent higher than the average yearly taxable profits since 2018 (Art. 14-18). This will be to the benefit of households and companies, mitigating the effects of high retail prices for electricity. In this respect, the use of the proceeds from the temporary solidarity contribution, provides that, among other destinations, “in a spirit of solidarity between Member States, Member States may assign a share of the proceeds to the common financing of measures to reduce the harmful effects of the energy crisis, including support for protecting employment”, and to promote investments in energy efficiency, including cross-border projects, and in the Union renewable energy financing mechanism ex Article 33 of Reg 2018/1999.
Additional solidarity measures include solidarity agreements between Member States. Since at domestic level states have different energy mixes, not all states can support their final customers in a symmetric manner. Therefore, Member States with net import of electricity above 100% shall conclude agreements to share the surplus revenues with the main exporting Member State in a spirit of solidarity (Art. 11 Reg 1854). Such solidarity agreements are also encouraged, in particular, to reflect unbalanced trading relationships.
More initiatives include proposals for a Council Regulation on a new framework to accelerate the deployment of renewable energy, and a proposal for a Council Regulation on the coordination of gas purchases. All these initiatives have the legal basis in Article 122(1) TFEU.
This last measure provides for solidarity through a better coordination of gas purchases, with a joint purchase system, providing for demand aggregation and a duty for Member States to join for at least 15% of their respective storage filling targets. As one can perceive, 15% is not a great share of the filling targets, so this joint purchase mechanism could have -in the best case- a corrective effect only. Also, the proposal provides for joint purchases on a voluntary basis, in the effort to help smaller states and companies to access markets at better conditions.
Furthermore, another instrument, the Market Correction Mechanism, can be activated in case of spikes in gas prices, measured on the TTF, used as a price reference for gas contracts. This dynamic price cap will apply as long as the prices remain high. The ACER will monitor the market, and the Commission will propose the activation of the cap to the Council, that will decide. This price cap is meant to be a mechanism of last resort to prevent episodes of excessively high prices, and not a regulatory intervention by the Commission on prices.

 

The mitigation of the energy crisis between national sovereignty and supranational integration
All in all, the EU is addressing the crisis, partially coordinating the responses of the Member states and avoiding that free riding could compromise energy security for some states: this seems to be the minimum legacy of the OPAL case. Next to a coordinated effort, some states remain active in securing their domestic markets, and this feeds the frustration of others, that possess less economic resources to address this crisis and invoke a stronger supranational intervention.
The energy crisis creates a situation where an asymmetrical shock will create exponentially more asymmetrical consequences, because of the fragmented nature of European energy market. It is therefore important that emergency measures can address these imbalances, to grant energy security and to correct distortive effects created by the crisis.
If the measures are certainly inspired by solidarity, some observations can be made precisely on this principle.
First, solidarity is -once again- linked to emergency, and the use of Article 122(1) TFEU as legal basis confirms it. Article 122(1) TFEU deals with economic solidarity in case of “difficulties (..) in the supply of certain products, notably in the area of energy”. This procedure does not involve the European Parliament, and it allows the Council to decide alone. This entails by-passing the rules and guarantees typical of the OLP, also including an impact assessment. Though motivated by the sense of urgency implied by the emergency and by their temporary nature, it would be legitimate to question some of the long-term effects of those measures. Additionally, Article 122(1) TFUE has been used for many disparate measures, from supporting Greece during the refugee crisis, to the SURE during the pandemic: is this legal basis becoming the general passe-partout legal basis for emergency regulation, for any situation requiring urgent action at EU level?
Second, in several horizontal inter-state solidarity measures there is an important voluntaristic dimension, in the sense that states are left free to decide to activate forms of solidarity, in contrast to mandatory solidarity initiatives, perhaps because of the urgency and legitimacy issues explained above. These measures do not seem to be inspired by a vision of further Europeanization of the markets, but rather by the preservation of domestic competences, where the EU intervenes to correct the most dangerous effects of the crisis. Along these lines, though there is a strong redistributive component in these emergency measures, aimed at protecting households and companies, the redistributive effects of solidarity are to be measured within states; their horizontal (inter-state) effects seem inspired by a corrective logic, mainly to address the asymmetric consequences of the crisis.
Though unprecedented and unthinkable before the war, a final question mark remains on the long-terms effect of the crisis on the fragmentation of the European energy market. In similar terms, the evolution of the scope of the principle of solidarity in energy law after the OPAL case is yet to be seen. As to the current energy crisis, solidarity is certainly the buzz word, but it has been implemented in a way to preserve national competences. Instead, a more structural reform of the energy market, inspired by a more robust supranational rationale is yet to be seen. It might be in that context that we could appreciate the full potential of the solidarity principle as envisaged by the CJEU in the OPAL case, also to support more ambitious European decarbonization policies.

The Author wishes to thank Max Munchmeyer (European University Institute) for an exchange of ideas on the blogpost.

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