Background
Germany enacted the KWKG 2020, legislation reforming support for combined heat and power (CHP) generation. The measures provided financial support for electricity produced by newly built or modernized CHP plants, energy-efficient district heating and cooling networks, and storage facilities. Support was financed through a compulsory surcharge (“KWKG surcharge”) that distribution network operators were required to pay to beneficiaries, with transmission network operators compensating distribution operators and spreading the cost. Network operators could, but were not legally required to, pass the surcharge on to end consumers through electricity tariffs.
In June 2021, the Commission adopted a decision classifying these measures as State aid under Article 107(1) TFEU, finding they were financed through State resources in the form of a de jure compulsory levy managed and apportioned by law. The Commission nevertheless found the measures compatible with the internal market.
Germany challenged the decision at the General Court, arguing the measures did not constitute State aid because no State resources were involved. The General Court annulled the Commission’s decision in January 2024. The Commission appealed to the Court of Justice.
The Court’s Holding
The CJEU unanimously upheld the General Court and dismissed the Commission’s appeal. The Court held that the CHP support measures were not granted through State resources within the meaning of Article 107(1) TFEU.
Applying settled case-law, the Court confirmed two alternative criteria for identifying State resources: (1) funds financed by a compulsory charge or surcharge under national law and managed and apportioned in accordance with that law, or (2) sums constantly under public control and available to competent authorities. The Commission relied on the first criterion. The Court found it unsatisfied because, although network operators were legally obliged to pay beneficiaries, the financial burden was not compulsory on end consumers. Network operators retained discretion whether to pass the surcharge to customers in their electricity tariffs—they could absorb the costs themselves.
The Court emphasized that for support to constitute State aid, there must be a sufficiently direct link between that support and a reduction of the State budget, or a sufficiently concrete economic risk to it. The absence of a legal obligation on end consumers to bear the costs through tariffs meant the burden did not stem from State resources. The Court rejected the Commission’s arguments that a “triangular relationship” between payer, grantor, and beneficiary was unnecessary, and that management and apportionment criteria were not additional requirements beyond the existence of a compulsory charge.
Key Takeaways
- A compulsory charge on network operators is insufficient to establish “State resources” if those operators are not legally required to pass the burden to end consumers.
- State resources require a sufficiently direct economic link between the support granted and the State budget or concrete risk to it.
- The mere discretionary ability to pass on costs does not satisfy the legal obligation requirement; only mandatory passing-on establishes the chain.
- Criteria for State resources—compulsory financing and management/apportionment under law—are conjunctive (both required), not disjunctive, when addressing compulsory charges.
Why It Matters
This judgment significantly clarifies the boundaries of State aid law for member state subsidy schemes, particularly in energy policy. It establishes that intermediaries (like network operators) can manage State-mandated support obligations without converting the financing into “State resources” if the ultimate cost-bearer—the end consumer—is not legally compelled to bear it. This distinction is crucial for renewable and efficient energy support schemes across the EU that operate through third-party intermediaries.
The ruling confirms that the EU’s State aid framework focuses on ensuring subsidies ultimately burden the State budget or create concrete economic risk to it. Where private actors absorb costs at their discretion, the aid lacks the public-resource character required by Article 107(1) TFEU. This provides member states with legitimate policy flexibility in designing energy support mechanisms that operate through market intermediaries without triggering State aid notification and compatibility requirements.