Background
Italy’s President of the Council of Ministers challenged an Emilia-Romagna regional law concerning concessions for small-scale hydroelectric water diversions, meaning plants with average annual nominal power of no more than 3,000 kW. The law allowed a concessionaire receiving renewable-energy incentives to request that its concession term be adjusted to cover the incentive period, subject to the statutory 30-year maximum.
The Italian Constitutional Court asked whether the Services Directive applied to such plants and, if so, whether Article 12 barred the regional measure. Article 12 requires an impartial and transparent selection procedure where authorisations are limited by scarce natural resources or technical capacity, and prohibits automatic renewal of those authorisations.
The Court’s Holding
The Court held that Directive 2006/123 does not apply to power plants whose sole or principal activity is generating electricity, including the small-scale hydroelectric plants at issue. Electricity is a good or product under the Court’s case law; producing it is therefore not, by itself, a “service” within the meaning of the directive.
Obligations connected with operating the plants—such as managing water flows, protecting water resources, or occasional network-balancing activity—did not alter that conclusion. Even if some of those activities could be services in isolation, they were ancillary to the principal activity of electricity generation and could not independently bring the plants within the directive’s scope.
Because the directive was inapplicable, the Court did not answer the questions concerning natural-resource scarcity or whether the incentive-related adjustment amounted to prohibited automatic renewal.
Key Takeaways
- Electricity generation is production of a good, not a service, for purposes of the Services Directive.
- Ancillary operational and environmental obligations do not change the principal character of a small hydroelectric plant’s activity.
- The judgment does not decide whether the regional concession adjustment complies with Article 49 TFEU or other EU-law rules.
Why It Matters
The ruling limits the reach of the Services Directive’s competitive-selection and anti-renewal rules. A concession involving the use of public natural resources is not enough on its own: the underlying economic activity must qualify as a service.
For renewable-energy concession regimes, the decision leaves national courts to assess any remaining EU-law constraints outside Directive 2006/123, including those arising from the Treaty.