This blog is based on the article: "Solidarity In European Union Law And Its Application In The Energy Sector"by Leonie Reins and Kaisa Huhta published in International and Comparative Law Quarterly.
What is energy solidarity? A view from the EU and the energy crisis
The recent two years have been tumultuous for the European energy sector. The Russian invasion of Ukraine in early 2022 led to dramatic spikes in energy prices, undermining Europe’s energy security and threatening its economy. The EU responded by adopting several legal instruments in quick succession. Those instruments rely heavily on the idea of solidarity. Interestingly, just a year before the crisis, the Court of Justice of the European Union (CJEU) decided the case of OPAL, where it held that energy solidarity is a legally binding principle that should inform the decisions of the EU institutions and Member States.
This blog first describes the status of energy solidarity in EU constitutional law and then explores the legal instruments that have been adopted in the aftermath of the Russian invasion of Ukraine and the role and meaning of solidarity within these legal instruments.
Energy solidarity in EU constitutional law
The EU treaties make two references to solidarity in an energy-specific context. Articles 122 and 194 of the Treaty on the Functioning of the European Union (TFEU) both allow the EU to adopt legally binding for legislation in the energy sector. Article 122 empowers the Council to decide on legislative measures that are ‘appropriate to the economic situation, in particular if severe difficulties arise in the supply of certain products, notably in the area of energy’. These measures must reflect the ‘spirit of solidarity between Member States’. Before 2022, Article 122 had served as the legal basis for only two directives on minimum oil stocks in 2006 and 2009 and for one directive on the security of the gas supply in 2004.[i] All three instruments refer to solidarity but do not define it.
The scope of Article 122 is general. However, in the context of energy, it is lex specialis that only applies in supply shocks and has therefore been the key legal basis for adopting legislation in the energy crisis. In contrast, Article 194 is the general legal basis for all measures on energy policy. It is intended to guarantee the smooth functioning of the energy market and the security of the EU energy supply, to promote energy efficiency and innovation, and to enhance the interconnection of energy networks. These objectives are pursued ‘in a spirit of solidarity between Member States’. Article 194 was introduced by the Treaty of Lisbon in 2009. Before the first OPAL judgment in 2019, the legal relevance of solidarity under Article 194 TFEU was seriously questioned. For instance, it was argued that it would have ‘limited judicial impact’[ii] and that it lacked ‘a concrete definition’.[iii] After the CJEU affirmed the General Court’s findings in OPAL, it became clear that solidarity was central to EU energy policy, yet its legal meaning still suffered from definitional ambiguity. The adoption of the emergency instruments concretizes the meaning of solidarity in an energy policy context.
Solidarity in the EU’s response to the energy supply shock
The dramatically increased energy prices have raised well-founded concerns about energy security and resilience in Europe. As a response, the EU has adopted a political strategy (the REPowerEU Communication and the REPowerEU Plan) and several specific legal instruments to minimize the adverse effects of the Russian invasion of Ukraine on the energy sector and the economy.
So far, five energy-specific legislative measures have emerged from the EU’s political strategy:
The first is a Council Regulation on coordinated demand-reduction measures for gas (the Gas Demand-Reduction Regulation).
The second measure focuses on electricity and contains emergency provisions that address high energy prices (the High Energy Prices Intervention Regulation).
The third instrument, the Gas Solidarity Regulation, concerns the coordination of gas purchases and purports to protect consumers from high prices.
The fourth instrument is a Council Regulation that seeks to accelerate the uptake of renewable energy (the Regulation on Accelerating the Deployment of Renewable Energy).
The last instrument, once more a Council Regulation, creates legal means of intervening into the gas market when prices are anomalous (the Market Correction Mechanism). All five measures are based on Article 122 TFEU and were therefore adopted by the Council alone.
In these legal instruments, the term ‘solidarity’ is used in three different ways, namely (1) as an expression of the internal-market approach, (2) as a description of risk sharing between Member States, and (3) as a means of protecting those who are most affected by the energy crisis. This blog will explain what each of these uses of the concept implies in the next paragraphs.
Solidarity as an expression of the internal-market approach
The first way in which the new instruments harness the power of the principle of solidarity has to do with the internal market and the interdependence that it has created. Among other things, the internal market for energy is intended to achieve or at least contribute to energy security. The Member States are expected to pool their energy resources by eliminating restrictions to trade, which allows those resources to be deployed in the most cost-efficient way across the Union.
The increased interdependence that results from the sharing of resources requires mutual trust, solidarity and faith. This rationale is not unique to Article 122 – it is also the bedrock of Article 194(1), which requires EU energy policy to be pursued ‘in the context of the establishment of the internal market’. Links between the internal market and solidarity are also drawn often in secondary legislation, and the same line of reasoning appears in numerous passages in the 2022 instruments.
For example, the High Energy Prices Intervention Regulation states that protecting ‘the integrity of the internal electricity market’ is fundamental to ‘preserv[ing] and enhanc[ing] the necessary solidarity between Member States’ and that ‘in a spirit of solidarity, measures adopted in one Member State should, in the interconnected Union market, also have a positive effect in other Member States’. Likewise, the Gas Demand-Reduction Regulation points out that, given the ‘significant distortions of the internal market which are likely to occur if Member States react in an uncoordinated manner to a potential or actual further disruption of Russian gas supply, it is crucial that all Member States reduce their gas demand in a spirit of solidarity’.
These texts show that the internal market is key for solidarity and that solidarity is key for the internal market. Member States are expected to share not only the benefits of that market but also the risks of that interdependence.
Solidarity as risk sharing between Member States
In the EU legal instruments adopted to address the energy crisis, solidarity is often used in the context of risk sharing, which has also been described as ‘an agreement between states to intervene on a reciprocal basis if one encounters unforeseen difficulties—one for all and all for one’.[iv] In times of crisis, the concept of solidarity is used to explain why and how the Member States must share risks. While this second form of solidarity is also linked to the internal market, the focus is not on ensuring that the latter operates smoothly but on enhancing energy security among the Member States.
The idea of solidarity as ‘one for all and all for one’ shows up in several ways in the emergency instruments. First, solidarity is used to manage risks in the energy sector optimally, which is one of the starting points of the Gas Demand-Reduction Regulation. It highlights that ‘the recent escalation of disruption of gas supply from Russia points to a significant risk that a complete halt of Russian gas supplies may materialize in the near future, in an abrupt and unilateral way. The Union should therefore anticipate such a risk and prepare, in a spirit of solidarity, for the possibility of a full disruption of gas supply from Russia at any moment’. The same outlook is also apparent in the Market Correction Mechanism.
Second, solidarity in risk sharing is also used to justify the measures that the EU adopts – being a principle, it requires the EU to act in certain ways. For instance, the Demand-Reduction Regulation argues that to ‘prevent significant economic harm to the Union as a whole, it is crucial that each Member State reduce its demand after a Union alert has been declared. That reduction will ensure that there is sufficient gas for all, even during the winter. The demand reduction across the Union is an expression of the principle of solidarity, enshrined in the Treaty’. Similarly, the Regulation on Accelerating the Deployment of Renewable Energy emphasizes that energy solidarity is a means of achieving the ‘cross-border distribution of the effects of faster deployment of renewable energy projects’. Furthermore, the Recitals to the Gas Solidarity Regulation state that the ‘restrictions imposed on market operators by the extension of solidarity protection to critical gas volumes are necessary to ensure security of the gas supply during a situation of reduced gas supply and increased demand during the winter season’. These passages demonstrate that solidarity has been used as the key justification for adopting all of the emergency measures.
Solidarity as a means of protecting the most affected citizens and communities
The third way in which the emergency instruments draw on the principle of solidarity is by using it as a means of protecting the people, households and communities that are most affected by the energy supply shock that followed the Russian invasion of Ukraine. Previously, the EU has been reluctant to allow States to regulate their energy prices.[v] This has changed dramatically with the adoption of the emergency instruments, which allow price formulation on grounds of solidarity and equity. The main aim of the Gas Solidarity Regulation, for example, is to safeguard the supply of gas to the most vulnerable customers – it even defines a ‘solidarity protected customer’. Similarly, the High Energy Prices Intervention Regulation requires energy companies that secure windfalls from high energy prices to make ‘solidarity contributions’. The proceeds are used, among other things, to support energy customers, particularly vulnerable households, financially.
Obligations of this type have interesting implications for the scope of energy solidarity. In the OPAL ruling and under Article 194, solidarity is taken to apply to Member States and EU institutions alone. However, the solidarity contribution in Article 122 TFEU seems to extend the reach of the principle to private companies as well. Furthermore, the (temporary) solidarity contribution is a redistributive measure that is directed at ‘the improvement of the energy crisis in the internal market’.
Concluding thoughts
Based on an analysis of the emergency instruments and the interpretation of solidarity in EU case-law, it is clear that the principle is understood in fundamentally different ways in different contexts and under different legal bases. In particular, it seems that the meaning of solidarity is different in Articles 122 (legal basis for crisis measures) and 194 (legal basis for energy policy) despite their commonalities.
First, the swift adoption of several emergency instruments seems to indicate that solidarity under Article 122 is not as politically charged as solidarity under Article 194. Second, solidarity under Article 194 is a significantly broader concept than solidarity under Article 122. The OPAL ruling established that the principle of energy solidarity enshrined in Article 194 applies to all EU energy policy, while solidarity under Article 122 is fundamentally about security and responses to crises. The Court also appeared to confirm that secondary legislation on energy should be interpreted and reviewed in the light of the broader notion of energy solidarity enshrined in Article 194 TFEU regardless of whether the legislation in question refers to solidarity explicitly.
The political sensitivity and the broad interpretation of energy solidarity under Article 194 and the OPAL ruling exposes the principle to heavier criticism than its interpretation under Article 122. The measures that are adopted on the latter basis are temporary and respond to crises and use solidarity specifically in the context of the internal market approach, as a description of risk sharing between Member States, and as a means of protecting those who are most affected by the energy crisis. The swift adoption of these instruments showed that EU energy policy can, when needed, react swiftly to sudden changes in the market even though the adoption of the measures requires successful negotiations in the Council.
About the Authors
Leonie Reins is Professor for Public Law and Sustainability at Erasmus School of Law. Prior to joining ESL she worked as an Assistant Professor at the Tilburg Institute for Law, Technology and Society (TILT) at Tilburg University. She obtained her FWO-financed PhD on "the coherent regulation on energy and environment - using shale gas as a case study" from KU Leuven, where she subsequently also worked as a Post-Doctoral Researcher. In addition Leonie worked as Legal Advisor at a Brussels-based environmental law and policy consultancy, where she was involved in projects on environmental, energy and climate change law and policy. Leonie holds and LL.M. in International, European and Comparative Energy and Environmental Law .
Dr. Kaisa Huhta is a Senior Researcher and an Academy of Finland Postdoctoral Fellow at the UEF Law School and at the Centre for Climate Change, Energy and Environmental Law. Her research focuses on EU energy law. She has published more than 50 peer-reviewed journal articles, books, book chapters, expert statements and other publications and her work has appeared in top level international journals such as the European Law Review and the International and Comparative Law Quarterly. Dr. Huhta actively carries out consultancy work in the field of EU and Finnish energy law.