Hardly a day goes by without the shifts in the traditional power sector being mentioned in the news. The Paris Climate Agreement and the necessity of reducing emissions are significant drivers of the current energy transition. Traditionally, the use of cars driven by conventional motor fuels accounts for a relatively large part of CO2 emission. The energy transition and the gradual increase in the use of electric vehicles (EVs) is therefore impacting the markets for motor fuels. Conflicting interests of traditional suppliers of fuels and new market players that focus on the charging of electric vehicles have frequently given rise to legal conflicts. In this blog we will address various recent developments and place them in a legal framework.
Is current legislation hindering the increasing competition in the field of fast-charge stations?
Energy transition has a number of early adapters that were quick to identify the increasing demand for charging facilities for EVs. Relatively small players, such as New Motion, Fastned, Allego and Mistergreen, have made very significant investments these past few years, anticipating the exponential increase in the demand for charging stations for EVs. Those early adapters were initially able to operate without interference, albeit that the conventional parties, such as the traditional energy suppliers and oil companies, were concerned about their core business being negatively affected. Fastned in particular experienced this several times in legal proceedings.
Parties such as Fastned can install their charging stations on the grounds of a permit for a basic service under the Wet beheer Rijkswaterstaatswerken (Public Works Management Act). In principle, such a permit for a basic service is required in order to operate a petrol station, roadside restaurant or service station (a combination of a petrol station and a roadside restaurant) in motorway service areas. Because the traditional oil companies showed insufficient interest in installing charging stations as an additional service, the Minister stated in 2011 that new market parties, such as Fastned, could also apply for a permit for a charging station, but then as a basic service.
Two recent cases addressed the question whether (traditional) petrol station operators could also install charging stations as an additional service (in addition to their existing petrol pumps that have a permit for a basic service) if a third party already has a permit for a charging station at those locations as a basic service. In the first of those cases, in which judgment was passed on 22 December 2017, the administrative court answered that question affirmatively. In the opinion of the Amsterdam Court, which referred to its judgment of 8 December 2017, there are no objections, in principle, to issuing a permit for both an additional service and a basic service for charging stations at one and the same service area. Fastned did not accept that ruling and applied to the civil court, together with Mistergreen. On 24 January 2018, they requested the preliminary relief judge to issue an injunction on the State from cooperating in the installation of fast-charge stations at petrol stations and roadside restaurants in locations that already had a fast-charge station. Fastned and Mistergreen argued, among other things, that there was no level playing field and that the current petrol station operators had a competitive advantage over the new market players. That competitive advantage consists of a party such as Fastned, unlike the existing petrol station operators, not being eligible for a permit for an additional service for a charging station, but only for a permit for a basic service. Also, no other additional services (such as a convenience store, slot machine, etc.) are permitted in the case of charging stations as a basic service. However, the preliminary relief judge did not subscribe to the position taken by Fastned and Mistergreen and ruled that the cases were not equivalent and that the State is in any event not required to create a level playing field. The preliminary relief judge also drew attention to the existence of agreements with the petrol station operators banning additional services.
The question that this ruling presents is whether the current regulatory framework is adequately equipped to facilitate early adapters to expand, so that they can complete with the traditional oil companies also in the long term. Another question that can be raised in this regard is whether the licence requirements for providing a basic service or an additional service is in keeping with the Services Directive and the Dienstenwet (Services Act). It must be assumed that the services of parties such as Mistergreen, Allego and Fastned fall within the scope of that Directive. Under the Services Directive, Member States are prohibited, in principle, from making the access to and performance of a service activity dependent on an authorisation scheme or compliance with requirements. That is otherwise only if an authorisation scheme or the stipulation of requirements is justified by an overriding reason relating to the public interest (necessity). Moreover, it is a requirement in that case that that objective cannot be achieved by a less restrictive measure (proportionality). But also in that case the authorisation scheme may not be discriminatory towards the service provider in question.
The fact that charging stations can still be regarded as an additional service suggests that the increasing competition between cars driven by fossil fuels and electric vehicles is being underestimated to some extent. It is a fact, however, that the share of electric vehicles in the total new sales in the first quarter increased from 1.4% in 2017 to 2.9% in 2018. That is an increase of no less than 137%. Several parties expect that share will increase further to 30% by 2035 and most likely even to 50% by 2060. The coalition agreement goes even further, aiming for all new cars to be entirely electric by 2030. Some politicians furthermore believe that fast-charge stations for EVs should be obligatory at all motorway petrol stations in the European Union. In light of the expected increase in the number of EVs, the current distinction between facilities for petrol pumps and fast-charge stations may be obsolete. That is also apparent from the fact that the traditional suppliers of motor fuels are also switching to sustainable fuel, as demonstrated, for instance, by the acquisition of NewMotion by Shell and Total’s decision to roll out charge stations in France.
Government role by no means ended yet
For some time now, European legislation has placed an important responsibility on EU Member States to reduce the dependence on fossil fuels in the transport sector. The Directive on the deployment of alternative fuels infrastructure (“Alternative Fuels Directive”) sets out that objective. The Directive has been partly implemented by means of the Alternative Fuels Infrastructure Decree and partly in the form of a national policy framework. Some aspects of the Directive had furthermore already been included in existing national regulations, such as the Electricity Act 1998 and the Consumer Protection Enforcement Act. The primary purpose of the Alternative Fuels Directive is to have Member States ensure that publicly accessible charging stations with adequate coverage are installed, in close cooperation with parties in the private sector, since those private parties play an “important supporting role” in the development of alternative fuels infrastructure. For the Netherlands, it is estimated that there will be more than 25,000 publicly accessible charging stations by 2020.
Despite the government’s responsibility for stimulating the deployment of fast-charge stations, the primary responsibility is gradually shifting to the market parties. Network manager Alliander, for instance, recently sold its shares in Allego. As a result of the Splitsingswet (Unbundling Act), the shares in Alliander are held (directly or indirectly) by Dutch provinces and municipalities. According to ACM, public companies, such as Alliander, are free, in principle, to (temporarily) set up commercial subsidiaries to address new activities surrounding network management that the market is ignoring. Now that the market for charging stations has gradually matured, however, the supply and operation of charging stations is “primarily the responsibility of market parties”, according to the coalition agreement. Alliander was thereby operating on the boundary between public tasks and the rapidly growing market; in its opinion it therefore had insufficient commercial clout to take on energy giants such as Nuon and Shell in the long run.
But the role of the State has by no means come to an end yet. The transition requires investments of billions of euros that most likely cannot be coughed up (entirely) by private parties. Both the European Commission and several Member States (such as Germany) have already promised support to bring about the shift to sustainable fuels. In 2017, for instance, the European Commission honoured Germany’s proposal to invest €300 million in charging stations for electric vehicles. Previously (in 2005), the Commission already approved the Publicly Accessible Electric Charging Infrastructure Green Deal, an aid scheme in the Netherlands with a value of almost €33 million.
Such aid schemes must be consistent with EU state aid rules. State aid is prohibited in principle, because it may disrupt competition on the European market. A measure constitutes state aid only if the cumulative criteria of the state aid prohibition are met. In the aforesaid aid schemes the operators of the electric charging stations are selected on the basis of competitive tendering procedures. The aid amount is therefore kept to the absolute minimum, which means that the aid measure is in accordance with Article 107(3)(c) of the TFEU.
The government’s role is also apparent from the conditions that apply to the supply of energy by the operators. The Alternative Fuels Directive imposes various requirements on the operators regarding the provision of information to consumers. In addition to information on the locations of the charging stations, “the Member States must ensure that the prices charged by the operators of recharging points accessible to the public are reasonable, easily and clearly comparable, transparent and non-discriminatory”. The tariff system set out in the Electricity Act 1998 serves as a basis in that regard. According to the legislature, the Consumer Protection Enforcement Act also guarantees transparent prices.
It is therefore clear that the government will play a key role in both the deployment of electric charging stations and the protection of consumers. But it remains to be seen whether the government will play a role in determining the conditions on which traditional suppliers of motor fuels and new market players will compete with each other.
This blog has been co-written by Mr B. Braeken (who, as of 15 July 2019, no longer works at Maverick Advocaten).