ECJ Ruling of November 28, 2024: Customer Installations Not Compatible with EU Law

On November 28, 2024, the European Court of Justice (ECJ) ruled on the compatibility of German regulations regarding customer installations with the Electricity Internal Market Directive (EU) 2019/944. The ruling could have far-reaching consequences for the structure of energy supply in Germany, as it deems the current German regulations on customer installations incompatible with EU law.

What is meant by "customer installations"?

According to Section 3 No. 24a of the German Energy Industry Act (EnWG), a customer installation is an energy facility that is freely available to all end consumers within a spatially contiguous area and is insignificant for competition among energy suppliers and network operators. Previously, such installations offered the advantage that the operator was not required to fulfill the obligations of a network operator. Additionally, operators could save costs on network charges, enabling a more economical power supply within a decentralized energy system.

The ECJ Ruling: No Deviation from the EU Definition of "Distribution Network"

The key issue in the proceedings before the European Court of Justice (ECJ) was whether the German regulations on customer installations comply with the provisions of the Electricity Market Directive (EU) 2019/944. This directive defines the term "distribution network" without providing a precise definition. The ECJ clarified that distribution networks are installations that transmit electricity at high, medium, or low voltage levels and are intended for the sale of electricity to wholesalers and end consumers.

In its ruling, the ECJ emphasized that a reference to national legislation of the Member States is not sufficient to allow for criteria deviating from this definition. Instead, the term "distribution network" must be interpreted uniformly across the EU, and national exemptions are not permissible. In concrete terms, this means that a "distribution network" must always serve the purpose of transmitting electricity at these voltage levels and must be designed to transport electricity for sale.

Why Is This Ruling So Significant?

The ECJ ruling has far-reaching consequences for the German practice of customer installations. Until now, operators of such installations have been able to use this structure to exempt themselves from the obligations of a network operator and thus achieve economic advantages. This practice is now being called into question.

Another key aspect of the ruling is the determination that the definition of a "distribution network" cannot be altered at the national level. This requirement for a uniform interpretation could significantly limit flexibility in the design of energy infrastructures.

In practice, this means that operators of customer installations may no longer benefit from the exemption from network charges.

Possible Consequences of the Ruling: Legal Amendments and Uncertainty

The ECJ ruling calls for a reform of German law, particularly concerning the regulations on customer installations. A legislative amendment may be necessary to align with EU law requirements. However, it remains unclear to what extent and at what pace these changes will be implemented.

Both the complete abolition of customer installations as defined in Section 3 No. 24a EnWG and a restructuring of the regulations are conceivable. For market participants who rely on customer installations, this could have significant consequences—especially regarding the economic viability of decentralized energy supply models.

At the same time, the upcoming legal changes offer an opportunity to review and adapt existing business models in the energy sector.

Conclusion: A Paradigm Shift in German Energy Policy?

The ECJ ruling sends a clear signal for the harmonization of legal frameworks within the EU. The regulations on customer installations must now be aligned with the requirements of the Electricity Market Directive. This could impact not only the operators of customer installations but also the overall structure of decentralized energy supply in Germany.

The exact nature of these changes remains to be seen—what is clear, however, is that the ruling marks a significant turning point for both European and national energy policy.