Sweden's renewable energy support scheme is compatible with European Union law, the EU's top court said on Tuesday, in a ruling that means member states will avoid a radical overhaul of their renewable energy laws.
The EU's Court of Justice (ECJ) said the ruling meant EU member states can continue to limit renewables support schemes to within their national borders.
The ruling was unexpected as it went against the opinion of the court's top legal official in January, which had argued that Sweden had broken rules in EU treaties on free movement of goods. The ECJ tends to follow the official's judgement in most cases.
"The Swedish support scheme promoting green energy production in the national territory is compatible with EU law," the Luxembourg-based ECJ said in Tuesday's ruling.
EU states that support the production of green energy, such as wind and solar power, through subsidies or incentives are not required to support the use of green energy which is produced in another EU country, it said.
The case has political resonance as Europe struggles to wean itself off green energy subsidies, which are blamed for inflating costs and making the European Union less competitive.
The Commission has been pushing for harmonised subsidies across the bloc and encourages cross-border movement of power as part of a single energy market to limit costs and maximise available resources.
The ruling will put less pressure on Germany - which is at odds with the
European Commission over its energy subsidies - to reach a compromise with the Commission.
German economy minister Sigmar Gabriel welcomed Tuesday's ruling.
"The European Court of Justice has sent a clear signal on the continued support of renewable energy in Europe," Gabriel said in a statement.
The Swedish case arose after Sweden, which offers energy subsidies to companies in Sweden, refused to award them to wind power generated on the Aland archipelago, which lies between Finland and Sweden.
Although it is part of Finland, Aland is connected to Sweden's power grid and it is Swedish-speaking.
Wind energy company Alands Vindkraft in 2009 appealed Sweden's decision on subsidies to the Swedish courts, saying the support scheme violated principles on the free movement of goods.
The case was referred to the ECJ in 2012 and in January this year the court's advocate-general Yves Bot advised that member states be given up to two years to restructure their support schemes to make them compatible with EU law, which would have paved the way for an integrated EU renewable energy market.
German renewables law
Renewable energy industry groups also welcomed Tuesday's ruling.
"(The ruling) will provide added clarity for investors in the wind industry and reinforces stable regulatory frameworks, which are of paramount importance," said Justin Wilkes, deputy chief executive officer of the European Wind Energy Association.
Germany and the European Commission have been wrangling for a while over a German policy under which consumers pay a surcharge to finance renewable energy while heavy industrial users are exempt.
The Commission raised new objections last week, which led to Germany offering to change its planned reform at the last minute.
The German government proposed that industrial companies which generate their own power on-site in new renewable or combined heat-power plants would pay a higher surcharge than previously planned.
Economy minister Gabriel said Tuesday's ruling had removed any lingering EU obstacles to Berlin's renewable energy law.
"I am assuming now that there are no more state-aid related obstacles to the German renewable energy law," Gabriel said in his statement on Tuesday.
However, Matthias Lang, partner at law firm Bird & Bird in Dusseldorf, told Reuters that although the ruling shields Germany from having to revise its renewables law, the issue of industry exemptions from renewable subsidies still needed clarifying.
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