The European Union's Court of Justice on Thursday reversed a decision by the European Commission that had classified Germany's support system for renewable energy as state aid.

The Court of Justice, the EU's supreme court, found that Germany's move to exempt heavy industry from surcharges imposed to subsidise the development of renewable energy sources, such as wind and solar power, was legal and should not be classified as state aid.

Under EU law, national governments can only provide state aid under strict conditions to prevent distortions of competition in the EU's single market.

In Germany, levies had been imposed on power bills to subsidise the development of renewable energy. But the country exempted from the surcharge companies that required a lot of energy, so that it would not affect their competitiveness.

The Court of Justice found that the action taken should not be treated as state aid under the EU's definition because it failed to meet two necessary conditions: the money that benefited energy-intensive industries did not come from the German government and was not controlled by the government. Also, there were no advantages to the beneficiaries of the scheme over other economic operators.

The case illustrates the sensitivity EU member states have around issues of energy policy and  European Commission rules that affect national policies.

"Beyond the technical aspects of state aid law, this case is also about the broader issue of member states determining their energy mix on an autonomous basis," said Thomas Luebbig, an attorney with Freshfields Bruckhaus Deringer in Berlin, who represented the German Government in the case.

The ruling follows a 2014 decision by the commission finding that the surcharge exemption should be counted as state aid. The German Government appealed the commission's decision.

Germany established the support system for renewable energy in 2012, as part of its drive to decarbonise its energy sector.

The German Government appealed the commission's decision in 2016 at the EU's General Court. The General Court dismissed Germany's appeal. The government then appealed the General Court's ruling at the EU's Court of Justice.