Directive sets the EU pathway

The draft Directive governing the EU’s renewable energy target has finally arrived. Is it what the renewable industry had dared to hope for? Dirk Hendricks, director of the World Future Council’s EU Liaison office thinks it’s a start, but points to some elements that still need to be addressed.

By Dirk Hendricks

On 23 January, the European Commission presented its Energy/Climate package of new EU laws, introducing a number of necessary policy overhauls in the fields of climate and energy to mitigate the impacts of climate change, and to decrease the EU’s import dependency for the sake of Energy Supply Security.

The package includes binding emissions targets, a significant switch to renewable energy sources, as well as incentives for increased efficiency and reduced pollution from European industry.

Given the recent Bali conclusions that industrialised countries should reduce their emissions by 25%-40% by 2020, the EU’s proposed emission cut of 20% for EU countries and industry – compared to 1990 levels – falls short of the Bali agreement.
The Commission has also not included additional sectors in an expanded Emission Trading Scheme, among them 'transport'.

Renewable Energy Directive

In March 2007 the European Council agreed on a binding target for 2020 – to reach at least a 20% share of renewable energies (RES) in overall energy consumption, and a minimum share of 10% for biofuels in each Member State. They agreed to the goal of at least a 20 % increase in energy efficiency in Europe. The 20% for 2020 targets are only a medium step. Europe needs to increase renewable energy in the overall energy mix towards 50%-70% by 2050.

The promotion of renewable energy is addressed in the proposal for a new Directive on the "promotion of Renewable Energies in Europe until 2020", which replaces the current Directives 2001/77/EC and 2003/30/EC, and covers the promotion of RES, and Renewable Heat and Cooling.
Provisions regarding priority grid access, sharing of costs on grid extensions and reinforcement have been maintained and strengthened, compared to the Renewable Electricity Directive 2001/77/EC.

Trading, targets and grid access

Generally, the proposal can be welcomed, in particular since existing national regimes for feed-in tariffs are safeguarded. The Commission rejected initial proposals from EU Member States like the UK – and central power utilities – for a mandatory trade scheme for renewable energy. Such a trade scheme would have severely threatened feed-in laws that operate in many EU member states; Commissioner Piebalgs ruled out any EU-wide virtual certificate trading mechanism between companies, which would have interfered with existing and successful technology-specific support schemes (especially feed-in laws). This continuation guarantees investor confidence in the renewable energy industry in these Member States.

The Commission intends to promote a 'least-cost' solution to reach the 2020 targets. The 'Commission staff working document on support for electricity from renewable energy sources', published together with the Directive proposal, concludes that the trade of green certificates between companies turns out to be more expensive – and less effective and less efficient – than feed-in tariffs. The document recognises explicitly that "well-adapted feed-in tariff regimes are generally the most efficient as well as effective support schemes for promoting renewable electricity".

National Governments are responsible for meeting their own national targets. The proposed Directive provides flexibility in meeting these national targets. EU member states will have the possibility to transfer Guarantees of Origin (GoO) to other member states, provided they have reached or exceeded their own intermediate targets. This creates incentives for Governments to quickly increase their production of renewable energy to fulfil their targets.

Other suggested important measures include the introduction of binding priority access to the grid for renewable electricity – one prerequisite for the promotion of renewable energy production. This element represents clear progress in comparison with the existing directive on the promotion of renewable electricity.

The Commission has also made it mandatory to use a certain level of renewables in all new or refurbished buildings. This measure is supported by the introduction of several useful provisions designed to reduce administrative barriers and improve the transparency of procedures.

Another novelty with the current Directive is the insertion of a specific article about giving information on support measures; costs and benefits; and energy efficiency of renewable energies. The introduction of accredited training programmes for installers should contribute to accelerated installation of new renewable energy generation systems.

Despite these positive elements, there are also things to criticise. Despite a legally binding target in 2020, interim targets are not mandatory. And the Directive does not foresee penalties for Member states if they do not reach their own target. The Commission only has the possibility to increase political pressure on such States.

In addition, there is considerable room for manoeuvres for Member States – relating particularly to grid access. The implementation of an EU Directive (as opposed to an EU regulation) implies that many provisions are subject to National implementation. This might result in variations in policies between Member States, which could become obstacles to the completion of a single electricity market.
The transfer of Guarantees of Origin and the appointment of relevant organisations supervising the trade leave also room for interpretation. They still need to be clarified or improved to ensure a true promotion of renewable energy in Europe.

The EU legislative process to come

As it stands now, the EU climate package – including the proposed Directive – is certainly not enough to pave the way for an urgently needed transition to a sustainable energy supply in Europe. It is only a step in the right direction. And a number of improvements and clarifications appear necessary.
The proposed Directive still needs to go through the co-decision process during which European Governments and the European Parliament can demand amendments before their approval. Therefore, the approval of the Directive might take all of 2008.

The most urgent topics that need addressing include the integration of an enforcement mechanism for Member States that do not comply with their intermediate targets; as well as clearer wording in the section on guarantees of origin. An improved timing of the required intermediate targets would ensure that Member States’ efforts are well-distributed over the years, and that their efforts don’t just start shortly before 2020.

This article was taken from the January/February issue of renewable energy focus magazine.

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