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Renewable Power Target Missing from Commission Energy Package

08.02.2007

A new binding target for 20% of the EU’s overall energy supply to be provided by renewable sources in 2020 was the centerpiece of the Energy Strategy unveiled by the European Commission on 10 January. The long-awaited announcement was welcomed, with reservations, by organisations representing the renewable energy industry.

In its package of energy proposals, titled “An Energy Policy for Europe”, the European Commission strongly acknowledged the importance of renewable energy sources. “Renewable energy helps to improve the EU’s security of energy supply by increasing the share of domestically produced energy, diversifying the fuel mix and the sources of energy imports and increasing the proportion of energy from politically stable regions as well as creating new jobs in Europe”, the document says. It also correctly points out that “a gradual increase in renewable energies in the wholesale electricity market will reduce the wholesale market prices of electricity,” due to renewables’ low marginal costs.

The main criticism from the renewable industry sector and a number of NGOs was therefore not directed at the overall content, which gave a big stamp of approval to renewables in general and wind energy in particular, but at what was excluded. The most notable exclusion was the Commission’s refusal to include renewable energy targets for the electricity sector and the heating sector in its strategy. For the third sector, transport, the Commission proposed a biofuels target of 10% by 2020.

Since the Commission’s 1997 White Paper on Renewable Sources of Energy, the approach to EU renewables legislation has been based on setting an overall target for renewables of 12% by 2010, combined with sector specific legislation and targets for both renewable electricity (21% by 2010 in the 2001 RES-E Directive) and biofuels (5.75% by 2010 in the 2003 Biofuels Directive). “The missing link” in this approach has been a Directive on Renewable Heating and Cooling, a move formally requested by the European Parliament and supported by a wide coalition of renewable and conventional industry organisations, NGOs, energy agencies, academia and the public.

Existing legislation undermined

The Commission’s new strategy changes that approach. On the one hand, the Commission is proposing to strengthen the overall renewables target by extending it to 2020, increasing the level to 20% and making it binding (the current 2010 target of 12% is indicative). On the other hand it has suspended its former logic of combining the overall target with specific targets for electricity and heating. The main criticism from EWEA is that this change in approach could undermine existing, successful legislation for renewable electricity (see “EWEA’s View”).

Sector-specific targets are essential because they reflect the different nature of the three energy applications – electricity, heating/cooling and transport - as well as their divergent requirements in terms of infrastructure planning, support legislation and monitoring tools. In the case of electricity, there are important considerations in terms of planning the electricity network, investment in the grid and appropriate market incentives which quantitative targets would encourage.

EWEA expressed its concern that the Commission is about to replace existing legislation on renewable electricity which the Commission itself accepts is working well. “Only in the electricity sector has substantial progress been made, on the basis of the Directive on renewable electricity adopted in 2001, and the targets set will almost be met,” the energy package says.

Whilst the Commission’s energy package was found seriously wanting on renewable electricity targets, it does recommend full ownership unbundling of transmission and production of electricity and gas, a strengthening of national regulators and increasing their co-operation at the EU level. Such measures should contribute to reducing the serious discrimination suffered by new entrants, notably renewable energy investors.

EWEA also welcomed the proposal to appoint European coordinators for vital grid infrastructure projects, including the connection of offshore wind power in Northern Europe, and the Commission’s strong call for the need to “roll out offshore wind energy”.

The next steps

The energy package was a follow-up to the Commission’s Energy Green Paper published in March last year. It has no legal status, however, and will require legislation for its main proposals to be brought into effect.

The European Parliament gave its opinion on the issue in a resolution passed last December. This called for an overall binding target of 25% renewables, combined with binding sector specific targets for all three sectors, including a target of 35% renewable electricity by 2020. The current target for 2010 is 21%. In 2004, renewables’ share of electricity was 14%.

The next stage is for the Commission’s energy package to be considered by the EU Council of Ministers. Energy ministers will meet on 15 February and provide input to the Spring Council between European heads of state meeting on 8-9 March; this will adopt an Energy Action Plan based on the contents of the package. In 2006, European heads of state put a 15% target by 2015 on the table.

There is still considerable uncertainty as to whether the Council will support the binding 20% renewable energy target. At its first meeting on 23 January, there was not overwhelming support for the proposal. It is also, at this stage, unclear which, if any, fall-back position the German Presidency will table in the event that member states do not accept a binding target. What is clear to the wind energy sector, however, is that a situation with a non-binding overall target and no sector target for electricity would be a step backwards - and put Europe’s global leadership in wind energy at risk.

What the EU Energy Strategy Says

The energy package published by the European Commission on 10 January contains almost 20 documents, including supporting impact assessments and annexes  covering a wide range of energy issues. A summary document, “An Energy Policy for Europe”, gives an overview of the main recommendations. These are:

Renewable energy: New binding target for 20% of Europe’s energy to be provided by renewables in 2020 (increase from the existing indicative 12% target in 2010). Specific sectoral target for biofuels of 10% by 2020, but no target for renewable electricity or individual technologies such as wind power. National action plans specify targets for each member state.

Internal gas and electricity market: Recommendation for full ownership unbundling of transmission and production activities in the electricity and gas markets. Establishment of a new single body at EU level to facilitate cross-border electricity trade or, at a minimum, a European network of Independent Regulators. Report emphasises that renewable energy investment can be hindered by lack of effective unbundling, competition and transparency.

Grid interconnection: Update on proposals for 42 projects for improving gas and electricity network explicitly recognises the vital importance of connecting offshore wind power in northern Europe and calls for the need to “roll out offshore wind energy”. Priority Interconnection Plan calls for the designation of European co-ordinators, a strengthened framework for TSOs, the streamlining of authorisation procedures and a clear framework for investment.

Nuclear power: Each member state must decide whether to use nuclear in its energy mix. New EU-wide high level group proposed to establish clear rules and a common understanding about safety and security.

Fossil fuels: Construction of up to 12 large scale demonstration plants to test emission reduction technology and decide when coal and gas-fired power stations will need to install carbon capture and storage. 2020 suggested as deadline for all new plants. R&D funding for carbon reduction technology to be substantially increased.

Energy technology: New plan to be prepared during 2007 will strongly focus on reducing renewable energy costs in order to achieve the 20% by 2020 target. Special mention made of the impressive technological progress by wind over the last 20 years.

Climate change: Two targets suggested in order to help keep the rise in global temperatures below an increase of 20C: a 20% reduction in greenhouse gases by 2030 if the international community doesn’t commit to new measures, and a 30% reduction if it does. The lower target reflects concern in some Commission directorates about the possible costs to the EU economy of unilateral measures.

The energy package should also have contained a proposal for a directive on heating and cooling from renewable energy. This was rejected at the last minute, reflecting the tensions within the Commission around the issue of sector-specific targets for renewables.

The Parliament’s View

On 14 December 2006, the European Parliament voted on the issue of renewables targets. 479 members voted for sectoral targets and only 16 against. The Parliament also voted to have the sector specific targets made mandatory for member states. The resolution called for a 25% overall renewable energy target, combined with specific targets for the three sectors, including a sectoral target for renewable electricity of 35% by 2020 (the actual figure was 14.5% in 2004). By coming out against sector-specific targets, the European Commission has ignored an almost unanimous vote in Parliament on the issue – a relatively rare occurrence.

EWEA’s View: Strategy Could Undermine Existing Legislation

The European Commission has missed an important opportunity to back up its strong rhetoric on renewables with a specific sectoral target for electricity. Instead, the new EU Energy Strategy refers only to a new target for 20% of all energy to come from renewable sources in 2020. The effect is to undermine existing successful legislation.

“The Commission has described a great destination but is at the same time risking demolishing the existing well-functioning vehicles to get there, while failing to suggest an alternative route,” commented EWEA Chief Executive Christian Kjaer. “I wouldn’t call it a ‘Renewable Roadmap to Nowhere’ – rather, it is a ‘Missing Roadmap to Somewhere’. We risk ending up with a European renewable house on a foundation of sand.”

Six years ago, the European Union took a global lead by passing the world’s most significant piece of legislation for renewable electricity - the Renewable Electricity Directive with a target for 21% by 2010. As a result, 25 member states and several countries outside Europe have adopted frameworks for investment in wind power and other renewables. European companies are global leaders in wind power and Europe is reaping the commercial and environmental benefits.

EWEA considers sectoral targets – absent from the new EU strategy – to be a fundamental prerequisite for an effective strategy to boost the share of renewable energy. They are needed to account for the differing nature of the various technologies, as well as their divergent requirements in terms of infrastructure and monitoring. The wind energy sector would have preferred a strengthening of the existing, successful legislation, and is concerned that a new legislative package could take years to adopt at a crucial time in the development of large scale wind power.

“The Commission trusts the member states to endorse its binding target of 20% renewables by 2020,” commented EWEA Chief Executive Christian Kjaer. “Hopefully it is able to convince the Council, in cooperation with the European Parliament. But if the Council rejects the Commission’s strong appeal, the Energy Strategy provides no fall-back and little would have been achieved,” Christian Kjaer said. The Parliament called on 16 December for a more ambitious EU goal of 25% renewable energy by 2020, with binding sectoral targets.

EWEA is still hopeful that the Council will propose safeguard measures to ensure continued legal stability for renewable electricity in Europe. If legal stability in renewable electricity can be assured, the Energy Strategy has the potential to encourage a leap forward for wind power.

Despite these important criticisms of the Energy Strategy, EWEA welcomes the Commission’s firm recommendation on full ownership unbundling of the transmission and production of electricity and gas. The industry also welcomes the proposal to appoint European coordinators for vital grid infrastructure projects, including the connection of offshore wind power in Northern Europe, and the Commission’s strong call for the need to “roll out offshore wind energy”.

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