The new Directive is part of a “Climate and Energy Package” of draft laws that set a 2020 goal for greenhouse gas reductions of 20%, a 2020 goal for renewable energy of 20%, reform the ETS (from 2013), and create a legislative framework for carbon capture and storage. As part of its package the Commission also published an impact assessment, updated guidelines on environmental state aid and a working document on ‘the support of electricity from renewable energy sources’. The Commission proposal will now be debated by the Member States and the European Parliament, and will probably be finalised during 2009, before entering into force.

The proposal for 20% renewable energy by 2020 paves the way for a massive expansion of wind energy in the 27 Member States as it will be the biggest contributor to the increase in clean electricity production. More than one third of the EU’s power would have to come from renewable energy sources in order to meet the overall 20% renewable energy target. The proposal also addresses obstacles that wind energy is currently facing, such as heavy administrative procedures and grid access issues.

“The European Commission has provided a powerful response to the imminent energy and climate crisis. By introducing a voluntary trading mechanism, controlled by Member States, the proposal maintains market stability, increases investor confidence and will help Member States to reach their ambitious, yet achievable, targets” said Christian Kjaer, EWEA Chief Executive.

The Directive: HIGHLIGHTS

National Targets

The proposal divides up the overall EU target of 20% amongst the EU member countries, giving them each a legally binding overall target for 2020. This ranges from 49% for Sweden and 42% for Latvia to Malta and Luxembourg who have been given targets of 10% and 11% respectively. In effect, using 2005 as the baseline, each Member State will be required to increase by 5.5% with a further effort for each Member State weighted by a GDP/capita index to reflect different levels of wealth across Member States.

In meeting the final 2020 target Member States will need to follow an ‘interim trajectory’ set at 25% of the final target in 2011/12, 35% in 2013/14, 45% in 2015/16 and 65% in 2017/18. It is of concern that such an interim trajectory may encourage some countries not to make significant efforts in the near future, instead postponing decisions until closer to 2020.

In order to encourage Member States to meet their targets they will be required to submit a ‘National Action Plan’ to the Commission by the end of March 2010. Each action plan will outline how the Member State will achieve their assigned target - including the sectoral breakdown (electricity, heating and cooling, transport) - and the measures they will adopt to reach the final target. If a country fails to meet its interim trajectory then it will be required to submit an updated action plan to the Commission. This appears to be the only enforcement mechanism available to the Commission to ensure that Member States meet their binding 2020 targets.

According to the proposal, renewable electricity produced in non-EU countries could be counted towards a country’s national target if:

• the non-EU exporting country adopts a national overall target to the degree of rigour equivalent to that of the EU Member States;
• the non-EU exporting country establishes a GoO system; and
• the electricity is consumed in the EU (but not necessarily the same member State).

Guarantees of Origin (GoO)

A country’s target will be accounted through GoO. For each MWh of energy produced a suitably designated competent authority/body will issue (electronically) to the producer a Guarantee of Origin. The producer must then submit the GoO to the competent authority/body for cancellation (within 12 months) when:

• the production of a unit of electricity receives support in the form of feed-in tariff payments, premium payments, tax reductions or payments resulting from calls for tenders;
• the production of a unit of electricity is taken into account for the purposes of assessing an entity's compliance with a renewable energy obligation; or
• a supplier or consumer chooses to use a guarantee of origin for the purpose of proving the share or quantity of renewable energy in its energy mix, without claiming the benefits of a support scheme.

Member States and companies will be able to trade GoO, but only when a Member State is meeting or exceeding its most recent intermediate target. In order to control such a trade, protect national support mechanisms, and ensure future targets can be met; each Member State will be able to create a system of ‘prior authorisation’ to oversee the trade of GoO.

The Commission proposes to review the implementation of the provisions for the transfer of guarantees of origin in December 2014 at the latest.

Member States will be required to submit a report every two years to the Commission, the first one due by the end of June 2011. In this report each country must detail:

• the sectoral and overall shares of renewable energy in the preceding two years and measures taken or planned so that the indicative trajectory is met;
• support schemes;
• the functioning of the GoO system;
• progress in evaluating and improving administrative procedures;
• measures taken to ensure the transmission and distribution of renewable electricity; and
• measures taken to improve the framework or rules for bearing and sharing of costs.

On the basis of the Member States’ reports, the Commission will then submit a report every two years to the Council and European Parliament.

Countries are also required to ensure their administrative and planning procedures are both proportionate and necessary. The proposal establishes a number of principles which Member States should apply to their administrative procedures, such as:

• less burdensome procedures for smaller projects;
• streamlined procedures carried out at the appropriate level;
• a clear definition of responsibilities and precise deadlines for planning applications.

Planning issues are not an EU competence and the Commission is therefore limited in being able to impose requirements on Member States. However, the Commission has required that, as part of the first report which Member States submit to the Commission (by 30 June 2011), they must outline whether they intend to:

• establish a one-stop-shop for processing authorisation, certification and licensing applications for renewable energy installations;
• provide for automatic approval of planning and permit applications if the authorising body fails to respond within the set time limits; and
• indicate geographical locations suitable for renewables in land-use planning.

Importantly, the proposal if adopted will require Member States to provide priority access to the grid for electricity produced from renewable energy sources. Moreover, when transmission system operators dispatch electricity generating installations, they will be required to give priority to renewable installations (so long as the security of the national electricity system permits).

Concerning the development of grid infrastructure, in principle countries will have to take the necessary steps to develop grid infrastructure to accommodate the further development of renewable electricity, and improve the frameworks and rules for bearing and sharing of costs to ensure the integration of new producers.

In future, TSOs and DSOs will be required to provide new producers wishing to be connected to the grid with a comprehensive and detailed estimate of the costs, and Member States may put such connection work out to tender. Member States will have to ensure that transmission and distribution fees do not discriminate against electricity produced from renewable sources, and put in place a legal framework to ensure that the fees charged by TSOs and DSOs reflect realisable cost benefits resulting from the plants’ connection to the network.

ETS

The Commission also published a significant review of the EU Emissions Trading Scheme, for the trading period commencing in 2013. Despite intense last-minute lobbying, the Commission stuck to its guns and proposed full auctioning for the power sector from the start of the new regime in 2013.

All the energy proposals and documents published by the European Commission on 23 January can be found here.