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European Commission uses state aid guidelines to push its EU energy vision

28.05.2014

The European Commission is proposing to phase out support for renewable technologies after 2020 in a move that pushes its narrow vision for EU energy policy and clouds the future of wind energy.

According to state aid guidelines published today, the Commission recommends removing support mechanisms for renewable technologies that are expected to become "grid competitive" between 2020 and 2030, without specifically defining what the term means; whereas the guidelines only apply to the period from 2014 to 2020.

The proposals push for market integration above stability, with premiums allocated through tenders to replace feed-in tariffs and "technology neutrality", which does not distinguish between the maturity of technologies like onshore and offshore wind energy.

Nevertheless, a number of exemptions have been included, allowing Member States to opt out of tendering, to tailor support for technologies at different levels of maturity and to determine the pace at which national support is adjusted to comply with the guidelines.

The complex nature of the state aid guidelines risks exacerbating investor uncertainty around the renewables industry and Member States must be flexible in implementing the proposals.

Justin Wilkes, deputy chief executive officer of The European Wind Energy Association, said: "The Commission would have liked to put the cart before the horse, by focusing on forcing wind energy to compete in a market which still does not exist, while ignoring the obvious market distortions that need to be tackled first, such as the majority of subsidies that go to fossil fuels and nuclear.

"While we welcome the drive for long-term market integration of wind energy, state aid guidelines are not the ideal tool for the Commission to legislate on energy policy. Member States should be flexible in implementing the guidelines, in order to enable the most cost-efficient development of wind energy in Europe, and avoid increased uncertainty for the sector," he continued.

Wilkes finished by adding: "In the main, the opt-outs will become the most important tools used by Member States because the Commission has failed to propose good design requirements for its favoured method of tendering."

Key facts and background:

State aid is defined as an advantage conferred on a selective basis to undertakings by national public authorities. It is illegal in the EU, with certain exceptions - for example for renewable energy support - and the details of these exceptions are defined in guidelines.

All renewable energy support schemes implemented by Member States, which are State aid and do not comply with the guidelines, are therefore illegal.

The new guidelines, which come into force on 1 July 2014, are valid for six years until 2020, replacing current existing guidelines.

The guidelines state that "grid competitive" renewables should have their support phased out between 2020 and 2030. The term "grid competitive" is not defined in the guidelines.

Existing schemes do not have to be changed to comply with the guidelines by a specific date; new programmes need to comply but key provisions, such as tendering, do not fully come into force until 2017.

The opening of national support mechanisms is suggested rather than imposed on Member States.

Technology neutral tenders will be automatically considered not to result in over-compensation. Member States can opt out of the tendering process. They will need to choose between a feed-in premium, an investment aid-based programme or a tradable green certificate. Feed-in tariffs will not be allowed for installations above 3 MW, or three wind turbines.

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