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Clearing the path for renewables -- Positive European policy

The EU parliament has, as expected, voted overwhelmingly to adopt the Commission's proposed road map for renewable energy. This commits Europe to a target of 20% of energy from renewables. Binding individual national targets to meet the overall 20% goal remain to be agreed with European governments. The parliament "insists" the 20% must be made up of renewables, not other low-carbon energy sources.

The parliament calls on the EU executive to present, by the end of 2007, a proposal for a renewable energy legislative framework. This should safeguard existing renewables laws governing electricity and biofuels, it says. It urges the Commission to set "clear and realistic binding targets for the electricity, transport, and heating and cooling sectors." Specifying targets for each of the three sectors is an approach the Commission has shunned in favour of allowing market forces to determine how large the contribution of renewable energy in each sector can be. Even if the Commission agrees to pursue a target for each sector, that approach would most likely be resisted by national governments. A number of member states are already unhappy with the 20% target, despite having voted for it at the March 2007 European Council.

Parliament also calls on the Commission to draw up an action plan for offshore wind that would include promoting stronger grid interconnections. Furthermore, while current national support systems for renewables should be maintained to safeguard investor confidence, the Commission says an "effective and efficient harmonised support scheme drawing on best practices in the member states" is the long term objective in Europe.

The parliament's report sends a strong signal to the Commission and member states before new legislation is tabled in December, comments the European Wind Energy Association (EWEA).

Meantime, EWEA describes the Commission's latest proposals for furthering development of the EU's internal energy market as "a good job, but half done." The proposals aim to separate the job of power production from the business of operating energy networks. The Commission, in stopping short of pushing for a complete unbundling of generation and wires ownership, is bowing to pressure from a handful of states, says EWEA.

forced divorce

The Commission puts two options on the table. Under a first preferred option, generators and retailers of electricity and gas would not be able to own or operate transmission or distribution networks. Recognising, however, that this proposal would never gain the backing of all member states, particularly those which historically have operated power systems as single businesses, a second option proposes an independent system operator (ISO) so that vertically-integrated companies can continue to own networks provided the assets are operated by an independent company. The ISO would be empowered to ensure fair play.

The wind industry has long argued that vertical integration -- the ownership of generation, distribution and transmission assets by a single entity -- stands in the way of fair access to grid networks for wind generators. "Fair grid access is an absolute minimum requirement if the EU is to meet its objective of 20% renewable energy by 2020," says Kjaer. "Allowing power generation companies to own the transmission grid makes as much sense as allowing an airline company to own the sky. Independent operation of transmission networks is certainly a step in the right direction, but competition in the European electricity markets will continue to be distorted until independent operation has been complemented by independent ownership of the grids."

EWEA concedes that ISOs are probably as far as the Commission dares go at this stage. But ISOs must be made responsible for operation as well as expansion of the grid, it says. Close regulatory supervision is needed to guarantee price transparency, network access and investment incentives. EWEA supports the Commission's plans to increase the powers of national regulators and strengthen their cross-border co-ordination.

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