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Huge market boost hangs in the balance

Last minute amendments to the European Commission's latest controversial proposal for a directive to promote renewable energy in the EU were given a cautious welcome by policy experts last month. None, however, professed to understand the full implications of the changes. These were made, and subsequently leaked, just days before the proposal's scheduled presentation to Europe's energy ministers on December 2.

The feverish eve-of-presentation alterations by Commission officials were apparently prompted after details of the proposal, the Commission's second attempt at a renewables directive, became known in late October, prompting fierce criticism from environmental groups, trade associations and even a government minister (next story).

The main cause of the outcry was a requirement for member states to open the borders of their "direct price support" systems to renewable energy producers in other EU countries on a reciprocal basis once 5% of the national electricity requirement was provided by renewables. "Direct price support" covers any financial subsidy arrangement, whether through binding quotas of renewables facilitated by tradable green credit systems, auction models like the British Non Fossil Fuel Obligation, or fixed feed-in prices and fixed premium schemes as in Germany and Spain.

Three key elements

This 5% threshold clause is now dropped. Instead, countries have ten years from the day the directive becomes law to extend their price support schemes to foreign renewables production. This "will lead to increased trade and competition," states the directive. In practice it means EU countries do not have to apply their subsidised renewables rates to imports of green electricity for ten years, enabling member states to each build "a critical mass of electricity from renewable energy sources."

Member states do, however, have to make provision for imports and exports of renewable energy throughout the EU within a period of two years. All countries are therefore required to introduce a system for certifying green power within that period so it can be readily identified. Large hydro is now excluded.

Furthermore, countries which do not cover 5% of their electricity consumption from renewables can be excluded from national markets that do. This effective ban from the internal green power market is intended to act as an incentive for members states to "quickly increase" their production of renewables.

The directive refers to the "significant advantages" of free trade and competition and says renewables must be ensured "every chance to take full advantage of the benefits which are offered by the internal electricity market." Currently, it says, there is uncertainty about when direct price support systems will conflict with EU law. They have been "tolerated" so far because the relatively small volume of electricity from renewables means that market distortions have been small. The directive, if adopted, will allow price support systems to continue, thereby creating a "stable regulatory framework" before an internal market for renewables is established.

"Of course it is an advance," says Søren Krohn of the Danish wind industry association of the amended version. "There will be time to build a critical mass. That is the reasoning behind the ten year period." He criticises the document, however, for its lack of clarity. "There are a number of apparent inconsistencies, but I don't really understand it," admits Krohn. "It could be very good depending on your interpretation." Krohn remains unhappy about the lack of any renewables mandate, or binding target, in the proposal.

Difficult job

The Commission is charged with devising a competitive support mechanism to boost the expansion of renewables within the framework of Europe's internal energy market. Europe's energy ministers stressed in May that a directive should eliminate obstacles to cross border trade in renewables, but that it must allow member states to choose their own support mechanisms (Windpower Monthly, June 1999). In particular, Germany, further behind with settling the details of its electricity market reform than other countries, has been concerned about the fate of renewables if it was required to abandon its Renewable Energy Feed-In Tariff (REFIT).

In the latest proposal, the push towards competition among renewable producers is less obvious than in the previous attempted directive (Windpower Monthly, December 1998). The European Commission-in a bid to get backing from energy ministers and the entire renewable energy lobbies-tones down its plans for harmonised mechanisms for cross border trade of renewables and for binding targets. It emphasises the principle of subsidiarity-leaving member states free to choose the support regime that best suits their own national situation. The newest directive safeguards the REFIT for at least ten years while encouraging Germany to adopt a support system that would not put it at a disadvantage at the end of that period.

Exemptions to the ten year limit on protection for domestic producers may be allowed by the Commission for countries who fear that opening their support systems will prejudice the operation of small isolated electricity plant or development of emerging market segments. Moreover, a "transitional regime" may be granted if existing commitments would be threatened by the new directive or if it would lead to financial difficulties-particularly for small and medium sized or independent renewable generators. The transitional arrangement could take the form of a temporary financial support scheme or continuation of direct price support schemes for existing producers.

No targets

Legally binding targets for renewable electricity consumption is another hot potato that has been dropped from the latest proposed directive. Most member states, aside from Denmark and Britain, have consistently objected to minimum levels, arguing they would not take account of different national circumstances and would ignore subsidiarity.

The directive proposes instead that member states be obliged set their own national targets for renewable sourced electricity. These shall be evaluated annually by the Commission for consistency with the objectives outlined in the White Paper on Renewable Energy, adopted by governments, such as the goal of 12% of Europe's primary energy consumption to come from renewables by 2010.

Many of the Commission's much praised proposals for tackling barriers to planning and grid access survive unchanged from its 1998 draft directive. Member states are asked to consider introducing measures to expedite the consents process including a fast-track planning procedure, single reception points for applications for consent, a mediator in the case of disputes, and consent by default in cases where consultees fail to respond within a certain timescale. Costs of access to the transmission system should be transparent and non-discriminatory. And governments should review the measures needed to facilitate grid access for electricity from renewables and for introducing two-way metering.

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