A momentous proposal

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In the scale of its ambitions and likely impact on energy markets, the package of climate change legislation released by the EU executive last month is momentous -- and not least for wind power. It defines the contribution each country in the European Union must make towards reaching an overall goal of 20% renewables by 2020 and it sets a carbon emissions reduction target for Europe of 20% by the same year (pages 27-28 & 57-61). Champagne corks popped in the offices of renewable energy associations across Europe and even governments were mostly prepared to toast the EU Commission for a job well started.

In the electricity sector, the expectation is that renewables will need to supply 35% of Europe's power by 2020 to meet the overall target, compared with about 15% today. Most of the 15% comes from large hydro, a mainly exhausted resource, which leaves wind power contributing the lion's share of the increase. Today about 56 GW of wind supplies 3-4% of Europe's electricity. That will need to move to 165 GW over the next 12 years, or 13.75 GW a year. The challenge is not that great; the industry is already putting up more than 10 GW in Europe every 12 months.

To run alongside the European emissions trading system (ETS), the Commission would have liked to introduce buying and selling of green certificates as an instrument for reaching the 20% renewables goal. Trade in guarantees of origin (GO) would have put poorer countries rich in renewables resources in a position to help richer countries poor in renewables, with economic benefits for both. But it was not to be. Fierce opposition to a one-size-fits-all approach from a united renewables lobby and several governments persuaded the Commission to drop the idea for the time being. Instead, each country will choose its own mechanism for stimulating investment in renewables within a closed market.

Upheaval and uncertainty is an investment killer and with national wind markets already doing the job required, introducing a new support structure is a big risk to take. Letting an imperfect economic system continue can be the cheaper option. The Commission warns, however, that by its estimate the walled-garden approach will cost the consumer another EUR 1.8 billion. And Eurelectric, representing national electricity associations, is concerned, with some justification, about the impacts of "ring-fencing" what will become 35% of the competitive electricity market that Europe is striving to create. That level of direct government intervention is not likely to bring the benefits of competition to consumers.

Energy Commissioner Andris Piebalgs assures, however, that the renewables directive is a temporary measure only (page 58). Come 2020, ETS, a cap and trade system for carbon permits, will have added so much to the cost of fossil fuel generation that the energy market will be tilted towards the use of low carbon technologies, he says. Provided it is not also tilted towards nuclear, that should be all that wind requires to emerge victorious. But there is a long way to go. Visionary and straightforward at first glance, the Commission's proposal in detail is a complex and interlinked set of initiatives promising everything from jobs and prosperity to reversing the ravages of climate change. The risk of the legislation unravelling when national governments attempt to transpose the grand ideas into workable laws is real.

Although the Commission sees its renewables legislation as entirely separate from ETS, the two are inextricably linked. Each GO represents renewables generation, but it also means less fossil fuel was used and fewer emissions released. Following that trail of logic leads to an interesting polemic. Under the grand plan, if Portugal's power industry, having all but met its green electricity target (page 8), discovers it has GO to spare, it can offer them to counterparts in other countries. British electricity retailers could credit their national GO account with Portuguese wind power, but Portugal would retain the carbon credits, reducing its need to buy emission allowances. The upshot is that the environmental benefit of wind power is monetised twice, once as a GO and once as an emission credit, with British consumers paying for Portugal's emissions reductions. The Commission needs to let us know if that is the intention of its legislation.

The battle ahead

Countries not meeting their 2020 targets do not have to buy excess GO from elsewhere. Yet if buying GO from Portugal was a quick and cheap way for Britain to get wind power online while its offshore resource was being developed, a government ban on their purchase would seem contrary, to say the least. Meantime, Italy has already expressed a desire to build wind projects in the Balkans or even Africa, where it is cheaper to generate GO than at home. It also wants greater flexibility in trade of GO within the EU. Here Italy is set for a head-on clash with Germany, which under no circumstances wants its fixed price support system destabilised by GO invaders lining up along its border. Spain feels the same way.

Perhaps, though, the Commission's renewables legislation is not intended to support wind at all. In the 64 page proposal, the word "wind" appears once, compared with 22 counts of "solar," 39 of "biomass" and 45 of "biofuel." Interpret that as you will.

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