Industry hits out at utility lobby -- Warming up to EU policy review

Wind industry players have lambasted a report by Eurelectric, a lobby group for the Europe's electric utility industry, on the costs of meeting the EU's renewables targets, including the costs of different support mechanisms across Europe. Eurelectric published "A Quantitative Assessment of Direct Support Schemes for Renewables" in the run up to the European Commission's review this year of market support frameworks. The Commission is considering pan-Europe harmonisation of the different systems. Its review is to play a key role in the decision-making process.

According to Eurelectric, total cost of direct support for renewables was EUR 3.3 billion for the EU 15 countries in 2001 and will rise to an estimated EUR 11.5 billion in 2010. Combinations of direct subsidies and kilowatt hour production incentives to renewables in member countries will range from EUR 0.027/kWh in Finland, up to EUR 0.09/kWh in Germany and EUR 0.119/kWh in Italy. The weighted average price is EUR 0.068/kWh, it says.

Eurelectric, which is known to be hostile towards governments fixing the rate of pay for renewables electricity, as in Germany, claims that if renewable energy support across the EU 15 was brought up to the level of Germany, the total cost of direct support would roughly double to EUR 20 billion a year -- approximately 25% of wholesale electricity prices.

The European Wind Energy Association (EWEA) attacks Eurelectric's calculations. EWEA's Christian Kjaer accuses the underlying assumptions of being unrealistic, with some of them plain wrong. He expresses surprise that Eurelectric has published a report that can be so easily attacked.

"The report assumes that the level of support to renewables will remain at the 2001 level throughout this decade," he points out. "Unlike conventional power sources, the cost of producing renewable electricity will fall significantly over time as the technologies develop." Eurelectric also takes no account of the in-built step-by-step reduction over time of the German wind tariff. Payments for wind start at EUR 0.087/kWh and decrease to EUR 0.055/kWh. They are not the EUR 0.091/kWh assumed in the report, says Kjaer.

Documentation from the European Parliament contradicts the Eurelectric report. The parliament says support for renewables amounts to EUR 2.4 billion, not EUR 3.3 billion, Kjaer says. This is low compared to subsidies paid to fossil fuels and nuclear. "EWEA agrees with Eurelectric that permanent subsidies must be avoided," he says. "But that should apply to fully commercial technologies such as coal and gas as well. Subsidies to fully competitive conventional technologies are highly unproductive, seriously distort the markets and increase the need to support renewables."

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