Support Race against the European RES Target
Stine Grenaa Jensen1, Stephanie Ropenus2
1Danish Energy Association
Rosenoerns Allé 9, DK-1970 Frederiksberg, Denmark
Phone: +45 35 300 437; E-mail:
2Risø National Laboratory for Sustainable Energy, Technical University of Denmark
P.O. Box 49, DK-4000 Roskilde, Denmark
Phone: +45 4677 5144; E-mail:
Overview
The new Directive on the promotion of the use of energy from renewable energy sources (European Union, 2009) stipulates the ambitious mandatory target of a 20% renewable energy share in overall energy consumption in the European Union by 2020. In order to achieve this objective,the final Directive agreed on in December 2008 sets national mandatory targets for each MemberState.However, it does not put any common European support scheme into place. If all targets are met by national as opposed to European measures, several studies show that renewable energy sources are not utilised optimally in compliance with the target (Eurelectric, 2008 and European Commission, 2007).The Directive leaves room for bilateral agreements between Member States, which could result in a more suitable allocation of renewable energy production, but the experience until now indicates that excess countries, i.e., countries which have larger potentials than targets, do not intend to enter into such agreements.
An interesting issuewith respect to the newly adopted system is whether or not European countries are now starting a race to attract renewable energy producers to help fulfil national targets. This could result in producers “cherry-picking” betweensupport schemes in the different countries: when choosing a site for new generation capacity investment, producers have an incentive to deploy renewable electricity production in Member States with attractive investment conditions, i.e., where the country level of national support is high and provides investment certainty. This bears the danger that country levels of national support schemes will become the driver for deployment of renewable energy in Europe and notthe availability of resources.
In addition, support schemes interact with regulation in other policy areas, e.g., support instruments to achieve other policy goals, such as emission permits trading, but also rules for grid connection, network regulation, and the implementation of unbundling. The interaction of renewable support schemes with these other areas, will affect renewable energy deployment, and hence, also be critical for target compliance.
This paper surveys, to what extent we can already observe competition between Member States in order to meet national targets. The aim of this survey is to discuss whether or not a lack of harmonisation in levels of support schemes can obstruct the common European goal of 20 % renewable energy in 2020. Furthermore, the survey is used to discuss how a path toward harmonisation can be found in the framework of the new Climate and Energy Package. This discussion also includes a discussion of rules for grid connection and further European Market integration.
Methods
The method applied in this paper is a survey on newly adopted national support schemes. The aim of this survey is two-fold: firstly, it aims at identifying the support schemes currently applied (feed-in tariff, price premium, green quota system) and at comparing their design. The design encompasses the level of financial support, its guaranteed duration, and eligibility criteria for technologies. Secondly, with the use of the collected information, the survey seeks to analyze whether we can observe converging or diverging tendencies in the choice and design of support schemes across EU Member States. The objective is to analyse if Member States are trying to bid higher in their support schemes to attract investments in their country. Since the policy changes have only been recently implemented and there is a time lag for effects to materialise, this paper will draw on findings from other surveys, interviews with selected regulators in Member States, and on arguments from microeconomic theory in the discussion.
Preliminary Results
At present, feed-in tariffs are the predominant support scheme applied in EU Member States (Lipp, 2007). In several Member States, e.g., in Denmark, Germany, the Netherlands and Spain, there is the common tendency of a transition from the classic feed-in tariff scheme to price premiums paid on top of the electricity price (Cali et al., 2009). In the discussion, we will argue that creating incentives for “cherry picking” by providing attractive investment conditions in Member States may result in two opposing effects: firstly, it may lead to a divergence of support schemes if some Member States may alter their policies in order to provide more attractive conditions translating into a first mover advantage over other countries. Secondly, it may induce a convergence of support schemes if other Member States join the race and adapt the design of their support schemes as well. However, this “cherry picking” can only materialise if other areas of regulation, such as rules for grid connection and unbundling, do not create barriers that undermine the effect of high support levels.
Conclusions
The main conclusion in this paper is that a lack of harmonisation and coordination can be obscuring for the common European renewable energy target of 20 percent renewable energy in 2020. Based on the results of the survey and discussion, we will be able to make recommendations for how to initiate further coordination and harmonisation of support schemes, rules for grid connection and market integration.
References
Cali, Ü., Ropenus, S., Schröder, S., 2009. Development of interactions between distributed generation and distribution system operators. IMPROGRES, WP 2, Deliverable D2.
European Commission (2007) “Towards a low carbon future”, COM(2007) 723 final.
European Commission (2008) “Proposal for a Directive for the European Parliament and of the Council on the Promotion of the use of energy from renewable energy sources”, COM(2008) 19 final, 23.01.2008.
European Union (2009), “Directive of the European Parliament and the Council on the promotion of the use of energy from renewable sources amending”, PE-CONS 3736/08.
Eurelectric (2008), “Reaching EU RES Targets in an Efficient Manner –Benefits of Trade”.
Lipp, J., 2007. Lessons for effective renewable electricity policy from Denmark, Germany and the United Kingdom. Energy Policy, Vol. 35, pp. 5481-5495.
Ragwitz, M., G. Resch, T. Faber, R. Haas, C. Huber, R. Coenraads, M. Voogt, G. Reece, P.E. Morthorst, S.G. Jensen, I. Konstantivaviciute, and B. Heyder, “Assessment and optimisation of renewable energy support schemes in the European electricity market” (OPTRES), Karlsruhe, 2007.
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