More than just hot air – how can Europe turn targets into reality?

Date: 20/10/05

Four years after the adoption of an EU renewables directive promoting the use of alternative energy sources, the European Commission is gearing up to publish a report on lessons learnt through experience so far.

The directive sets renewables targets for each of the 25 member states to meet by 2010. But it is now widely accepted that these targets will not be met by the majority of countries.

The attention of governments, green lobbyists and the energy sector has so far focused on whether or not the Commission report will suggest boosting the market by setting up a single EU-wide renewables support system. This would replace the several different support schemes, from trading certificates to state aid, currently used in Europe.

RECS, a certification lobby group, has been pushing for Renewable Energy Certificate Systems, a single support mechanism - cross-border certificates trading. Under certificates trading, companies could, for example, buy or sell legal obligations to use renewable energy.

But at a meeting of experts in Amsterdam this month the Commission ruled out the idea of a single scheme for the time being, explaining that "harmonisation seems to be very difficult to achieve in the short and medium term". In particular, it said the administrative costs of running an EU-wide certificate trading system were still unknown.

Christian Kjaer of the European Wind Energy Association (Ewea) welcomed the delay to proposing a single support scheme, saying it was too early to change the rules for member states still struggling to build up their renewable capacity.

"Every time you change the rules you create market problems in 25 member states," said Kjaer. He estimated that Europe would need at least another five years' experience before considering a harmonised system. "Countries need time to build up their own renewables frameworks. Only Spain, Denmark, Germany and Finland are on track to meet the [renewables] directive targets, but a lot has been done all across Europe."

Traditionally, the renewables sector has said 'feed-ins' (essentially, state aid) are the best way to boost alternative energy sources, whilst industry has favoured market-based instruments like certificates. However, Kjaer said the wind sector did not dismiss the idea of certificates, once more was known about them. "Green certificates are very complicated but that doesn't mean they won't work."

The UK, Italy and Sweden are currently the only three member states to rely on a certificates trading system alone, whilst Belgium uses a combination of certificates and price-fixing. The most popular system is feed-in tariffs of one sort or another, with 12 countries favouring them. Ireland also this year announced it would scrap its tendering scheme - under which companies had to bid against each other for the right to build renewables plants - and replace it with feed-in. Other systems range from tax breaks and other investment incentives to grants.

Given the hotchpotch of systems being used to prop up a very young market, it is unsurprising that the Commission is unwilling to place its bets on any one support mechanism. In Amsterdam, however, it did confirm that so far feed-in tariffs have been far more effective at boosting national renewables markets than any other mechanism. Nonetheless, experts express doubts that feed-in can continue in the long run, given the huge amount of money needed to make it work. Industry sector representative Eurelectric last year estimated that Germany alone spent more than EUR 2 billion per year on feed-in support - a figure that would rise drastically if Germany increased its renewables sector, as it is required to do under the EU directive.

The Commission report will also react to slow take-up of the directive's 'guarantees of origin' (GOO) labelling system - intended to simplify potential future renewables trading. The majority of member states have missed the deadline for setting up a national GOO mechanism.

EU think-tank CEPs published a report on 20 October calling for GOO systems to be harmonised across the EU by 2010. It also says that a harmonised renewables system should be in force by 2014.

Four years after the adoption of an EU renewables directive promoting the use of alternative energy sources, the European Commission was preparing a report on lessons learnt through experience so far. The Directive sets renewables targets for each of the 25 member states to meet by 2010. But it was at the time widely accepted that these targets would not be met by the majority of countries.