EC mulls green subsidy framework

Differing national subsidies for renewable energy sources can be counterproductive, according to the European Commission. Carmen Paun reports from Brussels

By backing a binding 2030 European Union target for renewable energy, EU energy commissioner Gunther Oettinger did not signal much faith in the ability of ­renewables to become competitive in the next 20 years.

The commissioner was not happy with some member states’ renewables support schemes either, but he steered clear of pointing the finger. Instead, he suggested that some national subsidy methods could be counterproductive.

“The different types of support schemes from member states for renewables are not that cost-effective,” he said when unveiling the European Commission’s latest green energy policy paper in Brussels last month. There are regional issues to consider, such as subsidising wind energy in northern Europe and solar energy in the south, but there are Europe-wide problems that would benefit from harmonised European solutions, he suggested. “We have to consider other factors such as infrastructure, financing and cutting red tape [that impedes the integration of renewables into the market].”

Destroying confidence

He also said that an EU-wide policy would aid stability. To attract capital for renewables from private investors, member states would have to avoid sudden and retroactive changes in their support schemes, the commissioner stressed.

“Retroactive changes destroy investor confidence,” he said. “They must know what support they will be eligible for in the next years.”

Meanwhile, major infrastructure investment was needed and Brussels could help: “When it comes to wind and solar, we have a problem. We need to work to secure supply, develop storage capacities and new transmission and distribution networks,” the commissioner said.

But will such public support ever end? Officials in the Commission think so.

According to one European Commission source, photovoltaic energy will become cost-effective and able to operate in a competitive market by 2014 in Italy and by 2017 in Spain. Wind energy, however, is not moving as fast, the source said. The official said: “As soon as renewables technologies are mature and able to compete in the market, we want to stop giving subsidies. We cannot give an exact date when that will happen because the process will be different for each technology.”

Although the European Photovoltaic Industry Association (EPIA) supports a binding renewables target for 2030, “the industry does not expect or want support schemes such as feed-in tariffs to last forever”, according to Craig Winneker, the EPIA’s head of political communications. But for the time being, photovoltaics still need policy support to close the competitiveness gap.

He agreed with Oettinger that binding targets for 2030 would help reinforce investor confidence, which he says has been undermined by patchy reforms in some EU countries.

Single framework

Annika Ahtonen, policy analyst at the European Policy Centre in Brussels, said an EU-wide approach would help: “We have in place 27 different national support schemes instead of a single European framework. This means technologies do not get the chance to develop and scale up, and they end up being used in less than optimal locations.” She cited a Ruhr Economic Paper published by three German universities that noted how Germany had invested ¤50 billion (£39 billion) in photovoltaics in ten years but by 2008 it accounted for just 0.6 per cent of the generation mix.

Stephane Bourgeois, head of regulatory affairs at the European Wind Energy Association, believes onshore wind energy in northwest Europe will be competitive by 2020, but says many factors affect its competitiveness: grid connection procedures, access to capital, economic conditions, market adaptation to intermittency and energy market liberalisation.

Also, he said, “we are chronically underfunded by the EU budget for research”. He criticised the decision by the Council of Ministers to back EU research spending on natural gas from 2014.

Shale gas investment is also a concern, but Elvira Oliva, researcher at energy consultancy Nomisma Energia, said European RES had not yet lost funds to shale gas, which is nascent, concentrated in specific countries and carries environmental baggage.

This article first appeared in Utility Week’s print edition of 20 July 2012.

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