European renewable policy must be market-based, urges Eurelectric

Eurelectric has urged policymakers to develop renewable energy policy that is market-based, using the European Union Emissions Trading System (ETS) as the key driver.

In a new report the pan-European electricity association said that for the period after 2020 a market-based approach should be taken to ensure cost-effective deployment of renewable energy technologies, which progressively phases out the need for subsidies.

“On the one hand, renewable generation must be made fit for the market; on the other hand, the market must be made fit for renewables,” a statement from the group said.

The report explained that policy should be approached with the EU ETS as main driver for mature low-carbon technologies, with support for immature technologies made specifically through research, development and demonstration funding.

“Public support should be primarily oriented towards new, high potential immature low-carbon technologies that have not reached market readiness,” the report said.

But policy should also address the fact that the markets need back-up capacity to secure the supply for customers, despite the fact that the markets themselves do not provide the necessary price signal incentives to bring this forward.

To do this policymakers will require a capacity market but should ensure that only enough capacity is delivered and rewarded as is strictly needed, while opening the opportunity for cross-national and European-wide solutions, the report said.

The report is the result of a year-long, in-depth investigation into how future electricity markets should be designed to ensure a cost-efficient transition towards decarbonisation while securing electricity supply, and was published ahead of the 23-24 October climate change summit to be held in Brussels.