PROMOTION OF ELECTRICITY FROM RENEWABLE
ENERGY SOURCES
(21349)
9312/00
COM(00) 279
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Draft Council Directive on the promotion of electricity from renewable energy sources in the internal electricity market.
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| Legal base: |
Article 95 EC; co-decision; qualified majority voting
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| Document originated:
| 10 May 2000 |
| Forwarded to the Council:
| 5 June 2000 |
| Deposited in Parliament:
| 23 June 2000 |
| Department: |
Trade and Industry |
| Basis of consideration:
| EM of 7 July 2000 |
| Previous Committee Report:
| None |
| To be discussed in Council:
| December 2000 |
| Committee's assessment:
| Legally and politically important
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| Committee's decision:
| Not cleared; further information requested
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Background
2.1 According to the Commission, the promotion
of renewable sources of energy is a high Community priority, partly
in order to diversify supply and help integrate the environmental
concerns into energy policy, but more particularly because of
the "substantial contribution" which it says such measures
can make towards meeting the Community's Kyoto commitments to
reduce greenhouse gases. It goes on to recall that, in its November
1997 White Paper[7]
setting out a Community strategy and action plan in this area,
it had suggested that 12% of the gross inland energy consumption
in the Community as a whole should be met in this way by 2010.
It says that, expressed purely in terms of electricity consumption,
this figure implies that 22.1% of production should be from renewable
sources (RES-E). The Commission has now put forward a proposed
Directive setting out ways in which this aim might be achieved.
The current proposal
2.2 The Commission first explores the case
for and against setting binding RES-E[8]
targets for all Member States. However, whilst it concludes that
this could facilitate the Kyoto objective, it says there are good
arguments for maintaining a large degree of flexibility, thus
enabling Member States to identify the strategy best suited to
their own climate change commitments. That said, it also believes
that a Directive is needed in order to provide the framework necessary
to increase the rôle of RES-E throughout the Community.
With this in mind, it has proposed that Member States should be
obliged every five years to set year-by-year national targets
for their future domestic consumption of RES-E over the next 10
years, in terms of kWH consumed or as a percentage of electricity
consumption for the next 10 years. Member States would also be
required to publish on an annual basis their national objectives
and the measures they have taken to meet these. In the case of
the UK, the indicative target suggested by the Commission would
be 10%, as compared with the Community average of 22.1%. Those
for other Member States would range from 5.7% for Luxembourg to
78.1% in the case of Austria (see Annex to this paragraph). The
Commission suggests that this approach would be fully in accordance
with subsidiarity, in that, so long as the Kyoto commitments were
met, it would leave the mix of RES-E sources to individual Member
States. However, somewhat surprisingly in view of its intention
to propose mandatory national targets if it considers the actions
taken by Member States are inconsistent with Community targets,
the Commission also appears to make this same claim in relation
to Member States' overall objectives.
2.3 The proposal also deals with a number
of other issues which would arise from the central aim of the
Directive. These are set out in the following paragraphs.
— Incentives towards RES-E use
2.4 The Commission points out that Member
States use a number of different mechanisms to support RES-E,
such as investment aids, tax exemptions, and direct price support,
and that, although costs are coming down rapidly, support is expected
to remain necessary in the medium term. It goes on to say that
price support is the principal tool, and is based either on quota-based
systems (as in the UK) where a given quantity of RES-E receives
price support, or through fixed price schemes, which in practice
set a limit for RES-E in the Member States concerned. The Commission
considers that these schemes have generally been very successful
in bringing about a substantial increase in the share of RES-E
, and that it will be necessary to reinforce them as long as electricity
prices do not fully reflect the environmental costs of the energy
sources used. It also suggests that, although it would ultimately
be desirable to have a Community-wide market for RES-E, this is
not feasible at present. Similarly, although the Commission goes
on to explore the possibility of providing the framework for a
gradual move in that direction — for example, by requiring
Member States to allow foreign suppliers to participate in their
national support schemes, or by having a single type of support
scheme in all Member States — it again concludes that this
would be premature, not least because insufficient information
is available at this stage about the relative effectiveness of
the different national schemes.
2.5 The Commission does, however, put up
three markers. First, that direct price support schemes should
in the medium term be adapted to the principles of the single
market, and that this will require all existing forms of support
to be taken into account, including those to conventional sources
of electricity. Secondly, that it will, in any event, be necessary
for it to assess the compatibility of any measures with the Community's
state aid rules. Thirdly, that progress "has to be made"
in adopting its 1997 proposal[9]
for a Council Directive to restructure the Community framework
for the taxation of energy products.
— Guarantee of origin
2.6 The Commission says that, given consumer
demand for "clean" electricity, and in order to permit
trade in RES-E to take place effectively, a guarantee of origin
system is necessary to allow purchasers to be certain their electricity
has been produced from renewable sources. However, whilst it again
suggests that a single Community system would in many ways be
the most effective approach, it proposes that each Member State
should for the time being be responsible for issuing the guarantees.
It says these should be mutually recognised by the Member States,
specify the energy sources used, and state whether the capacity
of any hydroelectric installations used is above or below 10 MW
(see paragraph 2.9 below). The Commission also goes on to point
out that guarantees will be susceptible to fraud, and that Member
States should therefore be obliged to put in place mechanisms
to ensure their reliability (and to report to the Commission annually
on the measures they have taken). The Commission in turn will
produce a regular overall report, and a group of national experts
would consider any improvements that might be appropriate.
— Administrative and planning procedures
2.7 The Commission suggests that administrative
and planning procedures constitute a major barrier to the further
development of RES-E, and that, although the Electricity Directive
(96/92/EC)[10]
provides for certain basic rules, these can place a significant
burden on RES-E producers, given their smaller size. Consequently,
although it once more rules out at this stage a harmonised approach,
it is proposing that all Member States should be required to review
existing requirements so as to reduce potential barriers to RES-E
production, by such means as setting up a single point for applications,
establishing deadlines for approvals, providing a "fast track"
approval system for RES-E producers, and identifying suitable
sites for generating RES electricity. The Commission says it will
also produce a report within two years of the entry into force
of the Directive outlining what further action might be taken.
— Grid connection
2.8 The Commission stresses the importance
to RES-E producers of being sure that they can feed in electricity
to the grid, and its proposal therefore requires Member States
to take the necessary measures to ensure that they are granted
priority access by transmission and distribution system operators.
It also points out that connection costs, for example for wind
power in remote areas, can be high, and so inhibit development,
particularly for smaller operators. It therefore says that charges
put on renewable generators related to the grid system should
reflect the economic costs and benefits associated with the connection;
and it points out that, whilst the Electricity Directive ensures
that Member States' rules on the connection of generators to the
grid are non-discriminatory and published, a comparable provision
does not exist for the distribution system. However, it rules
out the suggestion that the connection costs of renewable generators
should be borne by the grid operator, on the grounds that this
would encourage non-economic installations. It also believes that
mandatory rules on cost-sharing would be inappropriate at a European
level, provided Member States comply with a number of general
principles.
— Hydroelectric installations
2.9 The Commission suggests that, although
hydroelectric power is clearly a renewable source of energy, and
should thus be included for the purposes of national targets,
large plants with a capacity above 10 MW are in general competitive
and do not need particular support. Consequently, although such
plants should be included within the guarantee system, any certificates
should specify whether capacity is above or below the 10 MW threshold,
so as to allow the exclusion of large hydro from a harmonised
support system.
— Further action
2.10 Because the Commission believes that
developments in this area need to be closely monitored, and action
taken if the results are inadequate, it says it will produce detailed
reports to the Council on the implementation of the Directive.
A report will, if necessary, be presented two years after its
entry into force, and in any event no later than 31 December 2004.
A final report will be made no later than 1 January 2009.
The Government's view
2.11 In her Explanatory Memorandum of 7
July 2000, the Minister for Energy and Competitiveness in Europe
at the Department of Trade and Industry (The Rt. Hon. Helen Liddell)
says that the promotion of renewable energy sources is a high
priority for the Government, and that it supports the general
thrust of the proposal to promote renewables in the single electricity
market. She adds that the Government has already proposed a target
of 5% RES-E by 2003, and 10% by 2010, subject to the cost to consumers
being acceptable. She also points out that the arrangements already
in place through the successive NFFO[11]
Orders should deliver the 2003 target, but that the provisions
of the Utilities Bill, which place obligations on suppliers of
electricity, are needed to achieve 10% by 2010.
2.12 She then goes on to highlight a number
of issues which arise in connection with the proposal, as follows:
— Definition of renewables
The Minister says that by 2010 one-third of the UK's
electricity from renewables could come from municipal solid waste
and landfill gas, but that, in contrast to the Commission's 1997
White Paper, these are excluded from the definition in the draft
Directive. She points out that waste from such sources is less
expensive than other RES, and would displace the more polluting
fossil fuel capacity in electricity generation, whilst its exclusion
would make it much more difficult for the UK to meet its indicative
target of 10%. It would also impose a burden on industry additional
to the UK's national programme because a greater amount of renewable
energy would need to be generated from more expensive sources,
such as energy crops or offshore wind.
— Targets
The Minister points out that, although the targets
in the draft Directive are said to be indicative, the Commission
contemplates introducing binding targets. She suggests that this
is a cause for concern, particularly when the targets proposed
appear to take no account of the costs involved, and she adds
that, although the Government recognises that increased RES-E
will entail costs to consumers, their acceptability must be fully
considered.
— Certificates of origin
The Minister says that, in order for these to pave
the way for a tradeable system, two key issues need to be addressed.
One is "double dipping", where a generator receives
a premium price, and then sells green certificates, again at a
premium price, in another Member State; whilst the other is the
need for an arrangement to ensure that the purchaser of green
electricity gets the credit for the reduction of CO2
emissions.
— Planning
The Minister says that the Article in the proposal
requiring Member States to review their legislative and regulatory
framework is not entirely clear, and will need to be explored
further. However, she suggests that it would appear to override
some important planning principles, notably in suggesting preferential
treatment for renewable energy projects, which are currently assessed
(like all other development proposals) against all material planning
considerations. She also points out that, under existing Community
law, such projects will almost certainly require environmental
impact assessments, which could extend the process if a developer
did not act in a timely fashion.
— Grid issues
The Minister says that, even though this might be
thought desirable, it would be extremely difficult to ensure priority
access for RES-E, and that, although the UK seeks to ensure that
renewables are not disadvantaged, priority access could distort
the electricity market.
2.13 More generally, the Minister says that
there has been preliminary consultation with industry, and that
contact with relevant groups will be maintained during the negotiation.
She also says that, although costs are difficult to quantify at
this stage, a full Regulatory Impact Assessment will be carried
out later this year on the Government target of 10% by 2010. In
this connection, she suggests that the Directive would not, of
itself, impose any additional costs for the UK, but that the costs
are nevertheless substantial, and that the need to ensure these
are acceptable has to be carefully considered. She also points
out that additional costs would flow if the UK target proposed
by the Commission was greater than that adopted nationally, and
were to be legally binding, particularly if renewables from waste
and landfill gas were not taken into account.
Conclusion
2.14 Much of the current proposal arises
from the Commission's 1997 White Paper on this subject, which
was debated in European Standing Committee B in April 1998. Moreover,
although the Commission clearly envisages that it will be necessary
in due course to introduce a number of Community-wide provisions,
the proposal as it stands is perhaps less prescriptive than might
have been expected. On the other hand, it does give rise to a
number of potential concerns which the Minister has highlighted
in her Explanatory Memorandum, including the prospect of the Commission
proposing mandatory national targets if it judges the action taken
by Member States is not sufficient to meet Community targets,
including its Kyoto commitments. The Minister has also drawn attention
to the possible costs of the proposal, particularly if renewables
from waste and landfill gas are not taken into account.
2.15 We also ask the Minister to explain
to what extent the proposed measures do in fact facilitate trade
in electricity between Member States and invite her views on whether,
had the proposal been regarded as an environmental measure and
hence based on Article 175, the Council would have been obliged
to act unanimously in accordance with the consultation procedure
because the measures significantly affect Member States' choices
between different energy sources.
2.16 For these reasons, we are reserving
judgement on this proposal and withholding clearance, pending
an answer to our questions and further information from the Government
on the extent to which the concerns it has registered are met
during negotiations in Brussels. We will also be interested to
see the Regulatory Impact Assessment which the Government intends
to carry out later in the year. As we understand it, this is to
be related to the Government's own objective for 2010, and it
would be helpful if the Assessment could, so far as possible,
take on board as well any variations which might arise as a consequence
of this proposal being adopted.
ANNEX
INDICATIVE MEMBER STATE TARGETS FOR CONTRIBUTION
OF RES-E TO GROSS ELECTRICITY CONSUMPTION BY 2010
|
Percentage
|
TWh
|
Austria |
78.1
|
55.3
|
Belgium |
6.0
|
6.3
|
Denmark |
29.0
|
12.9
|
Finland |
35.0
|
33.7
|
France |
21.0
|
112.9
|
Germany |
12.5
|
76.4
|
Greece |
20.1
|
14.5
|
Ireland |
13.2
|
4.5
|
Italy |
25.0
|
89.6
|
Luxembourg |
5.7
|
0.5
|
Netherlands |
12.0
|
15.9
|
Portugal |
45.6
|
28.3
|
Spain |
29.4
|
76.6
|
Sweden |
60.0
|
97.5
|
UK |
10.0
|
50.0
|
EU 15 |
22.1
|
674.9
|
7 (18762)
5140/98; see HC 155-xviii (1997-98), paragraph 2 (25 February
1998) and Official Report, European Standing Committee
B, 1 April 1998. Back
8 Defined
for the purposes of this Directive as electricity generated from
renewable non-fossil fuels, and notably "wind, solar, geothermal,
wave, tidal, hydroelectric installations with a capacity below
10 MW and biomass". Biomass is defined as products from
agriculture and forestry, vegetable waste from agriculture, forestry
and the food production industry, untreated wood waste and cork
waste. Back
9 (17983)
6793/97; see HC 155-ii (1997-98), paragraph 8 (22 July 1997) and
HC 155-xi (1997-98), paragraph 1 (17 December 1997). Back
10 OJ
No. L 27, 30.1.97, p. 20. Back
11
Non Fossil Fuel Obligation. Back
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