11 SUPPORT FOR ENERGY FROM
RENEWABLE SOURCES
(27114)
15745/05
COM(05) 627
+ ADD 1
| Commission Communication: The support of electricity from renewable
energy sources
Commission staff working document: impact assessment
|
| Legal base | —
|
| Document originated | 7 December 2005
|
| Deposited in Parliament |
19 December 2005 |
| Department | Trade and Industry
|
| Basis of consideration |
EM of 12 January 2006 |
| Previous Committee Report |
None |
| Discussed in Council | No date set
|
| Committee's assessment | Politically important
|
| Committee's decision | Cleared
|
Background
11.1 In 2001, the Council adopted a Directive ("the Renewables
Directive") aimed at increasing the contribution of renewable
energy sources to electricity production.[36]
For the purposes of the Directive:
- "renewable energy sources" means renewable non-fossil
energy sources (wind, solar, geothermal, wave, tide, hydro-power,
biomass, landfill gas, sewage treatment plant gas and biogases);
- "biomass" means the biodegradable fraction
of products, waste and residues from agriculture, forestry and
related industries, as well as the biodegradable fraction of industrial
and municipal waste.
11.2 The main provisions of the Directive are as
follows:
- Member States should encourage
greater use of electricity from renewable sources.
- In 2002 and every five years thereafter, Member
States should set national indicative ten-year targets for future
consumption of electricity produced from renewable sources (the
UK's indicative target for 2010 is 10%). The collective target
for the EC is 21% by 2010.
- Member States should report every two years on
their progress towards achieving their indicative targets; and
the Commission should produce two-yearly assessments based on
those reports.
- The Commission should report before the end of
2005 on Member States' systems of financial support to promote
the consumption of electricity produced from renewable sources.
- Member States should: ensure stable investment
conditions for the production of electricity from renewable sources
by removing administrative barriers; ensure fair access to the
electricity grid; and issue guarantees of the origin of electricity
produced from renewable sources.
11.3 Article 174 of the EC Treaty specifies the objectives
to which Community policy on the environment should contribute.
The objectives include preserving, protecting and improving the
quality of the environment; protecting human health; and prudent
utilisation of natural resources. Article 175(2)(c) empowers the
Council to adopt "measures significantly affecting a Member
State's choice between different energy sources and the general
structure of its energy supply".
The document
11.4 The purpose of the Communication is:
- to discharge the Commission's
obligation under Article 4 of the Renewables Directive to report
before the end of 2005 on the extent to which Member States' "support
systems" have succeeded in promoting the consumption of electricity
produced from renewable sources ("green electricity");
and
- to report progress on the removal of administrative
barriers to the production of green electricity and ensuring fair
access to the electricity grid.
The Commission staff working document (ADD 1) provides
detailed information in support of the Communication.
SUPPORT SYSTEMS
11.5 Member States are currently operating four
different support systems: feed-in tariffs; green certificates;
tendering; and tax incentives.
11.6 Feed-in tariffs: this is the system
used by most Member States, including Denmark, Germany, France
and Spain. The competent national authority sets a price or premium
(usually fixed for several years) that electricity companies must
pay domestic producers of green electricity. The price or premium
takes account of the higher cost of production from renewable
sources. The cost of the support system is met by electricity
suppliers in proportion to their shares of total sales.
11.7 The Commission says that feed-in tariffs:
"have the advantages of investment security,
the possibility of fine-tuning and the promotion of mid- and long-term
technologies. On the other hand, they are difficult to harmonise
at EU level, may be challenged under internal market principles
and involve a risk of over-funding ….".[37]
11.8 Green certificates: this system is currently
in use in the Belgium, Italy, Poland, Sweden and the UK. In order
to help cover the additional cost of generating energy from renewables,
electricity consumers (or, in some countries, producers) are required
to buy a specified number of green certificates from the generators.
11.9 The Commission says that
"Since producers/consumers wish to buy [green]
certificates as cheaply as possible, a secondary market of certificates
develops where [green electricity] producers compete with one
another to sell green certificates. Therefore, green certificates
are market-based instruments, which have the theoretical potential,
if functioning well, of ensuring best value for investment. These
systems could work well in a single European market and have in
theory a lower risk of over-funding. However, green certificates
may pose a higher risk for investors …".[38]
The Commission adds that high-cost technologies might
not easily develop under a green certificate system and that the
administrative costs of the system are currently higher than those
for other support systems.
11.10 Tendering: the competent national authority
places a series of tenders for the supply of green electricity,
which is then supplied at the price resulting from the tender.
The Commission comments that, although tendering systems theoretically
make optimum use of market forces, they have a stop-go nature
which is not conducive to stable conditions. France and Ireland
intend to combine tendering with feed-in tariffs.
11.11 Tax incentives: these are applied in
Malta and Finland. Some other countries (including the UK) combine
tax incentives with other support systems.
11.12 The Commission's assessment of these support
systems is confined to their application to electricity generation
from wind, biomass, biogas, small hydro and solar photovoltaic.
It does not cover large hydro because it is well-developed and
does not need support; and it does not cover geothermal energy,
wave, tidal and solar thermal either because Member States do
not support them or because they are not in industrial use.
ADMINISTRATIVE BARRIERS, AND GRID ISSUES
11.13 The Commission recommends Member States to:
- appoint "one-stop-shops"
to coordinate the work of all the national, regional and local
authorities which have a part to play in the authorisation of
green electricity generation projects and to help applicants for
authorisation;
- issue guidelines on authorisation procedures
based on objective, non-discriminatory criteria; and
- establish mechanisms to pre-plan land use for
renewables.
11.14 The Commission argues that an independent Transmission
System Operator and an independent Distribution System Operator
are essential — but not yet to be found in all Member States
— to ensuring fair access to the electricity grid and the
development of the green electricity. It also calls for the charges
for use of the grid to be open and non-discriminatory; and for
the grid's infrastructure to be developed so as to accommodate
the increases in electricity generated from renewable sources.
THE COMMISSION'S CONCLUSIONS
11.15 The Commission concludes that harmonisation
of support systems would be very difficult to achieve in the short
term. Moreover, short-term changes might disrupt markets and make
it more difficult for Member States to achieve their targets for
2010. In any event, it is too soon to compare the merits of well-established
systems, such as feed-in tariffs, with those of newer ones, such
as green certificates. The Commission concludes that it would
not be appropriate to propose a harmonised European system at
this stage.
11.16 Meanwhile, the Commission suggests that:
- Member States which have similar
support systems should cooperate to improve and perhaps move towards
harmonisation of their systems; and
- Member States should "optimise"
their systems by, for example, doing more to provide stable and
predictable conditions for investment in green electricity projects,
cut red-tape, and ensure fair access to the electricity grid.
The Commission intends to do further work on the
options for and effects of increased cooperation and harmonisation
and will present a report on its findings by the end of 2007.
The Government's view
11.17 The Minister for Energy at the Department of
Trade and Industry (Malcolm Wicks) tells us that the Government
agrees with the Commission that it would not be sensible at present
to try to harmonise green energy support systems; and, indeed,
the Government doubts whether harmonisation is either necessary
or viable in the longer term. He also says that the Government
believes that the UK is making good progress in increasing the
proportion of electricity generated from renewable sources.
Conclusion
11.18 The use of renewable sources to generate
electricity is an important subject and of wide interest, not
least because of recent concerns about the security of energy
supplies from abroad. Accordingly, we draw this Communication
to the attention of the House.
11.19 We understand why the Commission and the
Government consider that it would be premature to move towards
a single support system to increase the generation of green electricity.
It may be, however, that this will be needed in due course to
help establish the single European energy market. We look forward,
therefore, to the further report the Commission will be making
make next year. Meanwhile, we are content to clear this document
from scrutiny.
36 Directive 2001/77/EC, OJ No. L 283, 27.10.2001,
p.33. Back
37
Commission Communication, page 4. Back
38
Commission Communication, page 5. Back
|
