11 Renewable energy: progress towards
the 2020 target
| (32480) 5965/11
+ ADDs 1-3
COM(11) 31
| Commission Communication: Renewable Energy — Progressing towards the 2020 target
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| Legal base | —
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| Document originated | 31 January 2011
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| Deposited in Parliament | 3 February 2011
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| Department | Transport
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| Basis of consideration | EM of 17 February 2011
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| Previous Committee Report | None, but see footnotes
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| To be discussed in Council | No date set
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| Committee's assessment | Politically important
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| Committee's decision | Cleared
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Background
11.1 The Commission says that renewable energy is crucial to any
move towards a low carbon economy, and a key component of the
EU energy strategy, which was effectively launched with the adoption
of a White Paper in 1997, and which has been driven by the need,
not only to decarbonise the sector, but also to address the growing
dependency on fossil fuel imports from politically unstable regions.
It also points out that the focus over that period has shifted
from the use of indicative to legally binding targets under the
new Renewable Energy Directive (2009/28/EC). The Commission goes
on to highlight the way in which its Energy 2020 Strategy[57]
identifies how EU infrastructure and innovation policies are supporting
the sector's development, and it says that the purpose of this
Communication is to present an overview of the renewable energy
industry in Europe, its prospects to 2020, and the outstanding
challenges it faces.
11.2 The Communication is also accompanied by three
Commission Staff Working Documents—SEC(2011) 129 reporting
on the operation of the mass balance verification method for the
biofuels sustainability scheme, SEC(2011) 130 reporting on progress
in developing renewable energy sources and technical evaluation
of the use of biofuels and other renewable fuels in transport,
and SEC(2011) 131 reviewing European and national financing of
renewable energy—the four documents together forming the
Commission's response to the reporting requirements set out in
the relevant EU legislation.
The current document
ACHIEVING THE 20% TARGET
11.3 The Commission points out that, until 2008,
the Renewable Electricity Directive (2001/77/EC) and the Biofuels
Directive (2003/30/EC) set respectively national indicative targets
for the EU under which renewable energy would account for 21%
of electricity generation by 2010, and for 5.75% of the energy
used in transport. It says that only a few Member States were
expected to achieve either of these aims, and that this led to
the adoption of the Renewable Energy Directive, which covers energy
consumption as a whole and sets legally binding national targets[58]
such that the EU achieves a 20% share of renewable energy by 2020.
In addition, it requires Member States to prepare National Renewable
Energy Action Plans, reform planning regimes and develop electricity
grids.
11.4 The Commission says that a review of Member
States' plans shows that the new approach is starting to pay off,
with renewable energy constituting 62% of investment in energy
generation in 2009, and Member State projections showing that
it will grow at a faster pace in the years to 2020 than in the
past, and that some will exceed their targets (and will thus be
able to provide surpluses for other Member States). It says that,
if these predictions are fulfilled, the share of renewable energy
in the EU as a whole in 2020 will exceed the 20% target, and that
overall Member States expect to more than double their total renewable
energy consumption by that date. Electricity is expected to account
for 45% of the increase, heating 37% and transport 18%, with biomass
the largest source, followed by wind power (of which two-thirds
will be inshore and one-third offshore), and solar energy.
11.5 As regards individual sectors, the Commission
comments that renewable energy should constitute 37% of Europe's
electricity mix by 2020, a development which it says highlights
the need to accelerate the modernisation of the grid (facilitating
grid balancing, flexibility and distributed generation, and in
particular the connection of offshore wind generation) and of
the electricity market as a whole. As regards heating and cooling,
it says that there was only a modest market development due to
the lack of an adequate support framework in most Member States,
but that this will clearly change with the sector's inclusion
in the new EU framework, and that biomass is expected to remain
the dominant technology, accounting for 50% of the expected growth
up to 2020. In the case of transport, the Commission says
that first generation biofuels will be the predominant energy
source to 2020, with Europe having the strictest sustainability
criteria in the world, and that second generation biofuels and
electric vehicles are expected to make only a small contribution.
11.6 The Commission observes that, in order to achieve
the 2020 targets in an economical and resource efficient manner,
the EU needs to continue to invest in research for advanced renewable
energy technologies, and to continue to bring down the costs of
offshore wind, photovoltaic power, electric cars, and second generation
biofuels, with projects bringing wider environmental benefits
being promoted through research programmes such as the Strategic
Energy Technology Plan.[59]
It notes that this will require significant investment, making
it essential to have a stable and predictable financing environment,
and that it will be necessary for Member States to strengthen
skills, knowledge and capacities.
BETTER AND MORE INTEGRATED FINANCING
11.7 The Commission recalls that its Communication
on infrastructure priorities[60]
identified the need for European investment of more than €1
trillion by 2020, with about half of this being required for replacing
or investing in new electricity generation capacity, and priority
being given to investment in renewable energy. It adds that this
would require annual capital investment in renewable energy to
increase from its present level of €35 billion to €70
billion, and that this must continue to be funded mainly through
private sector investment, financed eventually by energy consumers.
It suggests that the economic benefits of encouraging the renewables
industry was widely acknowledged as the global financial crisis
took hold in 2009, and that the challenge facing Europe is to
stay at the forefront of this industry, where it regards the EU
Emissions Trading Scheme as an important driver, and where it
believes much can be done by streamlining authorisation and planning
procedures and by removing non-cost barriers to the growth of
renewable energy.
11.8 In particular, the Commission says that, at
a time of major fiscal constraint, more can be done to ensure
that money spent in this area is used cost effectively, and that
effective selection and coordination of financing tools at both
national and EU level is important. It adds that the choice of
financial instrument depends upon the state of the technology
and project development, and that all the available instruments
(which include grants, loans and loan guarantees, equity funds,
feed-in tariffs, premiums, quota/certification schemes, fiscal
incentives and tenders) have role to play in relation to different
forms of project risk and the maturity of the project in question.
It notes that grants towards capital costs are used most often
in the initial stages, and that support then tends to shift towards
operating support, more commonly financed by energy consumers
than from taxation, but it stresses the need for financial support
to be phased out only when renewable energy costs have declined
further.
11.9 The Commission goes on to comment that, whilst
some EU funding is applied, the bulk of support for renewable
energy is delivered at Member State level, and that a range of
different instruments are used. It also says that there has been
significant adaptation of instruments as circumstances have changed,
with tariffs having been reduced as production costs have declined,
and producers being exposed to greater market price risk: and
it notes that private financing mechanisms have been developed
successfully in some Member States both to attract capital and
increase local acceptance of projects, provided these are undertaken
in accordance with a clear government strategy.
11.10 At the same time, the Commission says that,
although the efficiency of the various instruments has been improved,
more needs to be done, in that Member States have tended to operate
on a purely national basis, whereas up to €10 billion could
be saved annually if they treated renewable energy as a commodity
in a single European market. It therefore reiterates the call
in the EU Energy Strategy for a greater convergence of national
support schemes and the development of a pan-European approach
to the development of renewable energy sources of the kind now
emerging in relation to offshore wind: and it draws attention
to the "cooperation mechanisms" established by the Renewable
Energy Directive to enable Member States to develop such sources
jointly. In particular, these can involve statistical transfers
where a quantity of renewable energy produced in one Member State
is transferred to another for target compliance purposes, allow
Member States to embark on joint projects to build or co-finance
infrastructure, and to agree joint support schemes (such as a
common feed-in tariff).
11.11 As regards funding at EU level, the Commission
points out that, despite strong political support, the financial
support given is relatively low, amounting on average to €3.26
billion a year for the period 2007-09 (mainly in the form of loans
from the European Investment Bank). It comments that the instruments
used directly by the Commission for financing renewable energy
projects, those jointly managed with Member States, and those
managed with other institutions will be the subject of review
in the light of the next European Financial Framework from 2014,
and that it will in particular examine using funds to leverage
private capital into energy projects at local, regional, national
and European levels, combined with a greater uptake of the cooperation
mechanisms under the Renewable Energy Directive. In the meantime,
it points out that a major new source of financial support is
the programme established under the Emissions Trading Scheme to
support the demonstration of carbon capture and storage and innovative
renewables at commercial scale, with around €4.5 billion
of co-funding available for appropriate projects.
11.12 The Commission concludes by inviting Member
States to implement their National Renewable Energy Plans; streamline
infrastructure planning regimes, develop the electricity grid;
develop cooperation mechanisms and integrate renewable energy
into the European market; and ensure that reforms to national
support schemes guarantee stability for investors and avoid retroactive
changes.
The Government's view
11.13 In his Explanatory Memorandum of 17 February
2011, the Parliamentary Under-Secretary of State at the Department
for Transport (Mr Norman Baker) points out that there are no policy
implications as this Communication is not a proposal for legislation,
and that the Government is already using approaches to increase
the use of renewable energy in line with many of those recommended
in it, notably through implementation of the UK National Renewable
Energy Action Plan; implementation of a fast track process for
major infrastructure planning applications for development consent;
the publication of a white paper, in summer 2011, on the reform
of the electricity market, which will set out a strategy on electricity
system balancing; considering how to develop the cooperation mechanisms
within the Directive; a grandfathering policy that support, granted
under the Renewables Obligation to a generator, remains at the
same level as at the point of accreditation (subject to certain
exceptions). He also says that the UK is not pushing for harmonisation
of national support schemes at this stage.
Conclusion
11.14 This Communication is one of a number of
documents produced recently by the Commission on EU energy policy,
and deals specifically with the progress made towards achieving
the legally binding targets introduced in 2009 for the uptake
of renewable energy by 2020. In many ways, it covers familiar
ground, and contains no major surprises. In view of this, we see
no need for its further consideration, particularly as the Commission's
more general Communication on energy strategy was debated in European
Committee A on 2 February 2011. We are therefore content to clear
the current document.
57 (32170) 16096/10: see HC 428-xi (2010-11), chapter
2 (15 December 2010). Back
58
The UK is required to source 15% of its overall energy, and 10%
of energy used in transport, from renewable sources by 2020. Back
59
(29194) 15458/07: see HC 16-vii (2007-08), chapter 12 (9 January
2008). Back
60
(32215) 16302/10: see HC 428-xi (2010-11), chapter 15 (15 December
2010). Back
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