Legally and Politically important
Not cleared from scrutiny; further information requested; drawn to the attention of the Business, Energy and Industrial Strategy Committee
Proposal for a Directive on the promotion of the use of energy from renewable sources (recast)
Article 194(2) TFEU
Business, Energy and Industrial Strategy
(38345), 15120/16 + ADDs 1–9, COM(16) 767
3.1Global power markets are changing. According to the International Energy Agency, renewable energy represented more than half of the new power capacity around the world in 2015. In 2030, according to the Commission, half of the EU’s electricity generation will come from renewables.
3.2This proposal would replace nationally binding 2020 renewables targets with an EU-wide target of 27% renewable energy by 2030, consistent with the October 2014 European Council agreement on the 2030 Framework for Climate and Energy. The Commission proposes that Member State 2020 target levels be the baseline for Member States’ renewable energy share post-2020. Any Member States falling below their baseline would be required to pay into a Commission fund which will be used to finance renewable projects.
3.3The proposal sets out a variety of measures to ensure that the EU target is met, including:
3.4The Minister of State, (Baroness Neville-Rolfe), agrees that action needs to be taken at the EU-level, but she expresses concern that some of the detail of the proposal might be better left for national or regional authorities to manage. She points in particular to the provisions in respect of financial support to the renewables sector.
3.5The Minister indicates that the Government is still considering its response but she highlights a range of additional concerns, which are set out below. These include a concern that a number of the measures may equate to de facto binding targets. The Minister promises to submit to the Committee the standard checklist for analysis identifying the potential costs and benefits of the proposal in the UK.
3.6We note that the Minister agrees on the one hand that EU-level action is required in order to implement agreed EU-level objectives but, on the other, that the Government will consider whether some of the details of the proposal—notably on support schemes—are compatible with the principle of subsidiarity. We ask that she articulate any concerns more precisely, ensuring that she distinguishes between concerns surrounding subsidiarity and proportionality.
3.7The Government is considering whether the proposals in respect of achieving targets are such that Article 192 ought to apply. Article 192 is an environmental policy legal base, providing that the Council should normally operate by qualified majority but that certain decisions should be taken unanimously, while only consulting the European Parliament. These include (Article 192(2)(c)) measures “significantly affecting a Member State’s choice between different energy sources and the general structure of its energy supply”. Could the Minister clarify whether the Government is specifically considering whether Article 192(2)(c) should apply?
3.8The proposal is set to enter into force on 1 January 2021, by which time it is expected that the UK will have left the European Union. In that light, could she explain the basis on which the UK is approaching the negotiations: Is this purely in a business as usual manner, assuming that it will adopt the terms of the legislation? Alternatively, is the Government giving any consideration to approaching the negotiations from the perspective of a third country seeking to trade with the EU? If the latter, how might that influence the Government’s approach, particularly if it is anticipated that there will be any desire to export and import renewable energy? Would she expect the negotiations to cover any support scheme conditions that the EU might place on a third country wishing to trade in that manner?
3.9We look forward to receiving the standard checklist for analysis identifying the potential costs and benefits of the proposal in the UK. We ask that, in writing to us, the Minister responds to the issues above and that she sets out any changes to the Government’s position. It would be helpful if she could explain her concerns that a number of the measures may equate to de facto binding targets more fully. We ask too that she set out any early indication as to whether the Government’s concerns might be shared by others.
3.10We retain the document under scrutiny and draw it to the attention of the Business, Energy and Industrial Strategy Committee.
3.11The current Renewable Energy Directive, agreed in 2009, set a target for 20% of energy to be renewable across the EU by 2020. Member States were set individual binding targets for consumption of energy from renewable sources and a sector specific target to achieve 10% renewable energy in transport.
3.12For the renewable electricity sector the Commission proposes a framework for support schemes, highlighting the need for them to be in a form that is non-distortive to the functioning of the electricity market while minimising the costs to consumers, and integrated into the electricity market. It includes a gradual opening up of support schemes to cross-border participation.
3.13There are changes to the way in which a Member State’s share of energy from renewable sources is calculated, placing a cap on the contribution from crop-based fuels in the transport sector (see paragraph 3.16 below), not allowing electricity produced from new biomass to count towards the share and specifically including the production of electricity from self-consumers and energy communities.
3.14Single contact points for permit granting for renewable energy plants and for transmission and distribution infrastructure would have to be established along with simplified permit granting processes for repowering existing renewable energy plant and for small-scale installations.
3.15Member States would ensure that renewable self-consumers, and in certain circumstances SMEs/not-for-profit organisations, are able to self-consume renewable electricity and sell excess production without disproportionate procedures and charges. Remuneration received for electricity fed in to the grid should reflect market value. Member States would be required to take into account the specificities of renewable energy communities when designing support schemes.
3.16Member States would endeavour to increase the share of renewable energy supplied for heating and cooling (H&C) by one percentage point per year. Suppliers in the district H&C sector would be required to provide energy performance and renewable energy information to consumers. Consumers would be empowered to disconnect from systems that do not meet EU efficiency standards and Member States would provide measures to enable disconnection. Member States would enable access to district heating or cooling systems from third party renewable or waste heat sources, if systems have necessary capacity.
3.17In the transport sector, the Commission proposals would replace the current 2020 target of 10% renewables in the transport sector with an obligation for fuel suppliers to include a minimum share of renewable and low-carbon fuels in the fuels they supply to the market from 1 January 2021 onwards. The Commission proposes that the share gradually increase from 1.5% share in 2021 to 6.8% in 2030. At the same time, a cap for crop-based fuels (such as maize) would be set, declining from 7% of transport energy in 2021 to 3.8% in 2030, whilst allowing Member States to set lower limits and distinguish between different types of biofuels.
3.18The proposal would extend the scope of the existing sustainability criteria and greenhouse gas emission saving requirements for biofuels and biogas and introduce those requirements to the sourcing and use of biomass (such as wood pellets) and biogas for heat and electricity. This is to ensure that biomass production does not impinge on land that would otherwise have been used for food or lead to large-scale deforestation.
3.19Criteria would mainly focus on the feedstock rather than the end use, i.e. whether the biomass is sourced from agricultural land or forestry, rather than whether it would be used in transport, heat or electricity.
3.20The proposal would introduce common greenhouse gas (GHG) and sustainability criteria to solid biomass and biogas fuels used in electricity, heating and cooling, wherever in the world the fuels originate. The requirements would apply to solid biomass fuelled installations greater than 20 megawatts and for biogas installations greater than 0.5 megawatts. Member States would be able to set more stringent sustainability criteria where appropriate.
3.21Cooperation would be strengthened between Member States, the Commission and the voluntary schemes used to certify the sustainability of biofuels, bioliquids and biomass fuels. There are also a number of technical changes and updates to definitions and accounting rules.
3.22The Minister explains that the Government is currently considering its response to the Commission proposal. In general, she says, the proposal requires substantial policy and regulatory development to ensure it is consistent with the Government’s objective of providing clean, reliable, and affordable energy. The Government will complete the checklist for analysis on EU proposals identifying the potential costs and benefits of the proposal in the UK and will submit this to the Committee.
3.23The proposal is not expected to be taken forward until the Estonian Presidency in the second half of 2017 at the earliest.
3.24On the legal base, the Minister notes that the Government is considering whether the proposals in respect of achieving targets are such that Article 192 ought to apply. Measures under Article 192(2) are subject to unanimity and consultation of the European Parliament.
3.25The Government agrees that EU-level action is required in order to implement the agreed EU-level objectives. It nevertheless has concerns that some of the detail of the proposals may be inconsistent with the principle of subsidiarity:
“While the UK Government agrees that action needs to be taken at the EU level in order to implement the EU objectives and ensure cross-border coordination, noting also the enhanced flexibility some of the proposals allow, the Government has some concerns over specific measures in the proposals. Most specifically, this relates to the potential for targets being set via supplier obligations. The Government will also consider whether the proposal in respect of renewable electricity support is compatible with the subsidiarity principle”.
3.26The Minister goes on to observe that, in the conclusions of the European Council of 24 October 2014, it was agreed that no nationally binding targets for renewables would be set for the period to 2030. She says:
“While the recast of the Renewable Energy Directive no longer contains nationally binding targets, the UK Government will work to ensure that provisions in the proposal in relation to supplier obligations and other measures to increase renewable energy in the heating and cooling sector do not equate to de facto binding national targets”.
3.27The Minister notes that the baseline for Member States’ share of renewable energy would be set at the level of the 2020 target (15% for the UK) and that, through the Governance Regulation, any Member States that fall below their baseline should pay into a Commission fund which will be used to finance renewable projects. She concludes that this proposal could have a currently un-quantified budgetary impact, which the Government will be examining carefully.
3.28On designing support schemes, the Minister says that the UK adopts best practice in the form of Contracts for Difference. The Government recognises the benefits of publishing a forward look for support schemes, but would need to consider further any requirement to publish a schedule of support schemes with a three year forward look in respect of timing, capacity and budget. The Government will also consider the impact of the proposal on flexibility in respect of the design of present and future support schemes.
3.29The Minister indicates that the concept of cross-border cooperation and mandatory gradual opening of support schemes to generation in other countries might be acceptable in principle, but that these are novel, complex projects, and require technical and regulatory solutions designed by Member States themselves. The Government will further consider the practical implications.
3.30The proposal for Member States to endeavour to increase the share of renewable energy supplied for heating and cooling every year from 2020, expressed in terms of national share of final energy consumption, would involve new policy action in the UK, says the Minister, and the Government will further consider the impact of this proposal. The Government will seek to ensure that reporting requirements will not create additional administrative burden.
3.31On District Heating and Cooling, the Minister says that—aside from the Heat Metering and Billing Regulations—the UK does not have any dedicated consumer protection regulation for customers of heat networks. Instead, a system of industry-led voluntary schemes is in place. Development of measures to allow customers to disconnect from systems that do not meet the EU definition of “efficient district heating and cooling” would require new policy development and regulation. The UK Government will need to examine the workability of such proposals on “a relatively immature UK heat networks market.”
3.32Development of measures to ensure non-discriminatory access to district heating and cooling from renewable and waste heat sources would also require substantial policy and regulatory development, she says, and would require some assessment of the cost effectiveness of measures for the relatively small heat networks that are prevalent in the UK.
3.33Proposals for electricity distribution system operators to assess the potential for district heating and cooling systems to provide balancing and other system services would increase administrative burden on Distribution Network Operators (DNOs). DNOs are only beginning to develop their capability in active system management, and this would again require some assessment of cost effectiveness. It is worth noting that some operators of heat networks already take part in the Capacity Market and Demand Side System Reserve initiatives via the Transmission System Operator.
3.34In the area of biomass, explains the Minister, the proposal includes significant detailed changes which could impact on the UK and in some areas impose costs. She identifies those areas in the following terms:
3.35In the transport sector, says the Minister, the objectives of the Commission proposal broadly align with UK policy objectives:
“The Government has been promoting the uptake of renewable and low emission fuels in a cost effective manner, while taking into account the sustainability characteristics of the fuels. This is to ensure these fuels deliver greenhouse gas emission savings that contribute to the UK’s domestic, EU and global carbon reduction commitments. However, the Government would need to consider how the Commission proposals would interact with the UK policy in detail and whether the Commission proposals would increase the costs of the existing and planned measures. The Government is currently consulting on changes to the Renewable Transport Fuel Obligations Order 2007, as amended, (RTFO Order), and the Motor Fuel (Road Vehicle and Mobile Machinery) Greenhouse Gas Emission Regulations 2012 to implement the ILUC Directive 2015/1513. These consultations also set out the planned UK policy until 2030. The consultation outcome will further inform our stance on the Commission’s proposals.”
27 January 2017