House of Lords - European Union - Twenty-Seventh Report

Select Committee on European Union Twenty-Seventh Report

Chapter 2: The Renewables Directive

14. The proposed renewables Directive seeks to address "the dual objective of increased security of supply and reduced greenhouse gas emissions"[12]. The main aim of the proposed Directive is to set a target for the EU to achieve 20% of its final energy consumption (including heating, transport and electricity) from renewable sources.

15. The proposed Directive also contains provisions requiring Member States to ensure that planning and administrative procedures are proportionate and transparent, that information regarding renewables is promoted, that certification schemes are in place for renewable technology installers and that guidance on the use of renewables is provided for planners and architects. These measures are all aimed at enabling Member States to reach their target.

16. The EU has legislated previously to increase renewable energy generation, within the electricity sector. In 2001 the Community committed itself to achieving non-binding targets on renewable electricity. Directive 2001/77/EC set a target of 21% of electricity generation from renewable sources by 2010. The Commission expects that approximately 19% will be achieved by that date[13]. The UK set its own domestic targets in the 2003 Energy White Paper[14] to produce 10% of electricity from renewable sources by 2010. The UK appears unlikely to meet that target given that in 2007 only 4.96% of electricity was renewably generated[15]. Because of this lack of EU-wide progress, the European Council called on the Commission to propose more forceful legislation.

Why 20% by 2020?

ONLY A POLITICAL SLOGAN?

17. There has been criticism that the 20% by 2020 target is more a slogan than an empirically based target (Helm p 212). The Commission and the Government agreed that the 20% was not arrived at solely by "deeply scientific" reasoning (Q 405 and Q 317). There was also a political aspect as the European Parliament had already proposed a more stretching target of 25% (Eluned Morgan MEP Q 367). The Commission argued, however, that its target is grounded in studies carried out to determine what level would be feasible given the EU's generating resources, what level would be affordable for the EU as a whole and what level would appear suitably ambitious (Q 405).

18. A further element of the Commission's thinking in proposing a 20% emissions reduction target, alongside the 20% renewable energy target, is that it expects other targets to be adopted at an international level. In the Communication 20 20 by 2020: Europe's Climate Change Opportunity, the Commission set the emissions reduction target at 20% "rising to 30% if there is an international agreement"[16].

TOO MUCH, TOO SOON?

19. The UK Renewable Energy Strategy consultation states that to meet the target around 3,000 extra UK offshore wind turbines will need to be built before 2020. During our visit to Scroby Sands, Norfolk, the state of development of offshore wind farms was described as still being a "cottage industry" and we were told that a move from medium-scale to large-scale wind farms is happening only now. This process can be seen in the increase in generating capacity from Scroby Sands (60MW) to the Robin Rigg site under construction in the Solway Firth (180MW) (see appendix 5).

20. Some witnesses took the view that 20% by 2020 would be too much, too soon. Ofgem argued that the 2020 target would make the EU more reliant on a single renewable energy source, wind power (Q 199). It is estimated that in the timescale to 2020 the most mature renewable technology will be wind power and therefore meeting the 2020 target will rely heavily on an increase in wind generation (see paragraph 19). Lord Oxburgh, former Chairman of the House of Lords Science and Technology Committee whose report Renewable Energy: Practicalities was published in 2004[17], agreed that with a longer timeframe other technologies such as wave and tidal power may be available for greater exploitation, although he did not call for it (Q 124).

21. National Grid was concerned that the necessary reliance on wind to meet the 2020 target may "crowd out investment in other forms of renewables". They warned that the Directive may put too great an emphasis on meeting the target rather than "looking for the cheapest and quickest way to reduce carbon" significantly (Q 151).

22. We also received evidence warning against a longer timeframe. npower warned against "getting lost in the romance" that other technologies, such as marine power or solar electricity, were closer to commercial viability than they really were. If increases in renewable energy are to be achieved in the short to medium-term then wind power needs to be deployed (Q 264). Greenpeace argued that the 2020 target date was "not just an arbitrary number". Rather, it reflected a timeframe that industry regarded as practical but which was also close enough to create sufficient political momentum (Q 322). Both npower and E.ON argued that any moves to push back the deadline for the renewables target would create uncertainty in the market just at the time when investors are looking for credible renewables policies. Any such uncertainty would make increasing renewable generation significantly more difficult (Q 264).

23. Witnesses pointed to steps that are currently being taken to ensure that Europe does not become dependent on a limited number of technologies. Greenpeace argued that the Intelligent Energy Europe programme and the various EU-funded technology platforms were working to bring emerging technologies, like wave and biomass, closer to market (Q 350 and Q 380). The Commission echoed this view (QQ 423-424).

24. Although the Government do not explicitly address the problem of dependence on particular renewable technologies, they are consulting on ways to encourage innovation in the renewables sector. The UK Renewable Energy Strategy consultation outlines the support given by Government to energy technology research (p 207). This includes the Energy Technologies Institute and the Technology Strategy Board. Each of these supports research aimed to accelerate the development of new energy technologies.

25. It was also argued that climate change science makes the discussion, of whether 2020 is too soon, otiose. Malcolm Wicks said that climate change dictated that action had to be taken soon to lower emissions (Q 317). Eluned Morgan MEP stated that EU emissions needed to begin falling by 2015 if the EU was to contribute to ensuring global average temperature increases did not exceed pre-industrial levels by more than 2°C[18] (Q 372).

26. Many witnesses saw a danger of the renewables target becoming a focus in its own right, rather than as a tool for achieving decarbonisation. The Climate Change Bill currently before Parliament will commit the UK to cutting CO₂ emissions by a minimum of 26% by 2020 and 60% by 2050[19]. Witnesses argued that policy-makers must look down "the other end of the telescope, the 2050 end" (Lord Dixon-Smith Q 202) and that the 2020 target is properly viewed as a "stepping stone to meeting 2050 carbon and energy goals" (Malcolm Wicks Q 288).

27. We do not agree with witnesses who state that the target was reached purely on political grounds. However, we recognise that feasibility studies and the imperatives of climate change were not the only factors considered. Furthermore, as the target date has now been accepted in principle by the European Council we do not recommend that the 2020 deadline be extended.

28. We recognise the too much, too soon argument and we share the concerns of some witnesses that the target of 2020 may favour wind power to the detriment of investment in emerging technologies. We welcome the Government's recognition of the importance of encouraging emerging renewable technologies. We recommend that the Government increase their support for research into renewable technologies and ensure that the work of Government-funded research organisations is properly co-ordinated.

29. We recommend that as part of its regular assessment of Member States' progress towards the target the Commission should consider whether emerging technologies such as wave and tidal power are likely to be disadvantaged by the strategy and if so whether further intervention or research support is necessary.

Guarantees of Origin

30. Guarantees of Origin (GoOs) are a system whereby each MW of renewable energy generated is certified so as to guarantee its renewable credentials. A system of GoOs was introduced in previous renewables legislation (Directive 2001/77/EC). This Directive set out the minimum requirements for GoOs but their use was voluntary. Some Member States used them as a means for energy suppliers to prove their eligibility for financial support. Other Member States made little use of them. The Commission argued that this had led to different specifications for GoOs developing between Member States[20].

31. The proposed renewables Directive contains provisions for a new GoO scheme. The Directive would standardise the eligibility requirements for GoOs so that they can be used to measure Member States' renewable energy output more reliably. The Commission also sees GoOs being used as a tradable good so that an internal market in renewable energy can be created. This would allow Member States to meet their energy targets by generating renewables domestically as well as by buying GoOs accrued elsewhere in the Community.

32. The Commission told us that GoOs were necessary as the renewable targets for individual Member States were related to GDP, not generating potential. Therefore, GoOs were needed to allow some Member States to meet their targets in the most cost effective way. They gave the example of Luxembourg as "a small country with a relatively limited potential but a high target because they are lucky enough to be rich". It may need to meet its target by investing in renewables in poorer countries with higher generating potential. Bulgaria and Romania were cited as examples where the opposite could be true (Q 414).

33. Malcolm Wicks argued that although he expected most of the UK's target to be met through domestic generation, it was "important to develop the notion of trading" to achieve the target cost-effectively (Q 295). The Department for Business, Enterprise and Regulatory Reform's impact assessment of the Directive stated that intra-EU trading would reduce the UK's compliance costs by 30%. Other witnesses suggested that without GoOs it would be unlikely that the UK could meet its target (EDF p 196).

34. Some witnesses argued that the GoO proposals, as currently drafted, would not be flexible enough to allow the UK to make the necessary use of GoOs. Article 9 of the proposed renewables Directive states that Member States meeting or exceeding their indicative trajectories towards their targets can request their national competent body (the organisation assigned to deal with the issuing and recording of GoOs—in the UK this would be Ofgem) to trade surplus GoOs with other Member States. It also allows transfers between energy companies, subject to prior authorisation being given by the exporting Member State Government. npower argued that GoO trading needed to be more flexible and should be open directly to companies, without prior Government approval (pp 113-114). EDF agreed, arguing that the system currently proposed would "obstruct trading and force the UK to rely almost entirely on domestic measures to deliver its target obstruct trading and force the UK to rely almost entirely on domestic measures to deliver its target" (p 196).

35. Other witnesses were cautious about using a certificate trading scheme to meet the target. For example, Centrica warned that excessive reliance on GoOs would weaken investor confidence in the UK's renewables market, making it harder to increase domestic generation (p 117). Greenpeace argued that while Member States might work together to reach their targets, a trading scheme between energy companies would undermine national support schemes. They warned that energy companies would invest only in those countries with the most generous schemes. This would make achieving their target difficult for some Member States and overload the support schemes of others (QQ 336-339). Other witnesses also agreed that GoOs had the potential to disturb national support schemes (British Wind Energy Association p 96 and Scottish Power p 246).

36. Simon Roberts of the Centre for Sustainable Energy argued that, given its generating resources, if the UK needed to rely on GoO trading then that would be "a sign that the UK has not got its support mechanisms right rather than because the resources were that much better somewhere else" (Q 224).

37. Although it continues to support GoO trading, the UK Renewable Energy Strategy consultation recognises the potential dangers. It proposes limiting GoO trading to a specified portion of the UK's target.

38. None of the evidence received was very clear about how GoO trading would work in practice. Indeed, the details of an intra-EU scheme have yet to be decided, and various proposals are being debated by the Commission, European Parliament and Member States. Most submissions accordingly concentrated on whether the principal of GoO trading was appropriate. GoO trading will very likely have to be relied on to fulfil some part of the UK's commitments. We believe, however, that a significant proportion of the 15% target should be met domestically to ensure that GoO trading does not undermine efforts to increase the UK's renewable generation capacity.

39. We recommend that the Government specify soon the maximum proportion of the UK's target to be met using GoO trading so that the extent of their reliance on them to meet the target is known. This should help to create the stable and predictable investment environment the energy companies require.

Legal base

40. The legal bases for the proposed renewables Directive are Article 95 (internal market) and Article 175(1) (environment) of the Treaty Establishing the European Community. Both of these provisions involve the co-decision procedure between the Council and European Parliament, and Qualified Majority Voting in Council.

41. The Government's explanatory memorandum on the proposal argued that Article 175(2) alone would be more appropriate, as that Article provides for the adoption of "measures significantly affecting a Member State's choice between different energy sources and the general structure of its energy supply". On the face of it, Article 175(2) appears relevant to the proposed measure. This legal base would subject the proposal to unanimity in Council and would involve only consultation of the European Parliament.

42. According to the explanatory memorandum, the Commission rejected the use of 175(2) because Member States already use renewables. It argued that increasing renewable generation would not alter the general structure of a Member State's energy supply given that the same grid infrastructure is used as for conventional power.

43. Eluned Morgan MEP stated that the European Parliament would not "concede territory" on the legal base as that would reduce their role from co-decision to consultation only (Q 400).

44. The Government are clearly alive to the issues of the proposed legal base and we expect the matter will be fully discussed during negotiations.

12 On the promotion of the use of energy from renewable sources, COM(2008) 19 final Back

13 Ibid. Back

14 Op. Cit. Back

15 UK Energy In Brief July 2008, BERR, http://www.berr.gov.uk/files/file46983.pdf Back

16 ^2020by2020 ^{Europe'sclimatechangeopportunity}, COM(2008)30 final Back

17 See Science and Technology Committee, 4th Report (2003-04): Renewable Energy: Practicalities (HL 126) Back