BRUSSELS INSIDER #1 - June 19, 2018
EU transforms the European energy sector
by Sonja van Renssen
The EU has agreed on a new renewable energy directive which involves much much more than just a 32% renewables target, which got most attention in the media. It enshrines citizens’ right to produce and consume their own energy (a rooftop revolution!), it limits food-based biofuels (but not wood-based biomass), has rules on green gas, hydrogen, guarantees of origin – and more. Now the Council (Member States) and Parliament are preparing for all-night negotiations to close deals on a new energy efficiency directive and a new energy governance regulation for 2030. After this week, the European energy market won’t be the same.
During the night of Tuesday 19 June, EU negotiators are expected to reach political agreement on a revised energy efficiency directive and a new energy governance regulation for Europe for 2021-30. Together with the deal on a revised renewable energy directive (REDII) last week, this would bring the EU’s entire Clean Energy Package halfway to conclusion.
The four remaining files – a new energy performance of buildings directive was already agreed last December – all relate to power market design. Negotiations on these are due to start in July under the leadership of Austria, which will take over the rotating EU presidency from Bulgaria on 1 July.
MEPs looked jubilant in a photo with EU climate and energy commissioner Miguel Arias Cañete last Thursday 14 June – in the early hours – after they reached agreement on renewables. With a long list of unresolved issues still in the run-up to a meeting of EU energy ministers on 11 June, it was a big achievement.
The equally big disappointment that same day however, was the failure of MEPs, Member States and the European Commission to agree on a new energy efficiency directive. Energy Post understands that the Bulgarian EU presidency hopes to rectify that this evening.
The final negotiations on governance – a requirement for national climate and energy plans, potentially a long-term net zero emissions goal and enforcement mechanisms for the EU’s renewables and energy efficiency targets – were always scheduled for tonight.
The final text of the new renewable energy directive was not yet available at the time of this writing, hence many stakeholders did not want to comment on specifics and Energy Post will report on more of the details once they become available.
That said, the direction of travel is clear. With REDII, the EU commits itself to a legally binding renewable energy target of 32% for 2030. That’s closer to the Parliament’s proposal of 35% than the 27% the Council had proposed. There is also a review pencilled in for 2023 that could potentially raise (not lower!) the target further.
NGOs singled out new rules on self-consumption as the big victory and new rules on bioenergy as the big defeat.
As we reported earlier, self-consumption was very dear to Spanish rapporteur MEP José Blanco López (“Pepe Blanco”). In the end, he got what he wanted. The deal establishes the right for citizens, communities and cooperatives to produce, consume, store and sell their own renewable energy – without punitive taxes or administration. “EU overturns barriers to rooftop revolution”, exulted Greenpeace EU.
Pepe Blanco himself said: “We managed to reinforce self-consumption as a right, and included the Parliament’s wish for a ban on charges and fees on self-consumed energy until 2026, with some limited exceptions foreseen thereafter, as well as enshrining the right to be remunerated for the self-generated renewable electricity fed into the grid at market value.”
SolarPower Europe, representing the solar industry, also welcomed simplified procedures that will limit permitting for new installations to one year, and the freedom for countries to do solar-specific tenders. Contrary to the Commission’s wishes, opening up renewables support schemes cross-border will remain voluntary for the time being, Energy Post understands.
Biofuel trade associations welcomed the EU’s commitment to a renewables in transport target of 14% by 2030 (up from 10% by 2020). Note that the Commission didn’t want a transport-specific target at all, after all the controversy over biofuels. MEPs and Member States came up with one anyway.
There are a number of safeguards that come with it however. “We disincentivise investments in new production of food crop-based biofuels,” said Pepe Blanco. First generation biofuels will be capped at 2020 consumption levels in each Member State, up to a cap of 7% (the current cap on first generation biofuels), he explained in a press release.
“High indirect land-use change biofuels will be phased out through a certification process for low ILUC biofuels,” the Spanish rapporteur added.
“The signal that the EU is moving away from the most harmful biofuels, palm oil and soy, is even stronger,” said Green MEP Bas Eickhout. “Their contribution will be capped at 2019 levels until 2023, with a phase-out foreseen from 2023 until 2030. That is quite a victory. There is no precedent for a phase-out of the use of specific crops. The importance of this provision is shown by the reaction of the European Commission, who have expressed their reservations. Apparently there are some Directorates where trade agreements with Indonesia and Malaysia are more important than the environment.”
The European Biodiesel Board said it was “perplexed” about “unclear limitations targeting the use of food crops biofuels”. Fediol, representing the European Vegetable Oil and Proteinmeal industry, warned of “huge uncertainty” for investors until the Commission decides what counts as “high” and “low” ILUC biofuels.
In contrast, NGO Transport and Environment (T&E), which is fiercely critical of biofuels, applauded the result: “EU ends target for food-based biofuels”. See this explanatory diagram: there is a 7% de facto target for advanced fuels – half of that reserved for waste-based biofuels – while Member States are allowed to reduce their 14% renewables in transport target if they go for <7% food-based biofuels.
All parties criticised the prolific use of multipliers in the final deal. The biggest criticism on the bioenergy front however, was reserved for the use of woody biomass. “The EU has failed to fundamentally change its destructive policy of burning wood for energy,” said Linde Zuidema at NGO Fern. She warned against increasing forest harvests, the burning of whole trees and stumps, and the large-scale use of biomass in inefficient electricity installations. WWF said the rules on bioenergy “put both the climate and forests worldwide at risk”.
In practice, this fight was already lost before the Parliament adopted its final negotiating position however.
Meanwhile, the European Biomass Association (AEBIOM) welcomed the first-ever European-wide sustainability criteria for solid bioenergy. It issued a useful infographic summing up the new rules.
There is plenty more in the revised renewables directive, which we will return to along with more detail and analysis in future issues of the Brussels Insider. A few examples: an (indicative) target for a 1.3% annual increase in renewables in heating; a recognition that green hydrogen can count towards emission reductions at refineries (a big breakthrough for green gas!); and what the new directive means for Guarantees of Origin (GOs) and the fledgling corporate renewables sourcing market in Europe (see RE-Source platform launched 6 June).
Some of the new directive’s significance also depends on what gets decided in other parts of the Clean Energy Package. Thomas Nowak, Secretary General of the European Heat Pump Association (EHPA), said last week: “The absence of a parallel deal on the EED [Energy Efficiency Directive] is of great concern, as in particular the re-setting of the primary energy factor for electricity (PEF) will accelerate the introduction of efficient electrification technologies in heating.”
In the same vein, the European Consumer Organisation (Beuc), warned that the upcoming market design talks are crucial: “These negotiations will cover many technicalities such as whether the electricity produced by households is prioritised over the electricity produced by big power companies when it comes to uploading it to the grid.”
More immediately, the hoped-for deal on governance tonight would decide what happens when the EU isn’t on track to either its energy efficiency or renewables targets. In a briefing with journalists on Monday, rapporteur Claude Turmes highlighted the need for a safety mechanism if a whole group of Member States fails to hand in renewables plans (meaning the Commission cannot even calculate whether the EU is on track to its target or not – in other words, how to prevent filibustering).
Turmes also emphasised the importance of an enforcement mechanism for the EU’s energy efficiency target, binding or not. Unlike for renewables, over half of this is expected to be delivered by EU measures: ecodesign, energy labelling, nearly-zero energy buildings, and CO2 standards for cars, vans and trucks. If there is a gap to the target, it’s the Commission that should step up, Turmes argued.
He predicted a “big, big fight” over his proposal to enshrine a net zero emissions goal in the governance regulation.
A lot of what happens tonight will depend on Gerrmany. This was the show-stopper at the negotiations last week, reportedly capping ambition on renewables at the 32%. Understandable perhaps, when the German Federal Network Agency (BNetzA) on 18 June reported that German costs to stabilise the power grid rose to a record €1.4 billion in 2017. And that, while the country is not even on track to meet its renewable energy target for 2020, according to the German Renewable Energy Federation (BEE) a day earlier.
This didn’t stop NGOs from roundly criticising the 32% renewable energy target as too low. “Leaving behind the Paris Agreement”, lamented Climate Action Network (CAN) Europe. But, as we reported last week, Germany is done with “unachievable” targets. That will hold true for energy efficiency as much as for renewables.