May 29, 2017
BRUSSELS INSIDER #1 by Sonja van Renssen
Exclusive analysis: European Parliament ups the ante on renewables
May 29, 2017
The fight over the future of renewables in Europe – including in transport and heating – has truly broken out in Brussels with new proposals from the European Parliament that are much more ambitious than what the Commission or Member States have proposed. The proposals focus first of all on much higher – and nationally binding – renewable energy targets, but also include support for technology-specific auctions, a ban on retroactive changes in support schemes, and other far-reaching policies. Exclusive analysis from Sonja van Renssen in Brussels.
If energy efficiency is EU lawmakers’ first battlefield in constructing a new energy policy for Europe for 2030, renewables will be second. On the eve of 22 May, the Spanish Socialist MEP who will lead the European Parliament in negotiations on a revised EU renewable energy directive finally unveiled his proposals – to sighs of relief from green energy producers and NGOs, and groans – or so Energy Post imagines – from member states.
As he had hinted at in public debates leading up to his report, José Blanco López proposed a “modest” binding EU renewable energy target for 2030 of “at least 35%” – up from “at least 27%” in the European Commission’s proposal.
His reasoning is simple: the 27% target was concocted before the Paris Climate Agreement, it is barely beyond business-as-usual (24%) and it is based on technology costs which are now “outdated”. We note too that Blanco López has chosen a figure neatly in between the 30% supported by the entire Parliament back in 2016 and the 40% supported by his own Socialist Group.
More controversial than this higher EU target however, is the Spaniard’s proposal to realise it through nationally binding targets. These currently exist for EU member states for 2020 but had been ditched by the Commission for 2030 in response to pressure from heads of state and government.
Blanco López argues that the Commission itself has identified nationally binding targets as the most effective way for the EU to meets its 2020 goal of 20% renewables. “The binding targets create certainty for investors, reducing the need for financial support,” the Spaniard explains in a statement accompanying his proposals.
Equally controversially – and again diverging from the Commission – Blanco López revives the idea of a sectoral target for transport. In what seems testament to the strength of the biofuel lobby, the Spaniard proposes a 12% renewables target for transport for 2030, up from 10% for 2020. He also proposes to increase the obligation on fuel suppliers to provide “alternative fuels” to 9% in 2030, up from the 6.8% in the Commission’s proposal. 5.3% (rather than 3.6%) of that should come from advanced biofuels and a Commission-proposed cap of 1.7% on biofuels made from animal fats and waste oils is lifted. E-mobility contributions would count 2.5 times.
Heating and cooling also gets a leg-up, with Blanco López proposing to require member states to boost renewables in this sector by at least 2% a year (up from the 1% increase they should “endeavour” to make). In a few other tweaks, the Spaniard proposes to let supplies from SMEs count double, provided they do not add up to more than half the annual required increase, and to prioritise low-income households with an eye on combating energy poverty.
Blanco López doesn’t stop at targets. He re-introduces at least in part a set of common principles for renewable energy support schemes that France and Germany had tried to get into the Commission’s original proposal. The idea behind this is for energy policymakers – and indeed the Parliament and member states – to claw back some power over support schemes from the Commission’s Competition department. The latter has been calling the shots through its state aid decisions.
As part of these common principles, Blanco López explicitly retains the right for member states to hold technology-specific auctions; the Commission has been pushing for technology-neutral auctions. The MEP argues that countries need to be able to decide on their own technological diversification and that this flexibility will also help cut the costs of integrating renewables into the energy system.
In a move which is unlikely to go down so well with member states or indeed the renewables industry however, Blanco López also proposes strengthening the Commission’ proposal to force the opening up of state support to installations across the border. Member states would have to open up 15% of their schemes from 2021-25 and 20% from 2026-30 (up from 10% and 15% as per the Commission). In a move that effectively swings back in the other direction however, the Spaniard also proposes to exempt member states with low interconnection levels.
Blanco López reinforces a ban on retroactive changes of any kind to renewables support schemes, further streamlines permitting procedures (also specifically making life easier for smaller installations) and enhances visibility for the sector by calling on member states to issue support plans for the next five, not three, years. He opens the door to long-term power purchase agreements (PPAs) as a means to support renewables deployment by creating a possibility for renewable project developers to get Guarantees of [Renewable] Origin – and sell them on to customers – even when they have benefited from renewables subsidies.
Finally, Blanco López wants member states to actively promote self-consumption – especially too for those with fewer means – and categorically rules out any taxes or levies on it (as his home country Spain has imposed). Collective self-consumption should be possible for all apartment dwellers and the MEP opens the door to business models like SolarCity’s “SolarLease” programme by explicitly allowing self-consumption to be owned as well as managed by third parties.
How do these proposals sit in the broader Clean Energy Package debate in Brussels? If Blanco López’s proposals seem ambitious, they are, but related proposals on governance issued by green MEPs Claude Turmes and Michèle Rivasi the week before last are even more so. With Turmes in the leading seat, their report suggests EU goals of 45% for renewables and 40% for energy efficiency for 2030, again to be realised through nationally binding targets. The reference point here is limiting global warming to 1.5ºC and the goal “a net-zero emission, highly energy-efficient and fully renewables-based economy” by 2050.
It seems impossible that member states will ever accept the Turmes-Rivasi proposal on targets. Indeed nationally-binding targets all together still seem first and foremost a bargaining chip. But how viable is Blanco López’s proposal for a 35% EU target? Commission officials have publicly admitted that the impact assessment underpinning their 27% proposal is out of date.
“For large-scale solar, we are already 40% below the costs that the Commission estimates for 2030 in its impact assessment [for the new EU renewable energy directive],” Alexandre Roesch, Policy Director at SolarPower Europe, which represents the European solar industry, told Energy Post in an interview. The Parliament has asked its internal services to prepare updated cost assumptions and, while the Commission has ruled out a completely new impact assessment, there may be scope for it to “re-do something for solar and wind” a Commission official reportedly suggested at an event in Brussels last month.
According to SolarPower Europe’s calculations, “a 35% target would at least keep [new renewables] deployment at the same level as today” while a 27% target “amounts to a five-fold contraction in the deployment of new renewables in the next decade compared to this one”. Roesch adds: “The [35%] target is important, also because the European solar industry needs to produce large volumes to be able to compete with Asia [on cost]. It cannot do this without a high target.”
Aside from the 35% target, SolarPower Europe welcomes in particular the explicit continuation of technology-specific auctions, the streamlined permitting procedures and greater visibility for investors, the additional provisions for self-consumption, and the stronger push for electro-mobility in the context of a renewables for transport target.
What is noticeably absent is any call for a return to priority dispatch. In part this can be explained by the fact that the Commission has proposed to end priority dispatch for new renewables in its electricity market design proposals, not in the renewable energy directive, and these have yet to be taken up by EU lawmakers.
But the issue has been in the headlines in the last few weeks after the Agency for the Cooperation of Energy Regulators (ACER), together with Transmission System Operators (TSOs), called for an end to priority dispatch for existing as well as new renewables installations in Europe. They also want to remove the Commission’s proposal to offer compensation for curtailment of renewables after 2020.
In a response letter, outraged renewable energy groups accused ACER of “inappropriately” undermining the Commission’s plans in the new renewable energy directive “to make retroactive measures illegal”. “Even as the Commission is proposing to ban retroactive measures to protect investments, regulators [ACER] are proposing one. It’s completely inappropriate,” Roesch told Energy Post. The timing is sensitive also because the World Bank’s investment dispute arbitration panel (ICSID) this month condemned retroactive cuts by the Spanish government to renewables support.
All this is just the beginning. MEPs will discuss Blanco López’s report and the revised EU renewable energy directive before and after the summer, with a vote in the Parliament’s energy and industry committee not scheduled until October. Note too that while this committee, of which Blanco López is a member, has the lead on most of the renewables proposals, the environment committee also has shared and even exclusive competence on some, notably biofuels. EU energy ministers meanwhile will focus on energy efficiency when they meet on 26 June, as we reported last week.
That said, the Maltese EU presidency does want to put together a first compromise proposal on renewables by the end of its mandate on 1 July, Energy Post understands. Don’t expect this to resemble MEPs’ plans.