EU urges RE subsidy reforms

The EU said it wants to see renewables incentives tied more firmly to power price movements, as it joined the debate raging across Europe over the impact of subsidies on energy bills.

The European Commission’s (EC’s) latest guidance on state subsidies in the electricity sector said it wants the market, rather than government guarantees, to be the prime driver of wind, solar and other renewable sources.

In a statement on the guidance – which could help determine whether national governments are within future EU state-aid rules – the EC said “in practical terms” this would mean feed-in tariffs being replaced by feed-in premiums, where the incentive element rises or falls with power prices.

The EC favours auctions to allocate renewable generation to the lowest bidder, which it said would make the cost production more transparent and lead to different renewable energy sources battling it out between them. It also wants to see incentives disappear as soon as technologies are able to stand on their own feet.

The EC’s intervention comes as the impact of subsidies on power bills makes headlines in the UK and Germany, among other member states.

“The ultimate aim of the market is to deliver secure and affordable energy for our citizens and business. Public intervention must support these objectives. It needs to be cost-efficient and be adapted to changing circumstances,” says EU energy commissioner Gunther Oettinger.

While the EC guidance ranges across all generation technologies, Justin Wilkes, deputy chief executive of the European Wind Energy Association (EWEA), criticised an over-emphasis on renewables.

“The commission is overly focused on renewable energy support mechanisms, while fossil fuels and nuclear continue to get far more public money.

“The commission says it will launch a study of subsidy levels across the energy sector, but it must urgently require an immediate end to the huge subsidies given to fossil fuels and nuclear,” Wilkes said.

However, EWEA says the EC’s advice to national governments to keep support mechanisms for renewable energy stable and avoid retroactive changes should provide some stability for the wind sector.

The association says the sector is facing a crisis of uncertainty due to sometimes retroactive changes by national governments. Such changes have severely damaged the wind industry in many EU countries, such as Spain and Romania.

The EC will draw up formal guidelines on state aid by early next year.