EC drives RE to 'join the market'

Europe’s wind and solar industries have voiced concerns over a fundamental revision to the European Commission’s (EC) state-aid rules telling governments to move renewables support decisively towards market-based mechanisms.

As flagged up in an earlier draft, the EC wants member states to move towards competitive tenders and market prices plus feed-in premiums, rather than feed-in tariffs – both steps it said would “expose renewables to market signals”.

But renewable energy groups raised fears over the practical impact of the new arrangements, and uncertainties around the definitions the EC is working under.

For example, the European Wind Energy Association (EWEA) said an EC recommendation to phase out support mechanisms after the end of the decade for renewable technologies expected to become "grid competitive" between 2020 and 2030 fails to specifically define what the term means.

The guidelines only apply to the period from 1 July 2014 to the end of 2020, EWEA adds.

EWEA also repeats its earlier concern over definitions of “technology neutrality” in relation to the relative maturities of onshore and offshore wind.

A range of exemptions available to member states to tailor the nature and timetable of the changes in relations to specific technologies risks creating further market uncertainty, it adds

"In the main, the opt-outs will become the most important tools used by member states,” predicted Justin Wilkes, deputy chief executive officer of EWEA.
"The Commission would have liked to put the cart before the horse, by focusing on forcing wind energy to compete in a market which still does not exist, while ignoring the obvious market distortions that need to be tackled first, such as the majority of subsidies that go to fossil fuels and nuclear,” Wilkes said.

For its part, the European Photovoltaic Industry Association (EPIA) said the EC “appears to envisage an electricity system where renewables are mainly developed by large players, adopting a series of discriminatory measures against small-scale generation”.

Alexandre Roesch, EPIA head of regulatory affairs, said: “A tendering scheme inevitably comes along with risks and transaction costs, making it unfit for rooftop PV systems and other small-scale electricity generators.

“The 1MW threshold under which a different support regime is possible, is not enough. Cooperatives and community projects, for instance, will now be forced to place their bids in a scheme much more suited to the largest energy players.”

However, the EC’s competition commissioner Joaquin Almunia said: “It is time for renewables to join the market. The new guidelines provide a framework for designing more efficient public support measures that reflect market conditions, in a gradual and pragmatic way.”

A pilot phase in 2015 and 2016 will allow states to test competitive bidding procedures, with tendering not mandated until 2017.

German reaction

The German federation of renewable energies BEE has urged EU member states to appeal at the European Court of Justice against the new state aid rules, writes Bernd Radowitz.

“The guidelines are a clear interference in the competence of member states in the field of energy policy,” says BEE managing director Hermann Falk.

“They stand in open contradiction to the EU guideline for renewable energies and violate European treaties.”

The BEE, which represents 26 renewable groups with 30,000 individual members and 5,000 companies, claims the EC is one-sided in its recommendation for tendering systems, although experiences in many countries, such as in the UK, with tenders have been negative.

The federation also criticises the fact that the EC wants to abolish feed-in tariff-based support systems, such as the one in force in Germany, which have proven themselves in more than 60 countries.

Germany in a reform of its Renewable Energies Act (EEG) approved by the cabinet in Berlin this week wants to start pilot tendering processes from 2017 on.

But the government also struck a deal with the EC on exemptions for heavy industries to the payment of a surcharge to finance the expansion of renewables, which avoids seeing FITs given under the EEG labelled as state aid by the EC.

Berlin has long argued that the EEG doesn’t amount to state aid because FITs are paid by electricity consumers on top of their power bills and not by the state.

Note: Update adds German reaction