28 shades of black

Any nation can run the renewables support system it wants - as long as it is an auction.

Any nation can run the renewables support system it wants – as long as it is an auction.

“Any customer can have a car painted any colour he wants, so long as it is black,” Henry Ford, founder of the Ford Motor Company, said in 1909, referring to his Model T. The EU seems to be adopting a similar approach to renewable-energy support mechanisms in its member states.

All focus in the Brussels renewables community is on whether the October summit of the 28 European heads of government will adopt a 2030 EU target for renewables, and if so, whether this target will be 27% or 30%. But more complicated – and less transparent – issues have arisen, which might have escaped the attention of Europe’s leaders.

The majority of EU governments want national control over the choice of support mechanisms to promote renewables within their borders. In reality, that control has slipped through their fingers even before the issue has been debated. From 2017, with some exceptions, only national support mechanisms based on competitive tenders will be approved by the European Commission (EC), according to new Environmental and Energy State Aid guidelines issued on 9 April this year.

To adapt Ford’s words, the commission’s new state aid principle seems to be: “Any country can run the renewable-energy support mechanism it wants, so long as it is an auction”.

So why, if the EC’s decision is final and binding — a decision taken, by the way, without going through the Ordinary Legislative Procedure of the EU — does this matter? Because the state aid guidelines expire in 2020, and EU leaders can influence what comes afterwards with the decisions they are about to make on the 2030 framework.

The Gordian knot for the renewables sector is that, although most EU leaders want national control over their support mechanisms, very few of them want national targets for renewables to be established by EU legislation, as was the case in the existing 2020 directive.

But as things stand after the EC’s intervention in April, national control over the type of renewables support can be achieved after 2020 only if the overall binding EU renewables target (whatever it turns out to be) is broken down into 28 national targets. In effect, EU competition rules can crack down on national mechanisms with greater ease if no national targets are in place. Therefore, the words of the many member states insisting on control over their regulatory framework have little meaning unless they are combined with a call for national targets.

The heads of government must be made aware of this before their October summit, if they are to make an informed choice about their continent’s energy future. Unfortunately, they are unlikely to be told by their energy ministers, since they were not consulted on the recent changes in state aid rules. It is a competition and treaty issue.

The EC deserves full credit for having initiated the 2030 climate and energy debate in good time before the 2020 legislative framework runs out. It has done so in recognition of the fact that long-term regulatory stability and predictability is critical for investor confidence and cost-effective energy investments. In this light, it is difficult to accept that a decision by the same commission’s competition branch now casts serious doubt, not only on the post-2020 regulatory frameworks in Europe, but on all existing renewables frameworks in every EU country, between now and 2020.

It took the EC’s Directorate-General for Energy more than ten years to conclude that fixed-premium mechanisms were likely to be the most effective and efficient instrument, if designed right. It should not be too much to ask that the Commission now makes clear to member states and other stakeholders why tenders are suddenly the best way of reaching Europe’s mandatory renewables targets.

At the same time, the commission should put its cards on the table if it believes that the time is ripe for an EU-wide harmonised support mechanism, or if it believes that such a mechanism is the only thing compatible with the union’s competition rules. It would serve the EC well to propose a European solution upfront, rather than telling countries what not to do while creating a de-facto harmonisation through competition policy decrees.

Henry Ford’s customers were eventually given a real choice. The same courtesy should be extended to the 28 EU leaders and their co-legislators in the European Parliament when it comes to energy. And it should consider that the vast majority of the 500 million consumers they represent prefer green over black.

This entry was posted in EU climate and Energy 2030. Bookmark the permalink.

Leave a Reply

Your e-mail address will not be published. Required fields are marked *