EN    EN EN 
 
EN    EN  EUROPEAN COMMISSION 
Brussels, 31.1.2011 
SEC(2011) 131 final 
  
COMMISSION STAFF WORKING DOCUMENT 
Review of European and national financin g of renewable energy in accordance with 
Article 23(7) of Directive 2009/28/EC  
  
Accompanying document to the  
  
COMMUNICATION FROM THE CO MMISSION TO THE EUROPEAN 
PARLIAMENT AND THE COUNCIL  
  
Renewable Energy: Progressing towards the 2020 target 
 
 
{COM(2011) 31 final}
 
EN 2   EN 1. INTRODUCTION  
Renewable energy has always b een a part of Europe's industr ial development.  For centuries, 
biomass (wood) provided us w ith heating for our homes, hydro and wind energy have provided 
us with power for our industry. Today, renewable en ergy continues to be the sole source of truly 
sustainable energy available to us and Europe continues to lead the world in improving the 
technologies and in manuf acturing the equipment1.  
In 2009, Europe's leaders agreed to a new Euro pean framework for promoting renewable energy, 
including legally binding national targets for 202 0, such that the EU w ill reach a 20% share of 
renewable energy overall. This agre ement and the subsequent legislation2 were part of the 
Energy and Climate Package, sh owing EU leadership and commit ment to tackling the climate 
threat. Renewable energy is a core element in th e fight against climate change as it is an ideal 
energy source to decarbonise th e generation of energy, as we ll as a means of improving the 
security of our energy supply. In stead of relying on centralised power sources run on imported 
fossil fuels, rising use of rene wable energy allows us to draw on distributed and inexhaustible 
sources of energy local to the communities that use the energy, diversifyi ng fuels and sources of 
energy. Such industries also create jobs, for equipment manufacturers, in stallers, technicians, 
builders and engineers. The industry currentl y employs over 1.5 million people and by 2020 
could employ nearly 3 million more3.  
Providing the stable regulatory environment necessary to encourag e investment in this industry, 
in all Member States, is not easy. Changes are needed to planning  and building regimes and to 
electricity grids. In addition, the financing of the growth of th e renewables sector needs more 
attention . Striving to compete with incumbent energy companies, technologies and traditional 
infrastructure, with fossil fuels and nuclear power still receiving four  times the level of 
subsidies4, renewable energy is often more expens ive than traditional sources. However the 
traditional sources must be replaced , if we are to enjoy the net benefits of a clean and sustainable 
energy system.  
The benefits of encouraging the renewables indu stry were widely acknowledged as the global 
financial crisis took hold in 2009, when "cle an tech" stimulus packag es worth billions were 
implemented in the Unit ed States and China, as well as in the EU5. Indeed the growth of the 
sector in the US, China ot her Asian countries shows that the sector is seen as a crucial industry 
for the future. As noted in the new EU Energy Strategy6, the challenge facing Eu rope is to stay at 
the forefront of this industry, to  ensure it grows, at a time when  governments are simultaneously 
faced with the need to curtail government spending. This is one of the challeng es addressed in 
the EU 2020 Strategy for Jobs and Growth7. Much can be done to re move the non-cost barriers 
to the growth of renewable energy, but more can also be done to ensure that the public 
funding that is spent on renewable energy is used cost effectively .  
                                                 
1 See "Patents and clean energy: bridging the ga p between evidence and policy", UNEP, EPO, ICTSD 
2 Directive 2009/28/EC 
3 Commission (ECOFYS) EmployRES study, gross employment effects. 
4 Globally, the IEA has estimated 2009 fossil fuel subsidies at $312bn 
(http://www.worldenergyoutlook.org/subsidies.asp ), and the most recent figures fo r the EU (EU15) put fossil fuel 
subsidies at €21.7bn compared to €5.3bn for renewable energy (EEA Technical report 1/2004) . 
5 European Economic Recover Package: http://ec.europa.eu/energy/eepr/index_en.htm 
6 COM(2010)639/3 Energy 2020: a strategy for competitive sustainable and secure energy 
7 European Council conclusions 25/26 March 2010 
 
EN 3   EN For over a decade a few Me mber States have driven the deve lopment of renewa ble energy. They 
invested heavily, first in research and developm ent, then in building de monstration plants, and 
finally in supporting wide spread deployment of  renewable energy equipment. These countries, 
led by Germany, Denmark and Spain, now have major renewa ble energy companies, operating 
globally. However their growth was spurred by national sources of financing, chiefly from 
domestic energy consumers paying slightly higher energy bills to cover the extra cost of 
developing the renewable energy8. Now, this kind of growth an d commitment must occur across 
all Member States, if they are to reach their targets. Most of this  extra investment  will be borne 
by energy companies, who pass on  some of the cost to their co nsumers. As acknowledged above, 
there are costs associated with achi eving our renewable energy objectives9, but these are 
dominated by the clear net benefits of reducing emissions, diversifying our energy supplies and 
generating jobs and economic growth. We cannot revert to our old ways, and every delay in modernising our energy s ector adds to the costs
10. 
These issues and the political conclusions are co ntained in the Communication which this report 
accompanies11. This report provides the an alytical background to th e Communication. It reviews 
the instruments available for fill ing this investment need and th e European and national support 
instruments used, and contains suggestions for re form and improvement. In so doing, the report 
complies with the requirements of  Article 23(7) of Dire ctive 2009/28/EC. It also explores actions 
to improve cooperation regarding national renewabl e energy support schemes,  to ensure they are 
consistent with technol ogical progress and do not hinder innovation or competitiveness. 
2. POLICY CONTEXT  
Whilst Member States have lega lly committed to achieving their 20 20 targets, to simplifying 
their planning regimes and ensuring renewables are integrated into th e electricity grid, the 
challenges remain huge. The Comm ission and European Council have included the target as part 
of the aforementioned Europe 2020 Strategy and the new En ergy 2020 strategy calls for a 
continent-wide approach12, highlighting how important it is for Member States to work together 
to achieve these goals. The Commission's r ecent Communication on energy infrastructure13 has 
also explored the need for infr astructure in light of  the growing share of renewable energy in 
Europe's electricity mi x. The Communication finds that the short term costs of investing in 
electricity grid infrastructure are far outweighed by the benefits of creating an integrated 
European electricity market capa ble of sustaining a future de-car bonised electricity sector. The 
urgency of the need fo r action has been highlig hted most recently in  the IEA's 2010 World 
Energy Outlook.  
Whilst energy infrastructure has traditionally been fu nded by the private sector or national 
governments, European intervention and funding for infrastructure pr ojects of European 
importance can help create a more efficient energy network and create significant cost savings 
                                                 
8 Today, the cost of renewable energy in Germany (which produces the greatest amount of renewable 
electricity) is estimated at €0.0205/kWh. 
9 The Commission's Renewable Energy Roadmap, which first proposed the 20% target, estimated the 
additional annual costs for the EU as between €10bn-€18bn (COM(2006)848.  
10 The IEA noted that "Every year of  delay adds an extra USD 500 billion to the investment needed" (IEA 
press release 6 October 2009) 
11 COM (2011)xxx Renewable Energy: progressing towards the 2020 target. 
12 COM(2010)639/3 Energy 2020: a strategy for competitive sustainable and secure energy 
13 COM(2010) 677 Energy infrastructure priorities fo r 2020 and beyond - A Blueprint for an integrated 
European energy network  
 
EN 4   EN for Europe13. Similarly, European intervention to prom ote efficiency in the achievement of the 
renewable energy targets co uld save billions of Euro. 
3. RISING ENERGY INVESTMENT NEEDS  
The Commission's Communic ation on renewable energy11 (which this report accompanies) 
highlights the major investment required for meeti ng our energy needs in the future. The analysis 
undertaken for the Commission in preparing this report14 found that annual capital investment in 
renewable energy (including 62 % of new power investment) would need to rapidly double to 
€70bn to ensure we achieve our goals. So whilst  the production cost of most renewable energy 
technologies is declining (wind production costs ha ve declined by 20% over the 9 years to 2006 
and solar PV by 57%15), the growing scale an d market share of the renewable energy sector 
requires additional fu nding to fill the gap. More over, whilst some forms of renewable electricity 
generation have already reached "grid parity" (off  grid wind and PV, la rge hydro, biomass/waste 
plants, in good circumstances, can be as cheap as grid electricity), widesp read grid parity (and 
the consequent phasing out of subsid ies) will only occur after 2020. 
In addition to the choice of techno logy, location and scale,  the financing instrument used can also 
affect costs. Supporting investment  can reduce capital costs; cert ain types of operating support 
can reduce project revenue risks and so reduce co sts; coordinated action across Member States 
can help exploit resources more efficiently and so create savings. Analys is undertaken for the 
Commission suggests  that choosing more  efficient technologies and sites, mitigating risk and 
coordinating resource development across Europe rather than from a nati onal perspective, could 
reduce costs by as much as 10%16; reducing the annual investment  need from €70bn to €62bn. 
For this reason it is important to explore the whole toolbox of instruments available to us. 
4. THE FINANCING TOOLBOX  
For all industry, investment requires capital expend iture to generate production and revenues 
to cover costs. Renewable energies have much lower operating costs (no fuel costs for most 
technologies) but proportionately higher capital co sts and the financing of  renewable energy has 
to take this into account. To expand renewabl e energy deployment and meet the investment 
gap, efforts can be directed via direct or indirect support, to lowering the cost  of capital by 
reducing technology, plant and co nstruction costs, or by ra ising more revenues through 
support measures, to cover costs. 
reducing capital costs covering ge nerating costs through revenues 
Grants : taxpayer funded aid, often for 
innovative demonstration projects.  
R&D grants : grants, often for research into (starting point: energy prices covering costs) 
Regulated prices : feed in tariffs, giving energy 
producers a fixed financial payment per unit of electricity or heat produced from renewable energy 
                                                 
14 ECOFYS, Ernst & Young, Fraunhofer ISI, TU Vien na, 2010. The least cost electricity investment 
component of this, consistent with the analysis of COM(2010)677 ranges from €310bn-370bn. 
15 EWEA "The economics of wind energy" and EPIA "Set for 2020" 
16 Green X analysis of annual capital investment needs ranging from €70bn to €61.9bn see ECOFYS et al. 
These cost reductions occur if trade in renewable ener gy were to occur across the single market, rather 
than in protected national markets. 
 
EN 5   EN innovative, immature technologies. 
Public loans : offer cheaper access to capital due 
to public funds used to bear greater risk. 
Particularly useful for SMEs who are less able 
to access capital. 
Equity funds : private medium risk investors, 
expecting relatively high returns, for later stage of projects and more mature technologies, and investment periods of 3-5 years.  
Venture capital : private equity investment for 
financing technology innovation, with active involvement of the fund mangers in the project.  
Mezzanine funds : loans that take more risk 
than normal ("senior") debt but less risk than 
equity; expecting relatively short term and 
variable but high return. 
Guarantees : offer of compensating payment to 
a lender or an investor in case of payment default by a project developer.  
Contingent grants or loans : support that is 
converted into a loan when  a project turns out to 
be successful, or treated as a grant if the project encounters financial difficulties. sources. Often fixed for 10-20 years, differentiated 
by technology and phased out. 
Regulated premiums : feed in premiums, giving 
energy producers a fixed financial payment per unit of electricity or heat produced from renewable 
energy sources for the green value; the producer 
receiving the market price for the physical energy.  
Quota/certificates : impose a minimum share or 
quota of renewables in the electricity, transport fuel 
or heating fuel mix, which can be met either 
through physical production (common for biofuels) 
or through purchasing "green certificates", virtual, 
rather than physical energy. The producer of the green energy is paid for the green certificates by 
the supplier or other facing the obligation. 
Fiscal incentives : tax exemptions or tax credits for 
investments in renewable energy projects. 
Tenders : A government call for tender for a 
renewable energy project, often specifying the 
capacity/production/technology/site. The winner is generally granted a long term power purchasing 
agreement at a competitive price.  
 
The choice of instrument to help reduce rene wable energy costs depends on the state of 
technology and project development17. All of these instruments can play a role in the right 
circumstances. They alleviate different form s of project risk – technology, construction, 
regulatory – and depend in particular on the matu rity of a project or technology. R&D funding 
for instance traditionally consists of grants for significant portions of project capital costs, as 
the cost and uncertainty surrounding the technol ogy render them too risky for the private 
sector to finance alone. Once a technology is more established gr ants can still be useful to 
finance demonstration projects , and venture capital – bearin g high risks – can become 
available when technology is nearly established.  
Once a technology is capable of being deployed but  not yet competitive, support tends to shift 
from capital to operating support and here agai n there is a continuum of instruments, 
depending on circumstances.  
For some sectors and technology, where the scope of operations is quite large and the number 
of market participants quite small, public tenders for a given production of energy can be 
appropriate. For micro energy sy stems functioning at household level, investment grants or 
                                                 
17 See "Support schemes for renewable electricity in the EU" European Commission Economic Papers 
408, April 2010 and "Financing Renewable energy in the European Energy market", ECOFYS et al, 
October 2010 for details. 
 
EN 6   EN tax credits (e.g. for solar water heaters) are st ill quite common. The most significant form of 
operating support for electricity, heating and tran sport are feed in tariffs and obligations. 
Reviewing the relationship between  project risk and instrument choice, the empirical evidence 
suggests that the more reliable revenue stream pr ovided by feed in tariffs is generally more 
effective in driving renewable energy growth, particularly fo r a broad range of technologies. 
Quota obligations and tradable green certificates often suffer  from revenue volatility and 
require payment of a risk premium, which a ppears to make them both less effective and 
efficient.  
5. NATIONAL SUPPORT FOR RENEWABLE ENERGY  
Member States' use of different instruments for electricity, heating and transport (biofuels). 
   AT BE BG CY CZ DE DK EE ES FI FR GR HU IE IT LT LU LV MT NL PL PT RO SE SI SK UK 
FIT x x x x x x  x x  X x x x x x x x x   x   x x x 
Premium      x  x x x           x     x   
Quota 
obligation   x             x      x  x x   x 
Investment 
grants  x  x  x     x  x x   x x x x         
Tax 
exemptions   x       x x  x      x  x x   x  x x Electricity  
Fiscal 
incentives    x   x  x           x x x    x   
Investment 
grants x x x x x x  x  x  x x x  x x x x x x x  x x x x 
Tax 
exemptions  x x     x    X x   x x    x    x   x 
Financial 
incentives    x   x  x   X           x      heating  
Premiums            X                 
Quota 
obligation  x  x x x x x  x x X   x  x x x  x x x x  x x x trans-port  
Tax 
exemptions  x x  x x x x x x  X x x x x x x x x  x x x x x x x 
 
What is most striking about the above table is  how Member States use a range of different 
instruments. As discussed in Chapter 4, the use of multiple instruments can be appropriate, given the different economic status of all the different technologies, in terms of maturity, 
users, climatic conditions and markets.  
In the electricity market , 21 Member States now use feed in tariffs at least for some 
technologies and some market segments; seven use feed in premiums and six use quotas. The 
use of multiple instruments or the adaptation of instruments also reflects Member States' efforts to improve the efficacy of the instru ment in a gradual manner without causing too 
much disruption to the market. Changes in recent  years have seen a blurring of the traditional 
 
EN 7   EN dichotomy of tradable certificates (setting quantit y not price) and feed in tariff (setting price 
not quantity): Technology specific rules have be en introduced in quota regimes, optional feed 
in premiums are made available in more ma ture markets where project risk is lower, 
modifying the means of financing (in partic ular budget/off budget choice s) and creating new 
feed in tariffs for new technologies since the st able financial revenues from feed in tariffs 
appear to be more effective and effi cient in promoting green electricity18). In addition, 
Member States make smaller annual changes – to the quotas, to the tariff or premium rates, to 
the lifetime of the support, and to aspects of eligib ility. All of these changes improve the 
efficiency of the instrument. But more needs to  be done. The move to market integration, in 
particular the evolution to f eed in premiums is too slow and too fragmented. As the EU 
Energy Strategy notes, we need  a greater convergence of na tional support schemes and to 
move to a more pan-European  trade in renewable energy19. 
As shown by the National Renewable Energy Action Plans, most Member States have 
continued to focus on national  resources and could achieve their 2020 targets on their own. 
They have not sought to reduce costs by developing cheaper res ources in other parts of the 
single market. The analysis cited above16 makes clear that billions of Euro could be saved if 
Member States treated renewable energy as a co mmodity in a single European market rather 
than in national markets. Given the fiscal co nstraints Member States currently face, with 
combined government deficits of €868bn, every effo rt should be made to minimise costs. The 
first step to such a change is the use of  the new cooperation mechanisms created by the 
Renewable Energy Directive. 
These cooperation mechanisms are a means of a llowing Member States to benefit from a form 
of trade of renewable energy whilst still ma intaining control over their national support 
schemes and the achievement of their national targets.  
Historically, Member States have been keen to develop their own re sources (contributing to 
their own emissions reductions, reducing fossil fu el imports and generating jobs) rather than 
develop the cheapest renewable energy sources. However, as the cheaper renewable energy 
potentials are exploited and costs start to rise, the need to seek out cheaper renewables in 
other Member States will rise. For this reas on, the Directive created a number of “cooperation 
mechanisms” that allow a cross-financing betwee n Member States for the achievement of the 
EU target. 
Article 6 of the Directive creates “statisti cal transfers”. These are agreements between 
Member States to transfer a quantity of rene wable energy produced in one Member State to 
another Member State for target compliance purpos es. The transfer is purely virtual; there is 
no accompanying energy flow. 
This mechanism exists so that Member States with considerable renewable energy sources, or 
with effective support schemes that help develo p such sources cost effectively, can offer any 
renewable energy production surplus to their requirements (either to their target or trajectory) 
to other Member States. The “other” Member St ates interested in purchasing such transfers 
would be those with limited domestic renewabl e energy sources or w ith inadequate support 
schemes for developing the available domestic resources. The transfers would normally be for 
                                                 
18 See "Financing Renewable energy in the European  Energy market", ECOFYS et al, October 2010 
19 COM(2010)639/3 Energy 2020: a strategy for competitive sustainable and secure energy, p10 
 
EN 8   EN Member States wanting to comply with their ta rgets, or until their own domestic resources can 
be brought into production at a later stage. 
A second mechanism is the “joint project”, a broad concept covering the building or co-
financing of infrastructure or even an ener gy purchase agreement. The intention behind the 
mechanism is the same as for statistical transfer s: to help build new plants and infrastructure 
in a Member State and sharing the resulting energy towards two or more Member States’ 
national targets, in order to reduce the overall cost of reaching the targets. 
One key difference between joint projects and sta tistical transfers is the proposed inclusion of 
“private entities” in joint projects. A private en tity such as a power generator, infrastructure 
company, energy equipment manufacturer, a banki ng consortium can identify projects in any 
Member State. Financing such a project coul d occur under the normal and existing domestic 
arrangements, but if such arrangements are insuffi cient, because the supp ort is too low or does 
not qualify according to domestic priorities, the project would not be built. In such a case, the 
project developer could broker an agreement wh ereby another Member State agrees to help 
finance the project; again, this could be throug h loans, grants, tenders or access to national 
support schemes such as feed-in tariffs or green- certificate regimes. In exchange for this co-
financing, the Member State would receive credit for a share of the renewable energy that was 
produced as a result of the project.  
In addition to the cooperation mechanisms ava ilable to Member States, the Directive also 
creates an instrument that would enable third countries to take part in developing renewable 
energy sources and contributing to the EU targ et. Accordingly, “joint projects” between 
Member States and third countries  – similar in structure to the joint projects between Member 
States– can be established. However, whilst jo int projects between Me mber States can be 
purely “virtual trade” arrangements, joint projec ts with third countries have strict conditions 
attached to them to ensure that the arra ngements generate new renewable energy production 
of electricity that is actually consumed in th e EU. In particular, as proof of importation, the 
Directive requires that: 
• the electricity is firmly nominated to th e allocated interconnec tion capacity by all 
responsible Transmission System Operators in  the country of origin, the country of 
destination and, if relevant, each  third country of transit; 
• the electricity is firmly registered in the schedule of balan ce by the responsible 
Transmission System Operator on the Comm unity side of an interconnector; and 
• the nominated capacity and the production of el ectricity from the designated installation 
refer to the same period of time. 
In addition, the energy that is produced and e xported to the EU under the agreement may not 
receive operating support. This rule is applie d to reduce the risk of  paying double subsidies 
and over-compensating producers.  
The third element of the cooperation mechanis ms established under the Directive is called 
“joint support schemes”. Member States may agr ee to join or coordinate their national support 
schemes (e.g. a common feed-in tariff or green-cer tificate/obligation regime). In the event of 
the joining of schemes, the re newable energy produced under su ch conditions is considered 
“pooled” and shared out either as a “statistical transfer” or acco rding to an agreed distribution 
 
EN 9   EN rule. Sweden and Norway's recent announcement of a joint green certificate support scheme 
to begin in 2012 is the first exampl e of the use of this mechanism. 
5.1. Improving the functioning of national systems for supporting renewable energy 
Whilst there has been some convergence and improvement in the efficiency of some Member 
States' instruments in the electricity sector , there has not been a ny coordination, and past 
recommendations of the Commission have not often been acted upon20. The continued 
existence of multiple different national suppor t regimes shows little sign of change. This 
means investors and other market operators must  deal with a wide range of changes, small 
and large, occasional or regular, in 27 Member  States. This exacerbates the differences and 
distortions between Member States' electricity markets and ignores the benefits of operating 
in a single European electricity market. Given the growing importance of the share of renewable energy in the European electricity mix
21, this is a concern. As a consequence, there 
is a need for further reform of electricity market support schemes.  
As investor and market confid ence in the renewable energy sector depends heavily on the 
regulatory framework, the reform of support mechanisms must be managed carefully. 
Retroactive changes to support schemes in partic ular should be avoided given their negative 
effect on investor confidence. It is for this reason that Member States created the cooperation 
mechanisms of the new Renewable Energy Direc tive, allowing Member States to control how 
their renewable energy resour ces are jointly developed, co-financed, and their support 
schemes joined or harmonised. Thus as the leve l playing field of a single energy market is 
created, renewable energy will be able to participate and compete. 
The forums and projects established by the Co mmission to help Member States develop the 
cooperation mechanisms22 can also be used to steer othe r aspects of national support schemes 
such as common technology banding, a nnual revision dates, cost calculation 
methodologies/indices, conversion of  feed in tariffs to feed in premiums as technologies mature 
and ongoing work on the creation of regional clus ters for joint support sc h e m e s ,  s u c h  a s  t h a t  
under development between Norway and Sweden . The mechanisms also  provide scope for 
supporting the development of renewable energy production in th ird countries, such as in the 
Mediterranean Solar Plan and DESERTEC initiative. Thus the framework to make real 
progress towards a European supp ort scheme regime now exists.   
In the heating sector , the predominance of investment grants  is due to Member  States' focus on 
household installations of sma ll solar thermal or solar photo voltaic units. Gi ven the cost 
reductions that have oc curred in micro units in recent year s, Member States could start to 
consider regulatory rath er than financial soluti ons at the household leve l. For example, Article 
13(4) of the Renewable Energy Directive includes  rules for building regulations or codes to 
include minimum levels of renewable ener gy in buildings, ensuring growth through 
regulatory rather than financial means. Recent regional examples of such rules (e.g. in Catalonia) suggest major savings can be achieved by such means
23. Given its local nature, 
                                                 
20 See for instance SEC(2008)57 Chapter 4. 
21 The 16% share today is expect ed to rise to 33% in 2020. 
22 These include the Concerted Action on the Impl ementation of the Renewable Energy Directive, 
Member States' "International feed in cooperation group" and numerous projects under the Inte lligent 
Energy Europe Programme. 
23 See SEC(2008)85-2 Annex to the Commission's impact assessment on the energy and climate package, 
p122 
 
EN 10   EN support for micro heating systems can exploit distributed forms of  energy that develop a local 
community's biomass, solar or geothermal resources. 
The scope for any large scale heating from re newable energy sources is only now beginning 
to be explored in most Member States, partly because it is only now included in the European 
regulatory framework (the 20% ta rget). Projects could include developing combined heat and 
power plants and/or district heating systems based on geotherm al, biogas or biomass energy 
sources. In this context, Member States could start developing new in struments or extending 
existing instruments to heat production from renewable sources. In Sweden, for example 
(where Stockholm's district heating system serv es 80% of households and sourced 80% from 
renewable energy), the Local Investment Pr ogramme and Climate Investment Programme 
promote further household uptake. Whilst commerci al heat production occurs in a very local 
market, it is still sensible for Member States  to discuss their diffe rent experiences in 
developing this energy source, and again th e Concerted Action under the Intelligent Energy 
Europe Programme provides a forum for such coordination discussions.  
In the transport sector , a mixture of instruments is also used to support the development of 
renewable energy, chiefly biodiesel and bioethanol . Quota systems require the use of biofuels for 
a given fraction of the road transp ort fuel mix. The fuels themselves  are freely tradable across the 
EU. The extra cost of the biofuel is  then part of the price of petr ol or diesel and passed on to 
consumers. In 17 Member States  this quota regime is suppleme nted by tax credits, whereby 
expenditure on biofuels is tax deductible. This su pplement is therefore additional support funded 
by taxpayers. The empirical evidence regarding this  sector shows that biofuels growth is more 
effective in those Member States where both instruments are applied24.  
In all three sectors it is important that greater efforts are made to improve the efficiency and 
coordination of national instruments. For this  reason the Communication on renewable energy11 
notes that the Commission will promote a more harm onised approach on the basis of best 
practice, through its state aid scrutiny, review of national support scheme s and through guidance 
with the implementation of the Renewable Ener gy Directive and its co operation mechanisms. 
Bearing in mind the scope for reviewing cooper ation mechanisms given in Article 23 of the 
Directive in 2014 (prior to the preparation of a post 2020 renewable energy roadmap in 2018), it 
is important that the Co mmission take an active role in th eir development. Containing costs, 
helping to develop the European renewable energy market, it will be import ant for the 
Commission to help sh are the lessons of national experiences. 
Separately, producers of renewable electricity can also generate reve nues in the consumer 
market, from the sale of "guara ntees of origin". Electricity suppliers can buy and use these 
guarantees to demonstrate to consumers the share of renewable energy in their electricity mix. 
6. EU SUPPORT FOR RENEWABLE ENERGY  
Current EU funding for renewabl e energy has been provided through equity, project grants or 
loans. These have been in the form of debt assistance from the Europe an Investment Bank to 
help the achievement of Europ ean energy and environmental goals  and from the EU Research 
budget addressing the European dimension of energy technology development. 
                                                 
24 See SEC(2009)503 Section 2.3. 
 
EN 11   EN Despite the strong political suppor t, ambitious European  policy and legal fram ework (albeit with 
lagged implementation in some Me mber States), the EU financial support given to renewables is 
relatively low. For the period  2007-2009, funds spent on re newable energy amounted to roughly 
€9.8bn , (€3.26bn/a), the bulk of which in the form of  loans from the European Investment Bank. 
During this period the fina ncial support was made up of: 
• €8.4bn in loans and assistance from the European Investment Bank; 
• €565m from the European Economic Recovery Plan; 
• €110m for the "Intelligent Energy Europe" Programme, which co-funds analysis and 
policy research in renewable energy; 
€499m of EU Structural and Cohesion Funds were  allocated by Member States, to projects 
and demonstrations of renewable energy (with a total of approximately €4.8 billion planned for 
2007-2013)25; 
• €250m from the EU R&D Framework Programme; 
• In addition, the EIP GIF budgeted €151M in  venture capital or  loan guarantees; 
• Separately, the European Bank for Reconstruc tion and Development granted SEI loans of 
approximately €140M  
A major new source of financia l support for renewables at th e EU level is the "NER 300 
programme", established under the Emission s Trading Directive 2003/87/EC. This will 
support the demonstration of CCS and innovative renewables at co mmercial scale and aims to 
co-fund at least 34 innovative renewable energy  projects in the EU. The programme will 
provide around €4.5 billion of co-funding (match ing funding from industry and Member 
States).26 The Commission has launched the first Ca ll for Proposals comprising 200 million of 
the 300 million allowances under the NE R300 programme in November 2010.27 The 
European Investment Bank will support the Commission in implementing the programme. 
Annual EU budgets are prepared in the context of a multi-a nnual financial framework, the 
seven year "EU financial framework" plan, currently for 2007-2013. Today's EU expenditure 
thus occurs on the basis of a strategic document concluded in 2005 with a mix of instruments 
ranging from traditional grants to loans, loan gu arantees and venture ca pital. Discussions are 
now beginning on EU spending pr iorities in the next financ ial perspectives period, post-
201328.  
6.1. Improving EU expenditure on renewable energy 
European energy policy has change d significantly over the last five years. There has been a 
broad acknowledgement that a more active European  pursuit of our comm on policy goals is 
more effective on the global stage and in the global economy. For this reason, a reorientation of 
                                                 
25 See COM(2010)110, 31.3.2010, "Cohesion policy: Strategic Report 2010 on the implementation of the 
programmes 2007-2013". 
26 See Commission Decision 2010/670/EU of 6.11.2010, OJ L 290, p. 39. 
27 OJ C 302, 9.11.2010, p. 4, further information is available at: 
http://ec.europa.eu/clima/funding/ner300/index_en.htm   
28 See COM(2010)700 Final. 
 
EN 12   EN EU budget priorities is appropriate.  This is possible both in terms of more focused use of existing 
instruments and in developing new European instruments.  
Structural Funds and Cohesion Funds  constitute a significant part of EU expenditure, with 
planned support for renewable energy activi ties for the period 2007-2013 of aproximately 
€4.8 billion. As stated in the Communication "Regional Policy contributing to sustainable growth in Europe 2020"
29, the deployment of renewable energy can be an important driver of 
local economic development, espe cially in rural and coastal areas, outermost regions and 
islands. In this framework, local and regional aut horities need to see investment in renewable 
energy as strategic investment securing employm ent and regional development. To reap the 
full benefit of local renewable energy potential, local and regional author ities should address 
renewable energy in a full life-cycle, developi ng integrated regional supply chains according 
to the local renewable energy potential. Such in vestment has cross-sector al benefits at local 
and regional level from agricu lture and forestry (biomass for energy) to SMEs, industry and 
the construction sectors. Currently, the Commissi on is reflecting on the future of Cohesion 
Policy. The Budget Review as well as  the Conclusions of the 5th Cohesion Report30 conclude 
that Cohesion Policy needs to concentrate on the Europe 2020 objectives and targets, 
including the renewabl e energy target.  
The European Agricultural Fund  for Rural Development (EAFRD)  also finances 
development programmes of the Me mber States and in particular the rural part. This can also 
include renewable energy projects, in particul ar support for the stimulation of biomass 
production through ener gy crops or forestry. 
Another large element of Europe an budget expenditure is on research and technology 
development . The EU R&D budget (€48bn  FP7) helps to integrate national research agendas 
across Europe. It facilitates the creation of the Eu ropean Research Area and finances research in 
a wide range of disciplines. R&D has a long history of public support and clear economic 
justification for European fundi ng. EU budget expenditure in this  area drives forward European 
policy priorities through resear ch and maximi ses positive spill over effects from national 
research. The Commission has estab lished the field of energy as a clear priority for the future. 
The European Strategic Energy Technology Plan (SET-Plan)31 sets out a vision of how 
Europe can continue to lead the world in th e development of a diverse portfolio of clean, 
efficient and low-carbon energy technologies. More recently, the Commission has presented 
detailed analysis of the financ ing needs of clean energy R&D32. It estimates that a further 
€50bn is needed over the next te n years and concludes that "s tronger interv ention at the 
European level could be one of the most eff ective ways to bring forward the desired broad 
portfolio of technologies". Together with the private sector th e Commission has been 
establishing European Industrial Initiatives fo r key renewable energy technologies (European 
wind, solar and grid Initiatives) and propos ing to reinforce the successful financial 
instruments already used at the European level. 
For certain demonstration projects and for deploying technologies in near commercial, 
bankable projects, European funds ha ve also been deployed using the European Investment 
Bank.  The Bank has a mission to support projects that contribute to European energy and 
                                                 
29 COM(2011) 17 final, adopted on 26 January 2011. 
30 COM(2010)642, 9.11.2010, "Conclusions of the fifth report on economic, social and territorial 
cohesion: the future of cohesion policy". 
31 COM(2007)723 A European Strategic Energy Technology Plan 
32 COM(2009)519 Investing in the Development of Low Carbon Technologies. 
 
EN 13   EN environmental goals, and has contributed appr oximately €3bn per year for renewable energy 
projects for several years. The Commission's S ET Plan also called for the reinforcement of 
financial instruments involving the Bank, such as the RSFF, the Marg uerite Fund and the 
High Growth and Innovative SME Facility (GIF ). In addition, the Commission and the Bank 
will assess optimal financial packages for large demonstrations and market replication projects, to develop innovative financial instruments to prom ote both energy efficiency and 
renewable energy
. At the national level, the UK Gove rnment's plans to establish a Green 
Investment Bank highlight how Me mber States also see the need  to address the capital access 
concerns of the renewable ener gy industry. In recent y ears a range of external funds for low 
carbon technologies have been developed, su ch as the Global Energy Efficiency and 
Renewable Energy Fund (GEEREF) to leverage private finance into renewable energy 
projects through equity or debt. More recently, in its European Economic Recovery Package, the Commission financed over half a billion euro s of grants to speed up the implementation of 
key renewable energy projects of European interest.  
With the wide range of European instruments used to finance renewable energy projects with 
a European dimension, there is scope for ensu ring that in the forthc oming review of the 
European financial perspectives maximum use is made of these targeted and effective 
instruments. Indeed, in  its recent budget review
28 the Commission emphasised the catalytic 
role European funds should play in leveragi ng public and private financial resources.  
In this context, following the Commission's pr oposal for the next multi-annual financial 
framework, the Commission intends to maximise the leverage of private capital into energy projects of regional European in terest. It will strive to facilitate the uptake of the Renewable 
Energy Directive's cooperation mechanisms, the intended use of which is disappointingly low, 
according to the National Renewable Energy Action Plans recently submitted to the 
Commission
33. This would improve regional coopera tion and begin the harmonisation of 
support schemes. It could ensure savings of as much as €10bn annually16 and that renewable 
energy starts to be integrat ed into the European market . 
7. CONCLUSION AND ACTIONS  
Europe has established the regulatory framew ork for creating a low carbon economy, starting 
with pricing greenhouse gas emissions and a major drive to develop renewable energy 
technologies and deploying them in all sectors of our economy. Given the financing gap that 
needs to be filled to reach our targets, and the current fiscal constraint s governments face, it is 
important that we finance renewable energy growth  as efficiently as poss ible. As with energy 
infrastructure, there is a need for European actio n, to speed up the efficient delivery of renewable 
energy production.  
At the national level, the refo rm of financing instruments occu rs regularly, in a manner which 
generally strives to avoid creating investor un certainty. However such reforms occur in an 
uncoordinated manner. The Communication on renewable energy11 therefore notes that the 
Commission inte nds to lead national cooperation on fi nancing renewables, based on the new 
framework for Member St ate cooperation contained in the Re newable Energy Directive. In this 
way the cost of achieving the targets whilst prom oting the growth and future prosperity of the 
European renewable energy industry can be minimised.  
                                                 
33 http://ec.europa.eu/energy/renewables/tr ansparency_platform/action_plan_en.htm   
 
EN 14   EN With European sources of financ ing, the current Budget Review will aim to maximi se the impact 
of EU funds. For rene wable energy, EU funds,  including those of the European Investment 
Bank, must facilitate cost eff ective renewable energy developmen t and the lowering of the cost 
of capital investment s in the sector.  
To ensure the achievement of these objectives, reflecting the conclusions of the Communication 
on renewable energy11, action could include: 
• Preparation of guidelines for more harmoni sed reform of national renewable energy 
support schemes, through the use of th e Directive's coope ration mechanisms. 
• Facilitation of the developmen t of cooperation mechanisms both between Member States 
and with third countries (e.g.  in the context of large s cale industrial renewable energy 
initiatives such as the Mediterranean Solar Plan and Desertec Initiative). 
• Promotion of reforms in the southern Mediterra nean to facilitate the growth of renewable 
energy and the scope for thir d country cooperation post 2020 
• The review of European Structural Funds and Cohesion Fund in the context of the EU 
Budget Review to examine the scope for an improved contribution of the funds to EU 
energy and climate targets in lin e with the Europe 2020 Strategy. 
• Continued work with financial institutions  to improve European support for private 
investment in renewable energy projects.  
• Expanded use of innovative financial instrument s as a device for achieving greater private 
sector leverage for European policy priori ties and maximising the EU value added of 
financing in the energy sector.