EN Official Journal of the European Union C 44/133

Opinion of the European Economic and Social Committee on the ‘Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions — Renewable Energy: a major player in the European energy market’

COM(2012) 271 final

2013/C 44/24

Rapporteur: Ulla SIRKEINEN

On 6 June 2012 the Commission decided to consult the European Economic and Social Committee, under Article 304 of the Treaty on the Functioning of the European Union, on the

Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions — Renewable Energy: a major player in the European energy market

COM(2012) 271 final.

The Section for Transport, Energy, Infrastructure and the Information Society, which was responsible for preparing the Committee's work on the subject, adopted its opinion on 26 November 2012.

At its 485th plenary session, held on 12 and 13 December 2012 (meeting of 13 December), the European Economic and Social Committee adopted the following opinion by 163 votes to 30 with 26 abstentions.

1. Conclusions and recommendations

1.1 The EESC welcomes the communication, which opens a necessary discussion on resetting renewable energy sources (RES) and flanking policies.

1.2 The Committee is seriously concerned about rising prices to energy users, including the high costs of many national support schemes. This development meets with increasing opposition. The Committee calls on the Commission to prepare a study on current and anticipated future cost trends in the energy sector as a whole. The Committee supports the objective of driving down costs or keeping them as low as possible and of ensuring that RES technologies become competitive and ultimately market driven.

1.3 In the Committee's view a system of EU-wide common support schemes, tailored for each technology, would best meet the requirements of efficiency and the internal market. The schemes should be limited in time, until technologies are competitive, not provide for overcompensation and ensure tailored support to local, small scale solutions. However, as long as the internal energy market does not function properly, support schemes should be tailored for each electricity price area or Member State.

1.4 Instead of concentrating main efforts on a centralised model, more emphasis should be put on stimulating the development of decentralised, local solutions. These can and should be driven by local benefits. Regulations, support measures and access to networks must be clear, simple and reliable in order to facilitate participation of small (auto)producers.

1.5 RES technologies offer big opportunities as do other greenhouse gas emission reduction technologies: clean coal, electricity storage, demand response, carbon use, nuclear fission and fusion, or the reduction of other greenhouse gases (GHG) such as methane, etc. In many cases developments are clearly promising, and need to be adequately encouraged. Particularly demonstration and early deployment of new technologies should be supported.

1.6 The EESC recommends that the Commission concentrates its future work post 2020 on a policy of decarbonisation. This policy could finally disregard targets for renewable energy and instead be based on a clear GHG reduction target, in accordance with long term GHG reduction needs, and a carbon price high enough to drive better efficiency measures and contribute to R&D and investments by relevant actors, but not too high for consumers and industrial competitiveness. In addition targeted measures are needed to drive development of and investments in RES technologies, which in the end will bring real change. These measures should ideally be common for all EU and tailored for each technology.

1.7 The Committee welcomes the Commission's intentions on steps to be taken in the near future to enhance the present framework for renewable energy. Actions to integrate renewable energy into the energy markets, including issues on grid connection, balancing and grid charges, should be taken without undue delay.

2. Introduction

2.1 The increased use of renewable energy sources (RES) is central to current EU energy policy as it is expected to contribute to both reduction of greenhouse gases and security of energy supply as well as to creation of new jobs. Consistently, the EU RES goal of 20 % by 2020 is a headline target of the Europe 2020 strategy.

2.2 The EESC has for more than a decade in numerous opinions supported the goal of increasing the use of RES and given its comments and recommendations on proposed policies based on practical experience within civil society (1).

2.3 The development of RES use has been positive, currently beyond the path to the 20 % target according to the Commission. In the light of the Energy 2050 Roadmap future positive development has to be ensured. Strong growth of RES use is one of the ‘no regrets’ options of this roadmap. The EESC presented its Opinion on the roadmap in July 2012, supporting this general conclusion on RES (2).

2.4 The fast increase in RES is raising issues of costs, energy market influence and infrastructure needs. Therefore it is timely to consider future policy options. Investors are already looking beyond 2020, and they would also need clear signals of future policies in order to be able to deliver the high level of investments needed in this area.

3. The Commission proposal

3.1 The Commission aims at continuing to develop renewable energy and promote innovative solutions. According to the Commissioner for Energy, to do this cost-efficiently means, in short, producing wind and solar power where it makes economic sense and trading it within Europe.

3.2 The Commission is calling for a more coordinated European approach of support schemes and an increased use of renewable energy trading among Member States.

3.3 The communication discusses timely challenges in and possible policy options for: — integrating RES into the internal market, — electricity market opening and RES, — transforming our infrastructure, — empowering consumers, — driving technology and innovation, and — ensuring the sustainability of RES.

3.4 The Commission will launch proposals for a RES policy regime for the post 2020 period. In order to start the process of considering options, the Commission, in the accompanying impact assessment, explores three post 2020 policy options: 1) Decarbonisation without renewable energy targets, relying on greenhouse gases (GHG) reduction targets and the carbon market. 2) Continuing the current regime with national binding RES targets, as well as GHG emission reduction and energy efficiency targets. 3) An enhanced, more harmonised management of our whole energy sector with an overall EU RES target. A comparison of the options shows, roughly, options 1) and 2) a bit better than option 3) in meeting the criteria set by the Commission. None of the options is problem-free in relation to set criteria.

3.5 The communication finally indicates four main areas where efforts should be stepped up until 2020: The energy market, support schemes, cooperation mechanisms and energy cooperation in the Mediterranean.

4. The EESC's comments

4.1 The EESC welcomes the communication, which opens a necessary discussion on resetting RES and flanking policies. The Committee also mainly agrees with the Commission's analysis of the present situation, challenges and options. In addition, the Committee makes the following comments.

Integrating renewable energy into the internal market

4.2 The Committee is pleased that the Commission points to the rapidly increased expenditure and costs of RES – in spite of falling unit costs – as well as to the foreseen costs of investments in production, infrastructure/grids and balancing power. The Committee is seriously concerned about rising prices to energy users which can have a disproportionate impact on low-income consumers, including the high costs of many national support schemes. This development meets with increasing opposition. Even unit costs may not continue to fall at the present rate when most cost efficient options have been exploited. The Committee calls on the Commission to prepare a study on current and anticipated future cost trends in the energy sector as a whole. The Committee supports the objective of driving down costs or keeping them as low as possible and of ensuring that RES technologies become competitive and ultimately market driven.

4.3 On support schemes, the Committee agrees that changes of several national schemes during their running periods have created serious problems. Also short term policies, falling short of covering real extra costs for investors, are not satisfactory. Predictability, but also cost effectiveness of schemes needs to be ensured, and technology competitiveness encouraged. Therefore the emphasis on exposure to market prices is right. A push from the Commission on a support scheme reform is needed, avoiding also fragmentation of the internal market and ultimately aiming at phasing out subsidies.

4.4 One single European system covering all RES technologies would hardly be efficient. Rather flexible systems are needed, tailored to each technology's maturity and differing circumstances. In the Committee's view a system of EU-wide common schemes, tailored for each technology, would best meet the requirements of efficiency and the internal market. The schemes should be limited in time, until technologies are competitive, and not provide for over compensation. Suitable schemes are needed for local, small scale solutions (see 4.11.).

4.5 However, as long as the internal market does not function properly and price levels differ, due to failure to implement existing EU legislation and bottlenecks in the transmission infrastructure, support schemes should be tailored for each price area/Member State in order to best achieve efficiency and avoid overcompensation.

4.6 On boosting cooperation and trade, the Committee is strongly in favour of more cooperation in the energy field between Member States, indeed a real common EU energy policy, a European Energy Community (EEC). The Committee also supports the proposals in this chapter of the communication.

Electricity market opening and renewables

4.7 The Committee agrees with the Commission's comments on the need and challenges of integrating RES into the internal electricity market. Market price signals, including those of carbon within the ETS, need to be comprehensive in order to properly drive investments. The Committee supports the principle that all power producers, including RES producers, take on the same responsibilities, including as regards balancing.

4.8 ‘Capacity payments’ based on government determination of required back-up capacity are problematic, as they are justified insofar as market signals do not guarantee the cost efficiency of these plants. If a capacity market is needed then it should be pan-European, in the first stage possibly regional, or at least coordinated with neighbouring countries, within the EU.

4.9 The problem of the wholesale electricity prices, being pressured too low by an increasing share of wind and solar electricity with almost zero marginal costs, has to be studied and quantified further. The opposite effect of the emissions trading should be taken into account. More RES electricity would probably bring about much amplified volatility of wholesale electricity prices, causing other problems. In any case, a low marginal cost of power does not necessarily mean a low price for the electricity user, because the user will in one way or another pay for all investments and production, including transmission, balancing and support.

Transforming our infrastructure

4.10 The EESC has welcomed and given its Opinion on the energy infrastructure package (COM(2011) 658) (3), and emphasis now the need to adopt and implement it. However, if the set goal is ‘to produce wind and solar power where it makes economic sense and trade it within Europe’, the costs for the investments in necessary infrastructure may prove to be unacceptably high. Also problems of public acceptance may increase the cost and political risks.

4.11 More emphasis should be put on stimulating the development of decentralised, local solutions. These can and should be driven by local benefits and cover different technologies, like biomass (incl. residuals) and geothermal energy in addition to wind and solar, depending on local circumstances. Regulations, support measures and access to networks must be clear, simple and reliable in order to facilitate participation of small (auto)producers. The creation of local hybrid energy systems linked with intelligent grids and management would make it possible to move towards self-sufficiency at local level. This approach has, however, also its limitations, as mostly fossil fuel based balancing power is needed as long as no real and affordable solution to electricity storage is available (ref: Friedrich Wagner, Max-Planck-Institut für Plasmaphysik: Features of an electricity supply system based on variable input).

Empowering consumers

4.12 It goes without saying that the interests of consumers are central in the views on energy of the EESC, and this has been developed in many previous Opinions (4). One question here is the trade-off between high energy prices as saving incentives and the risk of energy poverty. The Commission's approach of empowering the consumer is supported by the Committee – without active consumer participation one cannot reach good results. One aspect that deserves more attention is ensuring the consumer's freedom of choice in practice.

4.12.1 As stated many times by the Committee, awareness raising and education are key to empowering consumers. In this context consumers should be provided with clear and easily accessible information on their own share of support to RES, normally expressed as total national RES support expenditures per capita. This information could ideally be included in energy invoices.

Driving technology and innovation

4.13 RES technologies offer big opportunities as do other GHG emission reduction technologies: clean coal, electricity storage, demand response, carbon use, nuclear fission and fusion, or the reduction of other GHG gases like methane, etc. In many cases developments are clearly promising, and need to be adequately encouraged. As the EESC has pointed out many times before, it is important to design and target the financing instruments correctly in relation to maturity of technologies. Particularly demonstration and early deployment of new technologies should be supported. For this purpose the resources of the SET plan need to be ensured. Action is urgent - it seems that the corporate sector in the US has recently increased its overall investments in energy R&D, with possible consequences to European competitiveness.

4.14 It seems that the Commission sees sufficient common financing and binding targets as proper drivers of innovation and hence jobs. These alone do not, however, guarantee efficient results. In addition open markets and a functioning competition are needed, as competition drives enterprises to innovation and renewal.

Ensuring the sustainability of renewable energy

4.15 Sustainability of the whole energy system is a necessary goal. This applies to all parts, not only bioenergy. The environmental and spatial impacts associated with use of different RES differ. Sustainability criteria for RES are needed, and accordingly the provision of financial support from EU funds should be conditional on the acquisition of energy from RES meeting these criteria. The Committee supports the communication's messages on the sustainability on bioenergy, with the addition that any new proposals should not add to the administrative burden of producers and users. Requirements should build as far as possible on existing, related monitoring and reporting systems, such as those on sustainable forestry applied in many Member States.

Renewable energy policies post 2020

4.16 The EESC finds it necessary to start preparing for a renewable energy policy post 2020, as stated in 2.4.

4.17 In its Impact Assessment (which as such is not impeccable, missing tables etc.) the Commission first presents a business as usual option, which is rejected by the Committee. On the three other options for a future policy framework the Committee is currently concerned about the following points:

4.17.1 The option of decarbonisation without RES targets post 2020 does not seem to guarantee a certain growth of RES use. This option is however best suited for an open energy market and would give the most cost effective results. It could also strengthen the ETS. A positive development of RES use seems certain under this option, given the strong RES development so far, existing and growing future R&D and other investments, binding climate goals and future policies outlined by the Commission.

4.17.2 A continuation of the present system with national binding targets would be effective and beneficial for at least a part of the RES business sector. But it would not guarantee cost efficiency of decarbonisation. Set prices under this option would also seriously jeopardise the ETS. Member States would again have to design their own policies to ensure compliancy, which would hamper the functioning of the internal energy market in spite of all efforts to enhance cooperation and trade. The binding targets have successfully helped to kick-start RES technology developments in the EU, but this may not continue to be a strong argument.

4.17.3 An ambitious EU management and target option could have in the view of the EESC many strong advantages in line with the concept of the EEC (5). As long as GHG reduction targets in accordance with long term GHG reduction needs have not been established this option should have preference. However, the risks pointed out by the Commission, of higher costs and the difficulty of public acceptance, seem relevant. Also there would probably be a need to build up a big new administrative structure.

4.18 The EESC recommends that the Commission concentrates its future work on a policy line for post 2020 mainly based on the first option. This decarbonisation policy would not be based on any RES targets, but on a clear GHG reduction target and a carbon price high enough to drive better efficiency measures and contribute to R&D and investments actions by relevant actors, but not too high for consumers and industrial competitiveness. In addition targeted measures are needed to drive development of and investment in RES technologies, which in the end will bring real change. These measures should ideally be common for all EU and tailored for each technology.

Next steps

4.19 Already in the near future steps are needed to enhance the functioning of present framework for RES. The Committee welcomes the Commission's intentions. Actions to integrate renewable energy into the energy markets, including issues on grid connection, balancing and grid charges, should be taken without undue delay.

Brussels, 13 December 2012. The President of the European Economic and Social Committee Staffan NILSSON

(1) OJ C 65, 17.3.2006, p. 105-113.

(2) OJ C 229, 31.7.2012, p. 126-132.

(3) OJ C 143, 22.5.2012, p. 125-129.

(4) OJ C 44, 11.2.2011, p. 53-56; OJ C 48, 15.2.2011, p. 81-86; OJ C 68, 6.3.2012, p. 15-20.

(5) See point 4.5 and www.eesc.europa.eu/eec.