Opinion of the Economic and Social Committee on the 'Communication from the Commission on Energy for the future: renewable sources of energy (White Paper for a Community Strategy)` (98/C 214/14)

On 19 December 1997 the Commission decided to consult the Economic and Social Committee, under Article 198 of the Treaty establishing the European Community, on the above-mentioned communication.

The Section for Energy, Nuclear Questions and Research, which was responsible for preparing the Committee's work on the subject, adopted its opinion on 7 April 1998. The rapporteur was Mr Morgan.

At its 354th plenary session held on 29 and 30 April 1998 (meeting of 29 April), the Economic and Social Committee adopted the following opinion by 106 votes to 1, with 3 abstentions.

1. Introduction

The Economic and Social Committee welcomes the white paper as a constructive and positive follow-on to the earlier green paper ().

The white paper is written in four chapters:

- Setting the scene;

- The action plan;

- Campaign for take-off;

- Follow-up and implementation.

Our opinion follows this outline.

2. Setting the scene

2.1. The first two sections of this chapter re-state the green paper thesis and report on the submissions received in response to it. In this context we have nothing to add to our submission in response to the green paper.

2.2. The third section of the first chapter re-states the strategic goals in a form with which the Committee positively agrees.

2.3. We are pleased to see that the strategy and action plan in the white paper are directed towards the goal of achieving 12 % penetration of renewables in the European Union by 2010. We have already given our support to this ambitious and radical objective. However, we have made no attempt to evaluate or substantiate the claims in the document for job creation, power generation, reduced CO2 emissions etc. We have simply accepted them as a basis of the programme.

2.3.1. With respect to Member States' targets and strategies, we are pleased to support a conclusion in line with our response to the green paper. The relevant passages are as follows:

'Achievement of the average 12 % overall indicative objective for the Union clearly depends on the success and growth of the various individual renewable technologies. Views expressed during the consultation process on the green paper confirm that it is important to analyse how the overall objective can be achieved by a contribution from each sector and hence to estimate the contribution each renewable source is likely to make.`

'It is important therefore that each Member State should define its own strategy and within it propose its own contribution to the overall 2010 objective, indicate the way in which it expects different technologies to contribute and outline the measures it intends to introduce to achieve enhanced deployment.`

2.3.2. Annex III to the white paper summarizes current Member State plans and actions for the development of renewables. The Committee takes the view that these do not yet represent an adequate response to the potential and need for increased renewable energy deployment. The scale of the programme implied by the 12 per cent target will need a radical and revolutionary approach to this opportunity which is not yet in place at the Member State level.

2.3.3. In Annex II, the white paper establishes targets for the various technologies. This is consistent with the approach which the Committee recommended and provides the necessary framework for the action plan. This is a considerable improvement on the prior use of TERES II forecasts.

2.4. In the fourth section of this chapter, there is a preliminary assessment of costs and benefits. This shows that the action plan targets require additional net investment of ECU 74 billion. This is a big number and seems to be out of proportion compared with other energy investment costs and will need a significant commitment.

2.5. It is not possible within the white paper to evaluate the economic return on this investment. Nor is it possible at the global level to anticipate the levels of price support which will be involved at the Member State level. Accordingly, although the white paper spells out a number of important public good benefits including CO2 reduction, it is not possible to calculate the impact on the profits of companies or the benefits to consumers. These will be important issues for the follow-up and implementation phase of this programme (Chapter 4).

2.6. It is also important to understand the uncertainty which surrounds the white paper proposals. We are dealing with new technologies. We are making assumptions about performance improvements. We are making assumptions about rates of take-up for markets. There is a large body of experience which shows that technology projects with these characteristics cost a good deal more than was originally estimated. Such projects tend to produce returns on the investment later than expected at the outset.

2.6.1. There are two ways of looking at the costs detailed in Table 5 of the white paper. The absolute numbers are very large; yet in the context of overall energy investment they are regarded by the Commission as quite reasonable. Either way, given the element of technological risk which surrounds this whole programme, there have to be concerns about the feasibility of achieving the 12 % target for renewable energy within the overall European energy scenario.

2.6.2. The programme needs to be tightly managed and controlled, otherwise there is little prospect of achieving the radical changes implied in the targets. In this context the Commission must act as one and each DG involved must step up to the scale of this project. It is likely that the Committee of Director-Generals discussed in the proposal for the multiannual framework programme for actions in the energy sector (1998-2002) () will provide a useful forum for focusing its commitment.

2.6.3. Member States will need to coordinate Government action and initiatives across many government departments. As noted in the green paper, there is a requirement for coordination and cooperation between Member States.

2.6.4. While the costs in Table 5 are absolutely huge, it needs to be recognized that they are not specifically budgeted for. They either depend on the budgets of other EC programmes or on expectations of programmes yet to be finalized. The Commission and the Council, in deciding whether to accept the white paper, should give serious consideration to the sources of funds and the commitment of those funds.

3. The action plan

3.1. Chapter 2 describes the main features of the action plan. This adds more detail to the actions in the green paper and we would generally endorse it. We agree that the plan is highly dependent on action being taken by Member States and we welcome the proposal to institute a system of continuous review. The action plan describes:

- internal market measures;

- reinforcing Community policies.

As compared with the green paper and the Committee's response, the most important actions are the internal market measures.

3.2. Internal market measures

3.2.1. Fair access for renewables to the internal electricity market

3.2.1.1. We endorse the view that fair access for renewables to the internal electricity market is central and fundamental to the whole renewable energy project.

3.2.1.2. With reference to the proposal for a Directive on Fair access for RES to the electricity market (see section 2.2.1 of the white paper, Fair Access for Renewables to the Electricity Market, and Annex I on related Action Plans), the white paper makes the point that there is an opportunity for renewable energy access obligations to be included when the internal market on electricity directive is being transposed into national law. The Commission should communicate to the Member States this specific requirement. If the Member States fail to incorporate this obligation into national law, then we recommend that a further directive be drafted. In this context, we have noted the draft report prepared by Mr Linkohr MEP 'drawing up a Directive on Network access for electricity from renewable sources of energy in the European Union`. It is a positive initiative.

3.2.1.3. The white paper calls out a number of issues to be addressed within the framework of this legal obligation. In addition to those points we would underline the potential contractual problems. Renewable energy project investment will require that contracts reflect the period of time needed to get an adequate return on investment.

3.2.2. Fiscal and finance measures

3.2.2.1. It is clear that renewable energies will continue to have difficulty competing with fossil fuels in price terms over most if not all of the period till 2010. Accordingly it will be necessary for Member States to put in place guaranteed medium to long term price programmes. With the support of guaranteed price contracts it will then be possible for the promoters of renewable projects to raise money from the private sector. These price support programmes are in effect a public subsidy to be paid for out of taxes but they are essential if private capital is to be raised and the growth of renewable energy production is to be increased.

3.2.2.2. In addition to a programme of price support there are other measures which Member States can take to encourage private sector financing of renewable energy investment, for example:

- flexible depreciation;

- favourable tax treatment for third party financing;

- start-up subsidies in certain circumstances for new production plants.

3.2.2.3. Not all renewable energy projects will be grid-connected. It will therefore be necessary to provide financial incentives for consumers to purchase RE equipment and services. Clearly there is a role for public utilities in this context.

3.2.2.4. Within the general framework of fiscal and financial measures, the Committee would like to reiterate its stance on the relationship between a carbon tax and the promotion of renewable energies. There are many reasons why Member States may wish to introduce a carbon tax; the promotion of renewable energy is not one of them. To tax 94 per cent of energy sources in order not to tax six per cent is an exaggerated case of the tail wagging the dog. Renewable energy technologies should be promoted through positive fiscal incentive.

3.2.3. New bioenergy initiative for transport, heat and electricity

Within the time frame to 2010 there should be considerable changes in fuel efficiency and use. There should be considerable advances in electric traction and fuel cells for road transport. The programme for biofuels should take account of the likely pace of these other developments.

3.2.4. Improving building regulations: its impact on town and country planning

3.2.4.1. We very much endorse the point that 'it is important to adopt a global approach and to integrate measures of rational use of energy (for the building envelope as well as for heating, lighting, ventilation and cooling) with the use of renewable energy technologies`.

3.2.4.2. The specific measures proposed will in some countries mean major changes in building regulations, building technologies and the property market. Accordingly these changes will need to be driven through forcibly following consultation with industry professionals; and the results monitored.

3.2.4.3. Within many Member States of the EU the potential for photovoltaics is significantly limited. However we endorse the inclusion of photovoltaics in the campaign for take-off. The white paper explains that not only is the potential in buildings important but there is also an opportunity to create a basis for technology export.

3.2.4.4. Building technology is of colossal importance for EU energy use. The Committee is preparing an 'own opinion` on this whole area. Clearly there are major opportunities for energy saving which fall outside the scope of the white paper. There is scope for building regulations to be changed to cover not only insulation but also thermal gain (passive solar).

3.2.4.5. Public Procurement

In this context there is clearly a need for coordinated and informed action. All buildings for central and local government and public authorities need to be checked for energy efficiency and, where possible, photovoltaics. Private companies and individuals should be encouraged to follow this example. Architects and builders and other involved professions need to be engaged. There must be communication with the general public and in particular with householders in relation to new standards.

3.2.4.6. Planning regulations and the attitudes of local planning authorities will need to be modified in favour of renewable energy sources, installations and designs.

3.3. Reinforcing Community policies

3.3.1. The actions proposed in the context of other Community policies are consistent both with the green paper and the Committee's response to it. The detailed plans are richer and more complete than previously and provide a sound basis for action throughout the Commission and the Member States.

3.3.2. One of the specific concerns is the requirement that the common agricultural policy should provide for energy crops from agriculture in an equivalent way to the provision for food crops. This does not mean necessarily that we are proposing additional subsidies. What we are proposing is equivalent treatment. It cannot make sense that a farmer is required to plant long-term crops for fuel purposes with an uncertain demand in the year when the crop matures when the same or similar land could be used for short-term food crops with a guaranteed return. It is also important to consider the environmental outcome of these policies.

3.3.3. Following the emphasis which we placed in our Opinion on the green paper on export opportunities, we endorse the attention which this subject receives in the white paper. In particular, we support the selection of photovoltaic technology for the start up campaign.

3.4. Strengthening cooperation between Member States

The Committee endorses the need to strengthen cooperation between Member States because we agree with the statement that, 'at present serious discrepancies persist in levels of advancement both as regards renewable energy implementation in the different Member States, and between the technologies themselves`. For the 12 per cent target to be met, all Member States will have to fully exploit the renewable energy opportunities available within their boundaries.

3.5. Support measures

3.5.1. Targeted promotion

3.5.1.1. We agree that action programmes designed to meet the penetration objectives for targeted technologies will provide a more focused framework for actions under Altener II.

3.5.1.2. We support the need to mount a major effort to harness the potential, influence, experience and enthusiasm of all manner of associations and bodies such as citizens groups, non governmental organizations and other special interest groups.

3.5.1.3. We are pleased to note the general level of interest shown by the white paper in the need to empower and activate individuals, local authorities and other organizations at all levels of society. This was a key concern in our submission on the green paper. We are glad to note this response. For the same reasons, we endorse the proposals on market acceptability and consumer protection.

3.5.1.4. In the context of the need for coordinated action referred to in 2.6.3 above the projects supported by both Altener II and the Fifth Framework Programme need to be specifically linked to the White Paper initiative.

3.6. Annex I to the white paper

We have reviewed the preliminary indicative action plan for renewable energies in the period 1998 to 2010. We have commented in the above paragraphs on many of the specifics but we have not tried to anticipate the contents of any proposed directives or proposals for revised directives. These must await the publication of the draft documents in due course. However the Committee has submitted Opinions on Alterner II and the Fifth Framework Programme and is continuing to work on the latter.

4. Campaign for take-off

4.1. There are a number of positive aspects to this campaign. We welcome the focus on large-scale projects for the different renewable energy sectors. We welcome the recognition that the critical success factor for this campaign is the quality of Member State action plans and that within those plans there are many active and involved parties. An urgent aspect of Member State action plans will be submission of request for Structural Funds for renewable energy projects.

4.2. The list of interested parties is not complete and will need to be further developed to include, for example, non-government organizations, the construction industry and its sub-contractors and, in due course, airports and the travel industry. Other interested parties are of course the clients of all these industries.

4.3. The white paper suggests communicating with all interested parties. It is probable that involvement will not be enough: education and training will also be needed. The Committee is concerned that many interested parties are not sufficiently knowledgeable to play their part to the full. It will be necessary for Member States to put in place communication, information and education plans. We believe that the Commission is correct to propose a limited number of high impact, high profile campaigns which will grab public and political imaginations alike.

4.4. We endorse the selection of three technologies for the take-off campaign but we have major concerns about the biomass project. This is because of the:

a) sheer scale of the project: the growth rate is significant and the 2010 outcome is a very large share of the RES total; and,

b) complexity of biomass projects: this is because of the two-level contracting process.

The plant operator needs assured prices in his electricity sale contracts to underpin investment in RES generation. He also needs contracts in place to guarantee a supply of biomass fuel for generation.

4.4.1. To the extent that the fuel comes from wastes new legislation is needed to require waste generators e.g. in the food processing industry to generate energy from waste.

4.4.2. To the extent that the fuel comes from agricultural crops, we are concerned that there is nothing effective in place to incentivise farmers. Indeed it seems that Agenda 2000 will make agricultural biomass supply even more problematical. The move to large-scale agricultural cropping will require detailed planning and implementation on the producer side. In addition it will be necessary to formulate the long term contractual framework which the producers will need. On the technical side, it will be necessary to establish the projects to research, develop and install the power plants given the huge dependence overall on the massive growth in biomass as a source of renewable energy. This whole area needs greater definition and precision.

4.5. While acknowledging the logic behind the choice of technologies for the start-up campaign, the ESC would also emphasise the need for continued support to other technologies with potential such as solar thermal.

4.6. One final caveat on the campaign for take-off - as the Committee stated its our opinion on the previous green paper - the programme still does not acknowledge the problems of scale in renewable energy. As volumes grow, the problems grow exponentially. Examples are the impact of variable electricity volumes on network capacity, the impact of intensive farming of energy crops over vast acreages, and the impact of windfarms on the environment.

4.7. There are now less than 13 years to the year 2010. In this period, renewable energy sources other than hydro-electric has to increase by a factor of five. The successful implementation of the campaign for take-off is therefore very critical. It needs to be effective in terms of volumes and schedules. Once the campaign has been formally accepted by the Council of Ministers it will be necessary to get action plans in the Member States in place with the utmost urgency.

5. Follow-up and implementation

5.1. In our green paper submission we have already endorsed the proposal for improved data collection and measurement.

5.2. There is no doubt that implementation by Member States must be coordinated at EU level. There are a number of reasons for this: first, it is essential to know that the sum of Member State action plans and targets do indeed meet the Union objective of 12 % penetration by 2010; second, it will be necessary to see that the countries apply for the Structural funding available; third, there will need to be check points on the progress of key technologies across the Union, particularly where the key action campaigns are concerned; and fourth, the Commission and the Member States together will need to be certain that any necessary harmonization or standardization needed for the working of the internal market is put in place as soon as it is needed.

5.3. In this context, the Economic and Social Committee welcomes the intent of the Commission to produce a regular communication to evaluate the success of the strategy and recommend a revised direction and/or new actions if sufficient progress in the penetration of renewables does not appear to be made. It will however be essential for the Commission's statistics to be seen to be soundly-based.

6. Conclusion

6.1. The Economic and Social Committee endorses the EU strategy and action plan set out in this white paper and supports the proposals for its implementation over the period to 2010.

However the scale and radical nature of the programme means that it can only succeed if there is a fundamental change of attitude in a number of areas.

6.2. In particular for the biomass programme to succeed there will need to be a significant change in the CAP incorporating new financial arrangements to provide incentives for farmers to grow energy crops.

6.3. Associated with the photovoltaic programme there has to be a revolutionary change in the construction industry - in technology, architecture and planning authorities.

6.4. For the overall programme to succeed, it is imperative that all affected departments in each Member State Government and all affected DGs in the Commission understand the radical and ambitious undertaking that this programme represents and act accordingly to implement it.

Brussels, 29 April 1998.

The President of the Economic and Social Committee

Tom JENKINS

() OJ C 206, 7.7.1997.

() COM(97) 550 final, ESC opinion in elaboration.