Opinion of the European Economic and Social Committee on ‘Promoting renewable energy: Means of action and financing instruments’
Date: 2004-01-28
Institutions: European Economic and Social Committee
Subjects: EU aid, energy policy, enlargement of the Union, environmental protection, renewable energy, sustainable development

30.4.2004

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Official Journal of the European Union

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Opinion of the European Economic and Social Committee on ‘Promoting renewable energy:
Means of action and financing instruments’

(2004/C 108/06)

On 17 July 2003, the European Economic and Social Committee, acting under Rule 29(2) of its Rules of
Procedure, decided to draw up an opinion on promoting renewable energy: Means of action and financing
instruments.

The Section for Transport, Energy, Infrastructure and the Information Society, which was responsible for
preparing the work on the subject, adopted its opinion on 8 January 2004. The rapporteur was Mrs
Sirkeinen.

At its 405th plenary session of 28 and 29 January 2004 (meeting of 28 January 2004) the European
Economic and Social Committee adopted the following opinion by 113 votes to two.

1. Aim and background

1.1
Europe, as the rest of the industrialised world, is highly
dependent on fossil fuels. Transports are almost totally and
energy generation to a high and still growing rate dependent
on oil, coal and increasingly natural gas. In the EU their of
energy generation is around half and is forecasted to grow to
70 % by 2020. Also governments finances are substantially tied
up to fossil fuels through, in particular, high taxes on transport
fuels.

1.1.1
The high dependence on fossil fuels is linked with
some problems. The future running-out of reserves of fossil
fuels will probably somewhat exacerbate the supply situation in
the long term. At the moment, however, this is not yet beyond
the power of the markets to deal with. But fossil fuels are
constantly in the focus of international politics. Most of the
reserves of oil and gas are in politically unstable regions or
otherwise not in the reach of normal market rules and competi-
tion. The most pressing challenge presently is, however, climate
change, as fossil fuels emit carbon dioxide when combusted.

1.2
A central piece of energy policy in Europe is to increase
the use of renewable energy sources. The Green Paper on
security of energy supply in Europe identifies renewable energy
sources as one cornerstone of a European energy strategy,
aiming at sustainable development.

The Green Paper presented two main objectives for the

1.3
strategies it outlined:

— enhancing security of supply by diversification of energy

sources towards non-imported sources; and

— combating climate change by substituting fossil fuels with

sources which do not emit greenhouse gases.

The third simultaneous objective for energy policies is the
competitiveness of Europe, in the spirit of the Lisbon strategy.

1.4
The main proposals on renewables by the Commission
are the White Paper on renewable energy from 1997, the
Directive on promotion of electricity from renewable energy
sources (‘RES-E’), which was adopted in 2001, and a Directive
on biofuels adopted in 2003.

these
The EESC has adopted opinions on each of
1.4.1
proposals, and in addition produced an own-initiative opinion
on Renewable energy from agriculture in 2000. In all these
opinions the Committee gave its strong support to the objec-
tive of increasing the use of renewable energy sources. The
proposed policy measures were also largely supported, but
some detailed comments given. In its opinion on the RES-E
Directive the Committee expressed its concern that leaving the
choice of support measures and their
freely to the
Member States could lead to distortions of competition in the
internal market.

level

1.5
Support measures to renewable energy sources are
necessary because many of the sources and technologies are
not always competitive in relation to traditional energy produc-
tion, but may have a potential to be so. Support can also be
seen as compensation to renewables for the public support
traditional energy sources and production methods have
received over time and the external costs caused but not
carried by traditional energy production and use. Many studies
support these arguments, but all do not, at least not fully.

1.6
The aim of this own-initiative opinion is to give an
input of facts, analysis and recommendations to the continuing
vivid discussion on renewable energy at a time when the
Commission is starting to prepare its review of the RES-E
Directive. A lot has happened in the Member States, even if
this Directive's
only
approaching.

implementation

deadline

still

is

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2. Present EU goals and regulations

2.1
On the European level targets are set to increase the use
of renewable energy sources. A definition of RES is given in
the Directive on renewable electricity production. The directive
states that renewable energy sources shall mean renewable
non-fossil energy sources: Wind, solar, geothermal, wave, tidal,
hydropower, biomass, land-fill gas, sewage-treatment plant gas
and biogas. The directive specifies biomass further to mean the
biodegradable fraction of products, waste and residues from
agriculture (including vegetal and animal substances), forestry
and related industries, as well as the biodegradable fraction of
industrial and municipal waste.

2.2
The White Paper for a Community Strategy and Action
Plan – Energy for the Future: renewable Sources of Energy aims
at doubling the share of renewable in the total energy supply
for EU. This means increasing the use of renewable energy
sources (RES) to an amount that is equal to 12 % of the Euro-
pean Union's final energy consumption by 2010.

2.3
To kick-start the implementation of the strategy set out
in the White Paper a campaign for Take-off started in 1999,
aimed to go on until 2003. For a couple of renewable energy
sources indicative targets were set for additions in the period
1999-2003.

2.4
The Directive on the promotion of electricity from
renewable energy sources (RES-E) sets an overall target for the
share of electricity from renewable sources at 22 % of total EU
electricity consumption in 2010. The directive holds indicative
targets for the share of renewable electricity production for
each Member State.

2.5
The aim of the Directive on biofuels is to increase the
consumption of biofuels to 2 % of the consumption of diesel
and gasoline in 2005 and 5.75 % in 2010. In couple with this
directive the Directive on tax deductions for biofuels has been
approved, providing for a key instrument for Member States in
promoting biofuels.

2.6
The RES-E directive does not set any clear rules on
support measures to renewable electricity. It states, however,
that the Commission will make an overview of the implementa-
tion and results in 2005 and then possibly decide on one
common support method to be implemented throughout the
Union.

2.7 Meanwhile the Commission has in 2001 set Community
guidelines for State aid for environmental protection. These
apply in principle to aid for RES. The main thrust of the guide-

lines are that renewable energy sources may receive state
support. Aid schemes must be notified to the Commission.
Four different, alternative types of aid are allowed. Only a
given, but in some circumstances high, share of costs can be
covered by aid and it must not lead to over-compensation. Aid
schemes must be limited in time and the aid intensity have a
declining trend.

2.8
At the World Summit on Sustainable Development in
2002 it was agreed to work towards increasing the use of
renewable energy sources worldwide, but no target was set.
The EU, however, committed itself by forming a coalition of
likeminded states to work towards a global target for the share
of renewables in line with the EU target. The Commission is
preparing a communication on this issue.

3. Related Policies and Measures

3.1
Promoting energy efficiency is another pillar of energy
policy with the same objectives as promoting renewables, i.e.
security of supply and combating climate change. A key tech-
nology is combined heat and power generation, CHP. A direc-
tive on CHP will be adopted soon. Other measures for energy
efficiency are efficiency standards for appliances,
labelling, a
draft Directive on design of electricity-using equipment and
one on demand-side management (DSM).

3.1.1 Member States have also put into place own measures
for promoting energy efficiency.
In some cases Voluntary
Agreements have been successful. The general appreciation is
that there is still much potential in this area.

3.1.2 Measures for better energy efficiency do usually not
overlap or intervene with measures to promote renewables. In
the case of CHP there is, however, an overlap, because one
source in CHP generation is biomass. This overlap should not
cause any problems on the market or vis-a-vis fulfilling obliga-
tions under the different directives.

3.2
The EU scheme for emissions trading, as designed in the
recently adopted directive, covers energy generation causing
CO2 emissions. This directive does not directly cover renewable
energy or other emissions-free energy sources, like nuclear -
that is, under the scheme no credits are given for cutting CO2
emissions by investing in emissions-free generation. The cap-
and-trading system is, however, a very forceful instrument and
will, indirectly enhance renewables, as the system will increase
energy prices and the cost of using fossil fuels, rendering non-
emitting sources more competitive.

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3.2.1
The ET Directive and in particular the RES-E Directives
overlap, and are in some parts probably not coherent. The ET
Directive can also be seen to cover the climate change aspect
of promoting renewable energy sources. One question is,
whether the goal of decreasing CO2 emissions should be left to
emissions trading solely. Possibly redesigning measures related
RES to promote the objective of security of supply only. The
EU emissions trading will, according to several studies, increase
the market price of electricity considerably (conclusions vary
from 20 % to over 100 %). Is it economically and politically
feasible to add to this cost burden by also applying any direct
support scheme for RES that additionally increases the user's
electricity bill?

the electricity needed to produce hydrogen from water. Also
the production techniques need to be further developed to cut
costs, including technologies to handle this very explosive fuel
safely.

4. Promotion of renewables in Member States

4.1
Transposition of the Directives promoting use of renew-
able energy and the biofuels directive are still under way in the
Member States. It is too early to say whether all Member States
will meet the target dates, but it is probable that all will not.
All Member States have already notified their national targets.

3.3
EU agricultural policy has a major influence on the
provision of biomass for energy use. In this respect, reform of
is bringing changes.
the common agricultural policy (CAP)
Energy crops can now also be planted on normal agricultural
land and promoted with a EUR 45/ha subsidy.

States have meanwhile

4.2 Most Member
introduced
national support schemes for renewable energy sources. Some
have intensified schemes which were taken into use already
before EU-level policy declarations. Support systems in Member
States differ considerably from each other, and so do the levels
of compensation they provide.

3.4
The Intelligent Energy-Europe, a Community support
programme for non-technological actions in the field of energy
efficiency and renewable energy sources, was adopted in June
2003. It runs for 2003-2006 and support is granted to projects
committed to remove market barriers to energy efficiency and
renewable energy sources. The programme is structured in four
fields with ALTENER directed to new and renewable energy
sources. The others are SAVE for energy efficiency, STEER for
energy relating to transports and COOPENER cooperation with
developing countries.

R&D policies are key to both developing new renew-
3.5
ables solutions and further refining those technologies, which
already are on the marketplace or close to it. Some form of
renewables that fall under the definition of the RES-E Directive
are, as a matter of fact, still in a stage of early development and
will require substantive R&D efforts before their potential can
be fully developed.

4.2.1

Five main forms of support methods can be identified:

1) guaranteed feed-in tariffs and mandatory buy-back obliga-

tions;

2) renewables certificates, usually coupled with take-in obliga-

tions;

3) public-bidding systems;

4) tax relieves or exemptions, and

5) direct support to investments.

4.2.2
Feed-in tariffs are in use in at least Austria, France,
Germany and Greece. Certificate systems are in use Belgium, in
Denmark, the Netherlands, Sweden and the United Kingdom
and planned in Italy. Support is built into the energy/carbon
tax system in Finland,
the Netherlands and the United
Kingdom.

Hydrogen technology attracts much attention and
3.5.1
In some applications it seems to be close to
expectations.
market entry. Used as a transport fuel and in fuel cells, the big
potential of hydrogen lies in the fact that its use does not emit
greenhouse gases, it can offer a means of storing electricity and
substitute oil. Hydrogen is produced either from natural gas
(the primary fossil energy source), from water (through energy
consumption) with electricity or from biomass. These sources,
or either of them, need to be sufficiently available. Since the
known reserves of natural gas are limited, it would be prefer-
able to direct them towards use as transport fuel. Nuclear and
in the future hopefully photovoltaic are best suited to supply

4.2.3
An example of a feed-in tariff/buy back regime is the
German Law on Renewable Energies. The system provides for
guaranteed feed-in tariffs for generators of electricity from
renewable energy sources over 20 years. There are different
tariff groups for different technologies and different efficiency
levels within a group, normally over EUR 80/MWh. The tariffs
then gradually
are usually guaranteed for
decreasing over time. The costs are allocated to all consumers
at the same rate. The German Law has been tried for its
compatibility with State aid rule of the Treaty, and the judge-
ment was that it does not constitute State aid as it does not
involve State resources.

some years,

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4.2.4
An example of a system built into the tax system is
the Netherlands.
the Regulating Energy Taxation system of
Electricity not generated from renewable energy sources is
taxed in order to support the generation of ‘green’ electricity.
Industrial electricity users are widely exempted from the tax in
consideration of an alternative instrument established for
industry, i.e. the industry's obligation to meet world top energy
efficiency targets.

increase rate is thus nearly the same as the objective of the
countries of EU. One of the problems will be that these ten
countries do not have very much wind potential. Insofar the
use of wind power does not promise an efficient way of electri-
city generation. Therefore, the use of bio mass seems to get a
growing importance in most of the new member states.

4.2.5
The UK Renewables Obligation is an example on a
system of certificates and obligations. An obligation is imposed
on suppliers (3 % in 2002, 10.4 % in 2010). The costs thereof,
including a possible cost of a penalty (about EUR 45/MWh) is
allocated to the consumers.

As to the provision of heat, the new member states are
5.3
largely covered by extended district heating networks, which
have however partly suffered from lack of maintenance. The
potential for use of biomass and CHP for district heating can
be considerable, but details are not known.

4.3
Systems are mostly purely national, imports are usually
excluded. Even so, in some cases operators may achieve double
benefits. An example is wind energy produced in Germany and
exported to the Netherlands, which may get both the guaran-
teed feed-in tariff price in Germany and the support
in
receiving Netherlands.

There seems to be a big potential for increased energy
5.4
efficiency in the new member states, still considerably bigger
than in the EU. This must be enhanced in parallel with RES. In
particular information campaigns to citizens should be initiated
on how to save energy in households.

4.4 Wind energy is expected to contribute most
to the
overall targets, and support programmes are set accordingly.
Remuneration for wind power is presently over EUR 100 per
MWh in Italy and Belgium, and over EUR 50 in addition in
France, Austria, Portugal, Germany and the United Kingdom. In
some Member States the remuneration levels will
fall after
between five and 15 years.

5. Enlargement

5.1
The share of RES in the national electricity generation in
1997 is in only three of the ten new EU member countries
higher than the current EU average in the same year (12.9 %).
These three countries are:

— Latvia with 42.4 %;

— Slovakia with 17.9 %; and

— Slovenia with 29.9 %.

All of them use mainly hydro power resulting from a good
availability of this energy source. In all of the other seven coun-
tries the share of RES in electricity generation is quite low,
i.e. about 2 % in the average.

One benefit might result from the fact, that they have
5.5
started their efforts to use RES at a later stage. Therefore, they
can profit from experiences of success and failures in the EU
concerning RES use. To enable both the new as well as the
current EU Member States to do so, it seems necessary that
positive and negative results of RES use in all EU countries
should be monitored thoroughly each year. Thus, successful
developments can be further improved, whereas mistakes could
be reduced. Generating costs can become optimised.

5.6
To support the new members in this respect seems very
important, as their experience in using RES seems to be rather
restricted according to the statistical figures, which show that
most of RES-electricity generation is based on hydro.

An additional aspect in this context relates to the costs
5.7
of RES electricity. All new members suffer
from scarcity
concerning financial sources. Therefore any new technology
which needs much capital and only few manpower is a heavy
burden and reduces the possibility of the new EU members to
reach the EU-levels within a certain number of years. Expensive
energy consumption could result in reduced rates of growth
and bad competitiveness.

5.2
The national objectives of the new member countries
amount to an increase of their RES electricity generation which
in 2010 shall be more than double as high as 1997. This

5.8
Therefore, the development of competitive prices for
RES electricity production is vital especially for this group of
countries, since they will, of course, soon be obliged to accept
the same obligations and targets as the current EU Member
States.

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6. Potentials and non-tariff obstacles to renewables

6.4
Cumbersome and prolonged permit processes make
investments in RES often too risky and costly. A time limit
should be introduced and respected by authorities. Still, appeals
to court on decisions by authorities can extend the permit
process unpredictably, even to years.

The potential of renewable energy sources is big, but in
6.1
most cases still
limited, even when disregarding costs. The
potential differs both between sources, and in particular, over
time. The forms of RES, which have the biggest potential in the
short and medium term, mainly wind, hydro and biomass, also
have obvious limitations. Other
like
photovoltaic and tidal, are still in early stages of development
and will show their potential only after 20-30 years, perhaps
even more. They still need much effort of research and devel-
opment. This means very different approaches and solutions
than those directed to helping almost fully developed technolo-
gies be more efficient and thread the last steps to full competi-
tiveness.

forms of renewables,

In many cases the increased use of renewables requires
6.5
development of
infrastructures, which can take time. Also,
increased use of RES leads to additional requirements on and
sometimes problems for grids,
in particular if location para-
meters are not carefully taken into consideration. Therefore the
pace of increase in use may be somewhat slower than targets
indicate, or costs can be higher.

6.2
The use of wind power is limited by the need for back-
up power and related grid capacity. The production of biomass
is enhanced by agricultural and forestry policy. The use of
biomass for energy generation is, however, influenced by other
uses with higher value added. Any market-driven preference
granted to such uses could, however, put the production of
biomass at a competitive disadvantage. Building more hydro-
power is more difficult in Europe for reasons of natural protec-
tion; even forward-looking plans for small plants encounter
resistance.

6.6
In practical terms, the goal for promoting renewable
energy is to substitute fossil fuels, as these emit greenhouse
gases and are, to a large extent, imported from outside the EU.
Taking into account efficiency rates for the use of primary
energy, direct electricity generation from renewables, like wind,
has the best substitution effect. Substituting primary fossil fuel
use with renewable fuels is less effective. Combined heat and
power production from biomass increases this substitution
effect considerably. The Commission observed the substitution
principle in its overall planning, but it has often not been taken
into account when designing promotion measures and calcu-
lating results.

6.3
A growing, serious obstacle for increased use of renew-
ables is public resistance. Resistance can be caused by insuffi-
cient insight in the importance of increasing the use of RES as
well as misinformation about the qualities of the technologies.
information and educational
In order
campaigns should be set up, including taking the importance
and features of RES up on school curricula. Location decisions
must naturally always take account of local acceptance. Tech-
nological development can also provide for good solutions, like
off-shore wind generation instead of on-shore.

to deal with this

6.7
High expectations are put on renewable energy sources.
Taking into account the above mentioned limitations and the
long time span needed in many cases, it is obvious that renew-
ables will not solve all of Europe's energy problems. They can
make an important contribution in covering increased demand.
In the short or medium term they cannot, even in the most
positive but still realistic scenario, substitute coal or nuclear, let
alone both. For the longer run scenarios and visions need to be
developed,
in order to inspire and direct R&D and other
actions at an early stage.

7. Evaluation of promotion methods and results

Technologies for renewables attracts a lot of inventive-
6.3.1
ness and entrepreneurship. This should be encouraged and
fostered. Also should possibilities for
involvement of and
investment by local people be encouraged. In spite of support
systems, sometimes fairly open handed, one should however
not ignore the risks involved.

The effectiveness of the instruments vis-a-vis increasing
7.1
the use of renewables depends much on their detailed design.
But it seems that feed-in tariff regimes are particularly effective.
Cost effectiveness, adverse impacts on markets and other impli-
cations of
the systems must, however, also be taken into
account.

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7.2 Most support schemes do not open for competition
between different forms of renewables nor between renewables
and traditional generation. Most promotion schemes lack also
otherwise any element of enhancing technology and efficiency
development. Also a barrier mechanism for over-compensation
is often lacking.

line with them, usually differing on several points. When
the feed-in-tariff/buy-back
compared with these principles,
system seems to contradict several of them.

7.3 Markets structures for heat, electricity and transport
fuels are fundamentally different. Heat has a purely local
market, with the extension of district heating networks. Trans-
port fuels markets are competitive, distorted to some extent by
differing taxation within the EU. Electricity is starting to open
up, but still has a lot of obstacles for transborder trade.
Unbundling of infrastructure and ensured third party access are
key issues.

7.5
Some studies have already been made on how support
systems have worked and forecasts have been made on the
resulting increases in the production and use of renewables.
Some of the studies take into account that the EU instruments
are mostly not yet in force. Some include the effects of policies
and instruments to be taken into use in the near future. Results
vary substantially, but it seems that most Member States will
have big difficulties reaching their targets for increasing RES by
2010, as will the EU as a whole.

Any measure to promote electricity and transport
7.3.1
fuels from renewables should take careful consideration of not
distorting competition in the internal market. A level playing
field for all in the EU, which is presently not the case, should
be put as a central goal.

In some cases substantial

7.6
increase in renewables has,
however, been achieved. The most obvious example is the
increase of wind power in Denmark, Germany and Spain. This
indicates that increases are possible, even in by natural circum-
stances less favourable areas, like inland Germany for wind. If
every Member State would follow the example of those with
the best achievements, the total EU target would be reached.

7.3.2
In the case of electricity, EU-wide optimal use of
natural and climatic circumstances as well as existing grid capa-
city should be taken into account when planning promotion
measures. Otherwise solutions will be all but cost efficient,
leading to much higher costs of investments and use for the
same end result. One example is the positioning of wind power
parks – they should be optimised in relation to beneficial wind
conditions and, on the other hand, grid capacity and use.
Today this is not the case, when driving factors are national
targets.

7.4
The RES-E Directive sets criteria on national support
schemes. They must be compatible with the internal market,
take into account the different characteristics of RES, be effi-
cient and simple and include sufficient transitional regimes to
maintain investors' confidence.
In its opinion on the RES-E
Directive the Committee proposed additional principles to be
taken into consideration. These include an affordable cost
burden on users and public funds, decreasing compensation
levels, no long term continuing support, full transparency and,
as far as possible,
leaving the final decision to the market,
including normal market risks.

7.4.1
These principles are still fully valid. Unfortunately it
seems that many national support schemes in place are not in

7.7
Reaching the EU target is thus not impossible, the ques-
tion is whether politicians and voters are willing to put up the
resources needed. Costs must be tolerable for consumers and
the global competitiveness of European industries must not be
jeopardised.

7.8 Many Member States, in particular the three mentioned
above, have opted for substantially high remuneration levels
for renewables. Evaluating acceptability of costs for meeting
RES targets are political decisions. The impression is, however,
that cost
levels are in many cases very high, when one
compares remuneration levels up to over EUR 100 per MWh
with the present market price for electricity (excl. transmission
and taxes), which on average is about EUR 25-30 per MWh.

7.9
As long as the amounts of renewables receiving support
are fairly small, so is the total cost. But when the amounts
increase, in accordance with objectives, the cost burden starts
to have an impact of users' economy. This may cause reactions
amongst voters, like in Denmark, or affect the competitiveness
of, in particular, big energy users in industry, which hardly is
in line with the objectives of the Lisbon strategy and other
economic goals.

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8.7
The Commission is, according to the RES-E Directive, in
2005 to review the developments of use of electricity from
renewable sources and can propose one single support system.
It will take until 2012 to reach full harmonisation. It is to be
expected that most Member States will strongly resist if they
have to change a system they have run for several years.

8.8
The introduction of a single support system for RES-E is
not by many seen as necessary at this stage. Also there is no
perfect choice for such a system. The Committee's view is that
a common system should be developed and introduced in due
course, and that developments towards further fragmentation
of national systems should be counteracted already now. A
common system should by its design particularly enhance inno-
vation and competitiveness.

The Commission has responsibility for the execution of
8.9
policies it has proposed. Even if it is an early stage in imple-
menting EU policies for renewable energy, the Commission
should pay serious attention to the above-mentioned problems
before they worsen over time.

8.10

The EESC recommends that DG TREN:

— strengthens its efforts to facilitate the exchange of good
practices between Member States, regions and other actors
for promotion of RES, with a particular emphasis on the
new member states;

— requests Member States to monitor yearly the developments
in their RES markets with a view to compile both statistical
figures and information on experiences, and that DG TREN
publishes a yearly summary report on this;

— makes an in-depth evaluation of the interaction, coherence
and practical effects of different EU policies affecting the
use of renewable energy sources and technologies in order
In particular the effects of the
to avoid over-regulation.
emissions trading Directive should be closely studied and
acted upon before the implementation of the Directive;

— without delay starts a thorough study of the developments
and the present situation of promoting RES, covering in
particular innovativeness, market issues, cost effectiveness
of support measures and their impact on cost burdens for
consumers and on global competitiveness of EU industries.

The President

of the European Economic and Social
Committee

Roger BRIESCH

8. Conclusions and recommendations

8.1
At the moment it seems that neither most Member
States nor the EU as a whole will reach their targets for
increasing the use of renewable energy sources by 2010.
Achievements in some Member States indicate, that it would
not be impossible to reach the EU target. It is, however, uncer-
tain whether the political willpower and the resources needed
can be fully mobilised.

8.2
As there are no EU-wide guidelines for support systems
for RES, Member States have applied national systems, varying
much in approach, design and intensity. It seems that many of
the present
to be critically
reviewed vis-à-vis their cost effectiveness.

schemes need,

in particular,

The present situation creates obstacles in the internal
8.3
market when schemes are purely national and imports are
excluded. The court's view on this concerning electricity is that
this is not the case, because the internal electricity market is
not fully open until 2007. Cross-boarder trade of electricity is,
however, already everyday and growing all over the EU.

8.4
There is also no level playing field among market actors
in different parts of the EU. There are several reasons for this:
for instance the European Court of Justice decision (1) that the
German feed-in-tariff system does not constitute state aid
because state funds are not
In economic terms,
involved.
however,
there is hardly any difference between support
flowing from consumers directly or the same money flowing
from the taxpayer via the state pocket.

8.5
As to the different forms of support schemes, no-one
meets fully the requirements of being effective, not distorting
the market and enhancing competition and innovation. For
feed-in-tariffs prices are set by authorities and amounts by the
market. For certificate trading it is vice versa. Feed-in schemes
can take into account efficiency, if properly used. Certificates
may not give enough security for investment, while prices may
be volatile.

The cost of RES promotion schemes is in some cases
8.6
already very high. This is starting to raise concern and this can
develop into a political backlash for the goal and policies of
increasing renewables.

Brussels, 28 January 2004.

(1) ECJ ruling of 13.3.2001, case C-379/98