Communication from the Commission - The support of electricity from renewable energy sources {SEC(2005) 1571}
Date: 2005-12-07
Institutions: European Commission
Subjects: electrical energy, energy production, physical environment, production aid, renewable energy

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 7.12.2005 
COM(2005) 627 final 

COMMUNICATION FROM THE COMMISSION 

The support of electricity from renewable energy sources 

{SEC(2005) 1571} 

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TABLE OF CONTENTS 

1. 

2. 

3. 

4. 

5. 

6. 

7. 

8. 

Introduction .................................................................................................................. 3 

Assessment of existing support systems ...................................................................... 4 

Internal market and trade aspects................................................................................. 8 

Co-existence or harmonisation................................................................................... 11 

Administrative barriers............................................................................................... 12 

Grid access issues....................................................................................................... 14 

Guarantees of origin................................................................................................... 15 

Conclusions ................................................................................................................ 16 

Annex 1 – Current share of electricity from renewable energy sources .................................. 19 

Annex 2 –Inventory of current support systems ...................................................................... 22 

Annex 3 – Costs of current support systems and effectiveness ............................................... 24 

Annex 4 – Methodology for the investor’s perspective ........................................................... 41 

Annex 5 – Intermittency in production and balancing power: need for an appropriate 
combination of internal market and renewables regulation ..................................................... 44 

Annex 6 – Administrative barriers ........................................................................................... 46 

Annex 7 – Guarantees of origin ............................................................................................... 48

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COMMUNICATION FROM THE COMMISSION 

The support of electricity from renewable energy sources 

(Text with EEA relevance) 

1. 

INTRODUCTION 

1.1.  Reasons for the report 

Increasing the share of renewables in the EU electricity has well recognised benefits mainly in 
particular: 

–  Improved security of energy supply.  

–  Enhanced competitive edge for the EU in the renewable energies technology industries. 

–  Mitigation of greenhouse gas emissions by the EU power sector.  

–  Mitigation of regional and local pollutant emissions. 

–  Improved economic and social prospects especially for rural and isolated regions.  

Therefore the European Union aims to have renewable energy sources providing 21% of the 
electricity by the year 2010 (see Annex 1). This target has been formulated in the Directive 
2001/77/EC1 on the promotion of electricity produced from renewable energy sources in the 
internal  electricity  market,  which  has  also  set  differentiated  targets  for  each  Member  State. 
The  Directive  further  stipulates  that  Member  States  have  to  provide  better  grid  access  for 
renewable  energy  generators,  streamline  and  facilitate  authorisation  procedures  and  to 
establish a system of guarantees of origin. 

The  dedicated  public  support  for  penetration  of  green  electricity  in  the  electricity  market  is 
justified because the benefits listed above are not (or only partially) captured by the net added 
value fetched by operators in the value chain of renewables-based electricity. 

Under the Directive, Member States have set up individual RES-E (electricity from renewable 
energy source) targets. They are free to choose their preferred support mechanism in order to 
achieve the targets and/or are allowed to continue to do so for a transitional period of at least 
seven  years  after  a  new  EU-wide  regulatory  framework  would  be  adopted.  Article  4  of  the 
Directive  states  that,  not  later  than  27  October  2005,  the  Commission  shall  present  a  well 
documented report on experience gained with the application and coexistence of the different 
mechanisms  used  in  Member  States.  The  report  shall  assess  the  success,  including  cost 
effectiveness, of the support systems promoting the consumption of electricity from renewable 
energy sources in conformity with the national indicative targets. This Article also states that 

1 

Directive 2001/77/EC of 27 September 2001 on the promotion of electricity produced from renewable 
energies  sources  in  the  internal  electricity  market  (OJ  L  283,  27.10.2001,  p.  33).  The  date  for  the 
implementation of this Directive was October 2003 and for the new Member States, 1 May 2004.  

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the  report  may  be  accompanied  by  a  proposal  for  a  Community  framework  with  regard  to 
support schemes, if appropriate. 

1.2. 

Scope 

This Communication serves three purposes: 

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- 

- 

The  report  that  the  Commission  is  required  to  make  under  Article  4  of 
Directive 2001/77/EC, presenting an inventory and the experience gained with 
the  application  and  coexistence  of  the  different  mechanisms  used  in  Member 
States for supporting electricity from renewable energy sources. 

The report that the Commission is required to make under Article 8 concerning 
administrative  barriers  and  grid  issues  and  the  implementation  of  the 
guarantee of origin on renewable electricity. 

A  plan  for  coordination  of  the  existing  systems  based  on  two  pillars: 
cooperation  between  countries  and  optimisation  of  the  national  schemes 
which will likely lead to a convergence of the systems. 

2. 

ASSESSMENT OF EXISTING SUPPORT SYSTEMS  

2.1. 

The existing support systems 

There  are  currently  in  the  EU  a  range  of  different  support  systems  operational  that  can  be 
broadly  classified  into  four  groups:  feed-in  tariffs,  green  certificates,  tendering  systems  and 
tax incentives. 

- 

- 

Feed-in tariffs exist in most of the Member States. These systems are characterised 
by  a  specific  price,  normally  set  for  a  period  of  around  several  years,  that  must  be 
paid  by  electricity  companies,  usually  distributors,  to  domestic  producers  of  green 
electricity. The additional costs of these schemes are paid by suppliers in proportion 
to  their  sales  volume  and  are  passed  through  to  the  power  consumers  by  way  of  a 
premium  on  the  kWh  end-user  price.  These  schemes  have  the  advantages  of 
investment  security,  the  possibility  of  fine  tuning  and  the  promotion  of  mid-  and 
long-term  technologies.  On  the  other  hand,  they  are  difficult  to  harmonise  at  EU 
level, may be challenged under internal market principles and involve a risk of over-
funding, if the learning-curve for each RES-E technology is not build in as a form of 
degression  over  time.  A  variant  of  the  feed-in  tariff  scheme  is  the  fixed-premium 
mechanism  currently  implemented  in  Denmark  and  partially  in  Spain.  Under  this 
system, the government sets a fixed premium or an environmental bonus, paid above 
the normal or spot electricity price to RES-E generators.  

Under  the  green  certificate  system,  currently  existing  in  SE,  UK,  IT,  BE  and  PL, 
RES-E is sold at conventional power-market prices. In order to finance the additional 
cost of producing green electricity, and to ensure that the desired green electricity is 
generated, all consumers (or in some countries producers) are obliged to purchase a 
certain  number  of  green  certificates  from  RES-E  producers  according  to  a  fixed 
percentage,  or  quota,  of  their  total  electricity  consumption/production.  Penalty 
payments  for  non-compliance  are  transferred  either  to  a  renewables  research, 
development and demonstration (RD&D) fund or to the general government budget. 

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Since  producers/consumers  wish  to  buy  these  certificates  as  cheaply  as  possible,  a 
secondary market of certificates develops where RES-E producers compete with one 
another  to  sell  green  certificates.  Therefore,  green  certificates  are  market-based 
instruments,  which  have  the  theoretical  potential,  if  functioning  well,  of  ensuring 
best  value  for  investment.  These  systems  could  work  well  in  a  single  European 
market and have in theory a lower risk of over-funding. However, green certificates 
may pose a higher risk for investors and long-term, currently high cost technologies 
are  not  easily  developed  under  such  schemes.  These  systems  present  higher 
administrative costs. 

Pure  tendering  procedures  existed  in  two  Member  States  (IE  and  FR).  However, 
France  has  recently  changed  its  system  to  a  feed-in  tariff  combined  with  tendering 
system  in  some  cases  and  Ireland  has  just  announced  a  similar  move.  Under  a 
tendering  procedure,  the  state  places  a  series  of  tenders  for  the  supply  of  RES-E, 
which is then supplied on a contract basis at the price resulting from the tender. The 
additional  costs  generated  by  the  purchase  of  RES-E  are  passed  on  to  the  end-
consumer of electricity through a specific levy. While tendering systems theoretically 
make optimum use of market forces, they have a stop-and-go nature not conductive 
to  stable  conditions.  This  type  of  scheme  also  involves  the  risk  that  low  bids  may 
result in projects not being implemented.  

Systems  based  only  on  tax  incentives  are  applied  in  Malta  and  Finland.  In  most 
cases (e.g. Cyprus, UK and the Czech Republic), however, this instrument is used as 
an additional policy tool. 

- 

- 

The  above  categorisation  into  four  groups  is  a  fairly  simple  presentation  of  the  situation. 
There  are  several  systems  that  have  mixed  elements,  especially  in  combination  with  tax 
incentives. Annex 2 gives an overview of support schemes in EU-25. 

2.2. 

Assessment of the performance  

The generation cost of renewable energies varies widely. National, regional, and agricultural 
resources are rather different in Member States. Any assessment of support schemes should 
therefore look at each individual sector.  

The current level of support for RES-E differs significantly among the EU Member States. 
Annex 3 gives a detailed assessment of the differences between the total money received for 
renewable energy produced and the generation cost2, therefore pointing at the cost-efficiency 
of the different schemes. When delivering, the wider the gap between “generation costs” and 
“support”  the  less  the  cost-efficient  the  system  is.  Due  to  the  complexity  of  the  different 
renewable energies and the differences in national situation, an analysis per sector has been 
chosen. A parallel lecture of the graphs in Annex 3 can give how cost-effective and efficient 
such a system is. 

In the case of wind power, the green certificate systems show a big gap between generation 
and support. The reasons for the higher cost may be found in the higher investment risk, with 
such schemes and probably in the still immature market for green certificates.  

2 

The average level for 2003 and 2004 is used. In the feed-in system, the support price level is equal to 
the value of the tariff. The source for generation costs used in this Communication is Green-X. 

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Wind is poorly supported in nine of the twenty-five Member States. Where the total money 
received by producers is lower than generation costs, no movement will be seen in this sector 
for those countries. 

For  biomass  forestry,  half  of  the  Member  States  do  not  give  enough  support  to  cover 
generation costs. In the case of biogas, in nearly three quarters of the Member States, support 
is not sufficient for deployment. 

Alongside  the  cost,  the  effectiveness  of  the  different  support  systems  is  also  an  essential 
parameter in the assessment.  

Effectiveness refers to the ability of a support scheme to deliver green electricity.  

In  assessing  effectiveness,  the  effects  of  more  recent  systems  are  difficult  to  judge.  In 
particular,  the  experience  with  green  certificates  is  more  limited  than  with  feed  in  tariffs. 
Moreover, the amount of green electricity delivered needs to be assessed against the realistic 
potential3 of the country.  

For wind energy, Annex 3 shows that all countries with an effectiveness higher than the EU 
average use feed-in tariffs. This type of system currently has the best performance for wind 
energy. 

The analyses for biomass sectors are not as clear as in the case of wind. The generation cost of 
biomass shows big variations4. These large variations are caused by: different sources (forest 
residues, short rotation coppice, straw, animal waste, etc.), different conversion processes of 
transformation  (co-combustion,  gasifications,  etc.)  and  different  sizes  (existing  sizes  of 
biomass  plants  can  vary  by  a  factor  of  200).  Thus  much  more  precise  analyses  are  needed, 
based on specific feed-stocks and technologies. 

Nevertheless, the analysis shows that, for biogas, both feed-in and green certificates produce 
good  results  (four  countries  with  feed-in  and  two  countries  with  green  certificates  show  a 
higher effectiveness than the European average). In the biomass forestry sector, it cannot be 
concluded  that  one  system  is  better  than  another.  The  complexity  of  the  sector  and  the 
regional variations mean that other factors play a strong role5. In general, incentives to forest 
harvesting should help mobilise more unused forest biomass for all users.  

It is also important to compare profits from an investor perspective and effectiveness. This 
exercise is carried out for a limited number of Member States in Annex 4, assuming current 
prices over a longer period. This gives an indication as to whether the success of a specific 
policy is primarily based on the high financial incentives, or whether other aspects have had a 
crucial impact on market diffusion in the countries considered.  

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5 

The potential should be read as the “realisable additional achievable potential assuming that all existing 
barriers can be overcome and all driving forces are active”. See Annex 3 for more detailed explanation. 
Wind on-shore cost varies between €40-100/MWh while biomass varies between €25 and €220/MWh.  
The support level for biomass is linked more to other factors like the policy choice (big or small plants, 
with or without co-firing…) than to the instrument chosen (feed-in or green certificate).  

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2.3.  Main conclusions as regards performance (see Annexes 3 and 4) 

Wind energy 

•  The green certificate systems present currently a significantly higher support level than the 
feed-in tariffs. This could be explained by the higher risk premium demanded by investors, 
the administrative costs as well as a still immature green certificate market. The question is 
how the price level will develop at the medium and long term.  

•  The  most  effective  systems  for  wind  energy  are  currently  the  feed-in  tariff  systems  in 

Germany, Spain and Denmark. 

•  The capital return with green certificates is higher than for feed-in tariffs. This high return 
(annuity), is calculated by extrapolating from the currently observed certificate prices6. The 
capital return will depend on the future price developments. 

•  The analyses show that, in a quarter of the Member States, support is too low for any take-
off. Another quarter provides enough support but still obtain mediocre results. This can be 
explained by the existence of grid and administrative barriers.  

•  Regarding  profit,  the  feed-in  systems  investigated  are  effective  with  a  relatively  low 
producer profit. On the other hand, green certificates at present have high profit margins. It 
should be emphasised that these green certificate systems are rather new instruments. The 
situation observed might therefore still be characterised by significant transient effects. 

Biomass forestry 

•  Denmark’s  system  with  feed-in  tariffs  and  centralised  co-generation  plants  using  straw7 
combustion and the Finish hybrid support system (tax relief and investment) clearly show 
the best performance, in terms of both effectiveness and economic efficiency of support. A 
long tradition in high-tech biomass use for energy purposes, stable planning conditions and 
a combination with heat generation can be considered as key reasons for this development. 

•  Although feed-in tariffs in general show better outcomes, since investor risks where green 
certificates  are  concerned  seem  to  hamper  the  real  take-off  of  the  biomass  sector,  the 
analysis is more complex in the biomass forestry sector. Factors other than the choice of 
financial instrument (infrastructural barriers, installation sizes, optimal forest management 
and the existence of secondary instruments, etc.), considerably influence the effectiveness 
of systems. 

In nearly half of European countries, the support for biomass forestry it insufficient to develop 
this  high-potential  sector  further.  In  many  regions  incentives  would  be  needed,  targeted  at 
forest  harvesting,  to  increase  the  wood-flow  from  EU  forests  to  all  users,  thus  preventing 
possible distortions in the market for wood residues. 

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The big question is how the green certificate price will evolve in the coming years. The analyses shown 
in this document are based on a constant value for the certificates. 
Biomass use of straw is included in the analyses of the biomass forestry although by origin it is not a 
forestry product. Denmark is the main country using this type of biomass. 

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Biogas8 sector 

Six  countries  have  an  effectiveness  higher  than  the  EU  average,  four  of  them  with  feed-in 
tariffs (DK, DE, GR, LU) and two of them with green certificates (UK, IT). As in the biomass 
forestry sector, these results are influenced by other factors: 

- 

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- 

The  agro-economic  possibilities  and  the  choice  of  the  size  of  plants.  Large  plants 
have a higher effectiveness. Small plants are supposed to be more important for the 
rural economy, but the cost is higher. 

The  existence  of  a  complementary  support  scheme.  The  biogas  sector  is  intimately 
linked  to  environmental  policy  for  waste  treatment.  Countries  like  the  UK  support 
biogas with a secondary instrument such as tax relief. Complementary investment aid 
is also a good catalyst for this technology. 

For  agricultural  biogas9,  generation  costs  are  higher  but  so  re  the  environmental 
benefits. With landfill gas, the cost is lower but the environmental benefit is reduced.  

Nearly 70% of the EU countries do not provide give enough support for the development of 
this technology. 

Other renewable energy sources 

The  small  hydropower  sector  shows  large  variations  in  both  supports  and  generation  costs. 
The development of this renewable technology is considerably influenced by the existence of 
barriers.  

Solar  photovoltaic energy is  currently actively promoted in DE (world leader),  NL, ES,  LU 
and AT.  

Full analyses of small hydro and solar photovoltaic energy production can be found in Annex 
3. 

There  are  other  renewable  energies  producing  electricity  which  are  not  included  in  this 
document. One of them is large hydro which is a well developed source of renewable energy 
and  in  general  it  does  not  need  any  support.  Geothermal  energy,  wave  and  tidal  and  solar 
thermal  concentrating  power  are  other  renewable  energies  which  are  not  included  in  this 
report, as they are only supported in some Member States or not yet applied at industrial level. 

3. 

INTERNAL MARKET AND TRADE ASPECTS 

3.1. 

Introduction 

Internal  electricity  market  and  support  of  RES-E  are  intimately  linked  together.  Renewable 
energies provide new installations contributing to security of supply and enlarging the energy 
mix  of  electricity  generators.  Conversely,  internal  market  aspects,  like  free  trade, 

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Biogas  includes  all  the  fermentation  processes  of  biomass:  biogas  with  Co-fermentation,  sewage  and 
landfill gas 
Agriculture biogas is the result of the specific treatment of waste from animal and plant production or 
from specific energy crops. Landfill biogas involves the extraction of methane from dumped wastes.  

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transparency, unbundling, disclosure, inter-connectors, can accelerate the deployment of RES-
E  in  the  internal  electricity  market.  In  many  cases,  support  to  renewable  energy  sources  is 
covered  by  the  Community  guidelines  on  state  aid  for  environmental  protection10.  State  aid 
rules can influence the design of the support scheme. 

3.2. 

Unbundling, transparency and dominant players 

In  an  unbundled  market11,  an  independent  Transmission  System  Operator  (TSO)  and  an 
independent Distribution System Operator (DSO) are obliged to guarantee fair grid access to 
all  producers  and  have  to  develop  the  network  infrastructure  according  to  a  long-term 
strategy, taking account of the integration of renewable energy resources.  

Some  countries  are  still  characterised  by  the  dominance  of  one  or  a  few  power  companies, 
often vertically integrated. This might entail a monopoly-like situation, which could hamper 
the development of RES-E.  

For the good functioning of all RES-E support systems, truly independent TSO and DSOs are 
an essential factor. 

Governments have to improve consumer information on how the cost of a renewable energy 
support  is  transferred  to  the  user.  According  to  estimates  by  the  European  Commission, 
renewable  support  represents  between  4%  and  5%  of  electricity  tariffs  in  Spain,  UK  and 
Germany and accounts for as much as 15% of the tariff costs in Denmark. The share of non-
hydro RES-E in these countries is currently 3.5% for the UK, 9% for DE, 7% for ES and 20% 
for DK (see Annex 5) 

3.3. 

Intermittency  in  Production  and  Balancing  power:  a  need  for  appropriate 
regulation to combine internal market and renewable regulation 

Wind  power  –  like  other  renewable  sources  –  is  an  intermittent  source  of  energy.  The 
following issues are especially important:  

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13 

The  prediction  of  wind.  In  countries  like  Denmark,  United  Kingdom  and  Spain, 
RES-E  generators  have  to  predict  their  production,  just  like  other  electricity 
producers. The more firm this prediction, the greater the value of intermittent RES-E 
sources. 

The time of gate closure12. The closer gate closure is to the operating hour, the better 
intermittent RES-E technologies can predict how much electricity they will be able 
to deliver. 

The charging of the balancing costs. UK, DK and ES13 have systems for charging for 
the  deviation  from  the  predicted  production  of  electricity,  of  whatever  origin, 

OJ C 37, 3.2.2001, p. 3 
Unbundling  is  described  in  Directive  2003/54/EC  as  follows:  in  order  to  ensure  efficient  and  non-
discriminatory network access, the distribution and transmission systems must be operated by entities 
which are legally and functionally separated especially from generation and supply activities. 
The closing time for power markets for receiving bids from electricity producers. 
UK  has  green  certificates  as  the  main  support  scheme  for  renewables.  DK  and  Spain  have  feed-in 
tariffs. 

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including wind electricity. A more detailed analysis of balancing costs can be found 
in Annex 5. 

An  intelligent  design  of  the  support  scheme  can  contribute  alleviating  the  problem  of 
intermittency. 

In  cases  where  power  production  from  intermittent sources  covers  a  high  share  of  domestic 
power consumption, it is important for RES-E producers to be able to  react better to power 
prices  on  the  spot  market.  The  integration  of  large  shares  of  intermittent  RES-E  power  into 
the  system  can  therefore  be  facilitated  by  a  support  system  that  includes  a  link  to  the  spot 
power price and therefore a risk-sharing approach. This is the case with a premium system14, a 
green certificate system and some feed-in schemes like the one in Spain15.  

3.4. 

Trade of Power 

The  impact  of  the  different  support  schemes  on  trade  is  an  important  aspect  of  the 
compatibility  of  RES  support  measures  with  the  internal  market.  A  distinction  needs  to  be 
made between the physical trade in power (electricity) and the green value of the electricity. 

The  physical  trade  in  RES-E  is  subject  to  the  same  restrictions  that  apply  to  conventional 
electricity16.  It  is  in  general  possible  and  is  currently  happening.  The  deployment  of  RES-E 
would  probably 
in  power  and  stronger 
interconnectors. 

the  need  for  cross-border 

increase 

trade 

Article 3(6) of Directive 2003/54/EC establishes a mandatory disclosure system under which 
consumers have to be informed of the contribution of each energy source to the overall fuel 
mix. The full implementation of the disclosure would increase the green value of renewable 
electricity.  The  disclosure  of  the  origin  of  electricity  would  also  give  added  value  to  a 
generator portfolio with a higher RES share. 

3.5. 

State aid rules 

When  talking  about  competition  in  the  RES  market  and  European  economies  at  large,  one 
should  also  pay  attention  to  the  distorting  effects  that  support  might  have  on  the  smooth 
workings of the market. As stated in indent 12 of the pre-amble of Directive 2001/77/EC, the 
rules of the Treaty, and in particular Articles 87 and 88 thereof, apply to public support. Such 
support  is  normally  covered  by  the  Community  Guidelines  on  State  aid  for  Environmental 
Protection  and  might  be  economically  justified  on  a  number  of  grounds  as  the  beneficial 
effects of such measures on the environment outweigh the distorting effects on competition. 
Since the use of renewable energy sources is a priority in the policy of the Community, the 
mentioned  guidelines  are  rather  generous  for  such  support  schemes.  On  that  basis,  some  60 
State  aid  schemes  supporting  renewable  energy  sources  were  approved  by  the  Commission 
during the period 2001 to 2004. 

14 

15 

16 

To recall, a premium system is normally classified as feed-in system although there are differences: a 
premium  is  applied  to  RES-E  generators  on  the  top  of  the  spot  market  price.  The  final  price  paid  to 
RES-E fluctuates with the normal electricity spot market. 
The  feed-in  system  in  Spain  includes  charges  for  the  deviation  in  electricity  production  for  RES 
generators – as for the rest of electricity generators.  
Currently around 11% of all electricity is the subject of physical cross-border trade in Europe. 

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3.6.  Main conclusion 

The compatibility of all different renewable energy support schemes with the development of 
the internal electricity market is essential in the medium and long term. The construction of a 
European  internal  market  should  be  accomplished  through  adequate  regulation  taking  into 
account the steps needed for the development of RES-E. The design of the market is essential 
for  the  development  and  take-up  of  RES-E.  Where  applicable,  the  State  aid  rules  must  be 
taken into account at the design of the support schemes. 

4. 

CO-EXISTENCE OR HARMONISATION 

Due  to  widely  varying  potentials  and  developments  in  different  Member  states  regarding 
renewable energies, a harmonisation seems to be very difficult to achieve in the short term. In 
addition, short term changes to the system might potentially disrupt certain markets and make 
it  more  difficult  for  Member  States  meeting  their  targets.  Nevertheless  the  advantages  and 
disadvantages of harmonisation towards the different current systems have to be analysed and 
monitored also notably for the medium to longer term development.  

4.1. 

Potential advantages 

•  A number of studies suggest that the overall cost of complying with the RES-E target share 
in  2010  could  be  substantially  lower  with  harmonisation  of  green  certificate  or  feed-in 
systems  than  with  the  continuation  of  the  present  different  national  policies.  However,  a 
better  functioning  internal  electricity  market  and  a  higher  interconnection  and  trade 
capacity are required to enable these cost-efficiencies to take place and market distortions 
in the form of support for conventional energy sources should be eliminated. 

•  The  integration  of  renewable  energies  in  the  internal  market  with  one  basic  set  of  rules 
could create economies of scale needed for a flourishing and more competitive renewable 
electricity industry. 

•  A Europe-wide green certificate scheme is likely to lead to a bigger and thus more liquid 
certificates market, which would result in more stable green certificate prices compared to 
smaller (national) markets. However, the administrative costs of such a system would need 
to be assessed against the administrative costs of the current situation.  

•  A  European  wide  common  feed-in  scheme  which  takes  into  account  the  availability  of 
local resources could drive down the costs of all RES technologies in the different Member 
States  as  installations  are  not  restricted  to  certain  Member  States.  Such  a  feed-in  system 
could either consist of fixed tariffs or “premium” tariffs on top of a base price bound to the 
average electricity price. 

4.2. 

Potential disadvantages 

•  A harmonised green certificate scheme can work only if it results in the correct certificate 
prices and penalties across the EU and thus the most efficient build-up of RES installations 
in  the  various  countries.  Significant  fluctuations  in  the  green  certificate  price  can  lead  to 
increased investor uncertainty and reduced build-up of RES.  

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•  Considerable  information  on  technologies  and  costs  are  needed  in  order  to  optimise  the 
tariffs and keep the costs low for a harmonised feed-in tariff system. Hence, if these issues 
are not managed properly, the system could risk becoming expensive and inflexible. 

•  Harmonisation  through  a  green  certificate  scheme  with  no  differentiation  by  technology 
would negatively influence dynamic efficiency. Since such a scheme would promote cost-
efficiency  first,  only  the  currently  most  competitive  technologies  would  expand.  While 
such  an  outcome  would  be  beneficial  in  the  short  run,  investment  in  other  promising 
technologies  might  not  be  sufficiently  stimulated  through  the  green  certificate  scheme. 
Other policies would thus need to complement such as scheme.  

•  Member States that become importers of RES-E in a harmonised system may be unwilling 
to pay the bill if they do not profit from the local beneficial effects (employment and rural 
development, diversity and thus security of indigenous energy supplies and reduced local 
pollution)  which  would  be  achieved  if  the  renewable  energies  were  produced  in  their 
territory. 

•  On  the  other  hand,  even  the  exporting  countries  might  be  unwilling  to  have  more  RES 
capacity  than  needed  for  their  own  targets,  as  this  could  create  opposition  within  the 
population to future RES installations (NIMBY-ism17). 

5. 

ADMINISTRATIVE BARRIERS 

It is impossible to isolate the discussions of support schemes from the issue of administrative 
barriers. To meet RES-E penetration targets in a cost-effective way, it is necessary to create a 
process that will facilitate increased RES-E generation in a timely and simple manner.  

This  chapter  –  in  accordance  with  Article  6  of  Directive  2001/77/EC  –  will  analyse  the 
different  problems  and  propose  some  solutions  for  reducing  the  administrative  burden  (see 
Annex 6 for more information).  

5.1. 

Identified barriers 

Barriers that project developers and investors encounter when installing new capacities can be 
of  administrative,  grid,  social  and  financial  nature.  Recently,  the  Commission  launched  a 
public consultation process on how barriers were perceived18.  

The identified administrative barriers can be classified into the following categories: 

1. 

Large number of authorities involved and lack of coordination between them 

An important issue that could hinder the greater presence of renewable energy sources is the 
existence  of  several  layers  of  competence  for  the  authorisation  of  generating  units. 
Requirements  imposed  by  the  numerous  authorities  involved  (national,  regional  and 
municipal)  often  lead  to  delays,  investment  uncertainty,  a  multiplication  of  efforts  and 

17 
18 

NIMBY-ism is the acronym of “Not In My Back Yard”. 
The  stakeholder  consultation  consisted  of  a  web-based  questionnaire  and  follow-up  interviews.  This 
process is described in the Impact Assessment accompanying this Communication. 

EN 

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potentially greater demands for incentives by developers in order to offset investment risks or 
the initial capital intensity of the project.  

Where  different  levels  of  administrations  are  involved,  Member  States  should  appoint  one- 
stop  authorisation  agencies,  responsible  for  the  co-ordination  of  several  administrative 
procedures, such as the Bundesamt für Seeschifffahrt und Hydrographie for off-shore wind in 
Germany. Standard forms and requirements should also be used by the different authorities.  

2. 

Long lead times needed to obtain necessary permits 

For onshore wind projects authorisation procedures may take two to seven years19, which has 
in some  cases it  has led to insinuations  of totally ‘freezing’ the development  of  the  market. 
The  track  record  of  authorisation  procedures  for  offshore  wind  projects  is  even  more 
inefficient,  as  until  recently  no  clear  procedures  were  established  for  the  division  of 
responsibilities among the different government authorities concerned.  

Clear  guidelines  for  authorization  procedures  are  highly  recommended  and  obligatory 
response periods for the authorities involved need to be incorporated in such procedures. The 
setting of approval rates20 is an excellent tool for checking the streamlining of authorisations.  

3. 

RES insufficiently taken into account in spatial planning 

In  many  countries  and  regions,  the  future  development  of  RES  projects  is  not  taken  into 
account in drawing up spatial plans. This means that new spatial plans have to be adopted in 
order to allow for the implementation of an RES-E project in a specific area. This process can 
take a very long time. Often obtaining the permits related to spatial planning accounts for the 
largest part of the overall period needed for the development of a project. This is especially 
the  case  for  projects  in  the  field  of  wind  and  biomass.  Authorities  should  be  encouraged  to 
anticipate  the  development  of  future  RES  projects  (pre-planning)  in  their  region  by 
allocating suitable areas.  

Where  different  levels  of  authorities  are  involved,  a  possible  solution  could  be  the  pre-
planning  carried  out  in  Denmark  and  Germany  where  municipalities  are  required  to  assign 
locations that are available to project developers for a targeted level of renewable electricity 
generating  capacity.  In  these  pre-planned  areas,  the  permit  requirements  are  reduced  and 
implemented faster. In Sweden, these areas are called ‘areas of national interest for wind’. 

The  planning  and  permitting  process  also  relates  to  the  respect  of  European  environmental 
legislation, such as the Water Framework Directive, the Habitats and the Birds Directive. The 
Commission  will  continue  its  work  -for  example  the  on-going  Commission  initiative  in 
relation to the link between the Water Framework Directive and Directive on electricity from 
renewable  energies  like  hydro-power-  so  as  to  increase  the  transparency  and  clarity  on  the 
application of these Directives in relation to renewable energy development. 

19 
20 

This period applies in the Netherlands and Scotland.  
The British Wind Energy Association publishes yearly approval rates: the last year, 2004, had a 80% 
approval rate. 

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5.2. 

Recommendations concerning administrative barriers 

As the situation with authorisation procedures differs considerably among the Member States, 
recommendations for improvement can only be formulated in general way. The Renewables 
Directive  (2001/77/EC)  calls  for  shortening  the  overall  authorisation  process.  This  can  be 
achieved  only  through  the  strong  commitment  and  involvement  of  central  governments 
together  with  the  regional  and  municipal  authorities  –  but  with  very  clear  competences  for 
each level. The Commission recommends the following actions: 

- 

- 

- 

- 

- 

One-stop authorisation agencies should be established to take charge of processing 
authorisation applications and providing assistance to applicants.  

Clear  guidelines  for  authorization  procedures  should  be  established  by  Member 
States  with  a  clear  attribution  of  responsibilities.  As  the  case  law  of  the  Court  of 
Justice  states,  authorization  procedures  must  be  based  on  objective,  non-
discriminatory criteria which are known in advance to the undertakings concerned, in 
such a way as to circumscribe the exercise of the national authorities' discretion, so 
that it is not used arbitrarily21. 

Member  States  should  establish  pre-planning  mechanisms  in  which  regions  and 
municipalities are required to assign locations for the different renewable energies. 

Lighter procedures should be created for small projects. 

Guidance on the relationship with European environmental legislation. 

6. 

GRID ACCESS ISSUES 

Access to the grid, at a reasonable and transparent price, is the main objective of Article 7 of 
Directive  2001/77/EC  and  is  essential  for  the  development  of  renewable  electricity 
generation. It requires Member States to put in place measures to facilitate access to the grid 
for renewable electricity.  

Grid infrastructure was mainly built when the electricity sector was publicly owned and has 
been designed  to  allow  large power plants being situated near mines and  rivers, or  near the 
main centres of consumption. Renewable electricity generation is normally not situated in the 
same  places  as  conventional  electricity  production  and  has,  in  general,  a  different  scale  of 
generation. Although some biomass electricity plants can have a capacity of around 200 MW 
and  wind  parks  are  increasing  to  similar  sizes,  the  normal  scale  of  renewable  electricity 
generation  plants  is  smaller.  Renewable  electricity  generation  is  often  connected  to  the 
distribution  grid,  and  prone  to  grid  extensions  and  reinforcements  in  addition  to  grid 
connection investments. Member States, with a few exceptions, have put in place legislative 
provisions  ensuring  that  grid  operators  guarantee  the  transmission  and  distribution  of 
renewable  electricity.  Priority  access  when  dispatching  at  transmission  level  is,  however,  in 
many cases not provided for.  

Transparent rules for bearing and sharing the necessary grid investment costs are necessary 
as many grid barriers result from a lack of such rules. The rules that have been established and 

21 

See Court of Justice, judgment 20/2/2001 C-205/99, “Analir”. 

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14 

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the degree of transparency of these rules vary considerably between Member States. A lot still 
needs to be done on transparency for cost-sharing.  

Good practice can be found in a number of countries, such as Denmark, Finland, Germany 
and the Netherlands. In these countries transparent rules for bearing and sharing the costs of 
various grid investments have been put in place. These countries have chosen a “shallow” cost 
approach, under which that grid connection costs are borne by project developers requesting 
connection or shared with grid operators, while costs related to the necessary grid extensions 
and reinforcements at distribution or transmission level are covered by the grid operators, and 
passed on through the grid tariff structure. In Denmark, some connection costs for wind are 
also borne by the grid operator, reducing the economic burden on wind producers in terms of 
grid  investment  costs.  Although  the  Netherlands  does  not  provide  priority  access,  all 
connection costs are, in general, covered by the grid operators.  

RES-E can be confronted with a lack of sufficient grid capacity. This barrier is worsened by 
the lack of clear enforced rules for bearing and sharing various grid investment costs, as well 
as by the existence of vertical integration and dominant utilities.  

To ensure that RES-E can represent a considerable share of the electricity mix, better planning 
and  overall  management  of  the  networks  is  needed.  The  Trans-European  Energy  Networks 
Programme  as  well  as  the  Framework  Programmes  for  Research  and  Technology 
Development  of  the  European  Union  has  started  to  support  studies  on  grid  adaptation  and 
optimisation for the integration of RES-E projects. 

The Commission recommends, firstly, that the principles of cost bearing and sharing should 
be  fully  transparent  and  non-discriminatory.  Secondly,  the  necessary  grid  infrastructure 
development  should  be  undertaken  to  accommodate  the  further  development  of  renewable 
electricity  generation.  Thirdly,  the  costs  associated  with  grid  infrastructure  development 
should  be  covered  by  grid  operators.  Fourthly,  the  pricing  for  electricity  throughout  the 
electricity  network  should  be  fair  and  transparent,  taking  into  account  the  benefits  of 
embedded generation.  

7. 

GUARANTEES OF ORIGIN 

Member  States  have  to  implement  a  system  guaranteeing  the  origin  of  electricity  produced 
from renewable energy sources in order to facilitate trade and consumer transparency22. They 
must  ensure  that  a  guarantee  of  origin  is  issued  in  response  to  a  request.  Currently,  the 
implementation of guarantees of origin varies across Member States, as can be seen in Annex 
7. 

The  new  Directive  on  the  internal  electricity  market23  was  adopted  after  Directive 
2001/77/EC.  In  accordance  with  Article  3(6)  of  Directive  2003/54/EC,  Member  States  are 
required to implement a scheme for the disclosure of the fuel mix. The Commission regards 
this provision as an important measure in meeting the objective of consumer transparency, as 
it covers the whole electricity sector and not only electricity from renewable energy sources. 
The guarantee of origin could be used as a basis for this information. 

22 
23 

Article 5 of Directive 2001/77/EC. 
Directive  2003/54/EC  concerning  common  rules  for  the  internal  market  in  electricity  and  repealing 
Directive 96/92/EC. 

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15 

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Trade  in  green  electricity  is  going  on  but  has  so  far  not  led  to  transfers  of  green  electricity 
produced in one country to another to meet targets there. In order to avoid double counting, it 
is  not  absolutely  necessary  to  have  a  uniform  guarantee  of  origin.  However,  a  waterproof 
system  needs  to  be  agreed  for  the  redemption  of  “used”  green  certificates.  Such  a  system 
exists  in  several  Member  States  and  could  be  further  coordinated  or  even  harmonised  if 
necessary for larger volumes of cross border trade. 

8. 

CONCLUSIONS 

Time for coordination 

While gaining significant experience in the EU with renewable support schemes, competing 
national  schemes  could  be  seen  as  healthy  at  least  over  a  transitional  period.  Competition 
among schemes should lead to a greater variety of solutions and also to benefits: for example, 
a green certificate system gains from the existence of a feed-in tariff scheme, as the costs of 
less efficient technologies fall due to the technological learning process, which in turn leads to 
lower transfer costs for consumers. Moreover, it is too early to compare the advantages and 
disadvantages  of  well-established  support  mechanisms  with  systems  with  a  rather  short 
history. Therefore, and considering all the analyses in this Communication, the Commission 
does not regard it appropriate to present at this stage a harmonised European system.  

The  Commission  considers  a  co-ordinated  approach  to  support  schemes  for  renewable 
energy  sources  to  be  appropriate,  based  on  two  pillars:  cooperation  between  countries  and 
optimisation of the impact of national schemes. 

8.1.  Cooperation 

Intensified co-ordination between countries in the form of “cooperation” could be useful for 
the  development  of  the  different  support  systems  within  Europe.  The  emerging  cooperation 
between  the  feed-in  tariff  systems  in  Germany,  Spain  and  France,  or  on  the  Iberian  market 
and the new planned common Swedish-Norwegian green certificate system can set examples 
for others. Member States with systems with a sufficient degree of similarity could then later 
be sub-harmonised. 

8.2.  Optimisation 

The Commission proposes a process for optimisation of national systems and recalls that the 
instability or ineffectiveness of systems normally translates into higher costs for consumers. 
Optimisation  concerns  economic  mechanisms  and  cost-effectiveness  but  also  calls  for  the 
removal of adminstrative and grid barriers.  

Member States shall optimise and fine tune their support schemes by:  

- 

Increasing  legislative  stability  and  reducing  investment  risk.  One  of  the  main 
concerns with national support schemes is any stop-and-go nature of a system. Any 
instability  in  the  system  creates  high  investment  risks,  normally  taking  the  form  of 
higher  costs  for  consumers.  Thus,  the  system  needs  to  be  regarded  as  stable  and 
reliable  by  the  market  participants  in  the  long  run  in  order  to  reduce  the  perceived 
risks.  Reducing  investment  risk  and  increasing  liquidity  is  an  important  issue, 
notably  in  the  green  certificate  market.  The  design  of  a  support  mechanism  must 

EN 

16 

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- 

- 

- 

- 

- 

- 

- 

minimise  unnecessary  market  risk.  Increased  liquidity  could  improve  the  option  of 
long term contracts and will give a clearer market price. 

Reducing  of  administrative  barriers,  including  the  streamlining  of  administrative 
procedures.  The  administrative  requirements  for  access  support  schemes  should  be 
reduced  in  order  to  minimise  the  burden  on  consumers.  Clear  guidelines,  one-stop 
authorisation  agencies,  the  establishment  of  pre-planning  mechanisms  and  lighter 
procedures  are  concrete  proposals  to  Member  States  in  addition  to  the  full 
implementation of the RES-E Directive.  

Addressing grid issues and the transparency of connection conditions. Transmission 
reinforcement  needs  to  be  planned  and  developed  in  advance  with  appropriate 
financing. The  Commission  recommends, firstly,  that the  principles of cost bearing 
and  sharing  should  be  fully  transparent  and  non-discriminatory.  Secondly,  the 
necessary grid infrastructure development should be undertaken to accommodate the 
further development of renewable electricity generation. Thirdly, the costs associated 
with grid infrastructure development should normally be covered by grid operators. 
Fourthly, the pricing for electricity throughout the electricity network should be fair 
and transparent, taking into account the benefits of embedded generation.  

Encouraging technology diversity. Some support schemes tend to support only the 
strongest  of  the  renewable  technologies  in  terms  of  cost  competitiveness.  For 
instance, offshore wind energy would usually not be developed if it came under the 
same financial framework as onshore wind power. Such schemes could therefore be 
complemented with other support instruments, in order to diversify the technological 
development.  A  good  overall  support  policy  for  renewable  electricity  should 
preferably cover different renewable technologies. 

Member States should better use the possibilities of tax exemptions and reductions 
offered  to  renewable  energy  sources  under  the  Directive  on  the  taxation  on  energy 
products24. 

Ensuring  compatibility  with  the  internal  electricity  market.  EU  Member  States 
are in the process of liberalising their power markets. This criterion assesses the ease 
with which a support scheme can be integrated into a liberalised power market, and 
its effectiveness in functioning together with existing and new policy instruments.  

Encouraging employment and Local and Regional Benefits. A substantial part of 
the public benefits pursued by policies supporting renewables relate to employment 
and  social  policies,  rural  development  while  other  national  policy  goals  should  be 
respected and duly take into account. 

Twinning  with  actions  on  energy  efficiency  and  demand  management.  The 
progress  of  renewable  electricity  generation  is  being  offset  by  excessive  growth  in 
electricity consumption and must be avoided. Only a combination of RES-E support 
measures with electricity end-use efficiency measures will bring Europe further in its 
energy policy goals. 

24 

Directive 2003/96/EC for the taxation of energy products and electricity (OJ L 283, 31.10.2003, p. 51). 

EN 

17 

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8.3.  Next steps 

Major regulatory change at Community level in the short term is not recommended in view of 
meeting  2010  targets.  However,  considering  the  drive  towards  completion  of  the  internal 
electricity market and the potential for increased cost-efficiency, the Commission will further 
analyse  the  options  for  and  impacts  of  increased  optimisation,  coordination  and  possible 
harmonisation, conditions in terms of progress in liberalisation and transmission capacity, and 
learn from the further experience gained with various support schemes in the Member States.  

The Commission  will closely monitor the state of play in EU renewable energy policy and, 
not  later  than  December  2007,  make  a  report  of  the  level  of  Member  States  systems  for 
promoting  renewables  electricity  in  the  context  of  the  on-going  assessment  related  to  2020 
targets  and  a  policy  framework  for  renewable  energy  beyond  2010.  Based  on  the  results  of 
this  evaluation,  the  Commission  may  propose  a  different  approach  and  framework  for 
schemes  to  support  electricity  produced  from  renewable  energy  sources  in  the  European 
Union,  taking  into  account  the  need  for  adequate  transitional  time  and  provisions.  In 
particular, the advantages and disadvantages of further harmonisation will be analysed. 

The  European  Parliament  has  recently  adopted  a  Resolution  on  Renewable  Energies25 
clarifying the criteria for a possible future harmonised European incentive system.  

According to Article 4 of Directive 2001/77/EC, the Commission will continue to assess the 
success, including cost-effectiveness, of the support systems. The report shall, if necessary, be 
accompanied by a proposal for a Community framework with regard to support schemes for 
electricity produced from renewable energy sources. Any proposal for a framework should: 

(a) 

(b) 

(c) 

(d) 

(e) 

contribute to the achievement of the national indicative targets; 

be compatible with the principles of the internal electricity market; 

take  into  account  the  characteristics  of  different  sources  of  renewable  energy, 
together with the different technologies, and geographical differences; 

promote the use of renewable energy sources in an effective way, and be simple and, 
at the same time, as efficient as possible, particularly in terms of cost; 

include sufficient transitional periods for national support systems of at least seven 
years and maintain investor confidence. 

25 

EP Resolution, 28 September 2005 (Turmes report on the share of renewable energy sources). 

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18 

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Annex 1 – Current share of electricity from renewable energy sources 

Renewable energies promise to bring about strategic improvements in the security of supply, 
reducing  the  long-term  price  volatility  to  which  the  EU  is  subject  as  a  price-taker  for  fossil 
fuels,  and  could  offer  an  enhanced  competitive  edge  for  the  EU’s  renewable  technology 
industry. Renewable energies reduce air pollution and greenhouse gas emissions. They could 
also  help  improve  economic  and  social  prospects  in  the  rural  and  isolated  regions  of 
industrialised  countries  and  provide  a  better  means  of  meeting  basic  energy  needs  in 
developing  countries.  The  cumulative  effect  of  all  these  benefits  makes  a  robust  case  for 
supporting  renewables.  The  EU  aims  at  having  renewable  sources  provide  for  21%  of  the 
electricity  consumed  in  its  25  member  states  by  2010.  Romania  and  Bulgaria  have  set  up  a 
target  by  2010,  maintaining  the  objective  for  the  enlarged  Union  at  21%26.  This  target  is 
formulated  in  the  EU  Renewables  Directive  2001/77/EC,  which  sets  individual  national 
targets to this end. The electricity produced by renewable energy sources (RES-E) in the EU-
25 countries accounted for 394 TWh in 2003, corresponding to a share of 14% in electricity 
generation (see Figure 1). The recent very dry years and the considerable growth of electricity 
consumption  affect  the  percentage  of  RES-E  in  consumption  as  a  whole.  One  percentage 
point of the objective on renewable electricity has been missed in the last three years due to 
the  important  draughts  occurring  in  Europe.  Electricity  consumption  is  growing  at  2%  per 
year.  

EU 25 electricity generation by fuel in 2003

Gas 19%

Renewables 
14%

Oil 5%

Nuclear 31%

Coal 31%

Figure 1:  
EU25 electricity generation by fuel in 2003. 

To  avoid  the  interference  due  to  the  variability  of  rain  conditions  in  recent  years,  Figure  2 
shows all renewable energies apart from hydropower. In recent years, the growth in renewable 
electricity  has  been  faster  with  the  non-hydro  sources.  Figure  2  shows  the  impressive 
evolution of wind (three countries were mainly responsible for the growth of this sector up to 
2003) and the other sectors such as biomass, geothermal and photovoltaic solar energy. 

26 

Romania has set up a target for passing from 28% to 33% by 2010 and Bulgaria from 6% to 11% by 
2010. 

EN 

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100

80

60

40

20

/

_
]
r
a
e
y
h
W
T
[
n
o
i
t
a
r
e
n
e
g
y
t
i

c

i
r
t
c
e
E

l

0
1990

Wind off-shore

Wind on-shore

Photovoltaics

Geothermal electricity

Biowaste

Solid biomass

Biogas

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

Figure 2:  
Historical development of electricity generation from ‘new’ RES-E in the European Union  
(EU-25) from 1990 to 2003. 

Hydropower  remains  the  dominant  source,  but  new  renewable  sources  such  as  biomass  or 
wind are starting to play a role. Especially in the EU-15 countries, wind energy is the most 
important of the new renewable sources in recent portfolios with a yearly growth of 35% in 
the  last  ten  years  while  biomass  is  prominently  represented  in  some  of  the  new  Member 
States. 

Biogas

Biowaste

(Solid) Biomass

Geothermal electricity

Hydro large-scale

Hydro small-scale

Photovoltaics

Solar thermal electricity

Tide & Wave

Wind onshore

Wind offshore

8,5%

2%

7,0%

15,3%

2%

1,3%

EU-15 total
RES-E breakdown 2004

62%

Figure 3: 
 RES-E as a share of the total achieved potential in 2004 for the EU-15. 

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20 

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Biogas

Biowaste

(Solid) Biomass

Geothermal electricity

Hydro large-scale

Hydro small-scale

Photovoltaics

Tide & Wave

Wind offshore

Solar thermal electricity

Wind onshore

1,7%

1,6%

7,3%

14,2%

EU-10 total
RES-E breakdown 2004

75,1%

Figure 4: 
 Breakdown of RES-E in 2004 for the EU-10. 

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21 

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Annex 2 – Inventory of current support systems 

Table 1: Overview of the main policies for renewable electricity in EU-15 

Country 

Main electricity support 
schemes 

Austria 

Feed-in  tariffs  (now  terminated)  combined 
with regional investment incentives. 

Belgium 

Quota  obligation  system  /  TGC27  combined 
with  minimum  prices  for  electricity  from 
RES. 

Comments 

Feed-in tariffs have been guaranteed for 13 years. The instrument was 
only  effective  for  new  installations  with  permission  until  December 
2004.  The  active period  of  the  system  has  not  been  extended  nor  has 
the instrument been replaced by an alternative one. 

The  Federal  government  has  set  minimum  prices  for  electricity  from 
RES. 

Flanders  and  Wallonia  have  introduced  a  quota  obligation  system 
(based  on  TGCs)  with  the  obligation  on  electricity  suppliers.  In 
Brussels no support scheme has been implemented yet. Wind offshore 
is supported at federal level. 

Settlement  prices  are  valid  for  10  years.  The  tariff  level  is  generally 
rather low compared to the previously high feed-in tariffs. 

For power plants < 12 MW feed-in tariffs are guaranteed for 15 years 
or 20 years (hydro and PV). 

For power plants > 12 MW a tendering scheme is in place. 

Feed-in  tariffs  are  guaranteed  for  20  years  (Renewable  Energy  Act). 
Furthermore soft loans and tax incentives are available. 

Premium 
(environmental 
adder) and tender schemes for wind offshore. 

feed-in 

tariffs 

Energy 
investment incentives. 

tax  exemption  combined  with 

Tax refund and investment incentives of up to 40% for wind, and up to 
30% for electricity generation from other RES. 

Denmark 

Finland 

France 

Feed-in tariffs. 

Germany 

Feed-in tariffs. 

Greece 

Ireland 

Feed-in  tariffs  combined  with  investment 
incentives. 

Feed-in tariffs are guaranteed for 10 years. Investment incentives up to 
40%. 

Tendering scheme. 

It  has  been  announced  that  the  tendering 
scheme  will  be  replaced  by  a  feed-in  tariff 
scheme. 

Tendering  schemes  with  technology  bands  and  price  caps.  Also  tax 
incentives for investment in electricity from RES. 

Italy 

Quota obligation system / TGC. 
Anew feed-in tariff system for photovoltaic 
valid since 5th August 2005. 

Obligation  (based  on  TGCs)  on  electricity  suppliers.  Certificates  are 
only  issued  for  new  RES-E  capacity  during  the  first  eight  years  of 
operation. 

Luxembourg  Feed-in tariffs. 

Netherlands  Feed-in tariffs. 

Feed-in  tariffs  guaranteed  for  10  years  (for  PV  for  20  years). 
Investment incentives also available. 

tariffs  guaranteed  for  10  years.  Fiscal 

Feed-in 
incentives  for 
investment  in  RES  are  available.  The  energy  tax  exemption  on 
electricity from RES ended on 1 January 2005. 

Portugal 

Feed-in  tariffs  combined  with  investment 
incentives. 

Investment incentives up to 40%. 

Spain 

Feed-in tariffs. 

Sweden 

Quota obligation system / TGC. 

UK 

Quota obligation system / TGC. 

Electricity  producers  can  choose  between  a  fixed  feed-in  tariff  or  a 
premium on top of the conventional electricity price, both are available 
over the entire lifetime of a RES power plant. Soft loans, tax incentives 
and regional investment incentives are available. 

Obligation  (based  on  TGCs)  on  electricity  consumers.  For  wind 
energy,  investment  incentives  and  a  small  environmental  bonus  are 
available. 

Obligation  (based  on  TGCs)  on  electricity  suppliers.  Electricity 
companies which do not comply with the obligation have to pay a buy-
out  penalty.  A  tax  exemption  for  electricity  generated  from  RES  is 
available (Levy Exemption Certificates which give exemption from the 
Climate Change Levy). 

27 

TGC = tradable green certificates. 

EN 

22 

   EN 

 
                                                 
Country 

Cyprus 

Czech 
Republic 

Table 2: Overview of the main policies for renewable electricity in EU-10 

Main electricity support 
schemes 

Grant  scheme  for  the  promotion  of  RES 
(since February 2004) financed through an 
electricity consumption tax of 0.22 E/kWh 
(since Aug. 2003). 

Comments 

Promotion scheme is fixed only for a 3-year period. 

Feed-in  tariffs  (since  2002),  supported  by 
investment 
and 
improvement  of  the  tariffs  in  February 
2005. 

Revision 

grants 

Estonia 

Feed-in 
obligation. 

tariff 

system  with  purchase 

Hungary 

tariff 

Feed-in 
January  2003) 
(since 
combined  with  purchase  obligation  and 
tenders for grants. 

Latvia 

Quota  obligation  system  (since  2002) 
combined with feed-in tariffs. 

Relatively  high  feed-in  tariffs  with  15-year  guaranteed  support. 
Producer can choose between a fixed feed-in tariff or a premium 
tariff  (green  bonus).  For  biomass  cogeneration,  only  the  green 
bonus applies.. 

Feed-in tariffs paid for up to 7 years for biomass and hydro and up 
to 12 years for wind and other technologies. All support schemes 
are scheduled to end in 2015. Together with relatively low feed-in 
tariffs this makes renewable investments very difficult. 

Medium  tariffs  (6  to  6.8  ct/kWh)  but  no  differentiation  among 
technologies.  Actions  to  support  RES  are  not  coordinated,  and 
political  support  varies.  All  this  results  in  high  investment  risks 
and low penetration. 

Frequent  policy  changes  and  the  short  duration  of  guaranteed 
feed-in  tariffs  result  in  high  investment  uncertainty.  The  high 
feed-in tariff scheme for wind and small hydropower plants (less 
than 2 MW) was phased out in January 2003.  

Lithuania 

Relatively  high  feed-in  tariffs  combined 
with  a  purchase  obligation.  In  addition 
good  conditions  for  grid  connections  and 
investment programmes. 

Closure  of  the  Ignalina  nuclear  plant  will  strongly  affect 
electricity prices and thus the competitive position of renewables 
as  well  as  renewable  support.  Investment  programmes  limited  to 
companies registered in Lithuania.  

Malta 

Poland 

Low VAT rate for solar. 

Very little attention to RES-E so far. 

Green  power  purchase  obligation  with 
targets  specified  until  2010.  In  addition 
renewables are exempted from the (small) 
excise tax. 

No penalties defined and lack of target enforcement. 

Slovak 
Republic 

Programme  supporting  RES  and  energy 
efficiency, including feed-in tariffs and tax 
incentives. 

Very little support for renewables. The  main support programme 
runs  from  2000,  but  there  is no  certainty  as  to  the  time  frame  or 
tariffs. The low support, lack of funding and lack of longer-term 
certainty make investors very reluctant. 

Slovenia 

Feed-in  system  combined  with  long-term 
guaranteed  contracts,  CO2  taxation  and 
public 
environmental 
for 
investments. 

funds 

None. 

Bulgaria 

Romania 

Combination  of 
incentives and purchase obligation. 

feed-in 

tariffs, 

tax 

Relatively low levels of incentive make penetration of renewables 
especially difficult as the current commodity prices for electricity 
are  still  relatively  low.  A  green  certificate  system  to  support 
renewable  electricity  developments  has  been  proposed.  Bulgaria 
recently agreed upon an indicative target for renewable electricity, 
which  is  expected  to  provide  a  good  incentive  for  further 
promotion of renewable support schemes. 

Subsidy fund (since 2000), feed-in tariffs.  Normal feed-in tariff modest, but high tariff for autonomous small 
wind  systems  (up  to  110-130  €/MWh).  Romania  recently  agreed 
upon  an  indicative  target  for  renewable  electricity,  which  is 
expected  to  provide  a  good  incentive  for  further  promotion  of 
renewable support schemes.  

EN 

23 

   EN 

 
 
 
Annex 3 – Costs of current support systems and effectiveness 

The  generation  cost  for  renewable  energies  shows  a  wide  variation  (see  Figure  1).  Any 
assessment of support schemes should therefore be carried out for each sector.  

cost range (LRMC)

Wind offshore

Wind onshore

Tide & Wave

Solar thermal electricity

Photovoltaics

Hydro small-scale

Hydro large-scale

Geothermal electricity

Biowaste

(Solid) Biomass

(Solid) Biomass co-firing 

Biogas

Costs of electricity (LRMC - Payback time: 15 years) [€/MWh]

0

50

100

150

200

Figure 1: 
Cost of electricity generation –Long-run marginal costs (LRMC). Sources: FORRES report. 

The current level of support for RES-E differs significantly among the different EU Member 
States.  This  is  due  to  the  different  country-specific  cost-resource  conditions  and  the 
considerable  differences  in  the  support  instruments  applied  in  these  countries.  In  order  to 
compare  the  prices  paid  for  the  different  RES-E  generation  options  with  the  costs  in  each 
Member  State,  both  quantities  are  analysed  and  shown  simultaneously  for  wind  onshore, 
agricultural biogas, biomass forestry, small-scale hydropower and solar photovoltaic. 

Before comparing costs and support levels among the countries, we have to make sure we are 
dealing with comparable quantities. In particular, the support level in each country needs to be 
normalised  according  to  the  duration  of  support  in  each  country,  e.g.  the  duration  of  green 
certificates in Italy is only eight years compared to 20 years for guaranteed feed-in tariffs in 
Germany.  The  support  level  under  each  instrument  has  therefore  been  normalised  to  a 
common duration of 15 years. The conversion between the country-specific duration and the 
harmonised support duration of 15 years is performed assuming a 6.6% interest rate. 

Only  minimum  to  average  generation  costs  are shown  because  the  readability  of  the  graphs 
would suffer if the upper cost range for the different RES-E were shown as well.  

Effectiveness28  can  be  defined  in  simple  terms  as  the  outcome  in  renewable  electricity 
compared  to  what’s  remains  of  the  2020  potential.  This  means  that  a  country  with  an  8% 

28 

The source of the indicators for Annexes 3 and 4 is the work carried out under the OPTRES contract of 
the European Commission, Contract EIE-2003-073. 

EN 

24 

   EN 

 
 
                                                 
yearly  average  effectiveness  indicator  over  a  six-year  period  has  been  delivering  8%  of  the 
2020 potential every year over that period – as is the case for Germany in Figure 5 (wind). 
Over  the  complete  six-year  period,  therefore,  48%  of  Germany’s  2020  potential  has  been 
deployed. 

In  more  complex  terms,  effectiveness  is  defined  as  the  ratio  of  the  change  in  the  electricity 
generation potential over a given period of time to the additional realisable mid-term potential 
by  2020  for  a  specific  technology,  where  the  exact  definition  of  effectiveness  reads  as 
follows: 

E

i
n

=

E

i
n

G

i
n
ADD

i
n
ADD

GG
−
−

i
1
n
−
i
POT
1
n
−
Effectiven
 ess

Indicator 

for 

RES

 technolog

 iy 

for the

year 
n

Electricit

y 

generation

potential

by 

RES

 technolog

 iy 

in 

year 
n

−

i
POT
n

Additional

generation

potential

 of 

RES

 technolog

 iy 

in 

year 

n 

until

2020

This definition of effectiveness is a measure of the available potentials of a specific country 
for  individual  technologies.  This  appears  to  be  the  correct  approach  since  Member  State 
targets  as  determined  in  the  RES-E  directive  are  based  mainly  on  the  realisable  generation 
potential of each country. 

The yearly effectiveness of a Member State policy is the ratio of the change of the electricity 
generation  potential  in  that  year  compared  to  the  remaining  additional  realisable  mid-term 
potential until 2020 for a specific technology. 

Figure 2 below shows the concept of the yearly effectiveness indicator: 

Growth and Existing Potential - Biogas UK

]
h
W
T

[

20

18

16

14

12

10

8

6

4

2

0

Additional realisable 
Potential in 2002 until 
2020

C

Effectiveness 
Indicator represents 
the RES-E produced 
compared to the 
remaining potential

E = (B-A)/C

A

B

2002

2003

Total potential
for 2020

Figure 2: 2003 effectiveness indicator – example biogas in UK 

EN 

25 

   EN 

 
 
 
 
    
 
 
    
          
 
 
          
 
 
The indicators included in this Communication are calculated in an average period of six or 
seven  years29.  In  figure  2,  we  show  the  annual  effectiveness  indicator  for  the  particular 
example  of  biogas  in  UK  for  the  years  1998  until  2003  as  well  as  the  average  during  the 
period.  The  interpretation  of  this  indicator  can  be  pursued  as  follows:  if  a  country  has  an 
average effectiveness indicator of 3% - as indicated by the dot line in figure 3 - it means that it 
has already mobilised a 17% of its additional potential until 202030 in a linear manner. 

Average Effectiveness Indicator -  Biogas UK

]

%

[

r
o
t
a
c
i
d
n

I
s
s
e
n
e
v
i
t
c
e
f
f

E

10%

9%

8%

7%

6%

5%

4%

3%

2%

1%

0%

1998

1999

2000

2001

2002

2003

Average Effectiveness Indicator in a period of 6 years 

Figure 3: Average effectiveness indicator for the period 1998-2003 –Example biogas in UK 

In the following section, effectiveness indicators are shown for the sectors wind onshore and 
solar  photovoltaic  for  the  period  1998-2004,  and  solid  biomass,  biogas  and  small  hydro  for 
the period 1998-2003. It must be clarified that in the subsequent section for the period 1997-
2003,  over  which  the  effectiveness  indicator  is  analysed,  a  mixed  policy  is  considered  in 
Belgium, France, Italy, the Netherlands, Sweden and the UK.  

Wind energy 

Figure 4 and figure 6 show the generation cost of wind energy and the level of the supported 
prices in each country. Support schemes for wind vary considerably throughout Europe with 
values ranging from €30/MWh in Slovakia to €110 per MWh in the UK. These differences – 
as seen in Figures 4 and 6 – are not justified by the differences in generation costs. Generation 
costs  are  shown  in  a  range  based  –  in  the  case  of  wind  –  on  the  different  bands  of  wind 
potential.  

29 
30 

The period of seven years applies to the case of wind energy and PV. 
As  the  remaining  potential  decreases  every  year  that  more  renewable  electricity  is  generated,  the 
complete figure is 17% instead of 18% (3% x 6 years). 

EN 

26 

   EN 

 
 
 
 
                                                 
Minimum to average generation costs [€/MWh]
Average to maximum support level [€/MWh]

160

140

120

100

80

60

40

20

0

AT BE DK FI

FR DE GR IE

IT

LU NL PT ES SE UK

Figure 4:  
Price ranges (average to maximum support) for direct support of wind onshore in EU-15 Member States 
(average tariffs are indicative) compared to the long-term marginal generation costs (minimum to average 
costs). Support schemes are normalised to 15 years. 

How effective are these support schemes? The definition of effectiveness has been taken as 
the electricity delivered in GWh compared to the potential of the country for each technology.  

r
o
t
a
c
d
n

i

i

s
s
e
n
e
v
i
t
c
e
f
f
e

e
g
a
r
e
v
A

-
e
r
o
h
s
-
n
o
d
n
W

i

-

12%

10%

8%

6%

4%

2%

0%

AT

BE

DK

FI

FR

DE

GR

IE

IT

LU

NL

PT

ES

SE

UK EU15

Feed-in tariff

Quota / TGC

Tender

Tax incentives / Investment grants

Figure 5: 
Effectiveness indicator for wind onshore electricity in the period 1998-2004. The relevant policy schemes 
during this period are shown in different colour codes. 

The three countries that are most effective in delivering wind energy are Denmark, Germany 
and Spain as can be seen in Figure 5.  

EN 

27 

   EN 

 
 
 
 
 
 
 
 
 
Germany applies a stepped tariff with different values depending on wind resources. France 
uses the same system. This stepped support scheme – although controversial as it does not use 
only the best potentials – is justified at national level in order to extend potential resources in 
the country and avoid concentration in one region and hence NIMBY effect. The values used 
in Figure 4 consider the maximum tariff for Germany31. 

It is commonly stated that the high level of feed-in tariffs is the main driver for investment in 
wind energy especially in Spain and Germany. As can be seen, the level of support is rather 
well adjusted to generation cost. A long-term stable policy environment seems to be the key 
to success in developing RES markets, especially in the first stage.  

The three quota systems in Belgium, Italy and the UK, currently have a higher support level 
than  the  feed-in  tariff  systems.  The  reason  for  this  higher  support  level,  as  reflected  in 
currently observed green certificate prices, can be found in the higher risk premium requested 
by  investors,  the  administrative  costs  and  the  still  immature  green  certificate  market.  The 
question is how the price level will develop in the medium and long term. 

Figure 4 shows the three countries with the lowest support: FI, DK and IE. The situations in 
these  countries  are  very  different.  DK  has  a  very  mature  market  with  the  highest  rate  per 
capita of wind installations in the world and current support is concentrated in re-powering32, 
while  IE  has  the  best  wind  potential  in  Europe  but  only  200  MW  installed  capacity,  and 
Finland has chosen a policy of biomass promotion and provides too little support to initiate 
stable growth in wind.  

For  the  EU-10,  the  comparison  of  costs  and  prices  for  wind  onshore  as  shown  in  Figure  6 
leads to the conclusion that the supported price level is clearly insufficient in Slovakia, Latvia, 
Estonia and Slovenia, as the level is below marginal generation costs.  

The  level  seems  to  be  sufficient  in  at  least  Cyprus  and  Czech  Republic.  For  countries  like 
Hungary and Lithuania, support is just enough to stimulate investment33.  

31 

32 

33 

Germany  wind  onshore:  tariff  €87/MWh  (maximum  tariff).  Duration  of  support  is  20  years.  Interest 
rate:  4.8%  (considering  the  soft  loans  granted  by  the  German  federal  government).  Wind  conditions: 
1 750 full load hours (country-specific average). 
The  DK  system  is  now  concentrating  on  re-powering  (replacement  of  old  turbines  by  more  efficient 
ones) and offshore which is not included in this text. 
For Poland no figures are shown since a green certificate price cannot yet be given. 

EN 

28 

   EN 

 
                                                 
Minimum to average generation costs [€/MWh]
Average to maximum support level [€/MWh]

160

140

120

100

80

60

40

20

0

CY

CZ

EE

HU

LA

LT

MT

PL

SK

SI

Figure 6: 
Price ranges (average to maximum support) for supported wind onshore in EU-10 Member States 
(average tariffs are indicative) compared to the long term marginal generation costs (minimum to average 
costs). 

Effectiveness indicator 
12%

r
o
t
a
c
d
n

i

i

s
s
e
n
e
v
i
t
c
e
f
f
e

e
g
a
r
e
v
A

-
e
r
o
h
s
-
n
o
d
n
W

i

-

10%

8%

6%

4%

2%

0%

CY

CZ

EE

HU

LA

LT

MT

PL

SK

SI

EU10

Feed-in tariff

Quota / TGC

Tender

Tax incentives / Investment grants

Figure 7:  
Effectiveness indicator for wind onshore electricity in the period 1998-2004. The relevant policy schemes 
during this period are shown in different colour codes. 

EN 

29 

   EN 

 
 
 
 
 
 
 
 
 
Biogas34 

Comparing apples and pears sometimes seems easier than analysing the biomass sector – as 
the  latter  is  like  comparing  cows  and  trees.  Biomass  is  a  very  complex  sector  as  it  covers 
wastes, products and residues from very different sources: agriculture, forests, cities, animals, 
etc.  Analysis  of  the  support  schemes  becomes  even  more  complex  when  25  countries  are 
considered. 

This  report  is  intended  to  give  an  overview  of  two  main  biomass  sectors  in  Europe:  biogas 
and forest residues. 

The different support levels are shown for agricultural biogas electricity generation in Figure 
8 for EU-15 and Figure 10 for EU-10. The effectiveness indicators are depicted in Figures 9 
and 11.  

Among  the  EU-15  level,  the  level  of  promotion  in  France  and  Sweden  appears  to  be 
insufficient  when  compared  to  long-run  marginal  generation  costs.  Finland  clearly  does  not 
specifically promote this technology. For Greece, Ireland, and Portugal, the support level is at 
the lower end of the cost range. In Austria, the tariffs35 are relatively high with policy aiming 
to support small-scale agricultural applications (average range of 70-100 kW) as compared to 
large  centralised  plants.  Germany  also  promotes  small-scale  installations  with  a  high 
effectiveness (Figure 9). UK has a rather high support (TGC + CCL exemption)36, resulting in 
a  high  effectiveness.  Denmark  has  a  medium  support  with  a  fairly  high  effectiveness.  The 
Danish  support  scheme  prioritises  large  central  power  plants.  The  Swedish  and  Finnish  tax 
rebates have been unable to trigger relevant investment in biogas plants. Similarly, the Irish 
tender  rounds  seem  to  have  ignored  biogas  as  an  option  for  increasing  RES-E  generation 
capacity.  It  should  be  noted  here  that  the  high  growth  in  Italy  and  the  UK  has  been  based 
mainly on the expansion of landfill gas capacity, whereas in Austria, Denmark, and Germany 
agricultural biogas has had a significant share in the observed growth.  

34 

35 
36 

Biogas includes all biomass fermentation processes: biogas with co-fermentation, sewage and landfill 
gas. 
Paid for new installations until December 2004. The system has now stopped. 
The  total  level  of  support  in  the  UK  is  about:  €110/MWh  =  €68/MWh  certificate  price  + 
€6.9/MWh CCL + €36/MWh market price. Before 2002, the UK had different tender rounds for biogas 
applications. 

EN 

30 

   EN 

 
                                                 
Minimum to average generation costs [€/MWh]
Average to maximum support level [€/MWh]

160

140

120

100

80

60

40

20

0

AT BE DK FI

FR DE GR IE

IT

LU NL PT ES SE UK

Figure 8: 
Price ranges (average to maximum support) for direct support of agricultural biogas in EU-15 member 
states (average tariffs are indicative) compared to the long-term marginal generation costs (minimum to 
average costs). 

r
o
t
a
c
d
n

i

i

-

s
a
g
o
B

i

-

s
s
e
n
e
v
i
t
c
e
f
f
e

e
g
a
r
e
v
A

4%

3%

2%

1%

0%

-1%

AT

BE

DK

FI

FR

DE

GR

IE

IT

LU

NL

PT

ES

SE

UK EU15

Feed-in tariff

Quota / TGC

Tender

Tax incentives / Investment grants

Figure 9: 
Effectiveness indicator for biogas electricity in the period 1998-2003. The relevant policy schemes during 
this period are shown in different colour codes. 

The  effectiveness  of  the  biogas  support  level  is  influenced  by  the  following  factors,  rather 
than the choice of support scheme: 

EN 

31 

   EN 

 
 
 
 
 
 
 
- 

- 

- 

- 

The choice of small or large plants: large plants yield a higher effectiveness. Small 
plants  are  supposed  to  be  more  important  for  the  rural  economy,  but  the  cost  is 
higher. 

The  existence  of  a  complementary  support  scheme.  The  biogas  sector  is  intimately 
linked  to  environmental  policy  for  waste  treatment.  Countries  like  the  UK  support 
biogas  with  a  secondary  instrument  such  as  tax  relief  (CCL  exemption)37.  A 
complementary investment aid is a good catalyst for this technology. 

If  a  country  supports  agricultural  biogas,  generation  costs  are  higher  but  so  are 
environmental  benefits.  For  supporting  landfill  gas,  the  cost  is  ‘cheaper’  but  the 
environmental benefit is reduced.  

The existence of district heating networks has proved to be an important aspect in the 
successful development of the biogas sector, e.g. Denmark. 

The EU-15 figures lead to the conclusion that, when the feed-in tariffs are set correctly, the 
support  scheme  is  able  to  start  market  development.  The  green  certificate  systems  seem  to 
need a secondary instrument (based on environmental benefits) for a real market effect. 

The picture for the new Member States looks rather different from the EU-15. For most EU-
10 countries, the supported price is low compared to the long-run marginal generation costs. 
Except  in  the  Czech  Republic  and  Slovenia,  financial  support  is  insufficient  to  trigger 
significant investment into biogas technology. Effectiveness is nearly zero due to the lack of 
sufficient support. 

Minimum to average generation costs [€/MWh]
Average to maximum support level [€/MWh]

160

140

120

100

80

60

40

20

0

CY

CZ

EE

HU

LA

LT

MT

PL

SK

SI

Figure 10: 
Price ranges (average to maximum support) for supported agricultural biogas in EU-10 member states 

37 

The  total  level  of  support  in  the  UK  is  about:  €110/MWh  =  €68/MWh  certificate  price  + 
€6.9/MWh CCL + €36/MWh market price. Before 2002, the UK had different tender rounds for biogas 
applications. 

EN 

32 

   EN 

 
 
                                                 
(average tariffs are indicative) compared to the long-term marginal generation costs (minimum to average 
costs). 

r
o
t
a
c
d
n

i

i

s
s
e
n
e
v
i
t
c
e
f
f
e

e
g
a
r
e
v
A

-

s
a
g
o
B

i

-

4%

3%

2%

1%

0%

-1%

CY

CZ

EE

HU

LA

LT

MT

PL

SK

SI

EU10

Feed-in tariff

Quota / TGC

Tender

Tax incentives / Investment grants

Figure 11:  
Effectiveness indicator for biogas electricity in the period 1998-2003. The relevant policy schemes during 
this period are shown in different colour codes. 

Biomass/forestry residues 

Before  any  analysis  is  carried  out,  the  complexity  of  this  sector  should  be  recalled  as  it 
includes  small  combined  heat  and  power  systems,  the  big  pulp  and  paper  industry,  the  co-
firing of wood residues, etc. 

Figures 12 and 13 show the differences between support schemes around EU-15 and also the 
variation in generation costs38. The level of Member States support in the EU-10 is generally 
relatively lower than in the EU-15. 

38 

The support for combined heat and power (CHP) is not included in this figure. 

EN 

33 

   EN 

 
 
 
 
 
 
                                                 
Minimum to average generation costs [€/MWh]
Average to maximum support level [€/MWh]

* system gives the option for co-firing

200

180

160

140

120

100

80

60

40

20

0

*
AT BE DK FI

*

FR DE GR IE

IT

*

*
LU NL PT ES SE UK

*

Figure 12:  
Price ranges (average to maximum support) for supported biomass electricity production from forestry 
residues in EU-15 member states (average tariffs are indicative) compared to the long-term marginal 
generation costs (minimum to average costs). 

Minimum to average generation costs [€/MWh]
Average to maximum support level [€/MWh]

* system gives the option for co-firing

160

140

120

100

80

60

40

20

0

CY CZ EE HU LA LT MT PL SK SI

 *

*

*

*

*

*

Figure 13:  
Price ranges (average to maximum support) for supported biomass electricity production from forestry 
residues in EU-10 Member States (average tariffs are indicative) compared to the long-term marginal 
generation costs (minimum to average costs). 

* = countries with co-firing. 

Figures 14 and 15 show the effectiveness of RES support for electricity produced from solid 
biomass.  The  first  conclusion  is  that  at  EU-15  level,  only  a  small  part  of  the  available 

EN 

34 

   EN 

 
 
 
potential  was  exploited  on  an  annual  basis  during  the  period  1998-2003.  The  effectiveness 
lower  compared  with  wind 
indicator  for  solid  biomass  electricity 
exploitation39.  This  confirms  the  conclusion  of  the  Communication  of  May  200440  that  the 
development of biomass electricity is lagging behind expectations at EU level. 

is  significantly 

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UK EU15

Feed-in tariff

Quota / TGC

Tender

Tax incentives / Investment grants

Figure 14:  
Effectiveness indicator for biomass electricity in the period 1998-2003. The relevant policy schemes during 
this period are shown in different colour codes. 

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39 

40 

Countries with a high effectiveness in wind energy have an indicator between 6-8%. For biomass, the 
top figures are around 4%. 
Communication on the share of renewable energy in the EU - COM(2004) 366. 

EN 

35 

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Figure 15:  
Effectiveness indicator for biomass electricity in the period 1998-2003. The relevant policy schemes during 
this period are shown in different colour codes. 

It  must  be  clarified  that,  for  Denmark,  Figure  14  covers  not  only  forest  residues  but  also 
straw, which represents half of their solid biomass market. The figure for the Netherlands also 
includes  the  co-firing  of  palm  oil,  which  in  2003  represented  3%  of  the  total  solid  biomass 
market.  

Denmark saw strong growth in biomass until 2001 with large centralised CHP plants, initiated 
by the relatively high feed-in tariffs and a stable policy framework.  

In the Netherlands, a  partial  tax  exemption  was  introduced  in  July  2003  for  a  feed-in  tariff 
system. Additional support was given by investment grants. Co-firing is the main technology 
in NL. It is highly likely that the Netherlands will already reach their 9% target for 2010 by 
2006. 

In  Finland,  the  tax  refund  for  forestry  chips  has  been  the  main  driver  of  market  growth  in 
recent  years.  An  additional  25%  investment  incentive  is  available  for  CHP  plants  based  on 
wood fuels. The key element in the success of this mix of tax relief and investment incentives 
is the important traditional wood and paper industry. 

In 2002, Sweden switched from investment grants to a TGC system and tax refunds.  

Austria and Germany have chosen a policy of medium- and small-scale biomass installations, 
which has higher costs but is driven not only by energy policy but also by environment and 
rural development considerations. 

The  new  German  support  system  shows  a  larger  gap  between  support  and  generation  costs. 
This  new  level  was  adopted  in  August  2004.  Effectiveness  in  the  biomass  forestry  sector 
needs still to be demonstrated in this country. 

The  main  barriers  to  the  development  of  this  RES-E  source  are  both  economic  and 
infrastructural.  Denmark,  Finland  and  NL  show  the  best  effectiveness  and  a  smaller  gap 
between support and generation costs. Denmark and the Netherlands have implemented feed-
in tariffs and Finland has tax relief as the main support scheme. The common characteristic in 
these three countries is that centralised power stations using solid biomass attract the largest 
share of RES-E investment.  

Nevertheless, biomass features a large band of options, uses and costs. The promotion of large 
biomass  installations  should  not  ignore  promising  technology  options  with  a  significant 
potential for technology learning. 

To conclude on this sector: 

- 

- 

In  UK,  BE,  IT  and  to  some  extent  SE,  the  level  of  support  is  just  enough. 
Nevertheless, it looks like that the biomass sector is not yet able to cope with the risk 
of green certificate schemes. 

Denmark, Finland and NL show the best effectiveness and the smallest gap between 
support and generation costs. Denmark and the Netherlands have implemented feed-

EN 

36 

   EN 

 
in tariffs and Finland has tax relief and 25% investment support. Centralised power 
stations using solid biomass attract the largest share of RES-E investment. 

In  France,  Greece,  Ireland,  Luxembourg,  Portugal  and  Spain,  the  feed-in  tariff 
support is not enough to bring about a real take-off in the biomass sector. 

Secondary  instruments  especially  small  investment-plant  support  and  tax  relief  are 
good  catalysts  for  kicking  off  biomass.  They  also  have  the  advantage  of  less 
interference with the wood market. 

CHP  support  is  very  good  for  the  biomass  development,  adding  higher  energy 
efficiency. 

It is not a matter of demand: good management of agriculture and forest residues is 
an important factor for good biomass exploitation.  

- 

- 

- 

- 

Hydropower 

As our third example, we provide the same analysis for small-scale hydropower. In this case, 
country-specific costs show very large differences. The technology is also especially relevant 
for some of the new member states. Again, it can be seen that existing feed-in tariffs are quite 
well  adjusted  to  the  costs  of  generation,  with  the  Austrian  and  the  Portuguese  tariffs  at  the 
lower  end  of  the  cost  spectrum.  The  Finnish  tax  measure  is  again  unable  to  cover  the  costs 
needed to stimulate investment in new generation capacity. Very good financial conditions for 
small  hydropower  exist  in  France  and  in  Slovenia.  For  Cyprus,  the  support  level  might  be 
higher than shown in the figure, since additional investment grants are not considered. 

160

140

120

100

80

60

40

20

0

AT BE DK FI

FR DE GR IE

IT

LU NL PT ES SE UK

Minimum to average generation costs [€/MWh]
Average to maximum support level [€/MWh]

Figure 16:  
Price ranges (average to maximum support) for direct support of small-scale hydro in EU-15 Member 
States (average tariffs are indicative) compared to the long-term marginal generation costs (minimum to 
average costs). 

EN 

37 

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3
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IE

IT

LU

NL

PT

ES

SE

UK

EU

Feed-in tariff

Quota / TGC

Tender

Tax incentives / Investment grants

Figure 17:  
Effectiveness indicator for small hydro electricity in the period 1998-2003. The relevant policy schemes 
during this period are shown in different colour codes. 

Minimum to average generation costs [€/MWh]
Average to maximum support level [€/MWh]

160

140

120

100

80

60

40

20

0

CY

CZ

EE

HU

LA

LT

MT

PL

SK

SI

Figure 18: 
Price ranges (average to maximum support) for direct support of small-scale hydro in EU-10 Member 
States (average tariffs are indicative) compared to the long-term marginal generation costs (minimum to 
average costs). 

EN 

38 

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Feed-in tariff

Quota / TGC

Tender

Tax incentives / Investment grants

Figure 19: 
Effectiveness indicator for small hydro electricity in the period 1998-2003. The relevant policy schemes 
during this period are shown in different colour codes. 

Photovoltaic solar energy 

As  can  be  seen  from  Figure  21,  photovoltaic  electricity  generation  showed  the  strongest 
growth  in  Germany41  followed  by  the  Netherlands  and  Austria  over  the  period  considered. 
The support system in these three countries consists of fixed feed-in tariffs supplemented by 
additional mechanisms such as the soft loans in Germany. As expected, quota obligations and 
tax  measures  provide  little  incentive  for  investment  in  PV  technology,  since  these  schemes 
generally  promote  only  the  cheapest  available  technology.  The  PV  support  scheme  in  DE, 
NL, ES and AT is implemented as part of a long-term policy for the market development of 
this technology. 

41 

DE has just become the world leader, overtaking Japan.  

EN 

39 

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Minimum to average generation costs [€/MWh]
Average to maximum support level [€/MWh]

1200

1000

800

600

400

200

0

AT BE DK FI

FR DE GR IE

IT

LU NL PT ES SE UK

Figure 20: 
Price ranges (average to maximum support) for direct support of photovoltaic electricity in EU-15 
Member States (average tariffs are indicative) compared to the long-term marginal generation costs 
(minimum to average costs). 

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Feed-in tariff

Quota / TGC

Tender

Tax incentives / Investment grants

Figure 21:  
Effectiveness indicator for photovoltaic electricity in the period 1998-2004. The relevant policy schemes 
during this period are shown in different colour codes. 

EN 

40 

   EN 

 
 
 
 
 
 
 
Annex 4 – Methodology for the investor’s perspective 

We  define  the  effectiveness  of  a  member  state  policy  in  the  following  as  the  ratio  of  the 
change  in  electricity  generation  potential  during  a  given  period  of  time  to  the  additional 
realisable mid-term potential by 2020 for a specific technology, where the exact definition of 
effectiveness reads as follows: 

E

i
n

=

E

i
n
G

i
n
ADD

i
n
ADD

GG
−
−

i
n
1
−
i
POT
n
1
−
Effectiven
 ess

Indicator 

for 

RES

 technolog

 iy 

for the

year 
n

Electricit

y 

generation

potential

by 

RES

 technolog

 iy 

in 

year 
n

−

i
POT
n

Additional

generation

potential

 of 

RES

 technolog

 iy 

in 

year 

n 

until

2020

– 

Annuity 

One  possible  approach  for  calculating  actual  support  over  the  entire  lifetime  from  an 
investor’s  perspective  is  to  determine  the  average  expected  annuity  of  the  renewable 
investment. The annuity calculates the specific discounted average return on every produced 
kWh  by  taking  into  account  income  and  expenditure  throughout  the  entire  lifetime  of  a 
technology. 

A

=

i
+−

1(1(

∗

−

n

i

)

)

n

∑

t

1
=

Income
t

−
1(

Expenditur
+

)

i

t

e
t

A= annuity; i=interest rate; t=year; n=technical lifetime 

The  average  expected  annuity  of  wind  energy  investment  for  Germany,  Spain,  France, 
Austria,  Belgium,  Italy,  Sweden,  the  UK  and  Ireland  is  calculated  based  on  the  expected 
support level during the period of promotion. The level of support in the German system is 
annually adjusted according to the degression implemented in the German EEG. For the four 
countries  using  quota  obligation  systems,  the  certificate  prices  of  the  year  2004  are 
extrapolated for the entire active period of support.42 Furthermore, an interest rate of 6.6% is 
assumed43 and country-specific prices of wind technology are used, taking the average market 
prices of wind turbines in those countries in 2004. Therefore, the expected annuity considers 
country-specific  wind  resources,  the  duration  the  support  is  given  as  well  as  additional 
promotion instruments, such as soft loans and investment incentives. An important limitation 
of  this  approach  is  that  an  estimate  of  the  future  evolution  of  certificate  prices  in  quota 
systems is needed. Such an estimate typically does not exist. We therefore assume that TGC 
prices will remain constant at 2004 levels. 

42 

43 

This assumption might be questionable because certificate prices might reduce as the certificate markets 
in those countries mature. However, only very little knowledge exists about the temporal development 
of prices in these markets. 
For Germany only, an interest rate of 4% was used based on the soft loans granted. 

EN 

41 

   EN 

 
 
 
 
    
 
 
    
          
 
 
          
 
                                                 
In  this  section,  a  comparison  of  profits  from  an  investor  perspective  and  effectiveness  has 
been made for a limited number of Member States and assumping current prices over a longer 
period.  

Therefore,  the  effectiveness  indicator  as  defined  in  Annex  3  is  shown  against  the  expected 
annuity  of  investment  in  wind  and  biomass  energy  for  each  country.  In  this  way  one  can 
correlate the effectiveness of a policy with the average expected annuity of investment. This 
gives  an  indication  as  to  whether  the  success  of  a  specific  policy  is  primarily  based  on  the 
high financial incentives, or whether other aspects have a crucial impact on market diffusion 
in the considered countries.  

Wind energy 

This  analysis  has  been  carried  out  only  for  a  selection  of  countries  in  order  to  show  the 
principal  differences  between  the  different  policy  schemes.  The  reference  year  for  both  the 
effectiveness  indicators  and  the  expected  annuity  is  2003.  This  analysis  covers  the  country-
specific costs of generation and the duration of payments. Furthermore, country-specific wind 
yields are used to calculate the income generated during the lifetime of plants.  

ES-
Fixed Price

ES-
Market Option

20%

15%

10%

AT

5%

SE

0%

FI

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DE

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BE-
Wallonia

FR

0

1

2

3

UK

IT

BE-
Flanders
4

5

6

7

Expected Annuity [€ Cent/kWh]

Feed-in tariffs

Quota/TGC

Tender 

Tax incentives/rebates

Figure 1: Historically observed efficiency of support: effectiveness indicator in relation to the expected 
annuity. WIND. 

EN 

42 

   EN 

 
 
 
Forestry Biomass 

The same analysis has been carried out for electricity generation from biomass. However, the 
biomass  sector  is  influenced  by  other  factors,  such  as  secondary  instruments44,  the 
combination of heat and electricity generation or an optimal forest management.  

The final result of this exercise, carried out for the year 200345, is shown in Figure 2.  

10%

8%

6%

4%

2%

0%

0

-2%

DK

FI

HU

DE

SE

1

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f
f

E

FR

-1

AT

UK

BE-
Flanders

IT

2

3

BE-
4
Wallonia

5

6

Expected Annuity [€ Cent/KWh]

Feed-in tariff

Quota / TGC

Tax incentives / Investment grants

Figure 2: Historically observed efficiency of support: effectiveness indicator in relation to the expected 
annuity. BIOMASS 
The economic data regarding investment costs and operation and maintenance costs are based on biomass 
electricity generation using CHP46 technologies. The sale of heat as a by-product is therefore also taken 
into account for the economic assessment. 

44 

45 

46 

Some Member States ‘reinforce’ the main instrument (normally feed-in tariff or green certificate) by tax 
relief  or  investment  support.  These  instruments  are  good  ways  of  catalysing  the  kick-off  of  biomass. 
They also have the advantage of less interference with the wood market. 
Again,  as  in  the  case  of  wind,  the  reference  year  for  both  effectiveness  indicators  and  the  expected 
annuity is 2003. 
CHP = Combined Heat and Power generation. 

EN 

43 

   EN 

 
 
  
                                                 
Annex 5 – Intermittency in production and balancing power: need for an appropriate 
combination of internal market and renewables regulation 

As previously stated in Chapter 3.3, balancing costs will of course depend on the volume of 
intermittent  power  that  has  to  be  balanced,  which  again  depends  on  the  prediction  of 
renewable production, gate closure etc. Moreover, the cost will also depend on the availability 
of  balancing  power,  which  will  in  turn  depend  on  the  generating  system  (energy  mix)  and 
interconnectors to other countries. As said before, an appropriate forecast of wind generation 
so as to minimise deviations will optimise system costs and regulation services. Under certain 
conditions,  RES-E  integration  can  match  with  local  and  regional  demand  peaks  (e.g.,  solar 
energy with respect to peaking and grid-destabilizing air-condition demand in Mediterranean 
countries during daytime. 

Balancing Cost depending on wind penetration 
(Comparison of international studies (except Germany))

]
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/
€
[

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0,5

0,0

US-Studien
US Studies

DK Risoe

UK ILEX

Published Germ an Balancing Cost  
(E.ON) are far w ay of the trend line. 
Therefore, they are  not show n here.

0

10

20

30

40

50

60

70

PWind,inst / PL,max [%]

Figure 1: 
Comparison of international studies on additional balancing cost due to large-scale intermittent wind 
integration. 

It should be stressed that most existing power markets are designed to cater to the needs of 
conventional thermal and hydropower, and therefore only to a very limited degree take into 
account  the  needs  of  new  renewables.  At  EU  level,  therefore,  the  need  for  rules  and  other 
measures to integrate intermittent RES-E technologies should be considered.  

The  influence  of  wind  power  on  cross-border  bottlenecks  between  Germany  and  its 
neighbours  has  created  some  disturbances  in  the  Netherlands  and  Poland.  Arrangements  for 
power  plant  scheduling,  the  possible  rigidity  of  the  structure  of  electricity  market,  reserve 
capacity for cross-border transmission and congestion management seem to be crucial points 
requiring further analysis.  

If developed in a more intensive manner, demand flexibility can also handle some of the 
fluctuations  in  power  production  from  intermittent  sources.  At  the  same  time,  this 
flexible demand which could ensure a better balance between supply and demand, may 
offer  advantages  not  only  for  integrating  RES-E  capacity,  but  also  for  the  general 
operation of a liberalised power market.  

EN 

44 

   EN 

 
 
 
 
How  is  the  cost  of  support  systems  reflected  in  the  electricity  tariff?  The  consumer’s 
point of view.  

The  transparency  of  consumers  of  the  different  support  systems  depends  almost  entirely  on 
the design of the system, especially the flexibility of the market. The majority of countries in 
the EU do not give the explicit cost of renewable energies in electricity bills. 

The  transfer  of  the  cost  of  renewable  electricity  depends  on  national  regulation  aspects  and 
the tariff structure. 

The structure of the electricity market and the design aspects are very different in Europe, so 
the  following  graph  should  be  considered  an  estimate  of  the  inclusion  of  RES  support  in 
electricity  prices.  The  cost  of  the  renewable  support  systems  as  reflected  in  the  tariff  is 
between 4% and 5% for Germany, Spain and UK and around 15% for Denmark. The share of 
renewable electricity in Denmark is currently higher than 20%.  

electricity prices end 2004 / medium industry consumer 
(~20 GWh/year)

]
h
W
M
/
€
[
e
c
i
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p
y
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100,00

90,00

80,00

70,00

60,00

50,00

40,00

30,00

20,00

10,00

0,00

PSO

taxes

CHP and other support

renewables support

transm & distr

generation

Denmark

Germany

Spain*

UK

Figure 2: Approximate breakdown of electricity prices. European Commission, own estimation47. * No tax 
is considered for Spain. 

47 

The  structure of  the  electricity  tariff  varies  between  countries  in  Europe.  The  figures  included  in  this 
table are based on data from Member States and further elaborated by Commission services in order to 
compare different countries. 

EN 

45 

   EN 

 
 
 
 
                                                 
Annex 6 – Administrative barriers 

Many  Member  States  recognise  the  problem  that  renewable  energies  come  in  many  cases 
under different codes  and  legislations. This multiple regulation leads to extra work for both 
applicants and the authorities concerned.  

Complex legislation concerning renewable projects: 

• 

• 

Spatial  planning  laws  involve  competent  authorities  at  different  hierarchical 
levels  (e.g.  central,  provincial  and  local  government);  civil  construction  works 
law and building codes involve local government as the competent authority. 

Environmental  laws  justify  a  favourable  environmental  impact  assessment  for 
granting environmental permits.  

•  Noise  disturbance  laws  (in  the  case  of  wind)  are  intended  to  limit  noise 
‘pollution’. Competent authorities are typically at local and/or provincial level. 

•  Nature  diversity  laws  aim  at  protecting  indigenous  plants  and  animals,  notably 

birds. The competent authority is typically central government. 

• 

Laws  for  the  management  of  water  and  road  infrastructure  seek  to  protect  and 
promote  the  efficient  use  of  public  infrastructure.  The  competent  authority  is 
central government. (More problematic in the case of small hydropower plants). 

• 

Electricity laws governing the transmission, distribution and supply of electricity. 

Pre-planning: the experience in Denmark and Germany 

In the 90s, more systematic planning procedures were initially developed at national level in 
Denmark, with directives for local planners. In addition, an executive order from the Minister 
of  Environment  and  Energy  ordered  municipalities  to  find  suitable  sites  for  wind  turbines 
through  the  country.  This  “pre-planning”  with  public  hearings  in  advance  of  any  actual 
applications  for  turbine  sites  was  a  considerable  help  in  gaining  public  acceptance  of 
subsequent sites for wind turbines. 

Around  1997,  another  set  of  planning  regulations  were  developed  for  offshore  wind  farms, 
with a central, national authority, the Danish Energy Agency, designated to hear all interested 
parties, public and private. This “one-stop shop” method has facilitated the planning process 
considerably, and is being widely studied around the globe. 

In Germany, under the principle of proportionality, small projects may be authorized by the 
local  authorities.  Large  projects  are  subject  to  authorization  by  a  national  body  under  the 
Federal Emission Control Act (BImSchG).  

Under the national building code (Federal Building Code, BauGB), wind power installations 
are  privileged  and  therefore  generally  permitted  outside  residential  areas.  However,  the 
Länder (Federal states) can designate specific areas in which wind energy use is restricted.  

EN 

46 

   EN 

 
Success rates and average approval timing – a good evaluation method 

The  British  Wind  Energy  Association  publishes  overall  planning  approval  rates.  From  the 
outset,  the  approval  rate  in  the  UK  as  a  whole  has  been  around  80%.  The  statistics  also 
include figures for different parts of the UK: Scotland has had an approval rate of over 90% 
compared with less than 20% in Wales. The time taken to decide on wind farm applications is 
also publicly available: this is currently around 13 months for local decisions and over 2 years 
for national or federal decisions.  

Estimation  of  administrative  barriers  to  renewable  energy  deployment  in  the  EU, 
excluding grid barriers 

A
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B
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C
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(cid:46)  (cid:46)  -  (cid:47)  ☺  -  ☺  (cid:47)  ☺  (cid:47) (cid:47) ☺ (cid:47) (cid:47) (cid:47) - 

-  (cid:46) (cid:46) (cid:47)  -  (cid:47)  (cid:46)  ☺ ☺

Member States have to report again – new Member States for the first time – on the existing 
administrative barriers by October 2005. 

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Annex 7 – Guarantees of origin 

Article 5 of Directive 2011/77/EC requires Member States to implement a guarantee of origin 
system (hereafter GO system) by 27 October 2003 for EU-15. For the 10 new Member States, 
the deadline for implementing such a system was, in accordance with the Treaty of Accession 
of 2003, 1 May 2004. The main objectives of such a system are to facilitate trade in electricity 
from  renewable  energy  sources  and  to  increase  consumer  transparency  by  distinguishing 
between electricity from renewable and non-renewable energy sources. This Annex contains 
an overview of the different stages reached with of GO systems in Europe.  

The main stages in the implementation of a GO system are:  

- 

- 

- 

implementing legislation,  

appointing an issuing body, 

setting  up  an  accurate  and  reliable  operational  system  for  issuing  guarantee  of 
origins.  

In accordance with Article 5 of the Directive, a guarantee of origin is issued on request. It is 
not an obligation for renewable electricity sources.  

Based  on  national  reports  and  supplementary  information,  the  situation  in  September  2005 
was as follows: 

Legislation 

Issuing body 

Ready to GO 

EU-15 

Austria 

Belgium 

Denmark 

Finland 

France 

Germany 

Greece 

Ireland 

Italy 

Luxembourg 

Netherlands 

Portugal 

Spain 

Sweden 

UK 

Passed 

Passed 

Passed 

Passed 

In process 

Passed 

In process 

Passed 

Passed 

Passed 

Passed 

In process 

In process 

Passed 

Passed 

DSO 

Regulator 

TSO 

TSO 

TSO 

Auditors 

TSO 

Regulator 

TSO 

Regulator 

TSO 

TSO 

Regulator 

TSO 

Regulator 

Operational 

Operational 

Operational 

Operational 

In process 

Operational 

In process 

In process 

Operational 

In process 

Operational 

In process 

In process 

Operational 

Operational 

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In process 

Not appointed 

EU-10 

Cyprus 

Czech Republic 

Estonia 

Hungary 

Latvia 

Lithuania 

Malta 

Poland 

Slovenia 

Slovakia 

Passed 

Passed 

In process 

Not started 

In process 

Passed 

Passed 

Passed 

In process 

In process 

In process 

Government 
organisation 

Not appointed  

Not started  

Not appointed 

Not appointed 

TSO 

Regulator 

Regulator 

Regulator 

Regulator 

Not started 

Not started 

In process 

In process 

In process 

In process 

In process 

In  total  only  9  of  the  25  Member  States  have  fully  transposed  this  article  into  national 
legislation and put in place an operational system for issuing guarantees of origin. At present, 
none of the new Member States has an operational system issuing guarantees of origin.  

Most of the EU-15 have passed legislation concerning a system of guarantees of origins, the 
exceptions being France, Greece and Portugal. However, these countries are in the process of 
adopting  legislation.  Of  the  new  Member  States,  only  the  Czech  Republic,  Estonia,  Malta, 
Poland and Slovakia have passed legislation regarding a system of guarantees of origin. The 
remaining new Member States, with the exception of Latvia, are in the process of preparing or 
have proposed legislation.  

Altogether  21  countries  have  designated  an  issuing  body.  The  majority  of  countries  have 
appointed  either  a  transmission  system  operator  (TSO)  (9  countries)  or  a  regulator  (8 
countries)  as  the  issuing  body.  The  exceptions  are  Austria,  Germany  and  Czech  Republic, 
which  have  opted  for  a  distribution  system  operator  (DSO),  a  group  of  auditors  and  a 
governmental  organisation,  respectively.  The  tasks  assigned  to  the  issuing  body  also  vary 
from  country  to  country.  In  some  countries,  issuing  bodies  maintain  a  national  register  of 
guarantees  of  origin,  while  in  others  they  are  also  responsible  for  accrediting  the  power 
generating  plants.  However,  the  task  of  plant  accreditation  and  verification  of  eligibility  is 
more  often  assigned  to  an  institution  other  than  the  issuing  body.  All  9  countries  with  an 
operational  system  in  place,  with  the  exception  of  Germany,  have  established  a  national 
registry for keeping track of ownership of guarantees of origin and to facilitate redemption, if 
required.  Only  3  countries,  Austria,  Belgium  and  the  Netherlands  have  introduced 
redemption.  Registry  and  redemption  requirements  help  reduce  the  problems  of  multiple 
counting. 

Other design features, also regarding applications for guarantees of origin, vary greatly from 
country to country. All countries with a fully operational system in place, with the exception 
of  Italy  and  Germany,  allow  for  the  transferability  of  guarantees  of  origin.  Italy  requires 
transferability to be linked with the physical electricity, whereas Germany does not allow the 
transfer of guarantees of origin issued to production eligible for the German feed-in system. A 
few  countries  have  introduced  earmarking  of  guarantees  of  origin.  In  addition  to  Germany, 

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Austria,  Denmark  and  the  Netherlands  require  that  the  guarantee  of  origin  is  earmarked  for 
support received or for tax benefits.  

Under Article 5 of the directive, the Commission has to consider the desirability of proposing 
common rules for guarantees of origin. At present, the Commission does not see the need for 
proposing common rules. There are several reasons for this. Firstly, regarding the objective of 
facilitating  trade,  a  necessary  clarification  was  made  in  COM(2004)  366  on  the  role  of  the 
guarantee  of  origin  and  under  what  conditions  a  Member  State  can  consider  that  imported 
renewable electricity can contribute to the achievement of the RES-E targets:  

The Commission has decided to apply the following principle in assessing the extent to which 
national targets are met: 

A Member State can only include a contribution from imports from another Member 
State  if  the  exporting  state  has  accepted  explicitly,  and  stated  on  a  guarantee  of 
origin,  that  it  will  not  use  the  specified  amount  of  renewable  electricity  to  meet  its 
own target and has thereby also accepted that this electricity can be counted towards 
the importing Member State’s target. 

This agreement should be included in a mutually recognised guarantee of origin. Currently, it 
seems  there  are  no  transfers  of  guarantees  of  origin  between  Member  States  in  order  to 
achieve targets. 

Secondly,  Directive  2003/54/EC48  was  adopted  after  Directive  2001/77/EC.  Under  Article 
3(6)  of  Directive  2003/54/EC,  Member  States  are  required  to  implement  a  scheme  for  the 
disclosure  of  the  fuel  mix  and  selected  environmental  indicators  on  electricity  sold  to  final 
consumers.  The  Commission  regards  this  provision  as  an  important  measure  in  meeting  the 
objective  of  consumer  transparency  as  it  covers  the  whole  electricity  sector,  not  only 
electricity from renewable energy sources. Several countries with legislation on the disclosure 
of generation details have already indicated that they will use the guarantee of origin to track 
information  on  renewable  electricity  generation.  The  guarantee  of  origin  can  therefore 
facilitate the implementation of electricity disclosure. The further development of disclosure 
would clearly increase consumer transparency.  

Thirdly, a few countries have opted for a mandatory renewable energy quota obligation as the 
main support mechanism for renewable electricity. The quota obligation is administered by a 
system  of  tradable  renewable  energy  certificates  and  there  can  be  significant  similarities 
between the guarantee of origin and tradable green certificates.  

Nevertheless,  the  majority  of  Member  States  have  chosen  feed-in  tariffs  as  the  main 
instrument for promoting renewable electricity. Although there may be similar tasks required 
for the feed-in tariff system as for the issuance of a guarantee of origin, such as accreditation 
and verification procedures for renewable electricity production, the issuance of a guarantee 
of origin is not strictly necessary to facilitate feed-in tariff system.  

The Commission considers that for the moment, the further development of disclosure would 
clearly increase consumer transparency.  

48 

Directive  2003/54/EC  concerning  common  rules  for  the  internal  market  in  electricity  and  repealing 
Directive 96/92/EC. 

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