COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL Renewable Energy: Progressing towards the 2020 target
Date: 2011-01-31
Institutions: European Commission
Subjects: common strategy, energy policy, energy site, energy supply

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EUROPEAN COMMISSION 

Brussels, 31.1.2011 
COM(2011) 31 final 

COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN 
PARLIAMENT AND THE COUNCIL  

Renewable Energy: Progressing towards the 2020 target 

SEC(2011) 129 final 
SEC(2011) 130 final 
SEC(2011) 131 final 

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COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN 
PARLIAMENT AND THE COUNCIL  

Renewable Energy: Progressing towards the 2020 target 

1. 

INTRODUCTION 

Renewable  energy  is  crucial  to  any  move  towards  a  low  carbon  economy.  It  is  also  a  key 
component of the EU energy strategy. The European industry leads global renewable energy 
technology  development  employs  1.5  million  people  and  by  2020  could  employ  a  further  3 
million1.  The  promotion  of  renewable  energy  also  develops  a  diverse  range  of  mostly 
indigenous energy resources. 

EU renewable energy policy is relatively young, having started with the adoption of the 1997 
White  Paper.  It  has  been  driven  by  the  need  to  de-carbonise  the  energy  sector  and  address 
growing dependency on fossil fuel imports from politically unstable regions outside the EU. 
Over  that  period  the  focus  has  shifted  from  the  promotion  of  renewable  energy  through 
indicative targets for the electricity and transport sectors to the definition of legally binding 
targets  supported  by  a  comprehensive  legislative  framework,  and  most  recently,  by  a 
reorientation  of  European  energy  infrastructure  policy  that  facilitates  renewable  energy 
growth.  The  new  Renewable  Energy  Directive  provides  a  strong  and  stable  regulatory 
framework for the development of the renewable energy in Europe. With the transposition of 
the  directive  by  all  Member  States  by  the  deadline  of  5th  December  2010  and  the  adoption  of 
National  Renewable  Energy  Action  Plans,  the  foundations  for  determined  EU  action  on 
renewable energy have been laid.  

The  Commission's  Energy  2020  Strategy2  highlights  how  EU  infrastructure  and  innovation 
policies  are  supporting  the  renewable  energy  sector's  development,  ensuring  that  renewable 
energy sources and technologies become economically competitive as soon as possible, thus 
supporting  the  growth  of  renewable  energy  to  achieve  our  goals.  However,  as  a  young  and 
developing  industry,  these  important  challenges  as  well  as  the  dimension  of  financing  will 
have to be addressed in the coming years.  

This  Communication  presents  an  overview  of  the  renewable  energy  industry  in  Europe,  its 
prospects  to  2020  and  addresses  the  outstanding  challenges  for  the  development  of  the  sector. 
The  background  analysis  underpinning  this  Communication  is  provided  in  three  reports 
reviewing the European and national financing of renewable energy, the recent progress in the 
development  of  renewable  energy  sources  and  the  use  of  biofuels  and  other  renewables  in 
transport as well as the operation of the mass balance verification method for the biofuels and 
bioliquid  sustainability  scheme  Taken  together,  these  four  documents  form  the  Commission's 
response to the reporting requirements set out in the relevant EU legislation.3  

1 
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Commission (ECOFYS) EmployRES study, gross employment effects. 
COM(2010)639/3 Energy 2020: A strategy for competitive, sustainable and secure energy 
SEC xx Recent progress in developing energy from renewable sources and technical evaluation of the 
use of biofuels and other renewable fuels in transport. Commission report in accordance with Article 3 
of Directive 2001/77/EC and Article 4(2) of Directive 2003/30/EC; SEC xx Review of European and 
national  financing  of  renewable  energy.  Commission  Report  in  accordance  with  Article  23  (7)  of 
Directive  2009/28/EC;  SEC  xx  Commission  report  on  the  operation  of  the  mass  balance  verification 

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2. 

ACHIEVING THE 20% TARGET 

Until 2008, the development of renewable energy was driven by a loose legislative framework, 
which  set  non-binding  targets.  The  "Renewable  Electricity  Directive"4  and  the  "Biofuels 
Directive"5 set national indicative targets such that the EU would reach a share of renewable 
energy in electricity generation of 21% by 20106 and a share of renewable energy replacing 
petrol and diesel in transport of 5,75% by 2010.  

The  review  presented  in  the  annexed  progress  report  shows  that  neither  of  these  targets  are 
likely  to  be  met,  even  though,  as  set  out  below,  both  sectors  have  experienced  continued 
growth: 

Sectoral and overall growth of renewable energy in the EU7 

18%

16%

14%

12%

10%

8%

6%

4%

2%

0%

Electricity share

transport share

Heating share

Overall RES share

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

(2009, 2010  
linear estimates)

Only a few Member States, namely Denmark, Germany, Hungary, Ireland, Lithuania, Poland 
and  Portugal  expect  to  achieve  their  2010  targets  for  renewable  energy  in  electricity 
generation; likewise, only Austria, Finland, Germany, Malta, Netherlands, Poland, Romania, 
Spain and Sweden expect to achieve their targets for renewable energy in transport.  

The  inadequate  rate  of  progress  towards  agreed  targets,  and  the  need  to  foster  renewable 
energy development in all Member States and not only in a few, were among the reasons that 
prompted  a  change  in  policy  approach  marked  by  the  adoption  of  the  Renewable  Energy 
Directive in 20098. The new Directive covers energy consumption as a whole, including for 
heating and cooling, and lays down legally binding rather than indicative national targets such 
that  the  EU  achieves  a  20%  share  of  renewable  energy  by  2020.  It  also  contains  a  much-

method  for  the  biofuels  and  bioliquids  sustainability  scheme.  Commission  Report  in  accordance  with 
Article 18 (2) of Directive 2009/28/EC. 
Directive 2001/77/EC of 27 September 2001 on the promotion of electricity produced from renewable 
energy sources 
Directive 2003/30/EC of 8 May 2003 on the promotion of the use of biofuels or other renewable fuels 
The  EU  share  of  renewable  energy  in  electricity  generation  included  in  the  Annex  of  Directive 
2001/77/EC is 22%, but following subsequent accessions has since then been amended to 21%.  
The shares referred to in this figure refer to the shares of energy from renewable sources in the three 
energy consuming sectors and the overall share of energy from renewable sources in the final energy 
consumption. 
Directive 2009/28/EC of 23 April 2009 on the promotion of the use of energy from renewable sources  

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reinforced set of provisions to facilitate the development of renewable energy, such as a legal 
requirement  for  the  Member  States  to  prepare  National  Renewable  Energy  Action  Plans, 
reform planning regimes, and develop electricity grids. The need to improve planning regimes 
(whilst  respecting  the  precautionary  principle  and  mitigating  environmental  impacts)  was 
another  element  also  discussed  in  the  Commission's  Communication  on  infrastructure 
priorities. Further efforts are needed both for renewable energy infrastructure and for energy 
infrastructure overall.  

The  review  of  Member  States  plans  shows  that  the  new  approach  is  starting  to  pay  off.  A 
comprehensive  and  binding  regulatory  framework  is  proving  catalytic  in  driving  forward 
renewable energy development to achieve the ambitious targets that the EU has set itself.9 The 
recent high growth rates have resulted in renewable energy constituting 62% of 2009 energy 
generation investments.  

….higher growth rates…. 

Member States projections show that renewable energy will grow at a faster pace in the years 
up  to  2020  than  in  the  past.  Almost  half  of  the  Member  States  (Austria,  Bulgaria,  Czech 
Republic,  Denmark,  Germany,  Greece,  Spain,  France,  Lithuania,  Malta,  Netherlands, 
Slovenia  and  Sweden)  are  planning  to  exceed  their  own  targets  and  be  able  to  provide 
surpluses for other Member States. For two Member States (Italy and Luxembourg), a small 
part of the renewable energy needed to reach their target is planned to come from “imports” in 
the form of statistical transfers from Member States with surpluses or third countries (see the 
annexed progress report for details). If all these production forecasts are fulfilled, the overall 
share of renewable energy in the EU will exceed the 20% target in 2020.  

The  plans  also  provide  important  information  regarding  energy  efficiency.  EU  energy 
consumption in 2020 is projected to be 95% of the 2005 level. National energy consumption 
estimates range from increases on 2005 of more than 20% in Cyprus, Lithuania and Malta to 
reductions of 14% in Germany and 9% in the UK.  

Combined  Member  States  expect  to  more  than  double  their  total  renewable  energy 
consumption from 103 Mtoe in 2005 to 217 Mtoe in 2020 (gross final energy consumption). 
The  electricity  sector  is  expected  to  account  for  45%  of  the  increase,  heating  37%  and 
transport  18%.  The  expected  developments  in  the  EU  in  the  3  sectors  are  illustrated  in  the 
Figures below10. Following biomass, wind power will account for 27% projected increase in 
renewable energy consumption (two-thirds onshore, one-third offshore), which will generate 
demand for Europe's wind turbine manufacturers and associated support industries. Similarly, 
the  solar  energy  industry  will  grow,  notably  for  photovoltaics.  Other  technologies  where 
quantities are currently small face even higher growth rates. Thus Europe's industrial players 
must be ready to respond to this growing demand. 

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10 

The  National  Renewable  Energy  Action  Plans  can  be  found  on  the  Commission’s  transparency 
platform:  http://ec.europa.eu/energy/renewables/transparency_platform/action_plan_en.htm.  Source  of 
the following data on the National Renewable Energy Action Plans except where shown otherwise are 
Renewable  Energy  Projections  as  Published  in  the  National  Renewable  Energy  Action  Plans  of  the 
European Member States, ECN/EEA report.  
Based on preliminary analysis of National Renewable Energy Action Plans.  

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EU development of renewable energy in electricity 

1400000

1200000

1000000

800000

600000

400000

200000

h
W
G

Tide, wave, ocean

Geothermal Electricity

Solar electricity

Biomass electricity

Wind

Hydro

0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

….more electricity…. 

Based  on  Member  States'  plans,  renewable  energy  should  constitute  37%  of  Europe's 
electricity mix by 2020. The projected expansion of electricity from renewable sources carries 
a number of implications. First, it highlights the need to accelerate the modernisation of the 
electricity grid. The Communication on Energy infrastructure highlighted that urgent action is 
necessary to prepare the grid for the integration of significant volumes of electricity produced 
from  renewable  sources,  facilitating  grid  balancing,  flexibility  and  distributed  generation. 
Electricity systems have to become more interconnected and flexible, and new infrastructure 
development  and  reinforcement  will  be  necessary,  including  the  deployment  of  smart  grid 
technologies11.  One  of the greatest challenges regarding the grid infrastructure is to connect 
the offshore potentials, mainly wind, foreseen in the Northern Seas of Europe, developing the 
electricity network both off- and onshore.  

The  Energy  2020  Strategy  highlighted  how  the  rise  of  electricity  produced  from  renewable 
sources also has implications for the electricity market as a whole. Multiple, flexible, smaller 
scale  distributed  forms  of  electricity  generation  need  different  grid  and  market  design  rules 
compared to traditional large, centralised power sources. The market integration of renewable 
energy should ideally occur in a manner that ensures resources are developed where it makes 
most  economicand  environmental  sense.  Factors  such  as  distance  to  consumption  centres, 
implied grid needs and issues related to public acceptance and job creation clearly also play a 
role  and  cannot  be  ignored.  In  any  event,  support  schemes  should  over  time  be  adapted  to 
apply best practice so as to avoid undue market distortions and excessive costs.  

….heating and cooling…. 

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COM(2010) 677  Energy  infrastructure priorities  for 2020  and beyond  - A  Blueprint  for  an  integrated 
European energy network. 

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As  for  the  heating  and  cooling  sector,  the  graph  below  gives  an  indication  of  the  expected 
growth  of  technologies  in  the  next  decade.  Biomass  will  remain  the  dominant  technology, 
with  50%  of  the  growth  up  to  2020  occurring  in  energy  produced  from  this  source  (half  of 
that in heating, a third in transport and the rest in electricity). 

EU development of renewable energy in heating & cooling

120000

100000

80000

60000

40000

20000

e
o
t
k

Geothermal Heat

Solar Heat

Heat pumps

Biomass Heat

0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

In the past, there was only modest market development in the heating sector due to the lack of 
an adequate support framework in most Member States. However this will clearly change in 
the  next  years  following  the  inclusion  of  the  heating  and  cooling  sector  in  the  new  EU 
renewable  energy  framework.  Member  States  are  already  planning  reforms  to  their  grants, 
feed  in  tariff  regimes  or  other  instruments  in  the  heating  sector.  Thus  development  and 
investments  in  Europe's  biomass  pellet  industry,  in  biomass  boiler  technology,  co-firing 
power plant technology and biofuels refining can be expected. 

…and transport…. 

The  plans  also  indicate  how  Member  States  expect  to  meet  their  10%  renewable  energy  in 
transport  target.  First  generation  biofuels  will  be  the  predominant  energy  source  over  the 
period to 2020. Europe has the strictest criteria in the world for biofuel sustainability and the 
Commission  has  provided  guidelines  for  their  application  in  June  201012.  An  assessment  of 
the  operation  of  the  verification  method  for  compliance  with  the  sustainability  criteria 
(referred  to  as  mass  balance  system)  is  contained  in  the  relevant  annexed  report13.  Second 
generation  biofuels  and  electric  vehicles  are  expected  to  make  only  a  small  contribution  by 
2020. 

COM (2010) Communication from the Commission on the practical implementation of the EU biofuels  

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and bioliquids sustainability scheme and on counting rules for biofuels 
13 

SEC xx Commission report on the operation of the mass balance verification method for the biofuels 
and bioliquids sustainability scheme. Commission Report in accordance with Article 18 (2) of Directive 
2009/28/EC. 

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EU development of renewable energy in transport 

Hydrogen

Other Biofuels

Electricity in transport

Bioethanol

Biodiesel

35000

30000

25000

e
o
t
k

20000

15000

10000

5000

0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Source: Commission's analysis based on NREAPs. 

To achieve the 2020 targets in an economical and resource efficient manner, and to pave the 
way for much bigger shares of renewable energy in the years after, the EU needs to continue 
to  invest  in  research  for  advanced  renewable  energy  technologies,  and  needs  to  continue  to 
bring  down  the  costs  of  offshore  wind;  photovoltaic  power;  electric  cars;  and  second-
generation biofuels. Win-win solutions to develop renewable energy projects that bring wider 
environmental  benefits  will  be  promoted  through  research  programmes  such  as  the  SET 
Plan14. Building up the mass deployment and roll out of current technologies to reach the EU 
2020 targets and developing and deploying advanced technologies for a decarbonised energy 
sector will require major effort and significant investments. For this reason it is essential that 
there is a stable and predictable environment for the financing of renewable energy.  

Furthermore,  beyond  the  technological  and  regulatory  aspects,  Member  States,  regions  and 
cities need to step up their efforts to strengthen skills, knowledge and capacities, in particular 
within  the  relevant  administrations  and  agencies  (such  as  through  the  EU  Covenant  of 
Mayors),  to  ensure  adequate  governance  for  the  efficient  delivery  of  renewable  energy 
investment programmes and projects.  

3. 

CLOSING  THE  INVESTMENT  GAP:  BETTER  AND  MORE  INTEGRATED  FINANCING  OF 
RENEWABLE ENERGY  

The  Commission's  Communication  on  infrastructure  priorities  has  signalled  that  European 
investment of more than one trillion euros is needed between today and 2020 to achieve the EU 
energy  policy  goals.  Of  this,  approximately  half  is  needed  for  replacing  or  investing  in  new 
electricity generation capacity. As the new EU Energy Strategy notes15, priority should be given 
to  renewable  electricity  investments  –  achieving  levels  higher  than  the  62%  of  all  new  power 

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COM(2007)723 A European Strategic Energy Technology Plan 
COM(2010)639/3 Energy 2020: a strategy for competitive sustainable and secure energy, p6 

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installations  in  2009.  Further  analysis  undertaken  for  the  Commission  suggests  that  whilst 
annual  capital  investment  in  renewable  energy  today  averages  €35bn ,  this  would  need  to 
rapidly double to €70bn to  ensure we achieve our goals16. Such outlays must be funded, as they 
are today, chiefly through private sector investment, financed finally by energy consumers.  

The  benefits  of  encouraging  the  renewables  industry  were  widely  acknowledged  as  the  global 
financial  crisis  took  hold  in  2009,  when  "clean  tech"  stimulus  packages  worth  billions  were 
implemented in the United States and China, as well as across the EU17. Indeed the growth of the 
sector in the US, China other Asian countries shows that, around the world, it is seen as a crucial 
industry  for  the  future  to  achieve  innovation,  energy  security  and  deliver  on  a  low  carbon 
economy. As noted in the new EU Energy Strategy18, the challenge facing Europe is to stay at 
the forefront of this industry, to ensure it grows, at a time when governments are simultaneously 
faced with the need to curtail spending.  

Climate policies that set a carbon price, such as the EU Emission Trading System, to achieve 
the 20% greenhouse gas reduction target by 2020 compared to 1990, are important drivers to 
promote renewable energy. 

Likewise, much can be done to streamline complex authorisation and planning procedures and 
to  remove  non-cost  barriers  to  the  growth  of  renewable  energy,  simply  making  planning 
regimes  more  transparent  and  faster  while  respecting  existing  environmental  legislation  can 
improve uptake of renewable energy19. Ensuring that installers are qualified, and providing more 
product information to consumers can also improve deployment rates20.  

But at this time of major fiscal constraint, more can also be done to ensure that the money spent 
on renewable energy is used cost effectively. Effective selection and coordination of financing 
tools at national and EU level is essential in this respect. The choice of a financing instrument to 
support  renewable  energy  development  depends  on  the  state  of  technology  and  project 
development21.  Instruments  include  grants,  loans  and  loan  guarantees,  equity  funds,  feed  in 
tariffs,  premiums,  quota/certificate  schemes,  fiscal  incentives  and  tenders.  All  of  these 
instruments can play a role in the right circumstances without altering the competitiveness of 
the  market.  They  alleviate  different  forms  of  project  risk  –  technology,  construction, 
regulatory – and depend in particular on the maturity of a project or technology. R&D funding 
for instance traditionally consists of grants for significant portions of project capital costs, as 
the  cost  and  uncertainty  surrounding  the  technology  render  them  too  risky  for  the  private 
sector  to  finance  alone.  Once  a  technology  is  more  established,  grants  can  still  be  useful  to 
finance  demonstration  projects,  with  a  move  to  venture  capital  –  bearing  high  risks  –  when 
technology  is  nearly  established.  Results  can  already  be  seen:  wind  production  costs  have 
declined  by  20%  over  the  9  years  to  2006  and  solar  PV  by  57%22.  For  wind  energy,  low 

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ECOFYS, Ernst & Young, Fraunhofer ISI, TU Vienna, 2010. The least cost electricity investment 
component of this, consistent with the analysis of COM(2010)677 ranges from €310bn-370bn. 
European Economic Recover Package: http://ec.europa.eu/energy/eepr/index_en.htm 
COM(2010)639/3 Energy 2020: a strategy for competitive sustainable and secure energy 
See  ECORYS:  Assessment  of  non-cost  barriers  to  renewable  energy  growth  in  EU  Member  States, 
http://ec.europa.eu/energy/renewables/studies/renewables_en.htm 
See  ECORYS:  Assessment  of  non-cost  barriers  to  renewable  energy  growth  in  EU  Member  States, 
http://ec.europa.eu/energy/renewables/studies/renewables_en.htm 
See  "Support  schemes  for  renewable  electricity  in  the  EU"  European  Commission  Economic  Papers 
408,  April  2010  and  "Financing  Renewable  energy  in  the  European  Energy  market",  ECOFYS  et  al, 
October 2010 for details. 
EWEA "The economics of wind energy" and EPIA "Set for 2020" 

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operating costs increasingly lead to falling market prices (the so-called "merit order effect"). This 
entails cost savings for all electricity consumers and may to a significant extent compensate for 
the extra costs of support schemes. 

Once a technology is capable of being deployed but not yet competitive, support tends to shift 
from  capital  to  operating  support  and  here  again  there  is  a  continuum  of  instruments, 
depending on circumstances. Whatever the instrument, it is important that it has a predictable 
and  transparent  way  of  adapting  support  levels  so  as  to  avoid  "stop  and  go"  policies  or 
political  calls  for  retroactive  changes  to  conditions(such  as  in  certain  photovoltaics  markets 
recently)allowing  adjustments  to  reflect  the  falling  production  costs  of  renewables  thus 
avoiding  excessive  returns  on  capital.  It  is  also  important  to  note  that  operating  support  is 
more commonly financed by energy consumers rather than from taxation. 

The costs of developing our energy sector vary, depending on a wide variety of factors, including 
technology  costs,  oil  and  gas  prices,  technological  progress,  grid  and  transport  costs  and 
administrative  barriers.  Yet,  due  to  the  still-fragmented  single  European  energy  market, 
traditional infrastructure, and with fossil fuels still receiving four times the level of subsidies23, 
renewable energy is still often more expensive than traditional sources. This is unfortunate and 
efforts should be pursued to provide incentives to allow Member States to reach the renewable 
energy targets. Until such market conditions are met and the barriers are reduced, continued 
support  for  renewable  energy  will  be  needed.  Clearly,  financial  support  for  renewable 
energy  can  be  phased  out  only  when  renewable  energy  costs  have  further  declined, 
market failures have been corrected and they can operate in a competitive market.  

….Member State support systems…. 

Whilst some EU financing is applied, the bulk of support for renewable energy is delivered at 
Member State level.  

The table shows how a range of different instruments are used by Member States to provide 
financial support. This reflects the fact that the use of multiple instruments can be appropriate, 
given  the  different  status  of  all  the  different  technologies,  in  terms  of  maturity,  users,  and 
markets. The choice of instruments should however be clearly framed in order not to create 
confusion  and  engender  negative  consequences  for  investors.  Indeed  in  all  sectors,  but 
particularly  in  the  electricity  sector,  there  has  been  significant  reform  and  adaptation  of 
instruments  as  circumstances  have  changed.  As  production  costs  have  declined,  tariffs  have 
been  reduced.  As  technologies  develop,  they  have  been  incorporated  into  quota  or  tariff 
support  schemes.  As  technology  risks  have  been  reduced,  producers  are  exposed  to  greater 
market  price  risk  (and  market  integration)  by  switching  support  from  feed  in  tariffs  to 
premiums.  It  is  essential  that  such  costs  are  "off  budget"  i.e.  are  borne  by  energy 
consumers  rather  than  tax  payers  (see  associated  staff  working  document  for  more 
details)  to  avoid  "stop-start"  interruptions  as  government  budgets  become  more 
constrained.  

Member States' use of different instruments for electricity, heating and transport (biofuels). 

23 

Globally, the IEA has recently estimated fossil fuel subsidies at $312bn 
(http://www.worldenergyoutlook.org/subsidies.asp), and the most recent figures(2004) for the EU 15 had put fossil 
fuel subsidies at €21.7bn compared  to €5.3bn for renewable energy  (EEA Technical report 1/2004). 

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FI  FR  GR  HU 

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grants 

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exemptions 

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grants 

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A  further  element  of  reform  in  some  Member  State  has  been  to  develop  private  financing 
mechanisms  that  both  attract  capital  and  increase  local  acceptance  of  renewable  energy 
projects  (thus  helping  to  overcome  other  barriers  such  as  planning  permission).  The  most 
common instrument used for this is "local ownership" whereby local communities can take a 
financial share in the investment of the project in return for cheaper electricity or a share in 
the profit of the project24. The development of local public-private partnerships can also be an 
effective means of reducing the cost of projects and achieving greater public acceptance while 
contributing to local and regional socio-economic development.  

Such reforms work when they are planned and anticipated by investors in accordance with a 
clear  government  strategy.  Sudden  changes  are  disruptive  and  undermine  all  renewable 
energy investment strategies. These have to be avoided as they undermine investor confidence 
and efforts to achieve the targets. Retroactive changes to support schemes in particular must 
be  avoided  given  the  negative  effect  such  changes  have  on  investor  confidence.  The 
Commission  has  already  expressed  concern  about  recent  developments  in  certain  Member 
States in this respect and will continue monitoring this issue closely with a view to consider 
further action from or at EU level if necessary.  

….cooperation mechanisms…. 

These changes improve the efficiency of the instruments, but more needs to be done. Most 
Member States have continued to focus on national resources to achieve their 2020 targets on 

24 

More information about benefit sharing mechanisms can be found in the RESHARE report, available on 
www.reshare.nu  

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their  own.  They  have  not  sought  to  reduce  costs  by  developing  cheaper  resources  in  other 
parts  of  the  single  market.  Commission  analysis25  estimates  that  up  to  10  billion  Euro 
annually  could  be  saved  if  Member  States  treated  renewable  energy  as  a  commodity  in  a 
single European market rather than in national markets. Thus the move to market integration, 
in particular the evolution to feed in premiums is too slow, too fragmented and needs to be 
reinforced.  

As  the  EU  Energy  Strategy  notes,  a  greater  convergence  of  national  support  schemes  to 
facilitate  trade  and  move  towards  a  more  pan-European  approach  to  development  of 
renewable energy sources must be pursued26. This repeated call for convergence is not new, 
and  is  to  flag  up  the  need  to  start  adjusting  to  a  European  electricity  market  in  particular, 
where  over  a  third  of  power  will  come  from  renewable  energy.  In  some  situations,  such  as 
offshore wind development, the need for an integrated strategy is imminent. In this instance, 
the  relevant  Member  States  and  the  Commission  are  acting,  having  just  signed  the 
Memorandum  of  Understanding  of  the  North  Seas  Countries  Offshore  Grid  Initiative.  The 
Commission  will  closely  follow  this  development  and  will  report  on  the  offshore  wind  and 
grid developments in 2012. The Commission is also examining the parameters for the import 
of  renewable  energy  from  the  Southern  Mediterranean  arising  from  initiatives  such  as 
Desertec and the Solar Mediterranean Plan.  

Beyond  this  priority,  a  medium  to  long  term  EU  strategy  should  be  developed  in  order  to 
make  the  energy  sector  function  cost  effectively.  One  first  step  in  integrating  renewable 
energy is the development of the new cooperation mechanisms created by the Directive. 

25 

26 

SEC  xx  Review  of  European  and  national  financing  of  renewable  energy.  Commission  Report  in 
accordance with Article 23 (7) of Directive 2009/28/EC. 
COM(2010)639/3 Energy 2020: a strategy for competitive sustainable and secure energy, p10 

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11 

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The Renewable Energy Directive's "cooperation mechanisms 

The Renewable Energy Directive establishes "cooperation mechanisms" by which Member States can join together 
to develop renewable energy sources. These include: 

–  "statistical transfers" whereby one Member State with a surplus of renewable energy can "sell" it statistically 
to another Member State, whose renewable energy sources may be more expensive. One Member State gains 
a  revenue,  at  least  covering  the  cost  of  developing  the  energy,  the other  gains  a  contribution  towards  their 
target at low cost.  

–  "joint projects" whereby a new renewable energy project in one Member State can be co-financed by another 
Member State and the production shared statistically between the two. Again, there is a mutual benefit and 
cost saving from such cooperation. Joint projects can also occur between a Member State and a third country, 
if the electricity produced is imported into the EU, e.g. from North Africa. 

–  "joint support schemes" whereby two or more Member States agree to harmonise all or part of their support 
schemes for developing renewable energy, to clearly integrate the energy into the single market, and share 
out the production according to a rule such as where the financial support is coming from.  

Using such mechanisms will generate a European rather than a national perspective to the development of renewable 
energy, ensuring that  Europe reaches  its renewable energy  target cost effectively. In  addition, the scope for trade, 
joint  projects  and  common  support  schemes  constitute  clear  steps  towards  integrating  renewable  energy  into  the 
European energy market.  

Member States created the cooperation mechanisms of the new Renewable Energy Directive, 
allowing  them  to  control  how  their  renewable  energy  resources  are  jointly  developed,  co-
financed, and their support schemes joined or harmonised. Thus when the level playing field 
of  a  single  energy  market  is  created  and  renewable  energy  producers  are  able  to  compete 
fairly, Member States should be more prepared for renewable energy to be promoted in a pan 
European  approach,  exploited  efficiently  across  the  Union  in  Member  States  where  it  is 
feasible and makes most economic sense.  

The forums and projects established by the Commission to help Member States develop the 
cooperation  mechanisms27  can  also  be  used  to  steer  other  aspects  and  reforms  of  national 
support schemes. Other initiatives could include common technology banding, annual revision 
dates, cost calculation methodologies/indices, more coherent conversion of feed in tariffs to feed 
in premiums as technologies mature and ongoing work on the creation of regional clusters for 
joint support schemes, such as the joint green certificate regime just agreed between Norway and 
Sweden.  The  mechanisms  also  provide  scope  for  supporting  the  development  of  renewable 
energy production in third countries. Thus these mechanisms can facilitate real progress in the 
convergence of European support schemes, ensuring greater coherence with a single market. 

The Commission will be assessing the effective functioning of support schemes and cooperation 
mechanisms in the light of the 2014 review foreseen by the Directive. It will prepare guidelines 
for more harmonised reforms, facilitate the development of cooperation mechanisms and prepare 
the  ground  for  the  development  of  renewable  energy  in  the  southern  Mediterranean.  These 
actions  will  provide  a  platform  for  exchanges  on  the  reforms  on  going  in  Member  States  and 
help to avoid a subsidy race.  

27 

These  include  the  Concerted  Action  on  the  Implementation  of  the  Renewable  Energy  Directive, 
Member  States'  "International  feed  in  cooperation  group"  and  numerous  projects  under  the  Intelligent 
Energy Europe Programme. 

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….heating sector…. 

In  the  heating  sector,  the  predominance  of  Member  States'  investment  grants  focuses  on 
household  installations  of  small  solar  thermal  or  solar  photovoltaic  units.  Given  the  cost 
reductions  that  have  occurred  in  micro  units  in  recent  years,  Member  States  could  start  to 
consider regulatory rather than financial solutions at the household level. For example,  Article 
13(4) of the Renewable Energy Directive includes rules for building regulations or codes to 
include  minimum  levels  of  renewable  energy  in  buildings,  ensuring  growth  and  major 
savings,  through  regulatory  rather  than  financial  means28.  Given  its  local  nature,  support  for 
micro heating systems can exploit distributed forms of energy that develop a local community's 
biomass, solar or geothermal resources. 

The scope for any large scale heating from renewable energy sources is only now beginning 
to be explored in most Member States, partly because it is only now included in the European 
regulatory framework (the 20% target). As the Communication on infrastructure priorities has 
noted26,  district  heating  networks  should  be  promoted  as  a  matter  of  priority  in  all  larger 
agglomerations where local or regional conditions justify it. The Commission will continue to 
assess the development of this sector. 

At  EU  level,  despite  the  strong  political  support,  policy  and  legal  framework,  the  financial 
support  given  to  renewables  is  relatively  low.  For  the  period  2007-2009, funds  spent  on 
renewable  energy  amounted  to  roughly  €9.8bn,  (€ 3.26bn/a),  the  bulk  of  which  in  the  form  of 
loans from the European Investment Bank.  

The EU instruments used directly by the Commission for financing renewable energy projects 
(the  European  Economic  Recovery  Package,  RTD,  SET  Plan  expenditure),  those  jointly 
managed  with  Member  States  (structural  and  cohesion  funds),  and  those  managed  with  other 
institutions (EBRD, EIB) will all be the subject of review in light of the forthcoming planning of 
the next European Financial Framework, covering EU expenditure from 201429. In this respect, 
the  ambition  to  back  up  the  political  commitment  of  the  EU  to  renewables  needs  to  be 
underpinned  with  the  adequate  funding.  In  particular,  the  Commission  will  examine 
opportunities for using EU and national funds to leverage private capital into energy projects 
of  European  interest  on  local,  regional,  national  and  European  levels.  Further  efforts  are 
needed to facilitate the uptake of the Renewable Energy Directive's cooperation mechanisms, 
and so improve regional cooperation and begin the harmonised reform of support schemes. 

A  major  new  source  of  financial  support  for  renewables  at  the  EU  level  is  the  "NER  300 
programme",  established  under  the  Emissions  Trading  Directive  2003/87/EC.  This  will 
support the demonstration of CCS and innovative renewables at commercial scale and aims to 
co-fund  at  least  34  innovative  renewable  energy  projects  in  the  EU.  The  programme  will 
provide  around  €4.5  billion  of  co-funding  (match ing  funding  from  industry  and  Member 
States).30 The Commission has launched the first Call for Proposals comprising 200 million 
allowances under the NER300 programme in November 2010.31  

28 
29 
30 
31 

EN 

See SEC(2008)85-2 Annex to the Commission's impact assessment on the energy and climate package, p122 
See COM(2010)700 Final. 
See Commission Decision 2010/670/EU of 6.11.2010, OJ L 290, p. 39. 
OJ 
9.11.2010, 
http://ec.europa.eu/clima/funding/ner300/index_en.htm  

information 

available 

further 

302, 

4, 

p. 

C 

is 

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at: 

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The Commission also intends to come forward with a proposal to revise the Energy Taxation 
Directive32.  

For both Member State and European financing of renewable energy, it is clear that the 
existing framework must be improved, if the EU is to reach its 2020 targets at the lowest 
possible cost. 

4. 

CONCLUSION 

The  limited  and  fragmented  growth  of  Europe's renewable  energy  industry  in  the  decade  to 
2008 resulted partly from the limited EU regulatory framework. Recognising that renewable 
energy  will  form  the  heart  of  any  future  low  carbon  energy  sector,  the  EU  introduced  a 
comprehensive  and  robust  supportive  legislative  framework.  The  challenge  is  now  to  move 
from  policy  design  to  implementation  at  national  level,  with  concrete  action  on  the  ground. 
The  implementation  of  the  Directive  and  the  presentation  of  plans  are  encouraging  signs  of 
progress that need to be sustained.  

In the current context of macro-economic fragility and fiscal consolidation, it is important to 
recognise  the  financing  for  renewable  energy  as  growth-enhancing  expenditure  that  will 
provide  greater  return  in  the  future.  It  is  equally  important  to  ensure  the  quality  of  the 
expenditure,  applying  the  most  efficient  and  cost  effective  financing  instruments.  As  with 
energy infrastructure, there is a need for European action, to speed up the efficient delivery of 
renewable energy production and its integration into the single European market.  

At national level, any revision of financing instruments should be pursued in a way that avoids 
creating investor uncertainty and takes into account other Member States' policies to ensure an 
approach  coherent  with  the  creation  of  a  genuine  European  market.  The  Commission  will 
actively support national cooperation on financing renewables, based on the new framework for 
Member  State  cooperation  contained  in  the  Renewable  Energy  Directive  and  promote  the 
integration of renewable energy into the European market. At European level, EU funds should 
be  directed  to  ensure  cost  effective  renewable  energy  development  and  providing  technical 
assistance while ensuring the most effective means of lowering the cost of capital investments in 
the sector, including in collaboration with the EIB and provision of technical assistance. 

The Commission therefore invites Member States to  

•  implement the National Renewable Energy Action Plans; 

•  streamline  infrastructure  planning  regimes  while  respecting  existing  EU  environmental 

legislation and strive to conform to best practice; 

•  make  faster  progress  in  developing  the  electricity  grid  to  balance  higher  shares  of 

renewable energy; 

•  develop cooperation mechanisms and start integrating renewable energy into the European 

market; 

32 

Council Directive 2003/96/EC of 27 October 2003 restructuring the Community framework for taxation 
of energy products and electricity (OJ L 283 of 31.10.2003 p. 51); Directive last amended by Directives 
2004/74/EC and 2004/75/EC (OJ L 157 of 30 April 2004, p. 87 and p.100). 

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•  ensure that any reforms of existing national support schemes will guarantee the stability for 

investors, avoiding retroactive changes. 

To  support  such  efforts  the  Commission  will  continue  to  work  in  partnership  with  Member 
States on the implementation of the Directive, to review and improve the effectiveness of EU 
funding  for  renewable  energy  projects  and  facilitate  the  convergence  of  national  support 
schemes  in  order  to  ensure  the  best  conditions  for  the  development  of  renewable  energy  in 
Europe. 

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