COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS Renewable Energy: a major player in the European energy market
Date: 2012-06-06
Institutions: European Commission
Subjects: Mediterranean third countries, consumer behaviour, energy distribution, innovation, liberalisation of the market, renewable energy, research and development, single market, sustainable development, technical cooperation, trans-European network

EUROPEAN COMMISSION 

Brussels, 6.6.2012  
COM(2012) 271 final 

COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN 
PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL 
COMMITTEE AND THE COMMITTEE OF THE REGIONS 

Renewable Energy: a major player in the European energy market 

(Text with EEA relevance) 

{SWD(2012) 149 final} 
{SWD(2012) 163 final} 
{SWD(2012) 164 final} 

EN 

   EN 

 
 
 
 
  
 
COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN 
PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL 
COMMITTEE AND THE COMMITTEE OF THE REGIONS 

Renewable Energy: a major player in the European energy market 

(Text with EEA relevance) 

1. 

INTRODUCTION 

Renewable  energy  enables  us  to  diversify  our  energy  supply.  This  increases  our  security  of 
supply  and  improves  European  competitiveness  creating  new  industries,  jobs,  economic 
growth and export opportunities, whilst also reducing our greenhouse gas emissions. Strong 
renewables  growth  to  2030  could  generate  over  3  million  jobs1,  including  in  small  and 
medium  sized  enterprises.  Maintaining  Europe's  leadership  in  renewable  energy  will  also 
increase our global competitiveness, as "clean tech" industries become increasingly important 
around  the  world.  In  2007  the  European  Union  set  the  ambitious  goal  of  achieving  a  20% 
share of renewable energy and a 10% share of renewable energy in transport by 2020 and has 
flanked  these  objectives  by  a series  of  supporting  policies2.  The  renewable  energy  goal  is  a 
headline target of the Europe 2020 strategy for smart, sustainable and inclusive growth. At the 
start of 2012, these policies are beginning to work and the EU is currently on track to achieve 
its goals3 (see Chapter 1 of Staff Working Document).  

However,  the  economic  crisis  has  made  investors  cautious  about  the  energy  sector.  In 
Europe's  liberalised  energy  markets,  the  growth  of  renewable  energy  depends  on  private 
sector investment, which in turn relies on the stability of renewable energy policy. Investment 
in  infrastructure,  manufacturing  and  logistics  also  requires  related  investment  -  in  testing 
facilities, cable production, factories and ships to build offshore wind installations. In parallel 
to a rigorous implementation and enforcement of the Renewable Energy Directive4, clarity on 
longer term policy is needed to ensure that the necessary investment is made.  

1 

2 
3 

4 

ISI 

Fraunhofer 

See  DG  Employment  Staff  Working  Document  on  "Exploiting  the  employment  potential  of  green 
growth"  accompanying  the  Employment  package  COM  (2012)  173,  p.  8.  and  Ragwitz  et  al  (2009), 
al. 
EmployRES, 
http://ec.europa.eu/energy/renewables/studies/doc/renewables/2009_employ_res_report.pdf.  More  ambitious  RES 
policy targets trigger investments and hence employment in knowledge intensive generation technologies. Capital-
intensive technologies such as photovoltaic and wind off- and on-shore, solar thermal and heat pumps dominate in 
absolute terms under a strong RES promoting policy. For many of these technologies, the construction phase is the 
most labour intensive one. 
These include administrative reforms, grid rules and 10 year national renewable energy action plans. 
In  2009  and  2010  renewable  energy  growth  increased  significantly.  Indeed,  the  EU  had  already  reached  its  first 
interim target for 2011/2012 in 2010. 
Directive 2009/28/EC 

Germany 

et 

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The Energy Roadmap 20505 builds on the single energy market6, the implementation of the 
energy  infrastructure  package  and  climate  objectives  as  outlined  in  the  2050  low  carbon 
economy roadmap7. Regardless of scenario choice, the biggest share of energy supply in 2050 
will  come  from  renewable  energy.  Strong  growth  in  renewables  is  the  so-called  'no  regrets' 
option. However, despite the strong framework to 2020, the Roadmap suggests that growth of 
renewable energy will drop after 2020  without  further  intervention due to their higher costs 
and  barriers  compared  to  fossil  fuels.  Early  policy  clarity  on  the  post  2020  regime  will 
generate  real  benefits  for  investors  in  industry  and  infrastructure  as  well  as  for  renewable 
energy investors directly.  

As currently framed, the Renewable Energy Directive 2009/28/EC is designed to ensure the 
achievement of the 2020 renewable energy targets. It foresees a post-2020 roadmap in 2018. 
However,  stakeholders  have  already  been  asking  for  clarity  regarding  policy  developments 
after 2020. This is why the Commission believes it is important to start preparing now for the 
period  beyond  2020.  This  Communication  explains  how  renewable  energy  is  being 
integrated into the single market. It gives some guidance on the current framework until 
2020  and  outlines  possible  policy  options  for  beyond  2020,  to  ensure  continuity  and 
stability,  enabling  Europe's  renewable  energy  production  to  continue  to  grow  to  2030 
and  beyond.  It  is  accompanied  by  a  Staff  Working  Document  and  an  Impact 
Assessment. 

2. 

INTEGRATING RENEWABLE ENERGY INTO THE INTERNAL MARKET 

To achieve the 20% target, the Renewable Energy Directive8 set mandatory national targets. 
In  order  to  reach  these  targets,  Member  States  may  operate  support  schemes  and  apply 
measures of cooperation (Articles 3, 6 to 9). Building on the national renewable energy action 
plans, the support systems put in place by Member States and the continuous investment in 
R&D, Europe's renewable energy sector has developed much faster than foreseen at the time 
of drafting the Directive. Renewable energy producers are becoming significant players in the 
energy market.  

Market developments and costs  

Strong  growth  in  renewable  energy  markets  suggest  that  significant  "maturing"  of 
technologies  is  occurring.  In  the  five  years  to  2010  average  photovoltaic  system  costs  have 
declined by 48% and module costs by 41%. Industry expects costs to fall further based on the 
growth  driven  by  current  government  support  policies,  reforms  and  removal  of  market 
barriers.  Onshore  wind  investment  costs  fell  by  10%  between  2008  and  2012.  Photovoltaic 
systems  and  onshore  wind  production  are  expected  to  be  competitive  in  several  markets  by 
2020.  Achieving  competitiveness,  however,  requires  political  commitment  to  regulatory 
frameworks  that  support  industrial  policy,  technology  development  and  removal  of  market 
distortions.  Other  technologies  follow  different  maturity  paths  but  their  capital  costs  are  in 
general also expected to fall.  

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6 

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8 

COM(2011) 885/2 
The  Commission  is  also  preparing  a  communication  on  progress  in  implementing  the  single  energy  market  to 
follow later this year. 
COM(2011)112 
Directive 2009/28/EC 

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It is important that we continue to use every tool at our disposal to drive down costs, to ensure 
renewable  energy  technologies  become  competitive  and  ultimately  market  driven.  Policies 
which  hinder  investment  in  renewables  should  be  revised  and  in  particular,  fossil  fuel 
subsidies  should  be  phased  out.  In  view  of  the  complementarity  of  climate  and  renewable 
energy  policies,  a  well-functioning  carbon  market  is  necessary  together  with  properly 
designed  energy  taxes  to  give  investors  clear  and  strong  incentives  to  invest  in  low  carbon 
technologies and their development. At the same time renewable energy should be gradually 
integrated into the market with reduced or no support, and should over time contribute to the 
stability  and  security  of  the  grid  on  a  level  footing  with  conventional  electricity  generators 
and  competitive  electricity  prices.  In  the  longer  term,  a  level  playing  field  needs  to  be 
ensured.  

Improving support schemes  

The  cost  of  renewable  energy  is  not  determined  solely  by  wind,  solar,  biomass  or  water 
resources; project costs are also driven by administrative costs9 and capital costs. Complicated 
authorisation procedures, the lack of one-stop-shops, the creation of registration procedures, 
planning processes that may take months or years and fear of retroactive changes to support 
schemes,  increase  project  risk  (See  Chapter  2  of  the  Staff  Working  Document).  Such  high 
risks,  particularly,  in  countries  with  stressed  capital  markets,  result  in  a  very  high  cost  of 
capital, raising the cost of renewable energy projects and undermining their competitiveness. 
Thus simple administrative regimes, stable and reliable support schemes and easier access to 
capital (for example through public supports schemes) will contribute to the competitiveness 
of  renewable  energy.  In  that  context,  the  European  Investment  Bank  and  national  public 
institutions  can  play  a  key  role.  Today,  most  renewable  energy  technologies  benefit  from 
national support schemes10, but only a small share of the energy market is affected: less than a 
third of the 19% of our electricity from renewable energy is sheltered from market prices. In 
the  transport  sector,  all  forms  of  alternative  fuels  from  renewable  energy  sources  can  count 
towards the 10% transport target, although development is held back by high prices of related 
transport  systems  and  insufficient  fuel  infrastructure11.  Biofuel  blending  obligations  are 
common  and  biofuels  constitute  around  4%  of  transport  fuels.  The  costs  are  in  principle 
passed  on  to  consumers  by  fuel  suppliers.  In  the  heating  and  cooling  sector  (some  13%  of 
which is from renewable energy sources), support for some mature markets and technologies 
(e.g. solar thermal) has been abolished.  

Mature technologies operating in competitive markets, with a well-functioning carbon market 
should  ultimately  no  longer  need  support.  On  the  way,  in  every  Member  State,  support 
schemes  are  being  adjusted  (15  Member  States  now  offer  support  schemes  which  expose 
producers to market prices – see Chapter 2 of the Staff Working Document). Support schemes 
need such reforms to ensure their cost effectiveness. Moving as rapidly as possible towards 
schemes that expose producers to market price risk encourages technology competitiveness. 
However, some form of R&D and other financial or administrative support may continue to 
be needed for newer, less mature technologies. Thus certain cost effective and well-targeted 
support  schemes  may  still  be  necessary  beyond  2020.  A  good  example  of  such  a  support 

9 
10 

11 

See Ecorys, 2008, Assessment of non-cost barriers to renewable energy, report TREN/D1/48 – 2008.  
Exceptions,  or  partial  exceptions  include  hydropower,  some  geothermal  and  biomass  sources,  heat 
pumps and solar heating in some markets. 
White  Paper,  Roadmap  to  a  Single  European  Transport  Area  –  Towards  a  competitive  and  resource 
efficient transport system. COM(2011)144 final 

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scheme is the "NER 300" which uses auction revenues from the EU emissions trading scheme 
to trigger demonstration and early deployment of innovative renewables technologies.  

Recent changes to support schemes have in some cases been triggered by unexpectedly high 
growth  rapidly  increasing  expenditure  on  renewable  energy  which  is  not  sustainable  in  the 
short  term.  In  some  Member  States,  changes  to  support  schemes  have  lacked  transparency, 
have  been  introduced  suddenly  and  at  times  have  even  been  imposed  retroactively  or  have 
introduced  moratoriums.  For  new  technologies  and  investment  still  dependant  on  support, 
such  practices  undermine  investor  confidence  in  the  sector.  Moreover  diverging  national 
support  schemes,  based  on  differing  incentives  may  create  barriers  to  entry  and  prevent 
market  operators  from  deploying  cross-border  business  models,  possibly  hindering  business 
development. Such a risk of impairing the single market must be avoided and more action is 
also  needed  to  ensure  consistency  of  approach  across  Member  States,  to  remove  distortions 
and develop renewable energy resources cost effectively. To encourage this, the Commission 
plans to prepare guidance on best practice and experience gained in these matters and, 
if  needed,  on  support  scheme  reform,  to  help  ensure  greater  consistency  in  national 
approaches  and  avoid  fragmentation  of  the  internal  market.  The  principles  thereof  are 
outlined in chapters 3 and 4 of the attached Staff Working Document. Principles for support 
schemes  need  to  be  established  that  minimise  market  distortions,  avoid  over  compensation 
and ensure consistency across Member States. These will address transparency, predictability 
and the need to stimulate innovation12.  

Boosting cooperation and trade 

Historically,  Member  States  have  developed  their  own  renewable  energy  resources, 
contributing  to  their  own  emissions  reductions,  reducing  fossil  fuel  imports  and  generating 
jobs on their territory. However, the creation of a European energy market, and the ongoing 
desire  to  reduce  costs  wherever  possible,  should  result  in  greater  trade  in  all  forms  of 
renewable  energy.  To  facilitate  this,  the  Renewable  Energy  Directive  created  cooperation 
mechanisms to enable renewable energy produced in one Member State to count towards the 
target of another (see Chapter 4 of Staff Working Document). These have not yet been widely 
exploited  despite  the  potential  economic  benefits  for  both  parties13.  Only  two  Member 
States14  have  indicated  that  they  would  use  cooperation  mechanisms  to  achieve  their  2020 
targets. On the "supply side", ten Member States15 are expected to have a "surplus" available 
for other Member States. This picture could however change up to 2020 and the Commission 
will continue to monitor the situation closely. 

Projects under development that could use cooperation mechanisms include the "Helios" solar 
power  project  of  Greece,  common  projects  or  support  schemes  in  the  Northern  Seas,  and 
similar initiatives in the Southern Mediterranean and in the European Neighbourhood Policy 
area  more  broadly.  Such  initiatives  are  already  being  discussed  with  a  number  of  third 
countries16.  Cooperation  in  developing  solar  power  both  for  domestic  consumption  and  for 

12 
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14 
15 
16 

This will elaborate on suggestions contained in COM(2011)31 and SEC(2001)131. 
The  Commission  calculated  that  optimal  trade  in  renewables  could  save  up  to  €8bn  per  year 
(SEC(2008)85 Vol. II)  
LU and IT, the latter, however, recently indicated that it may finally not need to use the mechanisms. 
BU, EE, DE, EL, LT, PO PL, SK, ES, SW.   
Norway  and  Iceland  adopt  much  European  legislation  to  participate  in  the  same  market;  the  Energy 
Community  is  in  the  process  of  adopting  similar  arrangements;  the  Commission  is  working  with 

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export can be a key element of an overall agenda for substantial growth in a viable renewable 
energy  sector  and  unfold  its  potential  for  economic  growth  and  employment.  To  further 
encourage  the  development  of  renewable  energy  production  in  and  with  our  neighbouring 
countries, the Commission will: 

a) facilitate international cooperation on renewable energy development by both enabling full 
use  of  the  cooperation  mechanisms  which  could  develop  renewables  in  the  Southern 
Mediterranean  and,  in  the  context  of  strengthening  EU-Southern  Mediterranean  policy 
dialogue  on  climate  change,  seek  a  mandate  for  the  negotiation  of  bilateral/multilateral 
agreement(s) to allow for the use of credits from renewable energy projects in the Southern 
Mediterranean, 

b)  propose  specific  measures  aiming  at  encouraging  trade  of  electricity  from  renewable 
sources  in  the  framework  of  a  future  agreement  with  Northern  African  partners,  e.g.  on  the 
basis  of  specific  negotiating  mandates,  paving 
towards  an  EU-Southern 
Mediterranean Energy Community, 

the  way 

c)  propose  the  extension  of  the  framework  of  Directive  2009/28/EC  to  the  countries  of  the 
ENP region and in particular to the Southern Mediterranean countries. 

Building on the experience so far, the Commission will prepare guidelines to facilitate trade 
in  renewable  energy  (see  Chapters  3  and  4  of  Staff  Working  Document),  reducing 
complexity,  such  that  post-2020  cooperation  mechanisms  are  a  simple  means  of  trading 
renewable  energy  across  and  beyond  the  EU.  More  convergence,  including  common  joint 
support schemes, would ensure more cost-effective exploitation of renewable energy as well 
as a more single market-compatible approach.  

Another aspect of international trade and renewable energy relates to the trade of products 
and  the  openness  of  markets.  In  the  relatively  new  global  market  for  renewable  energy 
equipment, we see clear evidence that the market is growing and international competition is 
having  a  beneficial  effect  on  innovation  and  cost.  Moreover  in  this  globally  competitive 
market, European industry continues to compete and must strengthen its competitive edge. As 
can be seen in the photovoltaics industry, EU value added dominates, and generates jobs and 
growth17.  Given  the  benefits  of  expanding  global  trade,  it  is  important  that  barriers  to  trade 
such as "local content rules" or partial closure of public procurement markets are eliminated. 
Consequently,  the  Commission  will  continue  to  foster  fair  and  liberalised  trade  in  the 
renewable energy sector.  

3. 

ELECTRICITY MARKET OPENING AND RENEWABLES  

The  heating  and  cooling  sector  is  a  very  local  market,  needing  local  reforms  and 
infrastructure. The development of renewable energy in the transport sector occurs in a fuel 
market open across Europe, which will be enhanced by the clarity provided by forthcoming 

Switzerland to improve policy coherence; and EU development aid, cooperation and forthcoming free 
trade  agreements  are  being  used  to  improve  coherence  with  Europe's  Balkan  and  southern 
Mediterranean neighbours. 
EPIA  (EUPVSEC  2011)  estimate  that  despite  competition,  55%  of  module  and  70%  of  PV  system 
value added occurs in Europe. 

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fuel labelling requirements. The electricity sector, however, is in the process of being turned 
into a single European market.  

In  response  to  the  call  by  heads  of  state  and  government  to  complete  the  internal  energy 
market  by  2014  in  the  electricity  sector,  the  Commission  is  working  with  regulators  and 
stakeholders  to  harmonise  market  and  network  operation  rules.  This,  along  with  the 
implementation  of  the  third  package,  should  open  up  national  markets,  increasing 
competition, market efficiency and consumer choice. This should also facilitate market entry 
and integration for new players, including small and medium enterprises and other producers 
of renewable energy.  

As  new  rules  are  developed,  they  need  to  take  account  of  the  changing  nature  of  our 
electricity  sector  based  on  a  competitive  market  with  multiple  power  producers,  including 
more variable power production from wind and solar energy. Bringing such rules into place 
that  will  reflect  the  specificities  of  the  new  forms  of  generation,  e.g.  by  allowing  trading 
closer to real time, as well as by removing remaining  obstacles  to  a  truly  integrated  market 
will enable producers of renewable energy to participate fully in a truly competitive market 
and to progressively take on the same responsibilities as conventional generators, including as 
regards balancing. 

The liberalised electricity market should also ensure that operators earn sufficient returns to 
cover  their  investment  costs  for  new  generation  to  maintain  system  adequacy  (ensuring 
adequate  investment  to  guarantee  uninterrupted  electricity  supplies).  However,  wholesale 
electricity prices, based on short run marginal costs, may face downward pressure due to the 
rise of wind and solar power (with near zero marginal costs). The market should be able to 
respond, reducing supply when prices are low and increasing it when prices are high. Changes 
in market prices need to encourage flexibility, including storage facilities, flexible generation, 
demand-side management (as consumers respond to changing price patterns). 

Some Member States, however, fear that investment in power generation capacity will not be 
adequate.  As  a  result,  they  have  developed  "capacity  payments",  where  governments 
determine  the  required  levels  of  generation  capacity.  Such  an  approach  may  encourage 
investment, but it also separates investment decisions from market price signals. Moreover, if 
poorly  designed,  it  could  "lock  in"  solutions  focused  on  generation  that  frustrate  the 
introduction of new forms of flexibility. Aggregated distributed generation, demand response 
and  expanded  balancing  areas  would  also  be  impaired.  It  would  also  segment  national 
markets,  undermining  the  cross  border  trade  necessary  for  an  efficient  European  electricity 
market and for the deployment of renewable energy.  

For market arrangements to deliver the necessary investment in flexibility, we need to ensure 
they are suitable for bringing in many more market players, new products and technologies, 
through a broadening of balancing markets. Market arrangements must be consistent with 
the single market and thus developed and improved. This will be the subject of further 
discussion  and  analysis  in  the  Commission's  forthcoming  Communication  on  the 
Internal Energy Market.  

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4. 

TRANSFORMING OUR INFRASTRUCTURE 

The  EU's  proposed  energy  infrastructure  package18  identifies  12  priority  energy 
infrastructure  corridors,  proposes  accelerated  permit  granting  procedures,  cost  sharing  rules 
and  the  provision,  where  needed,  of  EU  funding  under  the  Connecting  Europe  Facility 
(€9.12bn for energy, 2014-2020) 19. It does this not only because of the need to integrate more 
wind and solar electricity (5% of EU electricity supply today), but also to create an integrated 
EU  market  and  to  replace  outdated  assets.  The energy  infrastructure  package  estimated  that 
about €100bn is needed for new elec tricity transmission lines alone.  

The  energy  infrastructure  package  complements  the  internal  energy  market  directives20, 
which,  through  measures  to  better  coordinate  infrastructure  planning,  development  and 
operation  and  to  roll-out  smart  meters  have  paved  the  way  towards  integrated  European 
energy  infrastructure.  Both  initiatives  are  crucial  for  the  transformation  of  our  electricity 
sector.  The  creation  of  the  single  market,  new  technologies,  new  market  players,  new 
ancillary service providers – all hinge on the need for new infrastructure. 

Electricity shares of wind and solar power. Source: Eurostat 2010, national plans 2020. 

In  the  21  Member  States  with  less  than  5%  variable  renewable  energy  in  their  electricity 
system, renewable energy generation linked to infrastructure limitations is causing no or only 
local balancing problems. However, in the six Member States with over 5% wind and solar 
power  levels,  measures  have  already  been  taken  to  create  more  flexibility,  even  in  isolated 
systems,  to  ensure  balancing  and  grid  stability21.  The  challenge  of  meeting  future 
infrastructure  needs  will  very  much  depend  on  our  capacity  to  develop  renewables,  grid 
infrastructure and better operational solutions together in a single market. 

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19 

20 
21 

COM(2011)658 
The  infrastructure  needs  of  renewable  energy  transport  fuels,  covering  alternative  fuels  refuelling 
stations,  common  standards  and  policies  and,  in  case  of  electromobility,  improved  management  of 
systems  are  examined  in  depth  in  the  2011  Transport  White  Paper's  alternative  fuels  strategy  (White 
Paper, Roadmap to a Single European Transport Area – Towards a competitive and resource efficient 
transport  system.  COM(2011)144  final)  and  are  addressed  in  the  revised  TEN_T  guidelines 
(COM(2011)650).  
Directives 2009/72/EC and 2009/73/EC 
See IEA 2011, 'Harnessing variable renewables: a guide to the balancing challenge'. 

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The increase in distributed (renewable) generation and demand response will require further 
investment  in  distribution  grids,  which  have  been  designed  to  transmit  electricity  to  final 
consumers,  but  not  to  absorb  generation  from  small  producers.  Widespread  distributed 
generation  displaces  grid-sourced  electricity  and  turns  consumers  into  consumer-producers. 
So whilst some new generation capacity is further from traditional consumption centres and 
requires upgrades to transmission infrastructure (particularly in areas where "loop flows"22 are 
causing  concerns),  significant  distributed  generation  could  reduce  the  need  for  transmission 
infrastructure in other areas. The third way in which infrastructure can transform the system is 
the  development  of  smart  grids.  Producers,  including  new  micro-producers,  consumers  and 
grid operators will all have to be able to communicate in real time to ensure optimal matching 
of  demand  and  supply.  This  will  require  developing  appropriate  standards,  market  and 
regulatory  models.  Infrastructure  development  is  urgent  and  critical  for  the  success  of 
the  single  market  and  for  the  integration  of  renewable  energy.  Early  adoption  of  the 
legislative  proposals  of  the  energy  infrastructure  package  is  crucial  in  that  respect,  in 
particular  for  speeding  up  the  construction  of  new  infrastructure  with  a  cross-border 
impact.  The  Commission  will  continue  to  work  with  distribution  and  transmission 
system operators, regulators, Member States and industry to ensure the development of 
energy  infrastructure  is  accelerated  to  complete  the  process  of  integrating  Europe's 
networks and markets. 

5. 

EMPOWERING CONSUMERS  

Consumer  choice  and  competition  in  energy  varies  across  sector.  In  transport,  there  is  a 
degree of choice of fuel supplier, but not yet an EU wide market for alternative fuels. In the 
heating  sector,  consumers  are  able  to  enjoy  some  independence  by  using  solar  thermal  or 
local  geothermal  energy  sources.  And  whilst  market  opening  has  begun  in  both  gas  and 
electricity  sectors,  limited  supplier  choices  and  regulated  prices  are  still  quite  common.  All 
this  is  about  to  change  with  full  opening  of  retail  markets  and  increased  scope  for  buying 
"green electricity". 

The  greatest  benefits  should  come  with  the  combination  of  "smart  metering"  and  micro 
generation.  Smart  meters  will  show  consumers  how  much  they  are  paying  for  electricity  in 
real time and help them reduce their energy consumption. This, together with developments in 
"smart products" which can respond to price signals sent electronically, allows consumers to 
alter  their  consumption  to  take  advantage  of  low  prices.  In  addition,  individual  "demand 
response" can be aggregated by new market players to offer significant consumption savings 
when  prices  are  high.  As  discussed  in  the  accompanying  impact  assessment,  this  "peak 
shaving"  can  generate  major  financial  savings  by  reducing  the  need  for  peak  generation 
capacity.  

The  introduction  of  micro  generation  creates  a  degree  of  independence  for  consumers  as  is 
the case in the heating sector. Photovoltaic, micro wind, biomass and geothermal power and 
combined heat and power systems can reduce the need for power from the grid significantly, 
for households, office and industrial buildings. As consumers become "consumer-producers" 
they  will  also  gain  a  stronger  sense  of  ownership  and  control  over  their  energy  use.  This 

22 

"Loop flows" occur when electricity follows an unscheduled path as a result of a lack of infrastructure. Flows from 
northern to southern Germany via Poland or Benelux are the classic example, resulting from inadequate north-south 
infrastructure in Germany.  

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increases  understanding  and  acceptance  of  renewable  energy23.  Poor  public  acceptance  of 
certain  renewable  energy  projects  blocks  or  delays  development,  undermining  our  policy 
goals.  Thus,  empowering  consumers  as  micro  producers  and  improving  planning  and 
permitting processes are an important way to tackle a significant barrier to renewable energy 
growth. 

6. 

DRIVING TECHNOLOGY INNOVATION 

Research  and  development  (R&D)  funding  continues  to  be  crucial  to  support  technology 
innovation  and  development.  Resources  are  scarce  and  must  be  well  targeted  to  the 
appropriate research phase, of precompetitive, industrial or applications. Member States have 
spent €4.5bn on renewable energy R&D over the  last 10 years with the EU spending, €1.7bn 
from the FP6, FP7 & EERP and allocates €4.7b n in EU Cohesion policy funds (2007-2013). 
The  "push"  of  such  measures,  complemented  by  the  "pull"  of  market  deployment  such  as 
support  schemes  or  carbon  pricing  have  generated  major  advances,  brought  some  key 
technologies  (wind  and  solar  power)  to  maturity  and  contributed  to  achieving  today's  12% 
share for renewable energy. This approach should be enhanced. 

Other  technologies  are  still  young  and  may  need  support  for  renewable  energy  to  play  its 
expected, expanded role in the future. Floating and other deep-sea offshore wind, wave and 
tidal  power,  certain  biofuels,  advances  in  concentrated  solar  power  and  photovoltaic  novel 
applications,  development  of  new  materials,  electricity  storage  technology  (including 
batteries) are all on a long list of strategic energy technologies which need to be developed. 
(see  Chapter  6  of  the  Staff  working  Document).  It  would  appear  that  notably  ocean 
technologies,  energy  storage,  advanced  materials  and  manufacturing  for  renewable  energy 
technologies need to be given higher priority in future research. 

The  Strategic  Energy  Technology  (SET)  plan24  and  the  forthcoming  Horizon  2020  research 
programme  are  the  EU's  main  contribution  to  driving  developments  in  key  energy 
technologies.  Moreover,  for  2014-2020  the  Commission  has  proposed  a  significant 
concentration of EU Cohesion Policy efforts on renewable energy and energy efficiency, as 
well  as  a  strong  focus  on  R&D  and  innovation.  Other  instruments  include  revenues  from 
auctioning  EU  ETS  emissions  allowances.  With  such  a  coordinated  approach  to  technology 
development,  Europe  can  continue  to  lead  the  race  developing  new  generations  of 
technologies  and  high  tech  manufacturing.  The  measures  in  place  are  expected  to  help 
develop new renewable energy technologies that can play a significant role in diversifying our 
energy mix. 

The post 2020 legal framework should see a better application of the SET plan complemented 
by  targeted  actions.  It  should  drive  further  integration  of  national  research  and  innovation 
capacities and risk-sharing financing and enhance current industrial and academic cooperation 
on  innovation  in  energy  technology.  The  Commission's  2013  Communication  on  energy 
technology  policy  will  identify  future  R&D  needs  and  challenges  in  line  with  the 
priorities identified in Horizon 2020. It will develop plans to ensure Europe will compete 
globally to drive innovation forward on a broad range of renewable energy technologies, 

23 
24 

See Rebel, 2011, Reshare: benefit sharing mechanisms in renewable energy, www.reshare.nu. 
'Investing in the Development of Low Carbon Technologies (SET-Plan) - A technology roadmap' SEC(2009) 1295; 
'Materials Roadmap Enabling Low Carbon Energy Technologies' SEC(2011) 1609. 

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including  new  ones,  as  well  as  explore  further  scope  for  action  in  promoting  existing 
SET Plan technologies. 

7. 

ENSURING THE SUSTAINABILITY OF RENEWABLE ENERGY  

The Commission's analysis shows that an increased share of renewable energy together with 
energy efficiency in the EU has the potential to reduce significantly greenhouse gas emissions 
and improve air quality25. Moreover, Europe's well managed forestry and agriculture sectors 
will benefit greatly from new market opportunities as the bioenergy market develops, together 
with  other  sectors  of  the  whole  bio-economy.  Despite  such  benefits,  the  increased  use  of 
renewables  may  still  raise  sustainability  concerns,  regarding  both  generation  and 
infrastructure, in terms of direct or indirect impacts on biodiversity and the environment as a 
whole.  This  requires  particular  attention  and  vigilance.  In  general,  such  concerns  are 
addressed  by  cross-cutting  EU  legislation26.  In  other  cases,  the  EU  has  developed  energy-
specific rules, namely the biofuels sustainability criteria introduced by the Renewable Energy 
and  Fuel  Quality  Directives.  The  Commission  shortly  expects  to  address  indirect  land  use 
change  impacts  too.  Reducing  emissions  from  the  transport  sector  will  be  helped  by  the 
transition to biofuels with no or limited indirect land use change impacts.  

The expected rise in the use of biomass after 2020 heightens the need to use existing biomass 
resources more efficiently and to accelerate productivity growth in agriculture and forestry in 
a sustainable manner, in the EU and globally. At the same time it is important to take strong 
global action to reduce deforestation and forest degradation and help ensure the availability of 
biomass  at  competitive  prices.  This  will  be  addressed  through  the  implementation  of  the 
Renewable  Energy  Directive  and  the  EU  bio-economy  strategy,  the  proposed  reform  of  the 
Common Agriculture Policy, the forthcoming EU Forest Strategy, and EU action on climate 
change  and  on  development  cooperation.  Increases  in  the  use  of  biofuels  in  aviation  and 
heavy  road  transport  (where  electric  power  is  not  deemed  feasible)  reinforce  the  need  for 
developing advanced biofuels. However, significant further use of biomass requires additional 
measures  to  ensure  its  sustainability.  For  this  reason  the  Commission  will  evaluate  the 
effectiveness of current sustainability criteria by 2014 as required by the Renewable Energy 
Directive.  In  addition,  the  Commission  will  shortly  produce  reports  and  proposals  to 
further  develop  the  EU's  sustainability  framework.  It  will  also  investigate  the  most 
appropriate use of bioenergy after 2020 in a way that is consistent with the EU energy 
and climate ambition to 2030 while fully taking into account environmental, social and 
economic considerations.  

25 
26 

See chapter 5.2 of the Impact Assessment of this Communication 
For instance hydro and wind power development must comply with Directives on SEA (2001/42/EC), 
EIA  (85/337/EEC),  Habitats  (92/43/EEC),  Birds  (79/409/EEC),  Water  Framework  (2000/60/EC)  and 
the  Biodiversity  Strategy  (COM(2011)  244),  elements  of  photovoltaic  power  is  to  become  subject  to 
waste disposal rules for electronic equipment, and local air pollution risks from household biomass use 
are subject to EU emission standards for small-scale energy installations. 

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8. 

RENEWABLE ENERGY POLICY POST 2020  

The  current  renewable  energy  framework,  of  legally  binding  targets,  national  plans, 
administrative reform, simplification, better development and infrastructure planning appears 
to work well. According to Member State plans, the rate of growth of the sector will increase 
to 6.3% p.a.27, boosting confidence  in the future of the European renewable energy industry. 

Historical  and  projected  trend  of  renewable  energy  growth  in  the  EU  (%  of  total 
energy). Source: Eurostat and Roadmap 2050 data, business as usual scenario. 

Effective though the current European renewable energy legal framework seems today, its key 
driver  –  binding  targets  –  expires  in  2020.  The  chapters  above  explore  how  current  policy 
initiatives of market opening, trade, infrastructure development, institutional and operational 
market reforms and innovation will evolve. In a competitive market, the renewable energy 
industry can indeed be a major player in the European energy market. The creation of 
the  single  European  market  is  at  the  heart  of  Europe's  prosperity  and  should  be  the  driving 
force of change in Europe's energy sector. In an open and competitive European market the 
renewable energy industry created under the current regulatory framework should be able to 
prosper. 

If,  however,  current  policy  initiatives  are  not  adequate  to  achieve our  long-term  energy  and 
climate  policy  objectives,  as  the  2050  Roadmap  suggests,  renewable  energy  annual  growth 
would slump from 6% to 1%. To maintain robust growth of renewable energy beyond 2020, 
which is a "no regrets" conclusion of the 2050 analysis, a supportive policy framework will be 
needed  to  address  remaining  market  or  infrastructure  inadequacies.  As  the  Roadmap  2050 
states, it is crucial to consider the options for concrete 2030 milestones. To begin this process, 
three  policy  options.  These  are  a 
the  accompanying 
decarbonisation without renewable energy targets option, relying on the carbon market and a 
revised  ETS  (Directive  2009/29/EC);  the  continuation  of  the  current  regime,  with  binding 
renewable energy, emissions reductions and energy efficiency targets; and an enhanced, more 
harmonised management of our whole energy sector with an EU renewable energy target.  

impact  assessment  explores 

27 

Up from 1.9% and 4.5% under the earlier indicative targets regime. 

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The  Impact  Assessment  explores  how  effective  the  different  options  are  at  addressing  the 
multiple objectives. It is clear that specific 2030 renewables milestones can only be designed 
after reflection on the state of post-2020 climate policy, the degree of competition in Europe's 
electricity, heating and cooling and transport fuel markets, and the degree of energy diversity 
and technology innovation expected by 2020.  

9. 

NEXT STEPS 

Building on the current set up, action in a number of areas is under way to further enhance the 
contribution of renewable energy to the EU’s energy mix, to strengthen the single European 
energy market, remove market barriers and regulatory obstacles, enhance the effectiveness of 
renewable  energy  support  schemes,  advance  energy  infrastructure  development,  increase 
consumer  involvement  in  energy  markets  and  ensure  sustainability.  In  its  2012  Annual 
Growth Survey, the Commission already highlighted the growth potential of the widespread 
use  of  renewable  energies.  It  followed  up  on  this  in  its  country  specific  recommendations 
adopted  on  30  May  2012.  The  Commission  will  also  continue  to  discourage  polices  that 
hinder the investment in renewables, in particular by phasing out fossil fuel subsides, promote 
a well-functioning carbon market and properly designed energy taxes. This will open up new 
possibilities, increase the integration of renewable energy in the internal market by exposing 
producers to market prices, i.e. through exchange of best practice on support scheme reform. 
It will also facilitate international cooperation on renewable energy development by enabling 
full  use  of  the  cooperation  mechanisms  which  could also  help to develop renewables in  the 
Southern Mediterranean..  

To  ensure  all  these  steps  are  taken,  the  Commission  is  taking  four  main  actions 
following this Communication. It will: 

• 

• 

• 

• 

continue  to  drive  forward  the  integration  of  renewable  energies  into  the  internal 
energy market and address power generation investment incentives in the market 

prepare  guidance  on  best  practices  and  experience  gained  on  support  schemes  to 
encourage  greater  predictability,  cost-effectiveness,  avoid  over  compensation  when 
proven and develop greater consistency across Member States  

promote  and  guide  the  increased  use  of  the  cooperation  mechanisms,  allowing 
Member States to achieve their national binding targets by trading renewable energy 
and so lowering their costs 

ensure  improvements  to  the  regulatory  framework  for  energy  cooperation  in  the 
Mediterranean,  noting  that  an  integrated  regional  market  in  the  Maghreb  would 
facilitate  large-scale  investments  in  the  region  and  enable  Europe  to  import 
additional renewable electricity. 

Whatever form the post 2020 renewable energy milestones take, they must ensure that 
renewable  energy  is  part  of  the  European  energy  market,  with  limited  but  effective 
support  where  necessary  and  substantial  trade.  They  must  also  ensure  that  Europe 
maintains  its  research  and  industrial  leadership  globally.  Only  in  this  way  can  we 
continue  to  develop  our  renewable  energy  resources  in  a  cost  effective,  indeed, 
affordable  manner  and  grasp  the  associated  competitiveness,  economic  and  job 

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opportunities.  For  this  reason,  the  Commission  will  also  launch  proposals  for  a 
renewable energy policy regime for the post 2020 period.  

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