COMMISSION STAFF WORKING PAPER IMPACT ASSESSMENT Accompanying the document 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: energy distribution, innovation, renewable energy, research and development, single market, sustainable development, technical cooperation, trans-European network

EUROPEAN COMMISSION 

Brussels, 6.6.2012  
SWD(2012) 149 final 

COMMISSION STAFF WORKING PAPER 

IMPACT ASSESSMENT 

Accompanying the document 

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 

{COM(2012) 271 final} 
{SWD(2012) 163 final} 
{SWD(2012) 164 final} 

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COMMISSION STAFF WORKING PAPER 

IMPACT ASSESSMENT 

Accompanying the document 

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 

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TABLE OF CONTENTS 

1. 

1.1. 

1.2. 

1.3. 

2. 

Section 1: Procedural issues and consultation of interested parties............................. 4 

Organisation and timing............................................................................................... 4 

Consultation and expertise ........................................................................................... 4 

Opinion of the IAB ...................................................................................................... 6 

Section 2: Problem definition ...................................................................................... 7 

2.1. 

Context ......................................................................................................................... 7 

2.2.  What is the problem? ................................................................................................. 10 

2.3. 

2.4. 

2.5. 

Underlying drivers of the problem............................................................................. 11 

Business as usual developments ................................................................................ 15 

EU's right to act.......................................................................................................... 16 

2.6.  Who is affected?......................................................................................................... 17 

3. 

3.1. 

3.2. 

3.3. 

3.4. 

4. 

Section 3: Objectives ................................................................................................. 17 

General objectives...................................................................................................... 17 

Specific objectives ..................................................................................................... 17 

Operational objectives................................................................................................ 17 

Consistency with other European policies ................................................................. 18 

Section 4: Policy options............................................................................................ 18 

4.1. 

Policy options............................................................................................................. 19 

4.1.1.  Option 1: Business as usual........................................................................................ 19 

4.1.2.  Option 2: Decarbonisation without renewable energy targets post-2020 .................. 19 

4.1.3.  Option 3: Binding national renewable energy targets post-2020 and coordinated 

support........................................................................................................................ 21 

4.1.4.  Option 4: EU renewable energy target and harmonised measures ............................ 21 

5. 

5.1. 

5.2. 

5.3. 

6. 

6.1. 

6.2. 

Section 5: Analysis of impacts................................................................................... 22 

Economic impacts ...................................................................................................... 23 

Environmental impacts .............................................................................................. 28 

Social impacts ............................................................................................................ 31 

Section 6: Comparing the options .............................................................................. 33 

Effectiveness .............................................................................................................. 33 

Efficiency ................................................................................................................... 35 

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6.3. 

6.4. 

7. 

Coherence................................................................................................................... 35 

Overall summary........................................................................................................ 36 

Section 7: Monitoring and evaluation ........................................................................ 38 

Annex 1: Results of the public consultation............................................................................. 39 

Annex 2: Primes modelling used for the Energy Roadmap 2050 ............................................ 46 

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1. 

SECTION 1: PROCEDURAL ISSUES AND CONSULTATION OF INTERESTED PARTIES  

Identification: Lead DG: DG ENER. Agenda planning/WP reference: 2012/ENER/001 

1.1. 

Organisation and timing 

The  Impact  Assessment  (IA)  work  started  in  autumn  2011.  An  Impact  Assessment  Steering 
Group  (IASG)  was  established  in  November  2011  and  met  3  times  until  February  2012  to 
discuss  the  various  sections  of  the  IA,  including:  problem  definition,  objectives,  policy 
options, assessment of impacts and comparison of options. The IASG included the following 
DGs: AGRI, BUDG, CLIMA, COMP, ECFIN,  EMPL,  ENTR,  ENV,  INFSO,  JRC,  MARE, 
MARKT, MOVE, REGIO, RTD, SANCO, SG, and TAXUD.  

1.2. 

Consultation and expertise 

On 6 December 2011, the Directorate General for Energy launched a public consultation on 
the  2012  Renewable  Energy  Strategy.  The  public  consultation  was  based  on  an  online 
questionnaire with 10 sections and 33 questions, some requiring comments and others in the 
form of multiple choices. The public consultation was open until 7 February 2012. Some 400 
contributions  were  received.  Most  contributions  were  received  from  industry  (including 
utilities and other energy suppliers, technology providers and energy consumers), followed by 
individuals; NGOs (including consumers and environmental groups but also think tanks, trade 
and  research  associations);  and  public  authorities  (both  from  the  state  and  regional/local 
level). Given the participation from a broad spectrum of organisations as well as citizens, this 
public  consultation  offers  insights  into  a  large  range  of  stakeholder  opinions.  All 
Commission's  minimum  consultation  standards  were  met.  The  results  of  the  public 
consultation are summarised below (see Annex 1). 

A) General policy approach: A clear majority of stakeholders expressed support for a post-
2020  renewable  energy  target,  with  most  participants  in  favour  of  mandatory  target.  In 
particular,  renewable  energy  technology  manufactures,  renewables  project  developers  and 
environmental NGOs vastly support mandatory targets. A number of utilities are not in favour 
of  renewable  energy  targets  although  mostly  of  voluntary/indicative  nature.  Only  14%  of 
respondents considered specific mandatory targets unnecessary. 

B)  Financial  incentives:  There  was  wide  support  for  making  support  schemes  more  market 
oriented, but most respondents considered that national control over support schemes should 
nevertheless  be  maintained.  Public  authorities  were  considerably  more  sceptical  than  both 
industry and NGOs about the need to establish common EU benchmarks for support levels. 
The  need  for  financial  incentives  beyond  2020  was  seen  in  a  differentiated  way,  with  most 
respondents considering that support should be phased out for mature technologies. 

C)  Administrative  procedures:  Stakeholders  identified  the  length  and  complexity  of 
administrative  procedures  relating  to  authorisation,  certification  and  licensing  as  a  key 
obstacle to further growth of renewables. Only very few respondents (8%) considered that the 
requirements  contained  in  the  RES  directive  are  sufficient  to  address  all  administrative 
barriers. Most participants either called for more direct intervention into national procedures 
or even for more harmonisation or mutual recognition in this field. 

D)  Grid  integration  of  electricity  from  renewable  energy  sources:  Respondents  considered 
that  obstacles  for  grid  connection  of  renewables  were  likely  to  persist  after  2020.  Grid 
connection  rules  (39%  of  respondents),  followed  by  balancing  and  cost-sharing  rules  (both 
29%) were identified as key issues. The curtailment regime was regarded as less problematic 

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(23%). A minority anticipated that all obstacles related to grid access for renewables would be 
removed  in  a  post-2020  perspective  (19%).  The  need  to  increase  flexibility  to  enable 
electricity systems to cope with a higher share of variable renewable supply was confirmed. 
The most favoured options were demand-side management, infrastructure development (both 
45%) and an increased level of storage (40%). Capacity payments for new back-up generation 
received less support (only 21%). 

E) Market integration: Exposing renewable generation to balancing risk or introducing direct 
marketing  of  electricity  from  renewable  sources  were  mentioned  as  ways  to  improve 
renewables  market  integration.  A  shift  towards  feed-in  premiums  also  scores  high  amongst 
stakeholder  views,  although  some  respondents  also  argued  in  favour  of  the  introduction  of 
quota systems. Respondents also saw a need to move away from today's market model based 
on short-run marginal cost pricing (only 8% considered this future-proof). Most respondents 
considered it necessary to move towards reflecting full costs (33%) or towards energy service 
markets where revenues would be earned from more than just selling electricity (25%).  

F) Renewables in Heating and Cooling: In this section costs or lack of financial support were 
most  often  cited  as  main  obstacles  for  stronger  renewables  penetration  (43%  of  all 
respondents).  Other  obstacles  that  received  a  lot  of  attention  were  lack  of  awareness  or 
unfavourable building regulations. On the most promising pathways for heating and cooling, 
solar  thermal  received  the  most  support  among  the  respondents  (44%),  clearly  ahead  of 
biomass  which  was  named  similarly  often  as  geothermal  (both  by  around  33%). 
Electrification on the basis of a higher share of renewables in electricity production received 
somewhat less support (24%).  

G)  Renewables  in  Transport:  For  this  sector  the  respondents  saw  the  costs  of  a  further 
deployment  as  the  most  challenging  problem  (39%).  This  goes  along  with  a  lack  of  the 
necessary infrastructure and the need to set standards more quickly. A big concern among the 
respondents  was  whether  sustainably  produced  biofuels  can  be  supplied  on  a  big  scale  and 
also to public acceptance linked to sustainability concerns such as indirect land-use change. 
As a way forward, a high number of respondents proposed to increase the share of RES via 
electrification.  Regarding  transport  sectors  most  respondents  cited  road  transport  for 
passengers (46%) and rail transport (44%) as promising for stronger renewables penetration; 
prospects for air and water transport were considered less favourable. 

H)  Sustainability:  Asked  about  the  need  for  additional  sustainability  criteria  in  the  period 
post-2020, a clear majority of respondents confirmed that in their view sustainability criteria 
should  in  the  future  be  applied  to  both  all  biomass  and  fossil  fuels  (51%).  Besides,  around 
19% considered that additional criteria would be necessary to ensure only the best performing 
biomass was promoted.  

I)  Regional  and  international  dimensions:  Here  a  slight  majority  of  respondents  considered 
that  current  rules  for  cooperation  between  Member  States  were  not  sufficient  or  had  to  be 
supplemented  to  become  operational  (41%  over  34%  who  considered  the  current 
arrangements sufficient). More detailed guidance on the use of the flexibility mechanisms was 
frequently requested from the Commission. Cooperation between the EU and third countries 
on the development of renewables was seen positively, with a clear majority of respondents 
favouring  further  promotion  of  such  cooperation  (58%  over  30%  who  favoured  focusing 
exclusively  on  EU  domestic  resources).  More  respondents  favoured  an  approach  based  on 
agreements  between  the  EU  and  third  countries  rather  than  bilateral  agreements  to  be 
concluded by Member States (45% over 19%).  

J)  Technology  development:  Concerning  the  key  challenges  for  the  technologies  currently 
covered  by  European  Industrial  Initiatives  (wind,  solar  and  bio-energy  in  the  area  of 

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respondent 

renewable  energy)  most 
technology  performance  and  cost-
identified 
competitiveness  as  most  important  (46%  of  respondents),  ahead  of  issues  linked  to  system 
integration (39%) and industrial manufacturing and supply chain issues (20%). When asked 
about  technologies  other  than  those  covered  by  today's  industrial  initiatives  that  had  the 
potential  for  industrial  scale  application  in  a  post-2020  perspective,  the  fields  most  often 
mentioned  were  storage  technologies,  ocean  energies  such  as  wave  and  tidal  and  various 
forms of geothermal energy.  

In  addition  to  the  public  consultation,  the  Directorate  General  for  Energy  met  numerous 
stakeholders individually and received many reports on the topic of renewable energy policy 
post-2012.  Furthermore,  on  24  February  2012  a  public  conference  was  held  in  Brussels  in 
order to present the first outcomes of the public consultation and further discuss with a wide 
range  of  stakeholders  the  following  key  themes:  ‘grid  and  market  integration  of  renewable 
energy’,  ‘regional  and  international  cooperation’,  ‘sustainable  growth  of  renewable  energies 
in  transport  and  heating  and  cooling’,  and  ‘technology  innovation  and  development’.  The 
conference  featured  intervention  from  distinguished  speakers  representing  a  wide  range  of 
stakeholders, including from industry, NGOs, the Council and the European Parliament. 

1.3. 

Opinion of the IAB 

The first draft Impact Assessment (IA) report was presented to the Impact Assessment Board 
(IAB) on 28 March 2012. The IAB asked to further strengthen and improve the IA document 
by  i)  better  explaining  the  policy  context  and  the  problem  definition;  ii)  strengthening 
description  of  policy  options;  iii)  improving  the  assessment  of  impacts;  and  finally  iv) 
including more specific on the results of the stakeholder consultation. 

The revised IA report addresses the IAB comments in the following way: section 1.3 includes 
a  summary  of  the  public  consultation  results;  section  2.1  further  explains  the  rationale  for 
bringing forward the present communication, and clarifies the linkages and the coherence of 
this  initiative  with  other  EU  policies;  section  2.2  describes  in  more  detail  the  specific 
challenges  affecting  future  renewable  energy  growth  in  the  EU,  including  investors' 
uncertainty  and  the  cost-effectiveness  and  market  integration  of  support  schemes.  The 
objectives  of  this  initiative  were  further  refined.  In  addition,  a  table  summarising  how  the 
various policy options relate to the underlying drivers and further information on stakeholder 
view were included in section 4. Section 5 includes a more structured and detailed qualitative 
analysis  of  the  economic,  environmental  and  social  impacts,  which  is  complemented  where 
appropriate  by  related  quantitative  analysis  from  the  Energy  Roadmap  2050  modelling  and 
from  relevant  literature.  Furthermore,  policy  coherence  was  further  discussed  in  section  6. 
Finally, more information on the results of the public consultation and on the Primes model 
was added in the Annexes. 

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2. 

SECTION 2: PROBLEM DEFINITION  

2.1. 

Context 

The  EU  renewable  energy  policy  started  with  the  adoption  of  the  European  Commission's 
1997 White Paper1 which laid down a Community strategy and action plan for doubling the 
share of renewable energy in the EU's gross internal energy consumption from 6% to 12% by 
2010.  This  has  been  driven  by  the  need  to  address  key  challenges  affecting  the  EU  energy 
sector, 
including:  deteriorating  security  and  diversity  of  energy  supplies,  weak 
competitiveness, and energy-related GHG emissions (see Box 1).  

Box 1: Key challenges for the EU energy sector 

• 

• 

• 

• 

Deteriorating  security  of  energy  supply.  The  EU  is  increasingly  competing  with 
other  importing  countries  and  regions  for  energy  supplies,  given  that  its  own 
domestic  energy  production  is  on  the  decline.  With  more  than  half  of  the  energy 
consumed  in  the  EU  coming  from  third  countries,  the  EU  is  already  the  world's 
largest energy importer. Today, the EU imports more than 80% of the oil and more 
than 60% of the gas it consumes. If the current trends continue, import levels could 
reach more than 70% of the EU overall energy needs by 2030.  

Low  diversity  of  energy  supply.  The  EU's  geographical  location  puts  it  in  close 
proximity of a number of energy-producing regions as well as at the intersection of 
important  supply  routes.  Countries  in  the  EU's  neighbourhood  already  account  for 
the  majority  of  EU's  imports  in  oil  and  gas.  Russia,  Norway  and  Algeria  represent 
together 85% of the EU natural gas imports and almost 50% of the crude oil imports. 
This reliance on a limited number of fuels and technologies and suppliers generates 
supply  and  price  risks,  price  rises  and  price  volatility.  Countering  such  trends,  the 
increased  growth  of  renewable  energy  significantly  increases  the  diversity  of  fuels 
and suppliers, generally with a strong indigenous component. 

Weak competitiveness. The combination of soaring energy consumption in emerging 
economies and the gradual depletion of fossil fuel supplies are inevitably pushing up 
energy  prices.  Already  today  oil  prices  exceed  €90  per  barrel  despite  the  financial 
and economic crisis. Market volatility and medium and long term price risks increase 
costs  and  uncertainty  for  European  industry,  which  can  be  mitigated  through 
indigenous, more stably priced renewable energy sources.  

Climate  change  from  excessive  greenhouse  gas  emissions.  Whereas  the  EU  as  a 
whole has seen its GHG emissions decrease over the last 2 decades2, they are not in 
line with the reduction pathway required to achieve the EU and international goal of 
limiting  global  mean  temperature  increase  below  2°C  and  avoid  dangerous  climate 
change.  Despite  reduction  in  carbon  intensity,  the  energy  sector  remains  the  single 
largest  source  of  EU  GHG  emissions.  Attaining  the  2°C  objective  will  require  a 
dramatic  reduction  in  the  GHG  emissions  of  the  energy  system,  which  means 
reducing energy consumption and increasing significantly the use of renewables and 
other  low-carbon  energy  sources.  Renewable  energy  could  reduce  exposure  to 

1 
2 

COM (97) 599 final 
Excluding emissions from LULUCF (Land Use, Land Use Change and Forestry) 

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climate  change  risks,  and  so  provide  climate  adaptation  benefits  as  well  as  climate 
change mitigation. 

The White Paper was followed in 2001 by the "Renewable Electricity Directive"3 and in 2003 
by  the  "Biofuels  Directive"4  which  set  respectively  national  indicative  targets  such  that  the 
EU would reach a share of renewable energy in electricity generation of 21% by 20105 and a 
share of renewable energy replacing petrol and diesel in transport of 5.75% by 2010. As the 
Commission noted in earlier reports6, the 2010 targets have not been met. This inadequate rate 
of  progress,  and  the  need  to  foster  a  more  balanced  renewable  energy  development  in  all 
Member  States  and  technologies,  was  among  the  reasons  that  prompted  a  change  in  policy 
approach  marked  by  the  adoption  of  the  Renewable  Energy  Directive  (hereafter:  the  RES 
Directive) 7, as a key component of the 2008 Climate and Energy package. 

The RES Directive covers energy consumption as a whole, including the heating and cooling 
sectors. For the first time, it 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-
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 
(NREAPs)  –  ie  detailed  roadmaps  to  reach  the  RES  targets,  reform  planning  regimes,  and 
develop electricity grids.  

This comprehensive and binding regulatory framework is proving  catalytic in driving forward 
renewable  energy  growth  in  line  with  the  ambitious  targets  that  the  EU  has  set  itself.  As 
shown in Figure 1, MS project that renewable energy will grow at a faster pace in the years up 
to 2020 than in the past (6% during 2010-2020 compared to 4.5% in 2000-2010). As a result, 
the overall share of renewable energy in the EU will exceed the 20% target in 2020.  

Figure  1:  Renewable  energy  share  (%  of  total  gross  final  energy  consumption).  Source: 
PRIMES 2011 

3 

4 
5 

6 
7 

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%.  
Renewable Energy: Progressing towards the 2020 target, COM/2011/0031 final. 
Directive 2009/28/EC of 23 April 2009 on the promotion of the use of energy from renewable sources  

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100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

1995-2000
1,9% pa, 
1,6mtoe pa

2001-2010
4,5% pa,
4,8 mtoe pa

2010-2020
6,3% pa, 
11,4 mtoe pa

2020-2050
3,1% pa, 
12 mtoe pa

2020-2050
2,0% pa, 
6,6 mtoe pa

2020-2050
1,2% pa, 
3,4mtoe pa

1995

2000

2005

2010

2015

2020

2025

2030

2035

2040

2045

2050

Business as usual

Decarbonisation - low

Decarbonisation - high

The  RES  Directive  has  created  the  world's  most  ambitious  policy  framework  for  renewable 
energy deployment up to 2020. But its is clear that this represents only an early step in what 
will be a long road towards decarbonization of the European energy sector. In order to keep 
climate  change  below  2°C,  both  the  European  Council  and  Parliament  have  already  set  the 
objective  of  reducing  greenhouse  gas  emissions  by  80-95%  by  2050,  compared  to  1990 
levels, in the context of necessary reductions by developed countries as a group8.  

In  2011,  the  Commission  published  a  'Roadmap  for  moving  to  a  competitive  low  carbon 
economy  in  2050'  9  which  makes  the  economic  case  for  decarbonisation  and  shows  that  the 
targeted 80-95% GHG emissions reduction by 2050 will have to be met largely domestically. 
Intermediate  milestones  for  a  cost-efficient  pathway,  e.g.  40%  domestic  reduction  by  2030, 
and sectoral milestones expressed as ranges of GHG emissions reductions in 2030 and 2050 
were put forward.  

This  initiative  was  followed  by  two  sectoral  roadmaps  exploring  the  dynamics  of 
decarbonisation  within  the  transport  and  energy  sectors  and  its  interplay  with  other  sectoral 
objectives. The 'Roadmap to a Single European Transport Area – Towards a competitive and 
resource  efficient  transport  system10
  aims  to  introduce  profound  changes  in  passenger  and 
freight  transport  patterns,  resulting  in  a  competitive  transport  sector  which  allows  increased 
mobility,  cuts  CO2  emissions  to  60%  below  1990  levels  by  2050  and  breaks  the  transport 
system's dependence on oil.  
The  Energy  Roadmap  205011,  published  in  December  2011,  investigates  possible  pathways 
for  a  transition  towards  a  low-carbon  energy  system.  It  identifies  a  higher  penetration  of 
renewable  energy  beyond  2020  as  a  major  pre-requisite  for  a  more  sustainable  and  secure 
energy  system.  More  specifically,  it  shows  that  renewables  will  supply  the  biggest  share  of 

8 

9 
10 
11 

European  Council,  Brussels,  29/30  October  2009,  Presidency  conclusions.  15265/1/09.  European 
Parliament resolution of 4 February 2009 on "2050: The future begins today – Recommendations for 
the EU's future integrated policy on climate change; resolution of 11 March 2009 on an EU strategy for 
a comprehensive climate change agreement in Copenhagen and the adequate provision of financing for 
climate  change  policy;  resolution  of  25  November  2009  on  the  EU  strategy  for  the  Copenhagen 
Conference on Climate Change (COP 15) 
COM(2011)112, 8 March 
COM(2011)144, 28 March 
COM(2011) 885/2 

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EU  final  energy  consumption  in  205012.  Therefore,  post-2020  renewables  are  set  to  play  a 
central role in Europe's energy mix, moving from technology development to mass production 
and  deployment,  from  small-scale  to  large-scale,  from  financial  support  to  grid  parity  and 
competitiveness. This changing nature of renewables points to need for start reflecting on how 
to  adjust  policy  in  parallel  to  market  development,  build  on  using  the  full  potential  of  the 
existing EU renewable legislation. 

The  Communication  that  this  Impact  Assessment  accompanies  is  linked  to  initiatives  to 
deliver  on  a  resource  Efficient  Europe,  one  of  the  seven  flagships  of  the  Europe  2020 
strategy13. It aims at further developing the analysis presented in the Energy Roadmap 2050, 
with particular attention to the challenges and the related policy solutions that are needed to 
enable  a  greater  share  of  renewables  in  the  EU  energy  mix,  while  prompting  cost-
effectiveness, a European approach, and greater market integration. 

2.2.  What is the problem?  

Since  the  adoption  of  the  RES  Directive  in  2009,  the  EU  renewable  energy  sector  has 
developed  faster  than  foreseen.  Many  Member  States  have  experienced  rapid  growth  in  the 
deployment of renewable energy technologies and as a result 18 Member States are currently 
ahead of their renewable energy trajectory as set out in the Directive. Driven by economies of 
scale  and  technology  improvement,  unit  costs  of  different  renewable  technologies  have 
decreased  by  up  to  50%,  This  is  particularly  the  case  for  solar  PV.  In  view  of  the  EU´s 
ambitions  to  significantly  increase  its  share  of  renewable  energy  this  development  is  to  be 
welcomed. 

During the same period, the EU has undergone a serious financial and economic crisis, which 
has put pressure onto business and communities across Europe, as well as causing huge stress 
on  public  finances.  This  has  made  national  and  international  investors  cautious  about 
investing  in  capital  intensive  energy  markets,  and  in  particular  in  the  policy-dependent 
renewable energy sector. The economic downturn has also contributed to low carbon prices, 
which in turn has weakened the incentive to invest in renewables.  

The rapid fall in costs for renewable energy technologies and the boom in renewable energy 
installations,  has  in  some  cases  lead  to  increased  aggregate  costs  for  electricity  consumers 
(and  in  some  cases  taxpayers).  At  a  time  of  economic  austerity,  such  cost  increases  can  be 
difficult  to  manage,  and  the  risk  of  over  compensation  to  energy  producers  has  risen.  In 
response  to  such  events,  Member  States  have  increasingly  reduced  incentives  and  reformed 
support  schemes  for  renewables  to  ensure  cost-effectiveness  and  market  integration.  Again, 
this  is  to  be  welcomed.  However,  sometimes  the  manner  in  which  such  reforms  have  been 
undertaken  has  failed  to  follow  European  best  practice,  creating  investor  uncertainty  across 
Europe. 

Against this context, it is increasingly clear that the EU 2020 renewable energy target may not 
in  itself  be  sufficient  to  promote  the  necessary  long-term  investments  that  will  allow  for 
further  cost  reduction  and  a  greater  share  of  renewabe  energy  post-2020.  For  instance,  the 
testing  facilities,  cable  production,  factories  and  ships  needed  for  building  offshore  wind 
power  plants  not  only  need  time  to  be  developed,  but  their  investment  profiles  change 

12 

13 

RES share is projected to rise substantially in all scenarios analysed, achieving between 55% and 75% 
of total final energy consumption in 2050, up from today's level at around 10%. RES share in electricity 
consumption  reaches  even  higher  levels,  with  64%  in  a  high-efficiency  scenario  and  97%  in  a  high-
renewables scenario. 
COM(2011) 21, 26 January 2011. 

EN 

11 

   EN 

 
                                                 
significantly  according  to  policy  frameworks:  payback  periods  to  2020  (8  years)  change 
investment  decisions,  compared  to  payback  periods  of  18  years  (to  2030).  Clarity  about  the 
future  direction  of  EU  renewable  energy  policy  is  thus  crucial  in  order  to  provide  the 
renewables sector with predictability. Recognizing this issue, a number of MS have  already 
set milestones for renewable energy share post-2020. For instance, in 2011 Germany adopted 
the goal of increase renewable power share to 50% by 2030, rising to 60% by 2040 and 80% 
by 205014, while in 2012 Denmark committed to covering 100% of its national energy supply 
with renewable by 205015. 

The  RES  Directive  requires  the  Commission  to  present  a  post-2020  Renewable  Energy 
Roadmap  only  in  2018,  taking  into  account  technological  development  and  the  experience 
gained  from  the  Directive  implementation.  In  addition,  it  contains  a  requirement  for  the 
Commission  to  review  certain  specific  provisions  of  the  Directive  (notably  regarding  the 
GHG savings thresholds for biofuels and bioliquids, the measures and the impact of biofuels 
and bioliquids and the so-called cooperation mechanisms) by 2014. However, considering the 
fast-evolving  economic,  technology  and  regulatory  environment  described  above,  the 
Commission  senses  a  growing  belief  amongst  stakeholders  that  planning  for  the  post-2020 
period requires consideration already today. 

The  Communication  that  this  Impact  Assessment  accompanies  looks  at  both  the  challenges 
and possible solutions in terms of energy market opening, support scheme reform, modified 
electricity market arrangements, optimised infrastructure management and sustainability that 
are required to facilitate the integration of renewable energy into the single market. It also sets 
the framework for determining what policy regime is necessary post-2020 to enable Europe's 
renewable energy production continues to grow to 2030 and beyond. All of this is meant to 
provide  clear  signals  to  Member  States,  investors,  and  citizens  about  the  EU’s  long-term 
commitment to the promotion of cost-effective deployment of renewable energy. 

2.3. 

Underlying drivers of the problem  

The RES Directive is based on the rationale that a positive framework for renewable energy 
development is necessary due to a number of market and regulatory failures or imperfections. 
These include non-internalisation of negative externalities of conventional energy forms, the 
presence of subsidies for other energy forms, imperfect market structures, regulatory barriers, 
the  status  of  many  renewable  technologies  as  "infant  industries"  together  with  significant 
inertia of the system, and barriers related to information and public perception. While some of 
these issues will be increasingly addressed by 2020 through on-going policy initiatives16, the 
following  six  challenges  need  to  be  addressed  in  the  coming  years  in  order  to  facilitate  a 
greater share of renewable energy the EU energy mix post-2020. 

(1) Uncertainty of future policy framework 

14 

15 

16 

of 

Environment 

Federal  Ministry 

(2011),  Germany’s 

German 
www.bmu.de/english/transformation_of_the_energy_system/faq/doc/47589.php#1 
Danish Ministry of Climate, Energy and Building (2012) Denmark Energy Agreement, 22 March 2012, 
www.kemin.dk/Documents/Presse/2012/Energiaftale/FAKTA%20UK%201.pdf  
For  example,  policies  include  the  ETS  and  the  Large  Combustion  Plant  Directive  for  the  non-
internalisation  of  negative  externalities  of  conventional  energy  forms;  the  commitments  to  phase  out 
coal subsidies and the Energy Taxation Directive for the presence of subsidies for other energy forms; 
the  competition  policy  and  the  Third  Package  unbundling  for  imperfect  market  structures;  the  Third 
Package again and the RES Directive priority connection requirements for regulatory barriers; and the 
RES Directive for information and public perception. 

Energy  Concept, 

EN 

12 

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The RES Directive established a clear, stable and robust regulatory framework, notably based 
on  legally  binding  national  targets  for  renewable  energy  by  2020,  which  has  created  the 
required  conditions  for  a  period  of  major  growth  and  investment  in  the  sector  in  Europe. 
Whilst  the  framework  is  still  relatively  young,  current  analysis  suggests  that  it  has  been 
successful  in  promoting  MS  action  to  remove  barriers  to  and  support  the  development  of 
renewable energy. The case is similar for carbon emissions, technology development such as 
carbon  capture  and  storage,  and  energy  efficiency  measures.  These  are  all  issues  which 
require strong and continued government intervention for significant development to occur.  

As currently framed, however, the EU renewable energy policy framework effectively ends in 
2020,  a  mere  eight  years  away.  Post-2020,  there  are  no  renewables  objectives  and  no 
decarbonisation targets other than a decreasing EU Emission Trading Scheme (ETS) cap by a 
linear  factor  of  1.74%  per  year  and  a  political,  rather  than  legal,  EU  Council  objective  to 
achieve 80-95% greenhouse gas reductions by 2050 if other developed countries take similar 
action. Carbon pricing can provide an incentive for deployment of the more mature renewable 
energy technologies across Europe. In particular a strengthened ETS is a necessary condition 
for promoting renewables post-2020 but it may not be sufficient, particularly for speeding up 
the  commercialization  of  innovative  renewable  energy  technologies.  The  uncertainty  about 
renewable energy market volumes post-2020 and the related support schemes may therefore 
lead to commercialization problems for new capital intensive renewables technologies where 
investments are marked by long lead times. 

(2) Viability of financing incentives 

Whilst  multiple  financial,  institutional,  structural,  administrative  and  technological  barriers 
hinder  the  development  of  renewable  energy,  financial  incentives  have  often  been  used  to 
overcome  all  such  constraints.  These  have  consisted  of  R&D  support,  investment  aid  and 
operating  support.  This  multitude  of  different  support  schemes  raise  concerns  from  the 
perspective  of  the  single  market  as  it  could  undermine  system  efficiency  for  achieving  EU 
objectives  and  raise  costs17.  In  addition,  a  rise  in  expenditure  (partly  caused  by  a  boom  in 
installations resulting from falling photovoltaic per unit costs) is generating concerns on the 
cost-effectiveness and on their possible impacts on energy consumers18. 

The cooperation mechanisms established by the RES Directive address the need to improve 
the cost-effectiveness, convergence and market integration of national support schemes, with 
the  view  to  increase  the  efficiency  with  which  Europe  develops  its  renewable  energy 
resources19. However, further EU action may be necessary in the coming years, depending on 
the rate of technology cost reductions, policy and regulatory reform at national level and the 
scale of future renewable energy growth. 

17 

18 

19 

Investors  are  confronted  with  different  criteria  for  and  levels  of  support  as  well  as  administrative 
procedures  and  grid  access  conditions,  all  of  which  influence  their  production  and  site  location 
decisions. See SEC (2011)131. 
Operational  financial  incentives  are  typically  supported  by  energy  consumers  through  power  and  gas 
tariffs.  
According  to  COM  (2011)31  and  SEC(2011)131,  this  will  be  done  through:  the  facilitation  of  the 
development  of  cooperation  mechanisms  both  between  Member  States  and  with  third  countries,  the 
preparation of guidelines for more harmonised reform of national renewable energy support schemes, 
the  promotion  of  reforms  in  the  southern  Mediterranean  to  facilitate  the  growth  of  renewable  energy 
and the scope for third country cooperation post 2020, the continued work with financial institutions to 
improve  European  support  for  private  investment  in  renewable  energy  projects,  the  increased  use  of 
innovative financial instruments as a device for achieving greater private sector leverage for European 
policy priorities and maximising the EU value added of financing in the energy sector. 

EN 

13 

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(3) Consistency of market arrangements 

Current  power  market  arrangements  were  created  in  an  electricity  sector  characterised  by 
centralised  conventional  power  plants  running  on  gas  and  coal.  Wholesale  electricity  prices 
tend  to  be  based  on  short-run  marginal  costs  (with  significant  legacy  capital,  average  costs 
were  low)  and  are  largely  driven  by  changes  in  fossil  fuel  prices.  Most  forms  of  renewable 
power generation, by contrast, have high upfront capital costs but low operational costs (with 
the exception of bioenergy). As the proportion of renewable generation within the electricity 
market increases, if wholesale power prices remain based on short run marginal costs, prices 
will  fall  and  investments  covered  only  by  electricity  sales  revenues  will  struggle  to  cover 
costs. This might lead to concerns about the ability of investors to recover capital and fixed 
operating  costs.  In  addition,  current  renewable  electricity  purchasing  arrangements  do  not 
always  allow  for  renewable  generators  to  effectively  respond  to  market  price  signals,  thus 
creating inefficiencies in market operation.  

In  some  Member  States  these  challenges  have  led  to  calls  for  the  introduction  of  ‘capacity 
payments’ (mechanisms to remunerate the provision of capacity in addition to the electricity 
sold)  to  help  covering  fixed  costs.  Other  Member  States  and  market  participants  have  been 
more  sceptical  about  the  introduction  of  such  payments  and  see  them  undermining  price 
signals in the market. Against this background, the question arises on how to address capacity 
challenges in a way that does not lead to new distortions in the internal electricity market.  

(4) Adequacy of energy infrastructure 

Most of Europe’s large-scale renewable energy is located at its periphery (including wind and 
wave  power  in  the  northern  seas,  biomass  in  the  Northern/Eastern  Europe  and  solar  power 
around  the  Mediterranean),  away  from  centres  of  consumption.  Making  best  use  of  this 
potential  will  require  greater  volumes  of  electricity  crossing  national  borders.  Transmission 
expansion throughout Europe is a fundamental enabler for integrating power markets and is 
the most cost effective means to accommodate higher levels of diverse renewable energy in a 
secure and robust power system. In addition, the distribution grid also needs to become much 
smarter to deal with significant new forms of distributed generation such as solar PV and to 
facilitate  increased  demand  response.  With  more  decentralized  generation,  smart  grids,  new 
networks  users  (e.g.  electric  vehicles)  and  demand  side  management,  there  is  also  a  greater 
need for more integrated view on transmission, distribution and storage.  

The  EU  energy  infrastructure  policy,  including  the  proposed  regulation  on  trans-European 
energy infrastructure,20 addresses the need to improve Europe's transmission and distribution 
networks  to  enable  the  growth  of  electricity  from  renewable  energy  sources  as  well  as  to 
facilitate the integration of the European single market by 202021. However, stakeholders in 
the  finance  community  are  starting  to  raise  concerns  such  investments  will  be  difficult  to 
realize  in  the  current  economic  environment. Therefore  further  measures  may  be  necessary, 
depending  on  the  rate  of  infrastructure  development,  the  coordination  of  network  planning 
and the scale of future renewable energy growth. 

20 
21 

COM(2011)658. 
More  specifically,  transmission  System  Operators  (TSOs)  are  required  to  co-operate  to  elaborate 
regional  and  European  10-year  network  development  plans  (TYNDP)  for  electricity  and  gas  with  a 
focus on cross-border interconnections, in the framework of the European Network of TSOs (ENTSO). 
The  package  also  establishes  an  Agency  for  the  Co-operation  of  Energy  Regulators  (ACER)  that  – 
among other tasks – will have to monitor the implementation of European TYNDPs. The third package 
finally sets the target, where possible, to equip at least 80% of consumers with smart meters by 2020 as 
a first step towards the implementation of smart grids. 

EN 

14 

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(5) Uncertainty about innovative technologies 

The 2050 Energy Roadmap highlighted how a continuous up-take of breakthrough renewable 
energy technologies22 will be needed throughout the period to 2050 to achieve the transition 
to  a  sustainable  and  secure  energy  sector.  However,  bringing  these  new  renewables  to  the 
commercial market-place is challenging and cannot be achieved by the market alone. Creating 
new technologies requires large and cutting-edge research infrastructures. Their up-scaling to 
commercial  stage  demands  significant  capital  investments  with  risks  that  are  too  large  for 
venture  capital  and  too  high  for  the  traditional  banking  sector.  All  in  all,  higher  public  and 
private  investment  in  R&D  technological  innovation  are  crucial  in  speeding  up  energy 
innovation. 

the 

technology  creation  stage 

The  EU  Strategic  Energy  Technology  (SET)  Plan  addresses  the  main  bottlenecks  energy 
the  first-of-a-kind 
technologies  are  facing  from 
commercialisation and system integration stage through a better integration and coordination 
of research and innovation capacities and leverage of resources. Horizon 2020, the proposed 
framework programme for research and innovation for the period 2014-2020, will be key in 
catalysing these efforts. Reinforcing the capacity of the market to systematically promote the 
latest  breakthrough  innovations  and  their  diffusion  will  be  one  of  the  central  issues  for  the 
post-2020 horizon. 

to 

(6) Public acceptance and sustainability 

Public acceptance of renewable energies is fundamental to further increasing their share in the 
overall  energy  supply23.  Generally,  renewable  energy  generation  enjoys  widespread  public 
support  because  of  its  distributed  nature  and  its  global  and  local  environmental  and  socio-
economic benefits. However, a lack of such support for building large-scale renewable energy 
installations  or  related  energy  infrastructure  (both  at  transmission  and  distribution  level)  is 
often  causing  a  slowing  down  of  their  planning  and  permitting  processes,  potentially 
becoming a barrier to renewables growth.  

While  the  RES  Directive  and  the  Fuel  Quality  Directive  introduced  the  world's  first 
mandatory sustainability criteria for biofuels and bioliquids, concerns have been raised about 
the  need  to  further  strengthen  such  scheme  as  bioenergy  demand  is  set  to  be  a  significant 
component of the renewables increase post-2020. In this context, the Commission will soon 
report  both  on  the  issue  of  indirect  land  use  change  emissions  and  on  the  need  for  EU 
sustainability  criteria  for  solid  and  gaseous  biomass  used  in  electricity  and/or  heating  and 
cooling. The rationale for a specific renewables target in transports will also need to be looked 
closely at in the context of the post-2020 regime. Existing EU policy initiative, including the 
energy  infrastructure  package,  will  help  in  streamlining  authorisation  procedures  for 
international  energy  interconnectors,  but  further  measures  may  be  needed,  also  to  ensure 
public acceptance of the roll-out of smart-grid applications. 

22 

23 

Such  transition  will  require  significant  advances  in  renewable  energy  technologies  such  as  deep  off-
shore wind resources, second generation bio-fuels, biomass gasification, thin film photovoltaic, ocean 
energy, direct steam generation concentrating solar plants and compressed air energy storage. 
See: Heras-Saizarbitoria et al. (2011), Public acceptance of renewables and the media: an analysis of the 
Spanish PV solar experience, Renewable and Sustainable Energy Reviews, Vol. 15/ 9, Pg. 4685-4696; 
and,  Zoellner  et  al.  (2008),  Public  acceptance  of  renewable  energies:  Results  from  case  studies  in 
Germany, Energy Policy, Vol. 36/ 11, Pg. 4136–4141. 

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2.4. 

Business as usual developments 

This  chapter  looks  at  how  renewable  energy  share  would  develop  post-2020,  under  a 
business-as-usual scenario (BAU) where no further EU policy actions is taken. The analysis 
builds  considerably  on  the  Current  Policy  Initiatives  (CPI)  scenario  described  in  the  Impact 
Assessment  of  the  Roadmap  Energy  2050.  The  CPI  scenario  reflects  the  continuation  of 
current EU climate and energy policies (including the RES Directive, the latest Commission 
legislative proposals on energy efficiency, energy taxation and energy infrastructure) and also 
takes into account recent energy policy developments (higher energy import prices and effects 
of nuclear accident in Japan).  

Therefore,  the  BAU  scenario  assumes  the  achievement  of  the  overall  GHG  target,  ETS  cap 
and  non-ETS  national  targets  by  2020  but  thereafter  GHG  reductions  fall  short  of  what  is 
required  to  mitigate  climate  change  with  a  view  to  reaching  the  2  °C  objective.  Import 
dependency,  in  particular  for  gas,  increases  over  the  projection  period  and  electricity  prices 
and energy costs also rise. So despite efforts over recent years, the  long  term  effects  of  our 
current  and  planned  policies  (including  the  RES  Directive)  are  not  sufficient  to  achieve  the 
ambitious 2050 decarbonisation objective set by the Council, and to improve both security of 
supply  and  competitiveness.  Below  the  main  energy  trends  of  the  BAU  scenario  are 
described. 

Energy developments 

Under  the  BAU  scenario,  primary  energy  demand  falls  by  5%  in  2020,  and  it  continues 
slightly to decrease in 2030 (-5.8%) and in 2050 (-8.4%). Final energy consumption in 2020 is 
below  that  expected  under  earlier,  2007  projections,  further  decreasing  significantly  up  to 
2050  as  more  efficient  technologies  have  by  then  reached  market  maturity  and  so  reduced 
energy  demand. The  sectorial  break-down  of  demand  remains  broadly  stable  with  transport 
remaining  the  biggest  single  consumer  accounting  for  32%  in  2050;  the  industrial  share 
increases slightly while that of households declines a bit. Further energy savings are brought 
about mainly by energy efficiency measures for households and services sector and efficiency 
improvements  in  energy  transformation  in  the  short  to  medium  term,  leading  to  further 
declines in final energy demand which remains 4-6% below the BAU scenario. 

Renewable energy share is raising very slowly post-2020 to reach only 25% in 2030 and just 
over 29% in 2050. The sector’s growth declines from 6% per year in the current decade, to 
only  by  1%  per  year  between  2020-2050.  This  trend  is  due  to  the  assumed  phasing  out  of 
operational aid to mature renewable energy technologies. The share of renewables in transport 
also shows very slow growth, increasing from 10% in 2020 – as required by the RES directive 
–  to  a  mere  13%  by  2050.  Similarly,  the  pace  of  electrification  in  the  transport  sector  is 
projected to remain slow in the BAU scenario: electric propulsion in road transport does not 
make significant inroads by 2050. 

Although  consumption  of  fossil  fuels  decreases  and  an  increasing  share  of  energy  is  from 
renewable  energy,  the  share  of  energy  imports  still  rises,  though  only  slightly  (by  6%  from 
2005  to  2050).  This  is  because  the  development  of  renewable  energy  is  not  fast  enough  to 
compensate  for  the  drop  in  domestic  supply  of  fossil  fuels.  Import  dependency  rises  from 
54%, reaching 58% in 2030 and flattening out to 2050 due to increased domestic renewable 
energy production.  

Average  electricity  prices  rise  up  to  2030  and  stabilise  thereafter.  The  price  increase  up  to 
2030  is  due  to  three  main  elements:  high  fuel  prices  due  to  the  world  recovery  after  the 
economic  crisis,  ETS  carbon  prices  and  support  to  renewables.  Post-2020,  electricity  prices 
remain  stable  because  of  the  techno-economic  improvements  of  various  power  generation 

EN 

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expenditures 

technologies that limit the effects of higher input fuel prices and CO2 prices. Total costs of 
energy (including capital costs, energy purchases and direct efficiency investment costs) are 
rising  fast  over  the  projection  period  but  are  not  equally  distributed  across  sectors.  Energy 
related 
of 
energy related costs for services and industry is more moderate. Energy costs are rising faster 
than GDP and represent around 15.3% of GDP in 2030 (up from 10.5% in 2005) and 14.6% 
in  2050.  The  faster  rate  of  growth  relative  to  GDP  reflects  significant  investments  needs  in 
energy production, transmission and distribution as well as demand based energy  efficiency 
measures.  

strongly  while 

households 

growth 

rise 

the 

in 

Environmental developments 

Under  the  BAU  scenario,  greenhouse  gas  emissions  fall  by  26%  in  2030  and  41%  in  2050, 
achieving  only  half  of  the  contribution  necessary  to  limit  climate  change  to  2°C24.  The 
substitution of the use of fossil fuels would be partially achieved by greater use of biomass. 
Whilst current EU law sets sustainability criteria for the production of biofuels and bioliquids, 
emissions from indirect land use change are not taken into account in the current regime and 
the use of biomass in electricity and heating/cooling is not so far addressed at EU level. At the 
same  time,  national  and  EU  measures  promoting  biomass  sustainability  such  as  forest 
management laws and processes and environmental policies (e.g. EU post-2020 biodiversity 
strategy)  are  in  place  across  the  Union  but  they  do  not  apply  to  third  countries,  which  are 
expected  to  contribute  significantly  to  EU  biomass  supply  post  2020.  This  is  the  situation 
reflected in the business as usual scenarios. The lack of a coherent EU sustainability scheme 
may lead to increased pressures on land use and biodiversity. This is even more likely when 
biomass imports are considered, where the issue can be even more sensitive in certain third 
countries where there is a lack of forest management policies or ineffective implementation. 

Social developments 
The  vast  majority  of  literature25  indicates  that  renewable  deployment  is  associated  with  net 
job  creation.  For  fuel-free  renewable  energy  technologies,  the  greatest  number  of  jobs  is 
generally concentrated in the installation, manufacturing, and administration phase, while for 
fuel-based  technologies  such  as  bioenergy,  biomass  feedstock  production  and  distribution 
account for the largest share. While labour productivity evolves over time, studies have shown 
that renewables are currently more labour-intensive than fossil fuel technologies. Against this 
backdrop, under the business as usual scenario new job creation can be expected mainly in the 
period up to 2020 when the current renewable energy framework generates strong growth of 
the sector. Post-2020, as a consequence of the low growth rates in renewable energy markets, 
net job creation would be reduced significantly, especially if the EU would quickly loose its 
global technological lead on renewables.  

2.5. 

EU's right to act 

The  EU's  competence  in  the  area  of  energy  is  set  out  in  the  Treaty  on  the  Functioning  of 
European  Union,  Article  192  (environment),  Articles  114  (internal  market)  and  Article  194 

24 

25 

This includes also some energy-related non-CO2 emissions, e.g. methane emissions from coal mining 
and  losses  in  gas  distribution  networks  and  F-Gas  emissions  related  to  air  conditioning  and 
refrigeration. While the former are estimated to decrease under current trends, the latter are projected to 
increase considerably. For a more detailed analysis of the overall GHG reduction efforts needed and of 
trends in non-CO2 emissions see the Impact Assessment of the Roadmap for moving to a competitive 
low carbon economy in 2050 (SEC(2011)288). 
IRENA (International Renewable Energy Agency) (2012), Renewable Energy - Jobs Status, Prospects 
& Policies, www.irena.org/DocumentDownloads/Publications/RenewableEnergyJobs.pdf.  

EN 

17 

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(energy)26.  From  an  economic  perspective,  many  energy  system  developments  can  be 
achieved on an EU-wide basis, encompassing both EU and Member State action while duly 
considering the respective competences. The European market can encourage the most cost-
effective  renewable  energy  production;  facilitate  the  balancing  of  the  electricity  system  and 
reduce the need for back-up capacity and energy storage. The large scale investments needed 
to  harness  a  number  of  renewable  energy  sources  (e.g.  off-shore  wind,  second  generation 
biofuels)  are  also  more  feasible  and  cost  effective  in  EU-wide  markets.  Finally,  the  large 
R&D  budgets  needed  for  developing  innovative  renewable  energy  technologies  can  be 
mobilized and organized more-effectively at the European scale rather than at national level. 

2.6.  Who is affected?  

The energy industry, including but not limited to the renewable energy sector, will be directly 
concerned as it will need to develop and deploy the needed renewable energy technologies in 
the coming years as well as integrate them into the single energy market. Consumers will be 
affected by overall energy expenditure (resulting from the combination of energy prices and 
amount  of  energy  used)  as  well  as  by  energy-related  investments  such  as  house  renovation, 
new  types  of  vehicles,  more  efficient  appliances  etc.  Public  authorities  will  also  need  to 
engage in discussions about the pros, cons and trade-offs of different policy options (higher 
and  geographically  concentrated  renewable  energy  development  will  require  additional 
energy  infrastructure  investments;  supply  of  sustainable  biomass  will  require  enhance 
agriculture  and  forestry  practices,  etc.).  Changes  in  the  role  of  renewables  within  the  EU 
energy mix will also have a direct influence on third country fuel suppliers.  

3. 

SECTION 3: OBJECTIVES  

3.1. 

General objectives 

The  general  objective  of  this  intervention  is  to  ensure  that  EU  renewable  energy  policy 
contributes significantly to: the security and diversity of energy supply, competitiveness, and 
environment  and  climate  protection,  but  also  supports  economic  growth,  employment 
creation, regional development and innovation in the EU. 

3.2. 

Specific objectives 

More specifically, in order to achieve the general objectives, this initiative aims to: i) reduce 
uncertainty  for  investors  and  the  business  community,  ii)  improve  viability  and  cost-
effectiveness of financial incentives, iii) facilitate consistency with market arrangements, iv) 
provide adequate energy infrastructure, v) foster technology innovation and development, vi) 
and ensure wider public acceptance and address sustainability considerations.  

3.3. 

Operational objectives 

The  operational  objective  is  to  give  insight  on  how  the  EU  renewable  energy  policy 
framework could develop beyond 2020, with the view to: a) inform market actors (technology 
providers, operators, investors) and other stakeholders (central governments, local authorities, 
NGOs and citizens) about the possible future policy orientations at the EU level for enabling 
higher  penetration  of  renewables  in  the  EU  energy  mix;  b)  show  trade-offs  among  policy 
objectives as well as among different renewable energy development pathway; and, c) support 

26 

Under Article 194 TFEU, Union policy on energy shall aim at: (a) ensure the functioning of the energy 
market;  (b)  ensure  security  of  energy  supply  in  the  Union;  (c)  promote  energy  efficiency  and  energy 
saving  and  the  development  of  new  and  renewable  forms  of  energy;  and  (d)  promote  the 
interconnection of energy networks. 

EN 

18 

   EN 

 
                                                 
the policy debate on the need, ambition and timing of possible renewable energy milestones 
for the post 2020 period. 

3.4. 

Consistency with other European policies 

The  Renewable  Energy  Strategy  fits  into  the  overall  framework  of  decarbonisation  as 
designed  by  the  Europe  2020  flagship  initiatives  'Resource  Efficient  Europe'  and  the 
Commission's  Communications  on  'Roadmap  for  moving  to  a  competitive  low  carbon 
economy  in  2050'  and  'Energy  Roadmap  2050'.  The  objectives  of  this  intervention  are 
coherent  with  the  objectives  of  medium  term  strategy  as  defined  in  the  Commission's 
Communications  'Europe  2020'  and  'Energy  2020',  the  EU  objective  to  reduce  GHG 
emissions by 80 to 95% in 2050 compared to 1990, as well as with energy policy objectives 
as described in the Lisbon Treaty. This initiative seeks synergies and complementarities with 
a number of other EU policies and initiatives such as the EU Emission Trading Scheme, the 
Internal  Energy  Market  development,  the  Common  Agriculture  Policy  and  the  EU  Sorest 
Strategy, the Bioeconomy Strategy and Action Plan and the Resource Efficiency Roadmap. It 
is  clear  that  the  evolution  of  the  renewable  energy  policy  must  evolve  in  conjunction  with 
energy  market,  energy  efficiency  and  climate  action  policy  discussions,  with  the  view  to 
maximize synergies and minimize possible overlaps.  

4. 

SECTION 4: POLICY OPTIONS  

Table 1 below summarise the policy options identified in this impact assessment and further 
described  in  this  section.  They  respond  to  the  problem  definition  described  in  section  2.2, 
addressing the six underlining drivers described in section 2.3 with a selected number of key 
policy measures which are grouped in coherent policy packages that are characterised by an 
increasing  level  of  policy  ambition  and  EU  integration.  Additional  policy  elements  that  are 
necessary to promote renewable energy post-2020 include, for instance: phase-out of support 
mechanisms  or  subsidies  for  conventional,  non-renewable  energy  sources;  better  financing 
possibilities  for  renewable  energies;  public  procurement  obligations,  etc.  For  keeping  the 
assessment  manageable,  these  measures  have  not  been  included  in  the  studied  options  but 
they could be subject to future analysis.  

Table 1: Key features of policy options 

Policy options 

(1) Business 
as usual 

(2) Decarbonisation with 
no renewables targets 

(3) Post-2020 national 
renewables targets/ 

coordinated support 

(4) Post-2020 EU 
renewable target/ 
harmonised measures 

Underlining drivers 
Policy uncertainty 

Support viability 

Market  arrangements 
consistency 
Infrastructure 
adequacy 

No new 
RES/GHG 
targets  
Phase out of 
RES support  
No new 
measures 
No new 
measures 

Innovative 
technologies 
uncertainty 
Public acceptance/ 
sustainability 

No new 
measures 

No new 
measures 

New GHG targets post-
2020, no specific RES 
targets 
Phase out of national 
support schemes 
Renewables fully exposed 
to market risks 
New measures, 
connections with 3rd 
countries 
Enhanced R&D financing 
through carbon markets 

Post-2020 national RES 
targets + new carbon and 
energy efficiency goals 
Enhanced coordination and 
cooperation amongst MS 
Accelerated exposure to 
market risks 
New measures, connections 
with 3rd countries 

Enhanced R&D financing 
through carbon markets 

Post-2020 EU-wide RES 
target + new carbon and 
energy efficiency goals 
EU-wide harmonized 
support schemes 
Common balancing and 
capacity markets  
New measures, 
connections with 3rd 
countries 
Enhanced R&D financing 
through carbon markets 

Sustainability criteria 
applied to all bioenergy 
uses 

Sustainability criteria 
applied to all bioenergy 
uses 

Sustainability criteria 
applied to all bioenergy 
uses 

EN 

19 

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4.1. 

Policy options 

4.1.1.  Option 1: Business as usual 

As  explored  in  2.5.,  option  1  would  imply  no  new  EU  policy  framework  promoting 
renewable  energy  after  2020,  when  the  current  EU  renewable  energy  target  of  20%  ends. 
Renewable  energy  would  continue  to  benefit  from  to  the  current  greenhouse  gas  reduction 
framework for post-2020. This consists of the directive on the EU Emissions Trading System, 
which will continue to reduce the emissions cap for the ETS sectors by a linear factor 1.74% 
each year beyond 2020. The planned coordinated and partially EU-financed development of 
energy  infrastructure,  including  power  grids,  should  improve  and  will  be  able  to  keep  pace 
with the projected low growth of renewable energy share.  

The strong growth in renewable energy up to 2020 is expected to continue to bring down the 
cost  of  renewable  energy  technologies.  As  different  technologies  mature,  support  can  be 
phased  out,  or  at  least  renewable  energy  producers  can  be  integrated  into  the  market  with 
reforms  to  support  schemes  that  expose  renewable  energy  production  to  market  risks.  Once 
the  energy  market  for  established  renewable  energy  technologies  is  liberalised  and 
competitive, only new renewable energy technologies that still clearly need support would not 
be exposed to full market risk. With no further renewable energy support or policy objective, 
the development of international renewable energy sources (e.g. in North Africa and in the 
European  neighbourhood),  currently  facilitated  by  the  renewable  energy  Directive's 
"cooperation mechanisms", would slow down for want of European incentives. 

Concerning  the  sustainability  of  renewable  energy,  in  most  instances,  the  environmental 
impact  of  energy  related  activities,  including  renewable  energy,  are  addressed  through 
horizontal  measures.  At  EU  level  these  include  requirements  for  strategic  environmental 
assessments,  environmental  impact  assessments,  compliance  with  EU  biodiversity  and 
environmental  legislation  as  a  whole.  This  strong  European  environmental  framework  is 
usually  capable  of  addressing  the  public's  concerns  regarding  sustainability.  However,  with 
the  expected  increase  in  biofuel  generation  due  to  the  current  10%  renewable  energy  in 
transport target by 2020, dedicated sustainability criteria have been introduced for biofuel and 
bioliquids  under  the  RES  Directive,  Fuel  Quality  Directive  (FQD)  and  are  also  applicable 
under the EU ETS. Under this option, given that the current sustainability scheme for biofuels 
is  closely  linked  to  the  enforcement  of  the  EU  renewable  energy  target  for  transports,  it  is 
unclear  how  it  would  apply  to  biofuels  used  post-2020.  Their  impact  depends  on  the  future 
evolution of the targets of the FQD, which could be considered as remaining at current level 
for  the  purposes  of  this  business  as  usual  scenario.  In  addition,  it  assumed  that  solid  and 
gaseous biomass would remain exempted from sustainability standards.  

This option would not be in line with the views expressed by a clear majority of stakeholders 
which support some form of dedicated target for renewable energy post-2020. Only 14% of 
respondents considered such a target unnecessary. Among those favouring renewable energy 
targets, a clear majority supported mandatory over indicative targets (39% over 14%).  

4.1.2.  Option 2: Decarbonisation without renewable energy targets post-2020 

Option  2  would  imply  strengthened  GHG  reduction  targets  and/or  policies  fully 
compatible with the long-term decarbonisation goal of reducing EU GHG emissions by 80% 
to  95%  by  2050  compared  to  1990,  e.g.  along  milestones  as  outlined  in  the  Low  Carbon 
Economy Roadmap. For the ETS sectors, this could imply reductions compared to 2005 by 
around  45%  by  2030  and  around  90%  in  2050,  which  is  beyond  the  current  ETS  linear 

EN 

20 

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reduction factor of 1.74% that would lead to just over 70% reduction in 2050. For non-ETS 
sectors,  this  could  imply  additional  policies  and  measures  which  lead  to  GHG  emission 
reductions  compared  to  2005  by  around  30%  in  2030  and  around  70%  in  2050,  going  well 
beyond  current  non-ETS  policies.  Also  GHG  emissions  from  Land  Use,  Land  Use  Change 
and Forestry (LULUCF) would be appropriately covered by the policy framework.  

Under this option, no specific post-2020 renewable energy objectives would be set. However, 
this  option  would  include  binding  EU  measures  addressing  the  non-cost  barriers  to 
investments  in  renewable  energy.  These  measures  could  be  developed  for  the  specific 
conditions  in  the  electricity,  heating  and  cooling  sectors,  reflecting  on  grid  access  and 
authorisation regimes for new entrants, both for electricity and gas. They would also include a 
strengthening of existing provisions contained in the 2009 RES Directive, aimed at fostering 
the use of renewable energy in new and renovated buildings, at developing low carbon district 
heating networks, and introducing standardised product certification regimes.  

As with option 1, the absence of a post-2020 renewable energy specific target would end or 
reduce operational incentives for renewable energy, thus no further EU policy action aimed 
at promoting more cost-effective and integrated national support schemes would be needed27. 
Concerning infrastructure, further growth in renewable energy production, particularly if it is 
concentrated  in  few  regions  with  the  most  cost-effective  resources,  could  require 
supplementary measures on energy infrastructure beyond current policy initiatives28. Such 
measures would depend on the location of renewable energy growth and subsequent impact 
on electricity or other infrastructure. It would also depend on expectations regarding imports 
of renewable energy from neighbouring countries. For instance, greater efforts in developing 
appropriate energy infrastructure are needed in order to allow for imports from North Africa 
post-2020.  

Additional  policy  elements  of  this  option  would  include  enhanced  EU  R&D  and 
demonstration  support  for  low  carbon  energy  technologies,  building  on  a  philosophy 
exemplified  in  the  NER  300  programme  using  a  part  of  ETS  auctioning  revenues  for  such 
purposes29,  and  the  Horizon  2020  research  and  innovation  framework  programme  approach 
and EU-wide binding sustainability criteria in line with GHG emission reduction objectives 
for all biomass for energy purposes, which effectively exclude adverse GHG emission effects 
including  effects  via  indirect  land  use  change,  whether  it  used  in  electricity,  heating  or 
transport.  It  should  be  noted,  however,  that  the  implementation  of  such  criteria  on  those 
energy users that would be neither covered by the EU ETS, by the Fuel Quality Directive nor 
the future LULUCF policy framework could raise some administrative challenges, given that 
currently compliance is closely linked to financial incentives and target achievement.  

27 

28 

29 

This option assumes that there will be no need to introduce explicit capacity payments on energy only 
markets to ensure system adequacy. This is because the wide spread application of smart technologies 
and  appliances  will  enable  consumers  to  adjust  their  consumptions  when  needed.  Consumers  will  be 
offered appropriate supply schemes which mirror short term energy prices on wholesale markets and as 
such  provide  them  with  sufficient  incentives  to  reduce  or  increase  off-take  instantaneously.  This  will 
make  investment  in  generation  capacities  obsolete  which  would  otherwise  be  only  needed  to  serve 
periods of extreme peak demands.  
Additional  measures  could  consist  of  regulatory,  organisational  or  financial  nature  (e.g.  regarding 
planning authorisation regimes, European grid development coordination and EU funding for projects 
of common interest). 
Recommendations  would  be  developed  at  EU  level  to  allocate  parts  of  revenues  generated  from 
allowances  auctioning  towards  support  to  research  and  innovation  activities,  in  particular  financing 
first-of-a-kind commercial demonstration projects. 

EN 

21 

   EN 

 
                                                 
As stated above, a large majority of stakeholders support a dedicated renewable energy target 
for 2030. However, it should be noted that a number of stakeholders support a strengthened 
GHG  reduction  regime  as  the  main  tool  for promoting low-carbon  energy source, including 
renewables. Other aspects of this option which are clearly in line with the majority view of 
stakeholders  include  the  need  for  additional  measures  to  address  the  non-cost  barriers  to 
renewables and the application of EU-wide sustainability criteria to all biomass uses. 

4.1.3.  Option  3:  Binding  national  renewable  energy  targets  post-2020  and  coordinated 

support 

Option  3  would  imply  a  continuation  of  the  current  energy  and  climate  policy  approach 
embodied  in  the  Europe  2020  Strategy,  by  maintaining  the  three  interlinked  and  mutually 
reinforcing  EU  targets  on  GHG  emissions,  renewable  energy  and  energy  efficiency.  This 
would therefore imply setting EU and national renewable energy targets for 2030, consistent 
with  the  long-term  EU  climate  objectives  as  outlined  in  option  2  but  in  addition  ensuring 
specific  growth  in  renewable  energy  to  address  security  and  diversity  of  supply  goals, 
innovative technology deployment and competitive industrial development.  

This option would also include a more active convergence of national support schemes for 
renewable  energy,  building  on  and  further  strengthening  the  cooperation  mechanisms  laid 
down  in  the  RES  Directive.  As  described  in  section  3,  there  is  an  ongoing  debate  on  the 
viability of financial support for renewables, both in terms of the levels of incentives and the 
scheme  design,  and  on  their  impacts  on  energy  consumers.  Financial  incentives  are 
increasingly being revised downwards in several Member States to reflect falling costs due to 
economies of scale and technology development. To the extent that support will be necessary 
for  non-mature  and  innovative  renewable  energy  technologies,  further  EU  action  will  be 
needed to ensure that stronger growth of renewable energy occurs in a cost-effective fashion. 
This could take the form of EU guidelines on financial support, common cost methodologies, 
as  well  as  further  operationalization  of  the  cooperation  mechanisms  established  by  the  RES 
directive, including enhanced cooperation with neighbouring countries.  

As in option 2, this option would also imply additional measures on energy infrastructure 
and  enhanced  EU  R&D  support  for  renewable  energy  technologies  and,  aligned  to  the 
further  expected  demand  rise,  EU-wide  binding  sustainability  criteria  in  line  with  GHG 
emission reduction objectives for all biomass for energy purposes, which effectively exclude 
adverse GHG emission effects including effects via indirect land use change.. 

To a large extent, this option reflects the majority view, expressed in the public consultation. 
As  explained  above,  stakeholders  largely  support  the  introduction  of  post-2020  renewable 
energy targets, while they believe that support schemes management should remain under MS 
control.  At  the  same  time,  many  consider  as  necessary  the  on-going  reform  of  national 
support  schemes  through  introduction  of  market  elements,  tariff  down-ward  revision  and 
ultimately phasing out support for mature technologies. 

4.1.4.  Option 4: EU renewable energy target and harmonised measures 

Besides strengthened administrative/planning regimes (cf. infrastructure package) as in option 
3, option 4 would imply the establishment of a EU-wide renewable energy target backed-
up  by  a  harmonised  support  scheme  for  renewable  energy  (if  and  where  support  is  still 
necessary)  and  harmonised  electricity  system  management.  A  strong  European  approach  to 
renewable  energy  development  implies  that  full  and  open  trading  of  renewable  energy 
occurs  across  all  member  States.  Combined  with  the  ongoing  developments  of  integrating 
renewable energy producers into the European market, this option implies that all producers 

EN 

22 

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face market prices, that any distortions resulting from national approaches are removed, and 
that the target is achieved in the theoretically most cost-effective manner. An example is this 
is  given  by  the  current  technology  neutral  Swedish-Norwegian  tradable  certificate  regime. 
Under such approach a joint support scheme based on a technology neutral premium or green 
certificate regime, all participating Member States would pay the same premium for a MWh 
of  electricity  from  renewable  energy  sources,  thus  equalising  costs  across  the  EU.  Such  a 
scheme could be established based on joint support schemes.  

An additional element for such a policy option would be the extension of such a harmonised 
regime  to  the  production  of  renewable  energy  in  neighbouring  countries.  Then, 
irrespective  of  the  trade  in  electricity,  the  green  energy  could  be  purchased  via  a  certificate 
trading  scheme.  The  inclusion  of  3rd  countries  within  the  same  EU  framework  would  be 
intended to facilitate the growth of renewable energy even beyond the EU's borders, in a cost 
effective  manner.  As  with  option  3,  infrastructure  needs  beyond  the  current  2020 
infrastructure  package  would  depend  on  the  expected  or  intended  renewable  energy  targets 
and  the  extent  to  which  the  broader  (beyond  EU)  cost  effective  development  of  renewables 
modified the EU energy mix and location.  

This  policy  option  also  assumes  a  common  EU  approach  to  market  arrangements.  It  is 
clearly  the  intention  of  the  EU  to  ensure  the  completion  of  the  internal  market  well  before 
202030  and  to  harmonise  a  number  of  network  codes,  framework  guidelines  and  other  grid 
management practices. The extent and success of this harmonisation, the infrastructure needs 
associated  with  the  energy  mix  expected  to  be  generated  by  an  EU-wide  approach  to 
renewable  energy  development,  and  the  convergence  of  support  schemes  for  renewable 
energy all have implications for electricity market arrangements. As in option 2, this option 
would also see an enhanced EU R&D support for renewable energy technologies and EU-
wide binding sustainability criteria in line with GHG emission reduction objectives for all 
biomass  for  energy  purposes,  which  effectively  exclude  adverse  GHG  emission  effects 
including effects via indirect land use change. 

The  full  EU  harmonisation  of  support  schemes  envisaged  in  this  option  is  supported  by  a 
number  of  stakeholders,  mainly  energy  traders  and  utilities.  Overall,  the  majority  of 
respondents  to  the  public  consultation  (54%)  believe  that  national  control  over  support 
schemes should continue. A EU requirement to open support schemes to producers from third 
countries  as  envisaged  under  this  option  would  be  particularly  controversial  (supported  by 
only 11%). 

SECTION 5: ANALYSIS OF IMPACTS  

5. 
This  chapter  analyses  -  proportionally  to  the  nature  of  the  document  proposed31  -  the 
economic, environmental and social impacts of the four policy options discussed in chapter 4. 
The analysis is mainly qualitative but, where possible, it is complemented by quantitative data 
drawn from the Primes modelling carried out for the Energy Roadmap (see Annex 2 for more 
details).  More  specifically,  it  is  assumed  that  the  four  policy  options  considered  in  this 
document  broadly  correspond  to  4  scenarios  analysed  in  the  Roadmap  Impact  Assessment. 
Accordingly, option 1 (business as usual) is to a large extent reflected in the Energy Roadmap 

30 

31 

European  Council  Conclusions,  4/2/11,  note  "The  EU  needs  a  fully  functioning,  interconnected  and 
integrated internal energy market. Legislation on the internal energy market must therefore be speedily 
and fully implemented by Member States …. The internal market should be completed by 2014" 
In-depth  impact  assessments  examining  the  impacts  of  specific  policy  measures would  be  carried out 
for any follow up legislative proposal. 

EN 

23 

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reference  scenario  (CPI);  option  2  'Decarbonisation  without  renewable  energy  targets  post-
2020'  is  reflected  by  the  'Diversified  supply  technologies  (DST)'  scenario  where  renewable 
growth  is  driven  only  by  carbon  prices;  option  3  'Post-2020  renewable  energy  targets'  and 
option 4 'EU-wide renewable target and full trading' are reflected in the range of renewable 
energy  shares  modelled  in  the  'Energy  efficiency'  scenario  and  in  the  'High  Renewables' 
scenario  of  the  Roadmap.  For  further  information  regarding  the  assumptions  used  in  the 
Energy Roadmap please see Annex 2. 

5.1. 

Economic impacts 

The  overall  economic  impact  of  renewable  energy  policy  is  the  outcome  of  multiples 
interlinked  and  counterbalancing  mechanisms.  First,  the  deployment  of  renewables  creates 
economic activity in the renewable energy sectors. For instance, in Germany investments in 
renewable energy facilities have increased significantly between 2005 and 2010, respectively 
from  10.3  to  26.6  billion  euros.  Over  the  same  time,  total  demand  for  facilities  and 
components  (including  exports),  operation  and  maintenance  as  well  as  biomass  fuels  grew 
from 13.7 billion to 35.5 billion euros32. Activities in non-energy sectors of the economy can 
also  benefit  from  renewable  energy  growth,  through  the  supply  of  intermediate  inputs  or 
manufacturing equipment (e.g. steel industry producing wind turbines or shipping sector for 
seagoing vessels) which will contribute to increase the aggregate final demand. By defining 
the market volumes for renewables, options 3 and 4 could lead to greater direct or indirect 
economic activity related to renewables than option 2. 

Second,  increased  consumption  of  indigenous  renewable  energy  reduces  the  demand  for 
conventional  energy,  including  fossil  fuel  imports,  thus  increasing  energy  security. For 
instance,  the  Energy  Roadmap  shows  that  the  combined  effect  of  significant  penetration  of 
renewables and increased energy efficiency will be able to reduce the expenditure for fossil 
fuel imports and thereby the total external fuel bill of the EU. Compared to the business as 
usual scenario, the EU economy could save in 2050 between 518 and 550 billion euros (08). 
By  promoting  strong  action  to  develop  renewables  and  energy  efficiency,  options  3  and  4 
would lead to relatively greater reduction in expenditure on fossil fuel imports that option 2.  

It should be recalled that other aspects of security of energy supply, such as fuel and supplier 
diversity, are not captured in the simple indicator of import dependency. Current analysis is 
difficult to use to quantify the scope and benefits of a more secure and diverse energy supply. 
However,  it  would  appear  that  a  short-term  cost  minimising  decarbonisation  approach  as 
contained  in  option  2  should  encourage  carbon  emissions,  but  does  not  offer  incentives 
regarding the diversity or sources of a given energy mix. It therefore does not reflect any of 
the external cost of security and diversity of energy supply and thus stimulate relatively less 
any  such  benefits.  In  all  cases,  EU  security  of  supply  would  increase  as  a  result  of  an 
increased  use  of  renewable  energies:  even  in  the  case  of  goods  and  technologies  imported 
from third countries, energy generation actually takes places in the EU. However, in a broader 
sense,  EU  security  of  supply  also  strongly  depends  on  the  domestic  sourcing  of  renewable 
energy  inputs  and  on  the  mastery  of  associated  technologies.  Hence,  EU  security  of  supply 
would  benefit  from  framework  conditions  allowing  for  a  competitive,  EU-based  renewable 
energy industry to maintain its position as a world leader in the long run. 

32 

BMU (2011), Renewable energy sources in figures: national and international developments, 
http://www.bmu.de/english/renewable_energy/downloads/doc/5996.php 

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Third, renewable energy deployment promotes energy innovation, which is key for ensuring 
the  development  of  sufficient  different  technologies  enabling  the  long-term  cost-effective 
decarbonisation of the energy sector. Energy innovation is also important in economic terms, 
as  it  create  competitive  advantages  on  international  markets  with  associated  growth  and 
export opportunities – fact that it is often not quantified in macro-economic studies about the 
costs/benefits  of  renewable  energy33.  Options  3-4  involve  significant  improvement  in 
efficiency and cost parameters of the new technologies due to greater economies of scale and 
faster learning curves compared to the BAU scenario. The strengthening of the carbon price 
under option 2 could reduce the relative cost of new technology options, while ETS revenues 
could  partly  address  funding  for  innovative  companies  and  projects  that  fall  into  the 
‘commercialization gap’. 

However  technology  development  or  innovation  driven  only  by  carbon  prices  focuses 
narrowly  on  lowest  cost,  near-to-market  technologies  at  the  expense  of  a  broader  range  of 
technologies  which  could  be  competitive  in  the  medium  term.  In  other  words,  option  2  is 
likely  to  maximize  short-term  CO2  reductions  and  minimize  short-term  costs,  creating 
innovation  incentives  for  existing  technologies,  but  not  addressing  longer-term  technology 
development and innovation, to the detriment of renewable energy technologies that are still 
some  distance  away  from  being  competitive,  such  as  wave  and  tidal  energy  or  second/third 
generation biofuels34. In this respect, the cost-minimization focus of option 2 (and option 4 to 
the extent it is technology neutral within the renewables sector) would appear less directed at 
spurring innovation than option 3.  

Lead-market research suggests that early investment in the renewables sector allows a given 
economy  to  capitalize  on  growing  global  markets,  with  positive  impacts  on  domestic 
growth.  For  instance,  historically  the  EU  has  been  a  major  exporter  of  renewable  energy 
technology and expertise. However, as renewable energy industries develop internationally it 
is  not  clear  that  this  advantage  would  be  maintained  automatically.  As  the  European  sector 
evolves,  greater  specialisation  and  development  of  expertise  could  result,  together  with 
greater trade. There are implications both for the renewable technology and fuel providers, as 
both  grow  and  become  exposed  to  greater  international  competition.  All  in  all,  renewable 
energy  export  opportunities  will  strongly  depend  on  the  elimination  of  trade  barriers  in  and 
free access to key emerging renewable energy markets such as in China, India, and Brazil. 

On  the  other  hand,  renewable  energy  expansion  can  also  displace  investment  (and 
employment) in the conventional energy sector with the associated negative sectorial impacts. 
In  addition,  the  cost  of  financial  support  for  renewables  can  result  in  higher  energy  prices, 
which  may  impact  on  energy  users'  bills  and  affect  the  competitiveness  of  energy-intensive 
industries.  This  repercussion  can  lead  to  the  so-called  'budget  effect'  whereby  additional 
costs of renewables somehow constrain the budget available for the purchase of non-energy 
goods  or  services,  leading  to  economic  contraction.  The  Roadmap  modelling  shows  that 
average  prices  of  electricity  are  expected  rising  compared  to  2005  under  all  options, 
including  the  BAU  scenario.  It  also  shows  that  due  to  renewables  and  energy  efficiency 
promotion, energy intensive industries may face particularly high energy costs for their highly 
energy consuming production processes.  

This  said,  an  important  aspect  to  be  considered  in  this  discussion  is  the  ‘price  effect’  of 
renewable  electricity,  which  can  help  to  reduce  the  average  power  cost  by  affecting  the 

33 
34 

Lehr et al (2008), Renewable Energy and Employment in Germany, Energy Policy 36, pg 108-117. 
Centre  for  European  Policy  Studies  (2011),  The  EU  Emissions  Trading  System  and  Climate  Policy 
towards 2050: real incentives to reduce emissions and drive innovation?  

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wholesale  price.  Typically,  supply  is  made  up  of  various  power  technologies:  wind,  hydro, 
nuclear, combined heat and power plants, coal and natural gas plants. In a power market, the 
supply  curve  (the  'merit-order'  curve)  and  goes  from  the  least  to  the  most  expensive  units, 
reflecting marginal variable costs (mostly fuel costs). Because renewable electricity has low 
variable costs it is first on the merit order curve and the size of the remaining demand to be 
purchased  on  the  spot  market  is  reduced.  Under  the  "merit  order"  principle,  plants  with  the 
lowest costs are used first to meet demand, with more costly plants being brought on line later 
if needed. The most expensive conventional power plants are therefore no longer needed to 
meet  demand.  If  the  price  is  set  by  cheaper  plants  rather  than  by  the  most  expensive 
conventional  plants,  then  the  average  cost  of  electricity  decreases,  and  this  is  called  the 
‘merit-order effect’.  

A  few  empirical  analyses  have  attempted  to  estimate  this  merit‐order  effect.  For  example, 

Sensfuss et al (2008)  35 calculate that the volume of the merit‐order effect would have been 

EUR  5  billion  in  2006  in  Germany  if  the  entire  electricity  demand  of  a  single  hour  was 
purchased  at  the  corresponding  spot  market  price.  Meanwhile,  the  cost  of  incentives  for 
renewables in that same year totalled EUR 5.6 billion. The same authors estimate the value of 
the kilowatt hour produced by renewables (i.e. the costs avoided by substitution of electricity 
from other sources) at around EUR 2.5 billion, leaving EUR 3.1 billion as the true extra cost 
of RE support incentives. Of these, 0.6 billion are directly paid by final consumers, while the 
remainder  EUR2.5  billion  are  basically  paid  by  utilities  through  a  decrease  of  their 

infra‐marginal rents due to the merit‐order effect. In this way, the merit‐order effect transfers 

wealth from utilities to deregulated customers. In reality, not all electricity is sold on the spot 
market in Germany, and bilateral contracts mitigate this result. Furthermore, the lower price 
paid by deregulated customers does not represent a lower cost for producing electricity. The 
overall cost of wind kilowatt hours remains higher than some competitors, even if the gap has 
considerably  narrowed  in  the  last  decade.  Utilities  may  ultimately  find  ways  to  pass  part  of 
these costs to customers. 

A more recent study on wind power in Ireland provides even more striking results. Clifford et 

al (2011)36, using a detailed model of the all‐Island Single Electricity Market, show that the 

35 

36 

Sensfuss  et  al.  (2008),  The  merit-order  effect:  a  detailed  analysis  of  the  price  effect  of  renewable 
electricity generation on spot market prices in Germany. Energy Policy 36/ 8, pg. 3076–3084. 
Clifford  et  al  (2011),  Impacts  of  Wind  Generation  on  Wholesale  Electricity  Costs  in  2011, 
SEAI/EirGrid, Ireland 

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wind generation expected in 2011 will reduce Ireland’s wholesale market cost of electricity by 
around  EUR  74  million.  This  is  approximately  equivalent  to  the  sum  of  the  Public  Service 

Obligation (financing the feed‐in tariff for wind) cost, estimated as EUR 50 million, and the 

increased  “constraint”  (or  balancing)  costs  incurred  due  to  wind  in  2011.  The  reduction  of 
Ireland’s  dependence  on  fossil  fuels  and  the  CO2  emission  cuts  cost  nothing  in  this  case, 

despite the persistence of the support scheme which ensures recovery of the long‐term costs 

of electricity generation from the wind even when the market prices are low. 

A quantitative assessment of the macroeconomic impacts of a supportive renewable energy 
policy framework (option 3 and 4), was performed by a peer-reviewed study by Ragwitz et al 
(2009) for the European Commission37. Using an input-output model (Multireg) to assess the 
effect of developments in the RES sector on other economic sectors, and two macro-economic 
models (Nemesis and Astra), they found that achieving the EU 20% renewable energy target 
will  lead  to  a  net  GDP  increase  of  0.23-0.25%  in  comparison  with  a  scenario  where  all 
renewables support policies were abandoned. A continuation of a EU-wide specific renewable 
energy framework post-2020 (assuming a 30% renewables share) would result in a net GDP 
growth by 0.36-0.40% by 2030 in case of moderate development of renewables technologies 
exports,  which  could  increase  to  0.44%  in  case  of  more  optimistic  export  assumptions. 
According  to  this  research,  the  increase  in  GDP  is  most  strongly  influenced  by  both  the 
renewable energy investments and the improved trade balance.  
These  findings  were  echoed  in  a  recent  study  by  Balzejczak  et  al  (2011)38  for  the  German 
Institute  of  Economic  Research,  assessing  both  economic-wide  and  sectoral  impacts  of 
renewable energy expansion in Germany. Using an econometric model that evaluates the net 
economic  outcomes  by  taking  account  of  various  inter-related  economic  mechanisms,  they 
found that the expansion of renewable energy in Germany by 2030 has a positive net effect on 
economic activity, particularly thanks to increased investment activity.  

An additional indicator of economic impacts is represented by the total energy system costs, 
which  consist  in  costs  for  the  entire  energy  system  including  capital  cost  (for  energy  using 
equipment,  appliances,  and  vehicles),  fuel  and  electricity  costs,  and  direct  efficiency 
investment  cost  (house  insulation,  control  system,  energy  management,  etc.).  They  exclude 
disutility costs and auction payments. Reporting data from the Roadmap modelling, Table 2 
shows that system costs of all options are basically similar up to 2030. The ratio of energy 
system costs to GDP is similar across all options scenarios.  

It  should  be  noted  that  significant  differences  among  the  identified  options  occur  only  after 
2030, reflecting mainly increased investments in transport equipment as the major transition 
to  electric  and  plug  in  hybrids  vehicles  is  projected  after  2030.  Additional  system  cost 

37 

38 

EN 

in 

Ragwitz  et  al  (2009),  EmployRES:  the  impact  of  renewable  energy  policy  on  economic  growth  and 
employment 
the  European  Commission. 
http://ec.europa.eu/energy/renewables/studies/doc/renewables/2009_employ_res_report.pdf. 
Blazejczak,  2011,  Economic  effects  of  renewable  energy  expansion:  a  model-based  analysis  for 
Germany, Discussion Paper, German Institute for Economic Research, www.diw.de/discussionpapers. 

the  EU,  Fraunhofer 

ISI  et  al.  Report 

for 

27 

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difference  are  also  linked  to  significant  expansion  of  renewables-  based  power  generation 
capacity post-2030, which is likely to necessitate additional DC lines mainly to transport wind 
electricity  from  the  North  Sea  to  the  centre  of  Europe  and  grid  reinforcement  in  the 
Mediterranean  countries  to  exploit  their  solar  PV  potentials,  as  well  overall  more  storage 
facilities. Furthermore, increased uptake of energy efficiency and energy saving technologies 
and  practices  brings  additional  costs,  although  it  will  help  minimize  the  risk  of  possible 
negative impacts of raising energy costs on businesses and households. 
Using  the  Green-X  model,  Resch  (2010)39  has  analysed  in  more  detail  the  costs  of  the 
financing  elements  of  option  3  compared  to  option  4.  In  a  harmonised  technology  neutral 
support  framework,  where  producers  of  renewable  energy  are  rewarded  through  the  sale  of 
green  certificates  across  a  European  market,  intuitively  costs  are  reduced,  since  renewable 
energy  sources  are  exploited  where  they  are  most  optimal.  However,  the  analysis  finds  that 
several  factors  raise  the  average  annual  support  costs  of  this  option  by  12%  (€43.2bn 
compared with €70.3bn).  

In particular, when the certificate price is set by the last (most expensive) unit of renewable 
energy, all the renewable energy receives that price, irrespective of their cost. Thus all but the 
most  expensive  technologies  receive  over  compensation.  In  other  words,  there  is  a  risk  that 
windfall  profits  are  paid  to  all  producers  with  costs  lower  than  the  final  price-setting 
technology. Empirical analysis40 of renewable energy support schemes has found that an extra 
risk premium is paid to producers for greater exposure to market and price risk. Finally, the 
extra infrastructure expenditure resulting from greater concentration of production (e.g. wind 
production in the north and solar production in the south, needing transport to  consumption 
centres) also raises costs. 

As  discussed  in  the  IA  of  the  Energy  Roadmap  2050,  the  increased  bioenergy  utilization 
might have impacts on prices for biomass from agriculture and forest-based industries either 
directly through increased demand for energy use, or through increased demand for land and 
thus higher land prices. As most of the biomass used for energy has competing uses (food and 
feed, renewable raw materials), food prices and input costs of other biomass-using industries 
are likely to increase. 

In  conclusion,  options  2-4  are  likely  to  lead  to  positive  economic  impacts,  as  they  will 
promote  (to  a  varying  degree)  significant  investments  in  the  renewable  energy  technologies 
with  that  have  the  potential  to  generate  new  industries  and  jobs.  In  addition,  they  will  help 
lowering  expenditure  on  imported  fuels  which  may  also  protect  the  EU  economy  against 
external  energy  price  shocks,  although  options  3-4  may  result  in  high  import  savings  than 
option  2.  Meanwhile,  financial  incentives  for  renewables  under  options  3-4  may  increase 
costs for consumers (with option 4 having relatively higher costs), although this is likely to be 
partially compensated by the merit order effect that reduces wholesale electricity prices. On 
the  contrary,  option  1  has  higher  fuel  costs  which  do  not  generate  much  economic  growth, 
meanwhile it will require fewer public and private investments in developing and deploying 
renewable energy technologies.  

39 

40 

Resch  et  al  (2010),  Quo(ta)  vadis,  Europe?  A  comparative  assessment  of  two  recent  studies  on  the 
future development  of  renewable  electricity  support  in Europe,  Report  for  the  RE  SHAPING  project, 
www.reshaping-res-policy.eu/downloads/Quo(ta)-vadis-Europe_RE-Shaping-report.pdf. 
also 
background  analysis  carried  out  in  the  framework  for  "Beyond  2020"  project:  www.res-policy-
beyond2020.eu.  
Ragwitz et al (2011), Financing renewable energy in the European energy market, Report by Ecofys for 
the EC. http://ec.europa.eu/energy/renewables/studies/doc/renewables/2011_financing_renewable.pdf 

See 

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5.2. 

Environmental impacts 

An  increased  share  of  renewable  energy  in  the  EU  final  consumption  has  the  potential  to 
reduce  significantly  greenhouse  emissions.  As  discussed  in  the  Impact  Assessment  to  the 
Energy Roadmap 2050, all policy options explored but the BAU scenario achieve 80% GHG 
reduction and close to 85% energy related CO2 reductions in 2050 compared to 1990, as well 
as  equal  cumulative  emissions  over  the  projection  period.  In  2030,  energy-related  CO2 
emissions are between 38-41% lower, and total GHG emissions reductions are lower by 40-
42%. Local air pollution is also expected to decrease significantly, as this often goes hand in 
hand with GHG emissions. However, in some cases (where small unregulated biomass plants 
increase  significantly),  particulate  matter  (PM)  and  gaseous  emissions  could  rise,  causing 
local air pollution, although this risk can be mitigated by emission standards for small boilers 
as well as increased use of  efficient and modern district heating. Overall, air quality effects 
can be expected to remain positive41.  

All options are likely to affect directly the local biodiversity due to the construction of energy 
infrastructure,  particularly  overhead  power  lines.  Some  short-term  disturbances  to  animals 
and  destruction  of  plants  and  habitats  may  occur  during  construction  work,  and  some 
permanent  displacements  of  animals  and  destruction  of  habitats  might  take  place  due  to 
underground  cables  and  electricity  pylons.  Further,  overhead  electricity  lines  might  make  it 
necessary  to  keep  open  vegetation  in  corridors  in  wooded  areas  and  cause  habitat 
fragmentation to animal and plant species and disturbances to birds. These impacts will vary 
depending  on  the  project,  but  are  considered  to  be  rather  limited  outside  wooded  areas  for 
electricity line projects, as, due to the size of electricity pylons only small areas are affected, 
and  underground  impacts  of  cables  are  expected  to  be  less  important  due  to  the  limited 
existence  of  wildlife  in  those  areas.  Under  all  options  all  environmental  laws  must  be 
complied with. Option 2 and 4 may have higher impacts, in so far they are likely to prioritize 
deployment  of  renewable  energy  projects  in  the  best  sites  which  are  often  far  from 
consumption  centres.  This  will  require  additional  high-voltage  transmission  lines,  including 
interconnectors with neighbouring countries.  

However, all in all, if the infrastructure development follows well established environmental 
rules (including Strategic Environmental Assessment and Environmental Impact Assessment), 
these  potentially  negative  consequences  can  be  limited.  Therefore,  the  pathways  as  such  do 
not necessarily lead to biodiversity problems, as this will depend on implementation, but it is 
important  to  engage  all  stakeholders,  including  local  communities,  at  an  early  stage  of  the 
planning, which must be carried out in a strategic manner.  

Higher share of renewable energy in post-2020 period would imply an increase in bioenergy 
consumption and an obvious rise in demand for biomass feedstock. . The Impact Assessment 
to the Energy Roadmap 2050 gives an indication of the biomass supply needed to achieve the 
decarbonisation  target  by  2030,  ranging  from  214  to  236  Mtoe  depending  on  the  level  of 
renewable  energy  share.  Whilst  today  biowaste  and  residues  from  forestry  and  agriculture 
have an important untapped potential, it is likely that up to until 2020 most of these bioenergy 
streams will be utilized (either locally or for exports). Therefore it is expected that beyond-
2020 additional biomass production would be mainly based on dedicated energy crops, a fact 
that will require additional amounts of agricultural land. 

Several studies have tried to estimate the potentially available amount of biomass in Europe 
and worldwide for 2030 and beyond. For instance, the European Environment Agency (EEA) 

41 

For a detailed analysis see SEC (2011)288, section 5.2.14. 

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estimated the amount of potentially available biomass in 2030 in the range of 12±2 exajoules, 
depending on the strictness of application of environmental criteria42. Based on peer-reviewed 
data, the 2011 IPCC Report on Renewable Energy43 mentions a plausible global potential in 
the  range  of  100-300  exajoules,  depending  on  the  assumptions  regarding  the  realisation  of 
new production methods. This range corresponds to approximately 2500-7000 Mtoe by 2050. 
A  conservative  approach  would  therefore  take  the  lower  end  of  this  range  to  assess  the 
potentially  available  supply  of  sustainable  biomass.  Given  the  many  new  initiatives  and 
technologies  required  to  realise  the  2050  potential,  it  can  be  assumed  that  about  100-200 
exjajoules  (or  about  2500-5000  Mtoe)  could  be realistically  available  by  2030  on  the  world 
market. Considering the development of renewable energy and bio-economy based policies in 
other countries, it can be assumed that a fourth of the global potential is likely to be available 
for  the  European  market,  equal  to  a  potential  of  about  625-1250  Mtoe  by  2030.  While  this 
indicates that it is possible to increase the use of sustainable biomass to meet energy and other 
uses,  the  concrete  realization  will  require  significant  and  long-term  investment  in  the 
agriculture  and  forestry  sectors  over  the  coming  years,  with  the  objective  of  increasing 
productivity in a sustainable manner.  

It should be recalled that land use impacts of increased biomass use will depend on number of 
assumptions and uncertainties. One main source of uncertainty is the underlying assumption 
regarding  the  amount  of  unused  agricultural  land  available  for  the  cultivation  of  bioenergy 
crops,  and  to  what  extent  natural  grasslands  contribute  to  this  potential.  In  particular, 
assumptions  regarding  future  agricultural  productivity  and  future  consumption  of  animal 
products  have  a  great  impact  on  the  results.  Furthermore,  the  uncertainty  in  the  amounts  of 
available waste and residue resources from agriculture strongly depends on the still uncertain 
future  demand  from  other  uses  such  as  animal  feed,  renewable  raw  material  and  fertilizers. 
The same can be said for forestry biomass feedstock that has multiple uses, i.e. material, fibre 
and  energy  production44.  Another  source  of  uncertainty  is  represented  by  the  potential  to 
further improve crop yields for all uses (food, feed, energy and renewable raw materials), as 
the  amount  of  available  agricultural  land  depends  on  the  yields  which  can  be  achieved. 
Finally,  an  important  factor  is  the  application  of  sustainability  criteria,  aimed  to  exclude 
biomass  for  energy  purposes  on  the  market  that  is  produced  under  environmentally  harmful 
conditions. 

The limited availability of sustainable biomass resource may also require a prioritisation of its 
application.  Biomass  should  be  used  primarily  in  those  sectors  where  there  are  no  other 
renewable energy alternatives. These include, for instance, biofuels for heavy trucks, shipping 
and aviation, but also high temperature bioheat for industry. Outside the energy sector, the use 
of biomass as bulk chemical is the only option for the production of renewable raw materials. 
A post-2020 renewable energy strategy should therefore focus on stimulating these prioritised 
biomass  applications  and  short  term  decision  should  be  ideally  in  line  with  these  long-term 
considerations. 

CO2 emissions related to land use, land use change and forestry (LULUCF) due to increased 
bioenergy  use  have  been  also  discussed  in  the  Impact  Assessment  accompanying  the  Low 

42 

43 

44 

EEA  (2006),  How  much  bioenergy  can  Europe  produce  without  harming  the  environment?  European 
Environment Agency, Copenhagen, EEA report no. 7/2006 
IPCC  (2011),  IPCC  Special  Report  on  Renewable  Energy  Sources  and  Climate  Change  Mitigation, 
prepared  by  Working  Group  III  of  the  Intergovernmental  Panel  on  Climate  Change,  Cambridge 
University Press. 
For  on-going  EC  research  on  current  and  future  demand  and  supplies  for  wood  resources,  see: 
http://ec.europa.eu/enterprise/newsroom/cf/itemlongdetail.cfm?item_id=5328  

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carbon roadmap45. In this respect, the Commission has recently tabled a proposal for monitor 
LULUCF emissions in the EU. Those taking place in third countries will need to be addressed 
in the framework of the global climate change negotiations.  

Given  the  above,  by  increasing  the  use  of  bioenergy  and  the  demand  for  biomass  raw 
material,  options  3  and  4  (and  option  2  to  a  minor  extent)  will  result  in  higher  risks  of 
significant direct and indirect land use impacts. But these could be reduced by applying robust 
sustainability  criteria  for  all  bioenergy  uses,  building  on  (and  further  strengthening)  the 
mandatory criteria currently applying to biofuels and bioliquids. In addition, policy measures 
are needed to facilitate significant improvements in agriculture and forestry productivity and 
land-use  efficiency  in  general,  as  well  as  to  promote  internationally  action  to  reduce 
deforestation  and  forest  degradation  (REDD)46.  On  the  contrary,  under  option  1  it  is  likely 
that  a  growing  demand  of  biomass  for  energy  could  lead  to  increased  risks  of  a  non-
sustainable supply and overexploitation of natural resources in absence of sustainability rules 
for all biomass for energy uses, including solid and gaseous biomass. 

Options  2-4  include  a  possible  6-7%  increase  in  hydropower,  which  could  have  impacts  in 
terms  of  depletion  of  freshwater  resources,  from  changes  in  river  morphology,  combined 
with higher fertilizer inputs resulting from the increased cultivation of dedicated energy crops. 
In  a  context  of  increasing  water  stress  due  to  demographic,  socio-economic  pressures  and 
climate  change47,  if  not  addressed  these  impacts  could  exacerbate  already  existing  water 
shortages and jeopardize the recovery of good status of surface and groundwater availability. 
It  is  expected,  however,  that  these  risks  are  minimized  under  all  options  by  the  effective 
implementation  of  existing  EU  and  national  freshwater  management  policies  such  as  Water 
Framework Directive.  

With  its  effects  on  e.g.  water  and  air  temperatures,  precipitation,  sea  level,  as  well  as 
occurrence  of  floods  and  storms,  climate  change  has  the  potential  to  influence  energy 
generation.  Nuclear  and  fossil  power  plants’  operations  are  sensitive  to  temperature  (i.e. 
mainly impacts on efficiency) and precipitation (i.e. mainly impacts on cooling water supply) 
changes.  Moreover,  precipitation  changes  may  show  increasing  or  decreasing  trends, 
depending  on  the  geographical  area  and  the  season,  leading  to  considerable  changes  in 
discharge regimes for hydro-generation. Other renewable sources of energy, such as wind or 
solar power, may also be affected by a changing climate, and there are potentially important 
impacts on bioenergy (production)48. Overall options 2-4, combined with effective adaptation 
measures,  have  the  potential  to  improve  the  climate  resilience  of  the  EU  energy  system.  In 
particular,  decentralisation  of  electricity  generation  plays  an  important  role  in  decreasing 
overall network and system vulnerability to climate related natural (and other) disasters.  

45 
46 

47 

48 

SEC(2011)288, sections 5.1.4, 5.2.7 and 5.2.10 
This  said,  it  should  be  also  recalled  that  biomass  production  can  also  have  positive  land  use  and 
biodiversity effects. For instance, when the cultivation of perennial crops takes place on degraded land 
it may have positive local impacts on net greenhouse gas emissions and biodiversity. 
See the ClimWatAdapt project and on-going work for the preparation of the 2012 Blueprint to 
safeguard Europe's waters (http://ec.europa.eu/environment/water/blueprint/index_en.htm) 
See e.g. Rademaekers, K. et al. (2011): Investment needs for future adaptation measures in EU nuclear 
power plants and other electricity generation technologies due to effects of climate change, Final report 
(http://ec.europa.eu/energy/nuclear/studies/doc/2011_03_eur24769-en.pdf),  and  ongoing  work  under 
the ClimateCost FP7 project (http://www.climatecost.cc) and under the "Support to the EU Adaptation 
Strategy" DG CLIMA contract. 

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5.3. 

Social impacts 

The transition to higher shares of renewables will imply significant new opportunities for new 
and better jobs directly or indirectly related to the growing renewable energy sector. Studies 
on gross employment impacts of renewable energy policy have been conducted for several 
countries  and  renewable  energy  technologies,  including  Germany49,  the  UK50,  the  EU51  and 
the  US52  and  they  all  show  positive  figures.  For  instance,  by  the  end  of  2010,  the  EU 
renewable  energy  industry  employed  over  1.1  million  people,  with  the  solid  biomass  sector 
being  the  top  employer  with  more  than  273,000  jobs,  followed  by  the  PV  and  wind  power 
sectors  with  respectively  over  268,000  and  253,000  jobs53.  More  sophisticated  studies  go 
beyond gross employment impacts to calculate net job impacts. This research usually require 
sophisticated approaches to model complex economic and sectoral inter-linkages, accounting 
for a reduction in demand for conventional generation, the effects of government expenditures 
on renewables in the economy, and electricity price impacts. In general, these comprehensive 
analyses  show  that  net  employment  impacts  are  sensitive  to  assumptions  regarding  future 
energy prices, strategies for addressing greenhouse gas (GHG) emissions reductions, and the 
capacity to export technology.  

In their study for the European Commission, Ragwitz et al. (2011) have assessed both gross 
and  net  employment  impacts  of  the  EU  renewable  energy  policy.  They  calculated  that  the 
total  gross  employment  in  the  EU  renewables  sector  could  amount  to  2.8  million  people  in 
2020  and  could  increase  to  3.4  million  people  by  2030,  assuming  an  extension  of  the  EU 
renewable  energy  framework  post-2020  and  with  optimistic  export  expectations.  A  strong 
development  in  knowledge-intensive  renewable  energy  technologies  such  as  offshore  wind 
power,  ocean energy,  solar  PV  and  thermal electricity is responsible for  roughly half of the 
estimated gross employment increase. The study also shows that about two thirds of the jobs 
created  in  the  renewable  energy  sector  are  based  on  small  and  medium-sized  enterprises 
(SME). Compared to gross employment, the net employment effects are smaller yet positive. 
Even  considering  the  negative  impacts  on  replaced  investments  in  conventional  energy 
technologies  as  well  as  the  dampening  effect  of  the  higher  costs  of  renewable  energies 
compared to conventional ones, a strong renewable energy policy framework would result in 
up to 656,000 net jobs in 2030, depending on the export potential assumptions.  
Other  sectoral  studies,  such  as  the  PV  Employment  Study54,  have  come  to  similar  findings. 
Under  a  scenario  with  35  GW  of  annual  new  installed  PV  capacity  in  the  EU-27,  the  net 
positive employment effects would amount to 162,000 jobs by 2030. While today the major 
source of employment stems from the PV manufacturing, this study suggest that in the future 
most  jobs  will  be  created  in  the  operation  and  management  (O&M)  of  PV  systems  and  in 
servicing  activities.  The  creation  of  indirect  jobs  will  also  be  considerably  high,  accounting 
for  39%  of  the  total  employment  creation.  Lehr  et  al  (2011)  provide  more  recent  net 
employment estimates for Germany. They use scenario calculations based on a combination 
of  an  econometric  input-output  model,  an  ecological  model  and  a  model  for  international 
linkages. According to this study, net employment effects in 2030 are positive throughout all 

49 
50 

51 
52 

53 
54 

BUA (2011), Renewable Energy Sources in Figures - national and international development.  
Esteban  et  al  (2011)  Job  retention  in  the  British  offshore  sector  through  greening  of  the  North  Sea 
energy industry, Energy Policy, 39/ 3, Pg. 1543-1551 
Ragwitz et al. 2009 
Wei et al (2010), Putting renewables and energy efficiency to work: How many jobs can the clean 
energy industry generate in the US? Energy Policy, 38/2, pg. 919–931. 
EurObserv'ER (2012), The State of Renewable Energies in Europe, www.eurobserve-er.org  
EPIA (2011), PV Employment Study, www.pvemployment.org 

EN 

32 

   EN 

 
                                                 
scenario analysed. The largest job gains occur in a scenario with high fossil fuel prices and 
strong exports of renewable energy technologies and components.  

The above research suggests that in order to maintain a positive employment balance in the 
future, it is crucial to uphold and improve the competitive position of European manufactures 
of renewable energy technology, by ensuring both sustained domestic demand and also access 
to  foreign  markets.  Consequently,  by  actively  promoting  innovative  renewable  energy 
technologies, option 3 may have higher employment benefits that option 2, which thorough 
its  cost-based  approach  is  likely  to  incentivise  only  mature  technologies.  To  the  extent  that 
option  3  would  imply  smoothing  of  renewable  investment  over  time,  it  could  also  provide 
more stable employment for workers, helping to avoid periods of serious labour shortages for 
employers55. In addition, by providing financial and other incentives it can offer the needed 
key  tool  to  establish  domestic  manufacturing  facilities  and  encourage  demand  for  local 
components,  thus  helping  to  establish  domestic  manufacturing  capacity  with  potential  for 
access to export markets. Option 4, where a share of renewable energy will be developed in 
third countries, may have lower (although still sizable) employment benefits. 

On  the  other  hand,  deployment  of  renewable  energy  will  imply  restructuring  within  the 
energy sector and certain jobs will be lost. Given that the most polluting industries account 
for a relatively small share of total employment, the adjustment pressures will be concentrated 
on  a  small  portion  of  the  total  workforce.  The  top  emitting  industries  in  the  EU  have  some 
common characteristics in terms of employment, such as high share of older workers and low 
mobility, both within their sector and outside it, which may increase the costs of adjustment. 
For  instance,  the  share  of  workers  in  electricity  (NACE  40)  that  move  to  another  sector  of 
occupation  is  less  than  2  %  and  the  job-to-job  separation  rate  is  around  4  %.  Equivalent 
figures  for  agriculture  and  hotels  and  restaurants  surpass  4  %  and  16  %  respectively.  In 
contrast to that, two electricity sectors (NACE 40 and 23) occupy more highly skilled workers 
than the average economy and especially as other top polluting industries. One of the reasons 
is  implementation  of  various  innovations  in  environmental  technologies  in  recent  years 
(renewable  energy,  energy  efficiency,  fuel  efficiency  and  biotechnology)  56.  In  addition,  it 
should  be  noted  that  a  wide  range  of  skills  are  required  in  the  renewable  energy  sector.  In 
order to achieve deployment targets and maximise job benefits, it is necessary to facilitate and 
increase  education  and  training.  A  large-scale  shift  to  renewable  energy  will  require  some 
skills similar to those needed in the conventional energy workforce and other skills that are 
specific to certain renewable technologies. 

In their study employment and economic impacts of renewable energy expansion in Germany, 
Balzejczak  et  al  (2011)  found  that  employment  benefits  are  more  likely  to  be  maximised 
where there are active labour market interventions to support acquisition of necessary skills. If 
labour  markets  are  rigid  and  additional  works  cannot  be  easily  mobilized  from  the  pool  of 
unemployed  people,  this  can  impact  net  employment  effects.  This  result  highlights  the 
importance  of  labour  market  policies  as  a  supplement  to  renewable  energy  expansion,  for 
instance,  in  the  form  of  measures  to  increase  labour  market  participation.  This  study  also 
indicates  that  renewable  energy  deployment  triggers  sectoral  restructuring,  as  renewables 
growth results in a re-allocation of economic resources. In particular, fixed and human capital 
is  being  invested  in  renewable  technologies  instead  than  in  conventional  energy.  This 

55 

56 

EN 

Skills 

(2011), 

ILO/EU 
http://www.ilo.org/skills/pubs/WCMS_166823/lang--en/index.htm  
EU 
Review 
http://ec.europa.eu/social/main.jsp?langId=en&catId=89&newsId=1157&furtherNews=yes.  

Occupational 

Employment 

Renewable 

Situation, 

Quarterly 

Social 

Needs 

and 

and 

in 

33 

Energy 

(2011) 

   EN 

 
                                                 
underlines the  need  for  labour  market  policies,  in  particular  for  additional  qualification 
measures.  

Affordability  of  energy  services  is  another  indicator  for  assessing  social  impacts  of 
renewable energy policies, particularly on households. According to the Roadmap modeling, 
all  policy  options  show  significant  fuel  savings  compared  to  BAU  scenario  but  also  higher 
costs  for  stationary  energy  uses,  due  to  highly  efficient  appliances  and  building  insulation. 
Options 3 and 4 (that imply ambitious energy efficiency measures) may result in higher costs 
for energy services by 2030 compared to options 1 and 2. Therefore, policy measures will be 
needed to minimize possible affordability challenges for vulnerable consumers that may not 
be able to afford the necessary upfront investment to obtain later savings. 

6. 

SECTION 6: COMPARING THE OPTIONS 

This section provides an assessment of how the analysed policy options will contribute to the 
realisation  of  the  policy  objectives,  as  set  in  Section  3,  in  light  of  the  following  evaluation 
criteria: 

• 

• 

• 

Effectiveness: the  extent  to which  policy options analysed achieve the general and 
specific policy objectives of this intervention; 

Efficiency: the extent to which the specific objectives can be achieved at least cost; 

Coherence: the extent to which the identified policy options are likely to limit trade-
offs  across  the  economic,  social,  and  environmental  domains  and  the  relevant  EU 
policies. 

6.1. 

Effectiveness 

To recall, the specific objectives of this intervention include: a) reduce investors uncertainty, 
b)  improve  viability  of  financing  incentives,  c)  facilitate  consistency  with  market 
arrangements,  c)  provide  adequacy  of  energy  infrastructure,  e)  promote  technology 
innovation, f) and ensure sustainability and public acceptance.  

Concerning  investors'  uncertainty,  option  1  would  not  help  addressing  it,  as  it  does  not 
provide  clear  policy  framework  post-2020.  Currently  only  a  general,  horizontal  framework 
exists for the EU ETS. By building on and further strengthening the existing EU ETS regime, 
option 2 would help creating a long-term framework for investment decisions into renewable 
and  other  low  carbon  energy  solutions  provided  that  it  delivers  the  right  market  signals  to 
investors through appropriate carbon prices. Renewable energy-specific targets and measures 
as contained in options 3 and 4 would provide investors and the business community with a 
higher degree of visibility on the future market volumes for renewable energy technologies. In 
addition, it would again maintain a sense of continuity with the existing policy and regulatory 
framework which realizes  in  a number of interlinked policy  instruments  (ETS,  RES targets, 
energy efficiency measures, SET Plan and R&D programmes etc.) to maximise the chances of 
policy success. 

Under option 1, the ongoing reforms and cost reductions regarding renewable energy support 
schemes should result in significant improvements in their overall viability and consistency 
with  the  internal  market,  and  considerable  phasing  out  of  support.  Option  1  also 
presupposes  the  internal  market  will  be  completed  shortly  and  that  national  approaches  to 
market  arrangements  and  capacity  needs  are  similarly  compatible  with  the  internal  market. 
Under  option  2,  support  schemes  for  renewable  energy  would  also  decline  rapidly,  since 
decarbonisation  would  be  driven  by  carbon  prices  alone.  Under  option  3,  while  Member 

EN 

34 

   EN 

 
States would continue using support schemes for those renewable energy technologies that are 
not  competitive,  a  more  active  convergence  would  be  pursued  at  EU  level  such  that  the 
schemes  would  be  time  limited,  share  a  common  framework  and  be  consistent  with  market 
principles.  In  option  4,  a  single  EU-wide  support  scheme  would  be  applied  for  the  target 
framework,  which  would  have  the  potential  to  reduce  tendencies  towards  distortion  of 
competition and achieving EU targets with the minimum amount of aid, in compliance with 
State  aid  principles.  However,  as  noted  above,  this  could  risk  raising  support  scheme  costs 
and  undermining  their  viability,  however  it  would  normally  be  a  clear  means  of  fully 
integrating renewable energy into the internal market57. On the other hand, a greater role for 
cheaper renewable energy sources in neighbouring countries such as in North Africa and the 
Balkans would potentially also keep cost of RES support lower.  

Concerning the development of adequate energy infrastructure, the policy options assessed 
broadly rely on the implementation of the current infrastructure package providing a clearer, 
stronger European framework for planning, coordinating and developing energy infrastructure 
as  well  as  better  national  and  European  instruments  for  financing  the  infrastructure.  Thus 
under  the  BAU  scenario,  no  further  measures  are  envisaged  post  2020.  Under  options  2-4, 
partly depending on the stringency of either the GHG savings or renewable energy targets (or 
both),  further  efforts  and  harmonisation  of  infrastructure  planning  may  be  needed,  with  the 
view  to  ensuring  even  greater  coherence  and  cooperation  in  the  development  of  European 
infrastructure  as  well  as  extension  of  European  infrastructure  to  create  greater  connectivity 
with neighbouring countries, and so facilitate greater regional renewable energy cooperation 
and  development.  Significant  infrastructure  action  may  be  needed  to  allow  green  power 
imports from 3rd countries.  

Under policy options 1, 2 and 3 it is expected that electricity market arrangements evolve 
in a manner consistent with the internal market and with the development of a liquid trading 
market, open to all undertakings capable of providing flexibility in managing both supply and 
demand. This is a condition for a level playing field and competitive energy market in which 
renewable energy producers are expected to compete. Under option 4, this tendency would be 
reinforced as necessary, to ensure a harmonised European approach that was compatible and 
consistent with internal market objectives.  

Technology  specific  policies  include  both  R&D  support,  which  would  be  enhanced  under 
options  2,  3  and  4;  and  "market  pull"  policies  that  would  bring  new  technologies  into  the 
market for mass deployment. Option 2 is technologically wholly neutral and thus its "market 
pull" is limited to current, cost effective technologies. Option 4, whilst creating instruments to 
promote  renewable  energy  in  general,  would  again,  focus  on  the  most  cost  effective 
renewable  energy  technologies  and  not  expressly  drive  technology  innovation.  Option  3 
would  facilitate  Member  States  applying  more  technology  specific  initiatives  and  so  spur 
"market pull" innovation (as opposed to solely R&D).  

Sustainability  concerns  are  not  adequately  addressed  under  option  1,  but  would  be 
effectively  addressed  under  options  2,  3  and  4:  there  is  no  expectation  that  any  significant 
further development of renewable energy could occur without further measures to ensure the 
sustainability of biomass production and use. The effects on biomass use and the implications 
for the further development of the sustainability framework need further analysis which will 
occur  prior  to  any  post  2020  renewable  energy  policy  framework  decisions.  Regarding  the 

57 

For all options it remains the case that support schemes constituting State aid are subject to State aid 
control which aims to ensure that the objectives is achieved with well-targeted aid which is limited to 
the minimum and does not unduly distort competition. 

EN 

35 

   EN 

 
                                                 
acceptability  of  infrastructure/generation  plant,  public  acceptance  concerns  would  be 
addressed in accordance with the provisions of the RES Directive, the infrastructure package 
and existing environmental legislation.  

6.2. 

Efficiency 

Overall  system  costs  should  be  minimised,  for  achieving  the  multiple  objectives  in  a 
satisfactory  manner,  rather  than  one  objective  in  isolation.  The  present  analysis  indicates 
broadly similar levels of system costs for options 2, 3 and 458. By establishing a single GHG 
reduction target and using the EU ETS and other GHG-related measures in non-ETS sectors, 
option 2 has an intuitive appeal in particular because it would allow the market the flexibility 
to choose the most cost-effective technologies and other cost effective means of achieving the 
goal  of  decarbonisation.  This  in  turn  should  help  reducing  the  overall  cost  of  the  policy,  as 
well  as  lowering  the  administrative  burden  associated  with  managing  multiple  targets. 
However,  since  it  does  not  ensure  other  policy  objectives  are  met  (however  imprecise  they 
may be), it does not necessarily ensure the effective achievement of key components of EU 
energy policy, including energy security and diversity and the promotion of innovative energy 
technologies in a competitive renewable energy industry.  

This  said,  the  extent  to  which  the  instruments  created  under  option  2  could  contribute  to 
energy policy objectives (technological innovation and a competitive energy sector) requires 
more detailed analysis. Option 3 is effective to meet GHG and renewable energy objectives 
but  could  still  incur  higher  costs  if  progress  is  slow  to  remove  inconsistencies  between 
national  schemes.  The  analysis  shows  that  option  4  is  also  less  efficient  that  theoretically 
expected.  

6.3. 

Coherence 

When  assessing  the  coherence  of  policy  options  it  is  important  to  recall  the  findings  of  the 
impact  assessment  to  the  Climate  and  Energy  package,  which  analysed  the  role  that  different 
instruments  (the  EU  ETS,  national  GHG  reduction  targets,  energy  efficiency  measures,  a  new 
framework  for  carbon  capture  and  storage  and  the  RES  Directive)  play  in  achieving  multiple 
objectives.  It  acknowledged  that  strong  and  stable  carbon  price  signal  should  drive  a  range  of 
emissions reduction measures in a well operating energy market. However, price signals may not 
be  reaching  all  players  (in  particular  households)  and  may  not  provide  the  required  long-term 
incentives for product energy efficiency and technology development. As a result, the need was 
found for other, more direct methods – i.e. renewables and energy efficiency specific regimes – 
to ensure that efforts were made in all sectors such that long-term energy sustainability can occur 
at an affordable cost.  

Notwithstanding the above, the BAU trends established by the current regulatory framework 
(including  energy  market  liberalisation,  reform  of  electricity  market  arrangements  and 
renewable energy support schemes, R&D initiatives and ETS pricing) are further enhancing 
policy  coherence,  however  without  specific  measures  to  achieve  post-2020  energy  related 
objectives.  While  option  2  chiefly  focus  on  emissions  reductions  and  does  not  address 
specifically other energy policy objectives, a strengthened EU emission trading scheme as key 
pillar  of  option  2  would  appear  to  be  coherent  with  the  existing  energy  policy  framework, 
drawing  on  the  benefits  of  an  internal  market  and  respecting  subsidiarity  on  energy 

58 

It should be noted that the 2050 Roadmap analysis shows that whilst the differences in policy option 
trends  are  relatively  minor  to  2030,  differences  appear  beyond  2030  (higher  costs  associated  with 
greater technology innovation and diversity of technologies). 

EN 

36 

   EN 

 
                                                 
technology supply choices. For other climate-related policies, the extent of the coherence with 
the  development  of  the  internal  energy  market  depends  very  much  on  post-2020  policy 
design. Option 3 and 4 could continue the policy approach initiated with the 2008 Climate and 
Energy Package, while providing further assurance that the multiple energy policy objectives 
would  be  equally  pursued  and  all  sectors  would  contribute  effectively  to  the  long-term 
decarbonisation effort at an affordable cost. This said, building on the experience of the recent 
years,  more  detailed  analysis  of  policy  instrument  interactions  is  appropriate  for  assessing 
related  aspects  of  coherence  but  this  is  beyond  the  scope  of  this  assessment  and  will  be 
conducted in the context of future specific policy proposals.  

6.4. 

Overall summary 

The  above  comparative  analysis  of  the  impacts  of  the  four  policy  options  assessed  can  be 
summarised as follows:  

•  Business as usual. This option would not address the current investors’ uncertainty about 
the  EU  renewable  energy  policy  post-2020.  As  this  scenario  assumes  a  phase  out  of 
incentives  for  renewables,  issues  of  cost-effectiveness  and  market  integration  of  support 
schemes  will  be  addressed  by  the  end  of  the  decade.  Similarly,  energy  infrastructure 
development would continue as currently planned, which would be sufficient to integrate 
the  expected  low  growth  in  renewables.  Finally  this  option  does  nothing  to  enhance 
growth,  employment  creation  and  energy 
to  ensure 
sustainability and public acceptance issues. 

innovation  and 

technology 

•  Decarbonisation without renewable energy targets post-2020. This option would facilitate 
more  visibility  regarding  renewable  energy  market  developments  post-2020,  assuming 
that policy tools addressing ETS and non-ETS sectors would be able to provide effective 
market  signals  in  favour  of  renewable  energies,  through  appropriate  carbon  pricing.  By 
applying a European market integrated approach, it could help improving support schemes 
cost-effectiveness,  facilitate  market  integration and provide sufficient infrastructure. The 
technology-neutral nature of the policy instruments included in this option could also have 
a weaker impact on energy technology innovation compared to other options that include 
specific  energy  technology  measures.  This  option  would  effectively  help  minimizing 
sustainability and public acceptance issues. 

•  Binding renewable energy targets post-2020 and coordinated support. Depending on the 
ambition  of  targets,  it  could  help  provide  investors'  and  the  business  community  with 
greater  certainty  on  future  market  volumes  for  renewable  energy  technologies.  It  would 
also  promote  –in  a  predictable  way–  further  cost-effectiveness  and  convergence  of 
national  support  schemes  and  foster  greater  research  and  development  of  innovative 
technologies. This option would also effectively help minimizing sustainability and public 
acceptance issues, by promoting a more balanced and regionally equilibrated deployment 
of renewables, including for auto-consumption.  

•  EU renewable energy target and harmonised measures. This option would also positively 
address  both  post-2020  policy  uncertainties,  while  promoting  reinforced  internal  market 
integration. It would provide technology neutral support combined with market exposure 
to  producers  and  it  is  likely  to  promote  more  concentrated  and  distant  centralised 
renewable  energy  generation,  rather  than  distributed  generation  nearer  centres  of 
consumption. As a result, this option could risks raising support scheme and infrastructure 
costs, as well as public acceptance issues. As in option 3, potential risks of unwanted side 
effects of bioenergy uses would be minimized by a strengthen sustainability framework. 

EN 

37 

   EN 

 
Table 4: Comparison of analysed options against the baseline 
Criteria 

 Options 

1: No new 
EU action 

2: GHG 
targets/ no 
RES target 
+ 

3: post 2020 
national RES 
targets 
++ 

Effectiveness 

Efficiency 
Coherence 

Policy 
certainty 
Support 
viability 
Infrastructure 
adequacy  
Internal 
market  
Technology 
innovation 
Sust./public 
acceptance 
System costs 
with  other  EU 
policies  

= 

= 

= 

= 

= 

= 

= 
= 

4: EU RES target and 
harmonised measures 

++ 

+ 

+ 

++ 

+ 

+ 

= 
+ 

++ 

++ 

++ 

+ 

+ 

= 
+ 

+ 

++ 

+ 

++ 

+ 

= 
+ 

Legend = equivalent; + improvement; - deterioration.  

EN 

38 

   EN 

 
 
7. 

SECTION 7: MONITORING AND EVALUATION 

This  impact  assessment  has  highlighted  that  there  are  major  expectations  of  the  current  policy 
framework  delivering  improvements  that  will  help  ensure  EU  energy  and  climate  goals  are 
achieved. Key elements are the timely, complete, and effective implementation of the renewable 
energy  Directive,  and  energy  market  liberalisation  and  the  adoption  of  the  energy  efficiency 
Directive,  the  infrastructure  package,  and  the  EU  ETS  and  other  sectoral  climate  legislation. 
Progress  on  these  elements  will  be  closely  monitored  to  ensure  that  the  EU  stays  on  track  to 
achieve its 2020 climate and energy objectives and so is capable of building on that framework to 
achieve its medium to long term goals. 

Core indicators for meeting the objectives of this initiative include: 

Indicator 

Share  of  renewable  energy  sources  in  EU  final  energy 
consumption 

Reduction of GHG gas emissions in the EU  

Level of ETS carbon prices 

Relevance 

Renewable energy development 

GHG emissions reductions 

Effectiveness of carbon markets 

Origin of biofuels and bioliquids consumed in the EU and  

Biofuels impacts on land use, food availability and biomass 
prices 

Sustainability 

Sustainability 

The amount of MS financial support for RES 

The  use  of  the  cooperation  mechanisms  laid  down  in  the 
RES Directive 

The production costs of various RES technologies 

The economic availability of sustainable biomass 

The rate of market coupling 

Efficiency, cost minimising 

Efficiency, cost minimising 

Efficiency, cost minimising 

Renewable energy development 

Efficiency, market integration 

Reporting  and  monitoring  systems  for  the  above  mentioned  indicators  are  available  at  EU 
level. More specifically, under the renewable energy Directive Member States are required to 
submit  regular  progress  reports,  including  amongst  other  information  on  sectoral  and  overall 
share  of  renewable  energy,  the  functioning  of  support  schemes  and  other  measure  to  promote 
energy  from  renewables,  the  development  in  the  availability  and  use  of  biomass  resources  for 
energy  purposes,  the  estimated  net  GHG  emissions  related  to  renewable  energy  use.  Additional 
EU  legislation  has  already  established  reporting  requirements  related  to  GHG  emissions  and 
carbon prices. 

EN 

39 

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Annex 1: Results of the public consultation 

1 

Introduction 

The  Commission  is  preparing  a  Renewable  Energy  Strategy  to  be  adopted  in  the  second 
quarter of 2012. This will complement a Communication on the Internal Energy Market also 
planned  for  this  year  which  will  also  help  inform  the  evolution  of  the  EU's  wider  energy 
policies following on from the Energy 2050 Roadmap. 

The  main  purpose  of  the  Communication  on  renewable  energy  will  be  to  examine  the 
conditions  that  might  be  necessary  for  a  further  development  of  renewable  energy  in  a 
medium term perspective – i.e. until 2030. This will cover the three pillars of energy policy 
(sustainability, security of supply and competitiveness) and be consistent with the long-term 
decarbonisation  scenarios  presented  in  the  2050  Roadmap  which  all  point  to  a  substantially 
increased  share  of  renewable  energy  sources.  There  is  a  need  to  ensure  a  cost-effective 
development of renewable energy potential, as well as to ensure that their further expansion 
happens in line with the requirements for system stability (electricity) and is consistent with 
other  Union  policies,  notably  climate  mitigation,  the  internal  market,  international 
cooperation, 
including 
biodiversity.  

technology  development  and  protection  of 

the  environment, 

On 6 December 2011, as part of the process of preparation of the Renewable Energy Strategy 
the  Directorate  General  for  Energy  launched  a  public  consultation.  The  public  consultation 
was based on an online questionnaire which contained numerous questions subdivided under 
the following chapters: 

(1) 

(2) 

(3) 

(4) 

(5) 

(6) 

(7) 

(8) 

(9) 

General policy approach 

Financial support 

Administrative procedures 

Grid integration of electricity from renewable energy sources 

Market integration 

Renewables in Heating and Cooling 

Renewables in transport 

Sustainability 

Regional and international dimensions 

(10) 

Technology development 

The public consultation was open until 7 February 2012. More than 400 contributions were 
received. Most contributions were received from industry, followed by individuals, NGOs and 
public authorities. Member States as such did not participate in the public consultation. The 
individual contributions have been published on the public consultation webpage59. 

Participation  in  the  consultation  came  from  a  broad  spectrum  of  organisations  as  well  as 
citizens:  

59 

Address to be added. 

EN 

40 

   EN 

 
 
                                                 
19

58

74

80

150

Individual

Industry

NGO

Public Authority

Other (please specify)

Likewise  participation  followed  a  fairly  broad  geographical  spread,  with  all  Member  States 
except from Malta and Cyprus being represented: 

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In  conclusion,  this  public  consultation  therefore  offers  insights  into  a  large  range  of 
stakeholder opinions.  

2. 

General policy approach 

This section inquired about the attitude of participants towards the general policy approach to 
be adopted for the post-2020 framework. The first question asked whether they saw a role for 
new  targets  for  renewable  energy  sources  post-2020.  A  clear  majority  of  stakeholders 
expressed  support  for  some  form  of  dedicated  target  for  renewable  energy  post-2020.  Only 
14% of respondents considered this unnecessary. The relatively highest shares of opponents 
of  new  targets  are  in  the  categories  of  NGOs,  individuals  and  others,  whereas  only  a  very 
small percentage of industry participants (9%) and none of the participating public authorities 
considered  targets  unnecessary.  Among  those  favouring  targets,  a  clear  majority  supported 
mandatory  over  indicative  targets  (39%  over  14%).  Likewise  relatively  few  participants 
favoured an approach based exclusively on sectoral targets (only 10%).  

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There  was  also  a  question  in  this  section  about  which  other  policy  elements  would  be 
necessary  to  promote  renewable  energies  post  2020.  With  multiple  answers  possible,  two 
elements  were  clearly  singled  out  as  most  important:  enhanced  focus  on  R&D  as  well  as 
enhanced facilitation policies such as faster and easier permitting, improved grid access and 
availability of more sites (both options supported by around 60% of respondents). Among the 
options given public procurement obligations were seen as relatively least important. 

3 

Financial Support 

Replies on the need for financial support post-2020 showed that respondents see a need for a 
more differentiated approach in that time frame. A majority considered that support should be 
available for selected technologies (57%) whereas only 13% favoured phasing out all support 
for  renewables  post-2020.  Most  respondents  predicted  that  some  renewables  technologies 
would  be  competitive  in  that  time  frame  and  support  should  therefore  be  targeted  to  those 
which  will  not  have  reached  this  stage  yet.  Operative  support  could  be  provided  for  those 
relatively close to the market whereas at the very initial stage of development R&D support 
might  according  to  some  respondents  be  more  appropriate.  Technologies  mentioned  most 
often  in  this  context  were  various  forms  of  ocean  energy  as  well  as  geothermal.  Offshore 
wind, new solar applications as well as second generation biofuels were also mentioned. As 
for the conditions under which support for renewables continued to be justified, the absence 
of  full  internalisation  of  external  costs,  including  through  a  robust  carbon  price,  as  well  as 
removal of all subsidies for conventional generation were most often mentioned. On the other 
hand,  some  respondents  argued  that  limits  to  renewables  support  should  be  defined  ex-ante 
e.g. in terms of deployment volume, market penetration or time frame. 

Replies  on  the  need  for  more  common  approaches  towards  support  schemes  were  quite 
mixed.  As  to  the  level  of  support  36%  considered  these  should  remain  under  exclusive 
national control, 22% considered benchmark values for support at national level appropriate 
and  27%  argued  in  favour  of  EU-level  benchmarks.  The  support  for  EU-wide  benchmarks 
was  slightly  higher  among  industry  respondents  than  on  average  (34%).  On  the  other  hand, 
more  than  two  thirds  of  public  authorities  responded  that  support  should  remain  under 
exclusive  national  control.  For  the  structure  of  support  more  respondents  rejected  EU-wide 
alignment than supported it (45% over 37%). Again, strongest opposition to alignment came 
from  public  authorities  (67%),  followed  by  NGOs  (46%),  whereas  a  slight  majority  of 
industry respondents favoured structural alignment (43% over 40%). 

In general there was wide support for making support schemes more market-oriented. As to 
which  support  schemes  are  most  distortive,  the  majority  of  respondents  avoided  a  response 
with explicit reference to generic support types, but rather referred to abstract principles and 
stressed  that  distortions  were  highest  in  case  of  over-compensation,  respectively  lack  of 
proper  downward  adjustments  of  support  levels.  Nevertheless  a  number  of  respondents 
stressed  the  importance  of  exposing  renewables  to  market  price  signals  in  order  to  reduce 
distortions  and  mentioned  a  move  from  feed-in  tariffs  to  feed-in  premiums  as  a  step  in  the 
right  direction.  Some  respondents  also  referred  to  priority  access  rules  as  well  as  non-
exposure of renewables to balancing risk as specifically distorting elements.  

4 

Administrative procedures 

Asked  about  non-cost  related  obstacles  to  further  renewables  penetration,  the  length  and 
complexity of administrative  procedures relating  to authorisation, certification and  licensing 
was identified as a key obstacle to further growth of renewables by most respondents (62%, 
multiple  replies  possible).  Lack  of  commonly  agreed  technical  specifications  and  lack  of 
credible and certified training and qualification were the other biggest obstacles seen in this 

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category.  From  the  side  of  the  renewable  energy  sector  the  absence  of  clear  deadlines  for 
authorisation procedures leading to excessive lead times was stressed as a key problem. 

As to the appropriate policy response only very few respondents considered the approach of 
the  current  directive  sufficient  (8%).  Most  participants  either  called  for  more  direct 
intervention into national procedures or even for more harmonisation or mutual recognition in 
this field. A more European approach to authorisation procedures for infrastructure projects of 
common interest was also welcomed in this context with reference to the recent infrastructure 
package proposed by the Commission.  

5 

Grid integration of electricity from renewable energy sources 

In relation to the rules on grid access for renewables as laid down in Article 16 of the current 
Directive,  respondents  were  asked  whether  they  considered  obstacles  for  grid  connection  of 
renewables  were  likely  to  persist  after  2020.  Grid  connection  rules  were  mentioned  most 
frequently in this context (39%, multiple answers possible), followed by balancing and cost-
sharing rules (both 29%). The curtailment regime was regarded as less problematic (23%). A 
minority anticipated that all obstacles related to grid access for renewables would be removed 
in a post-2020 perspective (19%). This result was mirrored by another question asking about 
which  of  the  current  rules  of  Article  16  should  be  continued  after  2020.  The  obligation  on 
network  operators  to  develop  the  network  as  well  as  priority  or  guaranteed  access  were 
mentioned frequently whereas priority dispatch and counteracting curtailment were regarded 
as relatively less important. 

further 

improvement 

response  and 

The consultation also confirmed the need to increase flexibility to enable electricity systems 
to cope with a higher share of renewable energy from variable sources (i.e. wind and solar). 
Respondents were given several options how this could be achieved. Increasing availability of 
demand 
infrastructure  development  and 
interconnections  turned  out  to  be  the  most  favoured  options  (both  supported  by  45%  of 
respondents,  multiple  replies  possible).  Increasing  the  availability  of  storage  was  also 
regarded  as  an  important  option  (40%).  Among  the  diverse  options  given,  dedicated 
mechanisms  to  increase  the  availability  of  flexible  generation  capacity  (capacity  payments) 
proved  most  controversial  (only  21%  in  favour).  This  was  mirrored  in  some  of  the 
explanations  received  on  market  design  issues  (see  also  section  below)  where  respondents 
expressed  reserves  about  capacity  mechanisms  or  stated  that  should  they  be  considered 
necessary, they would in any case have to be designed in a way so as not to introduce new 
distortions in the internal market. 

in 

6 

Market integration 

In this chapter respondents stated that they saw a need to make support schemes more market 
oriented.  On  how  to  achieve  more  market  integration  two  elements  of  reform  to  support 
schemes to expose renewables more directly to market signals were most frequently quoted: a 
requirement  to  trade  renewables  production  on  wholesale  markets  and  an  exposure  to 
balancing  risk.  In  line  with  these  preferences,  when  it  comes  to  the  concrete  support 
mechanisms to be used, many respondents argued for a gradual shift away from feed-in tariffs 
towards premiums. There were also quite a few respondents who considered quota systems in 
general more market oriented. As to balancing responsibility some basic preconditions were 
frequently mentioned that had to be in place to allow exposure in particular of wind power. 
This included the possibility to trade close to real-time, including liquid intra-day markets, as 
well as cost-reflective imbalance prices. 

Respondents  were  also  asked  whether  they  considered  today's  market  design  an  appropriate 
framework  for  integrating  a  larger  share  of  renewable  electricity.  Only  a  small  majority 

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considered that the current wholesale market model based on short-run marginal cost pricing 
was  appropriate  (8%).  A  frequent  reply  was  that  wholesale  markets  would  have  to  move 
towards reflecting full costs (33%) although some respondents added that this could already 
be  observed  in  some  successful  markets.  It  was  also  stressed  in  that  context  that  remaining 
distortions in the market such as in particular price caps would have to be removed. Moreover 
an  evolution  of  electricity  markets  into  energy  service  markets  where  revenues  would  be 
earned from more than just selling electricity was also regarded favourably (25%).  

Finally, a number of respondents, especially from the NGOs, stressed that they regarded the 
current  market  as  grossly  distorted  by  subsidies  to  conventional  and  nuclear  energy  forms 
which  would  in  any  case  have  to  be  removed  to  allow  for  renewables  being  successfully 
integrated into the market. 

7 

Renewables in Heating and Cooling 

Asked  about  the  main  barriers  against  a  stronger  uptake  of  renewables  in  the  heating  and 
cooling sector, costs or lack of financial support was most often cited (43% of all respondents, 
multiple  replies  possible).  Other  obstacles  that  received  a  lot  of  attention  were  lack  of 
awareness  or  unfavourable  building  regulations.  Respondents  also  took  the  opportunity  to 
expand on a number of other problems for renewables in the heating and cooling sectors. The 
decentralised nature of the sector was often cited as a main barrier against a stronger uptake. 
Split incentives of market actors, as e.g. in the case of landlords and tenants, are considered to 
make  the  implementation  of  changes  difficult  and  respondents  see  the  need  for  a 
comprehensive  policy  approach  involving  all  administrative  levels.  Furthermore,  the 
respondents  reported  the  lack  of  a  supportive  tax  policy,  which  would  address  the  issue  of 
cost competitiveness e.g. through a carbon component in the price of heating fuels. A lack of 
education and training for installers to ensure a sufficient number of qualified staff was also 
frequently  mentioned.  Widespread  in  the  submissions  is  the  general  notion  that  so  far  the 
political attention is too much focussed on electricity, not reflecting the size and potential of 
the heating and cooling sector.  

On the most promising pathways for heating and cooling, perhaps surprisingly solar thermal 
is  the  technology  which  received  the  most  support  among  the  respondents  to  the  public 
consultation  (44%,  multiple  replies  possible),  clearly  ahead  of  biomass  which  was  named 
similarly often as geothermal (both by around 33%). Electrification on the basis of a higher 
share  of  renewables  in  electricity  production  received  somewhat  less  support  (24%).  On 
biomass,  respondents  raised  concerns  about  the  limited  availability,  alongside  concerns  on 
sustainability  and  the  call  to  operate  biomass  facilities  on  highest  efficiency  levels. 
Concerning  other  technologies,  heat  pumps  and  heating  &  cooling  storage  are  mentioned 
most often, with storage having the potential for increasing grid stability. A high number of 
comments  asked  for  a  neutral  policy  approach,  which  is  not  picking  winning  technologies 
beforehand.  

8 

Renewables in transport 

Regarding  the  main  barriers  against  a  stronger  uptake  of  renewable  energy  in  transport,  the 
respondents  see  the  costs  of  a  further  deployment  as  the  most  challenging  problem  (39%, 
multiple  replies  possible).  This  goes  along  with  a  lack  of  the  necessary  infrastructure  –  an 
issue  which  was  raised  to  a  similar  extent.  For  a  faster  increase  of  RES  in  transport,  the 
respondents  also  see  the  need  to  set  standards  more  quickly  –  some  ask  the  European 
Commission  to  set  deadlines  to  the  industry  in  this  respect,  with  a  standard  set  by  the 
Commission as the fall back option. Another big concern among the respondents was whether 
sustainably  produced  biofuels  can  be  supplied  on  a  big  scale.  As  well  in  this  policy  area, 
respondents  ask  for  a  long-term  regulatory  certainty  in  the  entire  EU,  given  the  high 

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investment  need  for  a  major  shift  towards  renewable  energy  sources  in  the  sector.  Other 
concerns relate to public acceptance, which can be linked to a lack of suitable information, but 
as well to sustainability concerns such as indirect land-use change. As a way forward, a high 
number of respondents proposed to increase the share of RES via electrification and a modal 
shift, alongside a reduction of energy demand. 

Regarding  transport  sectors  where  renewables  penetration  is  most  likely  to  be  successful, 
most respondents cited road transport for passengers (46%, multiple replies possible) and rail 
transport  (44%).  Whereas  good  transport  by  road  was  still  regarded  as  relatively  open  to 
renewable penetration, there was considerably more scepticism among respondents about the 
possibility to expand the use of renewables in air and water transport. 

9 

Sustainability 

Only  one  question  was  asked  about  the  future  of  sustainability  criteria  in  the  questionnaire, 
but the message coming from this was quite clear. When asked about the need for additional 
sustainability criteria in the period post-2020, a clear majority of respondents confirmed that 
in  their  view  sustainability  criteria  should  in  the  future  be  applied  to  both  all  biomass  and 
fossil fuels (51%).  

Besides, around 19% considered that additional criteria would be necessary to ensure only the 
best  performing  biomass  was  promoted.  Respondents  frequently  pointed  to  increased 
competition for the limited resource biomass and called for taking into account effects of its 
use on overall carbon stocks. There were nevertheless diverging views in how far aspects of 
land-use  change  should  be  reflected  in  sustainability  criteria.  Respondents  also  made 
reference  to  existing  regulations  in  the  forestry  sector  as  a  basis  for  ensuring  sustainable 
biomass  use.  Overall,  only  a  minority  of  respondents  considered  that  the  implementation  of 
the existing criteria was sufficient.  

10 

Regional and international dimensions 

Given the lack of practical experience so far with application of the cooperation mechanisms, 
a  slight  majority  of  respondents  considered  that  current  rules  for  cooperation  between 
Member  States  foreseen  in  Directive  2009/28/EC  where  not  sufficient  or  had  to  be 
supplemented  to  become  operational  (41%  over  34%  who  considered  the  current 
arrangements sufficient). Most frequently, more detailed guidance on the use of the flexibility 
mechanisms  was  requested  from  the  Commission,  including  on  procedural  aspects.  Some 
respondents  also  called  for  reinforced  efforts  to  move  to  a  more  regional  planning  when  it 
comes  to  the  use  of  renewables  or  at  least  considered  more  visibility  on  the  position  of 
Member  States  towards  target  fulfilment  useful.  Some  industry  respondents  also  asked  that 
private  sector  initiatives  should  be  possible  without  relying  explicitly  on  national 
governments.  Finally,  there  were  also  calls  for  an  EU  level  joint  framework  rather  than 
relying on purely bilateral initiatives.  

A similar point was also made regarding cooperation between the EU and third countries on 
the development of renewables. In general this was seen as quite a positive course of action, 
with  a  clear  majority  of  respondents  favouring  further  promotion  of  such  cooperation  (58% 
over  30%  who  favoured  focusing  exclusively  on  EU  domestic  resources).  Again,  more 
respondents favoured an approach based on agreements between the EU and third countries 
rather than bilateral agreements to be concluded by Member States (45% over 19%). Among 
the  instruments  that  could  be  used  to  strengthen  this  dimension,  enhanced  visibility  and 
transparency  for  existing  projects  as  well  as  forecast  of  third  country  contributions  were 
mentioned. Contributors also stressed the need for enhanced infrastructure given that physical 
transfer of electricity is a precondition for joint projects with third countries under Article 9 of 

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the  Directive.  This  concerned  not  only  interconnection  between  Europe  and  third  countries, 
but  also  enhanced  interconnection  within  Europe.  Beyond  the  immediate  use  of  the 
cooperation mechanisms there were also calls to promote reciprocal investments and market 
access in bilateral dialogues with all partners. 

As  far  as  the  preferred  partner  regions  for  cooperation  on  renewable  energy  is  concerned, 
unsurprisingly North Africa was most often mentioned, followed by other neighbours such as 
South East Europe (the Energy Community in particular) and Norway. Nevertheless enhanced 
cooperation with further away countries such as the US or China was also mentioned beyond 
the context of the cooperation mechanisms. 

11 

Technology development 

Based on the choices made for current SET plan, respondents were asked where they saw the 
remaining  key  challenges  for  the  technologies  currently  covered  by  European  Industrial 
Initiatives  (wind,  solar  and  bio-energy  in  the  area  of  renewable  energy).  Technology 
performance and cost-competitiveness were identified as the most important elements in this 
context  (46%  of  respondents,  multiple  replies  possible),  ahead  of  issues  linked  to  system 
integration (39%) and industrial manufacturing and supply chain issues (20%). A number of 
respondents also replied that it was not only about system integration of new technologies, but 
also  about  a  transformation  of  our  energy  systems  due  to  these  new  technologies.  On  the 
existing industrial initiatives a number or comments were also received arguing for enhanced 
focus  on  small-scale  and  more  local  applications;  these  respondents  perceived  the  current 
initiatives  (still)  to  be  too  much  focused  on  large  scale  technologies.  The  need  for  more 
training and education programs linked to these technologies was also underlined. 

When asked about technologies other than those covered by today's industrial initiatives that 
had the potential for industrial scale application in a post-2020 perspective or should be in the 
focus  of  future  research  and  industry  cooperation,  the  fields  most  often  mentioned  were 
storage technologies, ocean energies such as wave and tidal and forms of geothermal energy. 
On  a  more  horizontal  level,  several  themes  were  identified  that  would  also  merit  stronger 
focus.  This  concerned  material  research,  dedicated  small-scale/distributed  generation 
initiatives,  flexible  fuel  car  fleets  in  the  transport  sector  as  well  as  waste  heat  utilisation 
schemes. 

Most  respondents  considered  the  EU's  current  R&D  policy  only  partially  successful  in 
promoting a broader technology portfolio. One of the key challenges identified was to further 
facilitate  the  step  from  basic  research  to  deployment  and  commercialisation  although  the 
European  Industrial  Initiatives  were  acknowledged  as  step  in  the  right  direction.  An  even 
stronger  coordination  of  national  (and  regional)  research  agendas  and  consolidation  into  a 
more strategic European approach was also frequently mentioned. Other perceived problems 
concerned a lack of funds or dedicated budget lines for certain research priorities as well as 
high administrative burden for participation in the EU's research programmes, in particular for 
industry.  Finally,  an  improvement  in  communication  efforts  to  disseminate  the  results  was 
also considered necessary by some respondents. 

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Annex 2: Primes modelling used for the Energy Roadmap 2050 

The  PRIMES  model  simulates  the  response  of  energy  consumers  and  the  energy  supply 
systems  to  different  pathways  of  economic  development  and  exogenous  constraints  and 
drivers. It is a modelling system that simulates a market equilibrium solution in the European 
Union and its member states. The model determines the equilibrium by finding the prices of 
each  energy  form  such  that  the  quantity  producers  find  best  to  supply  match  the  quantity 
consumers  wish  to  use.  The  equilibrium  is  forwarding  looking  and  includes  dynamic 
relationships for capital accumulation and technology vintages.  

The model is behavioural formulating agents’ decisions according to microeconomic theory, 
but it also represents in an explicit and detailed way the available energy demand and supply 
technologies and pollution abatement technologies. The system reflects considerations about 
market  competition  economics,  industry  structure,  energy  /environmental  policies  and 
regulation. These are conceived so as to influence market behaviour of energy system agents. 
The  modular  structure  of  PRIMES  reflects  a  distribution  of  decision  making  among  agents 
that  decide  individually  about  their  supply,  demand,  combined  supply  and  demand,  and 
prices. Then the market integrating part of PRIMES simulates market clearing. 

PRIMES is a partial equilibrium model simulating the entire energy system both in demand 
and in supply; it contains a mixed representations of bottom-up and top-down elements. The 
PRIMES model covers the 27 EU Member States as well as candidate and neighbour states 
(Norway,  Switzerland,  Turkey,  South  East  Europe).  The  timeframe  of  the  model  is  2000  to 
2050 by five-year periods; the years up to 2005 are calibrated to Eurostat data. The level of 
detail of the model is large as it contains: 

• 

• 

• 

• 

• 
• 

• 

• 
• 
• 

12  industrial  sectors,  subdivided  into  26  sub-sectors  using  energy  in  12  generic 
processes (e.g. air compression, furnaces) 
5  tertiary  sectors,  using  energy  in  6  processes  (e.g.  air  conditioning,  office 
equipment) 
4  dwelling  types  using  energy  in  5  processes  (e.g.  water  heating,  cooking)  and  12 
types of electrical durable goods (e.g. refrigerator, washing machine, television) 
4  transport  modes,  10  transport  means  (e.g.  cars,  buses,  motorcycles,  trucks, 
airplanes) and 10 vehicle technologies (e.g. internal combustion engine, hybrid cars) 
14 fossil fuel types, new fuel carriers (hydrogen, biofuels) 10 renewable energy types 
Main  Supply  System:  power  and  steam  generation  with  150  power  and  steam 
technologies and 240 grid interconnections 
Other sub-systems: refineries, gas supply, biomass supply, hydrogen supply, primary 
energy production 
7 types of emissions from energy processing (e.g. SO2, NOx, PM) 
CO2 emissions from industrial processes 
GHG  emissions  and  abatement  (using  IIASA’s  marginal  abatement  cost  curves  for 
non CO2 GHGs). 

Further information on the assumptions behind the modelling done for the Energy Roadmap 
2050 can be found in the Commission Staff Working Paper SEC(2011) 1565, part 1 and 2.  

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