COMMISSION STAFF WORKING DOCUMENT 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: EU Member State, Mediterranean third countries, cross-border cooperation, disclosure of information, innovation, renewable energy, research and development, research project, sustainable development, technical cooperation, trans-European network

EUROPEAN COMMISSION 

Brussels, 6.6.2012  
SWD(2012) 164 final 

COMMISSION STAFF WORKING DOCUMENT 
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) 149 final} 
{SWD(2012) 163 final} 

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   EN 

 
 
 
 
  
 
COMMISSION STAFF WORKING DOCUMENT 
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 

This working document is intended for use by European Commission staff and is for information 
only.  It  does  not  represent  an  official  position  of  the  Commission  on  this  issue,  nor  does  it 
anticipate such a position. 

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EN 

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INTRODUCTION 

This  staff  working  document  accompanies  the  renewable  energy  Communication  "Renewable 
energy: a major player in the European energy market". Together with the Impact Assessment, it 
provides  further  background  material  supportive  of  the  narrative  and  arguments  put  forward  in 
the  Communication.  It  also  presents  the  outline  of  certain  actions  that  the  Commission  will  be 
undertaking in the current year and next two years, as announced in the Communication. 

The  Communication  explores  how  the  current  European  policy  and  legal  framework  for 
renewable  energy  appears  to  be  functioning,  as  planned  by  Member  States  in  their  national 
renewable  energy  action  plans.  Further  background  on  this  is  contained  in  Chapter  1.  The 
Communication  then  explores  how  national  renewable  energy  support  schemes  to  help  achieve 
national targets are being reformed, discusses how further use should be made of the renewable 
energy Directive's cooperation mechanisms and how a special regime for developing renewable 
energy in the Mediterranean specifically could be developed. The Commission's actions on these 
points  are  elaborated  in  Chapters  2,  3,  4  and  5.  Finally,  the  Communication  highlights  the 
importance of energy technology developments, and Chapter 6 contains a synopsis of key energy 
technology developments and expectations.  

1. 

NATIONAL RENEWABLE ENERGY ACTION PLANS: SYNTHESIS AND ASSESSMENT 

As  required  by  Article  4(1)  and  4  (2)  of  the  Renewable  Energy  Directive,  27  Member  States 
adopted  their  national  renewable  energy  action  plans  setting  out  their  national  targets  for  the 
share  of  renewable  energy  consumed  in  electricity,  heating  and  cooling  and  transport,  and 
measures for achieving the national overall renewable energy targets and measures supporting the 
growth  of  renewable  energy  in  each  of  the  energy  consuming  sectors.  All  Member  States 
submitted  their  plans  to  the  European  Commission  in  2010  and  the  Commission  evaluated  the 
plans,  including  the  adequacy  of  measures  envisaged  by  the  Member  States  for  reaching  their 
national RES targets. 

The  evaluation  of  the  27  NREAPs  shows  that  the  share  of  renewables  in  the  EU  final  energy 
consumption would reach 20.6% in 2020. Renewable energy production is projected to increase 
from 99 million tonnes of oil equivalent (Mtoe) in 2005 to 245 Mtoe in 2020 (an average annual 
growth rate of 6% per year). 

Based  on  Member  State  projections  for  renewable  energy  use  and  their  sectoral  targets,  the 
combined  EU  renewable  energy  share  in  electricity  will  grow  form  19,4%  in  2010  to  34%  in 
2020,  in  heating  and  cooling  respectively  -  from  12,5%  to  21,5%  and  in  transport  from  5%  to 
11%.  Renewable  energy  industry  expectations  for  the  renewable  energy  shares  in  the  three 
sectors  are  higher  –  EU  Industry  roadmap1  estimates  that  2020  renewable  energy  share  in  the 
electricity sector could reach even 42%, in the heating and cooling – 23,5% and in the transport 
12%. According to NREAP analysis, in the next decade the strongest growth will occur in wind 
power (from 2% to 14,1% of the total electricity consumption) and solar electricity (from 0% to 
3% of the total electricity consumption). 

1 

Mapping Renewable Energy Pathways towards 2020, EU Industry Roadmap, European Renewable Energy 
Council (EREC) (2011) 

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In  the  electricity  sector,  according  to  NREAP  technology  projections  by  2020  wind  would 
become the most important renewable energy source providing 40% of all renewable electricity 
compared  to  25%  in  2010,  the  contribution  of  photovoltaic  and  solar  thermal  electricity  would 
also  grow  from  current  3%  to  9%,  the  contribution  of  biomass  is  expected  remain  almost 
unchanged  (18%  in  2010  compared  to  19%  in  2020),  while  the  role  of  hydro  would  decrease 
from 50% in 2010 to 30% in 2020. The role of geothermal and wave and tidal are still expected to 
remain marginal in 2020 with respectively 1% and 0.5%. 

In the heating sector the analysis of Member State projections in NREAPs indicate that biomass 
would maintain its dominance (80% of all renewable heating in 2020, down from 90% in 2010), 
solar  energy  based  heating  would  increase  to  6%  compared  to  2%  in  2010  and  geothermal  is 
expected  to  contribute  2%  in  2020  compared  to  the  current  1%.  The  use  of  heat  pumps  would 
also increase from 6% in 2010 to 11% in 2020. 

Concerning the transport sector, in 2020 the first generation biofuels (biodiesel and bioethanol) 
are still expected to maintain their predominance with 66% and 22% share of the total RES use in 
transport compared to the current 71% and 19%. The contribution of lignocellulosic biofuels and 
biofuels made from wastes and residues and the renewable electricity is expected to make up the 
rest of contribution - 12% - towards the renewable energy share in transport in 2020.  

In addition to the Commission's evaluation of the NREAPs, various stakeholders have analysed 
the Member State renewable energy plans and have expressed their views on the Member State 
technology  choices  and  the  adequacy  of  measures  planned  to  achieve  the  renewable  energy 
targets2.  The  REPAP  2020  project  provided  an  independent  assessment  of  the  NREAPs 
evaluating  the  quality  of  measures  included  in  the  action  plans  for  tackling  the  administrative 
barriers  to  renewable  energy  development,  improvement  of  energy  infrastructure  development 
and  electricity  network  operation  and  support  measures  in  each  of  the  3  energy  consuming 
sectors.  It  found  that  the  strongest  weaknesses  still  existed  in  the  field  of  administrative 
procedures  and  spatial  planning  followed  by  still  rather  weak  support  measures  for  renewable 
energy heating and cooling. It also found that further improvements were still required in many 
Member States in the area of support measures in the electricity sector. This assessment is also 
largely echoed in European Renewable Energy Council's (EREC) EU industry roadmap. 

Conclusions 

The review of the renewable energy plans shows that all Member States have taken a responsible 
and serious approach to the implementation of the EU's 2020 renewable energy commitment and 
to generating their national contribution to this commitment. National Renewable Energy Action 
Plans  provide  more  comprehensive  information  on  the  renewable  energy  planning  and  policy 
measures in each of the 27 Member States than we have ever had before.  

It  is  important  that  Member  States  complete  the  transposition  and  implementation  of  the 
Renewable  Energy  Directive  and  vigorously  comply  with  their  National  Renewable  Energy 
Action  plans.  Delays  in  transposition  of  the  Directive  and  the  stakeholder  concerns  on  the 
Member  State  plans  prove  that  implementation  of  the  Member  State  commitments  will  require 
regular monitoring. The Commission will continue to assess the progress made in Member States 
on  the  basis  of  biennial  Renewable  Energy  Progress  reports  required  in  the  Renewable  Energy 
Directive and it intends to publish its next Renewable Energy Progress report by the end of 2012. 
The  Commission  will  take  all  appropriate  measures,  including  infringement  procedures,  in  the 

2 

REPAP  2020  project  report  (2011),  Mapping  Renewable  Energy  Pathways  towards  2020,  EU  Industry 
Roadmap, EREC (2011), EREC ECN/EEA report on Renewable Energy Action Plans (2011) 

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event of any member State's failure to comply with their own national action plans and renewable 
energy growth trajectories, or failure to fully implement any element of the Directive. 

2. 

MEMBER STATE RENEWABLE ENERGY SUPPORT SCHEMES & REFORMS 

In  order  to  achieve  the  20%  target,  the  renewable  energy  Directive3  sets  mandatory  national 
targets.  In  order  to  reach  these  targets,  Member  States  my  operate  support  schemes  and  may 
apply measures of cooperation. Member States' use different instruments and support schemes to 
achieve these targets in electricity, heating and transport (biofuels): 

x 

AT  BE  BG  CY  CZ  DE  DK  EE  ES 
x 
x 
x 
x 

x 
x  X 

x 
x 

x 

x 

x 

FI  FR  GR  HU 
x 

x 

x 

IT  LT  LU  LV  MT  NL 

PL 

PT  RO  SE 

x 

x 

x 

x 

x 

x 

x 

x 

x 

SI  SK  UK 
x 
x 

x  x 
  x 
  x 

FIT 

Premium 

Quota 
obligation 
Investment 
grants 
Tax 
reductions/ 
exemptions 
Financial 
incentives 
Investment 
grants 
Tax 
reductions/ 
exemptions 
Financial 
incentives 
Premiums 

Quota 
obligation 
Tax 
reductions/ 
exemptions 

y
t
i
c
i
r
t
c
e
l
E

g
n
i
t
a
e
h

t
r
o
p
-
s
n
a
r
t

x 

x 

x 

x 

x 

x 

x 

X 

X 

x 

x 

x 

x 

x 

x 

x 

x 

x 

x 

x 

x 

x 

x 

x 

x 

x 

x 

x 

X 

x 

x 

x 

x 

x  X 

x  X 

x 

x 

x 

x 

x 

x 

x 

x 

x 

IE 
x  x 
x 
x 

x 

x 

x 

x 

x 

x 

x 

x 

x 

x 

x 

x 

x 

x 

x 

x 

x 

x 

x 

x 

x 

x 

x 

x 

x  x 

x 

x 

x 

x 

x 

x 

x 

x 

x 

x 

x  x 

x 

x 

x 

x 

x 

x 

x 

x 

x 

x 

x 

x 

x 

x 

x 

x 

x  x 

  x 

x 

x 

x 

x 

x  x 

x  x 

x 

Source: (updated) Commission staff working paper on financing renewable energy SEC(2011)131 

•  Feed-in tariffs (FIT) are an energy-supply policy greatly reducing project risk. The producer 

is insulated from energy market prices and receives a fixed amount for the electricity. 

•  With Feed-in Premiums, the producer must sell the electricity in the market, and then receive 
a "green" premium. Thus the producer is, at least partially, exposed to market price risk and is 
integrated into the market. 

•  Certificate  schemes  with  quota  obligations  typically  require  suppliers  to  derive  a  certain 
percentage of their energy from renewable energy sources and provide "green certificates" as 
proof.  Renewable  energy  producers  operate  as  normal  market  players,  but  receive  a  green 
premium  from  the  sale  of  the  green  certificates  they  are  issued  upon  the  production  of  the 
renewable energy. In this instance, the producer is exposed to market risks. 

•  Fiscal incentives in the form of tax exemptions or tax reductions generally exempt renewable 
energy  products  from  certain  taxes  (e.g.  excise  duty)  in  accordance  with  the  Energy  Tax 
Directive4.  This  Directive  allows  Member  States  to  apply  tax  exemptions  or  reductions  in 
order  to  compensate  for  the  extra  costs  involved  in  the  manufacture  of  these  products  as 
compared  to  conventional  energy  products  with  external  costs.  In  addition,  Member  States 
would  be  able  to  provide  further  tax  reductions  during  a  transitional  period  (until  2023)  to 
compensate for the higher costs involved in the manufacture of sustainable biofuels where the 
standard system of taxation does not suffice to promote their use.  

3 
4 

2009/28/EC 
Council Directive 2003/96/EC of 27 October 2003 restructuring the Community framework for the taxation 
of energy products and electricity (OJ L 283, 31.10.2003, pp. 51–70). 

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• 

Investment grants are by name grants given in the form of subsidies on the initial investment 
cost  of  a  project  to  promote  the  construction  of  new  renewable  energy  power  plants.  Since 
they cover capital rather than operating costs, this should leave the producer free to optimise 
energy production according to need or market signals. 

The  Commission's  2011  Communication  on  renewable  energy  noted  that  different  instruments 
were  suitable  for  different  markets  and  technologies.  Large  scale  plants  managed  by  industrial 
players are more capable of functioning in a market than micro generators of household level, for 
example,  and  immature  technologies  bear  much  greater  risk  (and  may  need  support)  than  mature 
technologies. For this reason, the Commission noted that as the technology's scale increases, and as 
the  technology  and  market  matures,  it  should  be  capable  of  bearing  more  market  risk,  of  being 
integrated into the electricity or other market. This should allow for reducing tariff levels to reflect 
declining technology costs, greater technology specificity to avoid windfall profits, and changing 
structures to ensure greater market integration of renewables. In the above Communication, the 
Commission  stressed  that  any  such  reform  should  be  pursued  in  a  way  that  avoids  creating 
investor uncertainty and that it will actively support national cooperation on this matter. It should 
be  noted  that  15  Member  States  now  offer  market  oriented  feed  in  premium  or  tradable  green 
certificate support schemes. 

Renewable energy support scheme changes 

Whilst  it  is  important  that  Member  States  reform  and  improve  their  support  schemes  to  reflect 
decreasing costs of renewables and to encourage greater competitiveness on the part of renewable 
energy,  they  also  need  to  avoid  creating  uncertainty  and  thereby  discouraging  investment  from 
occurring.  Recently  a  number  of  Member  States  have  undertaken  reforms  that  have  caused 
disruption  to  industry  and  investors.  Without  prejudging  possible  justifications  for  the  reform, 
such examples include: 

•  Stopping biofuel blending after only recently having introduced it. 
•  Avoiding legal constraints in cutting PV tariffs by imposing a levy instead, cutting expected 

returns to existing investors/producers retroactively. 

•  Reducing tariffs for most existing energy producers without notice. 
•  Proposals  to  apply  new  lower  tariffs  in  exchange  for  an  existing  green  certificate  scheme, 

again, retroactively applied to existing producers. 

•  Ad hoc deferral of direct aid payments for biofuel production. 
•  Changes to an existing green certificate regime regarding technology eligibility and duration, 

directly affecting the price of green certificates for existing producers. 

•  A moratorium on support for new renewable energy production, which has an obvious direct 

and crushing impact on local renewable energy investment.  

•  Modifications  of  feed  in  tariffs  for  existing  producers,  cutting  expected  returns  to  investors 

significantly.  

•  Changes to timetables applying new, lower tariffs before announced or legally possible.  
•  Adding complicated project registration procedures to the authorisation process.  

On the contrary, best practice in the design, structure and reform of support schemes should 
strike a balance between certainty and sufficient incentives to invest in new technologies, on the 
one hand; and avoiding overcompensation on the other. Principles for support schemes need to be 
established that address transparency and predictability, including greater use of feed in premium 
schemes, the need for "off budget" financing and common approaches to methods for calculating 

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costs and premiums, scheme structure and technology banding5. If the scheme is flexible and able 
to  adapt  to  changing  market  and  economic  circumstances  (cost  reductions,  fiscal  constraints, 
excess production), forced or unexpected changes are not necessary. Thus schemes with planned 
forms of automatic tariff digression with clear rules for support evaluation and revision are able 
to provide revenue stability to producers whilst introducing a quantity constraint on production. 
The  method  of  tariff  calculation  and  the  nature  of  technology  banding  are  all  important 
determinants  of  the  nature  and  development  of  the  renewable  energy  market.  Thus  consistency 
between Member States on such issues facilitates creating a single, coherent European market for 
renewable  energy  equipment.  Applying  criteria  commonly  across  Member  States  could  also 
increase  coherence  and  convergence  of  approach  and  thus  reduce  distortions  arising  from 
different national support schemes.  

It  is  to  further  promote  the  application  of  best  practice  and  avoidance  of  bad  practice  that  the 
Commission  intends  to  prepare  and  publish  guidance  on  renewable  energy  support  schemes  to 
avoid fragmentation of the internal market.  

3. 

THE "COOPERATION MECHANISMS" OF THE RENEWABLE ENERGY DIRECTIVE 

3.1. 

Introduction 

Directive  2009/28/EC  on  the  promotion  of  the  use  of  energy  from  renewable  sources  has 
introduced a stable legislative framework laying down individual mandatory targets for the share 
of renewable energy in final energy consumption for each Member State whilst allowing Member 
States to decide on the most cost-efficient technology path and support scheme to achieve those 
targets. 

When designing the framework under the Directive, legislators were however aware, that intra-
European  trade  has  always  been  a  source  of  growth  and  development  for  Europe,  and  that  this 
would  no  less  be  the  case  with  renewable  energy.  To  obtain  a  competitive  European  energy 
market that efficiently exploits renewable sources for the generation of electricity for European 
consumers,  the  Directive  therefore  aims  at  encouraging  strategic  cooperation  between  Member 
States. With the objective of facilitating cross-border support of energy from renewable sources 
as a tool to optimise the energy system, the Directive defines a set of mechanisms giving Member 
States maximum flexibility to agree on the model for cooperation that best suits their respective 
interests. It encourages them to pursue all appropriate forms of cooperation, which can take place 
at all levels, bilaterally or multilaterally.  

A recent study for the European Commission clearly highlights opportunities for surpluses from 
wind  energy  in  the  North  of  Europe  (Sweden,  Denmark,  Finland,  Germany)  and  from  solar 
energy  in  the  South-West  of  Europe  (CSP  in  Spain  and  PV  in  France)  to  be  traded  using  the 
cooperation  mechanisms.  This  would  bring  economic  advantages  for  supplying  as  well  as  off-
taking Member States. The earlier the use of cooperation mechanisms is implemented the larger 
are  the  potential  efficiencies  to  be  exploited.  The  study  compares  two  scenarios:  one  with 
cooperation starting early and continuing over several years between 2013 and 2020, and another 
one  in  which  cooperation  mechanisms  are  only  used  as  a  last  resort  to  fill  gaps  in  target 
achievement in 2020. This comparison shows that delaying cooperation to the last moment could 
reduce the cooperation potential, with all its benefits, by a factor of about 10. 

5 

This will elaborate on suggestions contained in COM(2011)31 and SEC(2001)131 

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Figure 1: Comparison of surplus potentials analysed in the 2013-2020 and 2020 only scenarios of the RES4less study 

Similarly to the efficiency potential that can be tapped by cooperation amongst Member States, 
the  system  can  be  furthered  optimised  by  additionally  allowing  for  cooperation  with  third 
countries.  Under  more  restrictive  conditions  this  possibility  is  also  catered  for  under  the 
Renewables Directive. Imported electricity produced from renewable energy sources outside the 
Union may also count towards Member States’ targets if certain conditions are met, ensuring that 
such  electricity  generation  contribute  to  replacing  conventional  energy  in  the  EU  and  third 
countries and that net increases in greenhouse gas emissions are avoided.  

All cooperation mechanisms have to be agreed upon bi- or multilaterally between Member States 
or  –  in  the  case  of  cooperation  with  third  countries  –  between  Member  States  and  the  third 
country. This paper aims to highlight the opportunities presented by the cooperation mechanisms 
provided  for  in  the  Directive,  to  lay  out  practical  implications  of  their  implementation  and  to 
identify potential Commission action to facilitate Member States' utilization of the mechanisms. 

3.2. 

Overview of Cooperation Mechanisms 

The  Renewable  Energy  Directive  provides  for  a  set  of  cooperation  mechanisms  available  to  be 
implemented  amongst  two  or  more  Member  States,  namely  Statistical  Transfers,  Joint  Projects 
and Joint Support Schemes. It also allows for cooperation with third countries  

Article 6 of the Directive introduces the concept of “statistical transfers”. These are agreements 
between  Member  States  to  transfer  the  statistical  value  of  a  quantity  of  renewable  energy 
produced  in  one  Member  State  to  another  Member  State  for  target  compliance  purposes.  The 
transfer is purely virtual, without any accompanying energy flow. This mechanism exists so that 
Member  States  with  considerable  renewable  energy  sources,  or  with  effective  support  schemes 
that  help  develop  such  sources  cost  effectively,  can  offer  any  renewable  energy  production 
surplus  to  their  requirements  (either  to  their  target  or  trajectory)  to  other  Member  States.  The 
“other”  Member  States  interested  in  purchasing  such  transfers  would  be  those  with  limited 
domestic  renewable  energy  sources  or  with  inadequate  support  schemes  for  developing  the 

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available domestic resources. The transfer would normally be agreed for a number of years, for a 
price  per  MWh.  In  fact,  most  Member  States  wanting  to  buy  the  energy  would  likely  want  the 
supply  to  continue  until  at  least  2020,  in  order  to  comply  with  their  targets,  or  until  their  own 
domestic  resources  can  be  brought  into  production  at  a  later  stage.  Once  such  an  agreement  is 
reached between two or more Member States, the European Commission will be notified, and at 
the  end  of  each  year  the  production  statistics  of  the  relevant  Member  States  will  be  adjusted 
accordingly. 

Articles 7 and 8 create “joint projects”. A “joint project” is a broad concept covering the building 
or co-financing of infrastructure or even an energy purchase agreement. The intention behind the 
mechanism is the same as for statistical transfers: to help build new plants and infrastructure in a 
Member  State  and  sharing  the  resulting  energy  towards  two  or  more  Member  States’  national 
targets, in order to reduce the overall cost of reaching the targets. 

One  key  difference  between  joint  projects  and  statistical  transfers  is  the  proposed  inclusion  of 
“private  entities”  in  joint  projects.  A  private  entity,  such  as  a  power  generator,  infrastructure 
company,  energy  equipment  manufacturer,  a  banking  consortium,  can  identify  projects  in  any 
Member  State.  Financing  such  a  project  could  occur  under  the  normal  and  existing  domestic 
arrangements,  but  if  such  arrangements  are  insufficient,  because  the  support  is  too  low  or  does 
not  qualify  according  to  domestic  priorities,  the  project  would  not  be  built.  In  such  a  case,  the 
project  developer  could  broker  an  agreement  whereby  another  Member  State  agrees  to  help 
finance  the  project;  again,  this  could  be  through  loans,  grants,  tenders  or  access  to  national 
support  schemes  such  as  feed-in  tariffs  or  green-certificate  regimes.  In  exchange  for  this  co-
financing,  the  Member  State  would  receive  credit for  a share of  the renewable energy that was 
produced as a result of the project. 

As in the case  of “statistical transfers”,  the European  Commission will  again be  notified  of the 
details  of  the  joint  project,  and  each  year  the  agreed  quantity  of  energy  will  be  virtually 
exchanged.  Such  an  arrangement  does  not  preclude  a  project  being  completed  and  the  actual 
energy, the heat or electricity generated, being sold physically, and exported to another country. 
In  this  case,  the  Member  State  would  be  buying  the  energy  itself  as  well  as  its  “green 
characteristics”. 

The third element of the cooperation mechanisms established under the Directive is called “joint 
support schemes” created by Articles 10 and 11. Under these articles, Member States may agree 
to  join  or  coordinate  their  national  support  schemes  (e.g.  a  common  feed-in  tariff  or  green-
certificate/obligation regime). The European Commission has regularly reported on the structure 
and functioning of support schemes and has maintained that efforts are needed to coordinate the 
evolvement of national schemes through the exchange of good practice to strengthen the gradual 
convergence of national schemes. Thus these articles of the Directive ensure that in the event of 
Member  States  coordinating  or  joining  their  support  schemes,  the  targets  can  be  adjusted  to 
reflect the change. 

In the event of the joining of schemes, the renewable energy produced under such conditions is 
considered  “pooled”  and  shared  out  either  as  a  “statistical  transfer”  or  according  to  an  agreed 
distribution  rule  of  which  the  Commission  has  been  notified.  The  above  three  mechanisms 
(statistical  transfers,  joint  projects  and  joint  support  schemes)  were  created  for  Member  States’ 
use, as the renewable energy policy and targets are focused on consumption in the EU. However, 
the Directive explicitly highlights that some non-Member States – “third countries” – may also 
take  part  in  the  use  of  these  mechanisms.  These  include  the  European  Economic  Area  (EEA) 
countries  of  Norway  and  Iceland  (The  EEA  Joint  Committee  decided  in  December  2011  to 

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incorporate the Directive into the EEA Agreement6). They also include the Contracting Parties of 
the Energy Community Treaty, an association of South-East European countries providing a legal 
framework  for  the  gradual  adaptation  of  these  countries’  energy  markets  to  EU  energy  market 
laws.  The  Directive  explicitly  encourages  the  Energy  Community  to  adopt  the  Directive 
(including  the  establishment  of  ambitious  2020  targets)  so  that  the  Contracting  Parties  to  the 
Treaty would thereupon be eligible to make use of the cooperation mechanisms to help develop 
their energy production or energy infrastructure7. 

In addition to the cooperation mechanisms available to Member States, the Directive also creates 
an  instrument  (under  Articles  9  and  10)  that  enables  third  countries  to  take  part  in  developing 
renewable energy sources and contributing to the EU target, irrespective of their membership of 
the EEA or Energy Community Treaty. Accordingly, “joint projects” between Member States and 
third countries – similar in structure to the joint projects between Member States described above 
–  can  be  established  under  Article  9  of  the  Directive.  However,  whilst  joint  projects  between 
Member  States  can  be  purely  “virtual  trade”  arrangements,  joint  projects  with  third  countries 
have strict conditions attached to them to ensure that the arrangements generate new renewable 
energy  production  of  electricity  that  is  actually  consumed  in  the  EU.  In  particular,  as  proof  of 
importation, the Directive requires that: 

The  electricity  is  firmly  nominated  to  the  allocated  interconnection  capacity  by  all  responsible 
Transmission  System  Operators  in  the  country  of  origin,  the  country  of  destination  and,  if 
relevant, each third country of transit; 

The  electricity  is  firmly  registered  in  the  schedule  of  balance  by  the  responsible  Transmission 
System Operator on the Community side of an interconnector; and 

The nominated capacity and the production of electricity from the designated installation refer to 
the same period of time. 

3.3. 

The implementation of cooperation mechanisms and existing practice 

3.3.1. 

Statistical Transfer between Member States 

The first type of cooperation mechanism created, in Article 6 of the Directive, is the “statistical 
transfer”.  The  steps  outlined  in  the  Article  are  straightforward:  the  Member  States  agree  a 
“virtual”  transfer  of  a  certain  quantity  of  renewable  energy,  to  be  deducted  from  one  Member 
State’s  statistics  and  added  to  another’s.  The  energy  itself  is  not  physically  exchanged,  just  the 
“credit”  for  having  invested  in  producing  renewable  energy.  For  the  purpose  of  statistical 
transfers  the  energy  generated  from  renewable  sources  is  only  transferred  ex-post,  i.e.  after 
having been generated, and the Directive does not specify, if the energy is consumed in the form 
of electricity, heat or fuel. 

To  recall  that  making  statistical  transfers  must  not  put  into  danger  a  Member  State’s  ability  to 
meet its trajectory, target or other milestone, the text notes in the last sentence of Article 6(1) that 
the transfer shall not affect the achievement of the target; that is, the obligations contained in the 
rest of the Directive, regarding the trajectory and the targets themselves, remain in place. 

6 
7 

Liechtenstein was exempt from applying the Directive. 
The Contracting Parties of the Energy Community Treaty are Albania, Bosnia and Herzegovina, Croatia, the 
former Yugoslav Republic of Macedonia, Montenegro, Serbia, the United Nations Interim Administration 
Mission in Kosovo, Republic of Moldova and Ukraine. Georgia, Norway, Turkey and Armenia take part as 
observers. 

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The application of this cooperation mechanism could be as follows: a Member States finds that 
with the target it faces, the support schemes it uses to develop renewable energy and the resource 
potential  available,  it  can  produce  renewable  energy  at  below  average  EU  cost.  It  thus  feels 
comfortable  that  it  has  the  resources  to  meet  its  target  and  could  in  fact  produce  a  surplus  at  a 
relatively  low  unit  cost,  which  it  could  offer  to  another  Member  State.  At  the  same  time,  the 
Member State may very much need the revenue flows from such an exchange in order to finance 
the development of its renewable energy resources. Thus a Member State could be interested to 
be a “seller”. 

Conversely,  there  may  be  Member  States  with ineffective  support  schemes,  high  targets  and/or 
relatively low levels of renewable energy potential which, facing a relatively high unit cost, could 
be interested to help develop renewable energy sources in another Member States more cheaply; 
who  could  be  interested  to  be  “buyers”  to  strengthen  their  national  support  scheme  with  the 
revenue from statistical transfers. 

Article 6 explains the mechanism for cooperation in the event that a buyer and a seller agree to 
cooperate.  The  two  Member  States  involved  formally  “notify”  the  European  Commission.  In 
essence,  this  means  a  letter  is  sent  from  the  Member  State  government  explaining  the  quantity 
and price of renewable energy that is to be transferred (usually for a price/MWh or other relevant 
unit of energy). There is no prescribed format for this notification other than the information it 
must  contain.  Once  notified,  the  European  Commission  will  publish  the  information  on  its 
transparency platform8. 

The first sentence of paragraph 2 is worth highlighting: “The arrangements [the agreed statistical 
transfer]  may  have  a  duration  of  one  or  more  years…”.  Member  States  who  want  to  “buy-in” 
some of the contributions that will count towards their renewable energy trajectory and target are 
unlikely to want to do so on a year by year basis. In principle, they will be interested in a regular 
inflow  that  will  help  them  follow  their  given  trajectory  for  the  growth  of  renewable  energy, 
ending with their 2020 target. It can thus be expected that (unless a Member State plans a sharp 
burst in domestic production of renewable energy in the last years prior to 2020) agreements for 
statistical transfers (in fact for all cooperation mechanisms) will last from the initial year to 2020. 
This  is  clearly  important  for  the  Member  State  purchasing  the  statistical  transfer.  But  it  is  also 
important  for  the  Member  State  making  the  transfer:  whether  or  not  it  is  already  financing  the 
renewable  energy  production  it  agrees  to  transfer,  a  regular  source  of  income  is  necessary  for 
financing the expansion of the renewable energy production capacity of the country. 

So far no formal agreement has been reached between Member States to implement a statistical 
transfer under the Directive. In February 2011 Luxembourg and Lithuania signed a Memorandum 
of Understanding envisaging the possibility of such cooperation, as the share of renewable energy 
in Lithuania has been rising above the indicative trajectory provided for under the Directive. The 
Memorandum  provides  for  the  exchange  of  information  on  common  actions  –transfer  of 
statistical renewables indicator excess and joint projects. More concrete negotiations on the set-
up of a statistical transfer are conducted between Luxembourg and Germany. Also in developing 
a  major  photovoltaic  programme  for  electricity  export  to  other  Member  States  (the  "Helios" 
project), Greece is planning to offer statistical transfers in an initial pilot phase. Such plans could 
generate major benefits but need a clear business case to be taken forward. 

8 

See http://ec.europa.eu/energy/renewables/transparency_platform/transparency_platform_en.htm 

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3.3.2. 

Joint Projects between Member States 

The second cooperation mechanism, “joint projects”, is a variation on the flexibility offered by 
statistical  transfers.  The  principle  of  mutually  beneficial  trade  is  the  same,  but  in  this  case  the 
arrangement can include industry – private operators – and so need not be a purely governmental 
arrangement.  Only  projects  in  the  electricity  or  heating  and  cooling  sector  are  eligible  as  joint 
projects under Article 8 of the Directive. 

The involvement of a private entity can increase the scope for cooperation. Compared to national 
governments,  a  private  company  can  be  expected  to  have  more  detailed  knowledge  of  the 
renewable energy sources at its disposal, their relative costs, the nature of the market - both in its 
home country but conceivably also elsewhere in the EU; knowledge gained through its existing 
commercial  or  professional  contacts.  This  knowledge  can  be  used  to  propose  and  develop 
renewable energy projects in any sector – and propose them to the national government either in 
the  Member  State  where  the  resource  exists  or  to  another  national  government  who  might  be 
interested as a “buyer”. 

This commercial initiation of a project is generally the means by which today’s renewable energy 
projects are undertaken: a potential renewable energy producer proposes a project; it is possibly a 
profitable  proposition  and  could  be  developed  commercially  (for  instance  when  drawing  on  a 
cheap resource such as municipal waste or biomass residues) or, more commonly, it could be a 
profitable enterprise if it  received government support. Faced with such projects, a government 
determines whether it fits within its renewable energy strategy (for instance, if it is a resource or 
technology  priority  of  the  government)  and  whether  it  is  eligible  for  support.  If  the  Member 
States  so  decide,  one  Member  State  would  pay  a  company  to  produce  renewable  energy  in 
another Member State. With the agreement of the second Member State, that energy, or part of 
that  energy,  would  be  credited  to  the  trajectory  and  target  of  the  Member  State  financing  the 
production.  

If,  for  any  reason,  insufficient  support  is  available  to  make  such  a  joint  project  a  commercial 
proposition, the private entity and/or the government could propose that a third party – another 
Member State government – be involved in the project. Such “involvement” – the nature of the 
“joint project” – is not prescribed in the Directive; “joint project” is a broad concept covering the 
building or co-financing of plant or infrastructure, an energy purchase agreement or access to the 
national  support  scheme  of  another  Member  States.  The  financial  means  of  involvement  could 
take several forms.  

The intention behind Article 7 is the same as for statistical transfers – one Member State helping 
in the building of new plant and infrastructure in another and sharing the counting of the resulting 
renewable  energy  towards  their  national  trajectories  and  targets  to  reduce  the  overall  cost  of 
reaching the targets. By way of illustration, the paying Member State could offer a tender for the 
production  of  X  MWh  in  the  other  Member  State,  perhaps  for  a  given  technology  or  sub-
technology  (e.g.  for  highly  efficient  PV)  or  for  renewable  energy  in  a  particular  region. 
Alternatively, it could grant access to its support scheme (X MWh of green certificates or feed in 
tariff/premium), again for a specific technology or region in the other Member State. 

Whatever the financial arrangements that are made, the Member States  involved can determine 
between themselves how the energy resulting from the project will be shared in counting towards 
their targets. For instance, this could be in direct proportion to the financial contribution made. 

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Following  such  agreement,  the  Commission  must  be  notified  of  the  arrangement  in  the  same 
manner  as  for  a  statistical  transfer:  a  formal  governmental  notification  of  the  Member  States 
involved, the relevant installation, the energy to be shared and the period covered. As the project 
is concerned with planned production, a second stage of notification is necessary. Thus Article 8 
explains  that  within  three  months  of  the  end  of  each  year  for  which  the  agreement  holds,  the 
European  Commission  is  to  be  notified  of  the  actual  energy  produced  from  the  plant  and  the 
allocation of this energy between the Member States party to the agreement. 

In  both  cases,  statistical  transfers  and  joint  projects,  the  European  Commission  (Eurostat)  will 
keep an account of energy statistics in accordance with the notifications. 

3.3.3. 

Joint Support Schemes 

A  third  form  of  potential  cooperation  between  Member  States  is  to  go  beyond  sharing  the 
financing of limited quantities of renewable energy, or specific projects, and to join their support 
schemes  together  (e.g.  a  common  feed  in  tariff  or  green  certificate/obligation  regime).  When 
Member States wish to do this, it is appropriate that they should easily be able to do so without 
any hindrance from the regulatory regime for target compliance – from the Directive. Therefore 
the  means  of  linking  joint  support  schemes  to  Member  States’  target  compliance  is  straight 
forward, even if the mechanics of joining support schemes themselves together may not be.  

The Article on Joint Support Schemes reflects the view that the efficiency of support schemes can 
be enhanced and the cost of developing renewable energy reduced if support schemes are joined 
and so distortions between different systems avoided. It is worth noting that the legal framework 
for  the  harmonisation  of  support  schemes  for  electricity  from  renewable  energy  sources  that 
existed in the Renewable Electricity Directive has not been replicated. That Directive created a 
seven  year  time  frame  and  a  consultation  framework  for  any  development  of  harmonisation 
initiatives. However the various discussions on the importance of the stability of support schemes 
and the need for somewhat differentiated approaches corresponding to the resources and market 
development  in  different  regions,  have  resulted  in  an  agreement  that  more  effort  should  be  put 
into cooperation and coordination of schemes rather than harmonisation. 

That said, the Article on Joint Support Schemes exists because all parties involved recognise the 
benefits  a  common  approach  can  have.  The  European  Commission’s  recent  reports9  and  the 
working of such groups as the International Feed-in Cooperation initiative highlight the need to 
continue  to  facilitate  discussions  of  cooperation  and  convergence  of  support  schemes.  It  is 
reasonable  to  believe  that  a  gradual  pathway  to  more  consistent  support  frameworks  can  be 
developed which does not destabilise the market and would actually inspire investor confidence 
in the stability, removal of distortions and cost savings it could generate. It is worth noting that 
Article 23(8)(c) of the Directive requires the Commission to evaluate the use of the cooperation 
mechanisms to ensure that Member States are able to achieve their targets cost effectively. 

The renewable energy produced under a joint support scheme is considered “pooled” and shared 
out  either  as  a  “statistical  transfer”  or  according  to  an  agreed  distribution  rule  of  which  the 
Commission has been notified. The Member States concerned must determine and agree the rule 
by which the renewable energy produced will be shared out (for instance, in accordance with the 
level of national financing of the support scheme). The European Commission is then notified of 
this rule by formal letter of the governments concerned. 

9 

COM(2011)31; SEC(2011)131 

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3.3.4. 

Joint Projects between Member States and Third Countries 

In  addition  to  facilitating  cooperation  and  encouraging  cost  savings  through  “virtual  trade”  in 
renewable  energy  between  Member  States,  the  Directive  also  creates  a  framework  for  the 
extension of cooperation to third countries. It does this in two ways. Under certain circumstances 
a  third  country  can  be  treated  effectively  as  a  Member  State  and  take  part  in  the  system  of 
statistical  transfers  and  joint  projects.  More  generally,  the  Directive  provides  a  specific 
arrangement for third countries acting as third countries. 

The  inclusion  of  third  countries  in  the  framework  for  renewable  energy  development  achieves 
several goals. As with other types of cooperation mechanisms, it provides flexibility in meeting 
the  targets  which  can  help  reduce  costs:  physically  importing  renewable  energy  into  the  Union 
when  it  is  cost  effective  to  do  so.  In  this  respect,  this  type  of  cooperation  clearly  addresses 
European energy policy goals: it reduces European consumption of fossil fuels and so generates 
greenhouse  gas  savings,  furthermore,  it  diversifies  our  sources  of  energy;  even  if  the  energy  is 
still  imported,  the  diversification  in  the  number  of  countries,  types  of  energy  and  suppliers  of 
energy  all  contributes  to  improving  the  security  of  Europe’s  energy  supplies.  This  mechanism 
also fulfils a development role: many countries on the periphery of Europe are less wealthy than 
Member  States  and  often  in  need  of  further  investment  to  boost  their  energy  infrastructure. 
Cooperation with Member States can therefore also be beneficial for the third country – export 
revenues,  commercial  relations  with  Member  States  and  infrastructure  investment  will  all 
contribute to the third country’s on-going development. 

Whilst trade in renewable electricity contributes to a broader set of policy goals, it should also be 
recalled that the 20% target is a target for the consumption of renewable energy in the EU. The 
Directive  reflects  the  view  that  if  EU  consumption  can  be  combined  with  renewable  energy 
production in third countries, it should be encouraged. For some fuels – biomass, biofuels etc. – it 
is relatively simple to encourage the production of the fuel in a third country and to import it for 
EU consumption. For electricity is it not quite so simple. For this reason a special framework was 
created to allow electricity generated from renewable energy sources to be imported into the EU 
and  to  count  towards  the  target.  The  key  element  is  that  it  has  to  be  proven  to  be  both  from  a 
renewable energy source, and actually imported.  

The  requirement  that  the  energy is  physically  imported  occurs  because  the  fundamental  aim  of 
the Directive is to generate new renewable energy capacity to meet EU energy policy goals. It is 
submitted that the creation of new renewable energy production facilities in third countries is a 
positive  development  in  itself,  and  that  in  terms  of  reducing  greenhouse  gas  emissions,  the 
displacement  of  fossil  fuel  consumption  in  one  country  has  the  same  benefit  as  in  another. 
However, in terms  of reducing EU fossil fuel imports and diversifying the EU’s energy supply 
mix  and  in  terms  of  generating  new  European  industries  and  jobs,  the  growth  of  renewable 
energy production in third countries is of little benefit. In contrast, when the energy is imported, it 
displaces  EU  fossil  fuel  consumption  and  it  diversifies  the  energy  supply.  Thus,  when  the 
electricity  is  physically  imported  it  contributes  to  the  EU’s  energy  policy  goals,  and  for  this 
reason the joint project regime for third countries was created. 

The means by which electricity generated from renewable energy sources in third countries can 
count towards the target of a Member State is known as a “joint project” similar to those that are 
regulated  by  Article  7.  Such  a  project  can  be  established  between  a  Member  State  and  a  third 
country under certain conditions. Recalling the primary objective of the Directive - a 20% share 
of  renewable  energy  consumed  in  the  EU  –  the  article  specifies  that  renewable  electricity 

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produced in third countries may be counted towards a Member State’s target if it is produced by a 
new  installation  (operational  after  the  entry  into  force  of  the  Directive),  and  is  proven  to  be 
imported into a Member State of the EU. The proofs required on this last point are specified in 
detail (paragraph 2(a)). 

In  addition,  the  energy  that  is  produced  and  exported  to  the  EU  under  the  agreement  may  not 
receive operating support. This rule is applied to reduce the risk of paying double subsidies and 
over-compensating producers. 

A  limited  exception  to  the  requirement  of  physical  import  of  electricity  is  included  in 
Article 9(3).  This  article  allows  for  the  virtual  transfer  of  electricity  from  a  new  plant  if 
interconnector capacity is being built (construction started by 2016), if it will be operational after 
2020  but  no  later  than  2022  and  if  it  will  be  used  to  export  the  electricity  to  the  EU.  This 
exception takes into account that some projects of high European interest in third countries, such 
as the Mediterranean Solar Plan, may need a long lead-time before being fully interconnected to 
the territory of the Community. To kick-start the development it was therefore decided to allow 
Member  States  to  take  into  account  in  achieving  their  national  targets  a  limited  amount  of 
electricity produced by such projects during the construction of the interconnection. 

As with the other types of cooperation mechanisms, following notification of such schemes, the 
Commission will adjust the energy statistics. 

When the above conditions are clearly met, this cooperation mechanism allows Member States to 
search  even  further  afield  than  other  Member  States  for  cheaper  renewable  energy,  providing 
further  scope  for  cost  reductions.  With  this  instrument,  the  way  is  opened  for  trading 
arrangements  not  unlike  the  Clean  Development  Mechanism  under  the  Kyoto  Protocol  and  EU 
ETS for GHG emissions10. The requirement to import the electricity into the EU limits the scope 
of  the  instrument:  it  depends  on  new  plants  being  built  and  electricity  being  exported  through 
interconnector  capacity  between  the  country  of  production  and  the  EU  (including  any  transit 
countries). However, together with the ability to produce other renewable energy fuels (biomass, 
biofuels, biogas) and export them to the EU, this mechanism allows third countries to enter into a 
new market for renewable energy and access to a new potential source of investment and income 
for building up new renewable energy infrastructure, whilst at the same time helping to contribute 
to EU energy policy objectives. 

3.4. 

Barriers to Implementation 

The  Commission  has  noted  that  up  to  €8bn  could  be   saved  annually  by  Member  States  if  they 
took  advantage  of  trading  renewable  energy  through  cooperation  mechanisms.  The  legal 
framework for such trade is established; the economic and fiscal rational is strong, and yet little 
use  is  made  of  the  mechanisms.  It  is  important  to  try  to  understand  what  lies  behind  the 
reluctance of Member States to initiate or even simply allow the use of the mechanisms. Several 
reasons, or barriers have been identified:  

1.  Political  momentum  to  rely  on  domestic  resources,  because  it  is  perceived  to  better  justify 
action vis a vis their electorate (local jobs, domestic greenhouse gas savings) 

2. First movers fear legal risks involved in stepping onto a new field 

10 

The interaction of such schemes with carbon pricing schemes such as EU ETS would have to be taken into 
account.  

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3. Price setting: A question that arises under all mechanisms is how to share the costs and benefits 
of the deployment of renewable energy installations between the States involved. 

Determined based on RES support costs and other direct and indirect costs and benefits? 

4. Cross border grid (but also domestic transmission) infrastructure needs to be further improved 
(addressed through TEN-E, CEF) 

5. Institutional set-up – complexity of the issue rising from statistical transfer to joint projects and 
joint support schemes 

6.  Barriers  specific  to  one  of  the  mechanisms:  Statistical  Transfers  may  suffer  a  risk  of  non-
compliance; Joint Projects require clear definitions of the support scheme for the project, impact 
on and of the domestic support scheme, and mechanisms to share costs and benefits. 

4. 

FUTURE  ACTIONS  BY  THE  COMMISSION  TO  FACILITATE  THE  IMPLEMENTATION  OF 
THE COOPERATION MECHANISMS 

The Commission has participated in numerous meetings and conferences, in Member States and 
in  neighbouring  3rd  countries,  with  governments  and  other  stakeholders,  explaining  and 
discussing  the  nature  of  the  cooperation  mechanism  and  how  they  could  be  established.  The 
Commission  has  also  launched  several  projects  exploring  the  different  technical,  legal,  and 
economic issues surrounding the use of cooperation mechanisms. These include "RE SHAPING" 
(Shaping  an  effective  and  efficient  European  renewable  energy  market),  "RES4LESS"  (Cost 
efficient and sustainable deployment of renewable energy sources towards the EU 20% target by 
2020 and beyond), work by the Secretariat of the Union for the Mediterranean, "Paving the way 
for the Mediterranean Solar Plan". Finally, in its regular meetings with Member States to discuss 
the  implementation  of  the  Directive,  a  special  working  group  was  established  to  deal  expressly 
with  the  creation  of  cooperation  mechanisms  and  to  facilitate  their  creation  and  the  removal  of 
barriers. 

Further  initiatives  could  be  undertaken  to  continue  to  remove  the  barriers  identified  and  to 
facilitate the use of cooperation mechanisms. These include:  

•  Development of Guidelines for the implementation of Statistical Transfer and Joint Projects 
between  MS  and  with  third  countries,  including  methodologies  for  price  setting,  legal  and 
institutional framework conditions, model agreements. 

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•  Since current cooperation mechanisms may not be used beyond 2020, a post 2020 renewable 
energy regime would need to refine the current mechanisms, improve their attractiveness (for 
instance explore a bonus scheme, or future use of European funds to encourage such trade). 
•  Promote, where feasible with  EU  support, the creation of cooperation in the exploitation of 
renewable  energy  between  Member  States,  in  particular  in  Greece  (solar  power)  and  in  the 
northern seas. Further, continue to promote and facilitate the development of North African 
projects (solar power) through the creation of relevant cooperation mechanisms.  

•  Mandate  for  an  Agreement  with  countries  of  North  Africa  (as  already  envisaged  as  a 
possibility  in  the  Directive:  Recital  35:  "Agreements  with  third  countries  concerning  the 
organisation of such trade in electricity from renewable energy sources will be considered."). 
– see Chapter 5.  

The Commission will continue to explore such initiatives and undertake further work to explore 
how  best  to  develop  cooperation  mechanisms  in  the  context  of  achieving  the  2020  targets.  In 
addition,  given  the  constraint  that  the  2020  termination  date  imposes  on  the  use  of  the 
mechanisms, consideration is also needed of the treatment of cooperation mechanism agreements 
beyond 2020 or in a post 2020 renewable energy framework.  

Such  work  will  contribute  and  form  a  part  of  the  Commission's  review  of  the  cooperation 
mechanisms, required by Article 23(8)c of the Directive by 2014. 

5. 

A  LEGAL  FRAMEWORK  FACILITATING  INVESTMENT  AND  TRADE  IN  RENEWABLE 
ENERGY IN THE MEDITERRANEAN REGION 

In  its  Communication  of  8  March  2011  "A  Partnership  for  Democracy  and  Shared  Prosperity 
with  the  Southern  Mediterranean11  the  Commission  had  already  hinted  at  the  possibility  of 
creating a new legal and regulatory framework for energy cooperation across the Mediterranean. 
This policy direction was reiterated in the European Neighbourhood Policy Communication of 25 
May 201112 and the Communication "On security of energy supply and international cooperation 
- "The EU Energy Policy: Engaging with Partners beyond Our Borders" of 7 September 201113. 
The  latter  includes  as  a  key  follow-up  action  to  "Propose  to  partners  a  regional  EU-Southern 
Mediterranean  Energy  Partnership  initially  focused  on  electricity  and  renewable  energy  market 
development in these countries by 2020". 

These orientations were proposed at a moment when the Mediterranean Solar Plan, developed in 
the framework of the Union for the Mediterranean, and several public and private initiatives, on 
both  shores  of  the  Mediterranean,  are  being  developed  with  the  purpose  to  roll-out  renewable 
energy  generation  in  the  region.  Such  activities  address  notably  the  policy  and  regulatory 
framework, the infrastructure issues and the financing aspects. A first success was achieved this 
year  with  the  launch  of  the  first  large-scale  CSP  plant  in  the  Southern  Mediterranean  countries 
(Ourzazate,  Morocco)  with  the  support  of  the  European  Union  alongside  with  Moroccan  and 
international institutions.  

All activities carried out from public and private players in the last years and the experience of 
first  concrete  projects  have  demonstrated  the  need  for  a  stronger  legal  framework  to  facilitate 

11 
12 
13 

COM (2011) 200 
COM (2011) 303 
COM (2011) 539 

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large-scale investments and trade in electricity from renewable sources. This will be particularly 
important,  beyond  the  2020  horizon,  in  order  to  open  new  commercial  possibilities  to  export, 
when  commercially  interesting,  significant  volumes  of  renewable  electricity  to  the  European 
Union.  

The following proposals do not cover the wide spectrum of policies favouring renewable energy 
investment  in  the  Southern  Mediterranean  countries,  which  is  the  scope  of  the  Mediterranean 
Solar Plan "Master Plan" under elaboration with all interested countries. They rather address the 
range  of  legal  provisions  which  could  be  included  in  an  international  instrument  to  support  the 
creation of a renewed "EU-Southern Mediterranean Energy Partnership". 

5.1.  What legal aspects need to be developed? 

Investments in renewable energy projects are long term capital intensive investments for which 
effective  investment  protection  guarantees  are  essential  in  order  to  attract  private  capital.  The 
current  investment  protection  instruments  are  not  regarded  as  sufficient  by  industry.  This 
prevents investments to happen or increases the cost of capital and hence negatively affects the 
economic  feasibility  of  projects.  Appropriate  additional  investment  protection  instruments  are 
thus needed.  

For large-scale projects, only an integrated regional market can ensure commercial viability and 
deliver back-up capacities at economic conditions. This can only happen if basic conditions are 
set to trade electricity regionally, at least as regards wholesale markets. 

Furthermore,  preferential  connection  of  renewable  generation  plants  to  the  grid  and  access  to 
transmission  infrastructure  is  fundamental.  This  might  imply  to  review  or  establish  grid  codes 
ensuring  such  preferential  access  and  there  would  be  a  clear  benefit  in  doing  in  a  cooperative 
manner at regional level. 

More generally, in order to shape investors' confidence, authorisation regimes and/or the award of 
concessions shall be transparent and non-discriminatory. This is of particular importance where 
availability of sites is limited or when the realisation of project is only possible if specific rights 
are granted by the public authority. As a general rule, foreign investors should be treated in the 
same manner as national investors.  

Finally,  measures  concerning  access  to  EU  support,  simplification  of  requirements  for  the 
implementation of Article 9 of Directive 2009/28/EC, and eligibility to the EU Emission Trading 
System could raise the interest of Southern Mediterranean countries.  

5.2.  What provisions could be explored? 

Legal  provisions  facilitating  investment  and  trade  in  renewable  energy  in  the  Mediterranean 
region could thus be developed in the following areas: 

(1) 

Bilateral investment protection treaties link certain Member States and certain Southern 
Mediterranean countries. Several of them have also expressed interest to become party 
to  the  Energy  Charter  Treaty.  However,  it  seems  that  additional  provisions  on 
investment protection are needed at EU-third country bilateral level.  

(2) 

Regional exchanges will develop if import-export restrictions/monopolies are lifted and 
if other restrictions to trade in electricity of renewable origin are prohibited. Trade tariffs 

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should  be  kept  to  zero14  both  as  regards  electricity  of  renewable  origin  and  related 
equipment/services.  Non-tariff  barriers  to  trade  in  renewable  energy  equipment  should 
be minimized.  

Common  provisions  establishing  a  regional  wholesale  energy  market  (or  sub-regional 
wholesale  energy  market)  shall  be  established.  This  would  notably  include  common 
rules for cross-border electricity exchanges such as a common methodology to establish 
Net  Transfer  Capacities  (NTC),  transparent  capacity  allocation  and  congestion 
management rules (at least bilaterally), and common charging principles for the use of 
the networks. These are questions where the input of the energy regulators (through their 
regional  association  MEDREG)  and  of  the  electricity  transmission  system  operators 
(through their regional association MED-TSO) could be sought on the basis of mandates 
for specific grid codes.  

Within  each  network,  grid  connection  rules  and  preferential  access  to  the  grid  for 
electricity of renewable origin shall be established based on common general principles. 
Again, such general principles could be established with the support of MEDREG. 

The  principle  of  national  treatment  should  be  established  as  regards  any  type  of 
authorisation or licensing regime, allowing fair access of entities from all parties.  

Furthermore,  provisions  simplifying  the  physical  import  requirement  set  by  Directive 
2009/28/EC  could  be  proposed.  For  instance,  physical  imports  could  only  be  made 
compulsory if netting off imports and exports is not possible.  

Finally, eligibility of carbon credits generated from new market mechanisms at UN level 
from solar activities serving local markets to the EU Emissions Trading System could be 
enabled and pilot projects encouraged.  

(3) 

(4) 

(5) 

(6) 

(7) 

5.3. 

In what legal framework? 

The  above-mentioned  provisions  could  be  distributed  and  articulated  between  the  bilateral  and 
the multilateral level, notably: 

•  Where it concerns trade related provisions, these could be inserted in the energy parts of the 
Deep  and  Comprehensive  Free  Trade  Agreements  to  be  negotiated  with  Morocco,  Tunisia, 
Jordan and Egypt; 

•  A multilateral instrument focusing on renewable energy development in the Mediterranean. 

Such  multilateral  instrument  could  be  developed  as  an  implementation  measure  for  the 
Mediterranean  Solar  Plan  and  its  principles  could  be  approved  at  the  occasion  of  the  Energy 
Ministerial  Council  of  the  Union  for  the  Mediterranean  scheduled  in  2013.  Such  political 
orientations  would  then  open  the  way  to  a  multilateral  negotiations  between  the  EU  and  a  first 
group  of  countries.  In  a  later  stage,  if  politically  supported,  such  multilateral  agreement  could 
become the precursor of more advanced Mediterranean Energy Community.  

14 

The import of electrical energy in the European Union is not subject to customs duty. 

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6. 

DESCRIPTION OF STRATEGIC RENEWABLE ENERGY TECHNOLOGIES OF THE FUTURE 

6.1. 

Introduction 

Europe can deploy a secure, clean and efficient energy system by 2050 and maintain its global 
industrial  leadership  in  the  field  of  renewable  technologies,  only  by  leading  the  race  for  new 
generations of technologies, by spearheading the integration of renewables in the energy system 
and by developing and investing in high-tech manufacturing systems. The renewable sector has 
already  demonstrated  its  vitality  and  innovation  potential  by  rolling-out  to  the  market  new 
generations of technologies within short lead times. For instance, in less than 30 years, the size of 
wind turbines has increased by a factor of 10 while the cost of photovoltaic panels has decreased 
by more than 80%. These trends are bound to continue. The renewable sector by the variety of its 
resources, sunlight, wind, tides, waves, cellulose, household waste, or hydrogen from algae; and 
concepts  such  as  production  of  aviation  fuel  using  genetically  modified  microbes  or  synthetic 
photosynthesis,  is  a  fertile  ground  for  new  concepts.  The  following  sections  provide  a  broad 
overview of the main trends expected in this field for the post-2020 horizon. The information is 
drawn  mainly  from  the  2011  Technology  Map  of  the  SET-Plan15.  The  Technology  Map  is  a 
regular report produced by the SET-Plan information system (SETIS), which provides a concise 
and  authoritative  assessment  of  the  state-of-the-art  of  a  wide  portfolio  of  low-carbon  energy 
technologies,  their  current  and  estimated  future  market  penetration  and  barriers  to  large  scale 
deployment, ongoing and planned R&D and demonstration efforts and reference values for their 
operational and economic performance.  

6.2. 

Renewable energy technologies 

6.2.1.  Bioenergy 

EU market and industrial status 

In  2009,  global  ethanol  production  reached  nearly  76  billion  litres,  in  more  than  40  countries. 
Global  biodiesel  production  totalled  19.3  billion  litres  world-wide  in  2009,  80%  of  biodiesel 
being  produced  in  the  European  Union.  The  technology  is  therefore  commercially  mature. 
Mandates for blending biofuels into vehicle fuels have been set in at least 41 states/provinces and 
for  24  countries  at  the  national  level.  Most  mandates  require  blending  10–15  %  ethanol  with 
gasoline or blending 2–5 % biodiesel with diesel fuel. In the USA, the Energy Independence and 
Security  Act  of  2007  set  overall  renewable  fuels  targets  of  136  billion  litres  by  2022.  China 
proposed to produce 12 million tonnes of biofuels by 2020. The NREAPs estimate that biofuel 
use in transport in the EU-27 is likely to reach about 30 Mtoe in 2020. The greatest contribution 
in  2020  is  expected  to  come  from  biodiesel  with  21.6  Mtoe,  followed  by  bioethanol/bio-ETBE 
with 7.3 Mtoe and other biofuels (such as biogas/biomethane, vegetable oils, etc.) with 0.7 Mtoe. 
Advanced generation biofuels are expected to be in production at commercial scale by 2020. The 
NREAP  data  show  that  in  2020  about  11  Mtoe  biofuels  could  be  imported  by  all  the  Member 
States in order to reach the 10% binding target for transport fuels. Imported biofuels would then 
represent about 37% of the biofuel use in the EU in 2020. 

The  installed  bio-electricity  capacity  in  EU-27  according  to  the  NREAPs  is  expected  to  reach 
more  than  43  GW  in  2020,  of  which  30  GW  from  solid  biomass  plants,  11 GW  from  biogas 
plants  and  2  GW  from  liquid  biofuel  plants.  The  installed  capacity  of  biomass  power  plants  is 

15 

European Commission, DG JRC: 2011 Technology Map of the European Strategic Energy Technology Plan 
(SET-Plan) – Technology descriptions, EUR 24979, 2011. 

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expected to further increase in the EU-27 to 52 GWe by 2030. Technology for heat and power 
production is mature at commercial scale, although there is significant  potential to improve the 
efficiency of conversion. Renewable heating and cooling will make a total contribution of almost 
112  Mtoe  in  2020  in  the  EU,  according  to  the  NREAPs.  Biomass  will  still  have  the  major 
contribution of 81% (~ 90 Mtoe) for heating and cooling in 2020, of which, solid biomass will 
provide 81.0 Mtoe, biogas 4.5 Mtoe and bioliquids 5.0 Mtoe. 

Costs status and projections 

The  main  barrier  to  widespread  use  of  biofuels  in  transport  and  bioenergy  heat  and  power 
production is cost competitiveness with fossil fuels. Bioenergy and biofuels have to compete in 
the  same  markets  as  fossil  fuel  energy  and  fossil  fuels  and  thus  need  to  match  their  costs.  For 
example, the biomethane price to the customer will have to be the same as that for natural gas. 
For the other energy and fuels products from biomass a range of targets has been envisaged for 
2020  by  the  European  Bioenergy  Industrial  Initiative.  These  include  a  price  lower  than  80 
€/MWh  for  synthetic  liquid  fuels  by  thermal  processing  and  ethanol  and  hydrocarbons  by 
biological  processing.  For  electricity  and  heat  production  by  thermal  conversion,  prices  are 
projected to be less than 75€/MWh and 35€/MWh, 
respectively. All the above prices (reference 
2010)  are  based  on  lower  heat  values,  are  for  “the  point  of  sale  to  the  customer”  (taxes  not 
included)  and  assume  an  oil  price  of  86  USD/barrel.  The  main  parameters  affecting  bioenergy 
and  biofuel  costs  are  conversion  efficiency,  feedstock  availability  at  acceptable  cost  and 
investment  costs  for  plant.  Biofuels  production  depends  on  financial  support  (subsidies)  and 
further cost reduction of first generation biofuels is needed in order to compete with fossil fuels. 
The  development  of  second  generation  biofuels  depends  on  the  improvement  of  their 
technological and economic performances. Typically, lignocellulosic biofuel plants and most heat 
and power plants need to be of large scale in order to operate on a cost-effective basis. Biomass 
availability at low cost is an important issue. Increased use of biomass in the future will lead to 
increased prices. Biomass supply costs are influenced by the amount of biomass required and by 
transport  distances.  Infrastructure  and  logistical  planning  will  be  needed  to  ensure  efficient 
utilisation of high volumes of biomass for bioenergy. There is already a significant challenge to 
balance the sensitive interplay between biomass price, biomass availability for long-term supply 
contracts and the bioenergy plant size that will allow economic operation.  

Technology trends 

First  generation  biofuels  (bioethanol  from  crops  such  as  sugar  beet,  maize  and  sugar  cane,  and 
biodiesel/bio-kerosene from edible vegetable oil or animal fat) will be predominant up to 2020. 
The  first  commercial  plants  producing  advanced  biofuels  should  contribute  up  to  4%  of  EU 
transportation energy needs by 2020. As part of this contribution, the Biofuels Flightpath 202016 
is  preparing  the  shift  from  conventional  kerosene  to  liquid  biofuel  and  where  refinery  sector  is 
targeting to produce 2 million tons of bio-kerosene by 2020. Bioenergy should be covered mainly 
by biological and chemical pathways from lignocellulosic feedstock. Niche market opportunities 
will  also  provide  small  but  important  contributions  from  thermochemical  technologies  such  as 
Bio  Dimethyl  Ether  (DME)  from  black  liquor,  tall  oil  pitch  and  biomethane  upgraded  from 
biogas.  High  efficiency  heat  &  power  generation  via  thermochemical  conversion  should  also 
penetrate  the  market  by  2020.  Small  scale  very  low  emissions  combustion  installations  are 
expected to be available for commercial applications. 

16 

http://ec.europa.eu/energy/renewables/biofuels/flight_path_en.htm 

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Beyond  2020,  liquid  and  gaseous  biofuels  produced  via  thermochemical  routes  from 
lignocellulosic feedstock and microalgae and/or macroalgae are expected to penetrate the market. 
Bio-oil  production  by  flash  pyrolysis  process,  or  other  processes,  from  solid  biomass/waste 
feedstock are expected to enter the EU markets. Algae productivity can reach very high yield per 
unit  area  and  it  would  be  possible  to  produce  algae  on  non-arable  lands  thereby  avoiding  land 
competition  with  other  crops  (although  the  land  would  be  providing  other  ecosystem  services). 
Innovative  value  chains  combining  thermochemical  and  biochemical  pathways  could  permit 
biofuel  production  from  heterogeneous  organic  residues  (via  gasification)  or  directly  from 
industrial  gaseous  emissions.  Beyond  2030,  biofuels  produced  by  microorganisms  such  as 
bacteria  via  modified  metabolism  or  biofuels  produced  via  artificial  photosynthesis  could  also 
enter  the  bioenergy  market.  Artificial  photosynthesis  would  enable  a  high  gain  of  energy 
efficiency  from  sunlight  to  biofuels.  Natural  photosynthesis  has  an  efficiency  of  less  than  1% 
from solar energy to the energy in biomass that is grown. Current research developments indicate 
possible increases in efficiency by a factor of 10 through either modified metabolism or artificial 
systems and if successful this would reduce the pressure on land use. 

Bio-methane from biomass can be a gradually increasing substitute for natural gas. Bio-methane, 
as long as it undergoes a purification process to comply with the methane grid specifications, can 
be  mixed  at  any  ratio  with  natural  gas  avoiding  double  investment  into  a  parallel  bio-methane 
distribution network. 

6.2.2.  Wind 

EU market and industrial status 

Wind power is the renewable energy which has seen the widest and most successful deployment 
over the last two  decades,  from 3 GW to 240  GW of  global cumulative capacity. In the EU in 
2011,  the  wind  energy  generation,  estimated  at  the  EU  average  load  factor  of  21.2  %,  was 
175 TWh or 5.3 % of the estimated 3 300 TWh of EU electricity demand. The countries with the 
highest wind share in the electricity mix in 2010 included Denmark (22 %), Portugal (17.1 %), 
Spain (16.6 %), Ireland (10 %), and Germany (6.2 %). Wind energy will provide at least 12 % of 
European  electricity  by  2020,  therefore  significantly  contributing  to  the  20/20/20  goals  of  the 
European energy and climate policy. Beyond 2020, the integration of 50 % wind power into an 
electricity system is seen as technically possible. 

European technology largely dominates the world market although European manufacturers, who 
used  to  dominate  the  world  market  as  well,  have  seen  their  shares  shrink  to  50 %.  European 
technology is now present in US, Chinese, Indian and South American firms through licenses or 
purchases of European companies. European companies still dominate the offshore subsector of 
the wind industry. 

Costs status and projections 

The cost of wind energy depends on factors such as the cost of raw materials; technology options; 
supply  bottlenecks  (e.g.  there  is  limited  competition  in  offshore  cable  supply);  market 
supply/demand  balance;  administrative  barriers,  including  permits  and  those  caused  by 
NIMBYism; payments for wind electricity, e.g. feed-in tariffs (FiT) and premiums, grants, etc.; 
and on risks and uncertainties impacting on the investors and lenders. Up to 2004, turbine prices 
declined,  influenced  by  technology  learning  and  the  increasing  volumes  of  production. 
Supply/demand  imbalances  and  the  increase  of  raw  material  and  component  prices  pushed  up 

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onshore  turbine  prices  to  around  €1  150/kW  in  2009,  when  the  reduction  in  raw  material  costs 
caused  by  the  financial  crisis,  manufacturing  overcapacity  and  increasing  competition  pushed 
down prices to around €950/kW by mid-2011, with th e Spanish and Italian markets showing the 
lowest prices.  

The trend for capital investments is for onshore sites to reduce further due to non-technological 
factors  -  such  as  the  entry  into  the  competition  of  Chinese  turbine  suppliers  and  the  increasing 
size of turbine blades - playing a significant role, and then to stabilise. Without doubt technology 
will continue to progress but, as wind turbines are viewed as some kind of commodity, it is likely 
that  non-technological  factors  will  have  a  stronger  influence  on  the  onshore  turbine  price. 
Offshore  wind  costs  are  expected  to  remain  high  until  2015  but  there  is  potential  for  cost 
reductions  from  factors  that  include  technology  improvements  (e.g.  new,  cheaper  foundations 
with  lower  installation  costs),  learning-by-doing,  improved  supply  chain  and  increased 
competition. 

Technology trends 

Wind  energy  is  among  the  most  advanced  renewable  energy  technologies.  The  industry  targets 
are  to  supply  20%  of  Europe’s  electricity  in  2020,  33%  in  2030,  and  50%  in  2050  with  wind 
power.  Major  investments  in  technologies,  mass  production  and  deployment  will  be  needed  to 
reach these targets. Onshore wind systems require focus on innovative designs to reduce cost of 
energy  and  on  solutions  for  not  so  favourable  conditions  such  as  lower-wind  areas,  complex 
terrains and extreme weather. Innovative solutions to ease transport of all components, to shorten 
the  time  for  on-site  assembly  and  installation  and  to  minimise  the  external  impact  in  the 
construction  phase  are  also  needed.  Improved  forecasting  tools  for  wind  power  generation  are 
necessary to maximise its value on the electricity market. Additional cost reductions have to be 
achieved by using new control systems and methods for optimisation of operation and reduction 
of maintenance. 

Very large wind turbines, from 10 to 20MW, are required for the offshore sites to compensate for 
the  high  cost  of  support  structures,  in  particular  for  deep  waters.  New  concepts  for  multi-
service/multi-use  floating  platforms,  as  well  as  new  wind  turbine  designs,  such  as  vertical  axis 
turbines, should be developed, demonstrated and manufactured for commercial deployment. The 
intelligent  use  of  advanced  materials  will  become  increasingly  important  to  enable  larger  area 
rotors but also in respect to the shortage of raw materials for the generators. Furthermore, reliable 
and  affordable  solutions  for  assuring  grid  stability  as  well  as  for  balancing  demand  and 
production  in  the  presence  of  high  shares  of  wind  electricity  will  have  to  be  developed  and 
demonstrated.  Focused  technological  development  and  demonstration  action  for  increased 
availability and reliability for both onshore and especially offshore wind turbines is indispensable 
to  make  wind  energy  fully  cost  competitive  and  to  maintain  important  investments  in  wind 
energy in the absence of preferential tariff schemes. 

6.2.3. 

Solar photovoltaics 

EU market and industrial status 

The  PV  sector  has  expanded  rapidly  in  Europe  with  annual  growth  rates  of  the  order  of  40  % 
since  2000.  The  total  installed  capacity  of  PV  systems  in  the  EU  in  2011  was  51.3  GWp, 
representing  approximately  6  %  of  the  total  EU  electrical  generation  capacity.  The  electricity 
generated  by  PV  systems  that  year  was  approximately  35  TWh.  The  annual  installation  of  PV 

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systems  in  2011  in  the  EU  reached  18.3  GWp,  the  second  largest  amount  of  newly-built 
electricity generation capacity after gas-fired power stations. This was due to an exceptional high 
installation  rate  in  Germany  with  about  7.5  GW  and  approximately  6  GWp  installed  in  Italy. 
According  to  NREAPs,  26  Member  States  have  set  specific  photovoltaic  solar  energy  targets, 
adding up to 84.5 GW in 2020. Over 50 GW is foreseen to come from Germany, but the sun-rich 
Mediterranean  countries  which  only  pledged  24.6  GW  now  look  set  to  exceed  this  (by  2011 
Italy's cumulative installed capacity of more than 12 GW had was already above the target of 8 
GW target it set itself for 2020). 

Costs status and projections 

Crystalline  silicon-based  systems  are  expected  to  remain  the  dominant  PV  technology  in  the 
short-to-  medium  term,  but  thin  films  and  concentrator  PV  systems  are  increasing  their  market 
share. In the medium term, PV systems will be introduced as integral parts of new and re-fitted 
buildings,  a  market  which  will  also  be  driven  by  legal  requirements  for  building  energy 
efficiency. Finally, in the long term, new and emerging technologies will come to the market. It is 
expected that crystalline silicon, thin films and other technologies will have equal shares in the 
installed PV capacity in 2030. The cost of a typical turn-key system is expected to decrease from 
€2.0-3.0  in  2011  to  €1  to  2/Wp
  in  2015,  and  below  €1/Wp  in  2030.  Simultaneously,  module 
efficiencies will also increase. Flat-panel module efficiencies will reach 20 % in 2015 and up to 
40 % in the long term, while concentrator module efficiencies will reach 30 % and 60 % in 2015 
and  in  the  long  term  respectively.  It  is  expected  that  if  these  technology  developments  are 
realised,  the  cost  of  electricity  from  PV  systems  will  be  comparable  to  the  retail  price  of 
electricity in 2015 and of the wholesale price of electricity in 2030. 

Both  crystalline-Si  solar  cells  and  the  “traditional”  thin-film  technologies  (a-Si:H  and  its 
variations based on proto-crystalline or micro-crystalline Si, as well as polycrystalline compound 
semiconductors)  have  developed  their  roadmaps  aiming  at  further  cost  reductions.  These 
roadmaps are based on growing industrial experience within these domains providing a solid data 
base  for  quantification  of  the  potential  cost  reductions.  The  Strategic  Research  Agenda  of  the 
European Photovoltaic Platform is one example which describes the research needed for these set 
of PV technologies in detail, but also points out the opportunities related to beyond-evolutionary 
technology developments. These technologies can either be based on low-cost approaches related 
to extremely low (expensive) material consumption or approaches which allow solar cell devices 
to exhibit efficiencies above their traditional limits. 

Technology trends 

A broad variety of photovoltaic technological routes will continue to characterise the sector after 
2020 depending on the specific requirements and economics of the various applications. Typical 
commercial  flat-plate  module  efficiencies  are  expected  to  increase  to  25%  in  2030  with  the 
potential of increasing up to 40% in 2050 due notably to wafer equivalent technologies and new 
device  structures  with  novel  concepts.  The  operational  lifetime  of  photovoltaic  modules  is 
expected  to  increase  from  25  years  to  40  years.  The  use  of  energy  and  materials  in  the 
manufacturing  process  will  become  significantly  more  efficient,  leading  to  considerably 
shortened photovoltaics system energy payback times. At the same time, affordable materials will 
replace  the  expensive  ones  currently  used  (e.g.  copper  instead  of  silver).  Increased  R&D  is 
needed  to  bring  thin  film  technologies  to  maturity  and  long  term  reliability  and  to  create  the 
necessary  experience  in  industrial  manufacturing.  Beyond  2020,  the  efficiency  of  commercial 
modules could reach more than 20% for CIGS (14% max module efficiency today), 16% for a- 

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Si, and 15% for CdTe, with new and improved device structures and substrates, large area, non-
vacuum deposition techniques, interconnection, roll-to-roll manufacturing and packaging.  

Concentrated PV technology is presently moving to commercial-scale applications. Further R&D 
efforts  are  required  in  optical  systems,  module  assembly,  tracking  systems,  high-efficiency 
devices with the potential of reaching module efficiencies higher than 23%/45%. Emerging PV 
technologies such as advanced inorganic thin film technologies, organic solar cells, also based on 
novel concepts like quantum and excitonic structures with their potential for cost reduction and 
performance improvement will represent an increasing share of the PV deployment post 2020. A 
relevant R&D work is necessary to capture this potential. For instance, it is necessary to work on 
the  long-term  stabilization  of  the  performances  of  the  organic  solar  cells  and  improve  their 
lifetime. 

6.2.4.  Concentrated Solar Power (CSP) 

EU market and industrial status 

At the end of 2011, CSP plants with a cumulative capacity of about 1.2 GW were in commercial 
operation in Spain, representing about 70 % of the worldwide capacity of 1.7 GW. The NREAPs 
forecast  an  increase  in  capacity  to  7  GW  by  2020,  mostly  located  in  Spain.  The  CSP  industry 
association ESTELA is more optimistic, predicting 30 GW by 2020 and 60 GW by 2030.  

Within  just  a  few  years,  the  CSP  industry  has  grown  from  negligible  activity  to  over  4 GWe  either 
commissioned  or  under  construction.  More  than  ten  different  companies  are  now  active  in  building  or 
preparing for commercial-scale plants, compared to perhaps only two or three who were in a position to 
develop  and  build  a  commercial-scale  plant  a  few  years  ago.  These  companies  range  from  large 
organizations with international construction and project management expertise who have acquired rights 
to specific technologies, to start-ups based on their own technology developed in house. In addition, major 
renewable  energy  independent  power  producers,  and  utilities  are  making  plays  through  various 
mechanisms for a role in the market. 

Costs status and projections 

Capital investment for solar-only reference systems of 50 MWe without storage was estimated to 
be approximately €4800 per kWe. With storage,  these costs can go up significantly. Depending 
on  the  Direct  Normal  Insolation  (DNI),  the  cost  of  electricity  production  for  parabolic  trough 
systems is currently of the order of €0.18–0.20/kWh (southern Europe, DNI: 2 000 kWh/m 2/a). 
The Solar Europe Industrial Initiative indicates the potential to reduce costs by 35% by 2020. 

Technology trends 

The mainstream approach to CSP (oil circulating in trough receivers) appears to have a limited 
potential for cost reduction. Even allowing for storage and dispatchability possibilities as well as 
for  mass  production  of  components,  competitive  electricity  production  costs  cannot  be  assured. 
More  research  on  advanced  concepts  (molten  salts/solar  trough,  direct  steam/Fresnel,  molten 
salts/solar  tower),  able  to  bring  technology  innovations  is  necessary.  Beyond  2020  substantial 
increases  (above  600  °C)  in  the  operating  temperature  of  the  heat  transfer  fluids  are  to  be 
expected  compared  to  the  current  mainstream  technology.  This  will  be  achieved  by  studying 
materials  and  components  which  are  reliable  at  very  high  temperature,  developing  new  heat 
transfer  fluids,  more  efficient  cycles  and  new  system  architectures,  and  optimising  the  plant 

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control system. Gains in efficiency will be considerable - more than 20% compared to the current 
state of the art.  

In  terms  of  dispatchability,  the  storage  capacity  will  be  improved  (above  250  kWh/m3)  due  in 
particular to the study and implementation of ad-hoc thermochemical processes. This will make 
storage  systems  more  cost  effective.  With  regard  to  the  environmental  profile,  beyond  2020  a 
significant  reduction  of  water  consumption  (below  0,25  l/kWh)  can  be  obtained  (in  particular 
through the use of dry cooling systems) while at the same time maintaining the overall efficiency 
of  the  plant.  As  regards  multi-purpose  plants  and  hybridisation,  beyond  2020  it  should  be 
possible to optimise the hybridisation of CSP plants with other renewable energy sources and to 
efficiently couple the production of electricity with other uses (e.g. desalination).CSP solar power 
plant  exploiting  possible  efficiencies,  cost  reduction,  performances  improvements  coming  from 
innovative combined production of electricity and fresh water are strategically and symbolically 
relevant for exploitation in the MENA (Middle East and North Africa) region. 

6.2.5.  Geothermal energy 

EU market and industrial status 

There  are  three  geothermal  electricity  market  segments,  two  of  them  based  on  hydrothermal 
systems  and  the  enhanced  geothermal  system  (EGS).  The  first  one  is  the  high-temperature 
hydrothermal market, which accounts for only 910 MW in the EU, of which only 20 MW were 
installed  in  2010.  The  second  segment  is  low-temperature  hydrothermal,  exploited  through 
binary-cycle power plant, and which utilises resources that are more widespread in Europe. The 
plant units are smaller, costs are higher and the efficiency lower. Slowly, this market is growing, 
supported by high feed-in-tariffs. The third segment is made of EGS technologies, still at an early 
stage  of  exploitation,  with  currently  5 MW  installed  in  Europe  and  a  huge  potential,  which 
suggests that this will be an important future market.  

The  geothermal  heat  market  is  divided  among  heat  pumps  (GSHP)  and  direct  heat  use.  The 
former market is growing faster supported by subsidies to counterbalance the high costs, such as 
for piping. The European GSHP  market  was  1.75  GWth in 2009, which is a 6.6 % reduction in 
annual installed capacity compared to 2008, and suffered a further 3 % reduction in 2010 to reach 
an estimated cumulative capacity of 12.6 GWth The direct heat market, being surprisingly varied, 
has  much  room  for  growth  which  is  not  realised,  and  this  suggests  the  existence  of  strong 
barriers. At the end of 2009, European capacity for direct heat use was 2.86 GWth.  

Costs status and projections 

A 50 MW conventional geothermal plant with an average production of 5 MW per well requires 
1 285-2 285 €/kW in well costs assuming a 67 % succe ss rate. Total plant investment costs vary 
in the range of 1 600-3 200 €/kW for flash tech nology, 2 600-4 500 €/kW for binary cycles, and 
up to 26 000 €/kW for the current EGS demonstration  projects. It is expected that costs will reach 
around 8 000 €/kW in the long term. Cost of electr icity is competitive with fossil fuels in high-
enthalpy regions (e.g. Italy) at around 50 €/MWh, but can reach  300 €/MWh at low-enthalpy sites 
using binary plant. Cost of heat depends on whether it is the main product or a by-product of the 
geothermal exploitation, and the highest cost correspond to EGS exploitations in a range 40 – 100 
€/kWh th. 

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The  installed  cost  of  heat  pumps  varies  between  1 000  and  2 500 €/kW  for  typical  domestic 
facilities  of  6  -  11 kW,  and  between  1 700  and  1 950 €/kW  for  industrial  or  commercial 
installations  in  the  55  –  300 kW  range.  Capital  costs  depend  greatly  on  the  ground  exchanger 
layout, whether horizontal or boreholes. 

Technology trends 

Geothermal  energy  has  the  potential  to  supply  20%  of  the  energy  consumption  in  Europe  by 
2050,  according  to  the  European  Geothermal  Energy  Council.  The  use  of  shallow  geothermal 
energy through heat pumps is a proven technology with a potential for expansion to both new and 
existing  residential  and  commercial  buildings,  agricultural  and  industrial  applications.  Heat 
pumps combined with underground thermal energy storage are also ideally suited to supply low 
temperature  energy  to  district  heating  and  cooling  systems.  Research  and  development  are  still 
needed to increase the efficiency of heat pumps, to develop robust, reliable and low-maintenance 
systems and to develop products and methodologies for cost-effective retrofitting of buildings. 

EGS  have  the  potential  for  a  wide  and  cost-effective  exploitation  of  geothermal  energy  for 
electricity  production.  The  high  initial  investments  in  an  EGS  will  be  reduced  with  technology 
advances  such  as  developing  of  methods  of  reliable  resources  assessment,  cheaper  drilling, 
optimisation of stimulation technologies, reducing risk of induced seismicity, advanced reservoir 
management,  control  of  water  losses  and  water  chemistry.  The  low  operating  costs  and  the 
potential  to  increase  plant  efficiency  are  expected  to  make  geothermal  energy  competitive  with 
other  energy  sources  and  to  extend  the  application  potential.  The  technological  advances  in 
binary power plants (using Organic Rankine or Kalina cycles) will further expand the potential to 
areas with lower enthalpy sources. Advances in material research will help the cost-effective and 
reliable exploitation of supercritical zones which can deliver very high enthalpy resources. 

6.2.6.  Marine energy 

EU market and industrial status 

Most marine energy technologies are in an early stage of development, under demonstration, or 
have a limited number of commercial applications. Globally in 2011 more than 25 marine energy 
technology demonstration projects are performed with all of them being in pre commercial stage. 
Nevertheless, in 2014, 15 projects will be in commercial phase. The main markets in 2020 will be 
France, Ireland, Portugal, Spain, and the United Kingdom, i.e. the Member States of the Atlantic 
Arc. UK which is the pioneer in marine energy has 8 devices working at full-scale demonstration 
stage (5 on tidal energy and 3 on wave energy). 

Still  and  until  the  mid  2014  the  global  installed  capacity  will  account  for  prototypes  and 
demonstration. In 2014 first marine farms will appear and can reach 1GW by 2020 and nearly 10 
GW by 2030. Whereas, support for marine energy from policymakers and larger manufacturing 
capabilities  in  combination  with  cost  reductions,  could  lead  the  marine  energy  to  become  cost 
competitive with offshore wind and thus a part of the energy mix from 2020 onwards. European 
utilities are moving out of the development learning curve.  

Costs status and projections 

The levelised cost of energy for wave and tidal is 272 and 194 €/ MWh respectively. The high 
cost is due to the early stage of technologies. In particular, the present projects are constrained to 

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10 MW total installed capacity and thus have limited economies of scale. Nevertheless, the total 
electricity production cost according to ETSAP will decrease from 286 €/ MWh for wave energy 
to  172  €/  MWh  and  for  tidal  from  243  to  172  €/
  MWh.  Furthermore,  the  investment  cost 
according to IEA is projected for 2050 to drop to 1500-1750 €/ kW 17. 

Technology trends 

The  seas  represent  a  vast  potential  of  energy,  however,  marine  energy  device  deployment  and 
survivability in harsh marine environments is challenging and capital costs associated with pre-
production  prototypes  are  very  high.  In  the  last  few  years  an  increasing  number  of  devices  are 
reaching full-scale live testing and proving reliability over sustained periods. By 2020, full scale 
marine  energy  systems  are  expected  to  have  demonstrated  their  operational  performance  and 
survivability in real conditions. Further technological advances would still be needed in the key 
areas of energy converter and power take-off components, deployment and installation methods, 
development of design, operation and maintenance of single and multiple device arrays with an 
objective of technological advancement from R&D to demonstration, pre-commercial and finally 
to large scale commercialisation. 

The  deployment,  in  the  sea  environment,  of  large  marine  energy  farms  for  the  electricity 
generation of tomorrow presents also relevant logistic challenges related to the installation of the 
devices,  the  connection  to  the  grid,  the  continuous  monitoring  and  the  maintenance.  Strong 
synergies between off-shore wind, marine and the grid are also expected to be implemented for 
connection, transmission and distribution. 

6.3. 

Fostering renewable integration 

6.3.1.  Power storage 

EU market and industrial status 

After  a  few  years  of  stagnation  in  electricity  storage  capacity,  the  sector  is  gathering  new 
momentum  through  the  upgrade  and  new  projects  being  built  in  pumped  hydropower  storage 
(PHS).  The  European  PHS  capacity  of  around  42  GW  has  increased  mainly  in  Austria, 
Switzerland,  Germany,  Spain  and  Portugal,  and  could  reach  55 GW  by  2020.  The  other 
technology  capable  of  utility-scale  storage  is  compressed-air  energy  storage  (CAES).  There  is 
however only  one installation  in  Europe but worldwide  several projects  attempt to demonstrate 
advanced CAES (i.e. adiabatic CAES). The production of chemical storage (e.g. hydrogen) from 
renewables is seen as a necessary step in order to achieve a very high penetration of renewables. 

Technology trends 

Electricity storage is a clear key technology priority for the development of the European power 
system  of  2020  and  beyond,  in  the  light  of  the  increasing  market  share  of  renewable  and 
distributed generation and the growing limitations of the electricity grid. A cost efficient storage 
solution  would  consider  different  electricity  storage  technologies  at  different  levels  of  the  grid, 
and  take  also  additional  measures  into  account,  such  as  an  improved  demand  response,  an 
optimised  mix  of  renewable  generation  reducing  variability,  smart  grid  solutions  increasing  the 
resilience  of  the  grid.  The  technological  challenge  requires  the  significant  increase  of  storage 

17 

These  data  according  to  IEA  refer  to  plants  in  the  United  States.  Cost  data  in  other  world  regions  are 
calculated by multiplying these costs by region-specific multipliers for the investment and O&M costs. 

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capacity over the coming decades. Although recent research shows that there is room for further 
expansion of pumped hydro storage, it is still necessary to develop, demonstrate and deploy new 
storage technologies. A wide array of principles - mechanical, (electro)-chemical and physical - is 
available  to  store  electricity.  However,  today  hydropower  plants  with  storage  remain  the  most 
common and competitive  storage  technology at the energy  system level.  All other  technologies 
are to  some extent locked in the  development stage facing multiple barriers from technological 
issues, market uncertainty, regulation and economics.  

An overriding priority should be given to research and development in particular on materials and 
control systems to generate new concepts, to mature and improve the operational characteristics 
and economics of emerging technologies and to ensure optimum interoperability with the electric 
grid. This should be complemented by industrial-scale demonstration projects across the EU for 
near-to-market technologies such as adiabatic CAES and lithium-ion batteries to build industrial 
capacity and to provide data that can validate their performance and demonstrate their business 
cases  and value to  regulators, utilities, and investors.  Besides, there are relevant regulatory and 
market  issues  at  stake.  Traditionally,  the  storage  service  has  been  carried  out  by  the  vertically 
integrated grid operators. In today’s liberalised and unbundled electricity market, the economics 
of  storage  schemes  depend  on  revenues  from  grid  support  services  and  on  price  arbitrage.  It  is 
unclear  whether  this  framework  would  be  enough  to  foster  the  necessary  future  investment  in 
storage  schemes  or  a  different  regulatory  framework  will  be  needed,  one  which  could  allow 
storage  to  capitalise  on  its  ability  to  intervene  and  generate  revenues  from  all  the  electricity 
market segments.  

6.3.2.  Grids 

EU market and industrial status 

National  programmes  and  projects  supporting  market  deployment  of  advanced  electricity  grid 
technologies have been steadily growing in number in the last decade. To support the trend and to 
strengthen  the  effort  towards  the  deployment  and  market  roll  out  of  advanced  power  networks, 
the European Electricity Grid Initiative of the SET-Plan has been launched in 2009, with a EUR 2 
billion budget, over the period 2012-2018. At the same time, the European Commission grouped 
together all the relevant stakeholders in power transmission and distribution, creating the “Smart 
Grids Task Force”, with the aim of elaborating advice to the Commission in developing effective 
policy  measures  for  the  Smart  Grids  deployment  up  to  2020  according  to  the  provision  of  the 
Third  Energy  Package.  The  set-up  of  a  common  regulatory  and  market  framework  for  cross-
border  electricity  trade,  as  provided  by  the  Third  Energy  Package,  is  also  pushing  towards  a 
common  EU  electricity  market.  Such  a  development  will  drive  a  significant  increase  in 
transmission capacity and efficient allocation mechanisms, requiring both important investments 
from TSOs and market operators throughout Europe. 

National  investments  that  contribute  to  bridge  the  gap  between  the  innovation  and  the  market 
deployment  primarily  focus  on  smart  meters  and  system  integration,  allowing  increased 
integration  of  distributed  generation  and  demand  response.  The  European  industry  is  at  the 
forefront in the development and deployment of High Voltage Direct Current technology for long 
distance  transmission,  with  around  ten  projects  planned  in  Europe  in  the  next  decade.  Typical 
investment cost ranges for HVDC undersea cables range today from 1000 to 2000 kEUR/km for 
the  HVDC  cable  and  from  65  to  125  kEUR/MW  for  HVDC  terminals.  Flexible  Alternating 
Current  Transmission  Systems  FACTS  are  also  continuously  developed  in  order  to  improve 
controllability,  efficiency  and  reliability  and  ultimately  the  transmission  capacity  of  existing 

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lines.  However,  the  costs  of  the  power-electronic  devices  that  build  FACTS  systems  are  still 
much higher than mechanical ones, although they represent a concrete development perspective 
for  the  European  industry.  Nonetheless,  the  increasing  deployment  of  renewable  energy 
generation  plants  is  a  driver  for  the  ongoing  and  planned  installation  of  FACTS  devices  in 
Europe. ICT technology, including for data control and system supervision –including Wide Area 
Monitoring Systems (WAMS) and Supervisory Control And Data Acquisition (SCADA), are also 
offering the European industry a valuable opportunity to compete worldwide in the power sector. 
Other  markets,  such  as  the  storage  technologies  market,  addressed  in  the  previous  section,  are 
also expected to contribute and take off with future power grids technologies. 

The  European  power  industry  is  also  pointing  out  the  need  to  remove  obstacles,  by  defining 
common  technical  standards  and  a  clear  and  stable  regulatory  framework;  by  fostering  social 
acceptance for new infrastructure as well as customers’ engagement in participative programmes. 
These  conditions  will  contribute  to  shaping  the  market  deployment  pace  of  future  grid 
technologies. 

Technology trends 

Electricity grids will need to integrate and connect 34% of total electricity supply from renewable 
electricity sources by 2020. This percentage is expected to reach 64 to 97% in 2050. Much of the 
renewable electricity generation will be concentrated in locations far from consumption centres or 
will  be  widely  dispersed.  Future  networks  for  bulk  transport  of  renewable  electricity  to  distant 
load centres require research and innovation in materials and technologies, as well as in system 
management and controls. The fluctuation of renewable generation will require enhanced tools to 
offset this variability with all flexibility options such as active demand, cost effective storage and 
interaction among various energy networks. Millions of small producers, active loads and flexible 
grid  structures  will  require  equipment  and  algorithms,  policies  and  standards  for  sensing, 
communication  and  automation  of  their  interaction  to  ensure  security  of  supply.  Grid  planning 
and management will increasingly require a European-level approach, and increasing cooperation 
among existing players. New players will need to emerge, e.g. to provide energy services.  

The infrastructure needs of renewable energy transport fuels, covering alternative fuel refuelling 
stations,  common  standards  and  policies  and 
improved  management  of  systems  for 
electromobility  are  examined  in  depth  in  the  2011  Transport  White  Paper's  alternative  fuels 
strategy (White Paper, Roadmap to a Single European Transport Area – Towards a competitive 
and  resource  efficient  transport  system.  COM(2011)144  final)  and  are  addressed  in  the  revised 
TEN_T guidelines (COM(2011)650). 

6.3.3.  Advanced Manufacturing 

The mastery of manufacturing will determine in large parts the capacity of Europe to stay at the 
forefront  of  the  global  industrial  competition.  High  tech  manufacturing  creates  comparative 
advantages  by  shifting  the  price  focus  from  traditional  factors  such  as  labour  and  natural 
resources to knowledge, a resource in which Europe excels. Manufacturing is a particularly tough 
challenge  that  requires  a  holistic  innovation  approach.  Support  should  be  given  to  research, 
development  and  demonstration  activities  to  develop  flexible,  multi-product  manufacturing 
systems  to  shorten  innovation  cycles  and  rapidly  respond  to  customer  demands  and  smart 
assembly  systems  that  integrate  effectively  skilled  workers  and  automated  processes  and  can 
open  the  market  for  commercially  viable  small  scale  systems  to  be  deployed  also  in  emerging 
markets outside Europe.  

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6.3.4.  Electromobility  

Electricity  and  Hydrogen  are  energy  vectors  which  can  also  represent  an  effective  way  to 
introduce renewable energy sources into the transport chain. Battery electric and fuel cell vehicles 
enable  electrification  of  transport  (electromobility),  which  is  a  priority  in  the  EU's  Seventh 
Framework Programme for Research and the European Green Car Initiative. Electromobility is a 
key  component  of  the  current  EU  transport  policy  ideally  suited  for  densely  populated  urban 
areas  and  which  could  contribute  significantly  to  reducing  CO2  and  pollutant  emissions  from 
transport.  The  Green  eMotion  project  financed  by  the  Commission  under  the  Green  Cars 
Initiative  connects  a  range  of  ongoing  electromobility  initiatives  to  compare  approaches  and 
promote the best solutions for Europe. 

Electric propulsion in road transport could help to optimise electricity and hydrogen production 
through  load  levelling  and  exploitation  of  intermittent  renewable  energy  sources;  excess 
electricity  generated  during  periods  of  low  demand  can  be  used  to  produce  hydrogen. 
Furthermore,  the  use  of  hydrogen  fuelled  fuel  cell  and  battery  electric  vehicles  leads  to 
substantial  improvements  in  energy  efficiency  of  vehicles  compared  to  conventional  fossil 
fuelled, internal combustion engine vehicles. 

Hydrogen and fuel cell technologies are mentioned in the European Strategic Energy Technology 
Plan. They were identified amongst the new generation energy technologies that will be needed 
to achieve a 60 to 80% reduction in greenhouse gases by 2050.  

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