CELEX: 51988PC0225
Language: en
Date: 1988-05-04
Title: Proposal for a Council Recommendation to the Member States to promote cooperation between public electricity supply companies and auto-producers of electricity (submitted by the Commission)

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COM (88) 225
Vol. 1988/0070
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 ---pagebreak--- COMMISSION OF THE EUROPEAN COMMUNITIES
                                                COM ( 88 ) 225 final
                                                Brussels ,   4 May 1988
                                 Proposai
                                   for a
              Council   Recommendation  to the Member States
   to promote cooperation between public electricity supply companies
                    and auto-producers of electricity
                      ( submitted by the Commi ss ion )
                  [                   s
                           *9-              Ц
 ---pagebreak---                                     - 1  -
AIM OF THE PROPOSAI.
 1.  The proposal for a Council Recommendat Ion to the Member States
     contained In this Communication concerns cooperat Ion between public
     electricity supply companies and those electricity producers which
     have no public supply obi Igat Ions (autoproducers ) .
 2.  Public supply companies are committed to providing customers within
     their supply area with electricity as economical ly and as securely as
     possible .    In order to meet these requirements , they normally operate
     large , low cost generating Instal I at Ions , which are Increasingly
     based on solid fuels and nuclear energy .        In this way they make a
     substant ial contribution to the Community 's energy security by
     reducing dependence on Imported oil . Security of supply Is also
     Increased by the widespread Interconnect Ion of different
     companies 'supply grids .
 3.  There Is further potential for the generation of electricity , which
     for different reasons Is suited mainly to self generation by
     Industrial and other private or local power station operators outside
     the public supply system .     This Is pr I ncl pal ly electricity generation
     based on renewable sources of energy , on waste energy , and from
     combined heat and power .
 4.  Exploitat Ion of this additional potential would also help to achieve
     Important Community energy policy objectives set for 1995 , such as
     those on oil subst I tut Ion , dlversl f Icat Ion of energy sources and   the
     efficient use of energy .     Although the contribution Is difficult to
     quantify exactly , In total It must be regarded as substant Ial .
 5.  For one segment of this potential , renewable sources of energy ,
     electricity generat Ion is an Important mode of explol tat Ion , but not
      the only possible mode .   Indeed , In view of the wide variety of
     appl Icat ion   of this energy form , the Commission saw a need to
      introduce , at Community level , a set of general measures to encourage
      Its more Intensive explol tat ion .   These measures are set out In the
 ---pagebreak---                                            - 2 -
              Council Resol ut Ion of 26 November 1986(1 ) , and the subsequent
              proposal for a Council Recommend at Ion on developing the exploitation
              of renewable energy sources .( 2)
        6.    Among other things , this proposed Recommendat Ion refers to the need
               to overcome existing obstacles and to Introduce , where appropriate ,
               legislation and/ or admlnlstrat Ive procedures , and to encourage
              contractual terms between public supply companies and auto-producers ,
              which are such as to fad 1 1 tate the economic explol tat Ion of
               renewable energy sources .  The present proposal for a Recommendat Ion
               to promote cooperat Ion on electricity relates to this part Icul ar
               point .
        7.     As a starting point It Is assumed that In almost all cases auto¬
              producers of electricity , whether they use renewable sources of
              energy , waste energy or combined heat and power , will be dependent on
              some kind of cooperat Ion with the electricity supply companies .    As
              described below , this cooperat Ion Is often associated with problems
              of quantities or of prices , which tend to arise regard less of the
               type of energy source .
        8.     It would clearly further these forms of auto-product Ion If Member
              States could establish In their countries suitable conditions for
              better cooperat Ion   between the enterprises concerned and public
              electricity supply companies . Specific Community principles for this
              are set out In the proposal for a Council Recommendat Ion to the
              Member States , annexed to this document .
II .    FIELD OF APPLICATION OF THE PROPOSED RECOMMENDATION
        9.    This proposal deals with a sector which ,    In complementing the public
              electricity supply system , would be part Icul ar ly useful In helping to
               achieve the Community energy policy objectives set out In the Council
( 1 ) OJ No C 316 ,    1.12.1986
( 2 ) COM ( 87 ) 432 final , 29.9.1987
 ---pagebreak---                                           - 3 -
            Resolution of 16 September 1986^ 3^ .    These objectives aim to
            ensuregreater energy security by . Inter alia , encouraging the more
            efficient use of energy In all sectors , and a greater contribution
            from new and renewable energy sources .
       10 . In this respect all forms of electricity generation , which lead to
            the saving of exhaustible primary energy , can be regarded as
            part Icul ar ly desirable on energy policy grounds .   This Is the case
            with electricity generated :
            - from renewable sources of energy , I . e .
               . solar energy
               . biomass
               . geothermal energy
               . wind energy
               . energy from the sea
               . hydro-electricity
            - through the exploltat Ion of waste energy , I . e .
               . energy from organic waste
               . residual heat In Industry
            - through combined heat and power .
            Other forms of auto-product Ion which do not save primary energy , such
            as for example convent Zonal coal -f I red electricity generat Ion , are
            not covered by this recommendat Ion .    These types of auto-product Ion
            can certainly have energy policy merits , but their Just If teat ton must
            be sought on different grounds .    Problems of competition as between
            public and non-public conventional electricity generat Ion are also
            outside the scope of this recommendat Ion .
( 3 ) Council Resolution of 16 September 1986 concerning new Community energy
policy objectives for 1995 and convergence of the policies of the Member States
( OJ No C 241 , 25.9.1986 )
 ---pagebreak---                                            - 4 -
        11 . Electricity generation on this basis - Renewable energies , Waste
             energy and Combined heat and power ( RWC ) - Is very much linked to
             local conditions or specific Industrial production processes , and
             will often concern decent ral Ised and small production units .
             Electricity generat Ion based on RWC Is therefore not generally suited
             to targe public power stations but rather for auto-product Ion by
             smaller operators to cover their own requirements .      Such plants may
             be operated by Industrial companies , public Institutions orprlvate
             Individuals .   The Recommendat Ion should however also cover RWC
             electricity producers who , although not having public supply
             functions , sell their total output .
        12 . It Is difficult to determine accurately the primary energy potential
             In the Community for the different types of RWC auto-product Ion .      For
             fwo areas , renewable sources and residual heat , the Commission , In
             previous reports ^) , estimated that the total present product Ion
             from these sources of around 15 million toe ( In 1985 ) could rise to
             approximately 47-57 million toe by the year 2000 , and would then
             cover about 5% of the Community 's primary energy requirements .      A
             major part of this would be In the form of electricity generation ,
             although this proportion differs appreci ably by type of energy .
        13 . With combined heat and power generation ( CUP ) the efficiency of
             conversion of the primary energy used ( up to 80% ), Is much higher
             than In convent Zonal electricity generat Ion in condensing power
             stations ( 35-40% ).   This results In significant fuel savings with all
             the attendant energy-sav I ng and ecological advantages .    Statistics
             are hard to establish for this sector . The likelihood of CHP being
             profitable and the size of the role It could play , depends on a wide
             number of factors , such as the coincidence of heat and electricity
             requirements , energy price rel at lonshl ps , technical Improvements In
             transporting district heat      and In the CHP process In small plants ,
             density and quality of buildings , structure of Industry , etc .
( 4 ) Community or lentat Ion to develop new and renewable energy sources
( C0U(86)12 final of 23 .1 . 1986 ) and Final energy demand - A projection to the
year 2000 ; SEC / 85 / 324 .
 ---pagebreak---                                           ~ 5 -
           Estimates made nevertheless suggest that for the years 1985 and 2000
           the saving potential from the entire CHP process would reach an order
           of magnitude similar to the total potential Indicated for renewable
           energies and residual heat ( 15 and 47-57 million toe).
      14 . Auto-product ton as a whole , I . e . Including production In non-public
           condensing power stations , represented 15% of total Community
           electricity production In 1986 .      Some 95% of self generation Is
           accounted for by five Member States : Germany , France ,      Italy ,
           theNether I ands and the United Kingdom .     It Is concentrated largely In
           the chemical , steel and mining sectors . Around 10% of auto-product Ion
           Is fed Into the public supply network , although these percentages
           differ appreciably , ranging from 3% In Belgium to 56% In France .
      15 . These data Indicate that , while not bringing about fundamental
           changes In the current supply structure , RWC auto-product Ion would
           nonetheless make a worthwhile contribution to supplies . The following
           section of this paper explains why cooperation with public supply
           companies will be a decisive factor In the profitability of such
           plants .
III . COOPERATION BETWEEN AUTO-PRODUCERS AND PUBLIC SUPPLY COMPANIES
                                 H.e.e.dfor coopérât Ion
      16 . Auto-producers of electricity usually need reserve capacity to cover
           their own needs at times when their plant Is out of action because of
           breakdowns or during maintenance periods .       To this end , they normally
           buy the reserve capacity they need from public supply companies .
      17 . For Individual auto-producers , their own power requirements and their
           electricity production do not usually tally completely at one and the
           same time .   Their production will , for example , fluctuate with the
 ---pagebreak---                                         - 6 -
     flow of water In a river , with the wind , or with the heating
     requirements of a district heating system .         They therefore need :
     - to supply surplus electricity to the public supply network , and
     - to buv additional      electricity from this network over and above the
        specific reserve for times when their plant Is shut down .
18 . From the public supply company 's point of view It Is of Importance
     that supplies from auto-producers         meet quality requirements In
     respect of frequency and voltage .        Above all , they should fit In as
     far as possible with the opt i mlzat Ion of public supply operat Ions .
     Supplies from small hydroelectric or wind power generators at off -
     peak times , for example , are likely to throw up fewer problems than
     an unexpected Influx of power from large CHP plants .
19 . As far as public supply Is concerned , all Member States have laws ,
     adml nl strat Ive provisions and private law regulations covering this
     type of electricity cooperat Ion . They differ from country to country ;
     In some cases they consciously promote auto-product Ion based on RWC
     In general , whilst others concentrate only on some of these sources .
     In many cases , however , as discussed below , there are provisions
     which Impede the development of this sector of power generat ion . These
     problems concern both supplies and prices .
                         Quant I tat ive SUDDIV Problems
20 . Auto-product ion of electr Ici tv      :
     - Is basically authorised In all Community countries , either by legal
        or adml nl st rat Ive provisions or by Informal arrangements between
        auto-producers and public supply companies ;
 ---pagebreak---                                     - 7 -
     - but In some Member States , Is subject to legal restrictions beyond
        the usual safety requirements , governing for Instance the type of
        energy Input or the Installed capacity .
21 . As far as supply of surplus electricity to the public network Is
     concerned   :
     - In some Member States , public supply companies are obliged by law
        to purchase surplus electricity ,
     - In other cases there are formally agreed obligations to buy , or
        Informal declarations of Intent on behalf of the public supply
        companies ,
     - In some cases public supply companies refuse purchases under
        certain circumstances , such as during off-peak periods .
                               Price problems
22 . In general , prices paid for surplus electricity supplied to the
     public network are geared to the costs avoided by public supply
     companies .    These are normally lower than the costs of auto¬
     product Ion .   But If the public supply companies were to reimburse the
     full costs of auto-product Ion , they would Incur excess costs In all
     cases , where they could not rely on regular supply of the auto¬
     producer to the public grid .    In these cases they would not only Incur
     fixed costs resulting from their own capacity , which Is necessary to
     ensure the fulfillment of their legal supply commitments , but also
     the auto-producers' fixed costs . Unless these additional costs were
     covered by public subsidies , consumers would have to bear them
     through electricity prices .
 ---pagebreak---                                     - 8 -
23 .  In nearly all Member States reimbursement for supply Is gea red at
      I . e . mainly to fuel costs and occasionally to network losses .
     However , even for this minimum reimbursement there are still      In seme
     cases considerable 1 1 ml tat Ions ( e.g. no reimbursement for certain
     supplies at off-peak periods ).
24 . Some regut at Ions provide for larger payments In cases where suppliers
     give the public supply company firm guarantees of SUPD / V .     In these
     cases the public company can risk dispensing with Investments In
     generating capacity and possibly In the network .      These regulations
     are In some cases limited to certain types of energy , and sometimes
     exclude combined heat and power .
25 .  In the case of power generat Ion based on renewable sources or CHP ,
     however , firm supply guarantees can only be given to a re ! at Ively
     limited degree .     But to give auto-product Ion additional financial
     Incentives , special reimbursement regut at tons have been Introduced
     for pa rtial supply guarantees .     These also provide for capacity
     bonuses when , although there Is no firm commitment to supply , the
     public supply company can be sure of a certain aval I abl 1 1 ty of
     capacltly at agreed peak periods .      The extent of this
     add it lonalal lowance can be cal cul ated after the event on the basis of
     actual experience .
26 . Departures from the general principle of or lent at Ion on avoided costs
     occur In only a few cases where either reimbursement corresponds to
     the full comparable sales tariff , or where the payment made by the
     public supply company Is supplemented by subsidies from the Stale .
27 . Finally , as regards the prices for purchase of additional electric ity
     from the public network , the same rules generally appty as for
 ---pagebreak---                                         - 9 -
          comparable electricity users without auto-product Ion faculties .     On
          the Informat Ion available It Is not possible to say whether
          contractually arranged prices for such purchases are , In some cases ,
          unduly high and therefore a negative Influence on the economic
          viability of auto-product Ion .
IV .
     28 . Existing regu ! at Ions governing auto-product Ion of electricity and
          cooperat Ion with the public network differ considerably between
          Member States .    The provisions range from , at one extreme , allowing
          the public supply companies to refuse to buy surplus electricity from
          CHP plants , to State aids In favour of auto-product Ion from wind
          generators at the other extreme .    It Is clear that RWC auto-producers
          In many cases do not receive suitable terms on either quantities or
          price . Better overall conditions are therefore essential ,
          particularly at a time of low energy prices .
     29 . Cooperation on electricity supply between public companies and auto¬
          producers therefore needs to be governed by specific Community
          principles which would fad 1 1 tate auto-product ton and guarantee an
          appropriate reward for the auto-producer .     The price he receives for
          his supplies should be oriented as closely as possible to       avoidable
          costs In the public supply system and should not lead to distortions
          of competition through unjustified subsidies .
     30 . If necessary , this framework for co operation would have to be
          supplemented by changing any legal provisions which were at variance
          with these principles .    It should apply to all auto-producers
          operating on the basis of RWC , and thus    saving exhaustible primary
          energy .  The following proposal for a Recommendat Ion to the Member
          States Is designed to achieve these object Ivces .
 ---pagebreak---       1
                                       - 1 -
      1
             PROPOSAL FOR A COUNCIL RECOMMENDATION TOJTHE MEMBER STATES
        TO PROMOTE COOPERATION BETWEEN PUBLIC ELECTRICITY SUPPLY COMPANIES
THE COUNCIL OF THE EUROPEAN COMMUNITIES ,
Having regard to the Treaty establishing the European Economic Community , and
In particular Article 235 thereof ,
Having regard to the proposal from the Commission ,
Having regard to the opinion of the European Parliament ,
Having regard to the opinion of the Economic and Social Committee ,
Whereas    :
In Its resolution of 16 September 1986 concerning new Community energy policy
objectives for 1995(1 ) the Council adopted as sectoral objectives Improved
energy efficiency In all sectors and a greater contribution from new and
renewable sources of energy .
In accordance with the Council Resolution of 26 November 1986 on a Community
or lentat Ion to develop new and renewable energy sources (2) the Commission
has already submitted to the Council a Recommendat Ion to the Member States on
( 1 ) OJ No C 241 , 25.9.1986 .
(2)     OJ No C 316 , 9.12.1986 .
 ---pagebreak---                                          - 2 -
developing the exploitation of renewable energy sources In the Community ,(3)
Combined heat and power generation ( CHP ) and waste energy (combust Ion of
waste and use of residual heat In Industry ) with their potential for oil
subst I tut Ion and savings of exhaustible primary energy sources , could make an
Important contribution to the achievement of the Community 's 1995 energy
policy object Ives .
The generat Ion of electricity Is a common field of appl Icat Ion not only for
Renewable sources of energy but also for Waste energy and for CHP ( In total
hereafter called RWC ) and Is therefore of centra ! Importance to the
development of this energy supply potential .
These power generat Ion processes are mainly suited , because of factors
Inherent to the public supply system , to auto-product Ion outside this system .
The profitability of RWC auto-product Ion will also depend on the conditions
of cooperation with the public electricity supply companies as regards sales
of surplus electricity , purchases of additional electricity , and the
provision of reserve capacity .
Certain existing laws and admlnlstrat Ive provisions can const I tute an
obstacle to the development of auto-product Ion based on RWC .
The price for the auto-producer 's electricity sales to the public network
should be or lentated as closely as possible to avoidable costs In the public
supply system in order to guarantee appropr I ate revenues for the
auto-producer .
A framework of appropr I ate measures should govern cooperation on electricity
between auto-producers and public supply companies by establishing common
principles and hence creating better conditions for the further development
of RWC auto-product Ion of electricity In the Community .
(3)   COM ( 87 ) 432 final , 28.9.1987 .
 ---pagebreak---                                         - 3 -
HEREBY RECOMMENDS TO THE MEMBER STATES      :
7.  That , In order to promote auto-product Ion of electricity , based on
    renewable energy sources , waste energy and combined heat and power ( RWC ),
    they should provide a framework for cooperation between public supply
    companies and all fliVC auto-producers , under which the conditions
    concerning the quantity and price of electricity exchanges are agreed In
    accordance with common principles .
2.  That they should facilitate the creation of this framework by the
    Introduction of standard contract criteria      :
    - either by voluntary arrangements between the parties concerned ,
      or
    - If necessary , through specific legal or admlnlstrat Ive provisions ,
    and that existing legal or admlnlstrat ive provisions at variance with
    such criteria should be adapted accordingly .      The need for defining
    specific procedures for resolving disputes about contract conditions
    should also be examined ;
3.  To ensure within such arrangements or provisions :
    3.1 .  that with regard to quantities
           - auto - product I on of electricity based on RWC is authorized In
             principle as long as a public Interest Is not thereby Infringed ,
             and that It Is not impeded either by legal and adml nlst rat Ive
             provisions or by conditions Imposed by the public supply
             companies ;
           - the public supply companies should be obliged to offer to
             purchase those quantities of electricity which arise out of auto ¬
             product I on based on RWC , always provided that the economic
             operation of existing public generating plants Is not thereby
             jeopardized ;
 ---pagebreak---                                              - 4 -
    3.2 . i hat tf / frt r egard to pr I ces
          - reimbursement for electricity sales to the public supply network
             from auto-product I on based on RWC should :
             . be determined regardless of the type of energy used for such
                au t o-produc t Ion ,
             . be based primarily on the long term average costs avoided In
                the public electricity supply system for the area In question ,
             . correspond at least to the variable costs avoidable In public
                supply ,    I . e . mainly the avoidable fuel costs ,
             . guarantee an additional reward to the extent that the auto ¬
                producer contributes , In the public supply , to the avoidance of
                capacity costs In the generation or purchase of electricity .
                The size of this reward should depend on how regularly the
                auto-producer 's electricity product Ion capacity Is aval I able ,
                especial ly at peak periods ,
          - reimbursement for the purchase of electricity from the public
             supply network Is determined In such a way that auto-producers
             are treated In the same way as comparable purchasers without
             auto-product ion ,
          - the rules regarding these reimbursements are as transparent as
             possible .
4.  To report to the Commission after 3 years on the progress on cooperation
    between public electricity supply companies and auto-producers .
Done at ,
 ---pagebreak---                   COMPETITIVENESS AND EMPLOYMENT IMPACT STATEMENT
I.    What is the main reason for introducing the measure ?
       Improving conditions of electricity auto-production based on renewable
      energy sources , waste energy and combined heat and power through
       cooperation with public supply companies .
II .  Features of the businesses in question . In particular :
      ( a ) Are there many SMEs ?
              Amongst auto-producers : yes
              Amongst public supply companies : no .
      Cb ) Are they concentrated in regions which are :
              i . eligible for regional aid in the Member States ?
                   No .
              ii . eligible under the ERDF ?
                   No .
III .   What direct obligations does this measure impose on businesses ?
         No new obligations for auto-producers . The suggested framework of
         cooperation should oblige public supply companies to offer suitable
         terms on quantities and price for electricity delivered by auto¬
        producers to the public network .
IV .    What indirect obligations are local authorities likely to impose
        on businesses ?
         See § III .
V.      Are there any special measures in respect of SMEs ?       Please specify .
         No .
VI .    What is the likely effect on :
        ( a ) the competitiveness of businesses ?
         Increase of revenue for auto-prouucers .
         ( b ) employment ?
          Marginal . '
VII .   Have both sides of industry been consulted ?      No .
        Please indicate their opinions .