Renewable energy and the EU

Up to the end of the 20th century, European and other industrialised countries have enjoyed inexpensive and plentiful energy supplies. The easy availability of hydrocarbons, no CO2 constraints and the commercial imperatives of the market have made industrialised countries dependent on fossil fuels and have tempered the interest for innovation and investment in new energy technologies [see sections 16.1 and 19.1]. It is only recently that the need has been recognised to further promote renewable energy, given that its exploitation contributes to climate change mitigation through the reduction of greenhouse gas emissions, sustainable development, security of supply and the development of a knowledge based industry creating jobs, economic growth, competitiveness and regional and rural development.

In 1997, the European Union started working towards a target of a 12% share of renewable energy in gross inland consumption by 2010 representing a doubling of the contribution from renewable energies compared with 1997. Since then, renewable energies have increased their contribution by 55% in absolute energy terms. In spite of this progress, current projections indicate that the 12% target will not be met. Moreover, progress to a large extent is the result of the efforts of a few committed Member States.

Currently there are two Directives in the field of renewable energy.

· Directive 2001/77 on the promotion of electricity produced from renewable energy sources in the internal electricity market sets a 21% indicative share of electricity produced from renewable energy sources in total Community electricity consumption by 2010. It defines national indicative targets for each Member State, encourages the use of national support schemes, the elimination of administrative barriers and grid system integration, and lays down the obligation to issue renewable energy producers with guarantees of origin if they request them. With current policies and efforts in place, it can be expected that a share of 19% by 2010 - rather than the 21% aimed at - will be reached.

· Directive 2003/30, on the promotion of the use of biofuels or other renewable fuels for transport, sets a target of 5.75% of biofuels of all petrol and diesel for transport placed on the market by 31 December 2010, but the target for 2010 is not likely to be achieved and current expectations are for a share of biofuels of about 4.2%.

Therefore, the EU looks unlikely to reach a contribution from renewable energy sources exceeding 10% by 2010. There are several reasons for this, in particular: the failure to systematically include external costs in market prices gives an economically unjustified advantage to fossil fuels compared with renewables; the absence of legally binding targets for renewable energies at EU level; the relatively weak EU regulatory framework for the use of renewables in the transport sector; and the complete absence of a legal framework in the heating and cooling sector.

However, oil and gas prices have risen dramatically since early 2007, with electricity prices following. Moreover, the world climate is getting warmer. According to the Intergovernmental Panel on Climate Change (IPCC), greenhouse gas emissions have already made the world 0.6 degrees warmer. If no action is taken there will be an increase of between 1.4 and 5.8 degrees by the end of the century [COM (2006) 105]. All regions in the world - including the EU - will face serious consequences for their economies and ecosystems. European citizens are affected by higher prices, threats to the security of energy supply and changes to Europe's climate. European States have to address major energy-related issues such as a growing dependence on energy imports, high oil and gas prices affecting the prices of many consumer goods, climate change, forest fires, inundations and desertification of many regions.

In the framework of a new energy policy, the renewable energy sector stands out for its ability to reduce greenhouse gas emissions and pollution, exploit local and decentralised energy sources, and stimulate world-class high-tech industries. New and renewable energies (solar, wind, hydroelectric, geothermal, biomass) can generate economic activity, thereby creating added value and employment in Europe. Furthermore, they both improve the quality of the environment and standards of living, and are particularly important for the less developed regions of the EU, which have considerable potential for the development of renewable energy resources.

The Renewable Energy Roadmap of the Commission demonstrated, in January 2007, that a 20% target for the overall share of energy from renewable sources and a 10% target for renewable energy in transport would be appropriate and achievable objectives, and that a framework that includes mandatory targets should provide the business community with the long term stability it needs to make rational investment decisions in the renewable energy sector. The Brussels European Council of March 2007 endorsed these objectives, which means that there is political agreement for the new policy at the highest level.

Building on this agreement, the Commission tabled, in January 2008, a proposal for a directive on the promotion of the use of energy from renewable sources [COM(2008) 19]. This directive would establish an overall binding target of a 20% share of renewable energy sources in energy consumption and a 10% binding minimum target for biofuels in transport to be achieved by each Member State, as well as binding national targets by 2020 in line with the overall EU target of 20%. To achieve this target, each Member State should ensure that the share of energy from renewable sources in final consumption of energy in 2020 is at least their overall target, as set out in Annex I reproduced below.

The proposal of a directive establishes a common framework for the promotion of energy from renewable sources. It lays down rules relating to guarantees of origin (GOs), which would certify the renewable origin of electricity produced, administrative procedures and electricity grid connections in relation to energy from renewable sources. It establishes environmental sustainability criteria for biofuels and other bioliquids. While only the 2020 target is legally binding, the Commission has indicated that it could pursue earlier legal action in cases where a Member State's progress is so limited that it is clear the final target cannot be reached. Directives 2001/77 and 2003/30 would be amended in accordance with the new directive, with effect from 1 April 2010 and would be repealed with effect from 1 January 2012.

EU countries would be free to decide their preferred 'mix' of renewables in order to take account of their different potentials, but should present national action plans (NAPs) outlining their strategies to the Commission by 31 March 2010. The Commission's proposal allows for the virtual trade in renewable energies involving Guarantees of Origin. Under the system, Member States may invest in renewable energy production in another Member State in exchange for GOs, which can be counted towards the renewables target. But the Commission has attached the condition that a Member State must have already reached its own interim target before being allowed to receive investments and transfer GOs to another Member State.

Three sectors would be concerned in renewable energy: electricity, heating and cooling and transport. The overall approach is for Member States to retain discretion as to the mix of these sectors in reaching their national target. However, it is proposed that each Member State shall achieve at least a 10% share of renewable energy (primarily biofuels) in the transport sector by 2020. This is done for the following reasons: (1) the transport sector is the sector presenting the most rapid increase in greenhouse gas emissions of all sectors of the economy; (2) biofuels tackle the oil dependence of the transport sector, which is one of the most serious problems of insecurity in energy supply that the EU faces; (3) biofuels are currently more expensive to produce than other forms of renewable energy, which might mean that they would hardly be developed without a specific requirement. Specifically for biofuels and other bioliquids, the proposal of a directive sets up a system to guarantee the environmental sustainability of the policy, ensuring inter alia that the biofuels counting towards the targets achieve a minimum level of greenhouse gas savings.

Biofuels are the only available large scale substitute for petrol and diesel in transport. Given the precarious security of supply situation for oil (and thus for the transport sector), in 2003 the EU adopted the biofuels directive (2003/30/EC), with the objective of boosting both the production and consumption of biofuels in the EU [Renewable Energy Road Map]. In terms of agriculture, the reform of the Common Agricultural Policy (CAP) introduced a special "aid for energy crops" [see section 21.2.2], but statistics for forestry show that around 35% of the annual growth in EU forests remains unused. To address this, the Commission proposes an action plan for generating electricity from wood. Waste is also an underused energy resource. For this reason the Commission is currently developing a thematic strategy on preventing and recycling waste, and is preparing a proposal on the revision of the waste framework legislation [Biomass Action Plan].

In terms of balancing energy imperatives and environmental constraints, the Commission's approach is that only biofuels whose cultivation complies with minimum sustainability standards would count towards the targets of the new directive. The EU would support developing countries that wish to produce biofuels and develop their domestic markets. Domestically produced and imported biofuels could contribute 43 Mtoe, corresponding to 14% of the EU market for transport fuels. The growth would come both from bioethanol (which in Sweden has already achieved a 4% share of the petrol market and from bio-diesel, which in Germany, the world leader, has already achieved a 6% share of the diesel market. Domestically grown cereals and tropical sugar cane would be the main ethanol feedstocks, later complemented by cellulosic ethanol from straw and wastes. Rapeseed oil, both domestically grown and imported, would remain the main biodiesel feedstock, complemented by smaller quantities of soy and palm oil and later by second-generation biofuels, i.e. Fischer-Tropsch diesel mostly from farmed wood.

The security of supply, sustainability and competitiveness of Europe's energy depends to a large extent on the development and deployment of new energy technologies. For 2020, the technologies that will contribute to achieving the targets are available today or in the final stages of development. The private sector is at the forefront of these efforts. However, energy efficient technologies tend to have high upfront costs, which deter market take-up. According to the Commission, a twin-track approach is therefore needed [COM(2007) 723]: reinforced research to lower costs and improve performance; and pro-active support measures to create business opportunities, stimulate market development and address the non-technological barriers that discourage innovation and the market deployment of efficient and low carbon technologies. The EU's 7th Framework Programme for research aims to develop new energy technologies which will increase the efficiency with which energy is generated and consumed in Europe. In addition, the Commission advocates a "European Strategic Technology Plan (Set-plan)" to create a new European policy for energy technologies.

Likewise, the Intelligent Energy - Europe Programme (ALTENER III), which is part of the Competitiveness and Innovation Framework Programme (CIP) (2007-2013), helps speed up efforts to achieve the objectives in the field of sustainable energy. It supports improvements in energy efficiency, the adoption of new and renewable energy sources, greater market penetration for these energy sources, energy and fuel diversification, an increase in the share of renewable energy and a reduction in final energy consumption. Particular attention is paid in this context to the transport sector. The Global Energy Efficiency and Renewable Energy Fund (GEEREF) proposed by the European Commission should help mobilise private investments in energy efficiency and renewable energy projects.

At world level, the EU should exploit its position as the world's second largest energy market and as world leader in demand management and the promotion of renewable energy sources. The EU should intensify its relationship with its energy partners, with a view to further diversifying sources and routes, strengthening partnership and cooperation and focusing on the reduction of greenhouse gas emissions, renewables and increasing energy efficiency.

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