Renewable Energy: A Major Player in the European Energy Market | White & Case LLP International Law Firm, Global Law Practice
Renewable Energy: A Major Player in the European Energy Market

Renewable Energy: A Major Player in the European Energy Market

In what appears to be an effort to restore the confidence of investors in the renewable energy sector, on 6 June 2012 the European Commission presented a Communication on its renewable energy policy, assessing the current market and outlining options for the period beyond 2020.

This Communication reaffirms the European Union's objectives to continue developing the use of renewable energy, until and beyond 2020, and tries to address current stakeholders' concerns about the growth potential for renewable energies in the EU following budget cuts and drastic changes in Member States' support schemes.

Binding targets for renewable energy have been set at the EU level through the adoption of the Renewable Energy Directive in 2009, with an objective of a 20 percent share of renewable energy in the EU by 2020. This Directive sets national targets for each Member State and lays the groundwork for a single market for renewables.

Although this Directive does not call for a post-2020 roadmap until 2018, the Commission has realized that investors are already eager to understand long-term policy intentions in this field and is trying to clarify the EU's objectives with this Communication.

Main Features of the Communication
The main points addressed in the set of documents published by the Commission (Communication, Impact Assessment and Working Document) are the following:

Before 2020
The Commission identifies four main areas where additional efforts are necessary until 2020:

(1) Need to complete the internal energy market by 2014 and urgent need for infrastructure improvement: the Commission will prepare a Communication on the Internal Energy Market and is trying to get its proposed energy infrastructure package adopted as quickly as possible.
(2) Need to improve and harmonize support schemes in order to facilitate investment where it is needed, in particular through a simplification of the regulatory regime applicable to energy projects. The Commission will prepare guidance documents on best practice on this issue.
(3) Need to encourage cooperation and trade, in particular through an increased use of the cooperation mechanisms created by the Renewable Energy Directive.
(4) Need to boost energy cooperation in the Mediterranean by facilitating the dual use of renewable power for both domestic consumption and export: the Commission will prepare guidelines to facilitate the trade of renewable energy and try to eliminate current barriers, in order to allow the EU to import more renewable electricity.

The Commission identified three policy options to ensure the continued growth of renewable energy use in the EU:

(1) Rely only on the Emissions Trading Scheme (ETS) to reduce carbon emissions, without renewable energy targets.
(2) Set national targets for renewable energy, energy efficiency and emissions reductions (continuation of the current regime).
(3) Set up a more harmonized regime with EU-wide targets for renewable energy, energy efficiency and emissions reductions.

Additional Goals Set By The Commission
Involve consumers in the development of renewable energies, in particular by encouraging the use of "smart metering" and micro-generation.

(1) Identify future R&D needs: a Communication on energy technology policy will be published in 2013.
(2) Continued assessment of the sustainability of renewable energy: this could potentially lead to more stringent requirements for energy projects in the future (land use, protection of water and wildlife, waste issues, etc.).
(3) The use of renewable energy will also be encouraged through other EU policies (subsidies, energy taxes, ETS, etc.) and policies which could potentially hinder its development will be discouraged.

The adoption of this Communication shows that the Commission understands the negative impact on the renewable energy sector of recent subsidies cuts and regulatory uncertainty. The document outlines interesting policy objectives, such as the intention to support renewable energy beyond EU borders and to boost trade with Mediterranean countries, but it still lacks concrete recommendations and mostly refers back to future Commission initiatives for concrete measures. It also seems to rely heavily on private investors to ensure the continued growth of renewables in the EU while not really providing the intended level of regulatory clarity.

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