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Renewable Energy Loses Out in Europe's "Lame-Duck" Climate Plan

Renewable Energy Loses Out in Europe's "Lame-Duck" Climate Plan

Wind and solar power producers say they're at risk of losing investment after the European Union's executive arm scrapped proposals for a mandatory target on renewable energy use in 2030.

The European Commission yesterday said the 28-nation bloc should get 27 percent of its energy from renewables by 2030, up from 20 percent at the end of this decade. Unlike the current goal, the new one won't be split into national targets.

"It's very weak," Jacopo Moccia, head of political affairs for the European Wind Energy Association, said in an interview today. "It was a communications gimmick rather than a real target. How do we determine the EU has met its target if it has no obligations on member states? It's hard to imagine the EU will take itself to court and fine itself."

The EU is wrestling with how to reduce pollutants blamed for global warming while keeping a lid on electricity bills that sometimes are double U.S. levels. Companies including Vestas Wind Systems A/S, Alstom SA, Gamesa Corp. Tecnologica SA and Acciona SA lobbied for binding renewables targets, while the U.K. led a push against them to allow more space for carbon capture and nuclear power.

The commission's proposal starts the debate among member nations about energy policy to 2030. It also called for a 40 percent reduction in carbon dioxide emissions by then, double the current aim to cut 20 percent by 2020. EU heads of government are due to discuss the program in Brussels in March.

British View

U.K. Prime Minister David Cameron said in a letter to Commission President Jose Manuel Barroso in December that a renewables target would cost British consumers 9 billion pounds ($14.8 billion) a year by 2030. The commission's proposal would allow technologies such as nuclear power, carbon capture and storage and energy efficiency to be used in order to meet the EU's overall goal on carbon.

"If you set rigid inflexible targets, that's likely to lead to greater costs," U.K. Energy Secretary Ed Davey told reporters in London yesterday. "You should be allowed to choose whichever low-carbon technology you wanted."

Still, the decision is a disappointment to renewable energy developers, which expanded rapidly in the last decade on the back of the bloc's target for the technology. The share of renewable energy used in transport, heating and power generation reached to 12.7 percent in 2011 from 8.5 percent in 2005, according to statistics included in yesterday's proposals.

Subsidy Cuts

Germany, France, Spain, Britain and Italy all have trimmed renewable energy subsidies in recent years after a boom in installations translated into more costly power for consumers. Investment in renewables in Europe fell 41 percent to $57.8 billion last year, according to data compiled by Bloomberg.

"It's a setback, and it's going to slow what I think is increasingly inevitable: the eventual supremacy of renewables," Jeremy Leggett, chairman of the London-based installer Solar Century Holdings Ltd., said today by phone. "Most renewable technology costs are systemically going down while costs of most incumbent fossil fuels are rising."

Modeling by the commission shows that renewables would have to rise to close to a 27 percent share in order for its 2030 carbon target to be met, according to Davey and the European Photovoltaic Industry Association. That makes the 27-percent goal "a non-target," said Moccia from the wind association.

"The commission's proposal for 2030 sadly is a lame duck," Frauke Thies, policy director for the photovoltaic association, said yesterday in a statement. "We are now looking at the European Council to make this supposedly binding target meaningful, by turning it into real national binding targets."

Binding Targets

While the renewable energy target would be binding across the EU, the commission said that "it would not be translated into national targets through EU legislation." Instead, countries would be expected to lay out national energy plans that ensure "strong investor certainty."

"The white paper provides the basis for a long-term commitment in Europe, but of course we would like to see the national regulations as well," Vestas Wind Systems A/S Chief Executive Officer Anders Runevad said yesterday in an interview at the World Economic Forum in Davos, Switzerland. "The next big step is to get national level targets."

Davey said Britain and other nations will probably "publish ranges" of where they expect renewables to reach, "without having to commit."

Enforcement Question

"It is difficult to see how the commission can enforce this EU-wide binding target if the targets set by individual member states in their national energy plans are not also binding," Mike Landy, a policy analyst at the Renewable Energy Association, a U.K. lobby group, said today in an e-mail.

Britain, which is the leading market for offshore wind power, may suffer slower investment because of the absence of specific targets on renewables for 2030, said Maf Smith, deputy chief executive of the RenewableUK lobby group.

Already, Scottish Power Ltd. dropped plans for an offshore wind plant in December, saying it wasn't financially viable, and RWE AG abandoned another venture a month before. SSE Plc (SSE) today indicated it has concerns about the investment climate in the U.K. and that it's reviewing its strategy.

"The result of that is lower confidence in the market," Smith said. "It will mean the costs fall less quickly if these companies can't press ahead, and an increase in finance costs because investors will see increased uncertainty about this future market."

Renewable Supporters

While the U.K. opposed binding renewables goals, other countries wanted them. Environment and energy ministers from eight nations, including Germany, France and Italy, wrote to EU Energy Commissioner Guenther Oettinger and EU Climate Commissioner Connie Hedegaard earlier this month calling for a binding 2030 target.

The biggest challenge in devising the 2030 package was "this discussion around renewables," Hedegaard said yesterday in an interview in Brussels. "It was very important to send a strong signal to the renewables industry in Europe that has created so many jobs in recent years, that we still want a strong focus on renewables. It was one of the controversial issues, but there was a strong backing."

Copyright 2013 Bloomberg

Lead image: Annoyed looking duck on an icy pond, via Shutterstock

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