The world’s home of renewable energy has arguably been Europe for the last couple of decades. This is due largely to the use of feed-in tariffs as very successful market launch and development programs. Although different governments use them for different things, they have become the backbone of Germany and Spain’s dominance in terms of manufacturing and installed capacity.
But this could all be set to fall, leaving the way open for North American and Asian players to push European technology to the periphery. Due to several factors, some of which we can only make educated guesses about, there is a movement in the European Union (EU) which seeks to dismantle the feed-in schemes currently at work in 16 of the 27 EU member states.
One of the main culprits seems to be the UK’s present New Labour government. This should be no surprise as no UK government yet has taken renewable energy seriously. It has been revealed in recent weeks, via leaked internal documents, that the UK cannot meet the 2020 targets that EU member states signed up to in March (20 percent of total energy to come from renewables), and will lobby for these to be reduced. In addition, the country has been accused of trying to push through a certificate trading system which will allow it to simply buy certificates instead of building up domestic capacity. This trading scheme is not necessarily benign, and could have huge consequences.
From a meeting with a chief designer of the new legislation, the trading system may work as follows: A harmonized set of certificates of origin (guarantees of origin, or GOs) will be designed; for each kWh of green electricity produced, the producer can ask a competent national body to issue a green certificate; this certificate can then be traded and will be counted towards the national target in the country into which the certificate is sold. The country from which the certificate originates will not be able to count it under its own national target achievement plan; countries who want to keep their national support mechanism unchanged can opt out. This is why it is called voluntary.
A small number of EU member states already use certificate trading, with little success. Traded certificates have had the lowest increase of renewables produced in the EU. For onshore wind for example, the UK has reached only 2 gigawatts (GW), whereas the German market has now 20 GW installed. The cost of the UK scheme is much higher than that of the feed-in law in Germany.
According to an EU legal expert, a voluntary trading scheme would have the following consequences for Germany:
Since onshore wind is already better paid in the UK certificate trade mechanism (14 Eurocents per kWh, against 8 Eurocents per kWh under the German feed-in law), windfall profits will result.
Long-term investment security would dip immediately, and new projects, especially for PV, will be threatened.
Investment will fall in Germany because return on investment is much lower already, and so windfall profits can be gained, especially in the UK or on markets which will follow the UK in not wanting to invest in domestic renewables capacity.
All member states need to reach their mandatory national targets under the EU- wide binding 20 percent target. If no more wind investment comes forward, Germany will lose the cheap part of its feed-in technology basket, and will need an increase of the more expensive parts of the basket which lag behind, such as PV or offshore wind. Or, it would need to raise the feed-in tariffs for onshore wind.
An overall price increase in RES electricity will result. This will allow the campaigns by the conventional energy industry against the feed-in system to be reinforced, and consumers will lose their acceptance of the system. Germany will not be able to keep its feed-in system.
This will also jeopardize the whole German national energy policy, making it impossible to continue the present rather smooth way to reach the national targets (and to overshoot them).
This will degrade the manufacturing industry in Germany, Spain and Denmark, potentially leading to loss of global market share and foreign buy-outs.
The opposition to feed-in is entrenched in the conventional energy industry. They (Eurelectric et al) have wasted no time in mobilizing a fresh campaign against feed-in, again calling for quota systems and harmonized certificate trading, which, due to the high investment insecurity involved, allow only large credit-worthy players, i.e. themselves, to enter the electricity generating market. The UK’s energy companies are mostly owned by German and French utilities (such as E-ON, RWE and EDF) — who all oppose feed-in, but some welcome the opportunity for large profits from wind farms.
In Britain, this year’s Queen’s speech, traditionally used to set out the legislative priorities for the next calendar year, gave the firmest commitment yet to resurrecting civil nuclear power — just as reports came out to say that seven of the UK’s 16 nuclear power plants were currently off-line for repairs and maintenance. Support will also be given to carbon capture and gas infrastructure. It is worth noting that British unions are well represented in the conventional energy industry, with coal and nuclear carrying significant union membership. The UK renewables industry has no union.
So, between all of the above, it could be argued that the UK’s policy manoeuvres suggest that its relations with the big European energy corporates are very good indeed. They vigorously defend a domestic system which blocks out everyone except the biggest investors — the reverse of what a feed-in system achieves — and lobby in Europe for a system which will undermine everyone else’s renewables systems. The only winner can be the conventional energy industry.
The timing is particularly poor for Europe too. A news story on Euractiv.com (November 12) discusses a new report which “warns about a ‘clash of agendas’ between the EU and Russia that will increasingly undermine the security of Europe’s energy supply.”
The article continues, “the report points to increased efforts by Gazprom, Russia’s state-owned energy giant, to gain ‘control of the whole value chain’ of the EU’s energy supply, citing a number of new gas infrastructure projects and important pipeline ventures agreed jointly with Germany’s E.ON and Italy’s ENI.”
This can be framed in the context of the EU’s dependency on Russian gas, which is increasing steadily, and is expected to go from the present 25%, to 50% by 2030, according to the European Commission.
The conventional energy industry in Germany is busy with other business this week, as a major cartel has been uncovered by the German cartel office (Kartellamt). In their report, they found that between 2003 and 2006, a series of secret meetings were held, involving the chief executives of Germany’s four main energy suppliers — E.ON, RWE, Vattenfall (of Sweden) and EnBW (partially owned by France’s EDF) — during which they exchanged sensitive and secret information about their companies and discussed common strategies for a variety of markets, according to the Spiegel newspaper. E.ON were particularly creative in influencing energy prices, including through the premature decommissioning of power plants, according to the Kartellamt’s report.
The murky nature of energy politics has thus raised its head again in Europe. It seems clear that the renewables industry here is still far from safe, with national governments and energy giants working behind the scenes to keep the industry in check, or worse. Many other policy developments here all point to business as usual attitudes, especially in the UK, where new or revised planning legislation will make motorway and airport expansion easier. It would be a missed opportunity not to juxtapose this with the fact that in the same breath, the government has also set out the world’s first national legislation on reducing CO2 emissions: 60% by 2050 (1990 baseline).
Recent confidential information on the EU situation has given some signs for hope, but until the new draft Directive emerges in January, we won’t know the fate of renewables here. Certificate trading may possibly be done in a benign, limited and tightly-controlled way, which will not raise prices and destroy successful feed-in laws, but this is not a likely outcome, and would not necessarily be the desired outcome of those who wish to push this agenda. We can only continue to lobby, research, network and keep the benefits of a vibrant European renewables industry alive the minds of the commissioners. You would imagine that the idea of being increasingly dependent on Russia for energy imports would be reason enough to look to our own free renewable sources for supplies.
Miguel Mendonca has studied and trained in forestry, landscape management, journalism, geography and history, and is now undertaking an MA in Environment, Policy and Society. He is a research associate for the Schumacher Institute for Sustainable Systems, a visiting fellow at Bristol University, a consultant to Artists Project Earth and a freelance writer on sustainability issues. Miguel has been working as a World Future Council researcher since January 2006, producing the first WFC policy publication, ‘Policies to Change the World’ and the 2007 book ‘Feed-in Tariffs: Accelerating the Deployment of Renewable Energy’.