A Harmonized Feed-in System for the EU: Are We Ready to Seize the Opportunity?

During their 2007 spring summit, the European heads of state and government agreed on an ambitious and legally binding target: In 2020, the share of renewable energies in the EU’s overall energy consumption shall reach at least 20% — up from 8.5% now. They agreed to strive for this target in a cost efficient way. The European Commission was mandated to prepare a proposal for a European “Directive on the Promotion of Energy from Renewable Sources” not later than end of 2007.

Feed-in Tariffs for EU: Definitely a Good Solution

Just looking at the facts, this could have been — at least for the electricity sector — a clear and easy piece of work. For years, minimum price systems or premium models (together called “feed-in tariffs” or “FIT” in the European discussion) have proven to be the most effective instruments to foster growth of renewable electricity at reasonable costs. By the end of 2007, 46 countries and federal states world wide had introduced feed-in systems as their major instrument to incentivize deployment of renewable electricity — 18 out of 27 EU member states are using FIT.

The European Commission had repeatedly found out that “… well adapted feed-in tariff regimes are generally the most efficient and effective support schemes for promoting renewable electricity”1. And they also stated that “feed-in tariffs achieve greater renewable energy penetration and do so at lower costs for the consumers”2. Given this superiority of FIT over other support systems, the European Commission should have proposed a harmonized EU-wide FIT as the most effective and cost efficient way to reach the electricity sector’s share of the 20% overall target.

EU-Commission’s Proposal: A Certificate Trading System

However, this is not what happened. When the Commission’s proposal was finally presented to the public, it turned out to be an EU-wide certificate trading system — which would seriously endanger the successful national feed-in systems in Spain, Germany and elsewhere. It would result in additional costs of about €200 billion [US $308 billion] for European consumers and billions of windfall profits for the incumbent electricity companies.

Although today it is quite likely that the European “Directive on the Promotion of Energy from Renewable Sources,” which will eventually be passed in early 2009, will leave the decision about the appropriate support system to the member states, the debate about “harmonizing” support mechanisms is not over. The next report of the European Commission, presumably due already in 2014, will again raise the question of a unified mechanism.

FIT Supporters Must Be More Aggressive

So from now until then, a proposal for a harmonized feed-in system must be made ready to be adopted — ready meaning that proponents of the different variants of minimum price systems and premium models should try to come to agreement on a well designed European-wide FIT. It’s possible that in that time, two or more member states of the European Union could start to closely cooperate and coordinate their respective FIT models, eventually creating clusters of harmonized FIT legislation.

To be prepared for this discussion, the German Renewable Energy Federation (BEE) has developed a proposal named “EU FIT” — a European-wide minimum price model for electricity from renewable sources. EU FIT is legally fully compatible with the EU treaty, in particular with the single market, the free movement of goods and the subsidiarity principle.

Here are the main features of the presented Europe-wide minimum price model which is based on the successful German Feed-in law (EEG). Because this is a first step, the proposal deliberately does not address combinations with other feed-in or prime regulations, e.g. the Spanish bonus variant. This could, however, easily be added, if interested parties really start to collaborate on a joint proposal.

Basic Elements of the EU FIT Proposal

The EU FIT shall eventually be implemented at EU-level (although, as a first step, it could be introduced in two or more member states). In such a model for the electricity sector, the politically difficult distribution3 of an overall target among member states (or participating countries) would not be necessary.

Like the German EEG, EU FIT would presumably result in a dynamic increase of installations of different renewable energy technologies for the electricity sector. It would therefore contribute to target compliance in an optimal way.

To achieve a cost effective and efficient deployment of renewable electricity installations of different technologies, some basic elements have to be integrated in a harmonized EU FIT.

  • Plant operators producing electricity exclusively from wind, solar, geothermal, wave, tidal, hydro power and from sustainable biomass as well as landfill gas, gas from purification plants and biogas will receive an immediate and preferential legal claim to be connected to the nearest electricity grid, irrespective of whether grid and plant are located in different countries.

  • Grid operators are obliged to guarantee preferential purchase and transmission of electricity from renewable energies. In case of grid bottlenecks renewable electricity is granted unconditional priority over conventionally produced electricity.

  • The electricity offered has to be remunerated according to minimum prices. They are differentiated according to technology, size and site of the plant. Reference price models are applied at least for wind and solar electricity and the tariffs are guaranteed for 20 years.

  • Remuneration rates are to decrease annually in order to foster ambitious learning curves and economies of scale.

  • Electricity fed into the grid will be equally distributed among all European (or as a first step those in the participating countries) grid operators according to their electricity amount purchased in the respective regulative zone. The costs can be passed on to the consumers.

  • The details of the support instruments, in particular the tariffs and the rates of decrease, will regularly be revised by the European Commission every four years.

Rainer Hinrichs-Rahlwes is a board member of the German Renewable Energy Federation (BEE), the umbrella organization of 20 German renewable energy associations and more than 5,000 individual and company members. As a representative of BEE, he was recently elected a Vice-president of EREF (the European Renewable Energy Federation).

1 Commission Staff Working Document, “The support of electricity from renewable sources,” an accompanying document to the Commission’s proposal for the “Directive on the Promotion of Energy from Renewable Sources” of January 2008, p. 3.

2 Ibid, p. 8.

3 The calculation of the “target sharing” proposal among the 27 EU member states has become a major issue in the European discussion. Eventually, the European Commission’s proposal for the 27 member states was a “moderated approach,” based on the respective potential of renewable energies in each member state, moderated by the respective BSP.

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