Measures to facilitate the production and use
The current markets, until a full technological and economic maturity of renewable energies are generally not ready to supply energy from renewable sources at the desired levels and in line with the ambitious EU objectives.
For this reason, national support schemes may be needed to stimulate more investment in renewable energy.
However, it is necessary to avoid that public interventions can lead to distort the functioning of the energy market and lead to higher costs for European households and businesses.
For this reason, EU adopted guidance for EU countries on renewable energy support schemes.
The EU Guidelines valid until end of 2020
These European Commission guidelines are the rules on public support for environmental protection and energy to help renewable sources of energy enter the marketplace. Their aim is to support EU countries in reaching their 2020 climate targets while addressing the market distortions that may result from subsidies granted to renewable energy sources.
The EU’s 2020 targets include 3 climate targets, which are as follows:
- greenhouse gas emissions 20% (or even 30%, if the conditions are right) lower than 1990 levels;
- 20% of energy from renewables; and
- 20% increase in energy efficiency.
In recent years, renewable energy sources have been heavily supported with fixed tariffs. This has encouraged the growth of renewables in the energy mix* and has put the EU on track to meeting its 20% renewables target.
However, this type of support has also sheltered the renewables sector from price signals (which, under normal circumstances, reflect supply-and-demand conditions) and has thus led to market distortions. In particular, electricity from renewable energy sources has been generated irrespective of the actual market demand. In fact, it has out-competed other forms of generation which have to rely solely on the market price to operate economically.
As renewable energy technologies mature and their production achieves a substantial market share, the sector will need to adapt to market signals (i.e. interpret market trends) and aid amounts should respond to falling production costs.
The new guidelines therefore aim to limit State aid support to what is truly necessary. This will be done partly by gradually moving from feed-in tariffs* to competitive bidding processes* for the allocation of public support. A pilot phase in 2015 and 2016 will allow EU countries to test competitive bidding procedures in a small share of their new electricity capacity.
The new guidelines also include criteria for supporting energy infrastructure, focusing on projects that improve cross-border energy flows and promote infrastructure in EU’s less developed regions.
The guidelines have applied since 1 July 2014 and remain valid until the end of 2020.