The European Union's support for renewable energy, by Nuala Ahern MEP

The European Union's support for renewable energy

by Nuala Ahern ,Green Party MEP for Leinster

Although the EU has promoted renewable energy sources, it has failed so far to ensure that energy markets take into account the cost of the environmental damage caused by the use of fossil fuels and nuclear energy. Renewables would be fully competitive if this was done.

The European Union doesn't have a single energy policy, but rather a series of communications, white and green papers and directives which when patched together form a less-than-coherent series of policy measures in the energy field. This is somewhat ironic as the EU was largely formed out of the desire by countries to support their energy industries. Of the three founding treaties of the EU, two related to supporting energy industries. In 1952, the European Coal and Steel Community agreement was signed to support the development of these two industries for fifty years - and in July 2002 ceased to exist. In 1957 the treaty establishing the European Atomic Energy Community (Euratom) was signed, which will run indefinitely, explicitly promoting nuclear technology.

Following the 1997 Amsterdam Treaty that established the requirement for Community policy to 'contribute to sustainable development' the EU's energy policy is said to be based on three core objectives. These are:1

Security of supply. This aims to minimise the risks and impacts of possible supply disruptions on the EU economy and society.

Competitive energy systems - to ensure low cost energy for producers and consumers to contribute to industrial competitiveness and wider social policy objectives.

Environmental protection. This is integrated in both energy production and energy use to maintain ecological and geophysical balances in nature.

Let's look at the way renewables are treated in relation to each of these core objectives.

1. SECURITY OF SUPPLY

In November 2000 the Commission published its Green Paper on Security of Supply 2. A public consultation process followed its release and lasted until February 2002. The Commission was initially expected to prepare a white paper or a directive based on the original documentation and the comments received but in mid- September 2002 it published two new directives designed to reduce the insecurities for energy supplies in the oil and gas industries.3 The purpose of these directives is to propose specific measures in the framework of a liberalised energy market, particularly by increasing the quantity of fuel mandated to be kept in stocks. In the case of oil this will increase from 90 to 120 days, for natural gas to set a new requirement of 60 days supply for an average bad weather period.

The November 2000 Green Paper states clearly that renewable energy has a vital role to play in reducing the EU's dependency on third countries for their energy. It says:

With regard to supply, priority must be given to the fight against global warming. The development of new and renewable energies (including biofuels) is the key to change.4 Only technology-intensive renewable sources can help mitigate the present trend towards increasing energy dependency. 5

Despite this, the Green Paper merely calls for member states to give a 'firm commitment'6 to achieve the 'realistic' objectives of the 1997 White Paper on Renewable Energies. It is important to note that the Green Paper was published before a final decision was taken on the 2001 Directive on Renewable Energy and thus undermined attempts to have the White Paper targets made mandatory. At the request of the Council, but clearly with the support of the Commission and against the desires of the Parliament, the White Paper targets were not mandatory in the Directive on Renewable Energy. So, while the Green Paper points out renewables are fundamental for the future energy supply of the Union, it fails to call for these targets to be mandatory.

2. COMPETITION

In January 2003 the Council came to a Common Position for the two security of supply directives. The European Parliament has begun discussions on these and is expected to conclude its work in May 2003.

When the draft directives were read for the first time in the Parliament, the Green/EFA group made a number of key recommendations. These were intended to accelerate the introduction of renewables by creating a level playing field for generators. The key recommendations were:

Priority access for renewables: The current Directive on renewable energy states that priority access may be given to electricity produced by renewable energy sources. This must be changed to require priority access for renewables.
Electricity Labelling: Companies should be required to include information about the mix of fuels they use to produce the electricity they sell and the environmental impact of these fuels on their advertising and all bills to their customers.
Planning Applications: Smaller power plants should not be subject to the same planning applications as much larger stations. The environmental impact, actual and potential, of a 1000 MW nuclear power stations is clearly larger than the installation of a handful of wind turbines. The Group therefore proposed that generators under 50 MW should have access to an accelerated planning process.
Grid Pricing: Because there is excess generating capacity in the EU, long-established conventional generators often see renewables and cogeneration projects as being in competition with their existing or planned production.

These generators often influence grid companies with whom they may be linked financially to discriminate against the new players. For example in France even producers of low voltage electricity which is not passed through the grid at all have to pay a standard fee as if it were.

The Group's rapporteur therefore proposed that all financial links between grid operators and generators should be prohibited, that statutory regulators should have greater powers to set prices for the use of the grid and that grid system operators should be required to take account of the economic advantages of embedded generators.

Many of these proposals were accepted by the Parliament but we now have to wait and see the extent to which the Council will adopt them too. However, even at this stage it is clear that most of the Parliament's language will be dropped or significantly watered down.

3. ENVIRONMENTAL PROTECTION.

In 2001 the Community finally adopted the Electricity Production from Renewable Energy Sources (RES) Directive. The primary justification for the directive is the need to promote renewable energy sources as a priority measure given that their exploitation contributes to environmental protection and sustainable development. However, rather than the mandatory targets requested by the Parliament and NGOs, the directive only has indicative targets of 12% of energy to be produced by renewable sources by 2010 -including a target of 22% of electricity. These targets translate into the indicative national requirements shown in figure 4A1, which were determined by the present level of renewable energy sources within each country's current energy mix.
Ireland's below-average target for Energy Electricity from Renewable Sources (RES)

Besides the lack of binding targets, critics point to the inclusion of incineration of wastes as a renewable energy source as a major loophole and an environmental problem in the directive. Member states have to transpose the directive into national legislation during 2003.

ENERGY FUNDING

The major mechanism for EU funded research and development is through the Framework programme. Figure 4A2 shows that nuclear, fission and fusion, research has remained relatively constant in recent programmes, while conventional energy has seen a decline of 20%. As a result, nuclear technology receives 50% more research funding that all other energy sources combined.

The shrinking amount of funds for non-nuclear energy research
The €810 million provided for non-nuclear research in the 6th Framework Programme covers:

In the short and medium term:
- The main new and renewable energy sources and their connection into the grid system
- Alternative motor fuels
- Energy saving and energy efficiency, particularly in buildings
For the medium and longer term:
- Fuel cells including applications for transport and for stationary use
- Technologies for hydrogen as an energy carrier and storage system
- New and advanced concepts for photovoltaic energy and the advanced use of biomass
- Disposal of the CO2 produced by fossil fuel plants.

The framework programme is not the only mechanism for EU financial support for energy research. The figure 4A3 below is a snapshot of funding in 1996 for energy research.

From this it is clear to see how little funding renewables actually get in relation to all other programmes. The only line dedicated to the development of renewable energy is the Altener programme, while the Synergy, Joule and JRC have also cofunded some research. Furthermore, Phare and Tacis programmes have also funded some research into renewables, but only as a small percentage of their total work, with most once again going to nuclear technology.

ONGOING SUBSIDIES FOR THE NUCLEAR INDUSTRY

Despite the European Commission and Council both stating that they want to create a level playing field in the energy sector, nuclear power continues to get significant state subsidies that distort the electricity market. Apart from tax exemptions on the cost of nuclear fuel, these are in two main areas:

Nuclear liability: Operators of nuclear plants have their maximum liability for the damage done by nuclear accidents limited under the Paris and Vienna Conventions. In some cases the nuclear facilities are insured for more than the operator would ever have to pay out. As the cost of a large-scale release of radiation in Western Europe could run into trillions of Euro, not having to insure against such an eventuality is a considerable saving. It has been calculated that the liability ceiling saves German operators between 0.0003 and 0.022 EUR/kWh.

Nuclear waste: Although nuclear power companies are required to put aside funds to pay for the decommissioning of their reactors and the management of the waste from them, many are failing to put aside enough. For example British Energy, a private company, puts aside nothing to cover the first and second stages of decommissioning, the shutting down of the reactors, the removal of the fuel and making safety the facility for 70-100 years. Only the third stage, the dismantling of its reactors is funded. In other member states including Germany the nuclear industry receives special tax exemptions - or a reduction in the level of tax - for their nuclear waste and decommissioning funds.

LEGAL CHANGES

The scope that governments have for supporting the greater use of renewables has recently been increased by two rulings from the European Court of Justice. These were:

Decision on Environmental Protection: On 18 March 2001 the European Court of Justice stated that the protection of the environment is a valid reason for taking action within the market. This decision has been used to justify the laws allowing renewable energy to be fed into the grid on favourable terms in some member states.

Decision on Public Procurement: On 17 September 2002, the European Court confirmed the need for the EU to amend its public procurement directive to take into account the Amsterdam Treaty and allow public authorities to take social, environmental and fair trade criteria into consideration when awarding public procurement contracts. This decision opens the door for public bodies to choose energy suppliers on criteria other than price, thus allowing them to purchase more renewable energy.

CONSEQUENCES

The growth of wind power has been constantly increasing in the EU over the last decade, with the installed capacity rising from 629 MW in 1991 to 17,319MW in 2001. The graph 4A4 demonstrates this increase.

Source: BTM Consult and European Wind Energy Association, 2002

Other renewables, especially biomass, have not fared nearly so well while solar and wave power have yet to compete commercially with conventional power sources, particularly natural gas. The graph 4A5 shows the extent to which natural gas dominates new construction.

CCGT stands for Combined Cycle Gas Turbine. Source: Platts; Power in Europe August 2002.

There is currently 62 GW of new combined cycle gas turbine power plants being built or under active consideration.

Wind power is runner-up to CCGT with approximately 4500 MW of capacity being built each year. It is hard to compare this figure with those in the graph as the graph shows stations on order or under construction, a process which can take between two and ten years. Even so, wind power is now the second most important choice for new electricity capacity and given the ever-increasing dominance of natural gas power stations, it is essential to try and increase the diversity of electricity sources.

WHAT NEEDS TO BE DONE?

Step 1: Member states need to transcribe the Renewable Energy Sources Directive into national law as quickly as possible.

Step 2: The Commission and member states must act to ensure that all member states meet the targets included in the Renewable Energy Sources Directive.

Step 3: Assessments must be taken on how the EU can meet medium and long-term targets for the widespread introduction of renewables, and targets set for renewable energy in 2020 and 2030, especially for the transport sector.

Step 4: The research priorities and their associated budgets laid down in the 6th Framework Programme must not be repeated. In particular, funds earmarked for fission and fusion research should be dramatically cut and the savings switched to renewable energy sources and energy efficiency. This would require the abandonment of Euratom's own Framework programme, but this, along with the general reform of Euratom, is long overdue and should be carried out by 2007, the 50th anniversary of the founding of the Euratom Treaty, at the latest.

Step 5: Widespread support should be given to the EU's campaign to enable renewable energy technologies to take off by promoting the installation of 1,000,000 photovoltaic systems; 15,000,000 square metres of solar collectors; 10,000 MW of wind turbine generators; 10,000 MWth of combined heat and power biomass installations; 1,000,000 dwellings heated by biomass; 1,000 MW of biogas installations; 5 million tonnes of liquid biofuels per year and a hundred communities aiming to meet all their energy needs from renewable sources.

Step 6: 'Green' the Electricity Directive to provide priority market access for renewable energy sources generated electricity, accelerated authorisation for small power stations and a level playing field for embedded generators.

Step 7: Ensure that electricity bills specify the source of the electricity supplied so that consumers can choose their electricity supplier on factors other than cost.

THE WAY FORWARD FOR THE EU AND SUSTAINABLE ENERGY

Fossil fuel use has to be reduced drastically over the next fifty years and nuclear power cannot take up the slack as it is not sustainable. A bad accident would have a devastating effect on the environment and human life and more reactors would create an insoluable waste problem for future generations. Renewable energy therefore needs at least as much investment as the nuclear industry has had over the past fifty years, which amounts to billions of Euro. This level of investment is not happening and yet nuclear energy continues to be heavily - even covertly - subsidised.

Although the EU has promoted renewable energy sources, their present use is limited because energy markets do not take into account the cost of the environmental damage caused by the use of fossil fuels and nuclear energy. The cost of this damage should be reflected in the price of power and this internalisation of external costs should also extend to the transport system. Currently transport is relatively cheap because the environmental costs it imposes are not included in the price the customer pays. As a result, too many goods are being carried about. People in the alpine regions have strongly objected to the environmental damage caused by trucks carrying goods through their region from south to north Europe and vice versa.

If we internalise external costs we can develop renewables through market mechanisms and they will be competitive - particularly wind energy in Ireland. Global warming is already the probable cause of very substantial damage such as the floods in central Europe this summer. In Prague alone transport infrastructure was destroyed and will need to be rebuilt, and the UK is experiencing increased wind and flood damage. All this leads to huge insurance costs.

CREATING A SUSTAINABLE IRELAND

In Ireland we have had rapid growth in the last decade. Car use has risen by over 50%, there has been a huge increase in electricity demand and CO2 emissions are up by more than 30%. We are not a sustainable society and we cannot continue in this mode. Already Dublin is spreading out into Meath, Kildare, Wicklow and Louth and we look like having all the problems of the city the size of Los Angeles without its benefits.

It is not sustainable to keep moving people further and further from their work place in order to find an affordable place to live and at the same time provide no public transport infrastructure. All this apart from the level of growth was foreseen in the early 90s and yet very little was done. Indeed, the Dublin Transport Initiative was stifled by vested interests in the Dublin Chamber of Commerce for more than five years. If the Luas had been given the go-ahead five years earlier we would have had it by now.

Ireland can move towards sustainability if we take decisions and implement them. We need to use massively more renewable energy, stop using peat-fired power stations, transform the public transport system, and implement the hydrogen economy.

ENDNOTES

1. Energy in Europe, Economic Foundations for Energy Policy, The Shared Analysis Project, December 1999, European Commission, ISBN 92-828-7529-6, page 8.

2. Towards a European Strategy for the Security of Energy Supply, Green Paper, 29th November 2000, Com (2000) 769.

3. www.europa.eu.int/comm/energy/home/internal_market/oil_gaz/index_en.htm

4. Green Paper, page 5

5. Green Paper, page 22

6. Green Paper page 49

This is one of almost 50 chapters and articles in the 336-page large format book, Before the Wells Run Dry. Copies of the book are available for £9.95 from Green Books.

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