es

chem

A EuropEAn union for

upport S

rEnEwAblE EnErgy –

nd S

ids a

policy options for bEttEr grids

etter Gr

And support schEmEs

or B

by sascha müller-Kraenner and susanne langsdorf

ptions f

The European Union needs a common vision for its energy future.

The Heinrich Böll Foundation commissioned a working group of

A shift towards renewable energy sources will increase the security

experts from politics, industry, applied science and civil society

olicy OP

of supply, foster the competitiveness of the European economy and

who have considered these challenges. As a result of a series of

facilitate sustainability. In order to convince governments, busi-

expert meetings, this report ‘A European Union for Renewable En-

nesses and European citizens to support this shift, it is necessary

ergy’ provides a collection of policy ideas for two key areas that

nergy –

to demonstrate the practical feasibility of the vision.

will define the future of renewable energy development in Europe:

grids, and support and remuneration schemes for renewables. The

able E

We are now at a critical point in time to accelerate the transition

report shall serve as a stepping stone on the path to our sustainable

to renewables in Europe and to make necessary investments and

and renewables-based future. At a moment of deep economic and

enewr

adjustments. Around two thirds of all power plants will have to be

institutional crisis in Europe, the vision of a ‘European Union for

or

replaced in the coming years. At the same time, large parts of the

Renewable Energy’ is a positive project to give the EU a new push

European transmission and distribution grid require modernisa-

for integration.

nion f

tion and are in need of reinvestment. With the phase-out of nuclear

u

power in several European countries, opportunities to replace

large quantities of nuclear energy with renewables are plentiful.

uropean

A E

heinrich-böll-stiftung, European Union, Brussels – 15 Rue d’Arlon – B-1050 Brussels – Belgium

t +32 2 743 41 00 f +32 2 743 41 09 E info@eu.boell.org w www.eu.boell.org A European Union for

Renewable Energy –

Policy Options for Better Grids

and Support Schemes

By Sascha Müller-Kraenner and Susanne Langsdorf*

Commissioned and published by the Heinrich-Böll-Stiftung, European Union

Edited by Silvia Brugger

*The present paper is the outcome of a series of expert meetings. It was written jointly, with verbal and written commentary over the course of several sessions, and with individual contributions by the experts Bas Eickhout, Daniel Fürstenwerth, Frede Hvelplund, Katja Rottmann, David Toke, Claude Turmes, Andreas Wagner

and Paul Wilczek. Consequently, not every point made in this paper necessarily represents the opinion of all

members of this working group. Oliver Geden, Helmuth-M. Groscurth, Rainer Hinrichs-Rahlwes, Martin Kre-

mer, Oliver Krischer, Christine Lucha, Karsten Neuhoff, Lutz Nothbaum, Fabian Pause, Raffaele Piria, Mario

Ragwitz, Gustav Resch, Michaele Schreyer, Stephan Sina and Frauke Thies also made valuable contributions.

A European Union for Renewable Energy –

Policy Options for Better Grids and Support Schemes

Commissioned and published by the Heinrich-Böll-Stiftung, European Union

Authors: Sascha Müller-Kraenner, Susanne Langsdorf

Coordination of expert meetings and final editing: Silvia Brugger

Printed in Belgium, September 2012

© The authors, the Heinrich-Böll-Stiftung, European Union

All rights reserved

English proofreading and language editing: Katy Nicholson, Miranda Voke

German translation: Nora Löhle

French translation: Carole Courtoy

Production: Micheline Gutman

Cover picture: Heinrich-Böll-Stiftung, 2011

D/2012/11850/3

This publication can be ordered at:

Heinrich-Böll-Stiftung, European Union, Brussels – 15 Rue d’Arlon – B-1050 Brussels – Belgium

T +32 2 743 41 00 F +32 2 743 41 09 E info@eu.boell.org W www.eu.boell.org

3

COntEntS

Foreword

5

the Energy transition – Challenges and Opportunities

6

By Franz Untersteller, Minister of the Environment, Climate Protection

and the Energy Sector, Baden-Württemberg

Preface

8

Introduction

10

Part One

15

Remuneration and Support Schemes

1. today’s market, its shortcomings and our vision

16

1.1. Starting point: From fossil to renewables markets

16

1.2. Optimistic and realistic: Setting targets for 2030

18

1.3. Design matters: Options for remuneration and support schemes

19

2. tackling the flexibility challenge

23

2.1. The price of electricity and policy options to counter price deterioration

24

2.2. Power market integration

26

2.3. Ownership

27

2.4. Demand-side response and storage

28

2.5. Triple-A options for renewable energy investments

28

2.6. The European Investment Bank

30

3. What role for the Europeanisation of support and remuneration schemes

31

in the medium and long term?

3.1. Front-runner groups

32

3.2. Cooperation mechanisms

33

3.3. Non-compliance

34

4. Recommendations

35

4

Part two

37

Grids

5. Governance

38

Where we stand: Current measures to Europeanise electricity grids

5.1. What is necessary for the development of a European grid?

38

5.2. Responsibility for grid planning and implementation

39

5.3. Current legal developments in the EU

41

5.4. The potential of a European grid: The energy we want and the grid we need

43

5.5. ENTSO-E’s Ten-Year Network Development Plan

44

6. Elements for improved European grid planning

45

6.1. Coordinating sources of flexibility: Bringing the actors together

45

6.2. Transparency and participation

46

6.3. Using what we have: Best practice in Europe

49

6.4. A hybrid approach

49

7. Recommendations

49

List of abbreviations

51

Definitions

52

Short biographies of authors, working group members and contributors

53

5

FOREWORd

The European Union needs a common vision

In order to stimulate debate about the future

for the future of its energy supply. Such a vision

of renewables in Europe at both EU and Member

should be based on the principle of sustainabil-

States level, the Heinrich Böll Foundation’s

ity and must respond to the urgency of climate

European Union Office organised a series of expert

change. Some Member States have decided to

meetings focusing on two key areas: grids, and sup-

phase out nuclear power and to accelerate the

port and remuneration schemes for renewables.

deployment of renewable energy sources. At the

The meetings took place in Brussels, an important

same time, others intend to build new nuclear

but by no means the only location where the future

power plants, are proclaiming a new golden age

of renewables in Europe will be shaped. This pub-

of gas or are pinning their hopes on carbon cap-

lication is the result of these expert meetings and

ture and storage technology (CCS).

comprises the individual contributions and reflec-

tions of the members of the working group. We

EU Member States have the right to deter-

want to open and encourage a Europe-wide debate

mine their own energy mix as foreseen by the

which takes specific national and local conditions

Lisbon Treaty. However, the cross-border impacts

into account, while at the same time bringing in

of individual decisions made by Member States

the European dimension.

underline the need for more coordination of energy

mix choices at a European level. The European

We would like to express our thanks and

Commission has made attempts to ‘Europeanise’

gratitude to all the participants for the time and

national energy policies and is exploring long-term

knowledge they have invested in this project,

scenarios for the European energy future in order

and for their commitment. We know they will

to pursue the common goals of security of supply,

continue to contribute to this debate. We would

competitiveness and sustainability. But given the

especially like to thank Sascha Müller-Kraenner

different energy pathways that are currently being

for leading and moderating the expert meetings,

pursued at the national level, and without a com-

as well as Susanne Langsdorf for channelling the

mon vision for the energy mix of the future, such

results of the expert discussions into a coherent

proposals remain without substance.

report. We look forward to a fruitful debate on

a European Union for Renewable Energy.

The Heinrich Böll Foundation, in its proposal

for a European Community for Renewable Energy

(ERENE),1 argues for a transition to 100 per cent

Silvia Brugger, Coordinator of the Climate and

renewables by 2050. Numerous studies show that

Energy Policy Programme,

such a transition is not only feasible but that there

Heinrich Böll Foundation,

are also multiple economic and societal reasons

European Union Office

for completely covering European electricity needs

through renewable energy sources. These include

Claude Weinber, Director,

benefits in terms of global competiveness, security

Heinrich Böll Foundation,

of supply and employment.

European Union Office

1 Heinrich-Böll-Stiftung (ed.): ERENE – European Community for Renewable Energy. A feasibility study by Michaele Schreyer and Lutz Mez, Berlin 2008, http://www.boell.de/downloads/ERENE-engl-i.pdf

6 A EUROPEAn UnIOn FOR REnEWABLE EnERGy – POLICy OPtIOnS FOR BEttER GRIdS And SUPPORt SCHEMES

tHE EnERGy tRAnSItIOn – CHALLEnGES And OPPORtUnItIES

By Franz Untersteller, Minister of the Environment, Climate Protection and

the Energy Sector, Baden-Württemberg

As a result of the Fukushima nuclear disaster

affordable energy prices – and that discussions

at the beginning of 2011 and against the backdrop

remain free of the usual energy policy dogmas.

of the continuing warming of the Earth’s atmos-

phere, climate and energy policies stand more

The phasing out of nuclear energy and the

than ever at the centre of both public interest and

rapid expansion of renewable energy place new

political discussions – also and especially at the

demands on energy supply systems and the

European level.

associated infrastructure. Given the fluctuating

supply from renewable energy sources and with

The green/red state government of Baden-

it the increasingly unstable but also indispen-

Württemberg has set itself ambitious goals in

sable balance between supply and demand, we

the fields of climate and energy policy. We will

must direct our attention to answers that are not

actively push forward the Energiewende – the

only intelligent but also marketable. The rapid

energy transition – which was also agreed upon

expansion of electricity grids is therefore vital.

by the federal government and is based on a

The existing distribution networks should also be

broad social consensus.

expanded and further developed into intelligent

energy networks – the so-called ‘Smart Grids.’

The decision to phase out nuclear power, the

Such systems require the integration of additional

demands of climate protection and the limited

capacity, namely storage and controllable loads.

availability of fossil fuels demonstrate that over

In addition, we must ensure in the future that, in

the long term there is no reasonable alternative

times of low supply from renewable sources, con-

to a shift to renewable energy sources. The state

ventional power plants with the necessary highly

of Baden-Württemberg is meeting this challenge

flexible generation capabilities are available to

with the aim of advancing the restructuring of the

cover energy demand.

energy supply in a timely and consistent fashion.

The restructuring of the energy supply system

The proportion of renewable energy that

is, however, not a task that can be undertaken by

makes up Baden-Württemberg’s total energy sup-

government alone; it calls for the constructive

ply is increasing year on year. The pace of growth

cooperation of all stakeholders, from compa-

is remarkable, particularly in the electricity sec-

nies to individual citizens. Through our actions,

tor. In 2011, renewable energy already made up

each of us can contribute to the success of the

19 per cent of gross electricity generation. The

Energiewende. The local level – cities and com-

green-red state government has set itself the goal

munities – is also an important partner in the

of raising the share of renewable energy in this

implementation of the Energiewende and in the

sector to at least 38 per cent by the year 2020.

expansion of decentralized power generation.

It is clear to me that good energy policies grow

Aside from CO reductions, a secure and

from the bottom up. In Baden-Württemberg, we

2

economical energy supply is of the greatest

rely on the willingness of society to achieve the

importance to both Baden-Württemberg, one

Energiewende together.

of Germany’s leading industrial regions, and to

me personally in my capacity as Minister of the

The Energiewende represents a major eco-

Environment, Climate Protection and the Energy

nomic opportunity. In Baden-Württemberg alone,

Sector. With every political action, we must take

more than 40,000 people are already employed in

care to ensure that a balanced approach is taken to

the renewable energy sector. And in 2010, around

the three primary energy policy objectives – envi-

3.4 billion euros were invested in new facilities

ronmental sustainability, security of supply and

related to renewable energy in the state.

7

The transition to renewable energy also offers

in the building stock in particular – herein also lie

significant opportunities in the field of research.

opportunities for the economy and for research.

Charged not only with the task of accelerating the

transition from fossil fuels and nuclear power to

I am convinced that the Energiewende can

renewable energy, research also provides industry

succeed. It is also clear to me that the necessary con-

with the necessary basis to allow it to play a lead-

ditions must be created in order for it to do so – at

ing international role in the field of the new energy

a European as well as at national and regional levels.

economy in the years and decades to come.

I am therefore following the European-level discus-

sion with great interest and am sure that the present

The same also applies to two fields that are

publication by the Heinrich Böll Foundation can

essential for the success of the Energiewende: energy

make a valuable contribution to this.

efficiency and energy conservation. A sustainable

energy supply based on renewable energy can only

be achieved through the exploitation of the sig-

Franz Untersteller,

nificant potential for energy saving and increased

Minister of the Environment,

efficiency to be found in the generation and distri-

Climate Protection and

bution of energy. There are major energy reserves

the Energy Sector, Baden-Württemberg

8 A EUROPEAn UnIOn FOR REnEWABLE EnERGy – POLICy OPtIOnS FOR BEttER GRIdS And SUPPORt SCHEMES

PREFACE

When combined with energy conservation,

considered these challenges and produced the

Europe can cover all of its electricity needs using

report and recommendations below.

renewable sources of energy. In order to convince

governments, businesses and European citizens

The questions posed at the outset included

to support that shift, however, it is necessary to

the following:

demonstrate the practical feasibility of the vision.

Which competencies are necessary at the

The transition must take place in a way that is

European level to develop grid extensions that

both technically sound and socially and econom-

would enable the transition to renewable energy

ically feasible so that the current dependency on

sources? How can grids be designed in a way that

energy imports can be reduced and energy secu-

is compatible with the production of renewables?

rity be further increased. The decision-making

What kind of support is needed to enhance the

process on the road to Europe’s energy future

transition to renewables in Europe? And how can

must be open to all stakeholders, transparent to

a European alignment of support and remunera-

the public and follow democratic procedures.

tion schemes increase the share of renewables

while avoiding negative effects on producers,

The Heinrich-Böll-Stiftung has long argued

consumers and taxpayers?

for the vision of a European Community for

Renewable Energy (ERENE). ERENE would pro-

The working group focused on the practical

vide the institutional framework for Europe-wide

vision of 100 per cent renewables for the electricity

policies to support renewable energy.

sector. This would only constitute a first step, how-

ever; the transition of our energy system requires

This debate gained new impetus and a renewed

the strong integration of all energy markets – elec-

focus when, in spring 2011, the German government

tricity, heating, cooling and transport. Perhaps

announced the ‘ Energiewende’ (energy transition):

paradoxically, focusing on electricity alone lowers

an accelerated phase-out of nuclear power and its

the likelihood of achieving 100 per cent renewable

full replacement, over time, by renewable energy.

energy in this sector, while the integration of all

energy sectors increases the likelihood. This exam-

This report, ‘A European Union for Renewable

ple illustrates one of the main challenges in the

Energy’, now looks at concrete policy options for

transformation of the energy system: it is practically

two key areas that will define the future of renew-

impossible to look at one issue in isolation, as the

able energy development in Europe: the future

energy system is made up of an array of elements

of grids and the development of support and

that are interrelated and subject to frequent change.

remuneration schemes. With regard to grids, it

will focus on the decision-making process for

This report strongly argues for further inte-

electricity grid planning while, at the same time,

gration within the energy system. As it cannot

arguing for the better integration of all energy sec-

cover all energy markets, however, the electricity

tors and thus ultimately all types of grid.2

market remains at the centre of the debate. The

report will feed into the ongoing dynamic politi-

A working group of experts from the European

cal debates surrounding support schemes for

institutions and multiple Member States, as well

renewable electricity and grids. Nevertheless, the

as the worlds of politics, the renewable energy

local integration of electricity into other energy

industry, applied science and civil society, have

markets remains a major element for the success

of Europe in the years to come.

2 These include (district) heating grids and gas grids. As it was not possible for the report to cover all energy sources and their means of transportation due to time and space constraints, the scope of the report is limited to electricity grids.

9

Equity considerations have not been at the

tion in Germany. One question asked is whether

centre of our discussions in this project but

the accelerated phase-out of nuclear will lead to

deserve increased attention in the near future.

increased gas imports, particularly from Russia, with

We do wish to note, however, that claims that the

the associated economic and political dependen-

push for renewables will lead to rising electricity

cies. Those concerns can be addressed if Germany’s

costs, particularly for low-income households,

energy transition, as well as ambitious buildout

have been proven false: rising consumer prices

plans for renewables in other Member States, can be

can be attributed to the increased cost of fossil

anchored in the European energy market, backed

fuels, rising taxes and higher profit margins for

up by the appropriate infrastructure.

energy companies, among other reasons. Public

participation and a democratic discourse on the

With economists from the European Invest-

future of renewable energy in Europe can help to

ment Bank, as well as others, our working group

spread the benefits more equally between indi-

discussed how renewable energy could become

viduals and communities and thereby increase

a central pillar of the growth initiatives currently

political as well as economic ownership of the

under negotiation. Sustainable growth is not only

technology and of the policies behind it.

a challenge for the moment but is likely to remain

on the agenda for the next decade or longer. The

Currently, interest in and support for renew-

transition to renewable energy could become a

able energy technologies as a mainstream solution

central tenet of the ‘Green New Deal’ proposed

for our energy economies as well as for address-

by, among others, the Greens in the European

ing climate change is unevenly spread within the

Parliament (EP).

European Union. Some Member States, includ-

ing Scandinavian Member States, Austria and

Germany’s Energiewende was announced at

Germany are strong supporters of the renewable

a moment of deep economic and institutional crisis

energy vision. These countries have already built a

in Europe. A European Union built upon renew-

strong industry in that sector which, as a result, has

able energy supplies could be a positive project to

generated strong cross-party political support. The

give not only the eurozone but in fact the whole

picture in other countries remains mixed, although

EU a new push for integration. Renewable energy,

progress has been made almost everywhere.

as well as the related infrastructure, could be

a driver for sustainable economic development

Several Member States, including France, still

and job creation, particularly in Europe’s cur-

support the nuclear vision. The newly elected French

rently most economically depressed regions.

government might, for the first time, slowly reduce

the country’s dependency on nuclear electricity.

While renewable energy is not a panacea to

This is a unique opportunity to start a discussion

solve all of the world’s problems, it remains an indis-

with the new French leadership about alternatives

pensable part of a global transformation towards

to the nuclear pathway. An attractive framework to

inclusive and sustainable development. At the

support renewable energy in a European context

Rio+20 Conference on Sustainable Development

would ensure that this does not remain a purely

held in June 2012, governments, businesses and

‘Germanic’ political and economic vision and

civil society representatives from all over the

would be paramount in convincing the French elite

globe took note of the renewable energy revo-

that the renewable pathway is an opportunity rather

lution underway in Europe, and of Germany’s

than a threat to French industrial strength and can

Energiewende in particular. This is one of the few

help create jobs in a time of crisis.

areas in which Europe, an ever-smaller economic

and political power in a rapidly changing world con-

Certain Central and Eastern European Member

fronting increasing scarcity, can truly lead and make

States have reacted cautiously to the energy transi-

a valuable contribution for all.

10 A EUROPEAn UnIOn FOR REnEWABLE EnERGy – POLICy OPtIOnS FOR BEttER GRIdS And SUPPORt SCHEMES

IntROdUCtIOn

The transition to a European energy sys-

shale gas revolution is delivering low gas prices in

tem that produces 100 per cent of its electricity

many parts of the world, it has high environmen-

from renewable energy by 2050 is possible, on

tal costs, and does not change the fact that natural

the condition that the necessary investments

gas is a finite resource. Nuclear energy is one of

and adjustments are made.3 A complete shift in

the most expensive energy sources, with the gen-

electricity generation is viable even with the tech-

eral public picking up the major share of the bill

nology that exists today, and at costs only slightly

for the billions spent on nuclear waste transport

higher than under business-as-usual scenarios4

and storage. Moreover, no insurance company is

in the short to mid-term, offering strategic long-

willing to insure nuclear power stations, leaving

term economic and environmental benefits.

society not only with the risk of an accident, but

also potentially with all of the associated costs.6

The growing dependency on fossil fuel

The only conventional energy source which is still

imports is continuing to weaken Europe’s econ-

available at a relatively low price is coal, but this

omy, distorting the trade balance and negatively

has a comparatively low energy value and is the

impacting public budgets in a time of crisis. EU

conventional fuel with the worst climatic effects.

Member States have to spend more and more

on imported fossil fuels and other non-renewa-

Dependency on oil and gas imports from

ble raw materials. This has added considerably

Russia and the Middle East also impact energy

to the current budget deficit of some Member

security – a major concern, especially for Central

States and has thus had a negative impact on the

and Eastern European Member States. Such

stability of the eurozone.5 Fossil energy prices

dependency also impairs the Union’s ability to act

will increase over the coming decades due to

as an independent foreign policy actor in regions

the massive growth of global energy consump-

on which its economy depends.

tion and the end of the cheap oil era. This affects

energy importing countries economically, and

The EU-27 currently imports more than half of

also politically: the search for alternative sup-

its energy. Without the expansion of renewables,

plies and suppliers recently led the European

this share is expected to rise further in the future.

Parliament down the misguided path of relying

If implemented in the right way, a greater share of

on ‘new conventional fuels’ such as oil sands and

renewable energy will strengthen all of the EU’s

shale gas from Canada, the United States, Brazil

major energy goals by increasing security of sup-

and the Arctic region, among others. While the

ply at lower prices, fostering the competitiveness of

3 European Climate Foundation: Roadmap 2050: a practical guide to a prosperous, low-carbon Europe. Berlin 2010.

German Advisory Council on Global Change: World in Transition – A Social Contract for Sustainability. Berlin 2011.

Heinrich-Böll-Stiftung: ERENE – European Community for Renewable Energy. Berlin 2008.

Öko-Institut: The Vision Scenario for the European Union, Berlin 2006.

Sachverständigenrat für Umweltfragen (SRU): Wege zur 100% erneuerbaren Stromversorgung, Berlin 2011.

Gregor Czisch: Möglichkeiten des großräumigen (transeuropäischen) Ausgleichs von Schwankungen großer Teile

intermittierender Elektrizitätseinspeisungen aus regenerativen Energiequellen in Deutschland im Rahmen einer 100%

regenerativen Stromversorgung mit dem Zeithorizont 2050, Berlin 2009.

European Renewable Energy Council (EREC): REthinking 2050. A 100% Renewable Energy Vision for the

European Union. Brussels 2010.

4 European Commission: Communication from the Commission to the European Parliament, the Council,

the European Economic and Social Committee and the Committee of the Regions. Energy Roadmap 2050, Brussels,

15.12.2011 (COM(2011) 885 final).

5 Giegold, Sven: Aus der Eurokrise geht es nur mit dem Green New Deal!, Düsseldorf 2012.

6 Symptomatic of the lack of competitiveness of nuclear energy is the debate currently being held in the UK, in which nuclear project developers are openly calling for significantly higher subsidies than those needed to deploy a relatively expensive renewable technology such as offshore wind.

11

the European economy and facilitating sustain-

Europe. Around two thirds of all power plants will

ability. Reduced dependency on imports from

have to be replaced in the coming years. At the

energy exporting countries – which are often

same time, large parts of the European transmis-

undemocratic and have little respect for human

sion and distribution grid require modernisation

rights – would furthermore improve the political

or rebuilding and are in need of reinvestment.

position of the EU Member States.

With the phase-out of nuclear energy in sev-

This report looks at two policy fields that will

eral European countries, opportunities to replace

be defining factors for the smooth transformation

large quantities of nuclear energy with clean

to a renewable energy-based system. It provides

renewables are plentiful. For this to happen,

a collection of policy ideas, for the grid and for

investors need a secure perspective for return on

remuneration and support schemes in Europe,

their investments. Investment security and lever-

that are conducive to the achievement of the 100

age investments in renewables generation and

per cent renewable energy target in the electricity

electricity grids will therefore be decisive for the

sector by 2050 at the latest as part of the general

success of the transition. Investment in inflexible

growing independence from fossil fuels in other

power plants, such as nuclear and coal-fired, will

energy sectors. The integration of electricity pro-

hinder the development of renewable energy and

duction, transport and storage with the heating

lock in conventional fuels for decades to come.

and cooling sectors will be paramount to create

an integrated, economically feasible and stable

The future system has fundamentally differ-

system, particularly at the local and regional lev-

ent characteristics to the old fossil fuel baseload

els. Transport is the third pillar of this transition,

systems. The right balance has to be found

including the potential storage and balancing

between the generation capacities of non-variable

capabilities of a transport system based on renew-

and variable renewable energy (solar, wind and

able electricity.

in the future possibly wave or tidal energy), as

well as the flexible resources and technologies

Increased energy efficiency and a reduction in

needed to balance variable energy. This implies

overall energy demand are crucial prerequisites for

investment in transmission grids and in distri-

the successful transformation of the energy sector.

bution grids that must become able to integrate

This report advocates for binding energy efficiency

a high share of small-scale distributed generation

targets and measures for 2020 and 2030.

with flexible and responsive demand, as well as

distributed storage. It is for this reason that this

As a footnote on language, which is of impor-

report does not simply promote measures for the

tance for defining the terms of the debate and for

better integration of renewable energy into the

setting the right agenda, the authors of this report

existing energy system; instead, it promotes a sys-

have decided to use the term ‘remuneration and

temic change to a smart energy system7 which is

support schemes’ as opposed to simply speaking

able to deliver the flexibility that variable renew-

of ‘support’ for renewable energy. This reflects the

able energy needs.

fact that renewable energy is no longer a rare and

threatened flower that has to be carefully tended

The support of renewable energy and the

and supported (or subsidised); it is the mainstream

development of a pan-European electricity grid

source of energy for our near future, for which we

are at the heart of current European climate

have to find fair mechanisms of remuneration.

and energy politics and are therefore subject

to dynamic debates and policy developments.

Today is a critical point in time to accelerate

In December 2011, the European Commission

the transition to 100 per cent renewable energy in

adopted the Communication ‘Energy Roadmap

7 Lund, Hendrik/ Andersen, Anders N. / Østergaard, Poul Alberg et al.: From electricity smart grids to smart energy systems: A market operation based approach and understanding. In: Energy 42 (2012)1, p. 96-102.

12 A EUROPEAn UnIOn FOR REnEWABLE EnERGy – POLICy OPtIOnS FOR BEttER GRIdS And SUPPORt SCHEMES

2050’.8 Two months prior to this, it had published

order to provide faster, more cost-efficient ways

the proposal ‘Guidelines for a trans-European

of reaching an electricity system fully based on

energy infrastructure’9 which aims to ensure that

renewables. The transparency of grid planning

strategic energy networks and storage facilities

processes and civil society participation can be

are completed by 2020. Both publications partly

enhanced in order to boost acceptance of renewa-

build on the Communication ‘A Roadmap for

bles generation and grids. This report will identify

moving to a competitive low carbon economy

some of these shortcomings and propose meas-

in 2050’,10 also published by the Commission

ures to help achieve the right balance between

in 2011, which underlines the EU’s climate

power grids and other flexibility solutions.

objectives. These documents, as well as the EC

Communication ‘Renewable Energy: a major

The European institutions’ framework laws,

player in the European energy market’11 from

policy discussions and initiatives are supple-

June 2012 work towards supporting the goal of

mented and responded to by numerous actors

reducing European greenhouse gas emissions

from civil society, science, business and founda-

to 80 to 95 per cent below 1990 levels by 2050.

tions. In its report ‘World in Transition – A Social

The broad pictures painted of the decarbonised

Contract for Sustainability’,13 published in time

economy and energy system in the Roadmaps are

for the Rio+20 summit, the German Advisory

complemented with more detailed plans related

Council on Global Change highlighted the need

to grid planning.

for a common European energy policy. The

Council’s recommendations include the stepwise

Germany’s Energiewende has brought the

harmonisation of EU feed-in tariffs, as well as the

topic of ‘grid extension’, formerly restricted to

launch of an initiative to introduce similar instru-

those with expert knowledge of the field, to news-

ments elsewhere. The Council also supports the

paper front pages. European grid planning is now

further integration of renewable energy into the

widely discussed, with the Ten-Year Network

internal energy market. In its Communication

Development Plan12 (TYNDP) of the European

on renewable energy, the European Commission

Network of Transmission System Operators for

announced to provide guidance’14 on support

Electricity (ENTSO-E) attracting particular inter-

scheme reform, indicating the likely benefits of

est. At the same time, however, the actors and

enhancing cooperation and coordination.

processes involved in grid planning for the con-

tinent are little known outside of the small expert

The pooling of renewable energy poten-

community and the processes of grid planning

tial in Europe – including enhanced (and better

lack transparency and legitimacy. The current

designed) collaboration and connections between

grid planning processes can be improved in

national remuneration and support systems, to

8 European Commission: Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions. Energy Roadmap 2050, Brussels, 15.12.2011

(COM(2011) 885 final).

9 European Commission Proposal for a Regulation of the European Parliament and of the Council on guidelines for trans-European energy infrastructure and repealing Decision No 1364/2006/EC, Brussels, 19.10.2011,

(COM(2011) 658 final).

10 European Commission: Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions. A Roadmap for moving to a competitive low carbon economy in 2050, Brussels, 8.3.2011, (COM(2011) 112 final).

11 European Commission: Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions. Renewable Energy: a major player in the European energy market, Brussels, 6.6.2012, (COM(2012) 271 final).

12 ENTSO-E: Ten-Year Network Development Plan 2012, Brussels 2012.

13 German Advisory Council on Global Change: World in Transition – A Social Contract for Sustainability, Berlin 2011.

14 European Commission: Renewable Energy: a major player in the European energy market, p. 5.

IntROdUCtIOn

13

be agreed by Member States – can accelerate the

Most European citizens are in favour of

energy transition. The benefits can fully material-

a stronger role for renewable energy. Consumers

ise if more and more Member States committed

are, however, wary of additional costs, and of

themselves to the transition to renewable energy.

what they perceive as the risks of new technologi-

When making changes to the remuneration and

cal developments they do not fully understand.

support schemes currently in place, however,

A fully and openly informed EU citizenry will

it is important to keep sight of the fact that cur-

therefore be an indispensable ally for the trans-

rent positive developments in renewable energy

formation of our energy systems. Access to

development must not be undermined, and that

transparent and comprehensive information on

investor confidence should be boosted and not

the full costs of all energy sources should be the

reduced as a result of uneven development.

right of every EU citizen.

Given that there is currently no agreement

It is hoped that this report will serve as a step-

between all Member States on a 100 per cent

ping stone on the path to our sustainable and

renewable energy target, this report proposes the

renewables-based future and will enrich dis-

connection of front-runner countries in macro-

cussions by providing policy ideas. It indicates

regions and enhanced cooperation.

alternative routes to some of the policies that

are currently being proposed in order to facili-

As enshrined in the Treaty on the Functioning

tate the development of a sustainable pathway.

of the European Union (TFEU), it is currently the

At the same time as advocating what it labels

prerogative of Member States to determine their

a ‘low-carbon’ future, the European Commission

own energy mix. The Commission can neverthe-

is currently continuing with the simple integra-

less put forward proposals which have an impact

tion of renewable energy into the present system,

on the energy mix of the Union under article 194

which remains structured around the logic of

TFEU, which states that it is the task of the EU to

fossil and nuclear fuels. Some of the core ele-

promote the development of renewable forms of

ments the Commission includes into its vision

energy. If this impact is significant, there must be

of Europe’s energy future, such as the roles for

unanimity in the Council and there is no co-deci-

nuclear and carbon capture and storage (CCS)

sion with the European Parliament. This shows

technology, are rejected by this report as unsus-

that the political will for a transformation towards

tainable solutions. This report adopts an open

100 per cent renewable energy must be generated

approach to regulatory philosophies, but with

within Member States. For as long as this is not

a clear positioning for 100 per cent renewable

the case in all Member States, it will be necessary

energy15 and against nuclear and CCS.16

to put in place collaborative mechanisms and the

right infrastructure to keep open the option of an

This long-term vision needs to be backed

EU-wide shift to 100 per cent renewable energy.

up by ambitious medium-term targets. The next

goal, as enshrined in the Renewable Energy (RE)

15 This report is positioned in favour of renewables targets and against low-carbon targets as these are often abused to greenwash undesirable technologies such as nuclear energy and CCS. This so-called ‘technology-neutral’ approach would lead to fossil fuel lock-in, inappropriate infrastructure and high costs for consumers and taxpayers. With the no-regret option of renewables at hand, it is unwise to again create waste that has to be stored ad infinitum, bearing incalculable risks and keeping Europe dependent on fossil fuels.

16 Carbon dioxide capture and storage (CCS) is a process by which the carbon dioxide released during the combustion of (mostly) coal is condensed and stored underground. The aim is to reduce the greenhouse gas emissions of coal-fired power plants. CCS requires large amounts of energy; the efficiency of coal-fired power plants is thus reduced and more fossil fuels must be used. The application of CCS would also create new legacies for future generations. The main economic argument against CCS is that it needs a utility factor of around 7,000 hours to be economically feasible.

In a system with a high percentage of wind power, fossil fuels will only work for 3,000 to 4,000 hours in the coming years.

Consequently, the CCS plants would have a low utility factor and would not be economically viable.

14 A EUROPEAn UnIOn FOR REnEWABLE EnERGy – POLICy OPtIOnS FOR BEttER GRIdS And SUPPORt SCHEMES

Directive,17 is at least 20 per cent renewable

A detailed plan of the path to be taken until

energy of final energy consumption by 2020. The

2050 cannot be drawn up today, given that tech-

following step must naturally be a binding and

nological developments and other opportunities

ambitious renewables target for 2030. This expert

will occur along the way. Regular monitoring is

group advocates a binding target of 45 per cent

needed in order to prevent lock-in situations. The

renewable energy share by 2030. In line with the

entire energy and transmission planning process

logic of the RE Directive, this should be an over-

must be carried out using a system that is capable

all renewable energy target, leaving the decision

of learning. This is essential in order to constantly

on how to divide the renewables share between

improve this process and thereby increase our

the energy sectors (electricity, transport, heating/

chances of reaching 100 per cent renewable

cooling) to Member States.18

energy by 2050.

17 Directive 2009/28/EC of the European Parliament and of the Council of 23 April 2009 on the promotion of the use of energy from renewable sources and amending and subsequently repealing Directives 2001/77/EC and 2003/30/EC.

18 A 45 per cent overall renewable energy target will most likely translate to a share of 65 to 70 per cent of renewable electricity in 2030 in most Member States. A trajectory for the share of electricity is important for the security of grid planning and should be elaborated by Member States and published in the National Renewable Energy Action Plans.

Part One – Remuneration and Support Schemes

© Heinrich-Böll-Stiftung, 2011

16 A EUROPEAn UnIOn FOR REnEWABLE EnERGy – POLICy OPtIOnS FOR BEttER GRIdS And SUPPORt SCHEMES

1. today’s market, its

a more stable framework with reliable returns

shortcomings and our vision

for investment during their operation time. With

regard to (balancing) infrastructure, policies for

1.1. Starting point: From fossil to

district heating and cooling, the introduction of

renewables markets

heat-cooling pumps, hydro storage, electric auto-

motive infrastructure and other policy areas need

The present European energy market is far

to be established.

from functioning effectively as a driver for an effi-

cient and sustainable energy system: competition

The Renewable Energy Directive (RE Directive)

is distorted by externalities such as damage to the

of 2009 followed the 2001 Renewable Electricity

environment and to health, as well as by open

Directive,20 the Biofuels Directive21 and the long-

and hidden subsidies for fossil and nuclear power

standing demand for a Directive promoting the

generation.19 Market transformation is hindered

use of heat from renewable energy sources. It is

by a lack of adequate infrastructure and conflict-

a very successful piece of European legislation in

ing national regulatory approaches and corporate

that it creates an enabling environment to facilitate

strategies. The so-called ‘electricity market’ is

the deployment of renewables. Its binding targets

still widely dominated by the incumbent utilities

and provision of guaranteed or priority grid access

from the age of fossil and nuclear energy; these

and dispatch of electricity from renewable energy

represent a classic case of privatising gains and

sources led and still lead to favourable growth

socialising costs.

conditions for renewables. As national targets,

the respective ‘National Renewable Energy Action

Renewable energy breaks with this pattern by

Plans’ (NREAPs) and national commitments vary

creating benefits for both the climate and for soci-

from country to country, some Member States

ety. In order to overcome and balance existing

are moving faster than others; on the whole, how-

market distortions, mechanisms are needed to

ever, positive developments in the deployment of

level the playing field between conventional fos-

renewable energy have been observed in recent

sil-based and renewable energy. Key elements of

years. The RE Directive has broadened not only

this exercise include ensuring stable and reliable

the legislative but also the explanatory framework

remuneration for investors, as well as framework

of renewable energy from a focus on environmen-

conditions for grid access and priority dispatch

tal and climate concerns to the recognition of the

for (the mix of) renewable energy. Such stability

importance of renewable energy for security of

can be organised via support instruments such

supply and competitiveness.22

as feed-in tariffs and/or long term power pur-

chase agreements (PPAs) for renewable energy

The second piece of framework legislation of

technologies. Many renewable energy technolo-

importance for the current market is the ‘Third

gies, for example wind and solar power, require

Energy Liberalisation Package’.23 Most promi-

high upfront capital investment and hence need

nently, the Third Energy Liberalisation Package

19 See for example: UNEP: Reforming Energy Subsidies. Opportunities to Contribute to the Climate Change Agenda.

2008. In 2010 subsidies for fossil fuels alone amounted to 406 billion USD while subsidies for renewable energy sources reached only 66 billion USD. See: International Energy Agency: IEA analysis of fossil-fuel subsidies, World Energy Outlook 2011, Paris 2011.

20 Directive of the European Parliament and of the Council of 27 September 2001 on the promotion of electricity produced from renewable energy sources in the internal electricity market, (2001/77/EC).

21 Directive of the European Parliament and the Council of 8 May 2003 on the promotion of the use of biofuels or other renewable fuels for transport, (2003/30/EC).

22 See: Callies, Christian/Hey Christian: Erneuerbare Energien in der Europäischen Union und das EEG:

Eine Europäisierung “von unten”?. In: Müller, Thorsten: 20 Jahre Recht der Erneuerbaren Energien, Nomos 2012.

23 The ‘Third Energy Liberalisation Package’ or ‘Third Energy Package’ refers to a package of EU legislation on European electricity and gas markets that entered into force on 3 September 2009. The purpose of the Third Energy Liberalisation Package is to further liberalise European energy markets.

P

ART ONE – REMUNERATION AND SUPPORT SCHEMES 17

17

requires ENTSO-E to develop a pan-European

started to walk with the Climate and Energy Package

ten-year network development plan and trans-

of 2007, and particularly with the RE Directive – in

mission system operators to develop ten-year

which high energy efficiency and a high share of

investment plans for energy networks, as well as

renewables were rightly seen as major pillars of

drafting European-level network codes. These are

a sustainable energy future. Although reform might

binding EU regulations on cross-border network

be necessary for the period after 2020, the RE

management and market integration.

Directive should not be amended too early in order

to maintain a stable framework for the implemen-

In its recently published strategy papers,24

tation of current commitments. The Commission

the European Commission states that the goal is

should foster the implementation of the RE Directive

a transition to a low-carbon Europe by 2050. All

in all aspects and complement these efforts with

scenarios calculated by the European Commission

guidance to allow better coordination between

indicate a growing share of renewable energy; this

national support schemes, as announced.

remains robust against national preferences on

the energy mix. Even under the ‘diversified sup-

Compromise is part of the nature of the EU

ply technologies’25 scenario, which relies strongly

and trade-offs will be necessary to balance the

on nuclear and coal, the share of renewable elec-

competing objectives of EU Member States. The

tricity would reach at least 59 per cent by 205026

RE Directive successfully took this into account

despite some methodological bias against renewa-

by having an overall EU target for RE delivered by

bles.27 However, the scenarios developed by the

differentiated national targets, thus allowing for

Commission do not yet outline how a renewables-

varying policy designs in the Member States.

based low-carbon Europe will be achieved by 2050.

Not only do they continue to include unsustainable

In its recent Communication ‘Renewable

or unproven technologies such as ‘carbon capture

Energy: a major player in the European energy

and storage’ and nuclear energy in their scenarios

market’ the Commission supports the gradual

for the energy transition, they also lack clear and

integration of renewable energy into the market

unambiguous post-2020 targets for renewable

with reduced or no support, depending on the

energy deployment and fail to provide a combined

technology. In the associated impact assessment,

high renewables and a high energy efficiency sce-

the European Commission presents, among other

nario. The greenhouse gas (GHG) reduction goal

scenarios,28 the option of harmonised support

has also been shifted from ‘80 to 95 per cent’ to an

schemes, as well as the option to introduce trad-

80 per cent minimum level. These are backwards

able renewable energy certificates. The rationale

steps from the earlier positions agreed in the EU,

behind both options is increased cost-effective-

away from the spirit and from the path that the EU

ness, as suggested by the 2007 OPTRES study.29

24 Such as the above-mentioned ‘Energy Roadmap 2050’, the ‘Roadmap for moving to a low-carbon economy in 2050’ and the Communication ‘Renewable Energy: a major player in the European energy market’.

25 See: European Commission: Energy Roadmap 2050.

26 54.6 per cent renewable energy share of final energy consumption and 59.1 per cent renewables share in the electricity sector under the least ambitious scenario.

27 The methodological bias against renewables included overly pessimistic assumptions on the learning cost curve of renewables, extraordinary conventional back-up capacity because of a limited range of assumed storage technologies, excessive reliance on grid investment as a solution to the balancing challenge and over-optimistic assumptions on nuclear and CCS costs. For further information see: Matthes, F. C. (2012): Langfristperspektiven der europäischen Energiepolitik – Die Energy Roadmap 2050 der Europäischen Union. Energiewirtschaftliche Tagesfragen 62 (1-2),

p. 50-53. Hey, C. (2012): Low-carbon and Energy Strategies for the EU. The European Commission’s Roadmaps:

A Sound Agenda for Green Economy? GAIA 21 (1), p. 43-47.

28 One of these scenarios involves continued national support policies with more cooperation and coordination

among Member States.

29 OPTRES 2007. Assessment and optimisation of renewable energy support schemes in the European electricity market.

Authors: M. Ragwitz, A. Held, G. Resch, T. Faber, R. Haas, C. Huber, R. Coenraads, M. Voogt, G. Reece,

P. E. Morthorst, S.G. Jensen, I. Konstantinaviviute and B. Heyder. Final report. Karlsruhe 2007.

18 A EUROPEAn UnIOn FOR REnEWABLE EnERGy – POLICy OPtIOnS FOR BEttER GRIdS And SUPPORt SCHEMES

In the public consultation on the Communication,

renewables in order to provide a high level of

this option received some support, mainly from

investment security.

energy traders and utilities, but was dismissed by

the majority of respondents, including a major-

The market of the future will be character-

ity of Member States and within the European

ised by the generation of energy from renewables

Parliament.

and the balancing solutions that this will require.

The transmission of electricity will be only one of

The rationale behind the opposition to harmo-

the balancing solutions – albeit one of particu-

nised support schemes was that the expiration of

lar importance. The following chapters will shed

the current remuneration and support mechanisms

more light on some of the listed measures to facil-

would decelerate the deployment of renewable

itate the transformation of the energy system.

energy in Europe in the critical period leading up

the 2020 target.

1.2. Optimistic and realistic:

Setting targets for 2030

The Renewable Energy Directive is work-

ing well and should therefore remain unchanged

This report promotes a Europe-wide binding

for the time being. The current framework for

target of at least 45 per cent renewable energy for

renewable energy development in Europe, most

the energy sector and advocates following the

importantly the RE Directive, contains many valu-

basic logic of the RE Directive by breaking down

able design elements that should be preserved

the European target into binding national targets.

even beyond 2020. Additional elements to advance

This would imply a commitment to prolonging

Europe’s energy markets and to further develop

the ambition that needs to be made in the short

current remuneration and support schemes have

term (up to 2020).

to be identified, keeping in mind the perspective

that they favour a renewable energy-based system

Countries which have in the past relied on

rather than current fossil fuel-based structures.

voluntary targets and other soft measures to sup-

port renewables have fallen behind and today find

A stable investment framework for renew-

themselves at a lower level of development in terms

able energy deployment which provides clear

of this crucial industry. A binding European target,

guidance for investors at the same time as

combined with effective and mutually compatible

attracting the necessary capital is critical to the

national support mechanisms, will provide high

further success of renewable energy deployment.

investment security, which in turn is important

Furthermore, priority access to the grid and the

to bring down the costs of capital for renewable

priority dispatch of renewable energy remains

energy development. It is important to note, that

crucial for the necessary increase in the speed

past targets in the renewable energy sector have

of the deployment of renewables.30 On the other

frequently been over achieved. Being optimistic

hand, as the Commission rightly states in its

when it comes to the future of renewable energy in

recent strategy paper on renewables,31 subsidies

Europe therefore equals a realistic approach.

for conventional fuels have to be phased out;

the same needs to be applied to (open and hid-

The impact assessment (IA) carried out by

den) subsidies for nuclear energy. Additionally,

the European Commission following the recent

it is necessary to agree upon binding targets for

publication of the Communication on Renewable

30 In most EU Member States, the penetration of variable renewables such as wind and solar is still very low: less than 5 per cent of electricity consumption in 21 Member States, as noted in the recent Communication of the European Commission. The experiences of forerunner countries like Denmark and Germany show that the power system can easily cope with priority access for renewables up to much higher shares, and that the principle of priority access should not be questioned unless other means have been found that guarantee the necessary continuation of investments in additional renewable generation capacities.

31 European Commission: Renewable Energy: a major player in the European energy market, p. 4.

P

AR

T O

NE

–

R EMUNER

A TION

AND

S UPPOR

T

S CHEMES

19

Energy, which included an analysis of social

report and in country-specific recommendations

impacts, states that national post-2020 RE goals,

to ensure that the developments taking place in

combined with cooperation between Member

the Member States are on the right track.

States (option 3),32 is the option with the greatest

and most stable employment benefits. The rea-

1.3 design matters: Options for

son for this is that this model actively promotes

remuneration and support schemes

not only mature but also innovative renewable

energy technology possibilities. This leads to

Changes to support and remuneration schemes

a smoother investment in RE over time and con-

should not destabilise the market and must keep

sequently a more stable employment environ-

investment risks low. Most importantly, retroactive

ment. The IA also highlights that the financial and

changes as undertaken in Spain, the Czech Republic

regulatory incentives associated with this model

and the United Kingdom in 2011 are an absolute

could offer the necessary framework to establish

no-go. They undermine investor confidence on

domestic industry with the potential to expand

a long-term basis, are incompatible with legal prin-

into the growing export markets.

ciples and are counterproductive to economic inno-

vation in these countries. As retroactive measures

Binding targets enhance the visibility of the

may lead to non-compliance with the Renewable

technology supply chain and thus contribute to

Energy Directive, the European Commission should

more innovation and an appropriate build-up of

deploy all of the diplomatic and legal means at its

production capacity. This leads to cost reductions

disposal to insist on compliance.

for renewable technologies. Targets are therefore

not only an efficient but also a cost-effective strat-

National feed-in tariff systems have so far

egy for steering the development of this sector in

proven to be the most effective and efficient sup-

the right direction.

port mechanism for providing cost-effective sup-

port to renewables. Moreover, national feed-in

The working group welcomes the fact that

tariffs or remuneration schemes are a reflection of

achievement of the 20-20-20 targets is a core goal

the polluter pays principle, which is enshrined in

of the EU’s Europe 2020 Strategy for intelligent,

the European Treaties.

sustainable and inclusive growth. We support

the inclusion of these targets in the Integrated

However, the specific design of feed-in tar-

Guideline No. 5 of the EU 2020 Strategy33 which

iffs matters, as does the design of remuneration

not only deals with climate and energy policies

mechanisms in general. Decisions on specific

but also asks Member States to phase out envi-

remuneration and support mechanisms should

ronmentally harmful subsidies, invest in smart

therefore never be made on the basis of an

energy infrastructure and improve resource effi-

applied generic description, but by taking a close

ciency in general. The 20-20-20 targets are cru-

look at the specific architecture of the scheme

cial to economic development in the EU. Aside

proposed and its ability to further the deployment

from the monitoring process enshrined in the RE

of renewable energy in a sustainable, efficient

Directive, the European Semester for fiscal and

and cost-effective way under the specific national

macroeconomic surveillance provides a good

circumstances in question. On the basis of his-

opportunity to check on progress made in the

torical experience, this paper expresses a prefer-

Member States. The results of this monitoring

ence for feed-in tariffs as originally introduced

process should be included in the annual growth

in Denmark and Germany, without foreclosing

32 European Commission: Commission Staff Working Paper, Impact Assessment accompanying the document:

Communication from the Commission to the European Parliament, the Council, the European Economic and Social

Committee and the Committee of the Regions: Renewable Energy: a major player in the European energy market

SWD(2012) 149 final, Brussels 2012, p. 22 f.

33 European Commission: Europe 2020. Integrated Guidelines for the economic and employment policies of the Member States, Brussels 2010. URL: http://ec.europa.eu/eu2020/pdf/Brochure%20Integrated%20Guidelines.pdf

20 A EUROPEAn UnIOn FOR REnEWABLE EnERGy – POLICy OPtIOnS FOR BEttER GRIdS And SUPPORt SCHEMES

other options if they can be proven to achieve

players (i.e. technology providers, investors, etc.)

comparable or better results. A regular review of

who would foster even more competition. If mar-

environmental effectiveness, social fairness and

ket volumes are too small, there is limited compe-

cost should be part of the process. Reliability for

tition and prices for renewables installations will

investors should remain a paramount considera-

go up due to the high demand.

tion. Convergence of national support systems

on the basis of feed-in tariffs is therefore the pre-

Offshore wind development is currently suf-

ferred option. Some convergence in the support

fering from the effects of such limitations: the

of renewables can already be observed – mean-

market is still in its infancy – as was onshore

while more than 20 Member States (and over 40

wind in the early to mid-1990s and solar PV some

countries worldwide) have introduced feed-in

five to ten years ago. In addition, there is a bot-

systems or variations thereof.

tleneck with advanced (subsea) grid connection

technology. Currently, there are only three cable

Tariff levels and structures (feed-in tariffs)

suppliers on the market who can offer the high-

should be technology specific, and take the dif-

voltage direct current (HVDC) technology which

ferent stages of development of renewable tech-

is needed to connect offshore wind farms.

nologies into account. Regional and site-specific

differences play a role, but should not lead to

In the photovoltaic sector, the high prices

a system of remuneration that cancels out the

seen several years back were countered by posi-

comparative advantages of the best sites for

tive long-term prospects. This led to large invest-

renewable energy installations. As an investment

ments in supply chains – that is, in production

in the commons, it is legitimate to provide greater

and installation facilities. These investments were

financial support to some technologies than to

followed by strong cost and even stronger price

others.34 The cost reduction potential35 within cer-

reductions. The case of PV underlines the impor-

tain renewable energy technologies is more rele-

tance of ambitious and binding targets for 2030.

vant than across technologies. The last years have

In order to achieve cost reductions in offshore

witnessed steep learning curves for those renew-

wind power or other renewable energy tech-

able energy technologies that have seen growing

nologies, clear and positive long-term prospects

market penetration (supported by appropriate

are needed for investors. With long-term target

remuneration and feed-in tariffs). Growing pro-

setting, supplemented by the right price-setting

duction capacities and learning curve effects

signals, new renewable energy technologies can

have brought costs down considerably, e.g. in the

create the supply chain industry required to har-

case of onshore wind or, more recently, solar pho-

vest their cost reduction potential.36

tovoltaics (PV). Competition between different

renewable energy technology suppliers has sped

Support schemes should reflect cost reduc-

up this development by providing strong incen-

tions as closely as possible in order to avoid

tives for technology development. It is there-

unjustifiable profit margins. At the same time, it is

fore important to provide a framework in which

important that the costs and benefits are shared

renewable energy technologies can develop on

between consumers and producers: the value of

the market, thereby taking advantage of learning

the energy delivered should be reflected in the

curve effects by growing economies of scale. As a

system. Shifting support to energy technologies

result, there will be a sufficient number of market

that harvest considerably more energy in a certain

34 See also: European Court reports 2001 Page I-02099, Case C-379/98. Judgment of the Court of 13 March 2001.

PreussenElektra AG v Schleswag AG, in the presence of Windpark Reußenköge III GmbH and Land Schleswig-Holstein.

35 It is important to note that if the externalities related to fossil fuels were taken into account, most renewable energy technologies would today be cheaper than fossils.

36 For example, the UK aims to reduce the generation costs for offshore wind energy to 10 pence per kWh, i.e. a cost reduction of 30 per cent between now and 2020.

See: http://research.scottrade.com/qnr/Public/Markets/Article?dockey=100-163x3047-1; 6.8.2012

PART ONE – REMUNERATION AND SUPPORT SCHEMES 21

regional area is not only common sense, it is also

to the specific needs and characteristics of the

important for the ongoing acceptance of renewa-

different renewable energy technologies. In addi-

bles in the society that foot the bill for the support

tion to incentivising flexibility solutions, variable

schemes.37

renewable energy technologies also benefit from

the creation of a more responsive environment,

Another way to reap the benefits of the EU’s

for example by a reduction in forecasting errors

renewable energy potential is to adjust the mech-

and a stronger focus on intraday power markets.

anisms, rules and regulations of energy markets

Decentralised vs. centralised energy system

micro installations for electricity generation

structures: Definitions

achieve sufficient efficiency levels. It is also pos-

sible to increase the installed capacity of each

Almost every debate on the Europeanisation

individual installation on the spot (for instance

of renewable energy leads at some point to a

by the repowering of wind turbines). The thresh-

discussion on the centralised or decentralised

old for the distinction between decentralised or

nature of the energy system. But what is actually

centralised electricity production, based on the

meant by this distinction?

indicator ‘installed capacity’, is thus technologi-

cally variable. In addition, individual installa-

For the electricity sector, the following four

tions are often bundled into so-called ‘parks’.

indicators play a key role in the debate:

Here the following question arises: at what level

a) The size of the installed capacity of elec-

of combined installed capacity do decentralised

tricity generation facilities;

installations become a centralised supply struc-

b) The distance between the place of pro-

ture? There is no general, Europe-wide response

duction and the place of consumption;

to this question.

c) The dependence of the supply system on

high-voltage transmission lines;

b) The geographical distance between the

d) The ownership structure of generating place of production and the place of consump-

plants or networks.

tion serves as a second indicator. Entities ranging

from single buildings to whole regions – defined

a) A move to the production of electricity according to different administrative criteria – are

from 100 per cent renewable sources involves

associated with power supply systems that are

a paradigm shift. Fuels no longer need to be

defined as decentralised according to geographi-

transported from all over the world to the sites

cal criteria.

of power generation; instead, electricity is gen-

erated ‘on site’ at the location of the renewable

The shift of electricity generation to renew-

energy sources. These sources are geographi-

ables has different impacts on the distance

cally widely spread and exist in different forms

between the places of production and consump-

and in differing concentrations as determined

tion, depending, for instance, on the settlement

by nature. In contrast to fossil fuels, techno-

structure. For rural and sparsely populated

logical developments in the field of renewable

areas, the switch to renewables opens up the

energy allow the efficient exploitation of renew-

opportunity to achieve a self-sufficient energy

able energy sources on a small scale and even

supply. For those population centres with high

in areas with low concentrations. Small, even

electricity demands as a result of the number

37 Determining the value of the energy is not a simple task, as socio-economic and environmental concerns need to be calculated against different time horizons. For example, many current European support systems offer higher tariffs for small-scale rooftop PV installations, thus rewarding their lower impact on landscapes and lower grid costs.

See: Schleicher-Tappeser: ‘How renewables will change electricity markets in the next five years’. In: Energy Policy, Volume 48, September 2012, p. 64-75.

22 A EUROPEAn UnIOn FOR REnEWABLE EnERGy – POLICy OPtIOnS FOR BEttER GRIdS And SUPPORt SCHEMES

of inhabitants and the scale of economic activ-

which opens up new opportunities for pri-

ity, the consequence of the shift to renewables

vate households, farmers, local cooperatives

is currently rather the opposite: while large

or municipalities to take ownership of energy

power stations were located in or near these

supply facilities. But is this an indispensable

centres in the fossil-nuclear age, the distance

condition for the qualification of a structure as

between these places and the sites of renewable

decentralised? Does investment in energy sup-

power generation is tending to increase. The

plies by large companies or financial investors

form taken by developments often depends on

necessarily mean centralisation? And which

a country’s settlement pattern and the spatial

classification should be used in the event that

distribution of its renewable energy sources; it

municipalities acquire shares in large offshore

will therefore differ quite significantly between

wind parks, with the electricity transported over

Member States.

long distances via high voltage networks? Here,

too, the threshold for the distinction between

c) A further indicator of centralisation or decentralised and centralised can hardly be

decentralisation is the share of electricity

defined in general terms on the basis of one

obtained from high-voltage grids. Again, it is dif-

indicator alone.

ficult to define a commonly agreed threshold

and the following questions arise: can a system

But what does all of this mean for the debate

in which electricity is generated in small-scale

on the Europeanisation of renewable energy?

installations be considered as centralised if this

electricity is finally fed into a high-voltage grid?

The Europeanisation of renewables:

Is it important for the high-voltage network to

be limited to national territory or can it operate

1. Does not automatically mean the central-

across borders? Is the distance between the con-

isation of the energy supply system; nor does

sumer and the production structure of relevance?

the management of the entire supply system at

the national level automatically mean decen-

The shift in electricity generation to RES

tralisation.

means on the one hand that new transmission

2. Does not mean exploiting renewable

lines are needed, e.g. for the connection of off-

energy sources in areas of high concentra-

shore wind parks. On the other hand, the share

tion only and then transporting the electricity

of electricity obtained from the trans-regional,

generated over maximum distances via new

national grids will shrink significantly in some

European high-voltage networks which consti-

regions thanks to new opportunities for local

tute a new layer of grids above and in addition to

and regional self-sufficiency in renewable

the existing national transmission grids.

energy supply. The energy revolution will be

3. Does mean that their use should not be

associated with an altered spatial distribution of

confined within national borders. It means

the transmission and distribution networks.

connecting networks across borders in order

to allow for the optimised use of renewable

d) The fourth dimension to the debate energy, to balance variable energy supplies and

concerns ownership structures – primarily of

to ensure the optimal mix for a secure energy

generation facilities but also partly of (distri-

supply from 100 per cent renewable sources

bution) networks. Renewable energies allow

independent of national borders.

small and micro facilities to operate profitably,

PART ONE – REMUNERATION AND SUPPORT SCHEMES 23

2. tackling the flexibility

gration of the electricity market with the other

challenge

energy markets – heating/cooling and transport – is

another important of the solution to the variability

Variable energy sources such as solar and

challenge. Sources of flexibility to balance variabil-

wind energy play a decisive role in the transition

ity include dispatchable (or flexible) power plants,

to an energy sector based on renewables. With an

demand-side management and demand response,

increasing supply of variable energy sources to be

energy storage facilities and increased interconnec-

fed into the different grids, improved infrastructure

tion with adjacent markets. 38

and flexible solutions are necessary. This flexibil-

ity challenge is going to increase substantially due

‘Interconnection with adjacent markets’ includes

to the growing share of variable renewables and

the extension and optimisation of transmission grids

the geographical reshaping of the power system:

as well as the integration of power markets to make

renewable energy is generated in remote areas

best use of the interconnections. Demand response

(with little or no local demand) such as offshore

can be connected with storage opportunities in the

wind parks on the one hand, and generated very

heating/cooling or in the transport sectors.

close to the consumers such as the electricity from

PV on the other hand. The latter is embedded in the

Flexible services can usually be delivered by

local low or medium-voltage distribution networks.

more than one of these sources. Due to this inter-

changeability, the transition to renewables can be

Greater flexibility in the power system is part

achieved even if the deployment of one or another

of the answer to the challenges above. The inte-

of the flexibility sources is hindered.39

Fig. 1: Flexibility challenge and solutions

Needs for flexibility

Flexible resources

Fluctuations

Dispatchable

Power system context

in net load

power plants

Demand

variability

and

uncertainty

Power market

Demand side

management

and response

Variable

System operation

renewables

Energy

Grid hardware

storage

facilities

Contingencies

Interconnection

with adjacent

markets

Source: Harnessing Variable Renewables – A Guide to the Balancing Challenge © OECD/IEA 2011, figure 4, page 36

38 International Energy Agency: Harnessing Variable Renewables – A Guide to the Balancing Challenge, Paris 2011.

39 ISEA, RWTH Aachen: Technology overview on electricity storage, 2012.

24 A EUROPEAn UnIOn FOR REnEWABLE EnERGy – POLICy OPtIOnS FOR BEttER GRIdS And SUPPORt SCHEMES

Tackling the flexibility challenge first of all

Germany, the industrial areas of the Benelux

implies a substantial reform of the design of the

countries and other (to be) connected areas where

power market, which needs to provide the necessary

there might simultaneously be no wind or sun.

incentives to deploy the most efficient mix of flex-

Intelligently connected and extended infrastruc-

ible resources. The market is also in need of reform

tures can complement each other and flatten the

in order to benefit from the advantages offered by

peak load curve.

integration with the other energy sectors. 40

The storage of peak electricity and the better

The future power market must firstly mobi-

integration of electricity production systems with

lise the huge potential for flexible and respon-

the heat market (and, as a longer-term prospect,

sive demand in industrial processes, in the

integrated e-transportation systems) are solu-

tertiary sector and in the residential sector. These

tions to the challenges of electricity peaks and

resources can often be made available with small

times of low electricity supply. Pumped hydro

investments in smart information and communi-

storage, concentrated solar power plants and

cation technologies. The power market must send

other technologies will need to play a bigger role

out the necessary signals to encourage behav-

in the future energy system. Cooperation within

ioural change; this must also be encouraged

the EU and with non-EU countries, especially

by other means such as awareness raising and

with Switzerland and Norway or with accession

information campaigns. The Directive on Energy

candidates such as Iceland, holds a lot of so far

Efficiency that was agreed in June 2012 sets a sup-

untapped potential.

plementary cornerstone for a paradigm shift to

the energy market by laying the legal foundations

However, from a current techno-economical

for the development of a market for demand-side

point of view, at present there is insufficient stor-

management.

age potential available at a reasonable cost to bal-

ance the variable power produced by renewables.

Power market reform also requires the intro-

Further investment into the research and devel-

duction of capability mechanisms to ensure the

opment of storage capacities is therefore needed.

availability of flexible generation capability (such

as hydro power, biomass and open-cycle gas tur-

2.1. the price of electricity and policy

bine power plants) and/or storage capabilities at

options to counter price deterioration

the times and in the places where they are needed.

All of these measures can reduce the transmission

The variability of renewable sources, or rather

grid expansion necessary to integrate any given

the abundance of renewable energy, has conse-

share of variable renewable generation.

quences for electricity wholesale prices and poses

challenges for the grid system, as electricity sup-

To balance variable renewable energy, it is

ply and demand must always be balanced.

necessary for the transmission grid to be extended

and reinforced at the interregional and interna-

Even today, on peak days of wind energy

tional levels (‘electricity highways’), as well as at

production in Denmark, Germany, Spain, and

regional and local levels (distribution networks,

Portugal, supply can exceed domestic demand.

smart grids).

Currently, the ability of the grid to export electric-

ity to neighbouring markets is partly capable of

Peak electricity supply41 from strong wind

buffering that effect, but as the share of renew-

power generation in the North Sea can then be

able energy grows, additional measures will need

stored and/or transported to the areas where

to be taken.

electricity is needed, such as central or southern

40 For example, the cheap storage facilities of the heat market. Further information in section 2.2.

41 Periods in which electricity generation exceeds immediate demand in the local area.

PART ONE – REMUNERATION AND SUPPORT SCHEMES 25

In the current price formation in the elec-

design of the market was not adapted to variable

tricity wholesale market, prices depend on the

renewables and smart balancing. This effect is

marginal cost for a power plant to meet demand

called the merit-order effect after the basic mech-

at a given moment, including fuel prices or emis-

anism for peak-load power trading, in which the

sions trading certificates. The fixed costs, invest-

last electricity supplier that is needed to satisfy

ments in power plants, are only recovered during

demand determines the price for all suppliers.

periods in which more expensive technologies

A world of 100 per cent renewables might still be

or demand response set the price and thus the

some decades away, but the effect of diminishing

market price exceeds costs. Renewable energy

prices on a market with a high share of renewable

sources such as wind and solar involve no fuel

energy will already kick in much earlier. While this

costs and very small variable (operation and

reduction in electricity prices is positive for the

maintenance) costs, but relatively high upfront

consumer, it will serve to reduce and eventually

fixed costs. In a world of 100 per cent renewable

remove any incentive to invest in energy installa-

energy the electricity price would therefore sink

tions, as the market no longer provides a suitable

to close to zero if no storage were available, if

price signal for necessary investments in system

there were insufficient connections between the

stability, backup and storage.

heat, transport and electricity markets and if the

Fig. 2: the merit-order effect

A higher share of renewable energy lowers the wholesale

electricity market price (merit-order effect)

Price (MWh)

The marginal power plant determines the wholesale electricity market price.

These revenues are used for

covering the fixed costs.

Wholesale electricity

Merit-order effect

market price

Power plants which are already

amortized produce net profits.

Electricity from

renewable sources

Marginal cost = 0

Demand

Base load

Medium load

Peak load

(MWh)

The merit-order effect, based on AEE, 2011

26 A EUROPEAn UnIOn FOR REnEWABLE EnERGy – POLICy OPtIOnS FOR BEttER GRIdS And SUPPORt SCHEMES

Over the medium or long term, operators

advisable to better integrate the energy markets,

of renewable energy installations will probably

that is the electricity markets, with the heating- /

need to secure remuneration beyond spot price

cooling sector and the transport sector.

revenue for plant construction. Long-term power

purchase agreements could be one option to

The necessary technical infrastructure for

incentivise installations and keep them up and

integration already exists (although it will have to

running. Price guarantees for electricity from

be extended). It includes:

renewable energy might be another option.

smart meters and accompanying regula-

tory / financial incentives for demand

One alternative model that has been sug-

response, load shifting or energy

gested to build on the feed-in tariff (FIT) system

conservation, and energy efficiency;

is the volume market model.42 It aims to provide

pumped hydro;

investment incentives for renewable energy in

district heating cogeneration;

the event that a liberalised electricity market fails

heat pump and heat storage capacity;

to do so. Our main criticism of this model is that

compressed air;

tenders will increase the level of uncertainty and

e-vehicles;

therefore lead to higher costs and lower volumes

syn-gas.

of installed capacity. This is due to the apparent

danger of gaming by large market participants,

In the case of wind energy, the use of varying

the tendency to place uneconomically low bids,

turbine sizes can facilitate flexible responses to

and in many cases the failure to achieve planning

changing wind speeds, different landscapes and

consent for many projects with successful bids.

the demands of public acceptance. The integration

For the medium term, the integration of power

of variable energy into the local heating, cooling

markets and demand-side response mechanisms

and transport markets reduces the constrained

will help to even out the merit-order effect and

power – the renewable electricity potential lost at

keep prices at levels that do not purge investment

peak times – and can help to reduce congestion

incentives in renewable energy.43

in the grid system. As congestion – so-called bot-

tlenecks – makes up the biggest and most cost-

2.2. Power market integration

intensive item in European grid operation and

planning, the integration of energy markets can

The flexibility challenge cannot be solved

help to bring down costs considerably as it reduces

within the electricity sector alone; a solution can

the need for new grids. This would in turn acceler-

only be found through the integration of electric-

ate the transition of the energy system, as the inte-

ity markets with other markets such as heating/

gration of the energy systems necessitates some

cooling and transportation. In order to permit the

new build-up but often requires the optimised use

gradual change of the power system, it is therefore

of existing infrastructure.

42 The FIT of the volume market model is determined via a process of tenders, which should create competition and thus reduce installation costs, with different reward mechanisms for variable and non-variable technologies. Remuneration should be awarded for a fixed volume of electricity in order to connect production to demand and to compensate

installations for fluctuations of the annual average of the respective resource. Tenders could be differentiated with respect to capacity, technology, the requirements of the regional grid and the provision of system services. They should be placed continuously in order to prevent strong market fluctuations. For a discussion of this model see arrhenius Institute: Sven Bode / Helmuth-M. Groscurth: Elements of a Sustainable Design for Electricity Markets, Discussion Paper 6, Hamburg 2011. Helmuth-M. Groscurth / Sven Bode: Das Mengen-Markt-Modell Discussion Paper 4, Hamburg 2011.

43 By integrating electricity, the price for electricity will not be lower than the price of the oil or gas it can replace on the heat market. At times the price might be even higher in the event that ‘electricity for heat’ consumers are obliged to install heat pumps if they wish to use electricity for heat. In that case, 1 kWh of electricity could replace 3 kWh of oil/gas.

PART ONE – REMUNERATION AND SUPPORT SCHEMES 27

As will be elaborated in more detail in the sec-

trans-European electricity grid, not least to link

ond part of this paper, the current process for grid

new offshore installations in the North Sea to

planning in Europe is organised in such a way that

major centres of industrial production in Central

results in high grid kilometrage. The mechanism

Europe, therefore has to be complemented by a

is not yet fit to model how much grid extension

stronger focus on local distribution networks and

can be avoided by integrating electricity into other

other flexible resources as described above.

energy markets or by taking advantage of other

flexibility solutions. For Denmark, energy model-

2.3. Ownership

ling has shown that the local integration of wind

electricity is more economical than exporting elec-

Renewable energy – as with other large-scale

tricity to neighbouring countries, despite it being

installations – sometimes faces resistance from

one of the most interconnected countries in the

the residents of areas close to installation sites.

world.44 While it is not possible to make the gen-

Conflicts between local residents and the owners

eralisation that the local integration of energy is

of renewable energy installations hinder renew-

always more economical than exporting electric-

able energy deployment and harm the positive

ity, the Danish example shows that the potential of

image of renewables. A high share of local own-

local integration should be examined closely.

ership, as an addition to the non-local and often

private ownership of renewable energy (and where

Investments in the power grid system are

possible grids), is an effective tool to ensure that

necessary, on all voltage levels. The challenge is

owner interest is also local interest45 and has con-

to find the optimal balance between investment

tributed significantly to the success of renewables

in power grids and other flexibility solutions.

in the past. At present, however, there is a tendency

The high percentage of cogeneration and district

for more distant ownership. This development

heating in Denmark favours the local integration

should be reduced, particularly as the infrastruc-

of electricity. In other cases, the transmission of

ture required (cars, heat/cooling pumps, etc.) will

electricity will be more economical. This trans-

rely heavily on local involvement.

mission can take place on either a national or an

international basis; in some regions of Europe,

The local ownership of renewable energy

cross-border transmission will be shorter than

installations, such as wind turbines, can be private

the use of national lines and more cost efficient

(e.g. farmers, energy cooperatives or local distribu-

than other options. Considering the physics of

tion companies) or public (community ownership

energy transmission, the kilometres travelled

e.g. municipalities). For larger investments, a mix-

by an electron in the system may sometimes

ture of these owners would be most appropriate.

be greater for locally integrated energy than for

So far, most small and medium investments are (at

transmitted energy. It is therefore not possible to

least partly) locally owned, but as wind parks are

make generalisations for any one flexibility solu-

often widely visible and particularly contested, big

tion. The optimal mix has to be investigated on a

energy cooperatives, large associations of consum-

case-by-case basis. The current focus of European

ers or municipalities should be encouraged to take

policymakers in relation to the construction of a

on the ownership of these large-scale investments.

44 Lund, Hendrik / Münster, Ebbe: ‘Integrated energy systems and local energy markets’. In: Energy Policy 34 (2006), p. 1152-1160.

45 Common sense is backed up by basic neoclassical economics: according to its rationality and utility maximisation principles, people tend to prefer a situation in which they make a profit to one in which they get no profit. Consequently, they are more likely to accept wind power projects, for instance, if they receive a profit than if they receive no profit. The profit they make increases their benefits, and the costs are constant for the two alternatives ‘no local ownership’ versus

‘local ownership’. See for example the case studies: Musall, Fabian David / Kuik, Onno: ‘Local acceptance of renewable energy – A case study from southeast Germany’. In: Energy Policy 39(2011), p. 3252-3260; Warren, Charles R. /

McFadyen, Malcom: ‘Does community ownership affect public attitudes to wind energy? A case study from south-west Scotland’. In: Land Use Policy 27(2010), p. 204-213.

28 A EUROPEAn UnIOn FOR REnEWABLE EnERGy – POLICy OPtIOnS FOR BEttER GRIdS And SUPPORt SCHEMES

Local and regional ownership enhances pub-

prices. As regulators and system operators have

lic acceptance and support for renewable energy

limited experience with demand-side response,

projects as it creates local revenue. Furthermore,

they might have a tendency to ensure system

stronger public participation is also important for

adequacy with generation capacity. In that case,

the ‘emotional ownership’ of and identification

the capability of demand-side response will not

with renewable energy and the transition of the

be demonstrated. Dedicated programmes will be

energy system.

necessary to overcome this lock-in.

Public participation through local ownership

The power price helps to coordinate produc-

should be incentivised by adequate support design.

tion, demand and power storage and provides

To be attractive, the schemes have to be designed in

commercial incentives for the international bal-

a simple and transparent way so as to not create de

ancing of supply and demand. These interactions

facto barriers to newcomers to the renewable energy

in turn create substitution opportunities across

business. Additional support might be necessary, for

fuels, usage and time – and thus increase positive

example through bonuses or tax exemptions.

power price periods and reduce price spikes.

To take full advantage of the positive effects

It is essential to further develop the competi-

of local ownership, the Commission should

tive power market for the effective operation of

not interfere with local legislation that requires

a renewable energy system. Scarcity value will

project developers to offer a substantial local

increase in anticipation of a potential shortage,

ownership share. In the case that current EU

for example during the infamous cold and wind-

competition law impedes such legislation, at least

less winter week. Market clearing prices will

beyond a certain share (e.g. 20 per cent in Danish

therefore be maintained for many hours in the

legislation), it should be reviewed in order to

year with mid-range prices.

enable the promotion of the public acceptance

of renewable energy installations through local

2.5. triple-A options for

ownership as an important element of the pro-

renewable energy investments

motion of renewable energy.

In order to reach the European renewable

2.4. demand-side response and storage

energy target of a 20 per cent share by 2020,

investments in renewable energy need to double

Next to grid reinforcements, low supply

from the current levels. The ongoing financial cri-

of renewable electricity in areas with no wind

sis has reduced growth in the energy sector and

and sun also has to be dealt with via intelligent

has also negatively affected renewable energy

demand-response mechanisms, energy conser-

developments. It has driven up costs, as investors

vation incentives and storage facilities. As prices

act in a risk-averse fashion despite having large

increase during times of low electricity supply, it

sums open for investment.

is more attractive to expand demand-side respon-

siveness or invest in storage. Storage capacity

In the current financial climate fewer projects

increases flexibility as surplus power is bought

are bankable, which is affecting independent

and sold at times of higher scarcity.

power producers and technologies in particular.

The debt and credit crisis has also led to dramatic

It will be important to facilitate this grad-

differences between the cost of capital in different

ual development – of investment in storage,

countries, in particular leaving southern European

demand-side management and corresponding

countries with high potential for renewables with

contract cover – to hedge the financial exposure

a lack of investors.

to higher prices. Such a hedge does not remove

the incentive to respond as any energy saved

In order to facilitate investments, it is impor-

will be rewarded when there are high market

tant to distinguish between two perspectives in

PART ONE – REMUNERATION AND SUPPORT SCHEMES 29

financing: the project economics perspective and

technology-specific risks and technology

the macro-economic perspective. As the risk – or

maturity;

the perceived risk – for a project is a deciding fac-

the country-specific deployment status of

tor in finding an investor, methods to distribute the

that technology;

risks (and benefits) between the project developer

the country-specific electricity market

and society need to be defined. The parties have

design and structure;

different options to mitigate risks at varying costs

project size and investor group;

and with different societal benefits. The macro-

macro-economic paradigms.

economic result will vary between technologies and

countries.

These policies help reduce the risk perceived

by investors and can, according to the RE-Shaping

As financial situations and the conditions for

study, potentially reduce levelised costs by up to 50

the deployment of renewables vary between EU

per cent for specific technologies or Member States.

Member States, the policies need to be adapted to

the specific needs of each. Optimal allocation and

Most prominently, renewable support mech-

the treatment of risk will differ between coun-

anisms need to provide a robust investment

tries and technologies. One policy does not fit

framework for capital-intensive technologies

all, but certain policies for minimising the risk of

which underpins the importance and adequacy of

renewable energy investment can be identified.

feed-in tariffs. For some large-scale cross-border

The authors of the study ‘RE-Shaping: Shaping

renewables projects, tenders can offer secured

an effective and efficient European renewable

revenue streams and facilitate access to financ-

energy market’46 labelled these policies ‘Triple-A

ing. They do, however, hold the danger of shift-

policies’.47 These include:

ing opportunities away from new market entrants

Increasing policy stability

and from smaller-scale installations.

• No retroactive changes

• No abrupt policy changes for

Risks of target non-compliance (as tenders

upcoming projects

sometimes fail to be implemented, for example

• Simple and transparent permitting and

due to lack of finance or inappropriate upfront

grid access procedures.

calculations) need to be counteracted by the spe-

Minimising policy-related cost and risks

cific design of the tender. In cases where the ten-

• No budget/capacity caps

der winner does not follow the timetable or other

• Continual access to support.

provisions laid out in the tender, penalties need

Considering the (perception of) risk among

to be applied.

investors and lenders

• Allocate the risk to the party that can bear

Well-designed tenders provide information

it best and design regulatory frameworks in

about total costs, and supporters of tenders fur-

such a way as to ensure macro-economically

thermore expect cost-reduction effects due to

optimal treatment in order to stabilise policies.

competition in cases where there are rules and

• Reduce project revenue risks.

financial possibilities for a broad range of inves-

Removing barriers.

tors – including municipalities, local and regional

households and firms. In the past, bidders have

Macro-economically optimal allocation and

sometimes placed uneconomically low bids in

the treatment of risk and cost will differ between

the tender process in order to win the bid. Again,

countries and technologies, based on:

46 European research project RE-Shaping: RE-Shaping: Shaping an effective and efficient European renewable energy market, Karlsruhe 2012. URL: http://www.reshaping-res-policy.eu/

47 This classification is taken from the bond rating assigned to an investment grade debt instrument.

AAA is the highest possible rating.

30 A EUROPEAn UnIOn FOR REnEWABLE EnERGy – POLICy OPtIOnS FOR BEttER GRIdS And SUPPORt SCHEMES

the design of the tender process needs to counter

2.6.the European Investment Bank

these incentives. Extra costs resulting from une-

conomically low bids need to be borne by the bid-

The European Investment Bank (EIB) is the

der. Furthermore, tendering can only be applied

long-term financing institution of the European

to projects for which the site conditions are well

Union and is its house bank. The financing it pro-

known. Overoptimistic assumptions on site con-

vides should support the EU’s policy objectives.

ditions, for example with regard to wind speeds,

lead to uneconomically low bids. The same holds

The EIB focuses on six priority objectives,

for uncertainties concerning grid connection

among them the development of Trans-European

charges if these charges are underestimated in the

Networks of transport and energy (TENs) and sus-

bidding process.

tainable, competitive and secure energy. In order to

finance projects in line with its main objectives, the

As past experience with tenders for renew-

EIB borrows on the capital markets. It operates on a

able projects has been predominantly negative at

‘not for profit maximising’ basis.

the European level, the use of tenders has to be

accompanied with improvements to their design.

In the current financial crisis, the importance

While in most cases FITs will provide more stable

of the EIB for the financing of renewables has

– and thus cheaper – conditions for renewable

increased. Whereas renewable energy invest-

energy deployment, tenders can play a role for

ments showed a certain immunity to crisis in 2008

international cross-border cooperation for large-

and 2009, more recently there has been a declin-

scale renewables projects or large infrastructure

ing trend in renewable energy investments due to

investments such as transnational grids.

policies which have created market uncertainties

and hindered access to finance.

Case study: Photovoltaics in Spain

Retroactive policy changes are a major prob-

Large investments had been made in previ-

lem for the deployment of renewables. Solar

ous years in the growing PV market in Spain.

photovoltaic (PV) electricity in Spain serves as an

The level of support given created the frame-

example of the damaging effects of such measures.

work conditions for these investments. After

the implementation of the regulation, the

At the end of 2010, the Spanish govern-

number of new PV installations has decreased.

ment decided to cut the FIT support level for

The outlook for Spain’s PV industry within the

PV. While adjustments to the support level are

country remains bleak.

necessary when module prices drop, these cuts

must only apply to future remuneration and

The retroactive change not only violated

should be applied in a transparent manner.

investor confidence and rights but also under-

The Spanish cuts, however, were applied retro-

mines the prospects for Spain to become one of

actively. This retroactive cut of remuneration

the key players in this future market, in which

for PV deployment was the fourth regulation

global competitiveness is a major asset, creating

in only four years for the PV sector, which indi-

domestic jobs and wealth.

cates a structural failure of the country’s energy

planning. Such a policy environment creates

In January 2012, the new Spanish govern-

regulatory instability and undermines investor

ment has put in place a moratorium on all new

confidence. In order to gain support from the

renewable energy installations. This will fur-

general public for this cut in FIT, a campaign

ther undermine investor confidence and thus

was launched by the government which alleged

reduce the likelihood of Spain achieving its

major deficiencies in the Spanish PV industry.

renewables targets.

Part One – remuneratiOn and SuPPOrt SchemeS 31

The EIB can play a pivotal role in reduc-

fossil fuel investments should be given financial

ing risks for investors and thus facilitate renew-

support, and ongoing projects should be phased

able energy investment in these countries. The

out. In its ongoing policy review, the EIB should

financing EIB provides can help to disconnect

ensure that its future lending is targeted towards

renewables investments from the non-favourable

the achievement of the EU 2020 goals and the

economic climate. The selection of a project by

long-term climate objectives of the EU. To help

the EIB for funding usually sends a quality sig-

finance the transition to a sustainable energy

nal to other investors. These projects are gener-

future, the lending portfolio of the EIB requires

ally perceived as a low-risk investment. Thus,

additional capital or risk guarantees.

the EIB can serve as a catalyst for renewables

investments, reducing the risk for investors and

3. What role for the

indirectly increasing investment in renewables

Europeanisation of support

as a whole. The purpose of the EIB (as of other

and remuneration schemes in

European–level investment) must be to leverage

the medium and long term?

investments from public and private investors.

The role of support schemes is evolving along-

Overall EIB investments in 2011 came to over

side the technologies themselves.

60 billion euros. Of this, 18 billion euros were

invested in energy projects (including transmis-

First, as new renewable technology costs signif-

sion lines – 14.5 billion within the EU, 3.6 billion

icantly exceed power prices because many exter-

outside the EU). According to the EIB, its lend-

nalities are not internalised, support mechanisms

ing for renewable energy projects has more than

are needed primarily as instruments for market

doubled over the past four years, from 2.2 billion

entry and to enable the development of new tech-

euros in 2008 to 5.5 billion euros in 2011. This is

nologies. At this stage, European discussions will

a positive development which needs to be contin-

focus on effort sharing between countries.

ued by the bank. Between 2007 and 2010, a third

of EIB loans in the energy sector still went into fos-

In the second phase, cost differences will

sil fuels (16 billion euros against 13 billion euros

decline and the emphasis of renewable support

for renewables), with investments in renewables

mechanisms will shift to providing a robust invest-

and fossil fuels growing. At the same time, invest-

ment framework. This will reduce the rates of return

ments in energy efficiency were almost neglected

required to raise capital for capital intensive tech-

(only around 5 per cent of energy investments).48

nologies, thus both increasing their competitiveness

For EIB investment to be supportive of the EU

and reducing costs for consumers. In the second

2020 targets and the long-term target of a cut of

phase, the focus of EU discussions will shift to access

80 to 95 per cent in EU greenhouse gas emissions,

and the cost of finance and industry interests.

its ongoing support for carbon-intensive energy

generation needs to be phased out and invest-

In the third stage, renewables will become the

ments in energy efficiency and renewable energy

dominant energy source. Variations in resource avail-

must be enhanced. This is all the more true as

ability are likely to increase the scale of the renew-

the EIB has strongly supported fossil fuel invest-

able energy trade. EU discussions on renewable

ments in central and eastern EU states, locking

energy cooperation will at this stage focus on the

in fossil fuels in these Member States. No further

topics covered in the energy charter49 – protecting

48 cee Bankwatch network: carbon rising - european investment Bank energy lending 2007-2010, 2011, p. 4; according to eiB the actual figures for energy lending 2007-2010 are the following: 5.9 billion euros for fossil fuels, 15.8 billion euros for renewables and 10 per cent for energy efficiency. the reason for the difference between Bankwatch and eiB

figures is that there are major differences between eiB and Bankwatch methodology and categorisation of projects (see cee Bankwatch network, p. 29-32).

49 energy charter Secretariat: the energy charter treaty and related documents. a Legal Framework for international energy cooperation, Brussels 2004. See: http://www.encharter.org/fileadmin/user_upload/document/en.pdf#page=211

32 A EuropEAn union for rEnEWAblE EnErgy – policy options for bEttEr grids And support schEmEs the respective interests and needs of energy exporta major share of power generation. They can,

ing- and importing countries and energy technol-

for example, allow system operators to use wind

ogy exporting- and importing countries.

turbines for spinning reserve, or even spill wind,

when necessary for the system. In order to retain

The positioning of a country – or a technol-

the stable investment framework, the future

ogy – on this development trajectory has implica-

energy system needs to incentivise investment in

tions for the interaction of EU rules, guidelines

balancing solutions for variable renewables.

and national autonomy with respect to the energy

technology mix.

3.1. front-runner groups

Longer-term visibility and credibility will

Certain countries have been pioneers in

help to attract investment in pipelines and the

advancing the policies and politics of renewable

supply chain, facilitating increased innovation and

energy in Europe. A group of such front-runner

reducing costs. The European scale of renewable

countries can lead by example; it should support

energy policy will help to match the horizon of

the full implementation of the Renewable Energy

internationally active utilities, thus impacting their

Directive and, as a next step, should politically

technology and not only their choice of location.

advance a meaningful interim renewable energy

target of at least 45 per cent for the whole energy

Stronger Europeanisation in the renewable

sector by 2030. Furthermore, a front-runner

energy field will help markets with stable invest-

group should advance cooperation on research

ment frameworks to lend some of their credibil-

and development and the necessary infrastruc-

ity to partner countries. The more countries that

tural build-out, as well as the flexible balancing of

pursue similar schemes, the larger the common

the overall system.

market that will be established. Smaller countries

in particular may benefit from more visibility,

National borders are drawn neither to pro-

allowing them to attract additional competitors in

vide a safe energy supply generated by an optimal

a larger scheme for project planning, develop-

mix of renewable energy sources, nor to facilitate

ment and financing. The design of schemes will

the necessary power grid and balancing solu-

have to avoid and/or compensate for the risks

tions. Whereas most countries rely exclusively on

inherent in their enlargement; the credibility

domestic efforts to reach their renewable energy

transfer, for example, must not lead to a reduction

targets by 2020, many countries underline in their

in the credibility of any of the partner countries.

National Renewable Energy Action Plans that,

beyond 2020, stronger cooperation with other

The governance structures and administrative

countries will be necessary. Cross-border coop-

procedures must be kept as simple and as lean

eration can bring an array of positive synergies,

as possible so as to avoid eating up the benefits

for example in flattening peaks of variable renew-

of inter-European schemes in slower decision-

able energy and with regard to storage capaci-

making, higher transaction costs, increased uncer-

ties. Cross-border power grid cooperation should

tainty and less well-informed decisions. A certain

be balanced with local and regional integrative

learning process is inherent in all transformations;

energy systems.

the primary objective must therefore be to build

up an inter-European cooperation scheme that is

National governments need to enhance infor-

transparent and is accompanied by a common leg-

mation exchange and coordination when design-

islative framework that allows latecomers to enter

ing and adjusting national support systems. This

the scheme easily and accelerate the transition.

can serve to further strengthen policy frame-

works. Existing national support systems should

Feed-in systems are not inconsistent with the

be coordinated without endangering the poli-

long-term requirement for the flexible operation

cies that have allowed smart support schemes to

of renewable technologies once they contribute

help develop a viable industry. Such interlinked

Part One – remuneratiOn and SuPPOrt SchemeS 33

remuneration and support schemes should take

Investment security must be guaranteed,

into account the differing economic and political

particularly in the crucial transition phase from

starting points of different countries. Regional,

national to macro-regional schemes. This could

local and site-specific differences, as well as the

lead to a step-by-step process towards a European

need to create a level playing field for producers

Community for Renewable Energy as proposed

and stable and affordable prices for consum-

by the ERENE report. The EU Treaty's enhanced

ers, should be recognised during the process of

cooperation provision could provide the legal basis

designing these interlinked systems. All such

for this approach, making full use of the European

systems should remain open and offer interface

institutions and the support they can provide.

options to existing and future support systems

in the EU’s partner countries, particularly in our

Countries that join at a later stage could ben-

immediate eastern and southern neighbour-

efit from these insights, as could other Member

hoods. The key challenge is to develop a system

States that wish to increase cooperation but are

that is sufficiently open and flexible while at

located too far away from the first head group.

the same time providing adequate incentives to

ensure investor confidence.

We promote closer EU cooperation to reach

our climate and energy goals. The front-runner

The convergence of support schemes can be

group(s) must therefore be open to any Member

most advantageous for renewable energy deploy-

State that wishes to join. In order to enable the

ment in a European Union in which more and

smooth integration of latecomers, the regulation

more Member States are working towards the

establishing regional cooperation needs to be

transition of the energy system fully based on

simple and transparent.

renewables. This paradigmatic change should be

supported by the European institutions. In the

3.2. Cooperation mechanisms

meantime, the most suitable alternative to the

EU-wide harmonisation of support schemes is

The current cooperation mechanisms pro-

the connection of front-runner groups, consisting

vided in the Renewable Energy Directive are

of EU Member States which are already commit-

a natural starting point for cooperation. These

ted to the transition to renewable energy.

mechanisms theoretically offer the tools for coop-

eration while accepting that differing Member

While the need for action is too pressing to

States have different renewable energy potentials.

wait for a Europe-wide consensus on the per-

In practice, however, the cooperation mecha-

fect energy mix, the current national prerogative

nisms of the Renewable Energy Directive are not

over the energy mix does not allow for another

yet used by Member States. The primary motiva-

approach. The past has already shown that front-

tion seems to be the availability of local resources

runner countries can lead technology and policy

and the preference for Member States to attract

innovations and others will eventually follow. We

local investment. Hence, there are no agreements

therefore suggest that countries that are already

on joint projects or FIT/FIP (feed-in premium)

committed to a systemic transformation towards

schemes to date. A small number of projects are

renewable energy enter into new cooperative

currently being discussed and negotiations are

relationships based on the EU Treaty’s enhanced

ongoing in only a few cases.

cooperation provision. Cooperation could but

must not necessarily start at a regional level.

The exception in the EU is Luxembourg (and

Depending on their different starting points, one

possibly Italy), which plans to use cooperation

or more groupings could go ahead, converging

mechanisms to meet its 2020 targets. Furthermore,

medium-term vision and their energy needs.

a joint Tradable Green Certificates (TGC) system has

recently been established by Norway and Sweden.

34 A EUROPEAn UnIOn FOR REnEWABLE EnERGy – POLICy OPtIOnS FOR BEttER GRIdS And SUPPORt SCHEMES

Cooperation mechanisms within the RE

energy targets do not seriously require coopera-

Directive and their major characteristics

tion for compliance. Six Member States did how-

(2009/28/EC)

ever indicate that they could produce a surplus and

there should be political consideration of how this

Statistical transfers between Member

potential surplus could best be realised.

States (article 6):

Only if trajectory and targets are not

In order to reap the benefits of European

endangered.

cooperation, the mechanisms need to be scruti-

nised and refined. There is a strong case for cross-

Joint projects between Member States

border cooperation, but the existing mechanisms

(articles 7 & 8):

either lack attractiveness or require further guid-

Private operators may be involved.

ance on the details of their use.

New and refurbished installations only.

Cooperation needs to be facilitated by the EU,

Joint support schemes (article 11):

and pilot projects should be put in place with the

Member States may join or partly coor-

active support of the EU, notably in the offshore

dinate their national support schemes on

wind sector. Procedures, technical codes and

a voluntary basis

legal requirements have to be simplified, open

Distribution by statistical transfer or

questions about the impact of cooperation on

agreed distribution rule.

national support schemes must be answered and

minimum criteria for support frameworks have to

Joint projects with third countries (articles

be developed by the EU.

9 & 10):

Private operators may be involved.

While the use of the cooperation mechanisms

New and refurbished installations only.

remains very limited at present, there is neverthe-

No support received other than

less evidence to suggest that, to a certain extent,

investment aid.

support mechanisms are converging across

The electricity produced must be

Europe. A tendency towards evolving coopera-

consumed in the EU.

tion can be observed, but questions of reliability,

stability and technology differentiation must first

So far, the cooperation mechanisms have been

be answered in order for this to flourish.

used in very few cases only. The Directive came into

force in June 2009 and had to be transposed into

3.3. non-compliance

national law by the end of 2010. The national action

plans already had to be delivered one year after

Since the introduction of the RE Directive

the Directive came into force. Six months earlier

there have been positive developments in the

the Member States had been required to indicate

field of renewable energy in the EU. A preliminary

if they were planning to use cooperation mecha-

evaluation of the NREAPs finds that Member

nisms to reach their targets and provide quite some

States envisage delivering a surplus of about

detail in their responses. This timeframe played

0.7 per cent above the 2020 target. Twenty-five

a role because, in order to use the Directive’s coop-

Member States forecast that they will achieve

eration mechanism, certain administrative pro-

or exceed their binding 2020 targets within

cedures have to be put in place and the country’s

national borders. According to the projections

national legislation has to be amended.

of the renewable energy industry, the EU-27

could achieve even better results than these cur-

Member States have recognised in their NREAP

rent projections; the industry foresees 24.4 per

planning that, in general, their 2020 renewable

cent.50 The national reports on progress made in

50 See: EREC_EU Roadmap 5.

PART ONE – REMUNERATION AND SUPPORT SCHEMES 35

2010 were due at the end of 2011. Some reports

Member States that are at risk of missing their tar-

were submitted with some delay, but to date,

gets before they actually do so. In a second step

all Member States have submitted the required

of the infringement proceedings, the usual tools

reports.51 It is positive to note that most Member

for enforcing EU law should be initiated. The

States have reached or exceeded their indicative

Commission has already taken this step in recent

trajectories.

years, including in 2012. The mere possibility

of such an action often has the positive effect of

Aside from these positive findings, another

the Member State in question taking corrective

recent trend can be observed: Some countries

action, thus preventing the need to go to court.

have fallen below their 2009 shares of RE52 and

some countries are revising their NREAPs and/or

4. Recommendations

support policies including downwards revisions

of renewable energy targets.53

The current Renewable Energy Directive

creates the right framework for the further growth

These framework revisions and target reduc-

of the renewable energy industry up to 2020 and

tions undermine investor confidence and risk

has to be fully implemented by all Member States.

endangering the achievement of targets. To coun-

teract this negative trend, a clear commitment to

A Europe-wide binding target of at least 45

the 2020 targets is indispensable. The European

per cent renewable energy for the energy sector by

Commission has initiated infringement proceed-

2030 should be achieved by building on the cur-

ings against several countries whose legislation

rent structure of the Renewable Energy Directive,

is not in line with EU legislation. This also under-

especially by breaking the European target down

lines the need for specific post-2020 renewables

to binding national targets.

targets. Such targets are essential in order to

achieve compliance today as they give a long-

Markets need to be redesigned for variable

term incentive for countries to bring their legisla-

renewable energies and their balancing solutions:

tion into line with EU legislation; they also open

dispatchable (or flexible) power plants, demand-

up the possibility of legal action in the case of

side management and demand response, energy

non-compliance.

storage facilities, increased interconnection and

the flexible use of all transmission capacity with

Precautionary action is necessary to pre-empt

adjacent markets. The integration of all energy mar-

a trend of non-compliance. It is crucial for a certain

kets (electricity, heating/cooling and transport) as

course of action to be modelled – and ultimately

well as balancing and reserve markets, needs to be

taken – before there is a high level of non-compli-

fostered. Power markets need to be designed in

ance. A first step on such a course should be the

such a way as to provide incentives to deploy the

establishment of an ‘early warning system’ to iden-

most efficient mix of sources of flexibility.

tify significant deviation from a plan or trajectory.

Remuneration and a stable framework for

We suggest that the European Parliament

investments in renewable energy will be neces-

call for the performance of a policy assessment

sary beyond 2020 and needs to be complemented

study to examine the likelihood of non-compli-

by the necessary administrative or other non-

ance by individual Member States. Such a study

financial measures. The convergence of national

would put political and public pressure on those

support systems in the EU on the basis of feed-in

tariffs is the favoured option.

51 See: http://ec.europa.eu/energy/renewables/reports/2011_en.htm

52 See: http://epp.eurostat.ec.europa.eu/cache/ITY_PUBLIC/8-18062012-AP/EN/8-18062012-AP-EN.PDF;

http://ec.europa.eu/energy/renewables/reports/doc/2010_list_renewable_energy_targets.pdf

53 Revisions are discussed or planned in 2012 in the Netherlands, France, Spain and Portugal among others.

36 A EUROPEAn UnIOn FOR REnEWABLE EnERGy – POLICy OPtIOnS FOR BEttER GRIdS And SUPPORt SCHEMES

Tenders can play a role for international

Guidance on policies that foster invest-

cross-border cooperation for large-scale renew-

ment in renewable energy and establish a growth-

able energy projects. The design of tenders needs

friendly framework for renewables is needed.

to take past shortcomings into account and must

Such ‘Triple-A policies’ for renewable energy

ensure that a sufficient number of bidders can

investments include:

enter each bid.

• Increasing policy stability and removing

Macro-regional cooperation between

barriers: no retroactive changes, no abrupt

front-runner groups, consisting of EU Member

policy changes for upcoming projects, sim-

States which are already committed to the tran-

ple and transparent permitting and grid

sition to renewable energy, should be fostered.

access procedures.

The associated mechanisms should be able to

• Minimising policy-related costs and risks:

generate incentives for countries to establish

no budget/capacity caps, continual access

a common infrastructure for the use of renewable

to support.

energy sources, and to voluntarily open up their

• Considering the risk (perception) of inves-

support systems – or better still have a common

tors and lenders: allocate risk to the party

support system for the feed-in of power gener-

that can bear it best and design the regula-

ated in the macro-region. Such a Europe-wide

tory framework in such a way that macro-

approach of interlinked support schemes should

economically optimal treatment is ensured

take regional (climatic, geographical) differences,

in order to stabilise policies; reduce project

as well as individual countries’ different economic

revenue risks.

and political starting points, into account. It should

remain open and offer interface options to exist-

ing and future support systems in the EU’s partner

countries. Inter-European cooperation must be

transparent and should be accompanied by clear

legislative guidelines, allowing latecomers to enter

the scheme easily and accelerating the transition.

PART TWO – GRIDS

37

Part two – Grids

© Heinrich-Böll-Stiftung, 2011

38 A EUROPEAn UnIOn FOR REnEWABLE EnERGy – POLICy OPtIOnS FOR BEttER GRIdS And SUPPORt SCHEMES

5. Governance

5.1. What is necessary for the

Where we stand: Current

development of a European grid?

measures to Europeanise

electricity grids

The design of the grid is a three-step process:

1. Energy planning: a decision on the energy

The transformation of the European energy

scenario(s) for the coming decades.

system – upgrading Europe’s electricity networks

2. Grid planning: a secure and affordable grid

to be compatible with an energy future fully based

for renewable energy must be designed based on

on renewables – is a matter of urgency. Trans-

the future energy scenario(s).

European networks can connect and upgrade

3. Grid implementation and transformation:

national networks (inter alia for higher voltage

the implementation of the grid in line with envi-

which can minimise losses) and need to be com-

ronmental, social and cost-efficiency concerns,

bined with balancing solutions at the local and

including proper democratic and public partici-

consumption unit levels. Decentralised and cen-

pation.

tralised suppliers provide abundant but variable

renewable energy from the sunbelts and windy

The first two steps, energy and grid planning,

coasts, or from their own rooftops. In order to

are becoming – and have to become – increas-

transport this electricity to consumer centres,

ingly parallel processes in order to ensure that the

new but also reinforced and upgraded transmis-

planned actions are undertaken in a timely fashion

sion lines, cross-border interconnections and

and to enhance investment security. As renewa-

better local distribution networks are required.

bles take on an ever-greater share of the energy

The renewable energy available locally and

mix, both processes have an influence on each

regionally often transforms ‘classical’ consum-

other and grid planning can no longer be driven

ers into producers, changing the former one-way

by demand alone. Opinions on the technical fea-

street of electricity production and consumption

sibility of such a grid and the level of trust in the

to a two-way flow of electricity.

political will to build a certain grid structure will

have a major influence on European energy plan-

Existing power lines will have to be upgraded

ning, and vice versa. The successful organisation

and connections to ‘energy islands’ and new

of this process requires multi-level governance

areas of supply and demand strengthened, while

at its best. The energy mix and consequently

separate network capacities (e.g. company or rail-

energy planning remain primarily the preroga-

way networks) will have to be integrated into the

tive of Member States, although EU renewable

grid. The strengthening of public oversight and

energy and climate change targets, as well as the

coordination will also be necessary.

underpinning legislation, are increasingly limiting

Member States’ room for manoeuvre in this area.

The current electricity grid and energy trans-

Grid planning, on the other hand, has become

port infrastructure, however, has been developed

a mixed responsibility under the provisions of the

for the needs of the old fossil and nuclear fuel

internal energy market. On the European side, the

world. This means that not only is it organised

European Commission – and to a lesser extent the

around big fossil fuel power plants, it also func-

European Parliament – make suggestions con-

tions according to a ‘base load logic’ which

cerning energy planning, e.g. the Roadmap 2050.

will not apply the same way in the future. The

These documents acquire a binding nature until

European grid therefore requires no less than

they are enshrined into European law – like the

the entire energy system, a transformation rather

Renewable Energy Directive – decided by the EP

than a mere extension.

and the Council.

A clear guiding principle is important for

grid planning, which has long lead times of up

to ten years or more. There must therefore be

PART TWO – GRIDS

39

a robust indication of the power mix and the

– as well as an immediate push for research and

location of renewables infrastructure ten to 20

demonstration projects.

years in advance to ensure that investor risk can

be calculated. A renewables target for 2030 thus

In the past, grid planning and implementa-

minimises this risk, also in relation to transmis-

tion (both construction and operation) has been

sion and distribution networks. Furthermore, the

almost exclusively a national task. Given that

grid must provide security of supply at all times

a stronger grid in Europe is already necessary, and

and be built as cost efficiently as possible. To meet

will be even more so after 2020 in order to provide

these goals, grid planning and grid implementa-

Europe-wide clean energy in a stable grid system,

tion have to become faster, more transparent

a European level has been added to national-

and more predictable. Some of the renewable

level grid decision-making, which has itself had

energy generated in Europe today is already cur-

to adapt to the new challenges. Grid planning at

tailed (‘constrained power’) because the current

the national level has to be advanced, not least

underdeveloped grid cannot integrate all of the

through improved internal market rules. At the

energy generated from renewable sources. In

same time, EU-level grid planning needs to be

the long run, in a market with a dominant share

strengthened via the EU’s energy infrastructure

of renewable energy, accepting a certain level of

package.

curtailment may be cheaper than dimensioning

the grid and storage systems for maximal power

We are in a situation of greatly enhanced

generation. In the short and medium term, the

complexity in which new, old and restructured

development of the grid, storage and demand-

organisations at both the European and the

response and the integration of the energy

national level are responsible for managing the

sectors must aim at reducing the curtailment of

biggest energy and grid system transformation

renewable energy.

ever undertaken. At the same time, the existing

legal provisions for nature conservation at the

Furthermore, the entire process of grid plan-

national and European levels have to be fully

ning and permitting procedures has to be sped up

implemented and taken into account in current

in order to integrate all of the renewable energy

and future policy proposals.

generated and to prevent the deceleration of the

pace of development. This is necessary to allay

5.2. Responsibility for grid

the fears of those investing in power generation

planning and implementation

facilities of disconnection from the grid.

National level: Regulators and

The optimised use of the transmission grid

transmission system operators

and integration infrastructure such as storage

capacity, demand-side management and the

In EU Member States, grid planning is the

optimisation of local distribution can reduce the

responsibility of strongly regulated transmis-

need to build new transmission lines and would

sion system operators (TSOs). Regulators rely on

further speed up the transformation. Storage

practical information from the TSOs, who are in

capacity will have an important role to play in the

charge of transporting electricity and coordinat-

future energy system; for the time being, however,

ing the supply and demand of electricity and also

other flexibility solutions are often more feasible

make detailed proposals for grid extensions to the

options to balance the grid. An integrated and

regulator. In compliance with the Third Internal

continuous assessment of the different options to

Energy Market Package,54 TSOs are required to

provide a power system largely based on variable

suggest ten-year grid development plans to the

generation with the required flexibility is needed

regulator, who will review them and give their

54 See Regulation 714/2009 EC (Art. 8) and Directive 2009/72/EC (Art. 22).

40 A EUROPEAn UnIOn FOR REnEWABLE EnERGy – POLICy OPtIOnS FOR BEttER GRIdS And SUPPORt SCHEMES

final approval. The implementation of these plans

tem is one of the main objectives of grid planning.

then falls to the TSOs. In contrast to the regulator

In order to achieve this, the linkage to renewables

– which is a public agency – TSOs are companies

targets and, especially beyond 2020, to grid plan-

that are part privately and part publicly owned.55 In

ning and implementation, needs to be included

most European countries a single TSO operates in

in the mandates of ENTSO-E and ACER.

the market, but there are exceptions: the German

market, for example, is divided among four TSOs.

As ENTSO-E connects the national TSOs,

ACER is its European counterpart for national

European level: ENTSO-E and ACER

regulators. It was also founded through the Third

Energy Package and started work in 2011. ACER

The two most important bodies for grid

was established to improve cooperation between

planning and implementation on the European

national regulators and to monitor the work of

level are the European Network of Transmission

ENTSO-E.

System Operators for Electricity (ENTSO-E)

and the Agency for the Cooperation of Energy

The process of grid planning between

Regulators (ACER).

ENTSO-E and ACER involves several steps and

includes the development of European network

ENTSO-E was established in order to improve

codes. Network codes are basically rules for the

cooperation between TSOs. It currently repre-

secure operation of power systems as well as on

sents 41 TSOs from 34 countries. A successor

power market integration. In the European case

of European Transmission System Operators

they will furthermore set the framework for trad-

founded in 1999, ENTSO-E was created with the

ing in a European-wide electricity market. Based

Third Energy Package (Regulation (EC) 714/2009)

on the framework guidelines provided by ACER,

and became operational in July 2009.

detailed codes are developed by ENTSO-E. The

codes have to be approved by ACER and the

One of ENTSO-E’s main tasks is the develop-

European Commission.57

ment of grid codes and of ten-year grid development

plans. These plans aim to combine the various

The creation of European bodies for grid

national network development plans and to draw

planning and management with the Third Energy

attention to projects with particular European

Package, in addition to the establishment of

added value. Furthermore, ENTSO-E is currently

a process in which these European institutions

initiating some long-term planning efforts. In 2011,

organise grid planning in cooperation with the

ENTSO-E laid out a three-year study roadmap

Commission, was an important forward step in

through the ‘Modular Development Plan on pan-

relation to meeting the upcoming challenges. It

European Electricity Highways System’56 which

remains, however, that further improvements

shall lead the way to a pan- European electricity

to the process of grid planning and a more

highway system by 2050.

satisfactory division of power and responsibili-

ties between the actors involved are needed in

In the study roadmap, ENTSO-E states that

order to achieve cost-efficient and environmen-

the integration of renewables in the energy sys-

tally sensitive long-term grid and energy system

55 Most TSOs have at least a minimum share of public ownership, with German TSOs being a prominent exception.

56 ENTSO-E: Study Roadmap towards Modular Development Plan on pan-European Electricity Highway System.

Way to 2050 pan-European Power System, Brussels 2011.

57 For example, ACER assigns ENTSO-E with a task relating to congestion management. ENTSO-E then has one year

to define a network code, which it presents to ACER. In a final step, the European Commission has to approve the proposed network code. If the European Commission does not give its approval, the entire process must be re-started.

ENTSO-E’s network codes will cover 12 topic areas related to operations, development and market integration.

The congestion management and balancing market network codes that are currently developed will have a big impact on the role of renewables in the energy market.

PART TWO – GRIDS

41

planning. Inherent in the current process is the

5.3. Current legal developments in the EU

danger that it may be too bureaucratic and slow

to effectively address the challenges involved in

At present the most relevant legislation with

grid planning and implementation. At the same

regard to grid implementation are the ‘Connecting

time, it lacks the elements of transparency and

Europe Facility’ (CEF), its separate legislation on

public participation that are important for the

the pilot Project Bond Initiative and the proposed

identification of the best solutions and to gain

Regulation on ‘Guidelines for trans-European

widespread acceptance for the grid.

energy infrastructure’, all published in October 2011.

The European bodies for grid planning are

The Connecting Europe Facility is the finan-

fairly young and some of the existing problems

cial instrument of the Infrastructure Package and

may diminish over time. But as many decisions

aims to allocate around 9.1 billion euros from the

concerning the European grid will need to be

EU budget over the 2014-2020 period to energy

taken in the coming years, the process needs to

infrastructure projects in a combination of inno-

be improved urgently.

vative financing instruments and grants – so far

without differentiating between expenditure on

Of the bodies involved in grid planning, it is

gas infrastructure, CCS, transport infrastructure

ACER that brings in the European perspective.

and electricity networks.

In practice, however, the institution does not

reflect the EU’s stated preference for transforma-

The CEF is a continuation of the development

tion towards a sustainable society – not to speak

of trans-European energy networks (TEN-E).

of this report’s vision of transforming European

Despite the rather symbolic nature of the amount

grids to serve an electricity system based on 100

available to it for grid planning,59 for the time being

per cent renewable energy, plus the adjacent heat

it remains unclear if it can actually be allocated.

and transportation systems. ACER also suffers

It is expected that those responsible for budget-

from low visibility and poor recognition within

ary policy at the national level will be particularly

the European institutions and Member States.

likely to oppose this proposal. Investment in grids

remains predominantly the preserve of grid com-

In order to ensure that the public interest is

panies; the CEF, however, can provide financial

taken into account, it is important to strengthen

support to infrastructure that is not sufficiently

ACER within the grid planning process vis-à-

attractive to private investors (e.g. interconnec-

vis both ENTSO-E and, provided the institution

tors) but that is necessary for the better integration

receives a mandate to explicitly support a renew-

of the European grid, primarily via financial

ables development mission,58 the Member States

instruments. Given the current economic state of

and their regulatory agencies. ENTSO-E needs to

the EU and the limited funds available, leverag-

provide ACER with transparent information. Its

ing funding to secure access to capital should be

tasks and rights need to be clearly defined and

a key priority of the CEF. We support the proposal

enforceable. It is also necessary for ACER to be

for a Connecting Europe Facility. The establish-

sufficiently equipped with the technical expertise

ment of joint undertakings for the construction

required to analyse the network and energy mar-

and operation of projects financially supported

ket data. Apart from a clear mandate, ACER needs

by the Connecting Europe Facility, including the

the economic means to finance the extensive

Member States involved in the project and the EU,

data management that is required to fulfil its role.

could also be considered.60

58 ACER needs a clear mission to support the transformation of the EU electricity network towards the needs of a system that is aiming for a 100 per cent supply of renewable energy by 2050.

59 As a comparison, in Germany alone, more than 10 billion euros are required by 2020 to connect 10 GW offshore wind capacity. EU-wide, the amount of investment required (calculated on a rather less detailed basis) is over 100 billion euros.

60 See ERENE p.61 f.

42 A EUROPEAn UnIOn FOR REnEWABLE EnERGy – POLICy OPtIOnS FOR BEttER GRIdS And SUPPORt SCHEMES

The energy infrastructure guidelines set out

benchmarks which serve the overall goal of this

criteria for the selection of so-called ‘projects of

transition at all planning levels, in addition to dem-

common European interest’ (PCIs) in the grid sys-

ocratic control. The national TYNDPs should be

tem within nine identified priority corridors and

decided on by the national parliaments, while the

three thematic areas. Four of the priority corridors

priority corridors, although not individual projects,

cover electricity networks: 1. North Seas Offshore

should be approved by the European Parliament.

Grid, 2. South West Electricity Connections,

3. Central South Eastern Electricity Connections

Case study: Offshore wind in Germany

and 4. Baltic Energy Market Interconnection

Plan. The proposal also specifies how the selec-

While each renewable energy source

tion procedure for projects of common interest in

has its own particular specifics, the case of

these corridors should be carried out in regional

offshore wind (OW) energy in Germany never-

groups. The proposal requires Member States,

theless provides a good illustration of some of

regulatory authorities, grid operators, ACER and

the grid-related problems faced by renewable

the European Commission to cooperate on cross-

energy.

border planning and regulation, cost-benefit

sharing, pricing and several other issues. It also

The first government strategy setting targets

contains mechanisms for strengthened coop-

for German OW was adopted in 2002. The ini-

eration in case of difficulties (e.g. the European

tial targets were not reached; this was mainly

coordinators) and requirements to improve

due to insufficient support systems and a lack

investment incentives (articles 13 and 14).

of binding targets. OW nevertheless remained

high on the agenda of the German govern-

Storage is considered to be part of ‘infrastruc-

ment, through several changes of government.

ture’, which might be especially relevant for pump

The current German target for offshore wind is

storage. Furthermore, the proposal elaborates on

to install 10 GW capacities by 2020 and 25 GW

how the implementation of PCIs should be secured

by 2030 (15 per cent of German electricity con-

and monitored. Another important goal for the EU

sumption by 2030).

in this regard is to considerably shorten the per-

mitting procedures for these PCIs. Every country

In Germany, as in Denmark, TSOs are

is asked to establish a one-stop shop or stronger

obliged to connect offshore wind farms to the

coordination between the authorities involved,

grid.61 In the 2008 revision of the Renewable

and public participation is to be increased in order

Energy Act ( Erneuerbare-Energien-Gesetz – EEG),

to make the permitting process faster and leaner

this obligation only stood until 2015, creating

and to identify potential obstacles and possible

major uncertainty for the developers of off-

solutions early on. Most of the requirements con-

shore wind farms and for TSOs. In the 2011

tained in the proposal are of a very general nature.

revision, the time limit clause was abandoned,

The European Commission, the Council and the

putting TSOs fully in charge of offshore grid

European Parliament need to work towards their

connection. Nevertheless, this short episode

specification and implementation.

is illustrative of how inadequate policymaking

harms investment security and slows down

This working group believes that the proposal

the construction of the necessary grids to off-

on priority corridors is an interesting planning

shore parks.

approach. What is missing, however, is the clear

commitment that the grid investments in these

Challenges on the technical side include

corridors will facilitate the transition of the energy

the long distance of German offshore wind

system to renewable energy. There should be clear

farms from the shore. These challenges can be

61 Effective since December 2006, with the revision of EnWG §17(2a).

PART TWO – GRIDS

43

overcome, but they do add to the costs: 75 to

5.4. the potential of a European grid:

100 billion euros of investment are needed to

the energy we want and the grid we need

install 25 GW OW in the next 20 years, of which

up to 20 per cent would have to go to build-

The electricity grid we need in Europe depends

ing grid connections to the mainland. TSOs

on the energy mix – which is only partly deter-

like TenneT have claimed that the investments

mined by European law and otherwise decided

required exceed their resources. Critics argue,

in Member States – and the energy system envi-

with some justification, that the TSOs have

sioned for Europe’s future. The solutions applied

known of the authorised wind farms for a long

for the integration of electricity into the energy

time but failed to prepare themselves accord-

system and the mix of other flexible resources

ingly. As the connection of offshore wind

will influence the size of grid needed. Possibilities

farms remains highly capital intensive, new

such as the stronger integration of electricity into

investment sources need to be found, whether

the heat market are not being taken into account

via public ownership or private provisions.

by current grid planners. Currently, the very

There should also be a stronger role for public

nature of grid planning prevents the full utilisa-

banks (EIB, KfW) to facilitate these infrastruc-

tion of the existing options in order to bring about

tural investments.

the transition to 100 per cent renewable energy as

quickly and cost-effectively as possible.

A stable and long-term regulatory and

legislative framework for OW and the related

Grid planning today can be described as ‘coor-

infrastructural set-up could help to reduce

dinated bottom-up planning.’ At the European

investment insecurity, especially the risk of

level, ENTSO-E is in charge of coordinating the

stranded investments, and cut lead times. This

TYNDPs provided by the national TSOs. The key

would significantly advance the development

responsibilities remain with national planning

of OW across Europe.

systems. Most importantly, the grid planning

process is not yet fit to bring together all of the rel-

In the longer run, a more coordinated

evant elements – transmission, distribution and

European approach to OW development and

all flexibility solutions.

grid connection could bring costs down fur-

ther. The connection of Europe’s large OW

Grid planning is a reiterative learning proc-

farms (40 GW by 2020) would help to make

ess, the TYNDPs are drafted every two years. As

it cheaper to transport the huge capacities

experience improves with regard to decentralised

generated to load centres on the mainland,

solutions or other items, any new insights gained

as clusters could be created connecting them

can be integrated into the next plan.

one by one (hubs), transporting the power

generated offshore to the shore via HVDC

This report focuses on the improvement of

cables. This procedure might be more expen-

the grid planning process in Europe. The policies

sive in the short term, but would be more

proposed by the actors involved in grid planning,

cost effective in the long run, thereby creating

especially the ENTSO-E TYNDPs, naturally mirror

a more stable grid infrastructure. Again, ade-

the shortcomings of the system in which they are

quate economic incentives and the provision

developed. The following section therefore gives

of investment security are paramount to set

a brief overview of the content of the TYNDPs

the right incentives for operators to choose the

before moving on to the process of grid planning.

long-term option.

44 A EUROPEAn UnIOn FOR REnEWABLE EnERGy – POLICy OPtIOnS FOR BEttER GRIdS And SUPPORt SCHEMES

5.5. EntSO-E’s ten-year network

The investment costs of the projects of pan-

development Plan

European significance are calculated at 104

billion euros, which is less than one per cent of

Content

the end user’s electricity bill over ten years. Five

billion euros would be saved per year in system

The current ENTSO-E TYNDP, published in

operation costs.

July 2012, is a clear step forward from the first pilot

TYNDP released in 2010. In response to pressure

ENTSO-E claims that 80 per cent of its pro-

from stakeholders, ENTSO-E included the EU

posed transmission lines are related to the

2020 targets in its new plan. This represents quite

integration of renewable energy. Most of the lines

some progress from the 2010 version, which was

also serve the other major EU energy goals, secu-

simply a compilation of national grid develop-

rity of supply and the internal energy market.

ment plans and had very low expectations for the

capacities of installed renewable energy. The new

Process

network development plan is thus the first (non-

binding) master plan for a European grid.

The projects featured in the plan were iden-

tified using a multi-criteria analysis, with nine

A further step forward is the prioritisation

different categories. While this more systematic

of infrastructure-related projects in the plan,

approach is welcomed, the data and the market

which includes 100 projects of pan-European

and grid model used by ENTSO-E are not accessi-

significance. These projects represent the major

ble to third parties. It is therefore difficult to assess

bottlenecks which must be tackled in order to

if sufficient sensitivity analysis has been under-

achieve an integrated European grid. Many of

taken, and to ascertain how many lines could be

these projects consist of several power lines, and

avoided by a different distribution of renewable

there are many grid extension projects. The further

energy generation technologies, including more

prioritisation of the most relevant and impor-

decentralised technologies, and the use of other

tant projects therefore seems necessary in order

options to provide flexibility to the system, such

to identify those grid extensions that are most

as demand-side management (i.e. more intelli-

urgent. Apart from clearly identified transmission

gent communication within the energy system),

lines, the network plan also includes so-called

further storage technologies and higher energy

‘investment clusters’ which cover geographically

efficiency. Sensitivity analyses of the refurbish-

extensive areas; large parts of the North Sea, for

ment of lines on the distribution level, and of

example, are labelled as an investment clus-

the establishment of integrative smart energy

ter. The clusters have not yet been described in

systems locally and regionally (which can be

greater detail; there is no information of landing

a cost-effective alternative to the building of

points within the cluster or capacities. A decision

transmission lines), have not been taken suffi-

on how the TYNDP and investment clusters will

ciently into account.

relate to the selection of the ‘projects of common

interest’ is urgently needed.

In addition, the multi-criteria analysis fails to

analyse the environmental or social costs or ben-

In total, ENTSO-E recommends building

efits of possible power lines and therefore needs

42,000 km of new assets, of which 70 per cent

to be improved.

would be overhead and 30 per cent underground

or subsea lines. This is a substantial amount for

ENTSO-E, being the network of transmis-

a ten-year timeframe. Ten thousand kilometres of

sion system operators, has provided a power

the lines suggested are existing lines that would

system study which claims that a high number of

undergo refurbishment.

transmission lines is needed in order to provide

the energy system with the necessary flexibility.

While it is clear that Europe does indeed need

PART TWO – GRIDS

45

a high number of transmission lines, all other

to identify key actors or institutions to represent

flexible resources available remain untapped or

the options beyond grids.

underdeveloped and need to be brought into the

future process.

Three improvements could nevertheless be

implemented. Firstly, the process initiated recently

6. Elements for improved

(with the TYNDP published in 2012) must be

European grid planning

improved to include other forms of flexibility,

beyond grids, in the planning process. It must be

The planning of the electricity grid is a huge

ensured that, for instance, options for demand and

task and must be carried out in a system with

generation are sufficiently brought into the grid

many moving parts. Policies within countries

planning process – for example by involving DSOs,

change; the nuclear phase-out in Germany, the

the providers of smart grid technology, actors in

development of renewable energy in Spain and

capability markets62 (existing or in the future), and

the long-term price development of fossil fuels

civil society stakeholders. This involvement must

on international markets all have an influence on

go considerably beyond mere ‘dialogue without

the European energy market.

impact’, which is how the initial ENTSO-E consul-

tation on the TYNDP is widely perceived.

Creating an institution to take over the entire

energy planning process is therefore inadvis-

Secondly, coordinated efforts, including

able. An approach that would attempt to bring

research efforts, should be undertaken by both the

everything together would be neither politically

EU and Member States to improve understand-

practicable nor technically feasible. The task is

ing of the potential of different flexibility options,

therefore to create a system in which the various

including their long-term potential to reduce the

gear wheels interlock, rather than turn next to

need to build long-distance transmission grids.

each other.

Such efforts should focus on scientific analysis and

involve relevant stakeholders (as above) in order to

6.1. Coordinating sources of flexibility:

support their involvement and contribution to the

Bringing the actors together

grid planning process.

Intelligent grid planning is only possible

Thirdly, best practices related to the use

when all of the elements that bring flexibility into

of flexibility options in national grid planning

the system are taken into account. Expanding the

should be exchanged between Member States.

transmission grid is only one of several options for

National regulators, as well as ACER, could take

providing flexibility to a future European energy

on an active role in such an exchange and develop

system based largely on variable renewable ener-

specific knowledge and capacities.

gies. To reach a cost-efficient flexible energy

system that fully adheres to existing standards of

In the long term (e.g. beyond 2025), an improved

energy security, a broader integrated planning

process and possibly also new institutions may be

process will be necessary. Over the long term,

required in order to achieve an effective and effi-

this will require an integrated planning process

cient plan for an energy system that makes full and

in which the relevant actors representing the key

cost-efficient use of all flexibility options. The initial

options for flexibility (flexibility in demand, flex-

preparations needed for the development of these

ibility in generation, storage and grids) together

processes and institutions in the future should

contribute to optimal solutions. At this early stage

begin now, together with the implementation of the

of the energy transformation, it is still challenging

improvements described above.

62 See: Meg Gottstein / Simon Skillings, Regulatory Assistance Project (RAP): Beyond Capacity Markets -

Delivering Capability Resources to Europe’s Decarbonised Power System, IEEE, 2012. URL: http://www.raponline.org/

featured-work/beyond-capacity-markets-delivering-capability-resources-to-europes-decarbonised-power

46 A EUROPEAn UnIOn FOR REnEWABLE EnERGy – POLICy OPtIOnS FOR BEttER GRIdS And SUPPORt SCHEMES

In order to facilitate this, a forum should be

such an assessment be carried out for national

established which brings together not only trans-

plans with considerable impact on the environ-

mission system operators but also distribution grid

ment. The results of the national consultations and

operators, representatives of the heat and trans-

the SEAs should also be discussed at the EU level

portation sectors (to allow for the establishment

and be fed into the European TYNDP consultation.

of a smart energy system) and other stakeholders

such as energy producers and consumers as well

Information about the national grid planning

as environmental and civil society organisations.

processes and the results of the national consul-

tations should be made public via a European

The forum’s exact structure and its mem-

website to be operated by a public body (either

bership would depend on the tasks allotted to

ACER or the Commission) in order to give citizens

it. For a continuous dialogue between different

the chance to compare grid planning procedures

stakeholders, a consultative forum at which grid

in a broader context.

planning could be discussed in more detail should

be established. The respective European associa-

6.2. transparency and participation

tions would have to be part of such a forum. At the

same time, however, a bridge to the national level

Transparency and the participation of citi-

needs to be created in order to better link the

zens in grid planning, development and imple-

two levels. This is of particular importance as it is

mentation are important conditions for public

essential that both EU and national-level discus-

acceptance. The European energy transformation

sions take into account the debates taking place

will succeed only if it is a people’s project as much

at the other level. These consultations should

as it is a political and technical project.

not conclude with a binding outcome, but rather

give the responsible regulator a better knowledge

The majority of European citizens are in

base for grid planning that is more in line with the

favour of renewable energy and are willing to

needs of the public. This would help to prevent

accept new renewable energy installations or the

opposition at the later implementation stage –

expansion of existing grids for this purpose. At

and therefore also help to avoid costly delays.

a local level, however, strong public opposition

may often arise – particularly in the neighbourhood

The consultative process on EU grid planning

in which such projects are located. The so-called

via ACER and the Commission should be strength-

‘NIMBY’ problem (‘Not In My Back Yard’) cannot

ened. The Third Energy Package already contains

always be fully solved, as there may always be a

some requirements on public consultations at

certain level of opposition from residents directly

the EU and national levels. This framework can

affected by new infrastructural projects. But

still be improved, inter alia by better connecting

acceptance of grids and renewable energy instal-

both levels. Improved consultation processes on

lations can be enhanced if the public is involved in

grid planning and draft national grid develop-

the decision-making process, from grid planning

ment plans, as well as the underlying assumptions

to the implementation of single power lines or the

at the national level, can influence the EU level.

planning of RE installations. While it may not be

National regulators should report on the results

possible to reach full acceptance (meaning that

of the national consultations, both for the sce-

people actually like the outcome), it is possible to

narios and the draft national grid development

reach full legitimacy (meaning that people accept

plans. The reports should include the arguments

the process as being right and fair). Furthermore,

put forward by those consulted and an indication

the inclusion of local citizens can actually improve

of which have been taken into account and which

outcomes, with decision-makers able to take

have not. Furthermore, national regulators should

advantage of their knowledge of the area. The val-

be required to carry out strategic environmental

ues and preferences of the local population can be

assessments (SEAs) and issue an environmental

identified and obstacles for implementation iden-

report, as it is requested by the SEA Directive that

tified at an early stage.

PART TWO – GRIDS

47

The need for grids has to be determined

Regarding the organisational side of partici-

through a transparent process, based on energy

pation, the method needs to be chosen carefully,

planning and fully taking into account alterna-

the right target groups must be involved and the

tives to grid extension. It is important that the

process needs to be professionally moderated.

public understands which projects or lines need

to be built, and on which assumptions, in order

While some Member States have developed

to increase acceptance. This is why public partici-

good participatory methods, EU-level grid plan-

pation and transparency should be implemented

ning is in need of improvement. ENTSO-E’s

at the earliest possible point in the process – the

planning process has to become more transpar-

energy planning stage. Public participation is fur-

ent, and stakeholders need to have access to all

thermore crucial in the spatial planning process

grid and market planning data. With the increas-

in order to bring alternative corridors or tech-

ing complexity of energy planning and thus

nologies into the discussions. It should be the

electricity grid planning, the building of stake-

objective of the participatory process to bring the

holders’ and other actors’ capacities to fully

best available arguments into discussions at an

participate in the planning process is essential.

early stage in order to increase the likelihood of

an optimal outcome and to avoid public resist-

Transparent, participative processes are vital

ance where possible. Benefit-sharing schemes for

in order to convince civil society of the need

local stakeholders can increase the level of pub-

for grid investments. Public acceptance is then

lic acceptance and could be made possible on

needed to ensure fast and cost-effective grid

a Europe-wide scale. European law needs to be

implementation.

reviewed in order to enable benefit sharing and

public ownership of RE infrastructure.

In addition to increased transparency and

public participation, other elements could also

For participatory processes to become a suc-

enhance the acceptance of new energy infra-

cess, it is important to clearly communicate their

structures. These include benefit-sharing models,

purpose, and for the outcome of the process to be

attempts to avoid settled areas and alternative

open. Not only the opportunities but also the lim-

technologies such as HVDC lines or underground-

its of the process need to be clear to all participants

ing solutions. Such alternatives should be

in order to avoid raising unrealistic expectations.

considered on a case-by-case basis. Deliberations

Furthermore, in order to gain public acceptance of

should take into account the budgetary effect of

the grid it is essential to effectively communicate

the more rapid implementation of alternatives,

the ‘whys’ – the reasons for its construction – in

e.g. due to the higher acceptance of underground

particular to those citizens that will have to accept

solutions compared to overhead lines. For exam-

an outcome they did not wish for. Aside from early

ple, recent studies have shown that the additional

involvement, a continuous dialogue is also neces-

costs related to cables are limited. This means

sary to ensure that the different proposals brought

that in some cases it can be more cost effective to

to the table are properly addressed in discussions,

partly use cables instead of overhead lines as this

and to provide the public with feedback explaining

might reduce public resistance and hence speed

which arguments have been taken into account

up permitting procedures and reduce the overall

and which have not. This dialogue may help to

cost of the project.63

create mutual trust and willingness to agree on

common solutions on both sides, which is indis-

pensable.

63 BMU-Studie ‘Ökologische Auswirkungen von 380-kV-Erdleitungen und HGÜ-Erdleitungen’. This study concludes that costs for a HVDC cable compared to a high-voltage alternating current cable (HVAC) overhead line rise by a factor of 2.1 to 8.8 which is significantly below previous estimates.

48 A EUROPEAn UnIOn FOR REnEWABLE EnERGy – POLICy OPtIOnS FOR BEttER GRIdS And SUPPORt SCHEMES

Grid planning in the context of the

mines the need for grids for the coming years.

German energy transition

It will be subject to review every three years.

Another important provision of the Energy Act

In the context of the Energiewende, the

is the fact that the relevant data, including load

German parliament has decided to amend exist-

flow data, is passed to the responsible ministries

ing rules on grid planning and to adopt a new

and can under certain circumstances also be

law on permitting procedures for intra-regional

obtained by third parties.

power lines. At both levels of the process, public

participation shall be promoted and transpar-

When it comes to the implementation of

ency increased.

intra-regional power lines, the new Accelera-

tion Law ( Netzausbaubeschleunigungsgesetz

The revision of article 12 of the Energy Act

– NABEG) will streamline and speed up per-

( Energiewirtschaftsgesetz – EnWG) deals with

mitting procedures. Spatial planning shall be

new provisions on grid planning and shall con-

implemented at the national level by the regula-

tribute to a more transparent and participatory

tor. Under certain circumstances, the regulator

process. Furthermore, the process consists of

may also lead the permitting process, which is

several steps. The idea is that once a decision

traditionally managed by the regional authori-

has been taken at one level, the same issue shall

ties. The new permitting procedures go hand

not be discussed again at a later stage. TSOs

in hand with improved public participation.

are obliged to develop a set of three energy

The application conference which determines

scenarios for the next ten years in line with

the scope of the application file for a power

the political goals of the government. These

line shall be open to the public. Furthermore,

three scenarios are evaluated and approved by

a consultation as well as a public hearing shall

the German regulator ( Bundesnetzagentur –

be held. Information on the permitting proce-

BNA) after a public consultation. More than 70

dures will be made available not only by local

organisations participated in the first scenario

authorities but also via the Internet and the

consultation in autumn 2011. In December

local press.

2011, the Bundesnetzagentur amended the TSO

proposal and changed some of the assumptions

As these rules on grid planning and permit-

within in. Based on this, TSOs have to propose

ting procedures are still very new, it remains

a draft grid development plan which shall also

to be seen how much they can contribute to

be open to public participation. In May 2012,

increasing the legitimacy of new power lines.

the first draft was presented to the public via the

The process has become much more transpar-

Internet (www.netzentwicklungsplan.de).

ent than in the past. Some criticism has already

been voiced, however, due to the fact that some

After the public consultation and possible

issues such as demand-side management and

changes, the TSOs will transmit their draft to the

other means to reduce the need for grids have

regulator. At this stage, a strategic environmental

not been taken into account in the scenarios. As

assessment (SEA) as well as an additional public

TSOs have to develop a new draft of the national

consultation will be carried out by the regulator.

grid development plan every year, however,

The regulator will then prepare a draft proposal

there is still the opportunity to bring in a learn-

for a federal grid plan which has to be approved

ing process in which new ideas and knowledge

by the German parliament. This law then deter-

are taken into account.

PART TWO – GRIDS

49

6.3. Using what we have:

renewable energy and deprive us of the chance of

Best practice in Europe

reaching 100 per cent renewable energy by 2050.

The fragmented nature of the planning proc-

It is therefore advisable that forums be created

ess can be an asset, with the different systems

in which the European system can be developed

offering various ways of tackling the problems

while leaving the binding decisions to Member

that arise at a national level before they begin to

States or to regional groupings. The Europe-wide

become troublesome at the European level. The

model is needed not only from a technical perspec-

strongest points of the national grid planning

tive but also in order to enhance cooperation on a

systems should be identified and transferred to

political level as the energy system evolves. Existing

the European level. The development of a strate-

feasibility studies state that 100 per cent renewable

gic vision will therefore be a dynamic ping-pong

energy in Europe will only be possible with strong

process: the EU formulates some general require-

European cooperation; there is therefore no alter-

ments (e.g. the Third Energy Liberalisation

native to greater Europeanisation in the long term.

Package), Member States go beyond compli-

The foundations need to be laid now.

ance and best practice serves as a blueprint for

improved EU rules on participatory, transparent

7. Recommendations

grid planning which puts public policy goals such

as climate mitigation and renewable promotion

The process of grid planning has to be

at centre stage. In such a system, the second and

re-designed to ensure maximum flexibility and

third ENTSO TYNDPs should match public policy

resilience within the system, while guaranteeing

goals better than the first version. For example,

a planning process that is inclusive, transparent and

grid planning in the Nordic countries and in

democratic. Options to be included are demand-

Germany has identified solutions to participation

side management, the integration of energy systems

and transparency problems that remain unsolved

and the potential of smart grids, including decen-

in the European arena. In the German grid plan-

tralised generation capacities and the optimisation

ning process, a set of scenarios is developed and

of power lines and storage, as well as a more intel-

the strongest are identified. While the scenarios

ligent communication within the energy system.

are developed and presented by the TSOs, other

stakeholders have the opportunity to give their

A stakeholder forum should be estab-

feedback. Furthermore, the regulatory agency

lished using the smart grids task force as a model.

has a key role in matching private business mod-

A complete list of stakeholders still needs to be

els with public policy goals. The final decision

drawn up but would include ENTSO-E, ACER, the

lies with the parliament. Functioning solutions

DSOs, providers of smart grid technology, actors

that already exist in Europe, for example for the

in capability markets and representatives of the

stronger integration of stakeholders, should be

heat and transportation sectors. Other stakehold-

Europeanised.

ers such as energy producers and consumers as

well as environmental or civil society organisa-

6.4. A hybrid approach

tions should also be included.

It is necessary to find a middle way between a

The public interest needs to be better

purely step-by-step approach and a big blueprint

reflected in European grid planning. Public par-

for Europe. The latter holds the danger of getting

ticipation and transparency should be brought

mired in discussions that cannot be solved in

into the process as early as possible – thus at the

due time, given the existing European decision-

energy planning level and in the spatial planning

making process. The risk of the former is that

process – so that alternative corridors or tech-

poorly fitting systems may be constructed adja-

nologies can be discussed in order to identify the

cent to one another, thus making it more difficult

optimal outcome and to avoid public resistance

to transform the whole energy supply towards

where possible.

50 A EUROPEAn UnIOn FOR REnEWABLE EnERGy – POLICy OPtIOnS FOR BEttER GRIdS And SUPPORt SCHEMES

ENTSO-E’s grid planning process still

Benefit-sharing schemes for local stake-

lacks transparency. Public involvement needs

holders can increase the level of public acceptance

to be enhanced and consultation procedures

and should be made possible on a Europe-wide

improved. Stakeholders must have access to all

scale. European law has to be reviewed in order

grid planning and market planning data. With

to enable benefit sharing and public ownership of

the increasing complexity of energy planning and

renewable energy and grid infrastructure.

thus electricity grid planning, the capacities of

stakeholders and the various other actors have to

The process of selecting and developing

be built up to allow them to fully participate in the

the infrastructure needed for a transformation to

planning process.

a renewable future needs to be both streamlined

and accelerated. The current proposals should be

The EU grid planning consultation process

improved; this can be done by establishing a clear

could be strengthened by incorporating a pub-

link to the EU’s long-term energy and climate

lic consultation carried out by official EU bodies

targets, by better public involvement in the PCI

(either ACER or the European Commission), who

selection procedure and by fully implementing

would then in a next step give an opinion on the

nature protection legislation.

TYNDP proposal. Improved consultation processes

at the national level can influence the EU level:

A revision of the Treaty Establishing the

national regulators should report on the results of

European Atomic Energy Community is overdue.

the national consultations, including the arguments

All provisions on creating the conditions for the

put forward by those consulted and an indication

speedy establishment and growth of the nuclear

of which of these have been taken into account and

industry should be deleted and the Treaty should

which have not. The results of the national consul-

concentrate on protection and security matters.

tations should also be discussed at the EU level and

The democratic deficit must be closed, giving the

fed into the European consultation.

European Parliament full co-decision rights and

the European Citizens the right to take European

Best practice should serve as blueprint for

Citizens Initiatives on the issues of that Treaty.

improved EU rules on participatory, transparent

grid planning which puts public policy goals such

In a future revision of the European

as climate mitigation and renewable promotion

Treaties, the provision of article 194 (2) TFEU

at centre stage.

which states that it is the right of Member States

to determine their energy mix and the general

ACER’s mandate should be altered to ensure

structure of their energy supply should be recon-

that the European public interest is served with

sidered. This provision should be clarified so as

regard to grid planning. To fulfil this task, ACER

to guarantee that national energy policy choices

needs to be sufficiently equipped with the neces-

do not foreclose European policy options. There

sary technical expertise to analyse the network and

should also be a clear preference given to renew-

energy market data. ACER needs the economic

able energy, environmental integrity and the fight

means to finance the extensive data management.

against climate change.

ACER should become a bridge between the dif-

ferent levels – local, national and European – of

European grid and energy system planning in order

to identify the right balance between the European

grid and the potentials of regional, often labelled

‘decentralised’, electricity and energy solutions,

ACER will need sufficient resources in order to do

justice to this expanded role.

51

LISt OF ABBREvIAtIOnS

ACER

Agency for the Cooperation of Energy Regulators

BNA

Federal Network Agency (Bundesnetzagentur; Germany)

CCS

Carbon Capture and Storage

CEF

Connecting Europe Facility

CHP

Combined Heat and Power

DSO

Distribution System Operator

EC

European Commission

EEG

Renewable Energy Act (Erneuerbare-Energien-Gesetz; Germany)

EIB

European Investment Bank

ENTSO-E European Network of Transmission System Operators for Electricity

EnWG

Energy Act (Energiewirtschaftsgesetz; Germany)

EP

European Parliament

EREC

European Renewable Energy Council

EREF

European Renewable Energies Federation

ERENE

European Community for Renewable Energy

ETS

Emissions Trading System

EU

European Union

FIP

Feed-in premiums

FIT

Feed-in tariff

GHG

Greenhouse gas

GW

Gigawatt

HVAC

High-voltage alternating current

HVDC

High-voltage direct current

IA

Impact assessment

IEA

International Energy Agency

kWh

Kilowatt-hour

MoDPEHS Modular Development Plan on pan-European Electricity Highways System

NABEG

Acceleration Law (Netzausbaubeschleunigungsgesetz; Germany)

NIMBY

‘Not In My Back Yard’

NREAP

National Renewable Energy Action Plan

OW

Offshore wind

PCI

Project of common interest

PPA

Power purchase agreements

PV

Photovoltaics

RE

Renewable energy

RES

Renewable energy sources

SEA

Strategic environmental assessments

TEN-E

Trans-European energy networks

TFEU

Treaty on the Functioning of the European Union

TGC

Tradable Green Certificates

TSO

Transmission system operator

TYNDP

Ten-Year Network Development Plan

VMM

Volume market model

52 A EUROPEAn UnIOn FOR REnEWABLE EnERGy – POLICy OPtIOnS FOR BEttER GRIdS And SUPPORt SCHEMES

dEFInItIOnS

Carbon capture and storage

Carbon dioxide capture and storage (CCS) is a process by which the carbon dioxide released during

the combustion of coal is condensed and stored underground. The aim is to reduce the greenhouse

gas emissions of coal power plants. CCS technology is currently still under development: there are only

small-scale pilot plants in operation at present exhibiting low performance and low efficiency. As CCS

requires large amounts of energy, the efficiency of coal-fired power plants is thus reduced and more

fossil fuels must be used. The use of CCS would also create new legacies for future generations.

Network codes

The third legislative package for the internal energy market calls for ENTSO-E to draft network codes

on the basis of framework guidelines adopted by ACER. The network codes will cover 12 topic areas

related to operations, development and markets. These codes will establish a framework that guaran-

tees effective system operation, market integration and system development in the form of a binding

EU regulation.

Variable power

Wind and solar produce variable amounts of electricity, depending on weather conditions. Variable

power needs a new energy and grid system to balance supply. Solutions to the challenges of variable

power include bigger and smarter grids that are able to balance weather conditions and storage capaci-

ties. Dispatchable renewables such as pumped storage or biomass can cover times of low supply from

variable sources.

Syngas

Syngases (synthetic gases), generated through electrolysis in a process which can be powered by

renewable electricity, consist primarily of hydrogen (or, via a modified process, methane). Peak elec-

tricity supply from variable sources can be used to produce syngas, which, in contrast to electricity, is

easily stored.

53

SHORt BIOGRAPHIES OF AUtHORS,

WORKInG GROUP MEMBERS And COntRIBUtORS

Silvia Brugger has coordinated the Climate and Energy Policy Programme at the Brussels-based European Union office of the Heinrich-Böll-Stiftung since May 2011. Prior to that, she worked within

the EU office’s Global Dialogue Programme. Silvia has dealt in detail with political and economic trans-

formation processes during her work at the Centre for Applied Policy Research in Munich. She spent

a year at the University of Chile in Santiago and holds a Masters in Political Science, International Law

and Intercultural Communication from the Ludwig-Maximilians-University of Munich.

Bas Eickhout is a Member of the European Parliament for GroenLinks, the Dutch Greens. He is

a member of the Committee on the Environment, Public Health and Food Safety and substitute mem-

ber of the Committee on Agriculture and Rural Development and the Committee on Economic and

Monetary Affairs. He is also a member of the Delegation for relations with the United States. Eickhout

studied Chemistry and Environmental Science at the Radboud University in Nijmegen and lives in

Utrecht. Since 2000 he worked as a researcher at the Netherlands Environmental Assessment Agency

(Planbureau voor de Leefomgeving). He worked on several projects concerning international environ-

mental problems, such as climate change, agriculture, land-use and biofuels. He co-authored the IPCC

report on climate change which received the 2007 Nobel Peace Price. In 2004 and 2009 he co-authored

the GroenLinks election programme for the European elections. Since 2009 he has also been part of the

Programme Committee for the National Parliamentary elections. He has been actively involved in the

European Green Party since 2004, partly as an official delegate of the GroenLinks delegation.

Dr. Oliver Geden is a senior research fellow at the Berlin-based Stiftung Wissenschaft und Politik (SWP), the German Institute for International and Security Affairs. As a member of the “European Integration”

division, his studies mainly focus on the European Union’s energy and climate policy. He received his Ph.D. from Humboldt University Berlin, has been a visiting scholar at the University of California,

Berkeley and worked as an external expert in the Federal Foreign Office’s Policy Planning Staff.

Dr. Helmuth-M. Groscurth is managing director of the arrhenius Institute for Energy and Climate Policy in Hamburg, which he founded together with Dr. Sven Bode in 2005. The Institute specializes

in electricity markets, renewable energy and emissions trading. From 1999 to 2003 Dr. Groscurth

headed the department “Energy Concept Future” at Hamburg Electricity Works (HEW). The depart-

ment developed innovative business ideas in the context of environmental protection and climate

change mitigation. Their focus was on emissions trading, environmental risk management, renewable

energy sources and new energy systems. In addition, he coordinated the emissions trading activities

of Vattenfall Europe, the parent company of HEW. Before joining HEW, Dr. Groscurth worked for the

Centre for European Economic Research (ZEW) in Mannheim, Germany, where he coordinated several

EU projects on renewable energies. Helmuth Groscurth studied physics at the Universities of Würzburg

and Albany, New York. He wrote his PhD thesis on energy optimization models.

Daniel Fürstenwerth holds a Masters in mechanical engineering and in business administration from

RWTH Aachen. From 2008 to 2010 he was a consultant in a leading business strategy consultancy, with

a focus on the transformation of the energy sector in Europe until 2050. Working with the “Renewables

Grid Initiative” in 2011, he developed the “European Grid Declaration” together with Europe’s larg-

est transmission system operators and environmental NGOs. Today he is a Senior Associate at “Agora

Energiewende”, a project supporting the energy transformation in Germany.

54 A EUROPEAn UnIOn FOR REnEWABLE EnERGy – POLICy OPtIOnS FOR BEttER GRIdS And SUPPORt SCHEMES

Frede Hvelplund is a Professor in Energy Planning at the Department of Planning and Development,

Aalborg University, Denmark. His background is Economics and Social Anthropology. He has written

many books and articles on the transition to Renewable energy systems, amongst others “Alternative

Energy Plans” written in interdisciplinary groups together with engineers. He is a “concrete institutional

economist” and understands the market as a social construction that for decades has been conditioned

to support a fossil fuel based economy. Hence a transition to a “renewable energy” economy requires

fundamental changes of an array of concrete institutional rules and laws. In 2005 he obtained the Danish Dr. Techn. degree, and in December 2008 he received the EUROSOLAR European Solar Prize.

Rainer Hinrichs-Rahlwes is the President of EREC, the European Renewable Energy Council, the umbrella organization of European renewable energy industry, trade and research associations, and

of EREC’s member EREF, the European Renewable Energies Federation, the voice of independent pro-

ducers of energy from renewable sources. He is a Board Member of BEE, the German Renewable Energy

Federation. Until 2005, he was a Director General in the German Federal Ministry for the Environment,

Nature Conservation and Nuclear Safety (BMU). He was a chairman of the International Steering

Committee preparing the renewables2004-conference in Bonn and of the Global Policy Network, now

called REN21.

Martin Kremer, M.C.L., has contributed to the report exclusively in the context of his personal opinion. He studied law and economics and worked amongst others for the Europe Division of the

German Federal Foreign Service and as Cultural Attaché at the German Embassy in Moscow. After

having worked at the German Embassy in London for three years and as Senior Fellow at the Stiftung

Wissenschaft und Politik, he became Head of Division for general principles of EU economic policy at

the German Federal Foreign Office.

Oliver Krischer is a member of the Green Party in the German Bundestag. Born in 1969, Krischer joined the Green Party in 1989. After his studies in biology, he became a legislative assistant for the

former member of the German Bundestag, Michaele Hustedt, in 1997. Five years later he joined the

Green Party Parliamentary Group in the state of Northrhine-Westfalia to work as a senior adviser for

energy and agriculture. In the current parliamentary term, Mr. Krischer is the speaker for the parlia-

mentary group in the fields of energy and resource efficiency. He is a member of the Committee for

Environment, Conservation and Reactor Safety and a deputy member of the Committee for Economy

and Technology.

Susanne Langsdorf is a researcher at Ecologic Institute. She works on projects related to environmental

governance, energy security, renewable energy, and climate change. Before joining Ecologic Institute,

she worked as a project manager for the Friedrich Ebert Foundation Shanghai office, aand was in charge of

the climate and energy work of the office. Susanne Langsdorf obtained a Master’s degree in International

Relations from the FU Berlin, Humboldt-Universität zu Berlin, and the University of Potsdam.

Christine Lucha, M.Sc., is a Senior Fellow and member of the Legal Team at Ecologic Institute in Berlin, where she focuses on renewable energy law and climate protection policies. Her previous work

with Ecologic Institute concentrated on projects on the Renewable Energy Sources Act (Erneuerbare-

Energien-Gesetz (EEG)) and the implementation of the European Emissions Trading Directive. From

2007 until 2010 she worked as a lawyer and mediator for Clearingstelle EEG, an organisation estab-

lished in accordance with the Renewable Energy Sources Act and commissioned and funded by the

Federal Ministry for the Environment, Nature and Nuclear Safety. Following the focus of her Master's

degree in energy management, Christine Lucha takes a particularly great interest in answering the

SHORT BIOGRAPHIES OF AUTHORS, WORKING GROUP MEMBERS AND CONTRIBUTORS

55

legal, socio-political, technical and economic questions which relate to the further extension of renew-

able energies.

Sascha Müller-Kraenner is a founding partner of Ecologic Institute (Berlin, Brussels, Washington DC). He also serves as the executive director of The Nature Conservancy in Europe. Together with his

team, he is responsible for the Conservancy's relationship with European governments, foundations,

the corporate sector and NGOs. Sascha is also a member of the International Advisory Group of the

German government's International Climate Initiative (ICI); he serves on the Advisory Board of the

Berlin-Brandenburg Academy of Science's research group “Market-based instruments for ecosystem

services”; he is member of the Working Group on Global Issues of the German Council on Foreign

Relations and a regular contributor to the Council's journal "Internationale Politik"; he is a member of Naturschutzbund Deutschland (Birdlife Germany), and of the Indo-German Forum on International

Environmental Governance; he is also an Associate Fellow of the European Council on Foreign

Relations. Sascha studied Biology and Public Law at the University of Bayreuth and is a Yale University

World Fellow. He has published many papers on European and international energy, climate and envi-

ronmental policy issues. His latest book is "Energy Security" (2007).

Karsten Neuhoff leads the Department of Climate Policy at the German Institute for Economic Research (DIW Berlin). Previously he was senior research associate at the Faculty of Economics at the

University of Cambridge, leading projects on the future of UK power system, renewable integration

and technology policy and coordinating projects on the implementation of the European Emissions

Trading Scheme and North-South Climate Cooperation for the research network Climate Strategies

European. He holds a Diploma in Physics from the University of Heidelberg, an MSc in Economics from

the London School of Economics, and a PhD in Economics from the University of Cambridge.

Lutz Nothbaum has several years of experience in Corporate Social Responsibility (CSR), and is rep-

resenting DESERTEC Foundation in Belgium. He holds a Masters degree from the Aachen University

of Technology including studies abroad in Canterbury (UK) and Maastricht (NL). Lutz has previously

worked for the German-Dutch Chamber of Commerce in The Hague and the Research Institute for

international Technical and Economic cooperation in Aachen. He is a regular speaker at conferences

and seminars focusing on financial aspects and CSR.

Fabian Pause is a Senior Researcher for Stiftung Umweltenergierecht (Foundation for Environmental

Energy Law) in Würzburg, Germany. After studying law at the University of Würzburg and the

Universidad Autonoma de Madrid, he worked from 2003 to 2007 as a lawyer. In 2007, Fabian Pause

became Research Assistant at the Research Centre for Environmental Energy Law at the University of

Würzburg and completed his Masters studies in European Law. Since 2011, he has been vice-chairman

of the foundation board of Stiftung Umweltenergierecht. Fabian Pause is responsible for the area of

European environmental energy law and comparative law.

Raffaele Piria has 12 years experience in European energy policy. He has been policy advisor for the Green MEP Claude Turmes, policy officer at Euroheat & Power, and then Secretary General and

Vice-President of the European Solar Thermal Industry Federation. As such, he contributed to the

development of the European Renewable Energy Council. He now lives in Berlin, where he held execu-

tive positions at Solarpraxis and eclareon, and is currently Programme Director at the Smart Energy for

Europe Platform. Raffaele grew up in Italy, and studied in Milan, Berlin and London.

56 A EUROPEAn UnIOn FOR REnEWABLE EnERGy – POLICy OPtIOnS FOR BEttER GRIdS And SUPPORt SCHEMES

Dr. Mario Ragwitz is deputy head of the department Energy Policy and Energy Markets at the Fraunhofer-Institute for Systems and Innovation Research (ISI). He is also head of the business unit

of renewable energies at Fraunhofer ISI. He is responsible for developing and evaluating policies for

renewable energy and modelling energy systems with renewable sources focusing on the European

Union. He has coordinated more than 25 research projects on renewable energy policy development

at global, EU and national levels. Ragwitz also acted as an expert to the German Bundestag concerning

the revision of the German Renewable Energy Sources Act.

Gustav Resch, holds a degree in electrical engineering (Energy Technology) and a PhD in energy eco-

nomics. He is working as a senior researcher at the Energy Economics Group of Vienna University of

Technology. He joined the research group in 2000 and is currently leading a team dealing with policy-

related research in the area of energy policy and energy economics with a focus on renewable energy

technologies with expertise at the international level.

His fields of activity include techno-economic assessments of (renewable) energy technologies, design

and evaluation of energy policy strategies and energy modelling (focusing on policy interactions and

technology dynamics). He has contributed to several EU studies and policy assessments related to

renewable energies, assessing the feasibility and impacts of RES targets for 2020 and beyond.

Katja Rottmann is policy officer for power and grids at Germanwatch. She deals with electricity infrastructures in Germany and at the EU level and questions related to public acceptance of energy

infrastructure projects. Previously, she worked for five years in Brussels as head of the liaison office

of the Green parliamentary group in the German parliament. She has gained a broad experience in

energy and environmental policies working for different institutions such as the Worldwatch Institute

in Washington DC, Wuppertal Institut, the German Environment Ministry and Greenpeace Austria.

Katja holds an MA in European Studies.

Prof. Dr. Michaele Schreyer is Co-chair of the Supervisory Board of the Heinrich Böll Foundation. She

is an economist and teaches at the Free University of Berlin on European politics. Since 2006 she has

been Vice-President of the European Movement in Germany. In 1989/1990 she was Senator for Urban

Development and Environmental Protection of Berlin and from 1999 to 2004 she was a Member of the

European Commission.

Dr. Stephan Sina is Senior Fellow and member of the Legal Team at Ecologic Institute in Berlin. His

focus is on issues related to climate change and renewable energy. His recent projects include a report

on the transposition of the Renewable Energy Directive in the United Kingdom for the European

Commission and a report on the German Renewable Energy Action Plan for the Green Europe

Foundation. Before joining Ecologic, Stephan worked in a law firm on environmental and energy

law. He is a Specialist Lawyer in administrative law and a teacher of environmental law at the Berlin

Academy of Administration. He studied in Freiburg, Bonn, Heidelberg and Edinburgh.

Frauke Thies is Greenpeace’s EU Energy Policy Director. She has been working for the European Unit

of Greenpeace in Brussels since 2005, where she led her organisation’s activities on the 2009 Renewable

Energy Directive, the Strategic Energy Technology Plan, the development of the EU 2050 Vision for energy,

and other European initiatives on energy. Frauke has also spent several months in New Delhi, advising

Greenpeace India on renewable energy policy in India. In 2009, she was seconded to the Worldwatch

Institute in Washington D.C. for three months, where she worked as a research fellow on international

and US-American energy policy. Frauke holds a Masters degree in Environmental Sciences.

SHORT BIOGRAPHIES OF AUTHORS, WORKING GROUP MEMBERS AND CONTRIBUTORS

57

Dr. David Toke is Senior Lecturer at the University of Birmingham, UK. He has had over 40 papers

accepted for publication in refereed scientific journals and five books published. He has written numer-

ous influential reports for NGOs. His work, including a report published by the World Future Council,

proved to be a prime early influence (in 2007-2008) leading to the adoption of a system of feed-in tariffs

for smaller renewable energy projects in the UK. He has worked on various pan-EU initiatives includ-

ing a recent collaboration with the European Wind Energy Association on spatial planning for offshore

wind power.

Claude Turmes has been a Member of the European Parliament since 1999. In 2002, he became Vice

President of the Group of the Greens / European Free Alliance in the European Parliament. He is also

the Group’s coordinator on energy issues and co-initiator of the platform “Energy Intelligent Europe”.

Claude is a member of the Committee on Industry, Research and Energy and substitute member of

the Committee on Employment and Social Affairs. He was Rapporteur for the Directive on Renewable

Energy, and on the Liberalisation of the Energy Market and is currently Rapporteur for the Directive on

Energy Efficiency. Claude studied at the University of Louvain la Neuve, Belgium.

Franz Untersteller is Member of the State Parliament and Minister of the Environment, Climate Protection and the Energy Sector, Baden-Württemberg. Born on 4 April 1957 in Ensheim (Saarland),

he received a degree (Dipl. Ing.) from Nürtingen-Geislingen University, Department of Landscape

Planning in 1982. From 1981 he worked at the Öko-Institut (Institute for Applied Ecology), Freiburg.

In 1982 he received a Research Fellowship from the Carl Duisberg Society and participated in a project

of the Colombian Environment Ministry in the Cauca region. He is a member of the Green Party since

1983, and worked from 1983 to 2006 as adviser on environmental and energy policy for the green parlia-

mentary group in the Baden-Württemberg state parliament. He is member of the Baden-Württemberg

state parliament since 2006. Until 2011 he was deputy chairman of the green parliamentary group.

In May 2011 he was nominated as Minister of the Environment, Climate Protection and the Energy

Sector, Baden-Württemberg. He is member of the board of the Baden-Württemberg Foundation for

Development Cooperation (SEZ) and member of the Heinrich Böll Foundation.

Andreas Wagner is Managing Director of Stiftung OFFSHORE-WINDENERGIE, the German Offshore

Wind Energy Foundation. Before joining the Stiftung in May 2008, he worked in the wind industry for

the European branch of GE Wind Energy, based in Salzbergen, Germany. His functions included mar-

keting and communications, public affairs and business development. In the mid and late 1990s, Mr.

Wagner worked for several German wind energy associations. He started his professional career in the

early 1990s as Scientific Assistant in the German Parliament (for Dr. Herman Scheer, MP). Mr. Wagner

holds a degree of political science from the University of Innsbruck, Austria.

Claude Weinber, Secretary General of the Green European Foundation (GEF), was Director of the Heinrich Böll Stiftung (hbs) European Union office in Brussels from September 2001 until August 2012.

Previously, he was the Director of hbs Israel in Tel Aviv. From 1994 to 1997 he worked as a policy advisor

to a member of the German Bundestag for BÜNDNIS90/DIE GRÜNEN. Claude Weinber was executive

director of the Institute for Applied Environmental Research Katalyse e.V. in Cologne (1992-1994),and

coordinator of Ami(e)s de la Terre (CEAT-FoEE) in Brussels(1988-1991).

58 A EUROPEAn UnIOn FOR REnEWABLE EnERGy – POLICy OPtIOnS FOR BEttER GRIdS And SUPPORt SCHEMES

Paul Wilczek represents the European Wind Energy Association EWEA to an external audience on grid

and internal energy market issues. His main dossiers as EWEA’s senior regulatory affairs advisor are the

implementation of the 3rd Liberalisation Package, offshore and onshore grid development and elec-

tricity markets. Since 2005 he has worked on various EU policy topics in Berlin and Brussels, including

Structural Funds and EU Energy and Transport Policy. Paul obtained his Master’s degree of economics,

political science and public law from the Universities of Heidelberg and Potsdam.

es

chem

A EuropEAn union for

upport S

rEnEwAblE EnErgy –

nd S

ids a

policy options for bEttEr grids

etter Gr

And support schEmEs

or B

by sascha müller-Kraenner and susanne langsdorf

ptions f

The European Union needs a common vision for its energy future.

The Heinrich Böll Foundation commissioned a working group of

A shift towards renewable energy sources will increase the security

experts from politics, industry, applied science and civil society

olicy OP

of supply, foster the competitiveness of the European economy and

who have considered these challenges. As a result of a series of

facilitate sustainability. In order to convince governments, busi-

expert meetings, this report ‘A European Union for Renewable En-

nesses and European citizens to support this shift, it is necessary

ergy’ provides a collection of policy ideas for two key areas that

nergy –

to demonstrate the practical feasibility of the vision.

will define the future of renewable energy development in Europe:

grids, and support and remuneration schemes for renewables. The

able E

We are now at a critical point in time to accelerate the transition

report shall serve as a stepping stone on the path to our sustainable

to renewables in Europe and to make necessary investments and

and renewables-based future. At a moment of deep economic and

enewr

adjustments. Around two thirds of all power plants will have to be

institutional crisis in Europe, the vision of a ‘European Union for

or

replaced in the coming years. At the same time, large parts of the

Renewable Energy’ is a positive project to give the EU a new push

European transmission and distribution grid require modernisa-

for integration.

nion f

tion and are in need of reinvestment. With the phase-out of nuclear

u

power in several European countries, opportunities to replace

large quantities of nuclear energy with renewables are plentiful.

uropean

A E

heinrich-böll-stiftung, European Union, Brussels – 15 Rue d’Arlon – B-1050 Brussels – Belgium

t +32 2 743 41 00 f +32 2 743 41 09 E info@eu.boell.org w www.eu.boell.org

Table of Contents

Part One

Part two