By Gabriela Cretu, Electricity Expert, Energy Community Secretariat, Vienna
In convergence with the European policy on climate and energy, the Energy Community Contracting Parties agreed in 2012 to implement the Renewable Energy Directive and committed to binding national targets to be achieved through the use of renewable energy in the electricity, heating and cooling, and transport sectors by 2020. The rationale was to develop the contracting parties’ significant renewable energy potential, whilst bringing environmental benefits, reducing dependence on energy imports and creating the premises for growth and sustainable development of their economies.
In general, the contracting parties will have to increase their share of energy from renewable sources in gross final energy consumption by approximately 6% by 2020 compared with their share of renewable energy in 2009. In this context, the evolution of final energy consumption to 2020 plays a significant role. And here, the greatest ally, energy efficiency, is instrumental for reaching the 2020 targets with decreased effort.
So the countries embarked on a journey to create the legal and regulatory frameworks for renewable energy to support the attainment of these objectives, following the principles of European Union’s Renewable Energy Directive.
The Secretariat of the Energy Community submitted the first progress report on the promotion of energy from renewable sources to the Ministerial Council in October of this year. The report drew its conclusions based on the assessment of individual contracting parties’ biennial reports submitted at the end of 2014 and data from official energy statistics. The assessment revealed that Moldova, Serbia and Kosovo* ( were not on track to achieve the first interim targets in 2011-12. Moreover, all contracting parties except Montenegro are, in general, not on track to meet the 2020 targets when considering existing and planned policy measures as announced in their national plans. Montenegro has reached the interim trajectory and it will probably be the only contracting party to reach the 2020 target, due to revised biomass data rather than investments in new capacities. The outcome of the progress report should serve as an alarm bell for those contracting parties at risk of missing their renewables targets.
* This designation is without prejudice to positions on status, and is in line with UNSCR 1244 and the ICJ Opinion on the Kosovo declaration of independence.
Figure 1: The median shares of renewable energy sources in 2011/12 with and without the modified biomass data of the gross final energy consumption for all contracting parties compared to the 2011/12 indicative trajectory in the Renewable Energy Directive and the 2020 renewables target. (Eurostat 2015; IEA 2015, Renewable Energy Directive 2009/28/EC, as adapted)
And what can be done?
One might argue that renewable energy is for rich countries and that it is not the proper time now due to the high cost of technologies and the persistence of the economic crisis in the contracting parties. On the contrary! Investments in renewable energy and energy efficiency contribute to growth and job creation. But we need to create a level playing field in which the most mature technologies and best projects come online first. This is important for minimising the impact on the electricity price for the final customers. The contracting parties have a very good renewable energy potential for hydropower, wind or solar and biomass used for heating that could be deployed cost-effectively. Moreover, to impose control of the annual funding for support granted to renewable energy projects while being on track to achieve the policy objectives makes complete sense.
Furthermore, the cost of renewable energy technologies has dropped significantly in the last years. The contracting parties can benefit from the cost reductions due to the learning curve effect and from experiences – positive or less positive – gained by the EU member states on the pathway towards reaching their 2020 targets.
Despite sufficient support for renewable energy in place which are still needed to remedy market failures, it is the uncoordinated, lengthy and sometimes not so transparent administrative procedures for authorisation, permitting and access to the grids which are the main barriers to a higher uptake of renewable energy. These barriers increase the market risks and thus the capital cost, making projects difficult to finance.
It is equally critical to lower the risks for prospective investors to invest in the contracting parties by improving transparency, predictability and coherence of the administrative procedures and regulatory frameworks while exposing renewable energy producers to market signals.
The need to integrate renewables into the market is the new rule of the game. The preference for the feed-in premium over any other form of operational aid will prevail. Furthermore, granting the support for promotion of renewable energy will only be possible through a competitive procedure helping to drive down the cost of reaching the 2020 renewable energy targets. Only in this context, the policy objectives could be achieved and, in the same time, obtain public acceptance for the additionality needed to be paid by the end-customers to support the promotion of renewable energy.
On the other side, we also need the market to integrate renewables. Electricity markets are declared open in legislation. De facto, transparent and competitive platforms for day-ahead or intra-day trading do not exist yet to facilitate a support scheme based on a feed-in premium, where the producers sell the electricity into the market and get the premium on top of the electricity price. The renewable energy producers will be required to take balance responsibility gradually, but for this, a non-discriminatory balance settlement mechanism has to be introduced in all contracting parties and exemption from balance responsibility abolished for all market participants.
Therefore the complete, real liberalisation of the electricity market where the market price is competitively formed and transferred to end-customers – implying removal of price regulation on generation and supply – is vital to create a level playing field where renewables can further integrate and be exposed to undistorted price signals.
The principle of non-discrimination which is key in any market needs to be embedded in the tenders for granting the support, the market rules and the access to networks for all participants. In a broader sense liberalisation is also about democratisation, isn’t it?
All these are the key principles that would need to be respected and implemented by the energy policy makers, regulators and incumbent companies in order to ensure that the energy system can cope with higher uptake of renewable energy in the future.This way the contracting parties could properly embark on the path towards sustainable development of their energy sectors while meeting the climate and energy objectives in the most cost-effective way for the benefit of all citizens.