The EU Commission has this week published a communique titled Delivering the internal electricity market and making the most of public intervention that seeks to outline a set of guidance objectives for securing the EUs internal electricity market with solar power at the forefront.
In response to the Commissions guidance package, the European Photovoltaic Industry Association (EPIA) has welcomed the proposals, but also highlighted the communiques lack of consideration for small-scale solar installations.
The aim of the Commission’s communique is to provide support and guidance for EU Member States as they lay out their plans to meet the EU’s 2020 energy efficiency targets, which dictate that all EU countries must achieve a 20% reduction in greenhouse gas emissions, a 20% share of renewable energy generation, and a 20% increase in energy efficiency.
To help Member States achieve this, the Commission believes that state and public intervention in the supply of electricity is not only imperative, but inevitable. In preparation for a more internalized energy market across the EU, the Commission created its guidance package, which revolves around four main concerns:
· The creation of renewable energy support schemes
· The use of renewable energy cooperation mechanisms
· The actions aimed at ensuring generation adequacy
· The incorporation of demand-side flexibility and secure back-up capacity
Predicated on the notion that poorly designed public interventions in energy systems can distort the functions of the market and possibly lead to higher electricity prices, EU Energy Commissioner Gunther Oettinger said: "The ultimate aim of the market is to deliver secure and affordable energy for our citizens and business. Public intervention must support these objectives. It needs to be cost-effective and be adapted to changing circumstances."
The guidelines state that renewable energy support schemes such as the successful FIT schemes in place in numerous European solar markets must be "limited to what is necessary and should help make renewables competitive." The communique adds that such schemes should be flexible enough to adapt to market conditions, responding to falling market prices and possess the capacity to be fully removed once no longer financially viable.
Better planning, coordination and back-up
The Commission’s guidelines keenly press home the importance good planning should play in the creation and design of public intervention initiatives. Governments, they say, must avoid "unannounced or retroactive scheme changes", with decision-makers urged to bear investors’ legitimate expectations of return in mind. Member States throughout the EU should also better coordinate their renewable energy strategies, the report adds, in order to keep costs both low and stable throughout the continent.
Back-up sources of power must also be carefully managed: Member States should not eschew all reliance on fossil fuel-based power sources, but instead oversee a flexible back-up source of coal and gas power plants that can take up the slack when the sun isn’t shining or the wind isn’t blowing.
Importantly, however, the Commission stresses that such back-up schemes should not undermine renewable energy programs, adding that governments should first "analyze the causes for inadequate [renewable] generation" and "remove any distortions that may prevent the market from delivering the right incentives for investment in renewable energy."
Finally, the communique adds that Member States should plan their back-up policies from a European perspective, rather than focusing only on their own national market, adding that governments should ensure that renewable energy producers promote flexibility on the demand side, providing different tariffs to consumers that incentivize them to use electricity at times other than peak hours.
EPIA backs proposals, calls for more small-scale thinking
The EPIA has welcomed the Commissions proposals on the whole, issuing a press briefing remarking that such guidelines can only help Member States deploy renewables in a more cost-effective and flexible manner. However, the association also believes that the proposals overlook the importance that smaller installations particularly solar will play in the EUs future energy mix.
"The proposed set of parameters for a transparent and predictable adjustment of support levels presents a welcome approach towards making support for renewable energy both dynamic and cost-effective," said EPIA policy director, Frauke Thies.
However, despite calls for more market-based support mechanisms, Thies believes that existing market imperfections need to be ironed-out before these schemes can be fully effective. "We look forward to the moment when PV electricity can be traded adequately on the electricity market, but a number of barriers are standing in the way," she said.
"The European Commission should put the focus first on the fundamental adjustment of market rules to allow renewables a fair access. Until that has happened, requesting responsiveness from renewables would be putting the cart before the horse."
The Commission’s guidelines were also criticized for their apparent refusal to consider the opportunities that exist in the residential and small-scale, self-consumption PV market. "While the Commission proposes a trajectory for large-scale renewable energy installations," added Thies, "unfortunately it neglects important opportunities for smaller installations: The use of self-consumption of solar electricity will become an increasingly important driver to reduce and replace the dependence on dedicated support policies. Proposals to trigger the deployment of self-consumption, however, are markedly absent from the guidance documents."
The Commission’s communique is not a legally binding act, but the chief principles it proposes will be used as official criteria when the Commission assesses state interventions relating to renewable energy support schemes, measures introduced to ensure customer demand is met, and back-up capacity mechanisms. Hence, these proposals will become relevant to all future EU energy legislation policies and enforcements of EU state aid.
You can read the full guidance proposal here.