Power Proposal

Renewables Headwind for E.U. Energy Plan

  • Why it matters

    Why it matters

    Relying on markets over mandates, the proposals align with Commission President Jean-Claude Juncker’s vision for a pan-European “energy union” as well as the European Union’s commitments to the Paris accord.

  • Facts

    Facts

    • The proposals call for boosting the bloc’s renewable energy target to at least 27 percent of the total E.U. energy mix by 2030, while achieving 30 percent energy savings by the same time.
    • The German government is concerned that national power grid operators may have to give up too much control to regional operators.
    • Climate advocates have criticized the legislation as extending a lifeline to fossil fuel power plants – a claim Commissioner Arias Cañeta rejected.
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    Audio

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Energiekonzern Eon
The proposals align with European Commission President Jean-Claude Juncker’s vision for a pan-European “energy union” and the E.U.’s commitments to the Paris climate agreement. Photo: dpa

Sitting in his office in Brussels, E.U. Commissioner for climate action and energy Miguel Arias Cañeta is so visibly energized his legs are in perpetual motion under his glass desk.

The reason: Today, Mr. Arias Cañeta will present a 1,000-page plan to decarbonize and create a coherent single European energy market from a patchwork of 28 national industries.

Mr. Cañeta has good reason to be nervous. A key part of his proposal would expand the renewable energy sector but treat its members just like conventional utilities that burn coal or split atoms. Eliminating subsidies for alternative energy makers faces an uphill battle in countries like Germany.

“The package is quite simple and follows three main principles: energy efficiency throughout the sector, making the European Union the number one leader in renewables in the world, and ensuring a fair deal for consumers in energy production and consumption,” the commissioner said in an interview with Handelsblatt.

His proposal calls for boosting the 28-nation bloc’s renewable energy target to at least 27 percent of the total E.U. energy mix by 2030 – compared to a 2020 goal of 20 percent – while achieving 30-percent energy savings by the same time.

 

“We want competition in the market. Individual consumers need two things: lower bills for the energy they consume and to be able to produce their own energy and be active in the market.”

Miguel Arias Cañeta, E.U. commissioner for climate action and energy

 

Currently, the European Union is on pace to reach only 24 percent renewable energy by 2030, according to the commissioner.

“We will propose that governments review and tighten their national climate plans, as appropriate,” he said.

The proposals align with European Commission President Jean-Claude Juncker’s vision for a pan-European “energy union” as well as the European Union’s commitments to the Paris climate agreement, which entered into force earlier this month.

As part of the global climate pact, the E.U. has pledged to slash greenhouse gas emissions at least 40 percent by 2030, which will require large-scale investments into clean sources of energy.

 

EU Climate Action and Energy Commissioner Canete addresses a news conference in Brussels
E.U. Commissioner for climate action and energy Miguel Arias Cañeta says the proposals will invigorate European economic growth. Photo: Reuters

 

“We need huge investments in the energy infrastructure,” Mr. Arias Cañete said, adding that the E.U. needs €379 billion ($404 billion) in annual investments to meet its 2030 targets.

The climate action commissioner anticipates that meeting those goals would accelerate economic growth in Europe and create up to 900,000 new jobs.

The measures will also save money for average households and large energy consumers, he said.

“We want competition in the market. Individual consumers need two things: lower bills for the energy they consume and to be able to produce their own energy and be active in the market,” he said.

The European Council – made up of the heads of the 28 E.U. member states – and the European Parliament will discuss the individual measures in coming months and request amendments. All three bodies must approve the legislation for it to become law.

But even ahead of the proposed law’s official release, some member states have voiced considerable concern.

 

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Germany’s right-left coalition government, for instance, has rejected a bid to transfer some functions of power grid management from national to transnational operators.

But Mr. Cañete said such concerns were based on misunderstandings of what the commission is proposing.

The regional grid operation centers would support the national transmission system operators by helping to calculate regional transmission capacity and planning, he explained, as well as analyzing risks to grid security, he said.

“None of these functions entail real-time operation of the transmission systems,” he added, explaining that this would remain the responsibility of the respective operators.

Structurally integrating the operation of Europe’s electric grids would be much more efficient and save money, he said.

Better coordination of grid operations, he estimated, could cut the cost of dealing with supply constraints from €350 million per year to just €70 million.

But the most contentious part of the legislation is the way in which it seeks to support the expansion of renewable energy – namely, by relying more on market signals than on government-guaranteed production.

Under the commission’s new proposal, renewable energy generators would retain their current priority status only when network operators curtail supply from conventional power plants because of overproduction.

The reason for the proposed change, according to Mr. Arias Cañete, is that wind and solar power plants have long become cost-competitive with their conventional counterparts and no longer require preferential treatment.

Renewable energy incentives function best, he said, when they are “market-based” and avoided excessive subsidization, but were stable enough to protect investments.

Retroactive changes to incentive conditions should be avoided, he added.

Therefore, existing renewable energy power plants benefiting from priority status through Germany’s guaranteed payments for production fed into the grid, for instance, would not be affected by the legislation.

The same would not apply to new projects, however.

Climate advocates are critical of the proposals, which they view as extending a lifeline to coal and national gas power plants in the “capacity reserve” market, where they ramp up when intermittent wind and solar facilities are not operating.

“Capacity markets threaten the energy transition, because they keep old, fossil power plants alive artificially,” cautioned Martina Werner, a German Social Democrat and member of the European Parliament.

Mr. Arias Cañete disagreed, noting that the commission is proposing a cap on carbon emissions from capacity reserve generators of 550 grams per kilowatt-hour.

He said it would be “illogical” for the executive body of the European Union to seek support climate-polluting power plants given its goal of reducing emissions.

 

Till Hoppe reports on politics for Handelsblatt with a focus on defense, domestic policy and cyber issues. To contact the author: hoppe@handelsblatt.com

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