Danish MEP: ‘Fight continues’ for renewable energy in Europe

The European Commission should update its economic modelling to reflect the real costs of renewables, which have fallen considerably, argues Danish MEP Jeppe Kofod. [© European Union 2017 - Source : EP]

The 32% renewable energy objective for 2030 agreed at the EU level in June was a good result, says Jeppe Kofod, but it’s still insufficient to live up to the Paris accord, he told EURACTIV in an interview, setting out the agenda for clean energy battles in the years ahead.

Jeppe Kofod is a Danish Member of the European Parliament and Vice-Chair of the Socialist and Democrats (S&D) group. On 20 June, he was appointed acting president of the European Forum for Renewable Energy Sources (EUFORES) after his predecessor, MEP Claude Turmes, was appointed to a ministerial position in Luxembourg. Kofod spoke to EURACTIV’s energy and environment editor, Frédéric Simon.

INTERVIEW HIGHLIGHTS:

  • EU should update its economic modelling to reflect falling costs of renewables as well as the cost of non-action on climate change
  • Upcoming Baltic Sea manifesto will help further the energy transition in Poland
  • Priority dispatch for renewables is the single most important issue in the upcoming market design reform
  • Much stronger ACER needed to create a real market for energy across borders

***

What was your impression when the deal was struck on the Renewable Energy Directive last June? The 32% objective is higher than the 27% target initially tabled by the Commission so I suppose you must have been happy?

I was happy to see that we managed to move the target up quite a bit, despite resistance in the Council. That was good. But I wouldn’t hide that, if I see the challenge we have in our climate policy to live up to the Paris accord, I think we should have done much more.

So 35% or even more than that?

35% at least. If you look at the technology aspect, renewables are much cheaper to produce today than when the Commission tabled its proposal [in November 2016]. Wind turbines are more efficient, they run longer and produce more electricity than before. So not only do the costs come down but at the same time, the quality and the efficiency of renewables increases drastically.

This is why I think we should have done more. But given the political context and the reluctance of the Council, I think it was a good result. So I’m proud but I’m not satisfied.

That said, the fight continues. There is a review clause in the directive, and on top of that when the EU looks at its mid-century strategy, the Commission needs to review the modelling that it is using, to update it so that it reflects the real costs of renewables, which are much lower than before, as well as the efficiency, which has improved.

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Looking back at the 32% deal, what are the strengths and weaknesses of the agreed directive?

The binding 32% target and the review clause – that’s good. And also the fact that we have a deal – this is important on a political level as a way to push the Council, which has been reluctant.

But I don’t understand why we don’t update our models. Today, it’s cheaper to build a new offshore wind farm than a coal power plant. We know that. So I don’t understand why the Commission’s models don’t reflect this.

The Commission did something exceptional when it updated the figures in its own impact assessment, right in the middle of the negotiation process, which is quite unusual…

Yes, but they were under huge pressure because the numbers had changed so much. In Denmark, for instance, the price of electricity dropped considerably because of offshore wind. So the Commission had to update its old figures and reflect the real costs of renewables.

Should the Commission do that on a regular basis? Costs are falling so fast, it’s becoming hard for policymakers to keep up…

Yes, but not just for the Commission. Member states in the Council keep complaining that the costs of renewables are too high. But when the cost-benefit analysis is based on figures that are not accurate, then of course it looks more expensive. That’s wrong, so we need to update those figures more frequently.

And we need a much stronger policy for a just transition, helping to get out of fossil fuels and into renewables, especially in regions with traditional energy industries. There, we need policies at European level.

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There is the platform for coal regions in transition which was launched by the European Commission in December last year.

Yes, it’s a good, concrete initiative that needs to be followed up. And I think we should put more money into this, frankly speaking. Because some of the reluctance in the Council is coming from those very countries which are very reliant on coal.

…which is understandable when you see that Poland relies on coal for more than 80% of their electricity.

They need a real strategy with a sequencing to see themselves out of the coal dependency that they have. And they need real solidarity from the rest of the EU. We cannot look at the renewable energy directive in isolation, we need to look at other related policies such as interconnectors, market design, etc. We need a truly integrated union where energy doesn’t stop at borders and flows freely.

When it comes to a country like Poland, they are already heavily integrated, they have created a lot of jobs in the renewable industry. And we need to further facilitate that, for example by showing how offshore wind in the Baltic Sea can help further the energy transition in Poland.

You mentioned solidarity for Poland and other coal-dependent countries. But the scale of the transformation there can be huge and could involve substantial financial transfers from countries like Denmark for example. Is that acceptable politically?

It depends what types of transfers you’re talking about. Part of it should be public money, for example, the InvestEU programme, to fund renewables.

But the bulk of it should come from private money. If you put the right design around investments and give the right incentives such as labelling for sustainable investment – if think that will help a lot of countries like Poland.

And yes, a country like Denmark will have to invest some public money. But in return, you get to harvest the benefits.

So what could be the benefits for Denmark? New business for companies like Vestas, for example?

Yes, very much so. In my country, we have a legacy of state-run funds which were put in place in the 1990s under social democratic governments. That initially involved big amounts of money but they proved to be good business for Denmark. So it’s a short-term investment but a long-term benefit.

Isn’t the EU Single Market sufficient to guarantee investments? There are supposedly no borders for investors in Europe so a Danish company like Vestas is free to invest in Poland.

Yes, but we should still create the right conditions. For example in the North Sea, we agreed years ahead that we wanted an integrated electricity grid and we designed a framework for that. And investors said ‘Wow, that’s interesting!’ There was a political commitment and a detailed plan for 2030, which created the right conditions for investment.

And EU money can help getting started?

Exactly. There are a lot of initiatives coming together now – the InvestEU programme, or the initiative on labelling of sustainable investments that could help a lot. And I know they would be perfectly happy to invest if the framework was right.

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To conclude on the renewables directive, when will be the next opportunity to strengthen the 32% target at the EU level?

We have the review clause in 2023. So five years ahead, we’ll need to take stock of the technology developments, the real cost evolution, and the climate commitments under the Paris Agreement. And the review can only go upwards – that’s important.

So I’m optimistic because I think we will see exponential growth, with the technology beginning to take off more rapidly than we had imagined. The linear thinking that we are sometimes locked into is just not suitable for renewables.

And there could be other breakthroughs, for example in the transportation sector. So I think we’ll have an opportunity to beef up the target.

The next big EU policy initiative coming up for a potential final agreement this year is the new market design for electricity. What are the main issues you will be watching?

Priority dispatch for renewables is the single most important issue. And the regional integration of markets. We need this cross-border market integration to show that we can trust each other and remove artificial barriers or bottlenecks to transfers of energy.

And the Nordic model for electricity is a perfect example that it works: when you integrate more, the prices come down, the share of renewables goes up, and security of supply is maintained but at a much lower cost.

That implies building new infrastructure, right?

New infrastructure, yes. But also making real use of the current infrastructure because TSOs can decide to block access to their network. Sometimes this is done based on the legitimate security of supply concerns. But at other times, they are simply protecting their national market.

And therefore, in the market design, we need stronger regulation that will create a real market for energy across borders. We’re talking about the EU single market but we still don’t have a real single market for energy.  And that seems crazy to me.

We also see that national regulators sometimes work against the common European interest. So we need to have a stronger ACER to ensure they cannot do that, to put limits on what national regulators can block. We need to build trust between member states in this regard. And I believe very much in regional initiatives to do that, as I said. Of course, we should have a European perspective but at the same time, we have to recognise that we also need a step-by-step approach because countries need to trust each other more.

Regional centres for electricity trading already exist. So what’s missing?

A much stronger ACER, to put it shortly. And a stronger market surveillance system at European level. We need to be much clearer on what the obstacles are so we can remove them. And when it comes to renewables, we need to be able to prioritise some forms of energies over others, through priority dispatch. If we don’t, then we will end up being locked up into old fossil fuels, which is among the concerns I have.

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As part of the market design reform, changes are also being made to so-called capacity mechanisms for electricity. These have often been portrayed as subsidies for coal or gas-fired power plants that would otherwise not be profitable because they provide only back-up capacity on an intermittent basis. Is that the way you see it or is that a caricature?

No, I think it’s true to a large extent. In Denmark, we had the same discussion years ago. If we have a well-integrated market, there are many technological solutions that can help us eliminate the need for capacity mechanisms – demand-side management, energy storage, etc.

To be frank, sometimes I think it’s the old energy industry trying to maintain some plants running and get some of their costs covered.

Is there something in the capacity market reform that could further encourage renewables?

The first is to totally get rid of bottlenecks between borders and within countries. Secondly, to look at the capacity that each and every user can provide to the grid – for example, an electric car that can bring capacity at night when it’s standing in the garage.

And we also need to look at battery technologies. My concern there is that China is moving into this market like they did with solar PV. What the EU should do is to invest not only in battery production capacity but sustainable batteries that can be dismantled and re-used. So there is a lot to do but I think we can do it.

More complex, we should try to aim for a system-wide approach. In some countries, we see great success with district heating systems where you can integrate electricity – heat pumps, water storage, etc. If we produce a lot of wind, in the future we can also turn that into a fuel – hydrogen.

So there are a lot of things that we can do but we need an overall strategy to do that. And there, I don’t believe in the need for huge capacity markets based on old types of fossil fuel power plants standing there as a reserve.

You think capacity mechanisms should be completely eliminated over time?

Yes.

When is a realistic date for that?

That’s a good question. But like I said, technology is helping us, an integrated systems approach is helping us, and also using capacity provided by consumers – households or industry.

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In the electricity market design discussion, concerns have been raised about small-scale solar PV producers being told to respect the same kind of market rules and obligations as big energy utilities. Is that an issue that you consider now solved?

It’s still on the table right now and it’s an issue I will be watching for. The energy union should be owned by the citizens. So if someone wants to put solar PV on their roof and want to be part of the energy transition, they should be able to do it without too many obstacles.

I understand the value of large-scale – also renewable – energy production. But that should go hand-in-hand with local energy production, which is generally more efficient. So I think we should have both.

At the same time, we need ownership. The climate-consciousness of people is growing rapidly, which is good. And we need to give people the incentives to act on a small scale.

Your predecessor as EUFORES President was Claude Turmes. What was his biggest achievement in your view?

His biggest achievement was that he stood up against the old fossil fuel industry. He showed to the world and to other Members of the European Parliament that there is a future in renewables and energy efficiency in a way that benefits society, and brings jobs to the economy.

The green energy technology sector in Europe now employs around 8-9 million people. So he showed that the transition is possible. And that we can have a long-term vision to totally change our energy system, going step-by-step.

Part of his legacy is that he also managed to create a community around EUFORES – electricity producers from wind to solar, research institutions, universities, but also cities, regions and local governments. He managed to bring people around our objective to change the whole energy system and push forward Europe’s climate policy.

We have MEPs from all major political families as well as national MPs. And we do national workshops with people working on energy policy in all of the member states’ parliaments, transposing our objectives and EU directives into national politics. And that’s something nobody else is doing.

What will be your priority as the new president of Eufores?

We will go in the election cycle very soon. Until then, our big priority will be the Baltic Sea manifesto to show how offshore wind can bring clean electricity to the countries around the Baltic, including Poland and the Visegrad Four countries. We want to help these countries work together and share their technology and experience. Then, there are concrete files like electricity market design.

What’s next after that?

Next is the European Commission’s strategy for long-term EU greenhouse gas emissions reductions.

And there, I would say two things. First, the modelling of the Commission should be accurate, like I explained earlier.

But I also want the Commission to calculate the cost of non-action. Too often, the political debate is focused on the short-term cost of climate action. But what is the cost of non-action? What is the cost to society if temperatures rise above 2°C? That is the kind of calculation I’d like to see. And that fits well with the mid-century strategy.

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