Solar growth ‘threatened’ by new EU power market rules

The European Commission promised to put consumers in the driving seat of the energy revolution, saying “consumers and communities will be empowered to actively participate in the electricity market and generate their own electricity, consume it or sell it back to the market.” [Tom Jutte / Flickr]

EXCLUSIVE / Households, schools and hospitals that decide to place solar panels on their rooftop could be exposed to the same responsibilities as big energy utilities under new EU electricity market rules currently being drafted in the European Parliament, EURACTIV.com has learned.

A “big fight” is currently taking place in Parliament about whether small renewable energy installations should enjoy so-called “priority dispatch” to the electricity grid and be exempted from grid balancing responsibilities.

Krišjānis Kariņš (EPP), a Latvian lawmaker who is in charge of drafting the European Parliament’s position on the EU’s proposed electricity market design directive, is facing mounting pressure from angry small-scale renewable energy producers.

In proposals unveiled over a year ago, the European Commission promised to put consumers in the driving seat of the energy revolution, saying “consumers and communities will be empowered to actively participate in the electricity market and generate their own electricity, consume it or sell it back to the market”.

EU champions ‘people power’ but devil lies in the detail

The European Commission’s Winter Package of energy proposals, unveiled yesterday (30 November), is set to boost household and local power generation, but obstacles remain.

But the draft report by Kariņš literally turns this principle on its head by exposing small-scale renewable energy installation to the same rules as big electricity utilities, EURACTIV has learned.

“There is a big difference between small scale renewables and local energy communities and huge utility-owned renewable energy projects,” said Sebastian Mang, energy policy adviser at Greenpeace EU.

Failing to distinguish the two would “go against the EU’s stated aim to empowering energy consumers,” he warned.

The warning is echoed by SolarPower Europe, a trade association.

“Today, a level playing field does not exist between a state utility with massive solar farms and a local farmer with a rooftop solar system,” said Aurélie Beauvais, policy director at the association.

For small renewable energy producers like hospitals, farmers, and schools, whose main activity is not related to power production, the “administrative and financial burdens will certainly act as a strong disincentive to engage in renewable energy production,” she said.

Contacted by EURACTIV, the office of Kariņš declined comment, saying the final texts of the electricity market design directive and regulation were still under negotiation.

However, a draft of his report obtained by EURACTIV confirms the fears expressed by Greenpeace and SolarPower Europe. Most articles related to exemptions for small-scale renewable energy producers and high-efficiency co-generation facilities were simply deleted from the text.

“Providing exemptions to some market participants means discriminating against others, which fundamentally undermines the market structure, increases the costs to consumers and creates uncertainty for investors,” reads a ‘justification’ paragraph in the draft report.

Political group representatives in the European Parliament are meeting on Tuesday (6 February) to try and hammer out a compromise text ahead of a vote in the Parliament’s industry committee on 21 February. A plenary vote is expected to take place in the coming months, opening the door to final negotiations with EU member states.

“Lowering the bar even further”

However, small renewable energy producers have little to hope from the Council of the EU, which represents the 28 member states.

During a fractious meeting in December, EU energy ministers took little interest in the issue, spending most of their time haggling over the phase-out of subsidies for coal and gas-fired power plants.

Eluding talks on the issue, they let each country decide whether to expose small-scale renewables to the market or maintain exemptions.

People power? EU gets low marks on ‘energy communities’

When the European Commission tabled its Winter Package of clean energy laws in November 2016, there was a smell of revolution in the air, with Brussels pitching a future where citizens would be empowered to generate their own electricity, consume it locally and sell it back to the grid.

This is seen as the lowest common denominator by SolarPower Europe, which expected the Parliament to take a more assertive stance when it comes to protecting small-scale renewable energy producers.

But the draft text currently discussed in Parliament is even worse than what EU member states came up with, Beauvais warned.

“We had faith that the European Parliament would counter the Council’s position, but the latest report of Market Design rapporteur Kariņš risks lowering the bar even further and threatens to expose small installations to disproportionate market forces,” said Aurélie Beauvais.

The most supportive countries were France and Greece, SolarPower Europe says. And while Germany could have been a strong supporter for small-scale renewables, the government has been more preoccupied with the election aftermath and has tended to concentrate on other issues, like “capacity mechanisms” for gas and coal-fired power plants, as well as the delimitation of bidding zones for electricity.

Political intrigue casts shadow over EU's latest Energy Council

When EU ministers gathered in Brussels on Monday (18 December) to hammer out an agreement over a set of clean energy laws, the elephant in the room was a proposal from the European Commission to cap subsidies going to coal-fired power plants.

Priority dispatch and balancing responsibility

Small renewable producers are heavily reliant on service providers such as aggregators which can take care of grid balancing obligations for them and help manage the variable influx of green electricity coming into the power networks.

However, “in many countries, there are no or few balancing services providers,” Beauvais explained, saying the distribution grid – especially in eastern EU countries – would first need upgrading to better manage decentralised energy flows.

This can result in hefty prices for consumers generating their own electricity. In Bulgaria for instance, balancing costs for small renewable producers reached up to 12% of the feed-in-tariff when the country decided to abruptly remove the exemptions on balancing responsibilities.

The issue of “critical size” is also essential for priority dispatch of green electricity to the grid, Beauvais pointed out, saying “costly and heavy administrative requirements continue to be a prerequisite for trading electricity on the market,” acting as a disincentive for small producers. The Kariņš report calls for phasing out such favourable terms:

Amendment 39 in the Karins report, calling for the phase out of priority dispatch rules for small-scale renewables.

At the end of the day, SolarPower Europe warns this will have a negative impact on local communities, depriving them of cheap electricity and qualified jobs.

“The EPP and ALDE group have been very silent on small installations,” Beauvais said referring to discussions in the European Parliament with the centre-right European People’s Party (EPP) and Alliance of Liberals and Democrats for Europe (ALDE).

“This risks killing a business model which will be extremely beneficial for an efficient and cost-effective energy transition in Europe, the empowerment of energy consumers, as well as the social and economic dynamism of local communities,” she said, referring to a study by EY, which showed roof-top PV installations had the potential to provide three times more jobs than ground-mounted solar plants.

Study maps potential of ‘energy citizens’ in push for renewable power

Half of EU citizens – including local communities, schools and hospitals – could be producing their own renewable electricity by 2050, meeting 45% of the EU’s energy demand, according to new research published on Monday (26 September).

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