The Commission’s use of an existing mechanism for trading renewable energy based on guarantee of origin certificates is inappropriate for the purposes of promoting renewables use in the EU, according to MEP Claude Turmes. He spoke with EURACTIV in an interview.
Claude Turmes is a Green MEP from Luxembourg. He is Parliament’s rapporteur on a 23 January Commission proposal for a directive on renewable energy.
You are the Parliament’s rapporteur on the Commission’s proposed Renewable Energies Directive. How are the discussions proceeding?
In general, the Commission has done good work in terms of target setting, the issue of access to the grid, cutting red tape and also highlighting the issue of heating and cooling.
I see two weak points. First, this guarantees of origin (GO) ‘pancaking’, so giving three functions to something which existed only as disclosure. This is really a huge problem as it is creating a lot of legal uncertainty and also investment insecurity.
So one of the issues I have concentrated on it to solve this issue of flexibility [in GO trading] but without legal problems.
The second issue is of course agrofuels and sustainability criteria.
Could you expand on this notion of ‘pancaking’ guarantees of origin?
What the Commission did was hijack an existing instrument.
The GO concept was created in the 2001 Renewable Electricity Directive, and then followed up in the 2003 Internal Market Directive on Electricity in the part dealing with labeling for the purposes of what is called disclosure.
Disclosure means proving what you sell to the consumer, because in the internal market directive you have to be specific about your energy mix. So the ‘green’ electricity has to be registered or certified. You also have green energy labels, and for that these GOs existed already.
So the Commission took this instrument and they added a second function to it whereby if a government gives its support, there can be GO trade between different governments or companies.
And then they added a third function of target accounting, whereby the GO certificates can be used towards the targets.
The legal problem here is that, in article eight of the proposed directive, the Commission creates a new good: the tradable certificate. And then in article nine, in order to protect the national support schemes, the Commission suggests that you can limit this trade.
A lot of lawyers tell us that this construction will never stand in the European Court of Justice (ECJ), because an investor could say this is contrary to article 28 and 30 [EC Treaties] relating to the free movement of goods.
Why do you think the Commission set up the system in this way?
There was a big ideological fight within the Commission between those who wanted to destroy the national support schemes and move in one big bang to a European certificate model and others in the Commission – and also certain governments like Spain and Germany (who are the success stories in Europe) – told the Commission “we will not accept this”.
This ideological battle was only settled at the very last moment, one week before the proposal came out, and then the proposal was put together in a hurry. This explains why there is no legal explanation by the Commission on its own construction and why this was badly done.
So the division on this was within the Commission and not so much between member states?
At the beginning it was mostly Germany and Spain who were afraid and tried to influence the Commission’s decision, but today most governments are extremely sceptical.
So at the beginning it was mostly feed-in countries, but now the UK, the Netherlands and even the Swedish see that the biggest trouble for the directive is legal uncertainty for the national support schemes, and that would have as an immediate consequence an impact on investor security.
There will be flexibility, but the vast bulk of the efforts will be national efforts. Trade will, at the end of the day, make 10% to 15% of the effort that is needed. But what the Commission has done is to create an instrument that might function for this small percentage of trade, while destroying the other 85% of efforts.
Do you see broad agreement on this within the Parliament?
I have started to discuss this. We’ve had two workshops. The three shadow rapporteurs – Thomsen, Hall but also Langen – all see the point on legal uncertainty and agreed that we as Parliament have to bring legal certainty to the national support schemes because that is where the show is.
Without strong action at national level you go nowhere on this directive.
Can you outline what you will propose?
What I propose is to separate the three aspects related to GOs.
So GOs could be brought back to their original meaning of disclosure only. Also, since the GOs have not been well applied all over Europe, we have today two problems. One problem is double accounting, which is not good in a system, and the second is the cheating of consumers.
You have old hydro, without any additionality, which is sold to consumers in other countries, marked as something green and new renewables.
So I close the door to this fraud issue and to the double accounting.
What precisely do you mean by double accounting?
For example, Finnish biomass GOs were sold to the Netherlands but also still remained in Finland and counted towards the target. So GOs as disclosure only.
The second issue relates to target accounting – all the other renewables will be accounted for based on statstics. So my proposal is to base target accounting on Eurostat statistics. We are in the lucky situation where we just finalised a new regulation on energy statistics, where we have imposed on member states a new working group on renewables, where we will have earlier and better data on them.
The third issue is what you call flexibility. I created an instrument which I call TACs (transfer accounting certificates), which will serve as certificates between member states. There are two flexibilities foreseen in the Commission text and I broadened it to four, to give more flexibility to governments than the Commission has proposed. So these TACs have been separated from the GOs. TACs are done on a voluntary basis, and with that you eliminate the legal problem. The GO is not a good but just a certificate, and the TAC is not a mandatory good which is introduced but is voluntary.
This way you avoid a situation where, say, Vattenfall goes to court for not being allowed to sell its wind energy to the UK instead of Germany. With the Commission’s construction as it is, Vattenfall would probably have won that case.
Perhaps you could expand on the four flexibilities?
The two flexibility instruments foreseen by the Commission were transfers between companies and joint projects – so for example an Austrian company investing in a large-scale CHP plant in Poland and then doing a 50-50 joint target sharing. I will continue to allow both under this TAC regime.
The other two new flexibilities I create are: the possibility for governments to exchange volumes based on statistics, which I think is easier to organise and handle, and that certain member states could join their targets and their support schemes. So for example Sweden and Denmark could do one scheme, putting their targets together.
And you have already spoken with stakeholders on this issue?
We spent an enormous amount of time with experts all over Europe to be able to identify what to do because the issue is so complex.
I hope the governments will take this up, because it’s a better model. It’s legally on the safe side and gives even more flexibility than what the Commission has proposed.
And for the green electricity traders like Verbund in Austria or parts of EFET [the European Federation of Energy Traders], they are also quite upset about the Commission’s proposal because trading would almost disappear under its construction.
So with this model I hope to satisfy both those countries that are on feed-in and those that work more on certificates and who want more flexibility, as well as traders and electricity companies that want to disclose and have this trading.
In terms of the renewables market more generally, there have been concerns recently about skills and material shortages as well as financing difficulties. Do you see a real bottleneck after years of strong growth?
This directive is crucial precisely for the creation of a stable investment framework. 20% is quite a volume of investment. My amendments should give stability to investors and the financial community.
On the issue of skills shortages and prices of wind turbines for example, there is currently a boom in the US which is absorbing part of the wind turbine production in the EU. But this is now triggering a lot of investment in Europe.
This shortage will be overcome, and the skills shortage issue, the lack of engineers, is one that all energy sectors, nuclear in particular, have to overcome.
And what is really important is that with this directive we create a real market for the heating and cooling sector.
The other aspect is infrastructure. I strengthen articles 12, 13 and 14 related to priority access to the grid and also incentives for new storage capacity, including for more IT tools to operate the grid.
When it comes to heating and cooling, it’s important to understand that this also depends on infrastructure, like district heating and cooling facilities. We need to modernise and expand existing networks, especially in the Central and Eastern European countries, because there we have a lot of biomass that could enter the market through these networks.
The other infrastructure is buildings. I have discussed this a lot with people like Jeremy Rifkin, and we see buildings as the infrastructure for all the decentralised renewables. I create very strong incentives for ‘plus energy’ buildings, and propose the idea that all the roofs of public facility buildings should be open to third party investors to be allow them to build on these roofs.
Would you not need to update or change other directives for this?
I try of course to push things here. In the end we probably also have to work on other aspects of the buildings directive.
I am also proposing four renewables projects of European interest. The first is a strategic alliance between cities and regions with respect to decentralised building clusters and renewables, as well as smart grids and meters, electric vehicles, etc.
The second relates to offshore in the Baltic and the North Sea – I think we have to get serious there. The third relates to the potential of biomass combined a renovation of the building stock and district heating facilities in Central and Eastern Europe, and finally the issue of the Mediterranean and the enormous solar thermal and wind potential.
But this has to be combined with efficiency policy in Morocco, Algeria and Egypt. Egypt, for example, has a 12% energy demand growth rate, so even if you build wind turbines there, these would be eaten up by Egypt alone without proper demand policies in place.
To what extent is the success of the renewables push dependent on the revision of the EU Emissions Trading Scheme and the third energy liberalisation package?
I think we have good news from the vote on the Morgan report concerning the unbundling issue, and also very strong language concerning the role of regulators.
One of the problems we have, for example, is that even if you have a very progressive transmission system operator (TSO) that wants to invest in offshore wind, this TSO needs to get the waiver from the regulators. My information is that regulators today are too narrowly focused on costs, and to permit this necessary adaptation of the grid we have to give regulators a new mandate in the Internal Market Directive. This new mandate is: as cheap as possible while being reliable and phasing in both large and small scale renewables, and that is now in the text of the Internal Market Directive.
I am very cautious on this 10% target. I think we are rushing into something which is not well settled.
Do you see a consensus among MEPs to reject this target?
I have to see… I propose in my report to drop the 10% target, but I have to see where it goes.
I am working closely with MEP Anders Wijkman, who will do the opinion in the Environment Committee. We will focus on what are called ‘Go’ categories, meaning we will define categories for biomass use. For example using organic waste from household and industry, using residues from the wood and paper industries as well as agriculture.
We also have a concept of degraded land, which is outside the arable land that can be used, and we promote algae, so non-food/non-feed competing biofuels.
And of course we strengthen the sustainability criteria on greenhouse gas emissions, so we want something around 60%.
In addition, we need strict biodiversity criteria and we need specific definitions on water, pesticide and fertiliser use. Just using, as the Commission proposes, European good agricultural practice would de facto have a competitive disadvantage because European farmers would have to stick to this but third countries would not. So we have to be more specific on that.
And then social criteria, above all protection of third world farmers.
How do you see the links with energy efficiency improvements?
Renewables are inseparable from energy efficiency. So I want member states, during the presentation of their national action plans on renewables, to work on energy efficiency.