Industry, governments criticise renewables trading plan

Commission plans to introduce a trading mechanism for green power certificates have come under fire from Germany, Spain and the renewables industry, who argue they will undermine existing support schemes and investor confidence and ultimately hamper growth in the renewables sector.

Whither existing support schemes?

Renewable energy industry groups are concerned that existing national support schemes will not be sufficiently safeguarded by the proposal, despite assurances made by the Commission in public statements and in the draft itself.

“Member states may, in order to safeguard the viability of national support schemes, impose objective, transparent and non-discriminatory terms or limits on the transfer of guarantees of origin to or from other member states”, according to article 8(3) of the draft.

But the draft also says that member states would lose the right to impose GO transfer restrictions if they fail to reach their renewable energy interim targets (which are still to be determined).

The European Renewable Energy Council (EREC) argues that forcing a member state to open its national support schemes to firms from other EU countries would undermine existing support schemes, since member states would have no incentive to subsidise ‘foreign’ firms. This would lead to a “de facto ‘harmonisation’ of national support schemes through a domino-like cascade of those national support mechanisms employed by member states that fail to meet their targets”, EREC argued in an open letter to Commission President José Manuel Barroso. 

The draft also states that member-state limits on GO transfers would need to be reviewed annually by the Commission, a requirement that will have “significant negative effects on long-term market stability and investor confidence”, according to EWEA, the European Wind Energy Association.  

Trading ‘not acceptable’ for Germany and Spain

The concerns of the renewables industry were apparenly backed by the German and Spanish governments, who sent an open letter to the Commission arguing that the EU executive is moving contrary to the principle of subsidiarity by effectively trying to harmonise an EU-wide renewables support scheme.

“If member states have to achieve a national target, they need to have the means in their hands and they must not lose these means through an EU-wide scheme”, the letter states.

In stronger language, the letter argues that certificates trading is far less effective for promoting renewables than feed-in tariffs and that promoting GO trade will lead to a “severe disruption of markets”. 

“A European trading regime, even if combined with a temporary phasing-in or opt-out clause, is not acceptable to us”, the letter says.  

Commission driven by ideology?

EREC argues that a trading mechanism will simply strengthen the grip of incumbents and oligopolies on the EU energy market, since small and medium-sized firms do not possess the necessary capital to invest in the “huge upfront cost and investment risks inherent to such a complex trading system”, fueling speculation that large energy firms are behind the push for GO trading.

The European electricity industry indeed “strongly supports” trading. In a statement, industry group Eurelectric said it favours “the immediate setting up of a system of tradeable guarantees of origin alongside existing support systems, thus enabling all the various market actors to take advantage of optimal site selection and a Europe-wide market”.

However, according to Christian Kjaer, EWEA Chief Executive Officer, the Commission “seems to be driven by ideology” rather than by any major industry interest or “by the desire to meet the 20% target.”

Industry Commissioner Günter Verheugen and Economic and Monetary Affairs Commissioner Joaquin Almunia in particular are said to support the notion of increased intra-EU renewables trade as part of a wider push to boost trade in the EU internal market. 

A sign of possible internal division within the Commission came with a staff working document due to be released alongside the 23 January proposal, which acknowledges that feed-in tariffs are a better way to promote renewables than trading. 

The paper also notes that while the Commission supports the eventual harmonisation of support schemes in order to create economies of scale, pushing for harmonisation in the short term is “not appropriate”.

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