Traders and governments at odds over renewables trading

The Commission’s proposal to boost EU renewable energy use to 20% by 2020 is fuelling disagreements between energy traders and member states over the best regime for promoting renewables trading without undermining existing national support schemes.

“The EU can only reach the overall target of 20% energy consumption from renewable sources in a sustainable and efficient manner if an internal trade mechanism for Guarantees of Origin forms an integral part of the legislative framework,” says a 16 April letter by the European Federation of Energy Traders (EFET). 

The EFET letter is addressed to Green MEP Claude Turmes, Parliament’s rapporteur on the Commission’s proposal to revise the EU’s renewable energy regime. 

Initially, the Commission had planned to make GO trading mandatory. But Brussels apparently backed down under pressure from member states like Germany and Spain, who argued that a mandatory trading requirement would undermine internal renewables support schemes like feed-in tariffs. Such schemes can boost the prodcution of solar, wind, hydro and other renewables by guaranteeing producers a buy-back price that is higher than the market price for electricity (EURACTIV 16/01/08).

Under the current proposal, member states may invest in renewable energy production in another member state in exchange for GOs that count towards the renewables target. But the trading is to be voluntary, not mandatory, and the Commisson has attached the condition that a country must have already reached its own interim target before being allowed to receive investments and transfer GOs to another member state.

Saving subsidies

Despite the change, Germany in particular remains concerned that it would end up effectively subsidising the renewable energy obligations of other member states if its own renewable energy firms sell off too many GO certificates.

Berlin has allegedly suggested to the Commission that the directive limit trading even further and include an ‘opt-in’ for those member states wishing to trade, rather than an opt-out for those that do not. 

But the opt-in proposal is just one of several options currently being tossed around the table in the Council’s working group on the file, a spokesperson for Germany’s Permanent Representation in Brussels told EURACTIV. The Commission “understands” that the issue at stake is the protection of national support schemes, the spokesperson said, suggesting that negotiations are ongoing and that the EU executive is willing to examine alternative measures.

EFET argues that the issue could be addressed by harmonising national renewables support schemes so that GO trading could develop as part of normal internal market activity.

The European Renewable Energy Council (EREC), however, argues that it is too early for such a move given existing distortions in the EU’s internal electricity market. 

“It seems premature to call for competition in the renewables power segment at a time of non-competition in conventional power,” EREC said in a position paper, which argues that “there is no evidence that a harmonisation of RES support mechanisms would deliver any benefits at this stage”.

Lawyers’ paradise?

While Berlin and EFET may not see eye-to-eye on trading, both are concerned that energy firms could take governments to court for restricting their trading activities. They say the exemptions included in the proposal for restricting GO trade do not provide sufficient legal certainty.

In a technical annex attached to its letter, EFET argues that the proposed renewables directive is plagued by “fundamental inconsistencies and breaches of primary EC law”. 

“At the point when member states would come to transpose the proposed directive into national law, we expect that it will run a real risk of being challenged legally in several European countries,” EFET says.

Dörte Fouquet, a lawyer who heads the European Renewable Energy Federation (EREF), agrees. 

“The current proposal aims to introduce a new trade good which is a virtual trade paper based on the current guarantee of origin. Any future justification for a member state to opt out from this trade in order to maintain its national support scheme is creating a barrier to trade of GOs,” she says, stating that the exemptions set out in the proposal “can hardly be accepted” by the European Court of Justice (ECJ). 

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