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Brussels, 31 January 2011

Commission Communication on renewable energy

What is renewable energy?

Renewable sources of energy include wind power (both onshore and offshore), solar power (thermal, photovoltaic and concentrated), hydro-electric power, tidal power, geothermal energy and biomass (including biofuels and bio liquids). As alternatives to fossil fuels, their use aims at reducing pollution and greenhouse gas emissions. Another role of renewable energy is the diversification of our energy supply, with the potential to reduce the dependence on oil and gas.

What is our goal for the year 2020?

The Renewable Energy Directive adopted in 2009 sets binding targets for renewable energy. The new law focuses on achieving a 20% share of renewable energy in the EU overall energy mix by 2020. Every Member State has to reach individual targets for the overall share of renewable energy in energy consumption. In addition, in the transport sector, all Member States have to reach the same target of a 10% share of renewable energy.

Where do we stand in 2010?

According to the existing Renewable Energy Directive, there are no binding intermediate targets for 2010. However, in two previous Directives – 2001 Green Electricity Directive and the 2003 Biofuels Directive – there are laid down indicative, non binding targets for two sectors: electricity and transport fuel mix.

In the electricity sector, only seven out of 27 Member States expect to meet these 2010 targets. In the transport sector, nine expect to meet their 2010 targets. (See enclosed list for national breakdown).

The EU as a whole reached just over 18% for the share of renewable energy in the electricity in 2010 rather than the target of 21%. For transport, the EU reached 5.1% instead of 5.75%.

Will we reach our 2020 targets?

While Member States failed to reach their indicative 2010 targets for the share of renewable energy in the electricity and transport sectors, the new renewable energy Directive ensures that Member States take remedial action: Member States National Renewable Energy Action Plans are required to contain all the measures effectively designed to achieve the trajectory contained in the Directive. In following these trajectories, the failure to meet the 2010 targets will be overcome and Member States can be on track to reach their (legally binding) 2020 targets. According to their national plans submitted in 2010, the Member States will all meet their 2020 targets.

How much investment is needed to reach the 20% renewable target?

To reach the 2020 targets, the Member States have to implement their national action plans and substantially increase the financing of renewable. Annual capital investment would need to rapidly double to €70bn. This investment should mainly come from the private sector. This could big energy companies investing in wind or solar farms or households investing in solar systems or other forms of renewable.

What type of financing aid is provided by Member States?

A wide range of different financial instruments are used in all Member States to help reduce renewable energy costs. These instruments include capital support: grants, loans and loan guarantees, equity funds, and production aid: feed in tariffs, premiums, quota/certificate schemes, fiscal incentives and tenders.

What should the Member States do in terms of financing?

The Commission recommends further reforms of national renewable energy support schemes. Support schemes need to ensure the costs of renewable energy production continue to fall but they also need to provide a stable investment climate, without any retroactive changes to discourage investment.

Are we proposing a harmonisation?

No. We are not proposing a harmonisation of financing in this communication. The Commission encourages the coordination of renewable energy support schemes and to use the cooperation mechanisms which are already laid down in the 2009 Renewable Energy Directive. For example, if a big wind park produces in one country, another Member State can agree to finance the park and count some of the energy towards its own target. And if Member States had a joint support scheme, consumers in another country importing the electricity would pay the feed-in tariff (or other form of support).

A convergence of financing, such as feed in tariffs, will be necessary in the medium or long term, when a truly European market is created. This can include greater cooperation in setting tariffs, technology bands, tariff lifetimes etc. It could also include completely joining the support schemes (such as planned by Norway and Sweden).

What are the cooperation mechanisms?

Cooperation mechanisms are means of allowing Member States to benefit from a form of trade of renewable energy whilst still maintaining control over their national support schemes and the achievement of their national targets. Cooperation mechanisms include statistical transfers, joint projects and joint support schemes. According to their plans, Italy and Luxembourg both expect to use these mechanisms to help develop renewable energy in another Member State and count it towards their target. And nine countries (Czech Republic, Germany, Spain, Lithuania, Hungary, Austria, Poland, Slovenia, and Sweden) expect to exceed their 2020 targets and could therefore have a surplus available for transfer to another Member State using the cooperation mechanisms

What is the advantage of a single European energy market for renewables?

It is the economies of scale of the industry across the EU that will drive production costs down and keep the industry globally competitive, with a huge potential for job creation. It is more cost-effective to produce solar power where there are more sunny days then where there are few, the same with wind energy and windy days. Low production costs will ultimately be reflected in the power price, and both companies and consumers will benefit.

What has the EU contributed so far to the sector of renewable energy?

EU financial support given to renewables is relatively low. For the period 2007-2009, funds spent on renewable energy amounted to roughly €9.8bn, (€3.26bn/a), the bulk of which in the form of loans from the European Investment Bank. During this period the financial support was made up of:

  • €8.4bn in loans and assistance from the European Investment Bank;

  • €565m from the European Economic Recovery Plan;

  • €110m for the "Intelligent Energy Europe" Programme, which co-funds analysis and policy research in renewable energy;

  • €499m of EU Structural and Cohesion Funds were allocated by Member States, to projects and demonstrations of renewable energy (with a total of approximately €4.8 billion planned for 2007-2013) ;

  • €250m from the EU R&D Framework Programme;

  • In addition, the EIP GIF budgeted €151M in venture capital or loan guarantees;

  • Separately, the European Bank for Reconstruction and Development granted SEI loans of approximately €140M

What is the impact of renewable energy in the field of job creation?

Renewable energy industries has a great potential for creating jobs, for equipment manufacturers, installers, technicians, builders and engineers. The industry currently employs over 1.5 million people and by 2020 could employ nearly 3 million more, according to latest studies.

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