European Commission threatens feed-in tariffs for renewables

The European Commission has launched a thinly veiled attack on feed-in tariffs and the latest Energy Communication from the Commission threatens to change state-aid rules that currently favour renewable energy. Meanwhile the UK debate is distracted by the arguments surrounding the Government's fantasy new nuclear power construction programme.

The EU Commissioner for Energy, Günther Oettinger has criticised the feed-in tariff used in his own country (Germany) for distorting the market - Apparently he believes that the system of renewable energy subsidies  in Germany is unfair in the context of wholesale power prices being pushed down not only in Germany but also in The Netherlands and Switzerland. One may wonder just what is probelmmatic about wholesale powered prices being reduced, especially given the EU Renewable Directive requiring that 20 per cent of EU energy should come from renewables by 2020.

One also wonders how exactly the renewables target is to be met without special incentive regimes - subsidies - call them what you like - for renewable energy. However, it seems that given two apparently conflicting objectives, that is clearing away 'distortions' in energy markets caused by Government interventions, and the target for renewables, Oettinger has decided in favour of stopping what he calls 'distortions' in the energy market. Coincidentally, of course, this coincides with the agenda of the major electricity utilities and their mainly fossil fuel (plus some old nuclear) portfolios who are concerned that the growing renewables market (almost entirely owned by independent companies in Germany) is depriving them of electricity sales. You can see Oettinger's reported attitude in a news report on Renewables International website, http://www.renewablesinternational.net/eu-energy-commissioner-criticizes-german-energy-policy/150/537/59979/.

You can also see the formal notices from the European Commission in the website

http://ec.europa.eu/energy/gas_electricity/internal_market_en.htm

and specifically, the detailed Communication on:

http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:52012DC0663:EN:NOT

Please note the passage:

'The Commission is in the process of reviewing the guidelines on State aid for environmental protection to reflect changes in the technological landscape and EU policy objectives in the energy sector, while minimising competition distortions in the internal market.

In particular, the revision aims at ensuring that State aid control facilitates the granting of aid provided that it is well-designed, targeted, least distortive and provided that no better alternatives (regulatory, market based instruments) are available. The Commission will encourage in particular solutions that are cost-efficient and promote cross-border integration.'

Currently state aid rules give a clear exemption to Governments to establish and operate feed-in tariffs for renewable energy, but as this passage suggests, this exemption is now under threat. The Commission hints that it favoures some pan-EU certificate-based scheme ('market instruments'). This sort of scheme is well known for being very expensive (like the UK Renewables Obligation), except that it would not be as effective as the Renewables Obligation in building capacity since a) the EU could never agree a strong enough pan-EU single trading instrument (look at the poor showing of the EU-ETS 'market instrument') and b) the whole system would be under the effective control of the major electricity companies who would control the certificates. Independent investment, vital for acheiving the targets and giving competition to the multinationals, would wither.

The Commission says it wants lower prices for the consumer - but what will happen if the Commission gets its way is that more of the energy will come from fossil fuel plant run by multinational companies. The interests of the electricity majors are clear - either the renewables market has to be controlled by them or there should be no significant renewables market.

The only (small) crumb of comfort  in all of this is that the Commission's proposals would not help nuclear power in the UK. Outside of what seems currently to be the unlikely possibility that the UK Treasury would sanction a cost recovery guarantee being handed to EDF (a blank cheque), new nuclear construction seems very unlikely. Of course you wouldn't believe this by reading what is said in the newspapers, but then there are too many people who are paid to be optimistic about nuclear power. Some suspect that the Government will try and hide a 'blank cheque' for nuclear in the so-called 'investment instruments' that can keep financial terms secret - it is very necessary to make an issue out of this  possibility - see the article in The Independent on http://www.independent.co.uk/news/uk/home-news/taxpayer-billions-could-be-secretly-funnelled-to-edf-to-underwrite-cost-of-proposed-power-station-at-hinkley-point-8473810.html and also see the Parliamentary exchange on http://www.parliament.uk/business/publications/hansard/commons/todays-commons-debates/read/unknown/109/

However the 'investment instrument scheme', if it is a secret plot to give back door assurances to nuclear power, looks so hare-brained from a number of angles that the whole thing beggars belief. One problem of course, is that too many people have invested too much commercial and political capital in the public relations fairy tales spun by nuclear supporters over the past few years that they have lost touch with financial and commercial realities - see earlier blogs on this.

But a really major tragedy is that the nonsense about the fantasy 'new nuclear' programme is distracting the attention of British opinion away from the threats to renewable energy programmes. First there is the issue of the lack (as yet) of robust incentives for independent generators in the UK, under the proposed Electricity Market Reform, which are vital to the renewables programme continuing even at its present level of expansion (see earlier blogs). Second there is the very real threat posed by the EU Commission against any renewable energy strategy.

Green energy conference to discuss Government plans for renewables

Feeding Renewable Policy

 A Conference presented by The University of Birmingham and the Claverton Group of Energy Experts, Friday January 18th

Find copies of some of the documents and powerpoint presentations discussed at the Conference on :

http://www.birmingham.ac.uk/schools/government-society/departments/political-science-international-studies/news/2013/01/feeding-renewability-conference.aspx

See some comments on the Conference from Birmingham Friends of the Earth activists:

http://www.birminghamfoe.org.uk/blog/feeding-renewable-energy-conference

This Conference will focus on policies needed to underpin a feed-in tariff system for funding renewable energy and also the sort of policy environment that is needed to ensure maximised expansion of renewable energy. The event coincides with the passage through Parliament of the Energy Bill implementing Electricity Market Reform (EMR) which is concerned with giving priority to a low-carbon electricity strategy. A mixture of expert speakers and participants from industry, government, environmental NGOs, and academia will discuss the details of the issues and options. Attendance fees will be £200 corporate, £50 individuals and free to voluntary groups  – also free to speakers of course. Booking should be done through the online shop at; http://shop.bham.ac.uk/browse/extra_info.asp?compid=1&modid=2&prodid=546&deptid=17&catid=20

THE  FREE PLACES ARE AVAILABLE to interested individuals on application to d.toke@bham.ac.uk,

The Conference will be held in the Edgbaston Room, Lucas House, University of Birmingham, 48 Edgbaston Park Road, Birmingham, B15 2RA, http://www.venuebirmingham.com/venue/edgbaston-room

Timetable

 Note each individual speaker session (apart from the panel session) will comprise a talk for 20 minutes with 10 minutes for discussion

10.20 Tea and coffee

10.50 -11.00 Chair’s opening comments by Dave Andrews from the Claverton Group. Dave has worked widely in the energy industry, including a recent stint at the European Commission, and he has been the biggest force behind the formation of the Claverton Group.

11.00 Holly Tomlinson, Regulation and Compliance Analyst for Ecotricity: ‘How the Energy Bill might affect green electricity suppliers and also renewable generators’. Ecotricity is a leading green electricity supplier and the only one that is principally concerned with installing renewable energy projects.

11.30 Dr David Toke: ‘What sort of Feed-in Tariff do we need for renewables?’ David Toke will discuss the different types of feed-in tariff and what might be an optimum solution for renewables. Dr Toke is the author of a report ‘Fixing Renewables’, a new report  published by Friends of the Earth and Senior Lecturer in Energy Policy at the University of Birmingham

12.00  Rachel Cary, Policy Advisor, Green Alliance: ‘Implementing a feed-in tariff for energy efficiency’ Rachel has done a lot of the work on the Green Alliance’s proposal for an energy efficiency feed-in tariff. She leads the low carbon energy theme of the policy work of the Green Alliance. See http://www.green-alliance.org.uk/staff/Policy-team/Rachel-Cary/

12.30 Nigel Cornwall, Managing Consultant and Director, Cornwall Energy: ‘How Electricity Market reform may affect independent renewable generators’. Nigel Cornwall is said to be one of the few people in the country who has a deep understanding of how the electricity system and, in particular, the Balancing and Settlement Code works.

1.10 Lunch

1.40- 2.10 Alan Whitehead M.P. Alan is Chair of the Parliamentary Renewable And Sustainable Energy Group (PRASEG) and is very much involved in debates around the Energy Bill. Amongst his Parliamentary activities he is a member of the Commons Select Committees on Energy and Climate Change and Environmental Audit

2.10-2.40 Martin Alder, ‘What policy do we need to maximise renewable energy deployment?’

Martin runs Optimum Energy Ltd. which specialises in renewable energy contracts, trading and renewable market economics.   OEL is a partner with the Wind Prospect Group in the Wind Direct joint venture.  He is Director of Energy UK, and Chairman of their Renewable Energy Committee. He represents Energy UK as the UK member of the Eurelectric workgroup for Renewables and Embedded Generation. He is a member of the DECC CfD expert group. ‘

2.40-3.10 David Hirst: What are smart grids? What sort of ‘smart grid’ and demand-responsive system do we need to have a proper functioning system based on renewables? David Hirst is and inventor who runs consultancy through his company RLTec and has been involved in patenting and promoting demand-side response and smart grid technology.

3.10-3.25 Tea and coffee

3.25- 3.55  David Olivier. David will discuss strategies for reducing energy demand in buildings and in the supply system via not only CHP but also heat pumps. He has helped bring to fruition a large number of low-energy domestic and commercial buildings and associated energy systems over the past 20 + years and as such is among the most knowledgeable and experienced low energy buildings consultant in the UK

3.55-4.45 Panel Session. Each of the following panel members will give a 6 minute presentation followed by a question and answer session:

Graeme Cooper,  Graeme is Policy Regulatory & Compliance Manager at Fred Olsen Renewables. Fred Olsen Renewables is an independent developer in Norway, UK, Ireland, and Canada

Doug Parr, Chief Scientist, Greenpeace UK. Doug has been involved in numerous publications, presentation, submissions, campaigns and media interventions promoting sustainable energy on behalf of Greenpeace

Dave Timms, Energy and Climate Campaigner, Friends of the Earth. Dave Timms, previously Economics Campaigner for Friends of the Earth has led various FOE initiatives, including the 2007-2008 campaign for the small renewable energy feed-in tariff and campaigns for energy efficiency and anti-fuel poverty.

4.45 Chair’s closing comments

4.50 End of Conference

British increase in coal generation is much bigger than Germany's

The latest energy statistics suggests that Germany is doing much better in restraining coal used to generate electricity compared to the UK. Yet, to read the British press you would automatically assume that the exact opposite was true and that coal use was increasing dramatically in Germany compared to the UK - All, allegedly, because of the German policy of switching away from nuclear power and towards renewable energy and energy efficiency.

According to this week's Economist magazine 'In Germany, RWE, the biggest user of coal in Europe, generated 72% of its electricity from coal and lignite (a dirtier, low-grade form of coal) in the first nine months of 2012, compared with 66% over the same period in 2011'. The article also comments 'By displacing conventional forms of energy this way renewables have undermined utilities’ finances. Moody’s, a ratings agency, recently said the whole sector’s creditworthiness is under threat. In response, companies are switching from gas to coal as fast as they can, so renewables are in fact displacing gas but not coal.'
See http://www.economist.com/news/briefing/21569039-europes-energy-policy-delivers-worst-all-possible-worlds-unwelcome-renaissance

What the Economist does not mention is that the shift from coal to gas is independent of whether, like Germany, the country has a policy of phasing out nuclear power. This has to do with relative energy prices. Indeed, in the the UK, despite the fact that its pro-nuclear establishment has ordered the extension of the life of existing nukes and wants (wishfully!) to build more nuclear power, the shift from gas to coal is even bigger than the figures quoted in the Economist! As is stated on page 37 of the latest statistical digest produced by the Department of Energy and Climate Change:

'Gas’s share of generation fell from 46.3 per cent in the third quarter of 2011 to 28.2 per cent  in the third quarter of 2012 due to high gas prices. It was gas’s lowest share of generation  for the third quarter in at least 14 years. Coal’s share increased from 22.9 per cent to 35.4 per cent over this same period'. See

http://www.decc.gov.uk/assets/decc/11/stats/publications/energy-trends/3945-energy-trends-section-4-electricity.pdf

It does seem clear that the Economist published its piece in a context where a lot of British public opinion seems to live in some dreamworld where everything is always worse once you step onto the continent. In this case people may want to hear stories about how the Germans are foolish green idealists while the Brits are sensible followers of a sustainable energy path. The story also seems to suggest that a policy which weakens the hold of German utilities on energy markets is a bad thing. Is it really? So who is the Economist writing to please exactly?  The Economist claims to be able to give people sound business information, but in publishing an alarmingly selective set of statistics it seems to be grossly failing in this case.

Of course, as this blog has suggested, the policies in Britain are designed to safeguard and strengthen the grip of the major utilities on the energy business. This strategy is very damaging to a sustainable energy strategy. The truth is that the Germans are much nearer to getting things right than we are.