The European Commission is pushing for
guaranteed price Feed In Tariffs (FiTs) to be replaced by more
market-orientated funding schemes, despite their proposals being strongly
opposed. FiTs have been very
successful at getting renewable capacity built, in Germany especially- about
70GW so far there. But as
renewable capacity grew, especially initially expensive PV solar, the FiTs had
passed increasing amounts of surcharge on to consumer bills. The European
Commission has now proposed new rules which will be phased in gradually,
following a pilot phase from 2015-16. But from 2017 all member states will have
to use tenders to support new green power facilities. The idea is to replace
FiTs with auctions or bidding processes open to all green energy generators
competing equally. In its draft paper ‘Services of DG
Competition containing draft Guidelines on environmental and energy aid for
2014-2020’, it says, on ‘Aid granted by way of a feed-in-premium or
feed-in-tariff’ that in future ‘aid is granted in a genuinely
competitive bidding process on the basis of clear, transparent and
non-discriminatory criteria’.
There are
similarities with the Contracts for a Difference (CfD) system now being introduced in the UK, which, in its
latest variant, includes a competitive project assessment phases, and indeed
also with the old Non Fossil Fuel
Obligation (NFFO) capacity auction system the UK started out with in the 1990s.
That had proved very ineffective at getting capacity built: some developers bid low to get the
contracts but often were unable to go ahead with the project. Germany’s new
premium market EEG system also has some similarities- FiT are mostly replaced
by direct market competition. That has not gone down too well with critics like
the World Future Council: ‘With this reform
the German government ends its success story by putting the energy system back
into the hands of those who have a deep interest in remaining with
conventional, dirty fossil energy sources. The German government with its reform is slowing the rapid expansion of
renewable power, as it
forces investors to take higher risks when investing in a future-just energy
system.’ http://power-to-the-people.net/2014/04/german-renewable-energy-act-reform-is-not-a-feed-in-tariff-2-0/
As with the new German scheme, the EC is
proposing some exemptions for the EU wide scheme. As Reuters noted ‘Following
extensive lobbying from companies, the new rules allow for exemptions in
special circumstances, including sparing energy-intensive industries such as
chemicals, metals,
paper and ceramics from helping to pay for renewable power’ But, it added ‘That leaves ordinary household consumers to pick
up the bill’, and, understandably, reactions from green groups have be very hostile. Claude Turmes, a
member of the European Parliament representing the Green Party, told Reuters ‘Citizens
will lose twice: they will pay for industries' new free ride and will continue
to suffer from an outdated energy system.’ The
European Wind Energy Association said that, while it was appropriate that the
increasingly competitive wind industry be integrated into the market, the
Commission should eliminate all fossil fuel subsidies as a priority. The EC was
‘ignoring the obvious market distortions that need to be tackled first, such
as the majority of subsidies that go to fossil fuels and nuclear’.
Nuclear was included in an early draft of
the proposals but, after protests, has now been excluded- developers/
governments have to make a special case for it, as in the case of Hinkley in
the UK. But most of the rest of the proposals stayed. So now it’s goodbye to
all the various variants of FiTs .
Instead, in most cases, there will be pressure to impose a one-size-fits-all
market approach across the EU, with presumably the EC using the threat of
baring other approaches under the ‘state aid’ subsidy rules, to police the
system.
Views on all this will differ. Certainly
the new market approach should reduce costs to consumers in the short term:
that seems to be the ostensible aim, though that was not the result of the UK’s
disastrous Renewables Obligation (RO) market orientated approach: that cost UK
consumers much more/kW and kWh
than the FiTs used elsewhere. But just like imposing capacity caps (as in
Germany and elsewhere), the market approach will no doubt slow the deployment
of renewables- that’s how it will reduce costs. Though since increasingly
expensive fossil fuel will therefore have to be used more, longer-term it will
push prices up. However, despite the evidence from the RO and NFFO, devotees of
market competition may argue that competition will lead to reduced renewable
energy technology cost, so that may compensate, leading to more capacity for
the same, or reduced, outlay. Place your bets!
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