Growing Pains: Unclear Progress Towards the EU 2020 Renewable Energy Targets
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|BY EVAN MUSOLINO | MAY 20, 2013|
The European Union (EU) has undoubtedly been one of the global leaders in spurring the advanced development and deployment of renewable energies worldwide. The vision set forth by the Renewable Energy Directive 2009/28/EC – a directive setting continent-wide targets for all EU-27 member states to increase their share of renewable energy in the national energy mix – continues to stand out as the primary example of a coordinated effort to lead a large-scale energy transformation. While renewable energy targets now exist in 118 countries worldwide, few regional commitments to renewable energy deployment exist, though this trend is beginning to change.
In recent years, certain EU member states have gone beyond what is required under the Directive to set even more ambitious national goals. Denmark, for instance, is now targeting 100 percent renewable energy across their entire energy supply by 2050. These efforts should be applauded and their lessons replicated around the world. However, these successes should not obscure the very serious gap that is emerging between current policies and mechanisms and the significant challenges still facing the European renewable energy sector.
A recent European Commission report has outlined the challenging road ahead for member states as they continue down the path towards their 2020 commitments. The Commission’s report sends a mixed message. On one hand, all but 2 countries – Latvia and Malta – met their first interim final energy targets defined under the Directive. In fact, 13 countries even outperformed the target by over 2 percent.
Unfortunately, while promising, the current rate of deployment seen to date is not sufficient to meet the 2020 goals. The EU targets as currently designed call for a strong uptick in deployment rates through the end of the decade.
As a result, a number of EU countries appear to be at risk of falling behind the goals set in their National Renewable Energy Action Plans (NREAPs). As written, the plans call for an EU-27 wide renewable share of 33.9 percent in electricity, 21.4 percent in heating and cooling, and 11.7 percent in transportation by 2020, culminating in an overall 20.7 percent share of renewable energy in Europe.
While system-wide renewable energy developments were still on track to achieve short-term goals identified under the 2009 Renewables Directive, many countries are falling behind their own indicative sectoral targets set independently of the Directive in a number of key sectors. This hints at significant challenges facing the overall renewable energy sector and underscores the Commission’s assessment that the 2020 goals are at serious risk. Fifteen Member States missed their indicative targets for electricity from renewable sources while 22 Member States missed their transportation targets. The future of the biofuels target itself is currently up for significant debate as many seek to limit the volume of first generation biofuels produced in Europe. Though no targets exist for heating and cooling, analysis of the sector suggests that the renewable share may, in fact, decline rather than increase over the near term. The Commission’s technology deployment projections also point to expected underperformance. The onshore and offshore wind, biomass, solar photovoltaic, and biofuels sectors may all fall short of the national goals set for 2020. The Commission warns that even the currently over-performing solar PV sector is at risk of falling behind by 2020 due to an unstable investment climate created by recent policy uncertainty.
It is important to note that because of the long investment lead time, estimated at eight to ten years, a weak investment climate today will impact production well into the future. From development through installation, a typical offshore wind project currently sees a project lead time of 6.5-9.5 years, highlighting the urgency of quickly establishing an enabling framework to allow additional new capacity to be operational by 2020. Overall, many of the observed shortfalls in the sector can be linked to a number of barriers to renewable energies that have proven more difficult than expected to remove.
Administrative challenges and a slow uptake in infrastructure developments pose a significant constraint to project developers, further slowing and discouraging the investment necessary to meet the 2020 goals. The lack of grid and storage developments must be addressed as greater shares of renewables are integrated into these networks. Of great concern is the admission that current policies and support schemes do not appear sufficient to meet national targets.
This comes at a challenging time for policy makers. While the Commissions’ recommendations suggest that additional policy support is needed in many EU countries, the opposite is quite often coming true in practice. Due to a number of factors, policy reductions are hitting the European renewable energy sector. Over the past few years a number of support schemes have been weakened across the continent, including particularly damaging retroactive cuts to feed-in tariffs in Greece and Spain. Another troubling development has seen taxes or grid access fees on renewable power recently introduced in Belgium, Bulgaria, Greece, and Spain.
This policy uncertainty caused by these retroactive changes and unplanned reductions coupled with the low price of credits under the EU Emissions Trading System (ETS) has proven challenging to renewable energy developers and investors. It appears the combination of these factors is not sending the necessary market signals to fully encourage clean energy development. Though new capacity additions remained strong, total investments on the continent dropped by over US $30 billion to US $75.8 billion in 2012 as traditionally strong players such as Germany, Spain, and the United Kingdom all saw investments decline. Bloomberg New Energy Finance has estimated that a cumulative US $400 billion will be necessary to meet the 2020 goals.
Though not intrinsically linked with declining renewable energy investments, many of these same countries are witnessing other troubling trends as well. While Europe as a whole saw an increase of 0.6 percent in the renewable share of electricity consumption, 12 member states saw their domestic share decline between 2010 and 2011, mainly due to significant hydropower reductions. The continent as a whole witnessed a “marked increase” in coal generation, with significant growth of 8 percent in Germany, 65 percent in Spain, and 35 percent in the United Kingdom. For the 2020 targets to be met, both of these trends must be reversed.
This is not a time for defeatism but rather a time for reflection and reform. Great potential still exists and the EU 2020 targets are still within reach if the appropriate measures are adopted. European policy makers should take this opportunity to reaffirm their commitments to the development and deployment of renewable energy technologies by enacting well designed renewable energy support mechanisms to overcome the unique barriers in Europe.