EU Directive finalised

1 January 2002

The EU Renewables Directive was published on 27 October 2001, after three years in the making. Its purpose, as stated in Article 1, "is to promote an increase in the contribution of renewable energy sources to electricity production in the internal market for electricity and to create a basis for a future Community framework thereof." Peter Cassidy, Masons*, London, UK

Under the Kyoto Protocol, the EU has committed itself to reducing its greenhouse gas (GHG) emissions by 8 per cent relative to 1990 levels, by the period 2008-2012. One of the ways it will achieve this is through an increase in the generation and usage of electricity from renewable energy sources (RES).

The Renewables Directive has its origins in a request made to the Commission to submit proposals for a Community framework on access for electricity produced from renewable energy sources (RES), following deliberations by both the European Parliament and the Council.

This led to a resolution being produced in March 2000 by the European Parliament, which stated that binding and ambitious renewable energy targets at a national level were essential if Community targets under the Kyoto Protocol were to be achieved.

Finally, on 10 May 2000, a draft Directive on the promotion of renewable energy sources within the EU was unveiled,1 following two years of opposition from Member States and the Competition Directorate. Member States objected to the Commission's initial proposal of binding national targets, whilst the Competition Directorate was uneasy about any distortion of competition created by the use of financial aid to bolster generation of electricity from renewables, ahead of other electricity suppliers.

What is renewable energy?

In the draft Directive, renewable energy sources were described as "renewable non-fossil sources (wind, solar, geothermal, wave, tidal, hydroelectric installations with a capacity below 10MW and biomass)...." In the adopted text, however, landfill gas, sewage treatment plant gas and biogases are also included, as is energy produced from all hydroelectric schemes.

It is also interesting to note that the definition of biomass has been enlarged from that of the draft. It is now expressly deemed to include "biodegradable fraction of products, waste and residues from agriculture... forestry and related industries, as well as biodegradable fraction of industrial and municipal waste." This marks a significant change in the definition of renewable energy source for, in November 2000, the European Parliament actually voted to exclude the biodegradable elements of wastes. This is noteworthy because incineration of municipal waste is Europe's single largest source of dioxins, which, evidence suggests, can result in birth defects and cancer.

Another key feature of the definition is the inclusion of all hydroelectric power schemes. Despite various debates regarding the environmental aspects of hydroelectric power, eg, the release of high levels of methane gas from dammed water bodies (as suggested by a report by the World Commission on Dams in November 2000), the displacement of communities, the loss of valuable agricultural land, etc, its inclusion in the Directive may be vital to some countries, such as Austria, in the achievement of their overall target.


The Directive aims to increase the consumption of electricity generated from renewable energy sources to 22.1 per cent by 2010 (the "EU Target"). This overall target has been broken down and allocated among Member States as illustrated in the table below.

In all cases, with the exception of Finland, The Netherlands and Portugal, there has been no change in these targets2.

Indicative or mandatory?

The question of whether individual targets should be indicative or mandatory was hotly debated in the drafting stages of the Directive. Originally, it had been proposed that targets should be mandatory. However, the working paper Electricity from renewable energy sources and the internal electricity market examined whether binding targets should be set for all Member States at Community level. It concluded that they should not, and favoured instead the use of indicative targets because, it was decided, it is important to maintain a level of flexibility for Member States to identify the strategy best suited to meet their own climate change commitments in light of their own national circumstances.

It perhaps comes as no surprise, therefore, that the finalised text of the Directive does not impose mandatory targets. However, it does impose obligations on Member States to implement steps ensuring that consumption of electricity from renewable energy sources is consistent with the EU's overall energy and environmental objectives, including:

• Publication by Member States of a report setting national targets for future consumption of electricity from renewable energy sources, no later than 27 October 2003 and every two years thereafter. The draft proposed the first report should be published no later than one year after the Directive had entered into force and every five years thereafter. Overall, however, this does not, necessarily, represent tighter control, due to the more lenient centralised reporting requirements - see below.

• Annual publication by Member States of a report detailing their success at meeting the previous year's targets.

Further, the Directive requires that the Commission, no later than 27 October 2004 (and bi-annually thereafter), compile its own report to assess whether the targets fixed by individual Member States comply with the EU Target. If the performance of any state is found to be inconsistent, proposals must also be presented to the European Parliament and the Council as to how this situation could be rectified - including mandatory targets if necessary. This obligation differs from the draft in that it was proposed the Commission would compile its report on an annual basis.

So, whilst not going so far as to fix individual mandatory targets for Member States, nevertheless, there is still scope for imposing such, on an individual basis if necessary.

Can the targets be achieved?

In a study published by Cambridge Econometrics in August 2001, it was predicted that in the UK only 8 per cent of all electricity will be generated from RES by 2010, compared with the current government target of 10 per cent. Further, Cambridge Econometrics believes that the UK will not achieve the 10 per cent level until 2015, "unless steps are taken to remove some of the obstacles".

It has, also, been suggested by other organisations within the energy industry that individual Member States may miss their Kyoto target by up to 100 per cent.

Within the UK, one of the chief obstacles in the way of the attainment of the renewables target is the adverse effect of the New Electricity Trading Arrangements (NETA) on wind power. For, of the 10 per cent target, it is expected that 50 per cent will come from the harnessing of wind energy. NETA, however, does not favour either smaller generators or intermittent producers of electricity, since the reliability of a plant commands a premium under the scheme.

As the report from Cambridge Econometrics points out "it is particularly difficult for small renewables generators with weather-dependent energy sources to balance their contractual positions, and it is particularly important for renewable energy plants to have easy, low cost access to regional electricity distribution networks if projects are to be viable".

The development of wind farms in the United Kingdom is further hampered by the number of objections to wind farms - both on and offshore.

Perhaps the most noteworthy example of this is the decision by the Secretary of State for Trade and Industry to refuse an application for a substantial wind farm project in Kielder Forest, Northumberland, after the Ministry of Defence raised the objection that the farm's wind turbines could interfere with national security by affecting radar and low-flying aircraft.

A full judicial review of this case is now possible, however, after a preliminary hearing, on 14 December, was decided in favour of the claimant EcoGen Developments Ltd. Given the current political climate, it will be very interesting to learn the outcome of this process.

Moreover, the possibility of failing to achieve the 10 per cent target in the UK is reflected in the reduction of the UK government's interim target for renewable energy obligations, from 5 per cent to 3 per cent by 2003.

Overall, the question of whether the targets are achievable is being debated widely. For example, John Christensen and Jay Paul Wagner of Menas Associates recently stated: "the scale and pace of liberalisation of the EU electricity markets raises serious questions about whether these targets are achievable. Price competition between established producers and short term price volatility in the hydrocarbons sector do not provide the right incentive mix for investment in energy efficiency or cleaner generating capacity".

Hence, if targets are being questioned, if wind farms are blocked, if initial momentum slips and apathy sets in, it will be interesting to see if, in the coming years, the EU is forced to introduce mandatory targets, especially since (again, given the current political climate) the issue of securing the EU energy supply is becoming increasingly important.

Support schemes

Member States operate different mechanisms of support for renewable energy sources at a national level, including green certificates, investment aid, tax exemptions or reductions, tax refunds and direct support schemes. The Directive requires the Commission (without prejudice to Articles 87 and 88 of the [European] Treaty) to review the success of disparate national support schemes four years after it comes into force - one year earlier than proposed in the draft.

Then, if it is deemed necessary, the Commission must prepare a proposal for a support scheme framework, which should:

• "contribute to the achievement of the national indicative targets";

• "be compatible with the principles of the internal electricity market"; and

• "take into account the characteristics of the different sources of renewable energy, together with the different technologies, and geographical differences".

In addition, the proposed framework should be simple, cost efficient and have provision for a sufficient transitional period of at least seven years.

Guarantee of origin

As with the draft, the new Directive will introduce a "guarantee of origin system". Hence, Member States are obliged to appoint one or more independent bodies (only one body was proposed in the draft) to certify that the electricity in question came from a renewable energy source. The draft also stated this body would issue the guarantees, whereas the adoptive text states the body will "supervise the issue of such guarantees of origin". It could be interesting, therefore, to see how each State decides to interpret this revised text.

The Directive also recognises the importance of Member States introducing appropriate control procedures in the administration of the system, to avoid problems relating to fraud. Certificates are to be mutually recognised by Member States - should a State refuse to do so, it can be forced to do so by the Commission.

Article 5 of the directive stipulates that the guarantee of origin certificates must, in the case of hydroelectric installations, state the capacity of the plant.

Administrative procedures

Major barriers to the further development of electricity from renewable sources in the EU are the administrative and planning procedures that potential generators must face. Hence, each Member State3 is required by Article 6 of the Directive to evaluate and produce a report upon the existing legislative and regulatory frameworks in place, with regard to the authorisation procedures which are applicable to production plants for electricity from renewable sources.

The report should look at ways of reducing barriers to the increase in production of electricity from renewable energy sources, as well as streamlining the procedures at the appropriate administrative level. The report should also consider ways of ensuring that these rules are "objective, transparent and non-discriminatory, and take fully into account the particularities of the various renewable energy source technologies".

This report must be published by 27 October 2003, and will be used by the Commission in the compilation of its summary report as detailed in Article 8 of the Directive.

Grid access

The draft Directive introduced a compulsory obligation on Member States to ensure transmission system operators and distribution operators give renewable energy priority access to the grid system. However, this requirement has now been softened somewhat by the wording "only in so far as the operation of the national electricity system permits".

However, in line with the draft:

l Member states will have to either establish a legal framework or make operators establish and publish their rules on how costs should be apportioned with respect to issues such as grid connections and reinforcements. These should "be based on objective, transparent and non-discriminatory criteria". Further, "where appropriate, Member States may require transmission system operators and distribution system operators, to bear [these costs] in full..."

• Transmission and distribution system operators must provide a new producer of renewable energy, wishing to be connected, with a comprehensive and detailed estimate of the costs associated with the connection.

• A procedure has to be established for the allocation of costs resulting from systems installation - this must be allocated between all RES producers who will benefit from each respective installation.

Finally, with respect to grid access, the adopted Directive has introduced the following obligations:

• Transmission and distribution costs should not discriminate against electricity from renewable energy sources. And

• Realisable cost benefits, eg from the usage of a low-voltage grid, should be reflected in the amount charged for transmission and distribution of electricity from plants using renewable energy sources.


The Commission is required by Article 8 of the Directive to compile a summary report on its implementation, by 31 December 2005 (one year later than proposed in the Draft). This will be based on the reports of Member States created in accordance with Article 3 and Article 6 of the Directive. Subsequent reports will be compiled every five years thereafter.

These reporting requirements are a little stronger than under the draft, which required a summary report no later than 31 December 2004 and a final report submitted no later than 1 January 2009.

Both draft and finalised version, however, require the Commission to submit further proposals, along with the reports, if it is deemed appropriate.

To comply, "Member States [must] bring into force the laws, regulations and administrative provisions necessary to comply with this Directive not later than 27 October 2003".

Targets for electricity generated from renewables (%)

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