Feature: With renewables subsidies coming to an end, are renewables ready to stand on their own feet?
Renewable energy sources (RES) bring various benefits. But subsidies to support RES are also a significant cost to consumers. For years, CEER has called for EU legislators to bring RES fully into the market (with proper accounting for externalities) and in many ways Europe’s (2019) Clean Energy Package of legislation seeks to do that.
In this short CEER Paper on Unsupported RES, energy regulators examine the challenges for RES when the supports stops and the business strategies for RES running without any support or subsidy.
Background – what is the share of Renewables in Europe?
To reach Europe’s 20% RES target (measured in terms of the RES share of energy consumption) by the year 2020, as well as in the past to build-up to scale what was once a small industry, many countries have supported RES (e.g. through subsidies) to boost their renewables penetration. From 2004 to 2018, RES increased continuously (from 9.6 % to 18.9 %) and 14 EU Member States even doubled their RES share (source: Eurostat data). Europe is on track to meet the 20% target 2020, and the RES target now is 32% by 2030.
The adoption of EU-wide RES targets coupled with binding national targets set under the Renewable Energy Directive and supporting policy measures has resulted in strong growth in renewables across Europe. RES has reached a level of maturity. Renewable energy accounted for 30.7 % of gross final electricity consumption, 19.5 % of energy consumption for heating and cooling, and 7.6 % of transport fuel consumption in the whole EU (source: European Environment Agency).
RES support schemes are a significant cost to electricity consumers
Every two years, CEER reports on the level and cost of support schemes for RES across Europe (with country data on the amount of RES support, the type of support instrument and the support expenditure by technology).
The last CEER Status Review of Renewables Support Schemes (“CEER RES Status Review”), published in December 2018, shows that the weighted average subsidy paid to renewable generators, on top of the wholesale price, was circa €96.29/MWh across 25 countries for 2017. RES subsidies are a significant and rising part of electricity consumer bills in Europe, having risen from about 6% of average bills in 2012 to 14% in 2017.
Hence, it is in the interest of consumers to achieve RES deployment in the most cost-effective manner. Understanding the different approaches to RES support can help to inform and improve future support scheme designs, thereby reducing costs for consumers.
How are Europe’s renewables subsidised/supported?
Four types of support schemes were mainly in place in Europe, namely:
- Feed-in tariffs (FiTs);
- Feed-in premiums (FiPs);
- Green Certificates (GCs); and
- Investment grants.
CEER has also advocated that RES support schemes, where needed, should be market-based and market responsive. CEER has called for Member States to move away from guaranteed FiTs to more market-based schemes.
Key objectives of the new Paper on Unsupported RES
- To assess the magnitude of RES installations which will be running without support, notably after their support time has ended, in the coming years;
- To identify the upcoming regulatory challenges and, if needed, the changes to the legal framework; and
- To show the alternative business strategies for RES installations running without support.
Findings of the new CEER report on unsupported RES
Key findings of the newly published CEER Paper on Unsupported RES are:
- Only a small share of RES installations is not being supported;
- An increasing number of supported RES installations are reaching the end of their support time
- The largest share of unsupported RES installations has never been supported (much of which is hydro);
- There is a shift towards market-oriented support schemes (FiP or green certificates) for newly installed RES capacities.
- For onshore wind and solar, new (larger) capacities are already being planned and installed without any direct financial support;
- The legal framework governing RES installations has so far not been adapted in Member States; and
- There are many different strategies for unsupported RES (detailed in the paper).