Montag, 11. November 2013

EU Commission publishes guidance for state intervention in electricity

(LEXEGESE) - On 5 November 2013, the European Commission has presented a Communication which gives guidance to Member States on how to make the most of public interventions, how to reform existing ones - especially renewable energy subsidy schemes - and how to effectively design new ones. This concerns back-up capacities for renewable energy, mostly fossil fuel energy which is produced when there is no sun or wind.

According th the European Commission, if public interventions are not carefully designed they can severely distort the functioning of the market and lead to higher energy prices both for households and businesses. The aim of this Communication is therefore to give the Member States the necessary information, guidance and best practice in hand to make good choice for their national schemes.

While the Communication published is not a legally binding act, it does set out the main principles which the Commission will apply when assessing state interventions relating to renewable support schemes, capacity mechanisms or measures to ensure consumer demand response. They are therefore relevant to the future enforcement of EU state aid rules or EU energy legislation. The Commission will also consider whether to propose legal instruments to ensure that these principles are fully implemented.

Renewable energy support schemes

These principles are best practice in the EU and might be used by Member States planning to reform their schemes:
  • Financial support should be limited to what is necessary and should help making renewables competitive.
  • Support schemes should be flexible and respond to falling production costs. As they mature, technologies should be gradually exposed to market prices and eventually support must be fully removed. In practical terms this means that feed in tariffs should be replaced by feed in premia or other support instruments which give incentives to producers to respond to market developments.
  • Governments must avoid unannounced or retroactive scheme changes. Investors' legitimate expectations concerning the returns on existing investments must be respected.
  • Member States should better coordinate their renewable energies strategies to keep costs low for consumers - in terms of energy prices and taxes.

Back-up capacities for Renewable Energy

The Communication gives guidance on how back-up capacities can be designed in a cost-efficient way and take full advantage of the European market:
  • Before deciding on capacity mechanisms, governments should first analyse the causes for inadequate generation.
  • Secondly, they should remove any distortions that may in the first place prevent the market from delivering the right incentives for investment in generation capacity. Such causes can be: regulated prices, high subsidies for renewable energy.
  • Governments should also ensure that renewable electricity producers react to market signals and promote flexibility on the demand side, for example by promoting different tariffs to consumers and therefore giving an incentive to use electricity at other times than peak times.
  • Any back-up capacity mechanism should not be designed having only the national market in mind but the European perspective.

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