Wind group calls for level playing field for renewables
BRUSSELS, Belgium, 2004-11-24 Refocus Weekly
It is premature for Europe to force green power into a continental market framework until competition is more effective and the distortions which discriminate against renewable energy are removed.
The European Wind Energy Association supports the intention to eventually
adopt support mechanisms for green power that are compatible with an undistorted
market, but any shift to a EC-wide mechanism must be well prepared and follow
after effective competition in the internal power market has been achieved, the
group says in a position paper. Experience shows that even small adjustments to
a framework can have a profound negative effect on the markets for wind power
and other renewables, and a dramatic shift in all frameworks would “jeopardise
national renewable targets and undermine investor confidence.”
“Given the many interactions between the market for renewable electricity and
the Internal Electricity Market, effective competition in the latter must be a
precondition for fair and effective competition in renewables,” says Corin
Millais of EWEA. “Changing 25 national systems now would put European
leadership in wind power technology and other renewables at risk.”
The European Commission must file an analysis on the Renewables Directive by
next October, showing the experience of different mechanisms and assessing the
success and cost effectiveness of support systems in promoting consumption of
electricity produced from renewables.
Competition is “far from being effective” in the European Internal
Electricity Market, where 95% is based on conventional power sources and 5% on
new renewables, including 2.4% from wind. “There are numerous distortions in
the 95% conventional electricity market” and EWEA warns that “a hasty move
towards a harmonized EU-wide payment mechanism for renewable electricity would
put European leadership in wind power technology and other renewables at
risk.”
Successful frameworks require a good payment mechanism and effective policies to
remove barriers to grid access, barriers in the form of administrative
procedures and encourage public support, and there is “little evidence of
effectiveness beyond feed-in tariffs and premiums,” it notes. “It is too
early to draw final conclusions on the potential effectiveness of the full range
of policy options available,” and identification of the key reasons why
markets fail or are successful is crucial.
There are existing cross-border trade problems with additionality and double
counting of renewable electricity production, but making 2010 targets binding
and setting ambitious binding targets for 2020 will increase market penetration
of renewables. Among the ten main requirements for any future Community-wide
mechanism to create a sound investment climate for renewables are the principle
of ‘polluter pays,’ high investor confidence, high effectiveness in
deployment of renewables, facilitating a smooth transition, encouraging local
benefits, and transparency to avoid fraud and free riding.
“No electricity generation technology currently exists that completely avoids
pollution,” it explains. “Even production of renewable energy impacts the
environment to a very small degree. So, in practical terms, the second best
option is to make electricity generators pay for the environmental impacts they
cause.”
It estimates that the cost of generating electricity from coal or oil would
double if external costs, including damage to the environment and health, were
taken into account. One study estimates that these costs amount to 2% of GDP in
Europe, or up to Euro 170 billion, not including the cost of global warming and
climate change.
“If those environmental costs were levied on electricity generation according
to their impact, many renewables, including wind power, would not need any
support,” it notes. “If, at the same time, direct and indirect subsidies to
fossil fuels and nuclear power were removed, the need to support renewable
electricity generation would seriously diminish or cease to exist.”
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