EWEA Opinion:
A Future EU Directive on Access of Electricity from Renewable Energy Sources to the Internal Market in Electricity

Summary

Objective
The European Wind Energy Association (EWEA) fully supports the strategic aim of the European Commission to double the share of renewable energy in the energy mix of the Union from the present 6% to 12% by 2010.

Purchasing Obligation
EWEA believes that a binding obligation should be placed on electricity suppliers to purchase an agreed minimum share of renewable generation as an appropriate mechanism within a fully liberalised electricity market. The purchasing obligation should be set at a minimum of 8% of average annual electricity consumption by 2005, and at least 4 percentage points more than the share of electricity from renewable energy sources in 1996.

Power Purchasing Agreements
The wind industry requires long term power purchasing contracts at a price which is determined at the outset and fully recognising the real value and the positive effects of renewable energies. EWEA is concerned that this is not sufficiently taken into account in the current draft proposal for a Directive.

Liberalised Electricity Market
It will take some time before the Electricity market is fully liberalised. Furthermore, the Directive should take into account that the rate of liberalisation for the renewables sector can only be in step with the liberalisation of the conventional electricity industry. This sector is currently distorted and unbalanced to the disadvantage of renewables.

Member States
Until the market is fully liberalised, an obligation should be placed upon individual member states to introduce or maintain where they already exist appropriate market support mechanisms which best suit their individual circumstances.

National Renewable Energy Regulator
A renewable energy regulator should be appointed in each member state to ensure that the requirements of all aspects of the Directive including planning, grid connections and market mechanisms are properly implemented. The implementation of the programmes by member states should be reviewed periodically.

Competition
EWEA recognises that the competitiveness of renewables will be improved through competition within each technology. Competition should not be introduced between different renewable technologies until they are fully mature and competitive in the market.

Electricity Grid
Grid operators should extend and reinforce the grid to the areas where electricity from renewables can be produced, just as they are obliged to modify, extend and reinforce the grid to meet the electricity demand.

Flexibility
The application of the Directive must be flexible. Should the Directive be too ambitious in demanding long-term market reforms, it is likely that this could destroy present renewable energy markets.

Preamble
The European Wind Energy Association (EWEA) fully supports the strategic aim of the European Commission set out in the White Paper on renewable energy. In the White Paper the Commission proposed to double the share of renewable energy in the energy mix of the Union from the present 6% to 12% by 2010.
This policy is essential in order to meet the Union's commitments in its environmental and energy policies, both internally and in relation to its external obligations undertaken in Rio, Kyoto, and Buenos Aires.
Electricity generation is one of the major contributors to emissions of CO2, SO_X and NO_X. Therefore, electricity savings and increased generation using renewables are necessary to ensure the success of this policy.
EWEA believes that in order for the European target of 12% of overall energy supply to be met by renewables by 2010, each member country should be obliged to produce an increasing share of its electricity or energy supply from renewable sources.
In order to realise the Commission's target for renewable energies of 12 % by 2010 against the background of countries moving towards full liberalisation of their electricity industries at differing paces over the period, and 40.000 MW installed wind capacity, the White Paper on Renewable Energies has already presented ideas of how to ensure "fair access for renewables to the electricity market". Chapter 2.2.1 suggests the introduction of guidelines on the minimum price to be paid to a generator from renewable energy sources.
The minimum price may be determined either by national/local governments or by competition, and must be sufficient to enable projects to earn a reasonable rate of return.
The wind industry requires long term power purchasing contracts at a price which is determined at the outset and fully recognising the real value and the positive effects of renewable energies. However, EWEA is concerned that the current draft proposal for a Directive does not take this into account sufficiently.
Even if the costs for wind generated electricity have declined very significantly during the 1990s, new renewables are generally not yet competitive with conventional electricity generating technologies without taking the environmental benefits of renewables into account. However, to decrease costs, it is essential to ensure volume production and a long-term learning curve experience for the industry.
In each member state, a renewables regulator should be appointed to ensure that the requirements of all aspects of the Directive including planning, grid connections and market mechanisms are properly implemented.

1 Renewables Purchasing Obligation
The EWEA welcomes the proposal for a binding obligation to be placed on electricity suppliers to purchase an agreed minimum share of renewable generation as an appropriate mechanism within a fully liberalised electricity market. It is clear, however, that it will be some time before a fully liberalised market has been achieved in all countries of the EU. Until such a market is in place, the obligation should be placed upon individual member states using mechanisms which suit their individual circumstances.
In EWEA's view the purchasing obligation should be set at a minimum of 8% of average annual electricity consumption by 2005, and at least 4 percentage points more than the share of electricity from renewable energy sources in 1996.
It is clear that autoproducers would have to be included in any purchasing obligation upon electricity suppliers, since otherwise they would have the ability to opt out of the support system, leaving the remaining electricity consumers to bear the cost burden alone.
As defined in the preamble EWEA believes that a binding percentage obligation would not work successfully unless a minimum price level is established. Such arrangements are fully in line with article 130r (2) of the EU Treaty, as well as with the Directive for an Internal Electricity Market.
Furthermore, the Directive should take into account that the rate of liberalisation for the renewables sector can only be in step with the liberalisation of the conventional electricity industry. This sector is currently distorted and unbalanced to the disadvantage of renewables.

1.1 Review Mechanism
EWEA believes it is important that the progress in filling the binding targets by member states be reviewed periodically, and that member states submit renewables programmes which demonstrably are able to achieve the targets set by the Union.

2 Renewables Support Systems
2.1 The Need for Workable Support Mechanisms
In order to achieve the target, each member state should introduce or maintain where they already exist appropriate market support mechanisms which suit their individual circumstances in the short and medium term. Indeed, there is a need for flexibility in applying the Directive. If the Directive is too ambitious in demanding long-term market reform here and now, it is likely that present renewable energy markets will be destroyed in the process.

2.2 Competition among Renewable Producers vs. a Case for Subsidiarity
EWEA recognises the Commission's concern that the competitiveness of renewables be improved through competition between renewables producers within each technology, with a view to ultimately creating an internal market for renewable energy. Competition should not be introduced between different renewable technologies until they are fully mature and competitive in the market. This can only be effective across all member states once fully liberalised electricity markets have been established. Offshore wind energy should be considered a different technology than onshore wind energy due to substantially different circumstances, as stated in the White Paper. The Commission should note however that there is already fierce competition between wind turbine manufacturers and wind farm developers throughout Europe.
At present, prices for renewables in general and wind in particular vary widely between member states. Price variations are mainly, but not exclusively a reflection of differences in resource base (average wind speeds), varying population density, differing accessibility of sites, and varying needs for grid reinforcement. They also reflect very real differences in social priorities regarding considerations of landscape architecture, e.g. a preference for dispersed development, preferences for local community involvement in ownership with a corresponding necessity of reducing risk for small investors. Finally, the differences in prices reflect differing levels of ambition as to the degree of wind penetration in the grid.
A system which solely seeks to minimise the cost of renewables across the European Union as a whole would mean that wind energy would only be concentrated in a few areas of the Union. This would be unacceptable to the public. As we mention below, there are other considerations than energy policy and market liberalisation which play an important role in the shaping of national renewables policies. These issues range from employment to planning considerations.

2.3 The Experience with Competitive bidding Systems
Bidding systems such as the NFFO system operated in the UK have been successful in reducing the cost of energy. This has been partly due to the competitive element these systems have introduced, but also due to increasing investor confidence in wind energy technology and reduction in turbine prices, resulting from increasing volumes of production in other markets around the world.
Competition to achieve minimum electricity prices has tended to concentrate developments in high wind speed areas. This has in some cases resulted in planning difficulties which has constrained the number of projects reaching realisation. For bidding systems to be most effective, they should be combined with a planning system which requires local authorities to allocate zone for wind farm developments, in order to avoid the concentration issue.

2.4 Guaranteed Price Feed-in Schemes
The guaranteed feed in schemes are presently extremely successful in bringing about a significant growth in wind generating capacity in Germany, Denmark, and Spain (90% of the European wind turbine manufacturing is located in these countries creating many thousands jobs).
The basic advantage of these schemes is the certainty it gives to investors at the time they make their investment decisions. Another advantage is that the schemes make it easier to avoid concentrated wind park developments in a single area, and that they make individual or co-operative ownership possible. This has both the advantage of easing the social consensus necessary to obtain local planning permission (discussed further below), and from a technical point of view ensuring a better dispersion of generating capacity in the grid (embedded generation).
Since Germany, Denmark and Spain account for more than 80 per cent of the total wind capacity installed in the EU, and for three quarters of the World market for turbine installation in 1997, it would be extremely hazardous to disallow these guaranteed price feed-in schemes without reliable evidence that other support systems would work as well.

2.5 Coexistence of Different support Mechanisms
EWEA believes that with the present diversity of systems within the Union, different support systems can coexist without creating any noticeable distortion of competition, and that they must be allowed to do so. In the event of a change of support system in a member state in accordance with the Directive, any bona-fide investors must be compensated for any reduction in anticipated income at the time the project was first commissioned.

3. Certification of Electricity from Renewable Energy Sources and Green Energy Pricing
EWEA supports an official green energy labelling scheme for the European Union. Green energy labelling would be a necessity to ensure the operation of a mandatory renewables purchasing requirement, in any case, and it would be useful to protect voluntary green pricing schemes against fraud.

3.1 Green Pricing Schemes
Although the EWEA believes that whilst voluntary green pricing schemes will only bring a minor contribution to total demand for new renewables, it is important to protect citizens against fraud and manipulation in this context. It should therefore be ensured that any voluntary purchases of renewables generated electricity will be additional to the requirements set by the Directive's mandatory purchasing requirements.

4 Types of renewables to be Included in the Directive
The Commission should take note of the fact that electricity from non-organic waste cannot be considered a sustainable energy source. Instead, geothermal electricity should be included in the Directive.

4.1 Need for Separate Targets and for Differentiated Pricing for Different Renewable Technologies
The Directive would have to provide separate minimum targets for each technology. In that case, however, some periodical review mechanism would be necessary in order to avoid unwarranted distortion of competition between the technologies.
Different renewable technologies are at different stages of commercial development, e.g. offshore wind energy compared to onshore wind energy, energy crops, etc. It is therefore necessary to establish differentiated pricing mechanisms, and eventually, separate minimum targets for different technologies. Otherwise only one or two technologies will benefit from large-scale development.

5 Power Purchasing Contracts
Wind energy is a different commodity from traditional fossil fuel or nuclear generated electricity. Although total energy output is fairly stable and predictable from year to year, the resource is not dispatchable, a fact which is recognised by the Electricity Directive which gives priority access to the grid for wind and other renewables. The technology may be dispersed in the grid thus giving the additional advantage of lower grid losses.
Since ownership tends to be very dispersed among independent power producers, their marketing muscle and consequently their ability to forge standard contracts for this commodity may be assumed to be very limited. Therefore, there is a strong case for public regulation of electricity contract terms for wind energy and other renewables. This is even more true since the technology is very sensitive to capital costs, and has no possibility of adjusting output in accordance with current prices on the market, once a turbine has been installed.
In EWEA's view, a Commission proposal for a Directive must not exclude the use of market stabilisation mechanisms to ensure stable and predictable electricity prices which reflect the value of environmental benefits, and the benefits of distributed generation, cf. a base price plus an environmental bonus as mentioned in the Commission's White Paper on renewables.
The wind industry needs long term power purchasing contracts at a price which is determined at the outset. All contracts entered into should have a minimum term to ensure that finance for the projects can be obtained and that investors' interests can be protected.

6 Need for Streamlined Planning Procedures
Wind energy conversion is a resource-based industry, which relies heavily on the local microclimate. The best wind resources in member states tend to be concentrated in comparatively remote regional development areas. Although the size of the resource base per se is not a constraint on industry expansion in Europe, landscape architecture and public planning considerations are important constraints on development.
Successful large-scale deployment of wind energy requires streamlined and positive procedures for authorisation. The Danish model which has subsequently been taken up in Germany in a modified form has been quite successful: National, regional, and local planning has been co-ordinated to create development plans for sites suitable for wind turbine installation. This has enabled wind turbine installations to proceed with a fast-track planning procedure.
EWEA recommends such a procedure, including a "single counter" for filing applications and for co-ordinating public authorities' processing of applications.

6.1 The Importance of Social Consensus - linked to Financing Mechanisms
One of the important elements in gaining public and political acceptance for siting wind turbines is local influence through local planning and local ownership, such as has been the case in the Danish and German wind co-operatives. Likewise, wind energy development has brought prosperity to farmers and an increased tax base in remote municipalities in member states, thus assisting regional development. The wind industry and the national wind turbine owners' associations believe that these elements are important to ensure the success of large-scale implementation of wind energy in dispersed locations throughout the Union.
It is therefore important to ensure that the future financing mechanisms for wind energy encourage local participation in ownership.

6.2 Employment Considerations: Critical Mass per Geographical Market
Employment plays an important role for the public and political acceptance of renewables. For some renewables, like wind energy, the vast majority of expenditures are incurred up front at the moment of investment, whereas operating costs are extremely low. This means that an aggressive investment policy for renewables will bring immediate employment benefits in regions where wind turbines are manufactured or installed.

7 Grid System Issues
The present electricity grid in member states was built and optimised to accommodate large fossil fuel fired or nuclear power plant. It is highly centralised, often located near cities of industrial centres. The best wind resources, however, are generally located in areas that are unattractive for city or industrial development. These areas are therefore generally equipped with a weak electrical grid, and planning constraints often prevent wind turbine operators to optimise the size and location of their installations. The excess costs are thus to a large extent the result of public planning preferences.
The future European sustainable electricity grid will have to be much more geared towards smaller and more dispersed generating units located where the renewable resource is to be found. Just as grid companies are obliged to modify, extend and reinforce their grid to meet electricity demand, they should be obliged to extend and reinforce the grid to the areas which can provide a sustainable, safe, clean, and socially acceptable energy supply. It should therefore be an obligation for the transmission and distribution system operators to provide the necessary grid to the suitable areas.
Such a system operates in Denmark, where grid companies are obliged to provide a grid connection point for any publicly planned wind turbine development area of at least 1.5 MW rated power capacity.
The large scale development of wind power requires using new areas with weak electrical grids. The first project in a new area cannot be expected to carry the grid reinforcement costs because this will make the project uneconomic and thus act as a bar to development. It should therefore be an obligation for the transmission and distribution system operators to provide the necessary grid to the suitable areas, the cost of which should be passed onto consumers or publicly funded.