The proposed EU renewables directive

Response to Walter's comments on RE directive

Dear Walter,

Thank you for these interesting comments. Here below my answers:

1) Feed-in tariffs.

Feed-in tariffs are calculated, in general, to provide project developers with similar profitability, regardless of the technology. The reason why photovoltaics gets more than 10 times the wind subsidy is because investment costs are much higher, so the generation cost of one kWh (when including the depreciation) is also much higher. The subsidy to get photovoltaics competitive with market prices is still the highest among the most common renewable technologies.

That means that a Member State, in order to control the budget allocated to RE development, has to determine the global amount of installed power for each technology, taking into account the different subsidy levels required. Companies will make R&D on those technologies with great market potential (in other words, on those technologies for which the target installed power is high enough).

2) Regulatory stability

Indeed, visibility and an atmosphere of trust is absolutely required for project developers. Otherwise, despite good promotional schemes, renewables will not develop, especially those needing important subsidies (for instance photovoltaics). This feedback has been done to the Commission, that prepared a Directive with clear articles dedicated to remove regulatory and administrative barriers. Fortunately, the objectives set to 2020 by the Directive are binding, so “government-change-proof”.

In general terms, when a feed-in tariff is implemented, it is fixed not only the subsidy level, but a number of years of commitment to maintain the subsidy. Only retroactive laws could cancel the previous commitment.

3) Guarantees of Origin transfer

Transferring Guarantees of Origin doesn’t imply physical electricity transfer. It is just the transfer of the RE share obligation between two countries. But from an electrical point of view, both countries should generate the electricity to cover their own needs.

I will use your example. Netherlands has to face a RE share increase from 2,4% in 2005 to 14% in 2020. At this stage, the government will carry out an assessment on the RE potential of the country and the global cost of reaching this 14% share using exclusively indigenous renewable resources. This assessment will show how it will be quite economical to develop XX MW of installed wind power, a few more expensive YY MW of installed biomass power, and clearly unaffordable to develop the missing ZZ MW to cope with the share target. Dutch government could, indeed, meet some difficulties to finance the RE share target.

At the same time, Portuguese government carries out its own assessment and finds that the RE potential at a reasonable price is much higher than the requested target. In this case Portugal could submit to Netherlands an offer for the development of ZZ MW of RE technologies at an affordable price. Dutch government could consider the possibility to comply with its targets in a way more economical than developing domestic RE resources, by buying GoO to Portugal. The consequence of this agreement would be a country (Portugal) with a high share of RE (above the binding target) and another country (Netherlands) with a low share of RE (below the binding target). The aim of the Directive is to generate the RE development there where it is more economical in the whole European space, without need of physical energy transfer among countries.

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