| EU Renewable Energy Market Deployment Policies National strategies are important elements that have effectively promoted private investments in renewable energy in the EU. Most existing successful national RE strategies have overarching goals of achieving various benefits in renewable energy development such as security of energy supply, environmental protection, climate change mitigation, renewable energy industry development and sustainable development.
Setting of national renewable energy targets is one of the key components of renewable energy policy strategies in the EU. The European Union has prescribed an indicative target of 12% share of renewable energy in the total energy mix and 22 % in the total electricity consumption in 2010.
In very broad terms policies adopted by EU countries can be grouped in 7 main categories i) research, development and demonstration incentives; ii) investment incentives; iii) tax measures; iv) incentive tariffs; v) voluntary programs; vi) mandatory programs or obligations; and vii) tradable certificates. Each country moreover employed a combination of these policies. Figure 1 presents the evolution of these policies since the 1970s and reflects among other things the increased market orientation or policies moving from regulation towards economic policy tools.
Figure 1. Evolution of RE Policy Instruments in Developed Countries
 Source: IEA (2004) For more than 30 years, EU member countries have introduced various policies to promote renewable energies. In the early 70s, most European countries started to allocate funds for research, development and demonstration (RD&D) of renewable energy technologies. Investment incentives and tax measures were also implemented around the same time. Denmark, France and Italy were among the first to institute these measures in the late 1970s while other European countries started to adopt these instruments only in the late 1980s.
Spain and Denmark were also the first to implement guaranteed price systems in the late 1970s. During 1988-1994, most European countries introduced feed-in tariffs, which started a new wave in policy intervention. Many governments tried to reinforce feed-in tariffs with investment incentives and tax measures.
Switzerland launched the first voluntary programme in 1991, and six other European countries, the US and Japan developed their own voluntary programmes between 1993 and 2003.
Switzerland was also first to establish a target from renewable energy sources in 1991. Denmark and Finland followed in 1993, while other European countries, with the aim to open and widen renewable energy markets, introduced obligations and quota-based measures in the late 1990s. In 2001, the EU issued the Directive for Electricity Produced from Renewable Energy Sources, which set indicative targets requiring member countries to adopt relevant national policies.
Most recently, renewable energy certificate systems were introduced in Europe. The Netherlands was the first to utilize the certificate system to efficiently achieve its renewable energy targets. Italy followed in 1999 while the other European countries established their tradable certificate systems between 2000 and 2003.
Presently, feed-in tariffs, obligations and tradable green certificates emerge as the main policy instruments in the EU. Investment incentives and various tax measures do, however, remain important mechanisms that stimulate investments on renewable energies.
Feed-in tariffs encompass various schemes that set preferential rates or pay premiums to electricity generated from renewable energies. Feed-in policies in some countries comprise a range of renewable energy technologies while in others cover only one or two technologies. Tariffs are often differentiated according to technology types, sites/location of power generation, year of operation, and season of the year.
In the UK, Ireland, France and Norway, the guaranteed price rates are set through competitive bidding. European countries that adopted feed-in tariff laws include Austria, Czech Republic, Denmark, Estonia, France, Germany, Greece, Hungary, Latvia, Lithuania, Portugal, Slovak Republic, Slovenia, Spain, and Sweden. Feed-in tariffs in Europe stimulated investments in wind power, biomass, small-hydropower and solar thermal power generation.
Obligations include schemes that mandate energy suppliers to provide a set quantity or a percentage of their supply from renewable energies. These schemes do not make distinctions between different renewable energy sources and the market determines which renewable energy resources will be selected. Obligations are common in Australia, Europe, Japan and North America. In Europe, various forms of obligations or quota systems are implemented in Belgium, Italy, Poland, Sweden and the UK.
The use of tradable green certificates is very recent. Under this type of scheme, a certificate is created to represent the green attribute of renewable energy and is traded separately from the electricity product. The certificates could be used to record compliance with renewable energy quota schemes or can be sold in the voluntary green power markets. The Netherlands was the first country to introduce tradable certificates in conjunction with its renewable energy target, but shifted back to a feed-in system in 2004.
Some developed countries have also introduced environmental and carbon taxes to reduce energy market distortions and to partly reflect external costs associated with conventional fuel production and utilization. Germany, Denmark, Italy, the Netherlands, New Zealand, Norway, Sweden, Switzerland and the UK have applied environmental or carbon taxes and charges. Except Germany, energy generation from renewable energy sources are exempted from these charges. These levies are revenue neutral and revenues are partly (in some countries fully) used to provide investment incentives to renewable energies and partly returned back to the industry in various pathways. | |
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Last modified 10/09/05
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