EC Recommends Gradual Abolition of Renewable Energy Subsidies
The European Commission has issued guidelines to the governments of EU Member States on renewable energy support schemes.
The Communication argues that the need for state intervention in renewable energy, both wind and solar, should be revised in view of the technological progress, falling investment costs in solar panels, and expanding production.
The EC provides guidelines on the reforms to support schemes for renewables.
The Communication recommends awarding financial support only when it is necessary to make 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.
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.
Lastly, EU Member States should better coordinate their renewable energies strategies to keep costs low for consumers - in terms of energy prices and taxes.
The EC argues that Member States should organize discussions on how to organize and finance back-up-capacities, in cases when the sun is not shining and the wind is not blowing, in order to guarantee that electricity is produced in sufficient quantities to deliver energy to consumers and keep the electricity grid stable. The Commission cites coal and gas power plants as examples for back-up-capacities, adding that they are flexible enough to be turned on and off whenever needed.
The Communication gives guidance on how these back-up capacities can be designed in a cost-efficient way and take full advantage of the European market.
Firstly, before deciding on capacity mechanisms, governments should first analyze 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 of EU Member States 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, according to the guidelines.
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