EU unveils power market reform to boost renewables

Reuters News
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Posted: Nov 30, 2016 8:20 AM

By Alissa de Carbonnel

BRUSSELS (Reuters) - EU regulators set a path on Wednesday for renewables to power half of Europe by 2030, with plans to cut energy use, phase out subsidies for coal and enforce greater cross-border trade.

The European Commission's the 1,000-page draft law seeks to meet goals on cutting emissions and adapt Europe's grid to digital technologies and wind and solar power that is transforming industry and challenging utilities.

It sets Brussels on a collision course with governments that want to insure against black-outs by subsidizing conventional power and maintain sovereignty over pricing and grid operation.

Facing a crisis of confidence over Britain's vote to leave the bloc, the EU executive is seeking to champion consumer rights, pledging to lower prices, streamline billing and remove barriers for households to potentially sell surplus electricity from resources such as solar panels.

"Today there is not enough flexibility, the price signals are not working, we don't have enough cross-border exchanges," Commission Vice President Maros Sefcovic said. "The consumers are coming last in the line."

While wholesale power prices have plummeted, consumer bills have risen by around 3 percent a year across the bloc since 2008, EU data shows.

Many EU nations are stuck, Sefcovic said, due to vested interests struggling to adapt to new competitors and the bloc's climate pledge to cut emissions by 40 percent by 2030.

Poland has objected to provisions that could threaten its coal-mining industry, while Germany is wary of curbs on priority treatment for wind and solar power.

The bill sees governments ceding power to the EU's energy regulatory agency ACER to rule on disputes over the shape of single-price trading zones like that which covers joint German-Austrian power markets.

Local grid operators have voiced their own doubts over obligations for greater regional cooperation.

ENERGY SAVING

In an effort to reduce dependence on imports of fossil fuel and lighten the load on the grid, the EU executive set a binding target to cut energy use by 30 percent by 2030.

The move was welcomed by some environmental campaigners but still falls short of a call by European lawmakers for a 40 percent reduction. Analysts said the target could push down carbon permit prices.

The proposal - which still needs approval by member states and European Parliament - also takes aim at subsidies for fossil fuels by setting stricter limits on support schemes for reserve power, known as capacity mechanisms.

They would have to be open across borders and to innovative providers who offer capacity via schemes that pay firms to ramp down consumption in so-called demand-side response.

The bill attaches a limit of 550 grams of carbon dioxide per kilowatt-hour to capacity mechanism for new plants from 2021 - ruling out their use for inefficient coal-fired stations.

Green groups, however, said an EU-wide renewable energy goal of 27 percent by 2030 lacked ambition and was undermined by weak rules forgoing nationally-binding targets.

Also at issue are plans to scale back the right of renewable energy producers to be the first to sell into the grid for new projects in EU nations such as Germany where renewables already make up a large share of the power mix.

In a move to allay concerns that changes could stifle investment, the bill maintains "priority dispatch" for existing and small-scale assets. Europe's wind lobby called the proposal "more good than bad".

Among the biggest losers are farmers producing crop-based biofuels, with the ethanol lobby saying it felt "betrayed". The Commission has taken a U-turn on policies to promote them; they have been criticized for taking land that should be used for food.

The draft law caps their share of fuels used in transport to 3.8 percent in 2030, envisaging instead electrification of transport and advanced biofuels from agriculture or forestry industry waste reaching 6.8 percent.

(Additional reporting by Robert-Jan Bartunek in Brussels and Susanna Twidale in London; editing by Susan Thomas)