Policy context: Renewable Energy in Europe
Renewable Energy (RE) refers to “any energy resource naturally generated over a short timescale that is derived directly from the sun (such as thermal, photochemical and photoelectric), indirectly from the Sun (such as wind, hydropower and photosynthetic energy stored in biomass) or from other natural movements and mechanisms of the environment (such as geothermal and tidal energy).” (6)
Today, different forms of renewable energies offer solutions to all of society’s energy needs: electricity, thermal energy for heating and cooling, and fuels for transportation.
The benefits of renewables are manifold. Renewable energy sources (RES) are not threatened by depletion and will contribute to ensure our energy future beyond the availability of fossil fuels, as the resources they draw from are infinite and usually available for free (the wind, the sun, the flow of water). Therefore, most forms of renewable energy systems have very low operational costs.
Renewable energy production is CO2 neutral and does not destroy the atmosphere with harmful emissions, making it the energy form of choice for climate-conscious policymakers, and a means to prevent climate change induced by our heavily fossil-fuel-based energy system.
Finally, renewables are an indigenous source of energy that adds to Europe’s security of supply and helps drive down energy import dependency from its currently high levels (around 70%). RES do not need to be imported from potentially unstable areas outside of Europe, nor do they result in a cash-outflow. In fact, the development of renewables results in local value creation in the form of local investments and jobs. The decentralised nature of RES has potential for the creation of permanent jobs that are not threatened by globalisation, even (and especially) in structurally weak areas.
A region that has heavily invested in renewables will be able to enjoy the consequences of this political choice for decades through economic activity, local employment and a cleaner environment. These obvious benefits make renewables a prime sector for regional development policies.
1. Renewable Energy Technologies (RETs)
A wide variety of renewable technologies have been developed to meet our energy needs. Most of them have reached technological maturity, but continuous market deployment and R&D efforts are likely to result in further efficiency improvements and cost reductions. Since different RETs use different natural resources, there is almost always at least one RET that can be used in any given geography or climate zone.
Hydropower is responsible for the largest share of total installed Renewable Energy capacity in the world and is also one of the oldest, with hydroelectric dams being used for electricity generation since the late 1800s. Large hydropower installations (defined as installed capacity of over 10MW) can have significant environmental impacts and are not covered by EU RE support schemes. The benefits of pump storage are, however, undeniable: they provide on-demand additional generation capacity in peak electricity use periods, and can also store over-capacity at night when there is low energy demand. Hydropower installations are found around the world, with China becoming the world leader, holding 22% of world capacity. Most new large hydropower installations are in the developing world, with Europe instead refurbishing and modernising existing small hydropower (SHP) plants. (7)
SHP plants (installed capacity of under 10MW) usually consist of run-of-river schemes without dams, resulting in low environmental impact. Potential could be easily tapped by refurbishing and upgrading existing small plants, as new plants often suffer from lengthy permitting procedures and pressure from environmental groups that misperceive SHP as being environmentally invasive, despite state-of-the-art impact mitigation measures. SHP can be one of the most cost effective methods of generating electricity, as plants have a long life-span and although start-up costs are high, they have very low maintenance costs. SHP is slowly growing in Europe, with around 17,800 installations at present (40,517GWh) (8). In 2010, 45.7% of all RE generated in the EU27 was from large hydropower, and 7.8% from SHP. (9)
Wind power is the fastest growing electricity generation technology and in locations with good conditions, it is already cost-competitive. Since 2000, wind power has gained a growing share of the global market, with almost a quarter of all new power plants built being powered by wind. However, it is Europe that is the front-runner, with growth that has largely been driven by Feed-In-Tariffs. The current technological trend is to develop ever larger turbines, which produce greater amounts of energy. In offshore wind (OSW), turbines are installed near to the coast, but the technology is developing for deep offshore floating turbines to be built further out to sea where winds are stronger and visual impact is lessened. Challenges for wind energy include intermittency of wind and grid connection. There are plenty of opportunities for job creation in the manufacturing sector, as well as in installation and service provision along the entire supply chain. By 2025, wind energy is expected to overtake hydropower as Europe’s dominant RES. (10)
Biomass is a very flexible energy source that can be transformed into heat, electricity, liquid fuels (such as biodiesel) and biogas, depending on how it is converted and on what form of biomass is used. Raw materials come, broadly, from three strands: forestry, agriculture and waste (forestry, agricultural and biodegradable municipal solid waste). Conversion methods are combustion, thermo-chemical conversion, biochemical processes and physico-chemical.11 The most widely used conversion method is simple combustion to produce heat, and this is biomass’s main use, with around 95% of renewable heat coming from biomass combustion. Wooden logs and pellets are viable for small scale heating systems, but larger systems are able to use waste and refuse from the wood industry. Emerging technologies include the production of lignocellulosic ethanol, which uses only the wood of plants – rather than the edible parts, or energy crops – to produce ethanol that can be mixed with fuel or used in industrial processes, with other current efforts aiming at integrating so far unused biomass into the formal energy supply chain.
Solar energy can be used in a variety of applications. The production of electricity from solar power can be achieved through both concentrated solar power (CSP) and the use of photovoltaics (PV), while solar thermal collectors produce heat for both water and spatial heating. The PV sector has grown substantially since the 1990s, though Europe’s level of PV manufacturing has declined, with only one of the top 15 manufacturers now found in Europe. However, in 2011, the top five countries for solar PV per inhabitant were in Europe12 and of the 38.3GW of new energy capacity added in the EU27 that year, 21.5GW was solar PV.13 Trends include the emergence of concentrated PV cells to increase the yield of receptors, without increasing their size and surface area, and the integration of PV into roof tiles and other construction elements. CSP is mainly used in hot, dry areas with direct sunlight (i.e. deserts) that are unsuitable for agriculture, giving a boost to local economies. CSP plants are usually multi-MW installations, initially creating construction jobs, followed by service and maintenance jobs. The European CSP sector is the world leader, with Spain at the fore. Current trends aim to produce plants that can use thermal storage with phase-changing materials (PCM) to store heat and release it at night, so as to be able to produce electricity 24 hours a day and to act as a true base load (the minimum power supply needed to meet demand). Solar thermal is a technology that can be implemented throughout the continent, being both inexpensive and easy to install, mostly onto individual houses. Emerging developments include the use of medium temperature solar thermal systems to produce process heat for use in industry.
Geothermal energy can be used as an energy source for both heating and cooling (its main use) as well as for electricity production (dependent on geological conditions). Geothermal heating and cooling technology has developed in such a way as to be useable almost anywhere; geothermal heat is an indigenous source that is available everywhere. Systems either operate in low temperature soils at a shallow level using a heat pump, or by exploiting hot groundwater from deep in the soil. Either source can be used for individual heating systems, or in district heating. There are currently 216 such district heating systems in Europe, with 4 000 MWth capacity. Geothermal electricity production has been used since the early 1900s, and Europe has a combined installed capacity of 1.7 GWe, from 62 plants. Geothermal electricity systems are much deeper in the soil, and use heat and groundwater to produce steam that will drive a turbine. Geothermal energy has huge potential to supply a stable base load, which makes it an interesting option to explore, but high drilling costs keep holding back large scale deployment.
Tidal, wave and ocean energy is a developing form of RE electricity production, which, after years of research and small pilot projects, is now becoming a realistic source of energy. The UK is the leading nation for development and commercialisation of the technology (particularly in Scotland), although France and Germany are also investing in demonstrations. South Korea is leading in installation.
2. RES deployment
According to estimates, RES already provide around 17% of final energy consumption in the world. However, only 8% of this is from ‘modern renewables’, with the remaining from large hydropower and traditional biomass sources, such as wood. The European Union has already made good progress in the transition to RES and in the global context, it leads the way, with nearly 44% of global non-hydro renewable capacity.
New global investment in renewables rose 17% to $257 billion (€190 billion) in 2011, representing a two-fold increase since 2007. (14) Europe (not only the EU27) attracted around $101 billion (€75 billion) of this investment; almost double that of the next largest recipient; China (See left)
This investment has had a positive impact on job creation, with the RES industry in Europe already providing a sizeable number of jobs; around 1.1 million in 2011 (see Table 3). RE jobs are mostly for skilled workers and technicians; they are created where RE projects or technologies are developed – including structurally weak areas – and they are rarely threatened by globalisation. It has been estimated that investing in RES could create an additional 300 000 European jobs by 2020. (15)
Table 3 - Socio-Economic Indicators in RES (2011) (16)
- 2.1 Renewable Electricity
In 2011, 71% of all new electricity capacity in the EU was renewable, with support policies and long-term targets acting as the driving force for uptake. (17) Almost half of this newly installed capacity in the EU was from Solar PV, with Wind also proving a strong market presence.18 RES already provides around 20.9% (699.3TWh) of generated electricity in the EU27 (broken down in Table 4).
Table 4 - RES-Electricity in the EU27 (2011) (19)
RES Type Electricity generated (TWh) Electricity generated (%) Hydropower 397.7 57.0 Wind 149.1 21.0 Biomass and renewable waste 123.3 18.0 Solar 23.1 3.0 Geothermal 5.6 1.0 Tidal, wave and ocean 0.5 0.0 All 699.3 100
RES has had a strong rate of growth in Europe over the past two decades, but has a way to go to become a competitive, self-supporting market, especially as fossil and nuclear energy is still heavily subsidised. As the chart below shows, the highest growth rate for total renewable electricity generation occurred in the period 2009-2010, reflecting the outcome of focused policy initiatives.
- 2.2 Renewable Heating and Cooling
Heating and cooling forms 48% of the EU’s energy consumption, making it an area that should be of high concern for policymakers. (21) A key challenge in renewable heating is that thermal energy is difficult to measure by meter, but at present it is estimated that RES only fuel 13-14% of EU heating requirements, mostly from biomass, a traditional heat fuel. The potential of solar and geothermal heat are hugely under-used (see pie-chart below). For this reason, RE heating and cooling is often referred to as the ‘sleeping giant’.
The building sector has a particularly large potential for cutting emissions through solar thermal, geothermal and biomass heating, especially when coupled with energy efficiency measures such as insulation and double- or triple-glazing. With such measures, it is possible to produce nearly-zero, zero, or even positive energy houses. Trends for heating in new constructions include district heating and cooling, powered by RES and industrial waste heat. Also emerging as a strong business area is refurbishing and retrofitting buildings with energy efficiency and RE solutions combined.
3. Renewable Energy Policy
Although the figures are already impressive, if the EU wishes to achieve its long-term goals, then RE must continue to be supported with ambitious targets, support schemes and involvement at all levels of governance. The International Energy Agency (IEA) has argued that energy prices need to change in order to reflect the true cost of energy, including their external costs, such as environmental impacts through emissions or radioactive waste. As fossil fuels and nuclear currently enjoy this competitive advantage (and government subsidies), RE remains dependent on predictable political and financial supports for deployment. Policy therefore plays a vital role in the expansion of renewables and levelling the playing field with fossil fuels remains the most important task to be achieved. (22) This includes a shift from subsidising fossil fuels to renewables.
Whilst the EU has strong RES framework conditions, implementation takes place at the national and regional levels, resulting in a patchwork of methods that, on the one hand, reflect regional priorities and geographic differences, but on the other, also reflect shorter-term political decisions. There is difficulty in ensuring long-term security for investors, as needed to drive RES uptake.
- 3.1. European Union Framework
Since the Treaty of Amsterdam declared EU members to be “determined to promote economic and social progress for their peoples, taking into account the principle of sustainable development” the promotion of RES has become a priority, not just for environmental protection and social and economic cohesion, but also to tackle energy security issues, with concerns initially reflected in the 1997 White Paper ‘Energy for the Future: Renewable Sources of Energy’. (23) From this beginning, long-term strategies began to form, giving the RES market the stability needed to develop and grow.
The 2001 Directive on the promotion of electricity produced from renewable energy sources in the internal energy market (RES-E Directive) was the first step, setting a non-binding target of 12% of gross domestic energy consumption from renewables by 2010, with 22.1% of electricity produced by RES. (24) Although the RES-E Directive targets were non-binding, it had positive effects, with national targets being set for the first time, triggering action by the Member States. The Directive was amended to add targets for the ten new states that joined in 2004 and two in 2007.
In March 2007, the Heads of State and Governments of the EU27 set a binding target of 20% of final energy consumption from RES by 2020, as well as the related goals of increasing energy efficiency and reducing greenhouse gas emissions by 20%. These combined and interlinked 20/20/20 targets (the ‘EU climate and energy package’) also include initiatives such as the Energy Efficiency Directive (2012) and a strengthened Emissions Trading Scheme (launched in 2005). Together, these 20/20/20 goals will contribute significantly to the aims of energy security, competitiveness and climate change mitigation, as well as to the integrated goals of the whole of the ‘Europe 2020’ Strategy for Smart, Sustainable and Inclusive Growth. The Europe 2020 strategy suggests that in the right conditions, a 30% reduction of emissions should be targeted. (25) As we approach 2020, it will become crucial to set further RES-specific targets beyond this date to keep up momentum and provide investment security. (26)
As a follow-up to the 2020 targets, the Commission published its Energy Roadmap 2050, which explored several different scenarios, including high energy efficiency (aiming for a reduction in energy use of 41%); diversified supply technologies (energy sources competing on a market basis, with decarbonisation led by carbon pricing principles) and a high renewable energy sources mix (strong, direct support for renewables, aiming for 75% uptake by 2050). Whichever scenario is chosen, RES will continue to play a role.
Clearly, RE is not affected by RE-specific measures only. The Commission places RE legislation within a much broader context of its energy policy, which also involves market liberalisation and infrastructure. The overview below shows the sequencing and duration of different EU legislative acts relevant for RE development. (27)
- 3.2 National Policy
Member States of the EU each have very different RES policies and current shares of use. The differences between national positions are rooted in a variety of issues, such as geographical, economic, climatic, political and cultural conditions. In order to set achievable targets, the RES Directive established reference levels of RES use in 2005 for the EU27, ranging from 39.8% of final energy consumption coming from RES in Sweden to 0% in Malta. RES targets were set as a percentage increase on 2005 reference levels and take account of national conditions, resulting in widely different targets for each country.
To meet these targets, the Directive required National Renewable Energy Action Plans (NREAPs) to be written, allowing Member States to decide what measures to implement to meet their targets.28 The 2005 RES reference levels, Directive targets and NREAP forecasts are presented in the table below (Table 5).
Table 5 - RES Directive targets and forecasts for 2020 RES deployment (29)
Member State Share of energy from RES in final consumption of energy, 2005 (%) RES Directive target for share of energy from renewable sources in final energy consumption, 2020 (%) NREAP forecast – RES share in final energy consumption, 2020 (%) RES Industry forecast – RES share in final energy consumption, 2020 (based on NREAPs) (%) Austria 23.3 34.0 34.2 46.4 Belgium 2.2 13.0 13.0 14.5 Bulgaria 9.4 16.0 18.8 20.8 Cyprus 2.9 13.0 13.0 14.5 Czech Republic 6.1 13.0 13.5 13.7 Denmark 17.0 30.0 30.5 30.5 Estonia 18.0 25.0 25.0 25.0 Finland 28.5 38.0 38.0 42.3 France 10.3 23.0 23.3 23.6 Germany 5.8 18.0 19.6 26.7 Greece 6.9 18.0 20.2 25.2 Hungary 4.3 13.0 14.7 18.3 Ireland 3.1 16.0 16.0 16.0 Italy 5.2 17.0 16.2 19.1 Latvia 34.9 40.0 40.0 46.4 Lithuania 15.0 23.0 24.2 31.7 Luxembourg 0.9 11.0 8.9 10.4 Malta 0.0 10.0 10.2 16.6 Netherlands 2.4 14.0 14.5 16.8 Poland 7.2 15.0 15.5 18.4 Portugal 20.5 31.0 31.0 35.3 Romania 17.8 24.0 24.0 24.0 Slovak Republic 6.7 14.0 15.3 26.0 Slovenia 16.0 25.0 25.3 34.1 Spain 8.7 20.0 22.7 28.3 Sweden 39.8 49.0 50.2 57.1 United Kingdom 1.3 15.0 15.0 17.0 EU27 8.5 20.0 20.7 24.4
According to the NREAPs, 20.7% of final energy consumption and 34.3% of electricity will come from renewable sources by 2020. This comes from various levels of ambition shown by member states, with some having aimed to outperform their binding targets. Bulgaria, for example, has written an NREAP that aims for 18.8% of final energy consumption to come from RES, whilst its target is 16%.
Whilst some states aim high, others have instead focused on gradually adjusting existing initiatives or have not produced comprehensive support packages. Government changes have also led to inconsistent policies. For example, the United Kingdom divided its 15% target into 31% RES-Electricity, 12% renewable heating and cooling, and 10.3% renewable transport, but then cut its feed-in tariffs, despite choosing renewable electricity as the main way of reaching its target. Such discrepancies can account for differences in the forecasts made by the RES industry based on the NREAPs; whilst the UK is expected to exceed its target by only 2%, Sweden is expected to be over 8% above its target. Overall, the RES industry believe the NREAPs lay out the possibility of 24.4% RES in total energy consumption and 42% RES in electricity. With this said, recent cut backs in RE support schemes have been triggered by the financial crisis, which seriously threatens RE targets by undermining investor confidence. The EU 20/20/20 goals will succeed or fail based on whether implementation is fast and efficient at both national and lower levels of governance.
- 3.3. Regional Renewable Energy Policy
The importance of the regional governance level can often be overlooked and many tend to forget that around three quarters of EU policy is enacted at the regional level.30 Every region is different, with varied political, social and economic structures, strengths and RE sources (wind, sun, etc.), and it is essential that policies be created that can be adapted and enacted at the regional level.
Regional RES can play a large role in the energy future of the EU. Unlike fossil fuel and nuclear energy which require centralised plants for energy generation and need to be transported, often over large distances, renewable energy can be generated in decentralised, smaller units, providing local energy to local users. This is much more efficient than the current distribution system. For example, Greenpeace estimate that for 100 units of energy produced from fossil fuels at a centralised plant, only 22 units are used, with 62.5 units lost at generation, 3.5 in transmission and 13 through inefficient end use.(31) Instead, decentralised renewable energy systems achieve higher efficiency and reduce transmission losses.
Further, local energy systems can be of greater economic and social advantage, stimulating regional development that fits the strengths and infrastructure of the area, thus providing jobs and secure, cheap energy. Biomass energy, for example, requires local fuel supplies, thus promoting agricultural jobs and creating rural employment through co-ordination between farmers and the RES sector. One of the key trends in the development of RES support policy is the integration of measures into other policy areas and existing competencies, such as urban and rural (re)development.(32)
However, RES support schemes often require finance and implementation at the national scale, depending on domestic political structures and level of autonomy at regional level. When budgetary control is situated at the national, not regional, level, the central government can control support policies, or allocate only small amounts to RES for regions to spend. For example, a region may adopt a target for RES deployment but be unable to make it legally binding without national support. In other cases, such as paying subsidies or rebates to adopters of RES, regions may be entirely incapable of implementing such policies, being completely reliant on the national level for funding.
To overcome this, regional agencies can implement and manage programmes and initiatives, and public and private partnerships can be established. If financing does not come from the national level, and if regional taxation is not possible, then a region can attempt to secure financial support from private or European level sources.
As Table 6 (below) shows, there are a variety of traditional policy tools available to regions wishing to increase their share of renewable energy use. Regulatory policies, fiscal incentives and public financing have all been successfully used at national level and could be scaled down for regional use, depending on regional political structures. However, it should be noted that there may be a narrower scope for implementation, and economies of scale (or lack of) may have an impact on effectiveness.
However, the type of policy instruments used in a region does not only depend on political independence and structure. Regions must also take account of their own development and how much experience they have in RES use. A region starting out in RES will need to implement very different policies to those being implemented by regions with thirty years’ experience. Policies will also reflect differences in regional resources and know-how.
Table 6 – Categories of RES support policy (33)
Regulatory policies Feed-in tariff (including premium payment)
Electricity utility quota obligation / Renewable Portfolio Standard (RPS)
Tradable Renewable Energy Certificate/Credit (REC)
Fiscal incentives Capital subsidy, grant or rebate
Investment or production tax credit
Reductions in sales, energy, CO2, VAT, or other taxes
Energy production payment
Public financing Public investment, loans, or grants
Public competitive bidding
Throughout the following analysis, case studies will be presented showing regional policy initiatives and practices. The blue bordered boxes provide descriptions of regions with successful RES policies, whilst the green bordered boxes represent good practices from INTERREG IVC projects that have shown particular success in promoting RES. The top line of each of these green boxes shows the regional development stage and indicator.
Case Study – Bornholm, Denmark
The island of Bornholm is developing the world’s largest intelligent energy grid as part of the EcoGrid EU project. The development of ‘Smart Grids’ is essential to the development of a decentralised energy scenario, with the integration of a variety of RES types. By leading in grid development, the Bornholm region has become a very attractive location for investment and for R&D projects. The region’s achievements have been enabled by a supportive population and business community, who have been actively involved in the development of the regional vision and PR strategy; ‘Bright Green Island’. As an island, Bornholm has proved to be a perfect testing site for an energy-independent society, and the project shows the importance of demonstration projects to stimulate market development and create public acceptance.
Greenovate! Europe elaboration of EU’Oberserv’ER 2011 good practice
Strong commitment to R&D
Research into energy crops has been ongoing at Teagasc’s Oak Park (Carlow, IE) since the 1970s. Teagasc is the Irish National Authority that provides research, training and advisory services to agriculture and food industries, as well as to rural communities. Oak Park’s research focuses on growing bioenergy crops, harvesting and logistics. Energy crops are grown on site allowing for testing on all phases of crop growth, as well as on agronomical issues such as weed control, bioremediation and crop nutrition. Research also looks into conversion into biofuels and pellets, observing quality and combustion. Teagasc Forestry Development Unit provides advice for land owners and forestry industries. Researchers have developed a variety of tools and information services to spread good practice and communicate research results.
Greenovate! Europe elaboration of BIO.EN.AREA good practice
4. Added value of interregional co-operation
A variety of European programmes tackle the topic of renewable energy, though from different perspectives. The 7th Framework Programme for Research and Innovation focuses on the development and demonstration of state-of-the-art research in the area of renewables; the Europe INNOVA initiative (financed through CIP) has tested service innovation vouchers for renewables, and; Intelligent Energy Europe is supporting public, private and non-governmental organisation (NGO) capacity building, demo projects and promotion campaigns. Often these programmes and initiatives focus on developing and testing new and innovative concepts and technologies involving a high risk rather than spreading proven tools and methodologies.
With regard to renewables, INTERREG IVC is therefore unique in its focus, target groups and outreach:
- It focuses on tried and tested initiatives that can be transferred into a different regional context;
- It targets regional and local policymakers and involves them pro-actively in a process of policy development and implementation;
- It reaches out to large number of regions that would otherwise be uninvolved in RES projects and policy initiatives.
Since it is at local and regional levels where a comprehensive roll-out of sustainable energy policies needs to take place, this targeted outreach of INTERREG IVC towards a large number of European regions, is of paramount importance for the success of Europe’s 2020 strategy.
Co-operation between regions allows for the exchange of good practices, meaning that regions do not have to start from scratch in building a critical mass of successful policy initiatives, but can build on what has been successful before.
This is especially important in the complex field of renewables. RES can boost competitiveness and create jobs, but only if fitted to the regional context, taking account of available resources and market development.