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30% energy reduction by 2030?

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Offshore-Wind-PowerBy Lorenzo Torti

The European Commission wants the EU to meet a 30% energy savings target by 2030 as part of the EU’s wider climate and energy framework goals, according to a Commission Communication presented in late July.

The EU’s climate and energy framework, presented by the Commission in January 2014, proposed new targets for the reduction of greenhouse gas emissions and for an increase of the share of renewable energy sources in the EU energy mix to be achieved by 2030.

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The latest Commission Communication assesses the EU’s progress towards the goal of a 20% increase in energy efficiency by 2020. The Communication finds that at the current pace energy savings of 18-19% will be made by the deadline, but that the 2020 target could still be achieved if all member states fully implemented EU legislation in the area.  The Communication also addresses post-2020 goals, proposing the new 30% target for EU energy efficiency as part of the EU’s climate and energy framework.

The Commission’s focus on energy efficiency is part of a wider shift of EU energy policy towards energy security which has gained pace since the start of the crisis in the Ukraine which highlighted the EU’s dependency on foreign energy imports.

Energy efficiency is in fact seen as one of the key solutions to reduce Europe’s dependency on foreign suppliers, as well as one of the few investment plans that will guarantee local jobs.

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Positions on energy efficiency in both Brussels and national capitals have seemingly changed from only two years ago, when many member states were perceived to be directly or indirectly trying to water down the ambition of what was then the proposal for the Energy Efficiency Directive when Now the wind seems to have changed for good, as the explicit backing for the 30% target by Germany and France testifies.

The Commission’s Communication is structured as follows:
(1) An assessment of the progress towards the 2020 target;
(2) an analysis of the energy efficiency potential for 2030;
(3) a description of the challenges related to the financing of energy efficiency measures, and;
(4) a proposal for the way forward to 2030.

The Communication has three annexes; Annex I presents the policy developments reported in the 2014 National Energy Efficiency Action Plans, Annex II describes the status of transposition of the Energy Performance of Buildings Directive (EPBD), while Annex III focuses on the status of transposition of the Energy Efficiency Directive (EED).

Progress towards the 2020 target

The EU is currently trying to reach an indicative target of 20% energy savings by 2020. The Commission Communication finds that the EU is currently on the way to achieve energy savings in the range 18-19% by 2020. Although good progress is being reached in the building, appliances and transport sectors, the Commission specifies that around one third of energy savings are due to the effects of the financial and economic crisis which is still being felt in the EU.

The Commission therefore sees a need for increased efforts to be undertaken at the national level. The Commission believes that if all Member States fully implemented the legislation already in place, notably the Energy Efficiency Directive, the Energy Performance of Buildings Directive, the Ecodesign and Energy Labelling directives, regulations on CO2 performance standards for cars and vans, as well as the EU Emission Trading System (ETS), the 20% target would be achieved without additional measures.

The Commission calls on efforts to be focused on the following areas; Firstly, strengthening local and regional verification of national building codes and exhaustively informing consumers on the energy performance of buildings for sale or rent; Secondly Increasing cooperation between utilities and customers in order to obtain energy savings; and finally improving market surveillance related to the Ecodesign and Energy Labelling framework, to ensure a level playing field for industry and proper information provision for consumers.

Energy efficiency potential for 2030

The Commission Communication outlines the key benefits that the Commission believes the continuation of an EU policy for energy efficiency will bring:

Competiveness. Investments in energy efficiency would have a positive impact on growth and employment. The Commission notes that those jobs would be “local” jobs, as they would be related to sectors not affected by delocalisation, i.e. the construction sector. Energy efficiency would also be beneficial for the competitiveness of the manufacturing industry, as it would allow the same output with reduced energy consumption.

Lower energy bills for consumers. According to the Commission, EU households spend on average 6.4% of their disposable income on energy bills. Improvements in the energy efficiency of buildings, as well as in the energy performance of household appliances, could reduce that figure. The Communication cites an estimate that every additional 1% in energy savings will lead to a reduction of about 0.4% in gas prices and of about 0.1% in oil prices by 2030.

Energy-efficient transport. Energy consumption in transport is currently decreasing. In addition, consumer behavior, especially in urban areas, is changing. The Commission suggests that the gradual transformation of the entire transport system should build on greater interaction between different modes, innovation and deployment of alternative fuels, as well as increased use of intelligent transport systems.

Financing of energy efficiency investments

The biggest challenge to any energy efficiency policy is the nature of the related investments, for which a relatively high up-front cost is required with a long-term return rate. In this regard, the Commission considers putting in place appropriate financial instruments accessible to all groups of consumers particularly important.

The Communication highlights the funds for energy efficiency measures available under the current Multiannual Financial Framework (MFF) for 2014-2020. According to the Commission, the greatest energy-savings potential is in the building sector (which covers around 40% of the EU energy consumption). As almost 90% of the EU building floor space is privately owned, private financing will be key. In this regard, public funds should act as leverage for private capital; the Commission therefore argues that member states should allocate important shares of EU and national funds to leverage investment for a low-carbon economy.

With regard to the demand side, the Commission highlights the importance of informing consumers of the full benefits of energy efficiency. Financing schemes should be attractive and easily available. In addition, socio-economic research on the behavior of consumers should be carried out in order to better understand their decisions on energy efficiency investments.

Overall, the Commission considers that a number of key actions are needed to boost financing to energy efficiency measures:
(1) Identification, measurement and valuation of the full benefits of energy efficiency investment and communicating them to consumers, businesses and the financial sector;
(2) development of standards for each element in the energy efficiency investment process;
(3) providing tools and services to consumers in order for them to be able to control their energy consumption and costs;
(4) target-oriented use of EU funds in order to increase investment volumes and leverage private funds, and;
(5) tailor-made national schemes that best address energy efficiency investment needs in the building sector.

The Commission, for its part, will aim strengthen cooperation with member states and financial institutions (including the European Investment Bank) and ensure that EU law is adequately transposed and applied.

The way forward

The Commission proposes including an energy efficiency target of 30% for 2030  in the 2030 climate and energy framework, together with a 40% binding target for greenhouse gas (GHG) emission reduction and a target of a 27% share of renewable energy in the EU energy mix, binding at EU level only (meaning that there would be no binding national targets).

The Communication does not specify whether the energy efficiency target should be binding but points out that the approach followed with the 2020 target, - an indicative EU-level target and a mix of binding EU measures, is proving to be effective and should therefore be followed.

Under this approach, the Commission assesses whether the target will be met based on the national plans it receives periodically from the member states. The Commission will review progress in 2017, including whether the use of additional indicators, such as energy intensity, would be more appropriate to monitor the progress in the sector and to take into account changes in GDP and population.

The Commission will also carry out a series of additional actions to support the energy efficiency objective:

(1) Reviewing of the Energy Labelling Directive and of certain aspects of the Ecodesign Directive (expected at the end of 2014);
(2) further development and assistance with regard to financial instruments in order to leverage private investment;
(3) review of the Energy Efficiency Directive (various aspects over the coming years), the Energy Performance of Buildings Directive (expected by 2017);
(4) present an Action Plan (strategy) on retail markets, with the aim of increasing the diffusion of products promoting efficient use of energy;
(5) implementation of the market stability reserve of the ETS in order to boost energy efficiency improvement in the industrial sector;
(6) gradual implementation of the actions laid out by the 2011 White Paper on Transport, and;
(7) co-operation with member states on the relevant EU research and innovation programmes.

Next steps

Heads of State and government are expected to discuss and endorse the EU’s 2030 climate and energy framework at the European Council of 23-24 October 2014.

Following the endorsement of the 2030 framework the Commission will come forward with a legislative initiative on the governance framework for energy efficiency which will include a 2030 target.

 

Electricity interconnectivity

Commission approves Greek measures to increase access to electricity for PPC's competitors

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The European Commission has made legally binding, under EU antitrust rules, measures proposed by Greece to allow the competitors of Public Power Corporation (PPC), the Greek state-owned electricity incumbent, to purchase more electricity on a longer-term basis. Greece submitted these measures to remove the distortion created by PPC's exclusive access to lignite-fired generation, which the Commission and Union courts had found to create an inequality of opportunity in Greek electricity markets. The proposed remedies will lapse when existing lignite plants stop operating commercially (which is currently expected by 2023) or, at the latest, by 31 December 2024.

In its decision of March 2008, the Commission found that Greece had infringed competition rules by giving PPC privileged access rights to lignite. The Commission called on Greece to propose measures to correct the anti-competitive effects of that infringement. Due to appeals at both the General Court and European Court of Justice, and difficulties with the implementation of a previous remedies submission, such corrective measures have not been implemented so far. On 1 September 2021, Greece submitted an amended version of the remedies.

The Commission has concluded that the proposed measures fully address the infringement identified by the Commission in its 2008 Decision, in light of the Greek plan to decommission all existing lignite-fired generation by 2023 in line with Greece's and the EU's environmental objectives. Executive Vice President Margrethe Vestager, in charge of competition policy, said: “The decision and the measures proposed by Greece will enable PPC's competitors to better hedge against price volatility, which is a vital element for them to compete in the market for retail electricity and offer stable prices to consumers. The measures work hand in hand with the Greek plan to decommission its highly polluting lignite-fired power plants by discouraging the usage of these plants, fully in line with the European Green Deal and the EU's climate objectives.”

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A full press release is available online.

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Biofuels

Commission approves one-year prolongation of tax exemption for biofuels in Sweden

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The European Commission has approved, under EU state aid rules, the prolongation of the tax exemption measure for biofuels in Sweden. Sweden has exempted liquid biofuels from energy and CO₂ taxation since 2002. The measure has already been prolonged several times, the last time in October 2020 (SA.55695). By today's decision, the Commission approves an additional one-year prolongation of the tax exemption (from 1 January to 31 December 2022). The objective of the tax exemption measure is to increase the use of biofuels and to reduce the use of fossil fuels in transport. The Commission assessed the measure under EU State aid rules, in particular the Guidelines on State Aid for environmental protection and energy.

The Commission found that the tax exemptions are necessary and appropriate for stimulating the production and consumption of domestic and imported biofuels, without unduly distorting competition in the Single Market. In addition, the scheme will contribute to the efforts of both Sweden and the EU as a whole to deliver on the Paris agreement and move towards the 2030 renewables and CO₂ targets. The support to food-based biofuels should remain limited, in line with the thresholds imposed by the revised Renewable Energy Directive. Furthermore, the exemption can only be granted when operators demonstrate compliance with sustainability criteria, which will be transposed by Sweden as required by the revised Renewable Energy Directive. On this basis, the Commission concluded that the measure is in line with EU state aid rules. More information will be available on the Commission's competition website, in the State Aid Register under the case number SA.63198.

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Energy

Biden administration aims to cut costs for solar, wind projects on public land

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Solar panels are seen at the Desert Stateline project near Nipton, California, U.S. August 16, 2021. REUTERS/Bridget Bennett
Solar panels are seen at the Desert Stateline project near Nipton, California, U.S. August 16, 2021. Picture taken August 16, 2021.  REUTERS/Bridget Bennett

The Biden administration plans to make federal lands cheaper to access for solar and wind power developers after the clean power industry argued in a lobbying push this year that lease rates and fees are too high to draw investment and could torpedo the president's climate change agenda, write Nichola Groom and Valerie Volcovici.

Washington’s decision to review the federal land policy for renewable power projects is part of a broader effort by the government of President Joe Biden to fight global warming by boosting clean energy development and discouraging drilling and coal mining.

“We recognize the world has changed since the last time we looked at this and updates need to be made,” Janea Scott, senior counselor to the U.S. Interior Department’s assistant secretary for land and minerals, told Reuters.

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She said the administration is studying several reforms to make federal lands easier for solar and wind companies to develop, but did not give specifics.

The push for easier access to vast federal lands also underscores the renewable energy industry’s voracious need for new acreage: Biden has a goal to decarbonize the power sector by 2035, a target that would require an area bigger than the Netherlands for the solar industry alone, according to research firm Rystad Energy.

At issue is a rental rate and fee scheme for federal solar and wind leases designed to keep rates in line with nearby agricultural land values.

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Under that policy, implemented by the administration of President Barack Obama in 2016, somemajor solar projects pay $971 per acre per year in rent, along with over $2,000 annually per megawatt of power capacity.

For a utility-scale project covering 3,000 acres and producing 250 megawatts of power, that is a roughly $3.5 million tab each year.

Wind project rents are generally lower, but the capacity fee is higher at $3,800, according to a federal fee schedule.

The renewable energy industry argues the charges imposed by the Interior Department are out of sync with private land rents, which can be below $100 per acre, and do not come with fees for power produced.

They are also higher than federal rents for oil and gas drilling leases, which run at $1.50 or $2 per year per acre before being replaced by a 12.5% production royalty once petroleum starts to flow.

"Until these overly burdensome costs are resolved, our nation will likely miss out on living up to its potential to deploy homegrown clean energy projects on our public lands — and the jobs and economic development that come with it," said Gene Grace, general counsel for clean energy trade group American Clean Power Association.

The renewable energy industry has historically relied on private acreage to site large projects. But big tracts of unbroken private land are becoming scarce, making federal lands among the best options for future expansion.

To date, the Interior Department has permitted less than 10 GW of solar and wind power on its more than 245 million acres of federal lands, a third of what the two industries were forecast to install nationwide just this year, according to the Energy Information Administration.

The solar industry began lobbying on the issue in April, when the Large Scale Solar Association, a coalition of some of the nation’s top solar developers - including NextEra Energy, Southern Company and EDF Renewables - filed a petition with Interior’s Bureau of Land Management asking for lower rents on utility-scale projects in the nation’s blistering deserts.

A spokesperson for the group said the industry initially focused on California because it is home to some of the most promising solar acreage and because land around major urban areas like Los Angeles had inflated assessments for entire counties, even on desert acreage not suitable for agriculture.

Officials at NextEra (NEE.N), Southern (SO.N), and EDF did not comment when contacted by Reuters.

In June, the Bureau lowered rents in three California counties. But solar representatives called the measure insufficient, arguing the discounts were too small and that the megawatt capacity fee remained in place.

Attorneys for both the solar companies and BLM have discussed the issue in phone calls since, and further talks are scheduled for September, according to Peter Weiner, the attorney representing the solar group.

"We know that the new folks at BLM have had a lot on their plates," Weiner said. "We truly appreciate their consideration."

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