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Document 52004DC0366
Communication from the Commission to the Council and the European Parliament - The share of renewable energy in the EU - Commission Report in accordance with Article 3 of Directive 2001/77/EC, evaluation of the effect of legislative instruments and other Community policies on the development of the contribution of renewable energy sources in the EU and proposals for concrete actions {SEC(2004) 547}
Communication from the Commission to the Council and the European Parliament - The share of renewable energy in the EU - Commission Report in accordance with Article 3 of Directive 2001/77/EC, evaluation of the effect of legislative instruments and other Community policies on the development of the contribution of renewable energy sources in the EU and proposals for concrete actions {SEC(2004) 547}
Communication from the Commission to the Council and the European Parliament - The share of renewable energy in the EU - Commission Report in accordance with Article 3 of Directive 2001/77/EC, evaluation of the effect of legislative instruments and other Community policies on the development of the contribution of renewable energy sources in the EU and proposals for concrete actions {SEC(2004) 547}
/* COM/2004/0366 final */
52004DC0366
Communication from the Commission to the Council and the European Parliament - The share of renewable energy in the EU - Commission Report in accordance with Article 3 of Directive 2001/77/EC, evaluation of the effect of legislative instruments and other Community policies on the development of the contribution of renewable energy sources in the EU and proposals for concrete actions {SEC(2004) 547} /* COM/2004/0366 final */
COMMUNICATION FROM THE COMMISSION TO THE COUNCIL AND THE EUROPEAN PARLIAMENT - The share of renewable energy in the EU - Commission Report in accordance with Article 3 of Directive 2001/77/EC, evaluation of the effect of legislative instruments and other Community policies on the development of the contribution of renewable energy sources in the EU and proposals for concrete actions {SEC(2004) 547} TABLE OF CONTENTS Executive Summary 1. Introduction 1.1. The global challenges 1.2. Europe's role 1.3. Scope of this Communication 1.4. New Member States 2. Commission report on national progress towards electricity produced from renewable energy sources (RES-E) targets 2.1. Information sources used 2.2. The overall picture 2.3. Assessment of progress at the national level 2.4. Practical requirements laid down in Directive 2001/77/EC 2.5. Guarantees of origin 2.6. Clarification of the role of the guarantee of origin in the calculation of progress towards national targets 2.7. Infringement procedures 2.8. Development of electricity from wind, biomass and solar 2.8.1. Wind energy 2.8.2. Electricity from biomass 2.8.3. Electricity from solar photovoltaics 2.9. Conclusions on the development of electricity from renewable energy sources 3. Efforts and results for 2010 3.1. The legislative framework developed since 2000 3.2. Member State Actions 3.3. Community support instruments 3.3.1. Community support programmes 3.3.2. Dissemination - Public Awareness Campaigns 3.4. Achieving the 12% target - the impact of Community legislation 3.4.1. Energy efficiency legislation 3.4.2. Legislation on electricity from renewable energy source 3.4.3. Biofuels 3.5. Renewable energy for heat production 3.5.1. The trend in geothermal 3.5.2. Solar thermal heat. 3.5.3. Biogas 3.5.4. Woody Biomass 3.5.5. Summary 3.6. Conclusion: Scenario for the renewable energy share in 2010 4. Concrete Actions 4.1. New initiatives to reinforce the financing of renewable energy - action by Member States 4.2. New initiatives to reinforce the renewable energy and energy efficiency - action at European level 4.3. Other measures 4.3.1. A Community plan for biomass 4.3.2. Developing renewable energy in heating 4.3.3. Offshore wind policy 4.3.4. Electricity from solar irradiation 4.3.5. Research and technological development 4.3.6. Using major Community financing instruments 4.3.7. Placing biofuels on the market 4.3.8. Timely data 5. International political context and EU perspectives beyond 2010 5.1. The Lisbon process and the environmental dimension 5.2. The Johannesburg conference and its follow-up 5.3. The role of targets at EU level 6. Conclusions Executive Summary 1. As set out in the Green Paper on security of energy supply (2000), key priorities for European Union energy policy are to address the Union's growing dependence on energy imports from a few areas of the world, and to tackle climate change. Looking ahead to the next twenty to thirty years, the Green Paper drew attention to the structural weaknesses and geopolitical, social and environmental shortcomings of the EU's energy supply, notably as regards European commitments in the Kyoto Protocol. The promotion of renewable energy has an important part to play in both tasks. Since 1997, the Union has been working towards the ambitious target of a 12% share of renewable energy in gross inland consumption by 2010. In 1997, the share of renewable energy was 5.4%; by 2001 it had reached 6%. 2. This Communication assesses the state of development of renewable energy in the European Union. It serves three purposes: - The formal report that the Commission is required to make under Article 3 of Directive 2001/77/EC, evaluating the progress made by the EU15 towards achieving national targets for 2010 for electricity from renewable energy sources; - Assessment of the prospects for achieving the target of a 12% share of renewable energy in overall energy consumption in the EU15 in 2010 (including heating, electricity and transport), taking into account EU legislation since 2000 and other measures in renewable energy and energy efficiency; - Proposals for concrete actions at national and Community level to ensure the achievement of EU renewable energy targets for 2010, in the context of the Bonn World Renewable Energy Conference (June 2004) and, building on this, the line to take on the scenario for 2020. 3. In accordance with Directive 2001/77/EC, all Member States have adopted national targets for the share of electricity production from renewable energy sources. These are mostly in line with the reference values given in Annex I of the Directive. If Member States adopt the measures necessary for the achievement of their national targets, the share of electricity from renewable energy sources in EU15 electricity production should approximate to the share of 22% targeted by the Directive. However, analysis of the progress reports that Member States have submitted to the Commission shows that policies and measures currently in place will probably achieve a share of only 18-19% in 2010 compared to 14% in 2000. One of the reasons for this discrepancy appears to be that a number of Member States have not yet introduced active policies in line with the targets that they adopted. The Commission will closely monitor the situation in those Member States, and the full implementation of all requirements of the Directive, in order to prepare follow-up actions at a later stage. 4. Since 2000 the Commission has proposed a considerable number of new legal instruments to promote renewable energy and energy efficiency. The European Parliament and Council have adopted most of them. The remainder are in an advanced stage of the inter-institutional process. The adopted proposals are: - Directive 2001/77/EC on the promotion of electricity produced from renewable energy sources (OJ L283/33, 27.10.2001) - Directive 2003/30/EC on the promotion of biofuels (OJ L123/42, 17.5.2003) - Directive 2002/91/EC on energy performance of buildings (OJ L1/65, 4.1.2003) - Directive 2004/8/EC on the promotion of cogeneration (OJ L52/50, 21.2.2004) - Directive 2003/96/EC for the taxation of energy products and electricity (OJ 283/51, 31.10.2003) - Directive 2000/55/EC on energy efficiency requirements for ballasts for fluorescent lighting (OJ L279/33, 01.11.2000) - Commission Directive 2002/40/EC on labelling of electric ovens (OJ L128/45, 15.05.2002) - Commission Directive 2002/31/EC on labelling of airconditioners (OJ L86/26, 03.04.2003) - Commission Directive 2003/66/EC on labelling of refrigerators (OJ L170/10, 09.07.2003) - Regulation 2422/2001/EC on Energy Star labelling for office equipment (OJ L332/1, 15.12.2001) The proposals under examination by the European Parliament and Council are: - COM (2003)453 of 01.08.2003 on Eco design requirements for energy using products - COM (2003)739 of 10.12.2003 on energy efficiency and energy services 5. The Commission also brought forward a proposal for the multiannual programme Intelligent Energy - Europe (EIE), building on the successes of previous Community support programmes (ALTENER, SAVE and RTD). The European Parliament and Council adopted the proposal in June 2003 with a budget of EUR250 million. 6. With the measures that have been put in place, the Commission estimates that the share of renewable energy sources in the EU15 is on course to reach 10% in 2010. The shortfall compared to the 12% target is caused by sluggish growth of renewable energy markets for heating and cooling, leading to the conclusion that considerable extra action is needed in this sector to enable the full 12% target to be reached. However, this assessment assumes full implementation of the requirements of EU legislation by national and local authorities. The example of Directive 2001/77/EC demonstrates that this cannot be taken for granted. If this directive delivers only a 18-19% renewable energy share of the electricity market in 2010, then the share of renewable energy in energy consumption as a whole will reach no more than 9%. With a framework of Community legislation in place, it is to Member States that responsibility falls for ensuring that the agreed targets and measures are, in fact, implemented on the ground. This will require a wide range of national actions, including efforts to ensure that established firms in the energy supply industries pay a share of the costs of promoting renewable energy. The Communication also announces a number of additional concrete actions at Community level in order to support Member States' efforts to achieve the EU15 12% share. 7. The World Renewable Energy Conference, to be held in Bonn in June 2004, will address the promotion of renewable energy across the globe as a means to combat climate change, promote the security of energy supply and - notably for developing countries - reduce poverty. A European preparatory conference held in Berlin in January 2004 considered that the use of overall, general targets for renewable energy should be extended beyond 2010. It noted a range of technical studies that suggest a target of at least 20% of renewable energy in overall energy consumption in the EU25 in 2020, using the tools established in existing Community legislation and additional actions to deliver results. The Commission is committed to contributing to the successful outcome of this conference and has highlighted a number of actions it will offer as an input the International Programme of Action. 1. Introduction 1.1. The global challenges As set out in the Green Paper on security of energy supply (2000), key priorities for European Union energy policy are to address the Union's growing dependence on energy imports from a few areas of the world, and to tackle climate change. Looking ahead to the next twenty to thirty years, the Green Paper drew attention to the structural weaknesses and geopolitical, social and environmental shortcomings of the EU's energy supply, notably as regards European commitments in the Kyoto Protocol. The promotion of renewable energy has an important part to play in both tasks. Since 1997, the Union has been working towards the ambitious target of a 12% share of renewable energy in gross inland consumption by 2010. In 1997, in the EU15, the share of renewable energy was 5.4%; by 2001 it had reached 6% (for comparison, oil contributes 40%, natural gas 23%, nuclear power 16% and solid fuels 15%). In addition to that, renewable energies contribute to improve air quality, innovative capacity, creation of new business, employment and rural development, in the context of strengthening the 3 pillars of sustainable development. At the global level, energy consumption is growing fast - by 15% over the decade 1990-2000. It is expected to grow even faster between 2000 and 2020. Fossil fuels (coal, gas and oil) account for about 80% of world energy consumption. Global consumption of fossil fuels grew in line with overall energy consumption during the 1990s. Fossil fuel use is expected to grow even faster than overall consumption in the period up to 2020. Fossil fuels offer many advantages. They are relatively cheap to extract, convenient to use and widely available. The infrastructure to deliver them is in place. The industries that supply them are well organised and offer supplies in most parts of the world. They have two main disadvantages. First, when they are burnt, they emit pollutants and the greenhouse gases that are causing climate change. Second, countries without adequate reserves of fossil fuels - especially oil - are facing increasing risks to the security of their energy supplies. Import dependence and rising import ratios may lead to concern about the risk of interruption to or difficulties in supply. However, security of supply should not be conceived as merely a question of reducing import dependency and boosting domestic production. Security of supply calls for a wide range of policy initiatives aimed at, inter alia, diversification of sources and technologies and without ignoring the geopolitical context and its implications. The European Commission has set out elsewhere its ideas about how to tackle these problems, notably in its Green Paper on security of energy supply (2000) [1] and its communication on Energy cooperation with the developing countries (2002). [2] [1] "Towards a European strategy for the security of energy supply", COM (2000) 769. [2] "Energy cooperation with the developing countries", COM (2002) 408. As a substitute for fossil fuels, renewable energy can help tackle climate change. It can improve the security of supply by boosting diversification of energy production. The case for renewable energy is strengthened by its effects in protecting air quality and creating new jobs and businesses - many of them in rural areas. Today, investment in renewable energy is generally not the cheapest way to reduce greenhouse gas emissions. It is cheaper to use energy more efficiently. However, investment in renewable energy is vital from a longer-term perspective. Experience in sectors like wind energy has shown that sustained investment leads to innovations that make the use of renewable energy cheaper. By contrast, the cost of additional energy efficiency measures rises after the "low-hanging fruit" is harvested. Investment in both is needed. 1.2. Europe's role The European Union, even enlarged to 25 members, is expected to account for only 7% of the growth in global energy consumption between 2000 and 2020. More than a third is expected to come from China and India. Decisions here and in other industrialising countries will have an increasing influence on the level and pattern of world energy use. The European Union and other OECD countries have a moral and practical part to play in making it possible for industrialising countries to adopt policies that will help secure their energy supplies and hold climate change in check without jeopardizing their economy growth. The average citizen of the EU25 consumes about five times as much fossil energy as the average citizen of Asia, Africa and the Middle East (the same is true of citizens of the Japan-Pacific region. Citizens of the United States consume nearly 12 times as much). If the richest countries do not moderate their consumption of fossil fuels, they have little prospect of persuading less well-off ones to do so - especially when so many people in developing countries lack adequate energy services. The European Union has made a specific practical contribution in the field of renewable energy, namely by working out better and cheaper technical and institutional solutions. Europe is the pioneer in developing and implementing modern renewable energy techniques. Western Europe, with its 16% of world energy consumption, accounted for 31% of the world increase in electricity generation from biomass between 1990 and 2000; 48% of the increase in small hydropower; and 79% of the increase in wind power. The European Union and its Member States have pioneered the policy and regulatory arrangements, such as targets, and the financial schemes needed to drive renewable energy forward. European companies lead the world in renewable energy technology. If Europe is to continue to play its part, it must not be complacent. As the charts show, renewable energy's contribution in Europe still lags behind those of solid fuels, oil, gas and nuclear power. >REFERENCE TO A GRAPHIC> >REFERENCE TO A GRAPHIC> The European Union needs affordable renewable energy to contribute solving its own security of supply problems and meeting its targets for reducing greenhouse gas emissions. Recognising the wide benefits of renewable energy, Europe is pushing the development of technological and institutional solutions that can also be applied on a global scale. But while renewable energy has a significant part to play, it is important not to ignore certain difficulties. First, there are technical and practical limits on the cost-effective availability of renewable energy. There are major geographical variations in the incidence of wind and solar power. Biomass production must compete with other land uses, notably agriculture. There is a limit to the number of valleys that can be used for hydroelectric power. The Commission Staff Working Document that is published alongside this communication includes a careful analysis of the potential of renewable energy in each Member State. More in-depth analysis is forthcoming as announced in this Communication Second, renewable energy sources need conventional energy sources as back-up. Wind and solar power are intermittent and unpredictable. Climatic factors can produce big variations in the availability of biomass and hydropower from one year to the next. For these reasons, there are limits on the proportion of renewable energy that our present-day energy supply systems can absorb. This may give rise to a spare overcapacity of traditional sources entailing some additional costs. The development of renewable energy may also require new investments in existing energy systems, such as electricity grids. Energy policy needs the development of a range of different energy sources - having learnt the lesson of the need for diversification, this should not be forgotten. Finally, the development of a more diverse and secure energy system including a higher share of renewable energy remains today, in general, a policy of higher costs. It is true that hydropower and traditional uses of wood are competitive with conventional forms of energy, and that wind power is approaching competitiveness in some onshore locations with high average wind speeds. Nevertheless, many forms of renewable energy - for example biomass electricity and biofuels - costs two or more times as much as their conventional alternatives if compared on an individual basis without considering the impact of the total energy system cost. Others, such as photo-voltaic power, are more expensive still. [3] [3] "Wind energy - the facts" (European Wind Energy Association, 2004) gives costs for the best wind power generation of the order of 4 to 5 EUR-cents per kWh. "Renewables for power generation" (International Energy Agency, 2003) gives costs for photovoltaic power of at least 17 EUR-cents per kWh; and costs for biomass electricity plants of 7 EUR-cents per kWh or more. However costs can be reduced when biomass is used in combined heat and power plants (down to 5 to 6 EUR-cents per kWh) or for co-firing with fossil fuels, where investment costs on the power cycle are avoided (down to 2-4 EUR-cents per kWh). For comparison, the wholesale cost of electricity produced by conventional power plants is currently around 3 EUR-cents per kWh. The Commission's communication on "Alternative fuels for road transportation and on a set of measures to promote the use of biofuels" (COM (2001) 547) quotes costs of the order of EUR500/1000 litres for biofuels, compared with EUR200-250/1000 litres for oil-based fuels at USD30/barrel. There therefore remain certain barriers to the development of renewable energies. Whilst the present state of technological development prohibits to envisage a world in which conventional energy sources are totally replaced by renewable energy a more step-wise approach can certainly be envisaged. Improved analytical and management tools are already emerging that should allow to develop a proper response to these challenges and key barriers. These include more sophisticated costing models that take account of the impact of increased shares of renewable energy on the total energy system cost, sophisticated weather forecast tools can be integrated in modern energy management systems to better match supply with demand. Additional analysis is therefore set to take place in due course as announced later in this document. 1.3. Scope of this Communication Since 1997, the Union has been working towards the general target of an increase to 12% in renewable energy's share of gross inland energy consumption in the EU15 in 2010, compared with 5.2% in 1995. The biggest risk for the achievement of this target is the imbalance between different countries' levels of commitment to the development of renewable energy. To provide a focus for faster progress, the European Union has since 2000, set through legislation two indicative targets for renewable energy: - an increase to 22% in the share of electricity generated by renewable energy in 2010 for the EU15 (this compares with 14% in 2000); [4] [4] Directive 2001/77/EC on the promotion of electricity produced from renewable energy sources in the internal market. - an increase to 5.75% in the share of biofuels in diesel and gasoline used for transport in 2010 (this compares with 0.6% in 2002). [5] [5] Directive 2003/30/EC on the promotion of the use of biofuels or other renewable fuels for transport. The figures include the contribution of the 10 acceding countries. The EU15 figure in 2000 was 0.7%. The Commission has also proposed a considerable number of new legal instruments to promote energy efficiency. The European Parliament and the Council have adopted the majority of these proposals and the remainder is at an advanced stage of the inter institutional process. This Communication serves three purposes: - The formal report that the Commission is required to made under Article 3 of Directive 2001/77/EC, evaluating the progress made by the EU15 towards achieving national targets for 2010 for electricity from renewable energy sources; - Assessment of the prospects for achieving the target of a 12% share of renewable energy in overall energy consumption in the EU15 in 2010 (including heating, electricity and transport), taking into account EU legislation since 2000 and other measures in renewable energy and energy efficiency; - Proposals for concrete actions at national and Community level to ensure the achievement of EU renewable energy targets for 2010, in the context of the Bonn World Renewable Energy Conference (June 2004) and, building on this, the approach to adopt for the 2020 scenario. 1.4. New Member States The EU's ten new Member States are subject to the requirements of Directive 2001/77/EC on electricity from renewable energy sources. National indicative targets for the share of electricity from renewable energy in each new Member State are set out in the Accession Treaty. Taken together, these mean that the collective target for the EU25 is for the share of renewable energy to reach 21% in 2010. In the case of the EU15, the Directive requires the Commission to adopt a first progress report during 2004. Chapter 2 of this communication serves that function. For that reason, it concentrates on the EU15. In the case of the new Member States, the first progress report, on the basis of national reports to be made by the Member States in question, is not due until 2006. Therefore, their position is not assessed in Chapter 2. However the chapter cites, for information, some examples of good developments in the generation of electricity from renewable energy sources in the new Member States. The new Member States are subject to the requirements of the biofuels Directive (2003/30/EC). The Commission will make a first progress report on this directive in 2006. It will cover all 25 Member States. The target for a 12% share of renewable energy in overall energy consumption is an EU15 target. Progress towards this target is assessed in Chapter 3 of this communication. Like Chapter 2, this chapter therefore concentrates on the Member States to which the target applies. Again, it cites individual examples from the new Member States for illustrative purposes. Chapters 4 and 5 address future policies and actions. These concern the whole EU. The Commission Staff Working Document that is published alongside this communication covers all Member States. 2. Commission report on national progress towards electricity produced from renewable energy sources (RES-E) targets 2.1. Information sources used Under article 3.4 of Directive 2001/77/EC, the Commission is required to assess to what extent: "- Member States have made progress towards achieving their national indicative targets, - the national indicative targets are consistent with the global indicative target of 12% of gross national energy consumption by 2010 and in particular with the 22.1% indicative share of electricity produced from renewable energy sources in total Community electricity consumption by 2010." According to Articles 3.2 and 3.3 of the Directive, Member States must adopt national reports setting their national targets and analysing their success in meeting them. Reports on national targets were due in 2002. All EU15 Member States have adopted them. Reports on progress towards national targets were due by October 2003. All Member States except Finland, Luxembourg and Italy have sent them to the Commission (see Commission Staff Working Document). The Commission has analysed these reports and commissioned several consultancies to make assessments of the impact of the measures they describe (see Commission Staff Working Document). 2.2. The overall picture A first conclusion is that the target adopted by each Member State is consistent with the national reference value listed in Annex I of Directive 2001/77/EC, although Sweden has used a different method to fix a different value [6]. If Member States meet these national targets, the overall share of renewable electricity in the EU15 will achieve the target of about 22% in 2010, as required by the Directive. [6] Sweden has set a target for 2010 of an additional 10 TWh of electricity from renewable energy sources other than hydro, compared with 2002. The Swedish hydro figures are based on an average calculated on a 50 year base. This makes it difficult to convert the figures given by Sweden into a percentage. Unfortunately, the national policies, measures and achievements reported by Member States paint a less rosy picture. It should be underlined that it is difficult to predict exactly how measures now adopted will affect the share of electricity from renewable sources in 2010. However, the extrapolation scenarios set out in the Commission Staff Working Document lead to the second conclusion that, although progress towards meeting the targets has begun, the 2010 target will not be achieved under current policies and measures, even under a scenario that builds in reductions in total electricity demand as a result of new energy efficiency measures. Instead, currently implemented policies will probably result in a share of between 18% and 19% in 2010 (see charts). >REFERENCE TO A GRAPHIC> >REFERENCE TO A GRAPHIC> >REFERENCE TO A GRAPHIC> A third conclusion is that the main reason why the target is not being achieved is because the production of electricity from biomass has not been as high as initially previewed. The main difference between 2nd chart (showing the effect of national policies and measures now in place or recently planned) and 3rd chart (showing a practicable scenario for achieving the 22.1% target set in the Directive) is the size of the biomass (green area) contribution. 2.3. Assessment of progress at the national level Country reports indicate considerable differences between Member States. Figure 1, based on the detailed information in Commission Staff Working Document, arranges Member States in three groups according to the probability that, with the energy policies currently adopted, they will achieve their national targets. The first group (Germany, Denmark, Spain, Finland) is on track. The countries in the second group (Austria, Belgium, Ireland, the Netherlands, Sweden, the United Kingdom, France) have started to implement appropriate policies. For this group there is a mixture of positive and negative indications regarding the achievement of the 2010 targets. The countries in the third group (Greece, Portugal) are not on track to achieve their national targets. Italy and Luxembourg adopted new laws in March 2004. It has not yet been possible to assess their likely effects. However, only limited progress can be recorded for these two Member States during last 3 years. See Commission Staff Working Document for more details. >TABLE POSITION> Figure 1: Member States' progress towards achieving their national indicative target by 2010 On track. Denmark, if it maintains its active approach, is likely to achieve the 2010 target (29%) as early as 2005. Denmark has increased the share of electricity from renewable sources from 8.9% in 1997 to 20% in 2002. Germany has increased the share from 4.5% in 1997 to 8% in 2002 (national target of 12.5%) with wind generation growing from 3 TWh in 1997 to 17 TWh in 2002 (equal to 3% of the total electricity consumption in 2002). Spain is the second European country for wind power although its biomass policy needs to be given higher priority. According to Finland's national report, the contribution of electricity from renewable energy, passed from 7 TWh in 1997 to 10 TWh in 2002 excluding hydro. Although 2002 was a bad year for hydropower in Finland, the evolution of biomass has been impressive in the recent years. One of the drivers of success in all four countries was an attractive support system in a stable and long-term framework. About to be on track. For electricity from renewable energy, United Kingdom and Netherlands have actively invested in a new policy although the full results still have to materialise. Ireland has set up a support system through tendering but there are big difficulties in connecting wind electricity to the grid. Since 2002, Belgium has a new green certificate system. For the moment this does not show visible results. France recently put in place a new tariff system. The attractiveness of the tariffs is, however, reduced by the upper limit of 12 MW for each project. This particularly affects wind energy. In addition, long approval procedures and grid connection problems remain major obstacles. Sweden implemented a green certificate system in May 2003. Electricity generation from renewable energy rose hardly at all in Sweden between 1997 and 2002. But signals from 2003 are much better. Austria has a good perspective for growth. Such a development is facilitated by the feed-in tariffs introduced in January 2003, however not excluding a streamlining of the support scheme with additional efficiency requirements. Not on track. So far, the development of electricity from renewable energy has been held back in Greece. Administrative barriers prevent exploitation of the high potential that exists both in wind, biomass and solar. Portugal has increased its non-hydro production of electricity from renewable energy by only 1 TWh since 1997. A further 14 TWh are still needed to achieve its national target. 2.4. Practical requirements laid down in Directive 2001/77/EC In addition to the requirement for national indicative targets, the Directive lays down practical requirements for Member States in four areas. These are designed to ensure stable investment conditions for electricity from renewable energy: 1) the implementation of attractive support schemes, which should be as efficient as possible, 2) the removal of administrative barriers, 3) the guarantee of fair grid access, 4) the issuing of a guarantee of origin. Most Member States have implemented a support system for renewable energy. These take the form of feed-in tariffs, quota obligations and/or green certificates. National reports show that appropriate financial mechanisms are not enough. In several cases, take-off is blocked by complex licensing procedures, poor integration of electricity from renewable energy in regional and local planning and opaque grid-connection procedures. The table gives an overview of the situation in the Member States. >TABLE POSITION> Table 1: Overview of Member States's administrative and grid barriers In accordance with the Directive, the Commission will report in 2005 on support systems (Article 4.2) and best practices in administrative procedures (Article 6.3). 2.5. Guarantees of origin Article 5 of the Directive requires Member States to implement a system for a guarantee of origin by 27 October 2003. Implementation is in several stages. The most important of these are: implementing legislation, appointing the body for issuing the guarantees of origin and establishing an accurate and reliable system including the preparation of documents and registries. Based on national reports and supplementary information, the situation in March 2004 is the following: >TABLE POSITION> Full implementation - 3 "completed" boxes - means that a guarantee of origin can actually be issued. Although the table shows more green than red, implementation is not yet complete. The Commission will consider the practical implementation of guarantees of origin in its report on support systems in 2005. It will look at the validity of guarantees and the need for redemption, the reliability of the system, and the inclusion of guarantees of origin into the different support schemes, as appropriate. In accordance with Article 5 of the Directive, the Commission will consider the desirability of proposing common rules for guarantees of origin. 2.6. Clarification of the role of the guarantee of origin in the calculation of progress towards national targets In the Directive (Article 3), national targets are defined in terms of the consumption of renewable electricity from renewable energy sources as a percentage of total national electricity consumption. The consumption of electricity is defined as national production plus imports minus exports. In the Directive's Annex I, reference values for national targets are determined solely as percentages of national production. The question that arises is under what conditions can a Member State consider that imported renewable electricity is contributing to the achievement of its target under the Directive. A Member State cannot meet its targets with imports from outside the EU. This is made clear in a footnote to the table in the Annex I, which states that in ".... the case of internal trade of RES-E (with recognised certification of origin registered) the calculation of these percentages will influence 2010 figures by Member States but not the Community total." However, the situation is not so clear regarding imports from within the EU. The Commission acknowledges the need to clarify how progress towards national targets is to be calculated. In particular, it is important to define the role of guarantees of origin. The Commission has decided to apply the following principle in assessing the extent to which national targets are met: A Member State can only include a contribution from import from another Member State if the exporting state has accepted explicitly, and stated on a guarantee of origin, that it will not use the specified amount of renewable electricity to meet its own target and thereby also accepted that this electricity can be counted towards the importing Member State's target. It should be emphasised that trade in renewable electricity should occur. Consumer preferences may in any case generate trade. However, in the absence of the agreement of the exporting country, the production will be counted towards the target of this exporting country. Exporting Member States could include this agreement directly in guarantees of origin for renewable electricity produced on their territory. If they do not do so, importing Member States could ask for a supplementary approval with reference to the guarantee of origin in question. 2.7. Infringement procedures The Commission will examine the transposition of the binding text of Directive 2001/77/EC, in particular regarding the practical requirements described above. It will take into account the national report and will take infringement action where appropriate. 2.8. Development of electricity from wind, biomass and solar In total, renewable energy accounts in 2002 for about 15.2% of total electricity generation. Nuclear energy accounts for 33%. Fossil fuel thermal processes account for the remainder. The EU15 is using nearly all its large hydro potential. The contribution of this renewable energy source is high but the total capacity will remain stable. The two technologies that can be expected to deliver most of the increase in electricity from renewable sources in EU15 for 2010 are wind and biomass. However, in the new Member States - particularly in Slovenia, Hungary and Lithuania - there is still an important potential to increase hydro energy generation. Output expectations from the different biomass uses need to be reassessed taking into account its efficiency and availability. Section 2.2 showed clear differences in their growth rates of both energy sources. In addition, for strategic reasons on a medium time horizon (towards 2020 and beyond), solar energy is also observed. 2.8.1. Wind energy The European wind industry has 90% of the world equipment market. Nine of the world's ten largest wind turbine manufacturers are based in Europe. The industry employs 72,000 people, up from 25,000 in 1998. Costs per kWh have fallen by 50% over the last 15 years. Installed capacity in the EU15 grew by 23% in 2003, to a total of more than 28 GW (Figure 2). In an average wind year this capacity can produce 60 TWh of electricity, approximately 2.4% of EU electricity consumption. This success story is not the result of a common European effort. As the chart shows, Germany, Spain and Denmark contribute 84% of total EU15 wind power capacity. >REFERENCE TO A GRAPHIC> Figure 2: Wind energy capacity growth in EU15 1997-2003 - three leading markets In 1997 and as part of the 12% target, the Commission hoped to see 40 GW of wind power capacity installed by 2010. This will clearly be exceeded. Industry estimates now suggest that 75 GW could be installed by 2010 [7] (generating approximately 167 TWh per year). [7] Source: Wind energy -The Facts - March 2003. However, the final result for 2010 will depend on the efforts of those Member States where wind energy has not yet taken off. There are positive signals from UK, Austria, the Netherlands and Italy due to an improved policy framework. In other countries wind power is growing only slowly. In France, 91 MW was added in 2003 (as against 2.645 MW in Germany in the same year), with total capacity reaching 239 MW. In Greece 3.715 MW had been given first-step approval under national administrative procedures by September 2003 - but installed capacity was only 375 MW. The experience of the three leading countries suggests that successful expansion of wind power benefits from: - an attractive long-term financial framework, - removal of administrative barriers through the implementation of uniform planning procedures and licensing systems, - guarantee of a fair grid access and non-discriminatory tariffs, - least-cost network planning. The estimate of 75 GW of installed wind power capacity in 2010 includes 10 GW offshore. Offshore wind power will become more and more important as good wind sites on land are used up. Offshore wind power has several advantages. The wind is stronger and more reliable at sea (most marine sites in northern European waters are expected to deliver between 20% and 40% more wind energy than good shoreline sites). Neighbours fearing disturbance are fewer. However, the cost of generating electricity from offshore power plants is currently higher than from onshore plants. Denmark, with the highest wind power share of any Member State, is pioneering offshore wind power. The UK announced in July 2003 that it would sponsor offshore projects. These are positive developments which other Member States could follow. 2.8.2. Electricity from biomass Unfortunately, the success of the wind sector is not outweighing the slow growth of biomass electricity. Between 1997 and 2001, Finland, Denmark and the UK (mainly using biogas) were the only countries in which biomass electricity grew steadily. In some countries the biomass contribution grew comparably but intermittently, and in others it stayed small. In general, coordinated policies are lacking and financial support is little. In 1997, the Commission expected that 68% of the growth in electricity from renewable energy sources would come from biomass. 24% could come from wind power and 8% from a mixture of hydro, geothermal and photovoltaic power. Now, the strong growth of wind power means that it can be expected to contribute 50% of the increase needed to achieve the target set in the Directive. Hydro, geothermal and photovoltaic power can be expected to contribute 10%. Consequently, the target will only be achieved if biomass contributes the remaining 40%. It will need to grow from 43 TWh in 2002 [8] to 162 TWh. This will require biomass electricity to grow by 18% a year - compared with a rate of only 7% a year over the past 7 years (see chart). [9] [8] Source: Eurostat. Non-consolidated figures. [9] The 22% objective does not detail the penetration of the different sources of RES-E. It is the Member States' responsibility to detail the mix of renewables. Therefore, the sectoral breakdown of the target sketched here must be treated only as an estimate. In most of the new Member States there is an important potential for the use of biomass for both electricity and heat generation. This is particular true for the widely unexploited potential for electricity generation in Hungary, the Czech Republic, Slovakia, Latvia, Lithuania, and Estonia. >REFERENCE TO A GRAPHIC> This requirement should be seen in the context of the need for increased quantities of biomass not only for electricity generation, but also for heating and transport (see Chapter 3), and the biomass potential for cogeneration applications. 2.8.3. Electricity from solar photovoltaics In 2003, the photovoltaic industry produced some 740 MWp of photovoltaic modules world-wide, and it has become a 4 bill. EUR business. In the past 5 years, the yearly growth rate was more than 30% on average. Besides the exponential increase of the world market, the faster increase of the Japanese production capacities is of particular European concern. Since the introduction of the German Feed-in Law in 1999 the European PV production grew in average by 50% /year and has reached 190 MW in 2003. Europe's world market share rose in the same time from 20% to 26%, whereas the US share decreased due to a weak home market and the Japanese share increased to 49%. European PV industry has to continue this growth over the next years in order to maintain its share. This however will only be possible, if reliable political framework conditions are created, in order to enable a return on investment for the PV industry. Besides this political issue targeted improvements of the solar cell and system technology are still required. Although PV output is still small, its EU growth rate curve quite exactly mirrors that of wind power, with a delay of approximately 12 years. European installed PV capacity doubled between 2001 and 2003, Germany accounting for more than 70% of the total. However, PV also doubled in Spain and Austria, whereas Luxembourg achieved the highest PV power per inhabitant: 8W per capita. If the whole EU did likewise, it would produce around 3.6 TWh/annum on 3.6 GWp installed PV capacity. 2.9. Conclusions on the development of electricity from renewable energy sources Directive 2001/77/EC was the first legislative text to be adopted by the Council and the European Parliament explicitly aimed at the development of renewable energy. In October 2002 Member States confirmed their national targets. Collectively, Europe confirmed its intent to achieve a 22% share of electricity from renewable energy sources by 2010. October 2003 was the deadline for Member States to put in place the laws and administrative provisions necessary to comply with the Directive. All Member States have reported on their measures. During 2002 and 2003 nine Member States implemented a new policy for the promotion of electricity from renewable energy (see Commission Staff Working Document). Two countries already had active measures in place. Progress towards meeting the targets set in the Directive has begun. However, an analysis of national report shows that policies and measures currently in place will probably achieve a renewable energy share of only 18%-19% of the electricity market in 2010. Administrative barriers such as long and complex authorisation procedures persist in some Member States due to insufficient coordination between different administrative bodies (Article 6). Current regulations on grid access do not guarantee a legal framework based on objective, transparent and non-discriminatory criteria (Article 7). Further progress in improving grid access for electricity from renewable energy is essential for stable growth. Slow growth in the biomass sector is caused by inadequate support systems and a lack of coordinated policies. Support systems and policy refinements should be improved to enhance biomass energy use taking into account biomass potentials at regional and national levels. Wind energy has grown impressively in three Member States and this success story should be extended to other Member States, implementing the success factors mentioned in Chapter 2.8.1. But even the booming of wind energy will not be enough to outweigh the slow development of biomass. Extra efforts are needed, notably in the different biomass uses, offshore wind and financial support in general. Support also needs to continue for geothermal, mini-hydro and photovoltaic power (Japan has overtaken Europe in this field). The Commission will closely monitor the situation in all Member States and the full implementation of all requirements of the Directive in order to prepare follow-up actions. 3. Efforts and results for 2010 3.1. The legislative framework developed since 2000 Since 1997, the EU15 have been working towards the general target of an increase in renewable energy's share of gross inland energy consumption to 12% in 2010, compared with 5.2% in 1995. To achieve this target, the Commission has adopted and proposed a considerable number of new legal instruments since 2000 aimed at promoting renewable energy and energy efficiency. The European Parliament and Council have adopted most of these proposals. The remainder are at an advanced stage of the inter-institutional process. The legal instruments that have been adopted into law are notably: - Directive 2001/77/EC on the promotion of electricity produced from renewable energy sources (OJ L283/33, 27.10.2001) - Directive 2003/30/EC on the promotion of biofuels (OJ L123/42, 17.5.2003) - Directive 2002/91/EC on energy performance of buildings (OJ L1/65, 4.1.2003) - Directive 2004/8/EC on the promotion of cogeneration (OJ L52/50, 21.2.2004) - Directive 2003/96/EC for the taxation of energy products and electricity (OJ 283/51, 31.10.2003) - Directive 2000/55/EC on energy efficiency requirements for ballasts for fluorescent lighting (OJ L279/33, 01.11.2000) - Commission Directive 2002/40/EC on labelling of electric ovens (OJ L128/45, 15.05.2002) - Commission Directive 2002/31/EC on labelling of airconditioners (OJ L86/26, 03.04.2003) - Commission Directive 2003/66/EC on labelling of refrigerators (OJ L170/10, 09.07.2003) - Regulation 2422/2001/EC on Energy Star labelling for office equipment (OJ L332/1, 15.12.2001) And the proposals: - COM (2003)453 of 01.08.2003 on Eco design requirements for energy using products - COM (2003)739 of 10.12.2003 on energy efficiency and energy services The impact of one measure - Directive 2001/77/EC - was analysed above. The impact of others will be addressed in this chapter. Calculation of their impact is possible on the assumption of full compliance and rigid implementation by national, regional and local authorities. However, the example of Directive 2001/77/EC demonstrates that this should not be taken for granted. There is abroad consensus that the EU Emissions Trading Scheme (ETS) will have a positive effect of the renewable energy uptake in the EU from 2005 onwards. In addition, the recently agreed Linking Directive will have a similar impact on the uptake of these technologies in developing countries and in economies in transition The EU ETS will by itself not guarantee that the 2010 target renewable targets will be reached as the scheme only covers the greenhouse gas benefits of renewable energies. The positive effect will affect the 2010 extrapolations, although this might be premature as the allocation of allowance has not yet been finalised. It should also be taken into account that several measures, especially in the field of energy efficiency, will not have their full effect in the short or even the medium term (e.g. building improvements). This means that for these measures extrapolation of current trends is not possible and prognoses for 2010 can not yet include their full effect. 3.2. Member State Actions Over the last two years, Member States have been implementing new policies in renewable energy. Legal frameworks are more structured and financial conditions are clearer. But the overall picture is not so positive. There exists an imbalance between different countries' commitment to develop renewable energy. The situation would be very different if wind energy performed across the Community at the level achieved by Denmark, Germany and Spain if biomass heating was as dynamic everywhere as it is in Finland or if geothermal energy managed the level of development being achieved in Sweden and Italy. At Community level, the necessary legal and policy framework has been put in place, but responsibility for progress lies clearly with the Member States. Now is the time for Member States to step up their own action at local, regional and national level. Member States are invited to maximise the use of the funds made available through the Structural Funds, to promote actions in favour of the renewables. 3.3. Community support instruments The Community has only limited means for funding renewable energies. It can only intervene as a catalyst and supporting actor. The following actions were undertaken. 3.3.1. Community support programmes Intelligent Energy - Europe programme (2003-2006) [10] [10] Decision No 1230/2003/EC of the European Parliament and the Council of 26 June 2003 concerning a multiannual programme for action in the field of energy, OJ L 176 of 15.7.2003, p 29. The multiannual programme Intelligent Energy - Europe (EIE) adopted in June 2003 builds on the success of programmes Save and Altener which have supported actions in the fields of energy efficiency and renewable energy since the early 1990s. It is important to note the growth of the Community budget allocated to action in Member States. The combined budget for both previous programmes in the decade 1993-2002 was 220 million euros, while the budget allocated to the new programme for the period 2003-2006 is 250 million euros. EIE is intended to improve energy efficiency (Save actions), to promote new and renewable energy sources (Altener actions), to support initiatives tackling the energy aspects of transport (Steer) and to promote renewable energy and energy efficiency in developing countries (Coopener). The EIE programme supports the implementation of Community legislation by catalysing national, regional and local efforts across the EU. It focuses on the removal of non-technical barriers, the creation of market opportunities, the drawing-up of standards and the setting up of training structures as well as on the development-planning and monitoring tools. It complements the RTD programmes, by tackling the market barriers which are frequently identified when implementing demonstration projects. It also encourages actions by local communities and by municipal and regional administrations and agencies, which are vital to establish sustainable markets for renewable energy. The increasing importance and volume of the Community support has lead to the creation of the Executive Agency for Intelligent Energy to assist the Commission in the implementation of the EIE programme. Research, Technological Development and Demonstration The Sixth RTD Framework Programme (2002-2006) [11] contributes to the Union's efforts to promote sustainable development and the knowledge-based economy. Priority 6 of the current programme includes Sustainable Energy Systems. From a total RTD budget of EUR17.500 million, EUR810 million have been allocated to Sustainable Energy Systems: EUR405 million for medium and long-term research and EUR405 million for medium and short-term demonstration. [11] Decision No 1513/2002/EC of the European Parliament and the Council of concerning the Sixth Framework Programme of the European Community for research, technological development and demonstration activities (2002-2006), OJ L232 , 29.08.2002 The short to medium term part of the programme concentrates on five research priorities: - cost-effective supply of renewable energies, - large-scale integration of renewable energy, - eco-buildings, - polygeneration, - alternative motor fuels. Within this part of the Programme the Commission has launched a major initiative - Concerto - which supports demonstration projects that are focused on optimising the energy flows in local communities through innovative integration of renewable energy and energy efficiency technologies. This initiative also addresses the important objective of involving local communities in sustainable development activities. A similar initiative - Civitas - draws both on transport and research budgets to promote sustainable urban transport, including alternative motor fuels. The Commission has also launched several major initiatives including the Hydrogen and Photovoltaics Technology Platforms designed to provide a long-term vision and strategic roadmaps in these two key technologies. In relation to renewable energies, the medium to longer term research programme includes the following research priorities: - new and advanced concepts in renewable energy technologies, - new technologies for energy carriers/transport and storage, in particular hydrogen, - fuel cells, including their applications, - socio-economic, energy and environmental modelling. Besides, the Commission is launching two major initiatives in the field of Land Use and of Agriculture, which seek to contribute to design the EU Sustainable Development Strategy through the development of tools and methods for impact assessment of alternative policies. Among the agricultural and forestry land uses that will be considered, attention will be given to the production of biomass for renewable energy purposes. Finally, under the umbrella of the Environment Technologies Action Plan launched by the Directorate General for Research, renewable energy technologies will be analysed and promoted. 3.3.2. Dissemination - Public Awareness Campaigns The Campaign for Take-Off (2000-2003) The Commission launched the Campaign for Take-Off (CTO) for Renewable Energies [12] in 1999. It aimed to provide quantitative targets for 8 renewable energy sectors, serving as benchmarks for decision makers and planners to disseminate successful initiatives and to spread best practice and to raise the awareness of decision makers at local, regional, national and European level. [12] Commission staff working paper - Energy for the future: Renewable Sources of Energy (Community Strategy and Action Plan) - Campaign for Take-Off, SEC (1999) 504 More than 125 renewable energy programmes and projects involving more than 600 partner organisations in the European Union - municipalities, agencies, technological institutes, regional authorities, national institutions, universities and enterprises - joined the Campaign as Renewable Energy Partners in 2000-2003. 3.4. Achieving the 12% target - the impact of Community legislation 3.4.1. Energy efficiency legislation Energy efficiency is as important as renewable energy in increasing security of energy supply and reducing emissions of greenhouse gases. EU energy efficiency policy has developed in a different way from policy for renewable energy. Renewable energy policy began with a general target (the "12% target"). Next came sectoral directives for electricity and transport. EU energy efficiency legislation dealt with individual products first. Before 2000, it covered minimum energy efficiency and labelling requirements for a variety of products - plus a voluntary agreement with car makers (the "ACEA agreement"). [13] [13] Although this agreement is expressed in terms of reductions in CO2 emissions, it is being implemented mainly through improvements to the energy efficiency of cars. In the years since 2000 the Union has continued with energy efficiency legislation for individual products, setting efficiency requirements for ballasts (a component of fluorescent lights) [14] and new labelling requirements for refrigerators, freezers, air-conditioners and household electric ovens. [15] [14] Directive 2000/55/EC on energy efficiency requirements for ballasts for fluorescent lighting (OJ L279, 01.11.2000) [15] Directive 2003/66/EC of 03.07.2003 amending Directive 94/2/EC implementing Council Directive 92/75/EC with regard to energy labelling of household electric refrigerators, freezers and their combination, OJEU L170, 09.07.2003 At the same time, the Union began to adopt legislation that addresses energy efficiency across whole sectors with directives covering energy efficiency in buildings, and combined heat and power. [16] [16] Directive 2002/91/EC on the energy performance in buildings, OJ L1, 04.01.2003; Directive 2004/8/EC on the promotion of cogeneration, OJ L52, 21.02.2004 In mid-2003 the Commission proposed a framework Directive on Ecodesign for energy using products that should make it possible to set active minimum efficiency requirements or to promote the voluntary agreements in this field. Finally and most recently, the Commission has proposed establishing for the Union a general energy efficiency target - by law. The Energy Services Directive would require Member States to reduce the amount of energy distributed to final customers by 1% a year. The European Parliament and Council are currently considering Commission proposals for directives on Ecodesign and on Energy efficiency and energy services. Energy efficiency measures can make it easier to achieve the 12% target for renewable energy by reducing the total volume of energy consumption against which this share is calculated. The table shows the estimated impact of the adopted energy efficiency legislation on total EU15 energy consumption by 2010. // Savings in primary energy consumption (Mtoe) Buildings directive // 9 Cogeneration directive // 10 Ballasts directive // 1 Oven and air-conditioner labelling // <0.5 Refrigerator labelling // 1 Energy Star regulation [17] // estimate: 1 [17] Commission endorsed voluntary programmes, which will save at least another 1 Mtoe: GreenLight, Motor Challenge, the standby-power saving agreements for Digital TV and Power Supplies, and the CEMEP motor Agreement. TOTAL // 22 The Commission predicts that as a result of this new legislation total EU15 energy consumption in 2010 will be 1556 Mtoe, rather than 1578 Mtoe under the Commission's baseline scenario. It should be emphasised that this estimate is not a full assessment of the impact of EU legislation because several measures will have their main impact only after 2010. Directive 2002/91/EC on energy performance of buildings addresses the household and tertiary sector responsible for around 40% of the final energy demand in EU. The long term potential for energy savings is estimated at around 22%. The Directive introduces a common methodology for integrated energy performance standards for buildings, including integration of renewable energy supply and cogeneration. The standards are applied not only to new buildings but also in the event of the major renovation of large existing buildings. Buildings and dwellings must be certified when sold or rented out and energy saving measures must be identified. Boilers, heating and cooling installations must be inspected regularly and possible energy savings assessed. The Directive is to be transposed into Member States legislation at the latest in 2006. The impact by 2010 is estimated to be primary energy savings of 9 Mtoe and reduced CO2-emissions of 20 mtCO2. This estimate is based on a model in which a fixed amount of improvement occurs each year, and this over a 6 year period. Directive 2004/8/EC on the promotion of cogeneration aims to increase the share of high-efficiency cogeneration from the present level (2000) of 10% of all electricity consumption in EU. The Directive clarifies that good quality cogeneration of heat and power (CHP) saves at least 10% of primary energy consumption compared with separate production. Average primary energy savings are likely to be around 20-25%. The potential share that can be delivered by high-efficiency cogeneration has earlier been calculated at 18% in 2010, but this will be reconsidered in the light of the reports Member States are due to make in 2006 on their national potential for high-efficiency cogeneration. Guaranteed grid access on fair terms, streamlining of administrative procedures and a system offering a guarantee of origin to help operators to promote high-efficiency cogeneration are the other instruments in the Directive. The Directive is fuel-neutral. It will promote renewable energy cogeneration alongside fossil cogeneration. If the share of cogenerated electricity reaches 18% in 2010 this will result in primary energy savings of 18 Mtoe and a drop in CO2 emissions of 42 mtCO2 compared with a baseline of 13% CHP. The half-way scenario (15.5% CHP), shown in the table above, leads to primary energy savings of 10 Mtoe and emission reductions of 24 mtCO2. Energy efficiency should also be seen in a broad sense, like an extensive integration of processes both on the side of generation and consumption. Town planners inter alia have to be made aware of the substantial benefits of energy efficiency. 3.4.2. Legislation on electricity from renewable energy source The generation of electricity accounts for about 45% of the energy consumed in the EU25. [18] [18] Substitution method; this is a share of gross consumption not final consumption; excluding non-energy uses. Electricity produced from renewable energy sources amounted to 384 TWh in the EU15 in 2001. This corresponds to a share of 15.2% (consolidated figures for 2002 are not yet available). A detailed analysis of the Directive on electricity from renewable sources has already been given in Chapter 2. 3.4.3. Biofuels By 2002, the market share of biofuels had peaked in France (1.3%). Across the whole EU15 the share of biofuels was 0.6% of the petrol and diesel market. In the Czech Republic biofuels had already a share of 1.3% of all automotive fuels in 2001. Poland has also adopted a new law on the promotion of biofuels entered into force on 1 January 2004. Biodiesel from oilseeds is the commonest biofuel. It is blended with diesel. Bioethanol, made from sugarbeet or wheat, comes second [and is growing apace]. It is blended with petrol, partly in the form of alcohol, partly after transformation into ETBE. Other biofuels, derived from wastes and residues, account for only a small share. Biofuels are relatively expensive although the additional costs are justified by benefits across several policy fields. In particular, they would provide additional and alternative supplies for fuelling the transport sector, which is almost completely dependent on one fuel - oil - and accounts for more than 30% of final energy consumption in the Community. Biofuels are at present the only technically viable means of using renewable energy to replace oil as a transport fuel. This means that biofuels offer particularly clear advantages in terms of security of supply. Some of these advantages could be derived from biofuel imports given that biofuel has a different geopolitical origin to oil. In addition, biofuels have a good employment balance - about 16 jobs per ktoe, nearly all in rural areas. Taking into account the advantages of biofuels in terms of climate change, security of supply and rural employment, in 2001 the Commission proposed legislation to set targets for the use of biofuels in transport. A second proposal allowed Member States to exempt biofuels from fuel taxation without needing the prior approval of the Commission. These proposals led in 2003 to the adoption by the Council and European Parliament of the biofuels directive [19] and a provision in the energy taxation directive. [20] [19] Directive 2003/30/EC of the European Parliament and of the Council of 08.05.2003 on the promotion of the use of the biofuels or other renewable fuels for transport, OJ L123, 17.05.2003 [20] Council Directive 2003/96/EC of 27.10.2003 restructuring the Community framework for the taxation of energy products and electricity, OJ L283, 31.10.2003 The biofuels directive states that Member States "should ensure that a minimum proportion of biofuels and other renewable fuels is placed on their markets, and, to that effect, shall set national indicative targets". It sets reference values for these targets: 2% by the end of 2005 and 5.75% by the end of 2010. Member States are to report to the Commission each year on the measures taken to promote biofuels and on the share of biofuels placed on the market in the previous year. The first report, due by the end of June 2004, must contain a national indicative target for 2005. The report due in 2007 must do the same for 2010. The Commission is required to report on progress by the end of 2006, and then every two years. If the report concludes that the indicative targets are not likely to be achieved for reasons that are unjustified, the Commission should make proposals that "address national targets, including possible mandatory targets, in the appropriate form". The energy taxation directive states that - for as long as Community law does not lay down mandatory targets - Member States may exempt under fiscal control biofuels from fuel taxes, or apply a lower rate of tax. However, if Community law would impose mandatory targets, Member States could continue to grant tax reductions/exemptions in favour of biofuels through the procedure set by Article 19 of the Energy Tax Directive (proposal of the Commission, authorising decision by the Council). The present situation (as of March 2004) is that seven Member States have partly or completely detaxed biofuels (Austria, France, Germany, Italy, Spain, Sweden and the United Kingdom). If the objectives set in the biofuels directive are achieved, the contribution of biofuels will increase from 1.4 Mtoe in 2001 to 19 Mtoe in 2010 - an increase of 18 Mtoe. The Commission will closely follow up the biofuels market and the transposition of the biofuels Directive, due for December 2004. The progress of biofuels up to 2010 and beyond will be strongly influenced by and depend on developments in fuel quality standards, namely the competitiveness of biofuels, the development of new biofuels technologies, and the sourcing of biomass for biofuels. 3.5. Renewable energy for heat production Renewable energy in heating has grown slowly over the last seven years. The directive on the promotion of cogeneration (CHP directive) and the Building directive have a direct impact on efficient heat use. But there is no legislation in place addressing renewable heat production. It is still a sector dominated by traditional biomass use and a new dynamism is needed to deliver the necessary contribution to achieve the objective of a 12% share in renewables and to develop the sound potential that exists in the new Member States. Heat from renewable energy sources is used in many different ways. Heat demand for industrial purposes often calls for high temperatures or steam at high pressure. For such requirements renewable heat will typically be provided via the combustion of biomass (wood or industrial waste and residues) preferably with co-firing of fossil fuels in boilers or CHP. When heat is needed for heating buildings and hot water, the demand can be met by a wider range of technologies and sources. For larger-scale demand such as district heating and major buildings (commercial/public/residential), centralised supply is possible and economies of scale can encourage investment in technology (large boilers, geothermal, CHP). Domestic heat demand and other small-scale demands can be met using other technologies such as solar panels, wood stoves, geothermal sources, etc. 3.5.1. The trend in geothermal Direct heat is the oldest and the commonest use to which geothermal energy is put. Space and district heating, agricultural applications and aquaculture and industrial uses are well known examples. Following the introduction of ground coupled heat pumps, space heating and cooling has expanded considerably over recent years. Sweden is at the top of the list with a capacity estimated at 1 GWth for 176,000 units in 2002, representing one-third of all the heat pumps installed in Europe. Germany and France come next. Italy is the leading country in the European Union for low-energy applications of geothermal energy with a capacity of 0.44 GWth, followed by France and Germany. With 10% annual growth for heat pumps (the 2002/2001 growth rate was 14%), the target calculated in 1997 of 5 GWth to be achieved by 2010 would be exceeded by 60%. Geothermal energy is a well-developed energy source in Hungary where the amount of power installed is similar to France. The Czech Republic, Slovakia, Slovenia and Poland use this renewable energy source mainly in the form of direct heat. 3.5.2. Solar thermal heat. Solar thermal energy has taken off only in Germany, Greece, Austria and Cyprus. At the end of 2002 the installed surface of solar collectors in the EU15 was nearly 12.8 million square metres, compared with around 11.8 at the end of 2001. This increase was led by the German market. In 2002, 80% of the total solar thermal capacity of the EU15 was installed in the three leader countries. Austria, for example, has 9 times more thermal collectors than Spain. Among the new Member States, Cyprus stands out with about 600,000 square metres installed. Solar thermal collectors cover two thirds of the warm water needs of Greek households, in Cyprus up to 90%, and nearly 10% in Austria. In Spain, Portugal and Italy only a marginal 0.5% of warm water needs is covered. Solar thermal collector production has over the last four years grown at a rate of around 9%. However, unless far more significant steps are taken, the 1997 objective of installing 100 million m of solar collectors in the EU15 by 2010 will not be achieved. 3.5.3. Biogas Since the "environment" has become a full-fledged economic sector, the biogas sector has undergone constant development in most of the countries of the European Union. Biogas has the dual advantage of eliminating pollution while producing energy at the same time. Methanisation units have appeared across Europe. The biogas sector gives a value to different types of waste. This gas can be used to produce electricity, heat or as transport fuel. 60% of biogas is used in electricity production and 40% in heat production. In 2002, EU15 biogas production was 2.8 Mtoe - 10% higher than in 2001. This growth rate is too slow to achieve the 15 Mtoe proposed for 2010. >REFERENCE TO A GRAPHIC> >REFERENCE TO A GRAPHIC> Biogas development needs coordinated policy in the fields of energy, environment and agriculture (cattle manure is one source of biogas). 3.5.4. Woody Biomass Most of the biomass needed for heating is still, as it always was, wood - especially domestic use of wood. The biomass market for space heating is stagnant. Significant incentives are needed to overcome this problem and to encourage more efficient wood-burning stoves and boilers. CHP generation is a good option for the industrial-scale use of wood. The mid-term potential for the EU15 shows a more balanced split between the three technologies considered: biomass heat, geothermal heat and solar thermal installations (geothermal heat includes geothermal heat pumps). Other forms of biomass, such as purpose-grown energy crops have been well proven and the technology and logistics to use them have been developed. They should be encouraged and significant incentives are initially necessary. >REFERENCE TO A GRAPHIC> Examples of good practice are the Austrian programme to commercialise the use of wood and the French "Plan du Bois" which promotes the installation of efficient individual stoves and communal heaters. All such means to disseminate the spread of efficient practices in the use of wood as a fuel are to be encouraged. 3.5.5. Summary There are some national success stories in woody biomass and solar heat. Geothermal heating is growing at a good speed. Nevertheless, the overall development of renewable energy in heating does not give rise to optimism. According to the figures shown in the table below, even if the targets for renewable electricity generation and biofuels are met, extra 29 Mtoe of renewable energy for heat production would still be needed to achieve the 12% objective by 2010. >TABLE POSITION> 3.6. Conclusion: Scenario for the renewable energy share in 2010 The trends set out in the Commission Staff Working Document lead to the conclusion that, although progress towards meeting the targets has begun, the 2010 target will not be achieved under current policies and measures. There is a strong need for more political will to invest in the EU into renewables. - The share of renewable energy increased from 5.4% in 1997 to 6% in 2001. - If present trends continue in heating, and if Member States implement the national plans they have put in place in electricity and fulfil the requirements of the biofuels directive in transport, the share will reach 9% in 2010. - In addition, if Member States fulfil in full the requirements of the directive on electricity from renewable energy sources, the share will reach 10%. - Fulfilment of the 12% target for 2010 will require a step change in national policies towards the use of renewable energy in heating. >TABLE POSITION> 4. Concrete Actions 4.1. New initiatives to reinforce the financing of renewable energy - action by Member States Growth in the use of renewable energy is too slow to give confidence that the European Union's targets for 2010 will be met. In electricity, the European Council and Parliament agreed in 2001 to aim for a renewable energy share of 22.1% in the EU15 by 2010. National targets adopted in 2002 were consistent with this objective. But the practical measures that Member States have put in place so far are estimated to deliver a share of only 18-19%. In heating, most Member States have done little to stimulate new action. In transport, only six Member States have made a start on the production of biofuels. Prospects will be clearer early in 2005 following transposition of the biofuels directive. For renewable energy as a whole, the Community has been working since 1997 towards a renewable energy share of 12% by 2010. At best, with present trends and measures, the share achieved will be 10%. At worst, it will not rise above 8%. Renewable energy's contribution remains marginal in most Member States, apart from two old-established uses: electricity from hydropower and traditional uses of wood for heating. However, renewable energy has begun to move from the wings to centre stage. This move must gather pace if the Union is to meet its objectives for sustainable development and security of energy supply. At Community level, the necessary legal and policy framework has been put in place. Now it is time for Member States to speed up their own action at local, regional and national level. One important aspect is the financing of renewable energy. One estimate puts the gross investment cost for the EU15 to achieve the 12% target at EUR10-15 billion per year. [21] While Community funding plays a crucial catalytic role (see next section), the Community has still limited means to support the real development of renewable energy. Member States and the energy industries themselves have the resources needed to deliver this level of investment. [21] A. Zervos, "Updating the impact of the Community strategy and action plan for renewable energy sources", draft final report, 2003 (based upon 2001 prices). Over time, each energy source in turn has benefited from substantial public funding and risk support in its development. The established energy supply industries now have an income of over EUR200 billion a year in the EU15 alone. For the support of renewable energy sources different means are available to be used by Member States, like feed-in tariffs, green certificates, market based mechanisms, tax exemptions... It is time for all Member States to put these ideas into practice. Member States need to create a level playing field in the energy sector, by including external societal benefit/costs in their energy policy framework. 4.2. New initiatives to reinforce the renewable energy and energy efficiency - action at European level Clean energy policy shares fundamental goals with a wide range of such Community policies as enhancing competitiveness and cohesion for growth and employment, ensuring access to basic goods and services, and promoting the EU as a sustainable development partner. [22] Renewable energies and energy efficiency can do a great deal to address the challenges that other policies face. A coordinated approach is needed across the range of Community policies that have energy impacts. [22] Communication from the Commission to the Council and the European Parliament "Building our Common Future: Policy challenges and Budgetary means of the Enlarged Union 2007-2013", COM(2004) 101 final of 10.2.2004 The Union's future financial framework for 2007-2013 should have explicit provisions so that clean and efficient energy concepts are a visible part of the Union's priorities, strategies and commitments. It is the opportunity for the enlarged Union to express its political determination to change course and direct its efforts towards sustainable energy, by allocating adequate resources to boost its goals in this field. The Community's main financial instruments - notably the future structural and cohesion funds, the financial support made available through the Community's international co-operation programmes, and the Common Agricultural Policy - all need to be mobilised. In this respect, it is important to note that in February 2004 the Commission adopted a Communication regarding the reform of structural funds for the period 2007-2013. This report highlights the development and use of renewable energy, energy efficiency measures, the development of eco-industries, cleaner methods of transport and sustainable urban public transport as priority themes for future support. Supplementary action could be explored in four fronts. First, to bridge the gap between successful demonstration of innovative technologies and their effective entrance on the market to achieve mass deployment and to boost large-scale investment across the EU in new and best performing technologies. To achieve this, a new instrument is needed that operating at EU level could be tailored to accommodate the diversity and specificity of the renewables and energy efficiency sectors. This instrument should support the first market replications of just-proven technologies of European relevance. In this way the Union will share the risk that is involved in the economic exploitation of RTD results. This new instrument could be the main component of the successor to the current "Intelligent Energy-Europe, 2003-2006" programme. It would ensure better exploitation (through large-scale application across the Union and on export markets) of projects' results and promote the substantial stock of technologies that are close to being competitive. Action at EU level, in concert with national initiatives and with action by international financial institutions, is needed to tackle this task effectively. Second, this future Community programme "Intelligent Energy Europe" should also strengthen support for action at local and regional level. The main aim is to enable citizens to make informed decisions about energy and help to remove non-technological barriers to clean energy such as institutional capacity, public awareness, available technology at affordable prices, well-trained specialists and effective mechanisms for the exchange of know-how and best practice. A better focus is also needed for sharing European experience and technologies with third countries. This future programme should also continue to support the EU policy development and implementation in the renewables and energy efficiency fields. Third, it is necessary to strengthen support and accelerate the pace of public support for research, technological development and demonstration in renewables and energy efficiency in Europe. Fourth, it is necessary to capitalise on the important role that energy plays in sustainable development and share the responsibility with other Community policies. In the framework of the reform of the Common Agricultural Policy a new aid of 45 EUR per hectare will be introduced for areas sown to energy crops. Furthermore, non-food production, for instance of energy crops will continue to be permitted on set-aside land. The European Investment Bank has already set itself the target of increasing the share of renewable energy in its loans for energy from 8% to 16%. It could contribute to the financing of national, regional or private investment funds for renewable energy, along with contributions from other public sources at Community, national or regional level. 4.3. Other measures 4.3.1. A Community plan for biomass In 2001 the EU15 used about 56 Mtoe of biomass for energy purposes. Achieving the Union's renewable energy targets for 2010 would need approximately 74 Mtoe more - 32 Mtoe for electricity generation, about 18 in the form of biofuels and 24 for heating (total: 130 Mtoe) An indicative figure on the biomass availability for energy purposes at EU15 level is 150 Mtoe (additional 32 Mtoe for EU-10 and Romania and Bulgaria). [23] [23] The estimation of this figure considers 10% of the arable land (half for biofuels and half from solid biomass), forest by-products, wet manure and organic waste. Source BTG Interim Report. The biomass potential needs further assessment, especially in terms of land availability, land use for different renewable biomass applications (heat, electricity, transport biofuels, and forest products) and the difference in benefits these various applications might have, for instance in terms of greenhouse gas emissions in a life cycle perspective. However, effective use of biomass for energy purposes depends on the market developments as well as on the interactions between public policy in the fields of energy, agricultural, waste, forestry, industry, rural development, environment and trade policy. Community institutions play a key role in all these policy areas. By the end of 2005, the Commission will bring forward a coordinated biomass plan with a clear approach to securing adequate supplies of biomass through European, national and regional/local action across them all. This plan should ensure that the use of biomass for energy purposes does not lead to the undue distortion of competition. The plan will orientate and optimise Community financial mechanisms, re-direct effort within the policies concerned and tackle the obstacles to biomass deployment for energy purposes. Specific attention will be paid to the new Member States, taking into account the high and unexploited biomass potential that many of them have. 4.3.2. Developing renewable energy in heating Targets for renewable energy sources' heating would be difficult to establish because there is no single "heating supply industry" to whom they could be addressed. Instead, some specific initiative linked to heating and cooling applications will be brought forward as a first step. The Community has already adopted directives on the energy performance of buildings [24] and cogeneration [25]. These will encourage greater use of renewable energy in heating. There is a need for the buildings directive to be implemented in a way that stimulates the integration of efficient biomass systems, geothermal heat pumps and solar thermal heating in residential and tertiary-sector buildings. The decentralised energy supply based on renewable energy that is envisaged under the Buildings Directive should look to the potential of using renewable energy for heating and cooling, in particular through integrating solar heating panels in buildings. Micro-turbines fired by biomass are another possibility for using renewable energy in buildings. There is also a need to encourage a greater share of biomass in cogeneration and in district heating systems, especially where existing systems can be economically refurbished (which is the case in many of the new Member States). [24] Directive 2002/91/EC on the energy performance in buildings, OJ L1, 04.01.2003 [25] Directive 2004/8/EC on the promotion of cogeneration, OJ L52, 21.02.2004 The Commission will bring forward further initiatives - if necessary, legislative proposals - to accelerate the fulfilment of the potential of three key technologies - modern biomass heating, solar heating and geothermal heat. These initiatives could include targets for specific technologies, or requirements for suppliers of heating oil and gas to supply e.g. wood pellets and biogas. 4.3.3. Offshore wind policy To give legal certainty for offshore wind development, governments will need to establish legal regimes that give them relevant jurisdiction for the area outside the territorial seas (12 nautical mile limit), and quick procedures for giving consent for development. An off-shore wind policy for the EU will need to strengthen the necessary grid infrastructure. The Trans-European Energy Networks Programme has started to support investments for the grid adaptation and optimisation for the integration of off-shore projects. It is important to ensure that the development of offshore wind is not stifled by a false assessment of potential problems such as its coexistence with birds, trawling and shipping, the development and application of national planning rules, the source of funds to extend and upgrade the grid, the availability of insurance cover and the provision of legal protection against damage to structures outside states' territorial waters. The Commission will systematically review the obstacles and objections that may block the development of offshore wind, the environmental requirements that need to be met and will develop guidelines for Member States, by offering proposals for legislation if necessary. The Commission will also support research and development support to improve turbines and installation technology for use at sea and to improve the stability of the grid for wind energy penetration above 20%. It will also encourage the coordination of research being sponsored by national authorities on the effects of wind turbines on marine life and the marine environment. 4.3.4. Electricity from solar irradiation Contrary to Japan, a strategically conscious industry policy, systematically developing towards a multi 10 billion EUR business is lacking in Europe. Despite the growth rate of European production during the last years and the strong European RTD and innovation base available, Europe is still a net importer of photovoltaic cells. Continued, but evermore targeted RTD funding leads to new developments with respect to raw material use, evermore benign production technologies, optimised, often building integrated device design, reliability and efficiency of PV systems. A further option is solar thermal electricity production, with some promising pilot projects just being launched in Southern Europe. This technology has the additional advantage that it can be cost-effectively combined with modern gas turbines, therefore overcoming the problem of intermittency of the solar irradiation and enabling a base load share of solar energy without storage technology. 4.3.5. Research and technological development Several renewable energy technologies that could make a big contribution by 2020 need more research and development. The European Union has played a leading role in renewable energy research, demonstration and dissemination for more than 20 years and will continue to do so. OECD data indicate that only 10% of government energy R&D budgets are related to renewable energy, in contrast with more than 50% for conventional (fossil fuel and nuclear) energy technologies. As indicated in paragraph 4.2, and in order to support the longer term expectations regarding the penetration of renewables, it is therefore necessary to strengthen support and accelerate the pace of public support for research, technological development and demonstration in renewables in Europe. Under the 6th Framework Programme, the Union is focussing on bringing costs down and on the large-scale integration of renewable energies in the energy supply system. For the short to medium term the programme is addressing electricity production from biomass, wind, photovoltaic power, tidal stream, wave and other renewable sources, heating and cooling technology, and the production and processing of liquid and gaseous biofuels. Long-term research looks at how to achieve significant cost reductions in bio-energy, photovoltaics, and other renewable energies including wind, ocean, concentrated solar, and geothermal as well as improving the reliability, safety, availability and durability of renewable energy systems. The programme also addresses the issues of distributed electricity generation, hydrogen and fuel cells which have an impact on the further development of renewable energy systems. 4.3.6. Using major Community financing instruments The Commission intends from 2004 onwards to place special emphasis on the deployment of renewable energy and energy efficiency by using the structural and cohesion funds, and the EU development funds. Renewable energies could also play in the future an important role in the further evolution of the relevant rural development measures (second pillar of the Common Agricultural Policy). 4.3.7. Placing biofuels on the market The fuel quality directive [26] lays down minimum specifications for gasoline and diesel. These limit the blending of biofuels. Higher blending limits would make it easier to fulfil and go beyond a 5.75% share for biofuels. The scope for raising these limits is the subject of technical debate. The Commission is evaluating the arguments. It will bring forward new proposals, if necessary, by the end of 2005. [26] Directive 98/70 of 13.10.1998 relating to the quality of petrol and diesel fuels (OJ L350/58, 28.12.1998), amended by directive 2003/17 of 03.03.2003 (OJ L76/10, 22.03.2003) Member States may require each company to place on the market on the Member State's territory a given quantity of biofuels, but may not require that all fuel sold is blended with biofuels. Alongside its review of fuel quality specifications the Commission will consider whether this needs to change. 4.3.8. Timely data Official European data on renewable energy sources' contribution is currently available about 18 months after the end of the calendar year in question. The Commission will make data available more quickly. It will examine how extrapolation from samples could give an earlier indication of progress and how data gathering could be linked to the certification of renewable energy, as well as techno-scientific efforts to identify and validate trends. 5. International political context and EU perspectives beyond 2010 5.1. The Lisbon process and the environmental dimension The European Council of Lisbon of March 2000 agreed in its Conclusions (5) on a "new strategic goal for the next decade: to become the most competitive and dynamic knowledge-based economy in the world, capable of sustainable economic growth with more and better jobs and greater social cohesion". Increasing the share of renewable energy sources in the energy mix contributes to the goal of the Lisbon process to become capable of sustainable economic growth. The wind industry currently employs 75 000 people in the EU15. The German Government has confirmed the net creation of 135 000 jobs through its national policy on renewable energy up to 2003. Nearly 100% of renewable energy production uses European technology. Increasing the share of renewable energy sources creates new jobs - in research, industry and building sectors, agro and forest-based industry, waste treatment and consulting - by developing new technologies and by encouraging research and technical innovation. It is estimated that if renewable energy supplies 12% of EU15 energy consumption in 2010, the sector will employ between 500 000 and 650 000 people in serving this EU market. It is for Member States to decide to put in place an energy policy that can deliver significant employment benefits. European industry is the world leader in wind technology and holds a good position in hydro, photovoltaic and geothermal power. Export markets constitute a huge potential for the European renewable energy industry, which will benefit from the expertise gained in the domestic market. Export of renewable energy technology will create a significant number of extra jobs. The Göteborg European Council of June 2001 agreed on a strategy for sustainable development and added an environmental dimension to the Lisbon process. In its Conclusions (21) it "invites the industry to take part in the development and wider use of new environmentally friendly technologies in sectors such as energy and transport" and "stresses the importance of decoupling economic growth from resource use." 5.2. The Johannesburg conference and its follow-up The World Summit on Sustainable Development (WSSD) held in Johannesburg in September 2002, addressed the broad aspects of sustainable development with a strong focus, on the need to alleviate poverty as a matter of urgency. One of the main outcomes of the WSSD, was the general acceptance that energy, and in particular renewable energy, was one of the key priorities to alleviate poverty and to achieve long-term sustainable development. In Johannesburg, the EU committed itself to taking a lead through the EU Energy Initiative for Poverty Reduction and Sustainable Development (EUEI) and through the Johannesburg Renewable Energy Coalition (JREC). One of the first concrete actions taken by the Commission in support of the EUEI was to launch COOPENER within the Intelligent Energy - Europe programme, to encourage the provision of sustainable energy services for poverty alleviation in developing countries. The support to the provision of water access and modern energy services in the framework of poverty eradication is now a commitment of European Development Aid entered at WSSD. Renewable energy deployment and technology transfers to developing countries contribute to poverty eradication and to raising the standards of living in the poorest countries. Since its launch, JREC developed its activities in close partnership and with the support of a broad stakeholder community, including business, NGOs and academia. JREC membership is nevertheless the privilege of national governments. As of March 2004, 87 countries joined the Coalition and more are expected to do so. JREC meetings have already offered a unique platform for a constructive dialogue between many governments from the Northern and Southern hemisphere. In this context, and based on discussion amongst JREC Members following the WSSD, it is for example clearly acknowledged that the respective member-governments are best placed to develop and adopt ambitious national and regional time-bound targets. JREC Members are equally committed to identify and remove financing gaps and obstacles, including obstacles for the effective delivery of existing - but often untapped - public and private resources needed to develop and strengthen renewable energy markets with a particular focus on the needs of developing country members. JREC priorities and actions have been developed during informal high-level conferences and meetings, which have also served as a high-level platform to increase the regional and international awareness of the actions undertaken by pro-active governments thereby also assisting them in attracting interest from the finance and business community. The International Conference for Renewable Energy, to be held in Bonn in June 2004, will follow up the Johannesburg conference. It aims to produce a strong political declaration together with an ambitious international action plan accompanied including various commitments and guidance for good policy. In its capacity of hosting the JREC secretariat, the Commission started two key initiatives, to support the JREC and in particular the developing country members [27], i.e.: [27] The Commission has carefully selected and developed these initiatives in view of the developing country needs whilst also considering the need to complement existing and new instruments developed under the COOPENER, EU EI and other related programmes. - A global on-line renewable energy policy and measures database to tackle the significant information deficit in the area of policy design and implementation, in particular at the level of non-OECD countries; - A feasibility study for the creation a public-private fund-based mechanism for the creation and delivery of "patient risk capital" to offer renewable energy business and project developers - in particular in developing countries and economies in transition, increased access to risk capital and to encourage a more significant engagement from international and local financial intermediaries and corporate investors. [28] [28] This study is carried out by a consortium of financial engineers, private equity layers and technology consultants. Provided it could be established, patient risk capital would be a type of equity or quasi-equity finance obtained from blending public and private sector investment resources and requirements. It would provide equity funding in the expectation of a return, but on a less demanding basis than pure market private equity capital. The Commission will further develop these cross-cutting actions with interested JREC members and other stakeholders. In January 2004, a European preparatory conference organised by the European Commission and held in Berlin concluded that: - Implementation of Community Directives in Member States should provide for long-term domestic support that guarantees stable investment conditions. Administrative barriers to the distribution of green electricity should be overcome and progress is needed in the field of intelligent grid management. - Progress achieved in Europe concerning renewable energy consumption reveals that, while electricity production, mainly from wind, is increasing dramatically, biomass electricity and technologies for the production of heat and cooling are not progressing enough. In addition, Member States' efforts are very unbalanced. The heating and cooling sector is calling on the Commission to propose Community initiatives. - Distortion of the energy market, mainly due to the fact that energy prices do not reflect the full socio-economic costs, was highlighted as a barrier to create a level-playing field. The principle "polluter-pays" should be applied to energy. Concerning renewable energy targets, there was a common understanding that the EU general renewable energy target for 2010 has been a driving force in the legislative and policy process at domestic and European levels. This long-term approach needs to be carried forward. The conference noted that a range of technical studies suggest a target of at least 20% of gross inland consumption in 2020 for the enlarged EU25. [29] [29] This target would be equivalent to about 23% under the "substitution approach". The use of the substitution approach would have several advantages. It would give a more balanced reflection of the contribution of different forms of renewable energy, reflect the objectives of renewable energy policy in terms of substitutions for the use of fossil fuels and thus reducing CO2 emissions and improving security of supply and allow a clearer comparison between the effects of renewable energy and energy efficiency measures. 5.3. The role of targets at EU level Since 1997 EU policy has been guided by the objective of a 12% share of renewable energy. A number of Member States have set national targets for the share of renewable energy sources in their national energy mix and this should be encouraged. The Commission has proposed and the Council and the European Parliament have adopted operational targets for 2010 on electricity from renewable energy sources and biofuels. Moreover a large range of legal measures in efficiency and support measures have been adopted at EU level. Because development is still too slow to reach the 12% objective, the present Communication announces additional measures. It is now time for all Member States to use the legal tools that have been developed at Community level in order to deliver on these operational targets and to increase the share of renewable energy sources in their national energy mix to such an extent that the 12% objective for the EU can be attained. In April 2004, the European Parliament considered the recommendations of the Berlin Conference. It urged the Commission and the Council to start a political process of setting ambitious, time tabled targets for increasing the share of renewable energy in final energy consumption, addressing the medium and long-term time frame in advance of the International Conference in Bonn, and called upon the Commission and the Council to make the necessary efforts to reach a target of 20% for the contribution by renewable energy to domestic energy consumption in the EU by 2020. [30] [30] P5_TA-PROV(2004)0276 International Conference on Renewable Energy (Bonn, June 2004) The Commission acknowledges the importance of providing a longer term perspective, considering in particular the infant nature of the renewable energy industry and the need to ensure sufficient investors' security. Acknowledging the outcome of the currently available feasibility studies, however, the Commission considers it necessary to more thoroughly assess the impacts of RES resources, notably with regard to their global economic effects before deciding on adopting targets beyond 2010 and before taking a position on the above-mentioned 20% target for the share of renewable energy in 2020. The Commission will carry out regular reviews of progress in the development of renewable energy sources, with the aim also of ensuring compatibility with its overall sustainable development strategy. This will require an extended impact analysis of its policy. In the case of the economic dimension this will take into account the competitiveness of the EU economy on the one hand, and the security of supply on the other hand, as well as its technical feasibility. In the case of the environmental dimension, the required contribution to EU goals on climate change and other environmental priorities will be addressed. Finally the potential for the development of renewable energy resources should also be taken into account. This review will be carried out for the first time not later than the end of October 2005 with a view to opening a debate in order to set in 2007 a target for the period after 2010. By starting the process for establishing a longer term perspective for renewable energy, the European Commission wants to contribute to the continued leadership already shown by some JREC members, including some EU Member States. 6. Conclusions Renewable energy has potential. This is important in a situation where the EU energy supply has structural weaknesses and geopolitical, social and environmental shortcomings, notably as regards European commitments in the Kyoto Protocol. Developing Europe's potential for using renewable energy will contribute to security of energy supply, reduce fuel imports and dependency, reduce greenhouse gas emissions, improve environmental protection, decouple economic growth from resource use, create jobs and consolidate efforts towards a knowledge-based society. Throughout the world, it is time to ensure that this potential is fulfilled in order to alleviate poverty and improve energy access for the poorest people. However, as far as the European Union is concerned, further steps need to be taken in many Member States to accelerate growth in the use of renewable energy and thereby ensure that the Union's targets will be met. For the European Union, this communication provides a basis to report on developments achieved so far and draw conclusions, as follows: i) A comprehensive EU regulatory framework has been put in place over the last four years; ii) EU targets for 2010 will only be met through the full implementation of this legal framework by Member States together with complementary proactive measures geared to national conditions; iii) Additional measures - notably financial as mentioned in Chapters 2.9 and 4 - are also needed at EU level; As a contribution to the Bonn Renewable Energy Conference in June 2004, the Communication outlines the Commission's approach to renewable energy policy. COMMISSION STAFF WORKING DOCUMENT - The share of renewable energy in the EU - Country Profiles - Overview of Renewable Energy Sources in the Enlarged European Union {COM(2004)366 final} TABLE OF CONTENTS FOREWORD AUSTRIA BELGIUM CYPRUS CZECH REPUBLIC DENMARK ESTONIA FINLAND FRANCE GERMANY GREECE HUNGARIA IRELAND ITALY LATVIA LITHUANIA LUXEMBOURG MALTA NETHERLANDS POLAND PORTUGAL SLOVAKIA SLOVENIA SPAIN SWEDEN 101 UNITED KINGDOM 106 FOREWORD The promotion of renewable energy has an important role to play in addressing the growing dependence on energy imports in Europe and in tackling climate change. Since 1997, the Union has been working towards the ambitious target of a 12% share of renewable energy in gross inland consumption by 2010. In 1997, the share of renewable energy was 5.4%; by 2001 it had reached 6%. This Staff Working Document gives an overview of the different situations of renewable energy sources in the European Union. It includes part of the formal report that the Commission is required to make under Article 3 of Directive 2001/77/EC on electricity from renewable energy sources, and it completes the overall picture with information at a country level on the heat produced from renewable energies and biofuels in the transport sector. This Staff Working Document complements the Communication on "The share of Renewable Energy sources in the EU". Data is based on different sources. Firstly, on the reports from Member States on national progress in achieving the targets on electricity from renewable energy sources (Article 3 of Directive 2001/77/EC). These reports can be found in the web site of Directorate General for Energy and Transport [31]. Secondly, on a study launched by the Commission on the evolution of renewable energy sources [32]. And thirdly, on a variety of sources like the European Barometer of renewable energies [33], data from the industry, etc. [31] http://europa.eu.int/comm/energy/res/ legislation/index_en.htm [32] FORRES 2020 : Analysis of the Renewable Energy Sources, evolution up to 2020. Contract N° 4.1030/T/02-008. [33] EurObserv'ER, the European Barometer of renewable energy sources. Pdf documents can be found at http://europa.eu.int/comm/energy/res/ publications/barometers_en.htm With the enlargement of the European Union, the new Member States are required to adopt the RES-E Directive by 1 May 2004. In the accession treaty, national indicative targets are set and the overall renewable electricity target for the enlarged Union will therefore be 21% of gross electricity consumption by 2010. The Commission has the legal obligation to report on the degree of achievement of new Member States' targets by 2006. Although it is too early to assess RES-policy in the new Member States due to very recently adopted regulations, this document also includes national information on the States now joining the European Union [34]. This Staff Working Document aims to give an overall picture of the situation and the potentials of renewable energy sources in the enlarged European Union. [34] In the case of the EU15, the Directive requires the Commssion to adopt a first progress report during 2004. In the case of the new Member States, the Commission report on the assessment in achieving the targets is not due until 2006. National indicative RES-E targets 2010 for Member States [35] [35] The percentage contributions of RES-E are based on the national production of RES-E divided by the gross national electricity consumption. For the EU15, the reference year is 1997. For the EU10 (Czech Republic, Estonia, Cyprus, Latvia, Lithuania, Hungary, Malta, Poland, Slovenia and Slovakia), the reference year is based on 1999-2000 data. >TABLE POSITION> AUSTRIA 1. Summary of RES markets and policy Background The feed-in tariffs introduced in January 2003 represent the major modification of the Austrian RES policy. These tariffs included in the Renewable Energy Act are expected to stimulate significant growth especially for wind, biomass electricity and small hydro power. However, the instrument is so far only effective for new installations getting all permissions by December 2004 and finished before June 2006. In December 2003 the contracting of RES-E plants was stopped and the processing of the Ökostromverordnung was set out. This decision was only lifted in March 2004 and caused great insecurity among investors. RES targets The RES-E target to be achieved by Austria in 2010 is 78% of gross electricity consumption. Status renewable energy market The production of renewable energies in Austria is dominated by large hydropower and biomass for heat generation. The fastest-growing renewable energy source over the last decade was solar thermal energy. There is wide variety of policy measures for the support of renewable energies in Austria not only at the federal level but also at the provincial level. Stimulated by the new feed-in tariffs steady growth is also expected in the sectors of wind energy, biomass electricity as well as small hydro installations. Main supporting policies The main promotion schemes for RES in Austria are the following. Feed-in tariffs Small hydro: 3.15-6.25 EUR cents /kWh PV systems: 60 EUR cents /kWh for plants < 20 kWpeak ,47 EUR cents /kWh for plants > 20 kWpeak Wind systems: 7.8 EUR cents /kWh for new plants Geothermal energy: 7.0 EUR cents /kWh for electricity fed into the grid Solid biomass and waste with large biogenic fraction: 10.2-16.0 EUR cents /kWh (10-2 MW), 6.5 EUR cents /kWh (hybrid plants) Fuels including biogenic wastes: 6.6-12.8 EUR cents /kWh (10-2 MW) 4.0-5.0 EUR cents /kWh (hybrid plants) Liquid biomass < 200 kW 13.0 EUR cents /kWh; > 200 kW 10.0 EUR cents /kWh Biogas 10.3 - 16.5 EUR cents /kWh Sewage and landfill gas 3.0 - 6.0 EURcents /kWh Investment subsidy Subsidy of about 30% of the investment costs for solar thermal, biomass, geothermal, wind, hydropower on project basis Tax reduction of biodiesel: approximately 95% tax reduction on biodiesel Key factors The relatively high feed-in tariffs combined with reasonable investment subsidies has generated large growth rates over the recent past. Continuity could be a problem due to the short operational period (until end of 2004) of the present feed-in tariffs. The possible refusal of the provincial governors to raise the cap on the electricity price caused by RES can create great uncertainty as was seen in early 2004. For PV an upper limit of 15 MW has been set, which will jeopardise further growth. 2. Current status and potentials of RES 2.1. Current penetration The production of electricity from RES showed moderate growth during the second half of the 1990s. The relatively limited growth has to be seen in correlation with the high overall production and share of RES-electricity dominated by large hydropower. The total RES electricity production (compare Fig. 1 and Fig. 2) grew from slightly below 35 TWh in 1990 to about 40 TWh in 2002 (only 30 TWh in 2003 due to an extremely bad hydraulic year!). The largest share of this growth is attributed to production from large hydro. The electricity produced from large hydropower grew from 29.0 TWh in 1990 to 35.3 TWh in 2002. The installed large hydro capacity grew by only 0.7 GW during this period, which corresponds to an additional power production of about 3TWh. A major part of the increase in RES-E generation is therefore due to the annual volatility of large hydropower. Especially when judging the figures for 2001 it has to be taken into account that the year 2001 was a very good hydraulic year allowing above-average hydroelectricity production. The growth of small hydro electricity generation (4.0 TWh in 1990 to 4.2 TWh in 2002) is more or less in line with the increase of capacity (816 MW in 1990 to 843 MW in 2002). In fact, the development of small hydro lagged far behind the potential that is seen for this source in Austria. The installed capacity for electricity generation from solid biomass was almost doubled in the period from 1993 to 2002 (414 MW to 750 MW). The electricity generated grew approximately at the same rate (from 984 GWh to 1 750 GWh). A major share (1400 GWh) of the biomass electricity is attributed to industrial wastes, especially in the paper industry. The remaining 202 new biomass plants produce only a minor share of 350 GWh annually. The biomass plants based on industrial waste are not considered for the purposes of the quota in the Austrian Renewable Energy Act. Only RES such as PV and wind energy where the use started basically from scratch could achieve significantly higher growth rates. In the case of wind energy a very strong growth occurred in 2003 as a result of the feed-in tariffs that were introduced. The installed capacity grew by almost 200% to about 415 MW in 2003 compared with a growth of only 40% in the year before. Even in absolute terms this growth is rather impressive. It is, however, highly questionable whether it will continue in 2004 owing to the decision by the Verbund APG AG to stop awarding feed-in contracts for new renewable plants, which was only revoked in March 2004 and caused great uncertainty. [36] [36] The resulting additional costs due to the promotion of 'new' RES are partly paid by all consumers in form of an additional charge per kWh. Of importance in this context is the fact that the law explicitly contains a budget restriction - i.e. the charge is capped to initially 0.22 EURcent/kWh. Due to the prospering development of new RES-E in 2003 a need to increase the cap occurred. Hence, no approval to do so was given before March 2004. As a consequence high uncertaintyprevailed. Table 1 shows the electricity generation from RES for the years 1997 and 2002 as well as the average annual growth during this period. It can be seen that very high growth rates are obtained only by the new RES-E biogas, wind and PV. However, since the Austrian RES-E sector is mainly dominated by large hydropower, which is hardly growing at all, the total growth of RES-E in Austria is also very limited. Based on total demand, the share of RES electricity in Austria amounted to 68% in 2002 compared with 70% in 1997. >REFERENCE TO A GRAPHIC> Figure : RES electricity production in Austria up until 2002 [37] [37] Based on EUROSTAT data, which are up-to-date only until 2001. For many RES, e.g. wind-onshore and PV more recent data from sector organisations and national statistics have been used >REFERENCE TO A GRAPHIC> Figure : RES electricity production in Austria up until 2002 excluding large hydro Table : RES-electricity production in 1997 and 2002 in GWh >TABLE POSITION> The RES heat sector shows a somewhat ambiguous picture. Whereas the penetration of biomass heat production was decreasing over recent years, heat production from solar thermal heat and from geothermal heat including heat pumps increased (compare ). But even though the use of biomass heat was falling slightly, it is still by far the most important source for RES-heat, making a contribution of 2.4 Mtoe in 2001. The strong position in absolute figures is due to the continued and widespread use of traditional biomass-based heating. The installed collector area for solar thermal heat generation in Austria grew from 433 thousand m2 in 1990 to 2.66 mill. m2 in 2002. Even higher growth was reached for geothermal energy. Table : RES-heat production up until 2002 >TABLE POSITION> * Biomass heat only until 2001 The use of liquid biofuels increased by an average of 17 percent in the period from 1997 to 2002 (compare ), reaching a level of 26 ktoe. In the light of this very moderate absolute contribution to the fuel use, the growth rates could be judged as not very high. The biodiesel production capacities amount to 45 ktoe in 2003 and 90 ktoe in 2004. Table : RES-biofuel production up until 2002 >TABLE POSITION> 2.2. Mid-term Potentials >REFERENCE TO A GRAPHIC> Figure : Mid-term potentials of RES electricity, heat and transport in Austria Table : Policy assessment for RES - Austria >TABLE POSITION> // Sufficiency to promote RES * // Hardly any or no support ** // Little support *** // Moderate support **** // High support ***** // Very high support BELGIUM 1. Summary of RES markets and policy Background The three regions of Flanders, Brussels and the Walloon region implement the national energy policies. It is because of this distribution of implementation that the support differs per region. The Flanders market has been fully opened for competition. In the Walloon region households are only free to choose their supplier when they are supplied exclusively by green electricity suppliers (who have to sell a minimum of 50% of electricity from renewable sources). RES targets The RES-E target to be achieved by Belgium in 2010 is 6% of gross electricity consumption. The target in the Walloon region equals 7% for 2007, for renewable electricity and CHP. In 2005, targets for the period Jan 2008 onwards will be decided. In Flanders the target is 6% for 2010. In Brussels proposed green electricity targets for electricity suppliers are 2% for 2004, 2.25% for 2005 and 2.5% for 2006. Status renewable energy market Three different green certificate markets have started, one in Flanders, the Walloon region and the Brussels region. Because of the possibility of banking of certificates and increasing penalty rates and a shortage on certificates not much of trading has taken place, it is more favourable of paying penalties the first year and use the certificates in later periods. The three regional different systems complicate the implementation of RES-E market. Main supporting policies The main promotion schemes for RES in Belgium are Green certificate system with mandatory demand or minimum feed-in tariff. Minimum prices are: Wind offshore: 9 EUR ct/kWh Wind onshore: 5 EUR ct/kWh Solar: 15 EUR ct/kWh Biomass and other RE: 2 EUR ct/kWh Hydro: 5 EUR ct/kWh A second main driver for RES investments is the set of investment support schemes available. Major issues Flanders and the Walloon Region introduced a green certificate system in 2002. The development of RES-E is up to now shy. The year 2004 is crucial for completing the analysis of this country. 2. Current status and potentials of RES 2.1. Current penetration Development of the renewable electricity production in Belgium over the last decade is shown in Figure 1. Hydropower electricity accounts for the largest contribution to total renewable electricity production, with a stable annual production of around 330 GWh over the last decade, corresponding to a share of 31% of the total RES-E production in the year 2002. The share of electricity from biomass (biogas, biowaste, and solid biomass) shows an increasing trend in the last years. Wind energy had a low installed capacity of 34 MW in 2002 and 68 MW in 2003. For achieving the 6% target by 2010, the average annual growth has to increase (acceleration of current RES-E measures) and efficiency instruments are needed for controlling the electricity demand. >REFERENCE TO A GRAPHIC> Figure 1: RES-electricity production up until 2002 [38] in Belgium [38] Based on EUROSTAT data, which are up-to-date only until 2001. For many RES, e.g. wind-onshore and PV more recent data from sector organisations and national statistics have been used. Table 1: RES-electricity production in 1997 and 2002 in GWh >TABLE POSITION> 2 shows that also the RES-heat production has grown, although to a lesser extent than the RES-electricity production. Biomass heat is by far the major source of RES-heat, but it can be seen that the increase of solar thermal heat and geothermal heat has been more pronounced over recent years. Table 2: RES-heat production up until 2002 >TABLE POSITION> * Biomass heat only until 2001 The biofuel sector in Belgium is virtually non-existent, as can be seen from 3. Table 3: RES-biofuel production up until 2002 >TABLE POSITION> 2.2. Mid-term Potentials >REFERENCE TO A GRAPHIC> Figure 2: Mid-term potentials of RES electricity heat and transport in Belgium Table 4: Policy assessment for RES - Belgium Belgium is divided in three regions Flanders (F), Wallonie (W) & Brussels (B). Federal supports can be recognized by Fed >TABLE POSITION> >TABLE POSITION> CYPRUS 1. Summary of RES markets and policy Background Cyprus is almost totally dependent on oil imports for its energy supply accounting for 91% of the primary energy supply. The burden of cost of energy imports on the economy of Cyprus is considerable. RES targets The RES-E target to be achieved in 2010 is 6% for Cyprus. Status of the renewable energy market Cyprus plans full liberalisation of the electricity market to achieve until 2005. There is no electricity import or export. Almost all energy is produced from imported oil and diesel. The Electricity Authority of Cyprus (EAC) plans to invest in a new fossil fuel power plant, which would lead to an excess capacity for the next few years, being a major barrier for renewable development. Solar thermal energy is the major available renewable energy in Cyprus, and it is traditionally used by hotels and households for thermal purposes. The Government has recently adopted the "New Grant Scheme For Energy Conservation and the Promotion of the Utilization of Renewable Energy Sources" effective from 2003 to 2007. Main supporting policies The "New Grant Scheme For Energy Conservation and the Promotion of the Utilization of Renewable Energy Sources" provides financial incentives in the form of governmental grants (30-40% of investments) for investments in wind energy systems, solar thermal, PV, biomass, landfill and sewage waste using RES. There is a fixed purchase price for RES by EAC which is 6,3 EUR cents/kWh (3,7 cyp. cent/kWh). In addition to that EAC pays a special premium depending on the technology used from a Special Fund, financed by a levy on electricity consumption. The feed-in tariffs are as follows: Wind: first five years: 9,2 EUR cents/kWh (5,4 cyp. cent), for the next 10 years: 4,8 EUR cents/kWh to 9,2 EUR cents/kWh (2,8 to 5,4 cyp. cent/kWh) according to the mean annual wind speed. Biomass, landfill and sewage: 6,3 EUR cents/kWh (3,7 cyp. cent/kWh) PV up to 5 kW: 20,4 EUR cents/kWh (12 cyp. cent/kWh) Key factors Although the government intents to make Cyprus less dependent on imported energy, the energy infrastructure in Cyprus is set up for fossil fuel generation. 2. Current status and potentials of RES 2.1. Current penetration Virtually all electricity in Cyprus (around 99%) is produced with oil and diesel. There is very small amount of electricity from renewable energy, either solar, small-hydro or biomass. Wind is not used up to now for electricity generation. However, the total energy consumption is slightly different. 3.6% energy is provided by solar thermal. At the moment 92% of all houses and 50% of the hotels have installed solar water heaters. Cyprus has more solar collectors per capita installed than any other country in the world. Table1: RES-electricity production in 1997 and 2002 in GWh >TABLE POSITION> Table 2: RES-heat production up until 2001 >TABLE POSITION> There is no biofuel production in Cyprus. 2.2. Mid-term potentials >REFERENCE TO A GRAPHIC> Figure 1: Mid-term potentials of RES electricity, heat and transport in Cyprus CZECH REPUBLIC 1. Summary of RES markets and policy Background The Czech Republic as many other central European countries has a good supply of cheap coal and lignite based energy. However there have been serious efforts made to increase the share of renewable with own windmill design, numerous solar thermal installations, biomass and an extended system of small hydro. RES targets The RES-E target to be achieved in 2010 is 8% for the Czech Republic. Status of the renewable energy market The significant excess of generated electricity of around 27,000 GWh/year with the full commissioning of the Temelin Nuclear Power Plant is a major barrier for renewable electricity development for at least another decade. Poor reputation of wind energy caused by premature sales of prototypes to clients. Biomass and hydro are far the most utilised renewables. Geothermal is mainly utilised for balneological and swimming purposes. Main supporting policies The main supporting policies in the Czech Republic are: Minimum feed-in-tariffs annually adjusted. Minimum prices for 2003: Wind onshore: 9.6 EUR ct/kWh Geothermal: 9.6 EUR ct/kWh Biomass and biogas: 8 EUR ct/kWh Small Hydro: 5 EUR ct/kWh PV: 19.2 EUR ct/kWh Tax incentives: There is an exemption from property tax for five years for conversion of building heating systems from solid fuel to renewable energy. Also there is a tax relief up to five years (concerning income and property) for investment in renewable energy. The import duty on renewable-energy-equipment is reduced. Low VAT rate (5% instead of 22%) for small facilities (hydropower: 0.1 MW, wind: 0.075 MW, all solar and biomass units). Reduced VAT rate of 5% paid by final consumer of biomass fuel and heat. Exemption from excise duty for biodiesel fuel. Key factors Existing overcapacity on electricity production has historically hampered the development of renewables. A new Renewable Energy Act is being prepared and should enter into force the first half of 2004. The Energy Regulatory Office role for setting prices is unclear. This has resulted in large market uncertainty and investors and financiers have consequently held back on new RES-E investments. Other issues The present structure of the power production system is a result of the abundant and cheap supply of coal and especially of lignite. Lack of capital 2. Current status and potentials of RES 2.1. Current penetration Hydropower and biomass are for the moment the only two renewables contributing to RES electricity. Wind energy potential is for the moment nearly unexploited (around 8 MW currently installed). The utilisation of photovoltaic systems is also very limited. >REFERENCE TO A GRAPHIC> Figure 1: RES electricity production up until 2002 [39] in the Czech Republic [39] Based on EUROSTAT data, which are up-to-date only until 2001. For many RES, e.g. wind-onshore and PV more recent data from sector organisations and national statistics have been used. In 1999 about 1.6 million tons of dry biomass were used for energy purposes. Other renewable resources of thermal energy were much less significant. The total production of heat from biomass grew from 358 Mtoe in 1997 to 432 Mtoe in 2001. Energy recovery of biogas exploitations has started in the recent years. Even though this shows a great shift in a five-year period, it is only 10% of the real potential of biomass. Geothermal heat is utilised for domestic and swimming pool heating as well as for some small industries. Moreover about 380 geothermal heat pumps have been installed until 2002. In 2002 there were 100,000 m2 of solar collectors in operation. Table 1: RES-electricity production in 1997 and 2002 in GWh >TABLE POSITION> Table 2: RES-heat production up until 2001 >TABLE POSITION> In 2001, biofuels already amounted to 1.3% of all automotive fuels. Table 3: RES-biofuel production up until 2001 >TABLE POSITION> 2.2. Mid-term potentials >REFERENCE TO A GRAPHIC> Figure 2: Mid-term potentials of RES electricity, heat and transport in the Czech Republic DENMARK 1. Summary of RES markets and policy Background With the election of the new government at the end of 2001 fundamental changes were made to existing energy policies and targets. Most of the favourable promotion schemes for RES have been abolished. The introduction of a green certificate market has been announced but has not been implemented so far. Except for two offshore wind parks, which were already in an advanced planning phase, the strong RES development observed in the 90's has stopped. RES targets The RES-E target to be achieved by Denmark in 2010 is 29% of gross electricity consumption. Status renewable energy market The renewable energy market has dramatically declined over the last two years. Main supporting policies The main promotion schemes for RES in Denmark are the following. Act on payment for green electricity - settlement price instead of formerly high feed-in tariff Wind onshore: New installations receive spot price plus (on a monthly basis) an environmental premium (maximum of 1.3 EUR cents/kWh) plus a compensation for offsetting costs (0,3 EUR cents/kWh), in total limited to 4.8 EUR cents/kWh. Turbine owners are responsible for selling and balancing the power. The tariff can be well below the 4.8 EUR cents/kWh in times of a low spot price. The tariff is insufficient to attract new investments. Wind offshore: New installations receive spot price plus (on a monthly basis) an environmental premium (maximum of 1.3 EUR cents/kWh) plus a compensation for offsetting costs (0,3 EUR cents/kWh), in total limited to 4.8 EUR cents/kWh. Turbine owners are responsible for selling and balancing the power. The tariff can be well below the 4.8 EUR cents/kWh in times of a low spot price. Tendering procedure planed but conditions are currently under discussion. Solid Biomass: A settlement price of 4 EUR cents/kWh is guaranteed for a period of ten years. Additionally and as a guarantee these plants receive 1 EUR cent/kWh in compensation for an RE certificate. Biogas: A settlement price of 4 EUR cents/kWh is paid Waste: A settlement price of 1 EUR cent/kWh is paid Key factors Termination of the originally high feed-in tariffs. Delay of the implementation of a green certificate scheme. In the new Danish political climate change renewables are of less importance. The feed-in tariffs applied at present are insufficient to attract investments comparable to the development of the last decade. 2. Current status and potentials of RES 2.1. Current penetration Due to a focus on environmental issues during the 1980s and 1990s by the Danish governments and the energy administrations renewable energy is already widely used. More than 20 % of the electricity supplied in Denmark is currently based on renewable energy and RES cover approximately 9% of the country's primary energy consumption. >REFERENCE TO A GRAPHIC> Figure 1: RES electricity production up until 2002 [40] in Denmark [40] Based on EUROSTAT data, which are up-to-date only until 2001. For many RES, e.g. wind-onshore and PV more recent data from sector organisations and national statistics have been used. The current penetration in terms of the actual power generation is shown in Figure 1. The highest penetration rate as well as the highest growth during the last decade has been achieved by wind onshore. About 5000 GWh electricity was produced by wind onshore power plants in 2002. Up until 1999 economic conditions for wind energy were very stable. All wind generated power was delivered as prioritised dispatch and a feed-in system with a general tariff of approximately 8 EUR cents/kWh. However, over the last few years the situation has changed markedly due to a number of changes to the support schemes. In 2000 the annual installed wind power capacity peaked over 500 MW, but in 2001 only 115 MW was established. In 2002 the installed capacity increased again due to favourable re-powering conditions. Currently the figures for new wind on-shore capacities are very small (about 50 MW in 2003). There was major development with regard to off-shore wind energy in the years 2002 and 2003. In 2002 the off-shore wind park in Horns Rev (160 MW) was completed and in 2003 the large wind farm in Nysted (165.6 MW) as well as three smaller parks went on-line. Accordingly the total installed capacity of off-shore wind energy is about 425 MW. Biomass, especially biowaste, but also solid biomass and biogas, has the second largest RES-E share. The detailed figures can be seen in Table 1. Only very little growth occurred in the biomass sector during 2002 and 2003 because the earlier favourable promotion conditions for biomass were, like those for wind energy, no longer available. Table 1: RES-electricity production in 1997 and 2002 in GWh and average annual growth since 1997 >TABLE POSITION> In the heat sector the dominant renewable energy carrier is biomass, but since 1997 the market has been declining (see 2). Geothermal heat, including heat pumps, has shown the highest growth rate over the last few years. Table 2: RES-heat production in 1997 and 2002 in ktoe and average annual growth since 1997 >TABLE POSITION> *Biomass heat only up until 2001 Despite the rather low liquid biofuel production up until 2002 shown in 3, Denmark reached a biofuel production capacity of 36 ktoe in 2003. This figure is attributable to a number of experimental pilot plants currently being operated. It is not clear whether or not Denmark will launch commercial production of biofuels. If so, biodiesel seems to be the most likely option. Table 3: RES-biofuel production up until 2002 >TABLE POSITION> 2.2. Mid-term Potentials >REFERENCE TO A GRAPHIC> Figure 2: Mid-term potentials (2020) of RES electricity heat and transport in Denmark Table 4: Policy assessment for RES - Denmark >TABLE POSITION> // Sufficiency to promote RES * // Hardly any or no support ** // Little support *** // Moderate support **** // High support ***** // Very high support ESTONIA 1. Summary of RES markets and policy Background Estonia has one of the lowest penetration of RES in the region with an extended oils-shale based energy production employing 10,000 people in this relatively small country. RES targets The RES-E target to be achieved in 2010 is 5.1% for Estonia. Status of the renewable energy market There are low opportunities for solar and geothermal. However there is considerable potential in wind and biomass as well as hydro power. The biomass installations need high investment and though there are several wind projects in the pipeline the feed in tariff is hardly more than half of the amount the developers would favour. Main supporting policies Electricity Market Act (EMA): electricity price for renewable energy 1.8 times the residential price, so the price for renewable energy is: 5,2 EUR cents /kWh. This price is paid for 7 years for biomass and hydro and for 12 years for wind. The EMA has come into force on July 2003. Sales Tax Act: 0% VAT for renewable energies Key factors Extensive reserve of domestic fuel (10,000 people working in oil shale industry in the country with very high unemployment rate). Changes in Energy Law open the possibilities for producing wind energy profitably and start manufacturing wind generators and their components in Estonia. 2. Current status and potentials of RES 2.1. Current penetration The share of renewables is 0.2%, because of the huge and cheap supply of electricity from oil shale. This source dominates the Estonian electricity production. Currently there is one wind-farm operational with a total capacity of 1.8 MW. Several projects with a total of 76 MW installed capacity were identified. In Estonia, at present only one 1.2 MW hydro plant exists. The utilization of solar energy in Estonia has no noticeable spreading both for electricity production and heat supply. >REFERENCE TO A GRAPHIC> Figure 1: RES electricity production in Estonia up until 2001 The current penetration of biomass is not exactly known but very small. The area occupied by forests constitutes 22 thousand km2 that exceeds a half of the country territory, thus forest residue presents the highest biomass potential. Table 1: RES-electricity production in 1997 and 2001 in GWh >TABLE POSITION> Table 2: RES-heat production up until 2001 >TABLE POSITION> There is no liquid biofuel production in Estonia. 2.2. Mid-term potentials >REFERENCE TO A GRAPHIC> Figure 2: Mid-term potentials of RES electricity, heat and transport in Estonia FINLAND 1. Summary of RES markets and policy Background The main core of Finnish renewables policy is defined in the Action Plan for Renewable Energy. The most important objective is to increase the competitiveness of renewable sources for the future. The plan has a strong emphasis on R&D activities to achieve this result in the long term. Energy taxation of fossil fuels forms the main instrument for implementation of renewables in the short term. RES targets The RES-E target from the EU directive for Finland is 31.5% of gross electricity consumption in 2010. A national target for 2025 has been set which is aimed at increasing the use of renewable energy by 260 PJ. Status renewable energy market Renewables currently cover around 28% of the Finnish total electricity consumption supplied by two key sources: hydro power (70%) and biomass (30%). Over the past decade a significant increase has been achieved in the deployment of biomass, in particular in the form of CHP and district heating systems. Main supporting policies Exemption from energy tax for renewable electricity. Unlike electricity from fossil or nuclear sources renewable electricity is exempted from the Finnish energy tax paid by end-users. This brings the following benefits for renewables: wind 69 EUR /MWh biomass / mini-hydro 42 EUR /MWh biomass heating fuels 1 EUR /GJ (compared to natural gas) Investment subsidies are available for new investments which receive a subsidy of 30% (wind: 40%). Key factors Subsidies provide absolute certainty regarding lower investment costs. Tax exemptions help to bridge gap with fossil and nuclear competitors. Nevertheless in the case of wind energy, available support is not enough to plug the gap. The existing support systems have allowed a substantial increase to be achieved in the use of biomass for electricity production and district heating. Political changes and some uncertainty about future energy support programmes have resulted in new renewable energy investments being withheld. Other issues The value of total available support does not completely plug the price gap with fossil or nuclear based competitors. This holds in particular for wind energy. 2. Current status and potentials of RES 2.1. Current penetration The development of the renewable electricity production over the past decade has resulted in a 30% increase since 1990. In absolute figures bio-energy showed the strongest growth due to a strong expansion of biomass-fueled CHP and district heating. By its efforts Finland is now the largest generator of electricity from biomass within the EU. Nearly 10% of the domestic electricity demand is now met by biomass. Hydro power, however, still remains the largest source of renewable energy in Finland. The use of wind power and photovoltaics is still in its early stages in the Finnish electricity market. In 2002 a total of 51 MW was installed. The current penetration in terms of the actual power generation is shown in Figure 1 up to 2002 from Eurostat data. The fluctuations reflect the volatility in the supply of hydro power due to variations in weather conditions from year to year. Recent figures for 2002 indicate that electricity from biomass reached a level of 10 TWh. A similar amount was produced by hydro power in 2002. According to the total demand the share of RES electricity in Finland amounted to 25% in 2002 compared with 25% in 1997. >REFERENCE TO A GRAPHIC> Figure 1: RES electricity production up until 2002 [41] in Finland [41] Based on EUROSTAT data, which are up-to-date only until 2001. For many RES, e.g. wind-onshore and PV more recent data from sector organisations and national statistics have been used. >REFERENCE TO A GRAPHIC> Figure 2: RES electricity production in Finland up until 2002 without large hydro Table 1: RES-electricity production in 1997 and 2002 in GWh >TABLE POSITION> In the heat sector the use of biomass, in particular in new CHP and district heating installations, has grown substantially over the past decade (by nearly 50% compared with 1990). This substantial growth rate has fallen somewhat of late. With the use of biomass for heating purposes, Finland has become one of the leading Member States within the EU when it comes to the share of heat from biomass in the total energy demand for heating purposes. Solar thermal collectors and heat pumps have been introduced in Finland, but their contribution still remains small. Table 2: RES-heat production up until 2002 >TABLE POSITION> * Biomass heat only until 2001 Biofuel for transport has not reached any significant level so far in Finland. Table 3: RES-biofuel production up until 2002 >TABLE POSITION> 2.2. Mid-term Potentials >REFERENCE TO A GRAPHIC> Figure 3: Mid-term potentials of RES electricity heat and transport in Finland Table 4: Policy assessment for RES - Finland >TABLE POSITION> FRANCE 1. Summary of RES markets and policy Background France has introduced legislation which provides a strong financial support scheme for renewable energy based on feed-in tariffs. These measures took effect in 2001 and 2002. Before this change, implementation was dependent on modest subsidy programmes. RES targets The RES-E target from the EU directive for France is 21% of gross electricity consumption in 2010. Status of the renewable energy market Renewables cover currently around 16% of the French total electricity consumption. This supply is met mainly by hydro power. Despite significant resources wind, biomass and geothermal energy currently play an insignificant role in the electricity sector. The current use of heat from RES amounts to approximately 6,0 Mtoe which covers 7% of the domestic energy consumption for heating purposes. The use of biomass forms the main source for renewable heat and is relatively stable in size. Main supporting policies Feed-in tariffs: For renewable energy installations up to 12 MW, guaranteed for 15 or 20 years. Tariffs depend on source type and may include a premium for some sources. Rates are adjusted for inflation. PV-Systems: 15 EUR cents/kWh Hydro: Standard rate of 6 EUR cents/kWh, premium up to 7,5 EUR cents/kWh Biomass: Standard rate of 4,9 EUR cents/kWh, premium up to 6 EUR cents/kWh Sewage and landfill gas: Standard rate of 5,5 EUR cents/kWh, premium up to 6 EUR cents/kWh MSW: Standard rate of 3,5 EUR cents/kWh, premium up to 4 EUR cents /kWh Wind: 8,5 EUR cents/kWh for the first 5 years after installation, then 6,5 EUR cents up to 10 years after installation and 3EUR cents/kWh for a further 5 years. A tendering system is in place for renewable energy installations > 12 MW. Tenders follow an open bidding procedure, where the winner is awarded a guaranteed-price contract. The tariff contracted depends on the bid. Calls for projects have published for biogas, wind onshore and wind offshore with a total power capacity of 250 MW. Key factors The level of the tariff is clearly high enough to only attract small and medium wind-energy projects. Tariffs for other renewables seem relatively low or moderate. Guaranteed periods under the new scheme are sufficiently long to secure investments. Administrative and grid barriers persist. Uncertainty in winning a bid for projects larger than 12 MW due to the tendering procedure. Other issues The new feed-in tariffs may provide a strong incentive if major obstacles like administrative and grid barriers can be removed. 2. Current status and potentials of RES 2.1. Current penetration The development of renewable electricity production over the past decade has resulted in a 14% increase since 1990. This increase is almost entirely due to more hydro power production. Existing installations in particular have increased their output as there was only a modest growth in new capacity. Biomass is the second-largest source of renewable electricity and its use has also risen over the past decade. However, its contribution to the total renewable electricity generation is small (5%). The use of wind power and photovoltaics is still in its early stages in France. France has a considerable geothermal potential. Current penetration in terms of the power actually generated is shown in Figure 1 up to 2002 (Data from Eurostat). The fluctuations reflect the volatility in the supply of hydro power due to variations in weather conditions from year to year. In 2003 installed wind power increased by 91 MW to total 239 MW. Photovoltaic solar power rose by 3 MW to a total capacity of 17 MW. On the basis of total demand the share of RES electricity in France amounted to 14.4% in 2002 compared with 15% in 1997. >REFERENCE TO A GRAPHIC> Figure 1: RES electricity production up until 2002 [42] in France [42] Based on EUROSTAT data, which are up-to-date only until 2001. For many RES, e.g. wind-onshore and PV more recent data from sector organisations and national statistics have been used. >REFERENCE TO A GRAPHIC> Figure 2: RES electricity production in France up until 2002 without large hydro Table 1: RES electricity production in 1997 and 2002 in GWh >TABLE POSITION> Unlike renewable electricity, the heat sector has remained more or less stable over the past decade. The current use of heat from RES amounts to approximately 10 Mtoe, which covers 7% of the domestic energy consumption for heating purposes. The use of biomass forms the main source of renewable heat and is relatively stable in size. The largest contribution comes from wood-firing in households, which covers 90% of the heat production from RES. Geothermal heat is the second-largest form of heat in France. Like biomass, its contribution has remained stable over past years. The figures for recent years demonstrate that solar thermal collectors and heat pumps have attracted sizeable investments especially from private households. A total collector area of about 0,7 Mio. m2 was installed by the end of 2002. Table 2: RES-heat production up until 2001 >TABLE POSITION> *Biomass heat only up until 2001 France is within Europe one of the leading Member States in the production and use of biofuels for transport. Production levels are similar to Germany's. Table 3: RES-biofuel production up until 2002 >TABLE POSITION> 2.2. Mid-term Potentials >REFERENCE TO A GRAPHIC> Figure 3: Mid-term potentials of RES electricity heat and transport in France Table 4: Policy assessment for RES - France >TABLE POSITION> * Time implemented, duration of support and operational period are specified for the main instrument supporting the deployment of the selected renewable energy technology. The main instrument is indicated as the first instrument in the first and second row of the table. Elaboration of support: 1) Degree and duration of support 2) Non-economic factors (e.g. grid constraints, social constraints and administrative barriers) * // Insufficient support or very strong barriers ** // Little support or significant constraints *** // Reasonably sufficient support or acceptable market conditions **** // High support or good market conditions ***** // Very high support or very good conditions GERMANY 1. Summary of RES markets and policy Background The stability of political support has stimulated continuous and high levels of growth especially in the case of wind energy, PV and solar thermal installations over the past decade. But the sectors of liquid biofuels, heat pumps and to a lesser extent biomass electricity, and biomass heat have also shown relevant growth rates. A new feed-in tariff system is proposed that will lower the tariffs for wind on-shore, increase tariffs for biomass electricity, geothermal electricity and introduce a feed-in tariff for the refurbishment of large hydro. RES targets The RES-E target to be achieved by Germany in 2010 is 12.5% of gross electricity consumption (in 2020 10% of total energy consumption and 20% of electricity consumption). Status of the renewable energy market The renewable energy market in Germany is mature and showing large growth rates even at high penetration rates. Biomass might be considered as the only source that is significantly lagging behind expectations. Main supporting policies The main promotion schemes for RES in Germany are the following. Renewable Energy Act - feed-in tariff (present scheme) (proposed new law to be implemented in 2004) Wind: 9 EUR cents/kWh for at least five years after installation. Reduction of tariff to 6 EUR cents/kWh depending on yield of system. Yearly reduction of tariff by 1.5%. Biomass: up to 500 kW: 10 EUR cents/kWh, up to 5 MWp: 9 EUR cents/kWh, up to 20 MWp: 8,6 EUR cents/kWh, Hydro, landfill gas, sewage gas: up to 500 kW: 7,7 EUR cents/kWh, form 501 kW to 5 MW: 6,6 EUR cents/kWh PV: 48 EUR cents/kWh, yearly reduction of tariff by 5%. Starting in 01/2004 FIT of 59 EUR cents/kWh. (Proposed new law to be implemented in 2004 will contain different tariffs) Market Incentive Program: Investment subsidy for most sources except wind Income tax regulations on wind energy investments Environment and Energy Efficiency Programme: subsidised loans for major share of wind investments Full exemption from mineral oil tax and environmental tax for all pure liquid and solid biofuels in heat and transport. Key factors Partially exploited potentials and limited grid capacity in the northern parts of Germany are currently hampering the growth of onshore wind energy for much of the market. Offshore wind energy is developing more slowly than expected due to high costs and unsolved technical problems (long distance from land and deep water). Biomass development is slower than expected due to fuel price uncertainty and high infrastructure costs. Most of the low-cost potentials (wood wastes) have already been exploited. The proposed new renewable energy act will have a major impact on wind, biomass and large hydropower. The current relatively high feed-in tariffs combined with reasonable investment subsidies and loans has generated a considerable RES market. The termination of the 100 000 roofs programme would have led to a significant slowdown of PV development, however this is now being compensated by higher feed-in tariffs as from in January 2004. 2. Current status and potentials of RES 2.1. Current penetration The developments in renewable electricity production have been very dynamic in Germany over the recent years. In absolute figures wind energy showed the strongest growth reaching the combined generation potential of large and small hydropower at the end of 2003 of about 25 TWh. The actual generation of wind energy in 2003 was lower at about 18.5 TWh due to a wind year that was 16% below average as well as due to the fact that most wind turbines are installed at the end of the year. About 50% of the European wind energy capacity is installed in Germany. Hydropower has the second-largest RES-E share, but it has not been showing any significant development over the last five years. Biomass electricity, including the biodegradable fraction of municipal waste, is the third most important RES-E source with about 6.2 TWh of electricity production in 2002. Strong growth rates have also been achieved in the area of photovoltaics, reaching an installed capacity of 258 MW and a generation potential of about 190 GWh in 2002 and about 260 GWh in 2003. Penetration in 2001 in terms of actual power generation is shown in Figure 1. For wind and hydropower in particular this graph does not truly reflect the development of the installed capacities because of the volatility of power output over the year. In Table 1 electricity generation from RES is shown for the years 1997 and 2002 as well as the average annual growth during this period. >REFERENCE TO A GRAPHIC> Figure 1: RES electricity production up until 2002 [43] in Germany [43] Based on EUROSTAT data, which are up-to-date only until 2001. For many RES, e.g. wind-onshore, hydro power and PV more recent data from sector organisations and national statistics have been used. Table 1: RES-electricity production in 1997 and 2002 in GWh >TABLE POSITION> In the heat sector the growth was less rapid than in the electricity sector although solar thermal collectors and heat pumps have attracted sizeable investment especially from private households. A total collector area of about 5 million m2 was installed by the end of 2002. Biomass heating is largely dominated by wood and wood-waste applications in households and a growing share of biogas, accounting for about 13% of the biomass heat consumption by the end of 2001. The production of heat from wood in households remained quite constant over recent years. Table 2: RES-heat production up until 2001 >TABLE POSITION> *Biomass heat only up until 2001 The biofuel sector bas been growing very rapidly over the last 10 years, showing a doubling of production every two years. The existing biofuel mix is based almost entirely on biodiesel produced from rapeseed. Table 3: RES-biofuel production up until 2002 >TABLE POSITION> 2.2. Mid-term Potentials The mid-term potentials [44] of RES in the sectors of electricity, heat and transport are shown in Figure 2. [44] The exact definition of the "mid-term potential" can be found in Annex I - Methodologies of the final report. Compared with the technical potential the mid-term potential represents the so-called realisable potential, taking into account socio-economic restrictions, maximum annual growth restrictions, capacity of RES production industry, etc. >REFERENCE TO A GRAPHIC> Figure 2: Mid-term potentials of RES electricity heat and transport in Germany Table 4: Policy assessment for RES - Germany >TABLE POSITION> * Environment and Energy Efficiency Programme of "Deutsche Ausgleichsbank" // Elaboration of support * // Insufficient support ** // Little support *** // Reasonably sufficient support **** // High support ***** // Very high support GREECE 1. Summary of RES markets and policy Background The current development of RES in Greece showed the first significant growth in the field of active solar thermal systems stimulated by a deduction of the taxable income for final users. However, this measure is temporarily on hold for budgetary reasons. Law 2244/94 on Electricity from Renewables has played a decisive role in starting the large-scale development of RES through private investments The combination of feed-in tariffs (introduced by 2244/94) and subsidies in the order of 40% of the investment cost (provided either through the development law or the 3rd Community Support Framework-CSF) created a large measure of interest among investors. Most of the activity has been concentrated on wind energy and active solar thermal systems. Administrative barriers represent the major constraint to further growth. RES targets The RES-E target to be achieved by Greece in 2010 is 20% of gross electricity consumption. Status of the renewable energy market Greece has a mature RES market especially for active solar thermal systems, hydro and geothermal installations in the heat sector. The general promotion schemes have been in place for a considerable time already and have undergone only slight change (degree of support) of late. A recent inter-ministerial decision is aimed at reducing the administrative burden affecting RES installations, as well as some geothermal projects. Main supporting policies The main promotion schemes for RES in Greece are the following. Law 2244/94 (feed-in tariff) and Law 2773/1999 (liberalisation) (Feed-in tariff of a bout 7,8 EUR cents/kWh on the islands and 7 EUR cents/kWh on the mainland) Development Law 2601/98. The Law supports investment activities (including energy investments) of private companies (investment subsidy of about 30%). The Operational Programme 'Competitiveness' of the Hellenic Ministry of Development is part of the 3rd Community Support Framework (State aid for RES investments, ranging from 30 to 50%). Law 2364/95 introduces a reduction of the taxable income of final users installating renewable energy systems in private buildings (75% of costs for purchase and installation is tax-deductible). Key factors The big danger is that the construction and upgrading of the grid lines will be delayed, postponing as a consequence the development of RES. This fact, in combination with the administrative difficulties and grid connection obstacles causing problems with obtaining construction permits for wind and biomass power plants constitutes the biggest barrier. However, according to the latest inter-ministerial decisions, the licensing procedure for RES power plants will be streamlined and made more efficient. It remains to be seen over the next months how effective this decision proves to be. With regard to the upgrading and extension of power transmission lines, which also contribute to the further deployment of RES, expropriation procedures are being shortened and simplified to speed up implementation for the 2004 Olympics. The Greek Government has also established a set of rules for the rational use of geothermal energy in line with the Community's view. Any geothermal field is considered to be a single-entity deposit, and a-source that cannot be split up. A specific bidding procedure has been established for the whole range of products, by products and process residues obtained from a geothermal source. 2. Current status and potentials of RES 2.1. Current penetration The current status and development in the renewable electricity production in Greece is mostly dominated by traditional RES-E sources such as large-scale hydropower. A major part of the RES-E output is effected by annual fluctuations of precipitation. In 2002, the electricity generated by hydropower accounted for around 2.7 TWh (excluding pumped storage hydro energy). The utilisation of small-scale hydropower has increased moderately over the last 6 years. Wind energy has been growing modestly since 1997, reaching about 375 MW or 0.5 TWh in 2002. As explained in the policy summary, particular non-technical barriers such as obtaining installation permits for electricity generated by wind turbines, have hindered its development to some extent. In accordance with approved Ministerial Decision 1726/2003. [45], the Greek Government decided to streamline and speed-up its licensing procedure for RES power plants. As a result of these actions, it can be expected that the wind sector will grow more dynamically over the coming years. [45] 2nd National Report Regarding Penetration Level of Renewable Energy Sources in the Year 2010, Page 6, Athens, October 2003. Table 1: RES-electricity production in 1997 and 2002 in GWh >TABLE POSITION> >REFERENCE TO A GRAPHIC> Figure 1: RES electricity production up until 2002 [46] in Greece. [46] Based on EUROSTAT data, which are up-to-date only until 2001. For many RES, e.g. wind-onshore and PV more recent data from sector organisations and national statistics have been used. >REFERENCE TO A GRAPHIC> Figure 2: RES electricity production in Greece up until 2002 without large hydro With regard to the heat sector, Greece has increased considerably its national geothermal heat capacity (by about a factor of three) since 1997. This increase resulted from the installation of different projects accounting for approximately 80 MWth in 2002. The Greek Government has established a set of rules for the rational use of geothermal energy. A specific bidding procedure was established for the whole range of products, by-products and process residues obtained from geothermal sources. With respect to other technologies, solar thermal panels show a moderate 7 percent growth rate from 1997. As a result of tax incentives in this sector, the total cumulative capacity for solar thermal systems increased up to 2.8 million m2 in 2002, with Greece now being the second country in Europe after Germany. However, these support mechanisms are temporarily on hold for budgetary reasons and a future prospects look gloomy. Table 2: RES-heat production up until 2002 >TABLE POSITION> * Biomass heat only up until 2001 With regard to liquid biofuels production, Greece has been a dynamic country at the experimental stage with several pilot projects related to the different technologies for the production of biofuels. However, currently there is no commercial-scale production. The pilot projects tested so far, looked at the production both of biodiesel and bioethanol fuels for transportation purposes derived from various traditional crops such as wheat, corn, fried and waste oil, sunflower and rape seed. If these attempts prove to be cost-effective in the long run, major support mechanisms for the industry are expected to be implemented in the coming years. Table 3: RES-biofuel production up until 2001 >TABLE POSITION> 2.2. Mid-term Potentials >REFERENCE TO A GRAPHIC> Figure 3: Mid-term potentials of RES electricity, heat and transport in Greece Table 4: Policy assessment for RES - Greece >TABLE POSITION> Sufficiency to promote RES * // Hardly any or no support ** // Little support *** // Moderate support **** // High support ***** // Very high support HUNGARIA 1. Summary of RES markets and policy Background Hungary is net importer of energy. 70% of the total energy demand of Hungary is covered by import. The energy policy does not include significant actions towards renewable energy sources. RES targets The RES-E target to be achieved in 2010 is 3.6% for Hungary. Status of the renewable energy market There would be good opportunities for biomass, solar, geothermal and some wind energy development, although the investment climate was not favourable until now and only very few investment has taken place with different multilateral funding. Main supporting policies Ministerial Decree 56/2002: Guaranteed feed in tariff (on indefinite term), beginning in January 2003, all energy generated from renewable energy resources must be purchased between 6 and 6,8 EUR cents/kWh, not technology specific. Key factors No coordinated national action for RES penetration. Insufficient investment climate, although various funds available. 2. Current status and potentials of RES 2.1. Current penetration The penetration of the renewable energy sources in the Hungarian primary energy production is relatively small, 3.6 per cent. The share of RES in electricity production is even lower, 0.6 per cent. However due to the building of large hydropower plants in the 1970s on the Tisza river and several small hydro power plants (built in 1930-60) the hydropower has a notable share among the renewable sources. The capacity of the three largest hydropower plants is 43.8 MWe. They provide about 200 GWh of electricity annually. The installed hydro power capacity has been not increased in the last 30 years and further penetration of the hydropower - excluding the refurbishment of the old plants - is unlikely as it faces opposition. Photovoltaic applications have been implemented on an experimental basis in the telecommunications and other sectors, but this technology has not yet reached wide scale of commercialization in Hungary. Wind energy has for the moment a symbolic representatition (2 MW). >REFERENCE TO A GRAPHIC> Figure 1: RES electricity production up until 2002 [47] in Hungary [47] Based on EUROSTAT data, which are up-to-date only until 2001. For many RES, e.g. wind-onshore, hydro power and PV more recent data from sector organisations and national statistics have been used. Biomass accounts for the largest share of Hungary's renewable energy consumption. Currently fuel wood combustion is the primary use of biomass. Forestry wastes and sawmill by-products are currently burnt in furnaces to provide heat for the forestry industry or briquetted for retail sale. Nearly 40 percent of the round wood production is used for energy purposes. Consumption of biomass heat in 2001 amounted to 302 Mtoe mainly based in solid biomass uses. One of the largest exploited renewable energy resources in Hungary is geothermal energy with approximately 350 MW of installed capacity for heat generation. The geothermal energy and thermal water is used mainly for balneological purposes and for heating of the bath facilities. In the last 10 years there were several projects completed in the south-eastern part of Hungary for district heating and greenhouse heating. The penetration of heat pumps is proceeding only slowly - however there are several residential and office buildings heated with this technology - because of the high investment costs and that it is relatively unknown. Limited use of solar energy for water and space heating has been observed, based on flat plat collectors. Table 1: RES-electricity production in 1997 and 2002 in GWh >TABLE POSITION> Table 2: RES-heat production up until 2001 >TABLE POSITION> A National Biodiesel Programme has been launched some years ago with some pilot factories started but due to discontinuous support, the programme has not given any important results. Table 3: RES-biofuel production up until 2001 >TABLE POSITION> 2.2. Mid-term potentials >REFERENCE TO A GRAPHIC> Figure 2: Mid-term potentials of RES electricity heat and transport in Hungary IRELAND 1. Summary of RES markets and policy Background Ireland is the last EU country that uses a tendering scheme as the main instrument in supporting renewable energy. The Alternative Energy Requirement (AER) is a competition for investors in which the lowest bidders are offered a Power Purchase Agreement of up to 15 years. The first four competitions were held between 1995 and 1998. Rounds 5 and 6 were held in 2003. The market for household and small industrial consumers is open only for 100% green consumers, resulting in new market entrants that offer competitive green power contracts and investments in commercial wind parks (i.e. not funded through AER). RES targets The RES-E target to be achieved by Ireland in 2010 is 13.2% of gross electricity consumption. Status of the renewable energy market AER round 6 closed in April 2003. In Ireland there is no real voluntary market for renewable electricity. Main supporting policies The Alternative Energy Requirement (tendering scheme) is the main support instrument. Targets and purchase prices specified for the technologies are shown below. No support is provided for renewable heat and biofuels except promotional projects for biofuels that may receive tax exemption. Technology Support level (EURct/kWh) Specifics Large-scale wind 5.216 up to 400 MW Small-scale wind 5.742 up to 85 MW Offshore Wind 8.4 up to 50 MW; indicative price cap only Biomass 6.412 up to 8 MW Biomass-CHP 7.0 up to 28 MW Biomass-anaerobic digestion 7.0 up to 2 MW Hydro 7.018 up to 5 MW Key factors - The tender is a stop-start programme where the future of target-setting is unknown (both levels and technology preferences). - The AER tends to lead to relatively poor quality of equipment as the lower-price bids win the competition. - No stimulation is provided above the targets set. - Projects eligible may not exceed certain capacity levels which may lead to a certain inefficiency of the project design. - A lack of co-operation exists in the Irish RE industry as a direct result of the tendering scheme. - Long-term certainty of supply contract (up to 15 years, for biomass-CHP only 10). A market-based instrument that includes element of competition. Other issues An official consultation document on future renewable energy policies is currently being prepared. 2. Current status and potentials of RES 2.1. Current penetration Traditionally, hydropower is by far the most important renewable electricity source in Ireland, though in recent years production from other RES-E such as wind and biogas has been increasing. In 2002 the combined production of small-scale and large-scale hydropower stations was 912 GWh, which corresponds to 73% of the total RES-E production for that year. >REFERENCE TO A GRAPHIC> Figure 1: RES-electricity production up until 2002 [48] [48] Based on EUROSTAT data, which are up-to-date only until 2001. For many RES, e.g. wind-onshore and PV more recent data from sector organisations and national statistics have been used. Figure 1 shows that electricity generation from wind has increased from 0.2 GWh in 1990 to 330 GWh in 2002. The contribution of wind power to overall electricity generation from RES in 2002 was 27%. Installed wind power capacity at the end of 2002 was 137 MW. In 2003 installed wind power capacity increased by 49 MW up to 186 MW at the end of 2003. Electricity production from biogas in the year 2002 was 81 GWh, accounting for a contribution of about 7% to the overall electricity generation from RES. Finally, it can be noted that in Ireland there is virtually no RES-E production from solid biomass. The share of RES electricity in overall electricity consumption in Ireland increased from 3.6% in 1997 up to 5.1% in 2002, as shown in Table 1. >REFERENCE TO A GRAPHIC> Figure 2: RES-electricity production in Ireland up until 2002 without large hydro Table 1: RES-electricity production in 1997 and 2002 in GWh >TABLE POSITION> Table 2 shows data regarding the penetration of RES-heat in Ireland. Biomass heat production over the last few years has been increasing at an average rate of 8% per year. Total biomass heat production in 2001 was 145 ktoe. It can be seen that solar thermal heat and geothermal heat production is still relatively small-scale compared with biomass heat. As can be seen in Table 3, the biofuel market is virtually non-existent in Ireland. Table 2: RES-heat production up until 2002 >TABLE POSITION> *Biomass heat only up until 2001 Table 3: RES-biofuel production up until 2002 >TABLE POSITION> 2.2. Mid-term Potentials >REFERENCE TO A GRAPHIC> Figure 3: Mid-term potentials 2020 of RES electricity, heat and transport in Ireland. Table 4: Policy assessment for RES - Ireland >TABLE POSITION> Sufficiency to promote RES * // Hardly any or no support ** // Little support *** // Moderate support **** // High support ***** // Very high support ITALY 1. Summary of RES markets and policy Background The Italian RES policy is an integral part of CO2 reduction policies. In 2001 the main support program CIP6 was replaced by a green certificate system with binding targets. Certificates are issued for plants commissioned after April 1 1999 and only for the first 8 years of operation. The certificate system's overall target of 2% was not reached in the first full year of operation. Decree 387 of December 2003 that implements the EU Renewable Electricity Directive increased the target set for 2004-2006 by 0.35% per year. RES targets The RES-E target to be achieved by Italy in 2010 is 25% (76 TWh) of gross electricity consumption. Status of the renewable energy market Obligatory demand for producers and importers. The GRTN, Italy's Independent System Operator, may sell certificates produced at eligible RES-E plants under the former CIP6 support scheme at a fixed price and only if the market is short to prevent excessively high prices on the market. Voluntary demand for green electricity may be included in the certificate system. The implementation of the Guarantee of Origin will make the voluntary market more transparent and open. Main supporting policies - Certificate system with mandatory demand - Carbon dioxide tax with exemption for RES (biofuels) - Funds for specific technologies and/or municipalities Key factors - Relatively favourable certificate prices up to 8.4 EURct/kWh. - Certificates are issued only for plants producing more than 50 MWh per year. - The major problem with developing new production capacity seems to be problems in obtaining authorisation at local level and the high cost of grid connection. - The carbon tax is relatively high, which offers competition benefits for renewables. 2. Current status and potentials of RES 2.1. Current penetration Development of the renewable electricity production in Italy is shown in Figure 1. Hydropower represents around 85 - 90% of Italy's RES-E production, with a total production of 41 TWh of both small-scale and large-scale hydropower stations in 2001. Electricity production from renewable energy sources other than large hydro is detailed in Figure 1. Geothermal electricity is the second most important RES-E source, representing 8% of the RES-E production. Worth mentioning is also the strong growth of the installed wind power capacity, with a factor of 270 in the period from 1990-2002, up to 785 MWe in 2002. In absolute terms the Italian wind market is however still small in size. Installed PV capacity grew by 600% in the same period, up to an installed capacity of 23 MWp in 2002. According to the total electricity demand the share of RES electricity in Italy increased slightly from 16% in 1997 to 16.8% in 2002. >REFERENCE TO A GRAPHIC> Figure 1: RES-electricity production in Italy up until 2002 [49] in Italy [49] Based on EUROSTAT data, which are up-to-date only until 2001. For many RES, e.g. wind-onshore and PV more recent data from sector organisations and national statistics have been used. >REFERENCE TO A GRAPHIC> Figure 2: RES electricity production in Italy up until 2002 without large hydro Table 1: RES electricity production in 1997 and 2002 in GWh >TABLE POSITION> Data showing the RES-heat production in Italy can be found in Table 2. Biomass heat and solar thermal heat show strong growth rates of 9% and 21%, respectively. As with RES-E, the contribution of geothermal to RES-heat is substantial, with 213 ktoe produced in 2002. The production of biofuels in Italy also shows an upward trend, as shown in Table 3. Average growth rate for the production of liquid biofuels since 1997 is 32% per year. Table 2: RES-heat production up until 2002 >TABLE POSITION> *Biomass heat only up until 2001 Table 3: RES-biofuel production up until 2001 >TABLE POSITION> 2.2. Mid-term Potentials >REFERENCE TO A GRAPHIC> Figure 3: Mid-term potentials of RES electricity heat and transport in Italy Table 4: Policy assessment for RES - Italy >TABLE POSITION> >TABLE POSITION> LATVIA 1. Summary of RES markets and policy Background Imported energy resources account for 65-70 % of the total energy consumption in the primary energy resource balance of Latvia. Therefore the primary reason for supporting renewable resources in energy generation is security of supply and creation of new jobs. Wood and wind are the most prioritized from renewable energy resources for use in electricity generation. RES targets The RES-E target to be achieved in 2010 is 49.3% for Latvia. Status of the renewable energy market From 1996 to 2002, Latvia experienced significant growth in renewable energy projects as developers took advantage of the so-called double tariff, phased out the 1st January 2003. Latvia had a unique feed-in tariff, which was double the average electricity price for a period of eight years after grid connection for wind and small hydro power plants (less than 2 MW). Annual production at small hydropower plants increased from 2.5 to 30 GWh, while output from windpower plants built during the last three years increased to about 50 GWh. The plan to build an undersea cable from Finland to import cheap energy may jeopardize RES development. The political support of RES has decreased in Latvia since January 2003. The cheap production of electricity from large-hydro and the low regional import electricity prices are obstacles for further RES development. Main supporting policies Law on Energy: With the amendment adopted in 2001 that phased out the so-called double tariff by 1st January 2003, regulations fixing the total capacity for installation and specific volumes for next year are annually published. The annual purchase tariff for small hydro power as well as for power plants using waste or biogas is set at the average electricity sales tariff, while tariffs for wind power plants are approved on a case-by-case basis by the regulator. Other issues Long-term loans on favourable conditions for projects in private and public sectors Owners of buildings and other facilities have the right to choose the most cost-efficient type of energy supply. 2. Current status and potentials of RES 2.1. Current penetration The hydroelectric facilities provide about 75% of electric generation in Latvia, however, the supply reliability is complicated due to frozen rivers during very low winter temperatures. Total installed wind energy capacity in Latvia is currently very small (about 22.8 MW). >REFERENCE TO A GRAPHIC> Figure 1: RES electricity production up until 2001 [50] in the Latvia [50] Based on EUROSTAT data, which are up-to-date only until 2001. For many RES, e.g. wind-onshore and PV more recent data from sector organisations and national statistics have been used. The biomass energy is mainly used as firewood in small and, as a rule, low-efficient boilers in the private household utilities. Solar energy is practically not used for heat production. Table 1: RES-electricity production in 1997 and 2001 in GWh >TABLE POSITION> Table 2: RES-heat production up until 2001 >TABLE POSITION> Table 3: RES-biofuel production up until 2001 >TABLE POSITION> 2.2. Mid-term potentials >REFERENCE TO A GRAPHIC> Figure 2: Mid-term potentials of RES electricity, heat and transport in the Latvia LITHUANIA 1. Summary of RES markets and policy Background Lithuania has the highest dependence on nuclear power in its electricity supply of any country in the world, supplied by a single nuclear plant, Ignalina. However, the first of two reactors should be decommissioned in 2005 and the second in 2009. The decommissioning of the nuclear power plant Lithuania should prevent turning back towards fossil fuels as the main source for the electricity production. One of the strategic objectives in the Energy Strategy, 2002 is to strive for a share of renewable energy resources of up to 12% in the total primary energy balance by 2010. RES targets The RES-E target to be achieved in 2010 is 7% for Lithuania. Status of the renewable energy market Especially biomass supply is growing (wood and straw-firing boilers). There is still an important hydro potential. A big investment has been made in 2002 in geothermal energy. Although Lithuania has very good wind potential, there is no development of this energy up to now. Main supporting policies Resolution No. 1474 of 5 December 2001: Procedure for promotion of purchasing of electricity generated from renewable and waste energy sources. Average energy prices since February 2002: Hydro: 6.9 EURc/kWh, Wind: 7.5 EURc/kWh, Biomass 6.9 EURc/kWh Key factors There are feed in tariffs since February 2002 with no guaranteed time. There exist delays in supporting secondary legislation (biofuel). 2. Current status and potentials of RES 2.1. Current penetration Large hydro installed capacity was to 112 MW; small hydro to 15 MW. Recently the pump-storage plant Kruonis with 800 MW has been put into service. No wind turbines operate in Lithuania, only a 4 MW demonstration wind project is on the drawing board for a site at Butinge on the Baltic Sea coast. >REFERENCE TO A GRAPHIC> Figure 1: RES electricity production up until 2001 [51] in Lithuania [51] Based on EUROSTAT data, which are up-to-date only until 2001. For many RES, e.g. wind-onshore and PV more recent data from sector organisations and national statistics have been used. Recently solar energy has been utilized for hot water supply, space heating of premises and drying of agricultural production. Among the biomass energy sources wood was used in Lithuania for space heating of individual houses by burning in stoves with small efficiency. In 1994 waste wood and specially prepared wood chips were started to be used burning them in district heating boilers with higher capacity (> 1 MW). Now the totally installed capacity of such combustion wood boilers achieves around 120 MW. In accordance with the statistic data of 1998 the consumption of wood fuel was equivalent to 571 ktoe. The using of straw fuel in Lithuania was started since 1996. The total installed capacity of straw-fired boilers makes up about 5 MW. Approximately 7500 t of straw is burned annually in these boilers. This amount is equivalent to 2.5 ktoe of primary energy. There are 6 individual geothermal plants with the total capacity of 114 kW. The construction of Vydmantai geothermal plant in Kretinga region has recently started. 41 MW geothermal plant is build in Klaipeda. In the year 2002 this power plant was not yet working in its full capacity, however produced 180 000 kWh thermal energy. Table 1: RES-electricity production in 1997 and 2001 in GWh >TABLE POSITION> Table 2: RES-heat production up until 2001 >TABLE POSITION> There is no biofuel production in Lithuania. 2.2. Mid-term potentials >REFERENCE TO A GRAPHIC> Figure 2: Mid-term potentials of RES electricity, heat and transport in Lithuania LUXEMBOURG 1. Summary of RES markets and policy Background The 1993 Framework Law is the basis of two main regulations. The ongoing nature of the framework law creates a stable environment and investor confidence. Subsidies are granted to enterprises and companies for investments in eligible technologies, which include solar, wind, biomass, geothermal. Preferential tariffs are given for electricity produced from RES. RES targets The RES-E target to be achieved by Luxembourg in 2010 is 5.7 % of gross electricity consumption. Status of the renewable energy market The national energy supply company Cegedel just started this year with selling green electricity. The latest support program is limited to 5 years, and there is a limit on RES resources for creating new capacity. Development therefore seems to be restricted. Main supporting policies Feed-in tariff: tariff in EUR ct/kWh conditions Wind, hydro, biomass, biogas: 2.5 up to 3 MW, 10 years PV for municipalities 25 up to 50 kW, 20 years PV for non-municipalities 45 - 55 up to 50 kW, 20 years In addition investors can receive investment subsidies totalling up to 40% of investments. Key factors - RES has to compete with combined-cycle technology, a technology enabling the achievement of similar environmental objectives as RES, but more economically. - Limitations on eligibility and budgets. - Guaranteed market for electricity from RES provides certainty for investors. - Broad range of support measures which may be used cumulatively. Other issues Some of the support measures seem to have had no or only limited effect. Support measures in general aimed at municipality-level or specific technologies have not resulted in the promotion of RES-E. In February 2004, the national Parliament approved a modification to the Framework Law for transposing Directive 2001/77. 2. Current status and potentials of RES 2.1. Current penetration Development of the renewable electricity production in Luxembourg over the last decade is shown in Figure 1. Hydropower accounts for the largest contribution to the overall renewable electricity production, with a share of around 65-70% over the last few years. Wind makes a small contribution of 27 GWh in 2002. Production of electricity from biowaste shows more stability over time. In the period 1990-2002 electricity production from biowaste was around 23 GWh per year. In Table 2 the electricity generation from RES is given for the years 1997 and 2002, as well as the average annual growth during this period. It can be seen that the contribution of renewable energy sources to the overall electricity generation in Luxembourg was 2.1% in 1997 and 2.2% in 2002. >REFERENCE TO A GRAPHIC> Figure 1: RES-electricity production in Luxembourg upuntil 2002 [52] [52] Based on EUROSTAT data, which are up-to-date only until 2001. For many RES, e.g. wind-onshore and PV more recent data from sector organisations and national statistics have been used. Data covering RES-heat production in Luxembourg are shown in Table 2. Only biomass heat contributes to RES-heat production in Luxembourg with 25 ktoe in 2001. Production from solar thermal and geothermal sources in 2001 and the years before has been virtually zero. In Table 3 it can be seen that the same is true for the production of liquid biofuels. Table 1: RES-electricity production in 1997 and 2002 in GWh >TABLE POSITION> Table 2: RES-heat production up until 2001 >TABLE POSITION> * Biomass heat only until 2001 The biofuel sector in Luxembourg is virtually non-existent. No production data are available. Table 3: RES-biofuel production up until 2001 >TABLE POSITION> 2.2. Mid-term Potentials >REFERENCE TO A GRAPHIC> Figure 2: Mid-term potentials of RES electricity, heat and transport in Luxembourg Table 4: Policy assessment for RES - Luxembourg >TABLE POSITION> >TABLE POSITION> MALTA 1. Summary of RES markets and policy Background Energy utilisation in Malta is characterised by a total dependence on imported petroleum products and fossil fuels, low efficiency utilisation and no penetration of alternative sources. Efforts are being directed towards the identification and utilisation of appropriate alternative sources of energy, including solar energy. RES targets The RES-E target to be achieved in 2010 is 5% for Malta. Status of the renewable energy market No commercial utilisation of renewable energy. The Institute of Energy Technology and others have undertaken pilot projects and studies to assess the potential and applicability of renewable sources, mainly wind and solar power. Main supporting policies 5% VAT (instead of 15%) on solar applications. At present Malta is formulating a strategy for renewable energy for the Maltese Islands. Key factors Energy infrastructure up to now has been oriented to subsidised oil products although the existing potential for renewable energy sources. 2. Current status and potentials of RES 2.1. Current penetration The penetration of the renewable energies in Malta is practically zero. Photovoltaic applications in Malta that were so far restricted to research and demonstration systems will soon be available for everyone to install, according to the regulations to be set by the Malta Resources Authority. Table 1: RES-energy production in 1997 and 2002 >TABLE POSITION> 2.2. Mid-term potentials >REFERENCE TO A GRAPHIC> Figure 1: Mid-term potentials of RES electricity, heat and transport in Malta NETHERLANDS 1. Summary of RES markets and policy Background Major support measures and market openness resulted in much higher green power consumption, a large surplus of certificates. However, there were no new RES installations. The policy support scheme was criticised and accordingly revised. The new support scheme has been in operation since July 2003 (see below). RES targets The RES-E target to be achieved by the Netherlands in 2010 is 9% of gross electricity consumption. A target of 10% total renewable energy by 2020 has been set with an interim indicative total RES target of 5% by 2010. Status of the renewable energy market Early in 2004 the total amount of green power supplied to consumers reached 2.4 million. Competition in green pricing and green power supplies has been fierce in the wake of the opening-up of the green power market in July 2001. Investments in renewable energy have been slowing down over the past few years because of political uncertainty about renewable energy support. Main supporting policies The new policy programme MEP to support renewable energy investments has been in operation since 1 July 2003. See underneath the subsidy in EURct/kWh. The 2005 subsidies are higher because of the phasing out of the ecotax). Technology source Tariff 2004(*) Tariff 2005 Mixed biomass and waste: 2.9 2.9 Wind on-shore 6.3 7.7 Wind off-shore 8.2 9.7 Pure biomass large scale: 5.5 Small-scale biomass < 50 MWe 8.2 9.7 PV, tidal, wave and hydro 8.2. 9.7 (*) from 1 July 2004 onwards Key factors Budget constraints caused uncertainty about future energy support programmes with a consequent withholding of new renewable energy investment. A new system, the MEP scheme, has improved investment conditions, although the short duration of the tariffs scheme provided has been criticised. The opening-up of the green power market for small consumers has resulted in strong competition among utilities for green power products. Combined with a relatively high degree of support for energy-tax exemptions and feed-in tariffs for green power, this has led to large increase in the amount of green power consumed. Other issues The system for Guarantee of Origin has been launched by renaming the former certificate system a GoO system. Imports are still allowed (foreign GoO), but are not eligible for the MEP subsidy. 2. Current status and potentials of RES 2.1. Current penetration Renewable electricity production in the period 1990-2002 in the Netherlands is shown in Figure 1. It can be seen that in this period annual RES-E production increased from 0.7 TWh in 1990 to around 3.6 TWh in 2002. Solid biomass is the most important RES-E source and accounted for around 35% of the annual RES-E production in the Netherlands in 2002. The second most important RES-E source is generation by on-shore wind. In 2002 installed wind capacity was increased by 40% to 677 MW, corresponding to a production level of 0.9 TWh in the same year. >REFERENCE TO A GRAPHIC> Figure 1: RES-electricity production up until 2002 [53] [53] Based on EUROSTAT data, which are up-to-date only until 2001. For many RES, e.g. wind-onshore and PV more recent data from sector organisations and national statistics have been used. 1 shows the data for electricity generation from RES in the Netherlands for the years 1997 and 2002, as well as the average annual growth during the intervening period. Figures for RES-E penetration in 1997 have been adjusted from 3.5% (including non-biodegradable waste) to 1.8% (excluding biodegradable waste). The overall amount of renewable electricity production is clearly increasing, but faster development is still needed for achieving the 9% target. Table 1: RES-electricity production in 1997 and 2002 in GWh >TABLE POSITION> 2 and 3 show data indicating the penetration of RES-heat and RES-biofuel, respectively. Biomass heat production in 2001 was 324 ktoe. Solar thermal heat production is still relatively small compared with biomass heat, but an average annual growth rate of 17% since 1997 has been reported for this technology. Production of geothermal heat and biofuels is still a very small market in the Netherlands, with production figures of virtually zero. Table 2: RES-heat production up until 2001 >TABLE POSITION> Table 3: RES-biofuel production up until 2002 >TABLE POSITION> 2.1. Mid-term Potentials >REFERENCE TO A GRAPHIC> Figure 2: Mid-term potentials of RES electricity heat and transport in the Netherlands Table 4: Policy assessment for RES - Netherlands >TABLE POSITION> The Netherlands (a) Largest current incentive from MAP funds (Environmental Action Plan). (b) Biofuels have been stimulated so far only by R&D funds. At the end 2003 policies are expected to be formulated for biofuel support in the Netherlands. (c) Geothermal energy is not used in the Netherlands (note that this definition excludes heat pumps). >TABLE POSITION> POLAND 1. Summary of RES markets and policy Background Coal-fired power and cogeneration plants dominate electricity generation in Poland. However, more than half of the capacity was built in the 1970's and significant investment in new generation and modernization of existing generation is required. Poland requires that electric utilities maintain a renewable energy portfolio of at least 2.4 percent in 2001 (2.5% in 2002; 2.65% in 2003, etc., 7.5% in 2010 and in the following years) and has established a target of 7.5% of primary energy production from renewable sources by 2010 and 14% by 2020. However, these targets have not yet been enforced, discouraging large scale renewable development. The key resource for achieving the target is likely to be biomass, mainly forestry and agricultural residues and energy crops. RES targets The RES-E and primary energy target to be achieved in 2010 is 7.5% for Poland. Status of the renewable energy market Biomass covers more than 98% of renewable energy production. Biomass is considered to be the most promising renewable energy in Poland, for both electricity and thermal energy production. This is because of the abundant potential of straw and wood resources in Poland and maturity of this technology. At present there are 200 ha energy crops grown and estimations indicate that 1,5 million ha of arable land is available for energy crops. Polish hydro power has chances for development as neither the big hydro power plants are fully used (due to antiquated equipment) nor the small plants. There is also a considerable wind energy potential with developments in recent years. Main supporting policies Green Power Purchase Obligation. Law on biofuels Key factors No clear enforcement mechanism. Other issues There are environmental funds on all levels of administration supporting development of RES with grants or soft loans as well as an organisation called ECOFUND that support environmental protection projects, including RES. In addition, low interest credits are available from banks when the money is used for environmental projects. 2. Current status and potentials of RES 2.1. Current penetration The total installed capacity of large hydro-electric power stations is around 630 MW, and of the small ones 160 MW. In 2000 33 MW of wind capacity were installed with another 40 MW project under construction (at the beginning of 2003, 57 MW wind capacity were installed). In Poland 30% of the land surface is economically suitable for wind turbine applications, 5% very favourable. Poland has a good technical potential for wind energy development and local manufacturing. Photovoltaic cells are virtually not used in Poland. >REFERENCE TO A GRAPHIC> Figure 1: RES electricity production up until 2002 [54] in Poland [54] Based on EUROSTAT data, which are up-to-date only until 2001. For many RES, e.g. wind-onshore and PV more recent data from sector organisations and national statistics have been used. In solar thermal applications, both liquid and air solar collectors are used in a few areas in Poland. The total number of air collectors is estimated at 50-60 units, and their surface area at 6,000 m2. Around 1,000 solar installations for the heating of usable water have been installed in Poland with the total surface area of the collectors exceeding 10,000 m2. Biomass covers over 98% of renewable energy production. Biomass is considered to be the most promising of renewable energy in Poland. Current installed capacity using geothermal energy is approximately 68.5 MWt, of which 26.2 MWt is from heat pumps, which collectively generate 0,02 Mtoe of energy on an annual basis. Table 1: RES-electricity production in 1997 and 2002 in GWh >TABLE POSITION> Table 2: RES-heat production up until 2001 >TABLE POSITION> Table 3: RES-biofuel production up until 2001 >TABLE POSITION> 2.2. Mid-term potentials >REFERENCE TO A GRAPHIC> Figure 2: Mid-term potentials of RES electricity, heat and transport in Poland PORTUGAL 1. Summary of RES markets and policy Background Extreme dependence on external energy sources has pushed the Portuguese Government to launch several energy plans and financing measures in order to promote RES-E development. Incentives for renewable electricity mainly comprise investment subsidies and RES-E production incentives (through the establishment of a feed-in tariff scheme consisting of a fixed tariff per kWh for each RES technology). RES targets The RES-E target to be achieved by Portugal in 2010 is 39.0% of gross electricity consumption. Status of the renewable energy market In the recently approved energy policy, the Portuguese Government has set goals for the development of RES-E, giving special attention to wind power (with an expected capacity of 3.750 MW by 2010) and small hydro (400 MW). For the implementation of the guarantee of origin the grid operator REN is designated as the issuing body. Main supporting policies Feed-in Tariffs for 2003 in EUR cents /kWh Photovoltaics < 5kW 41.0 > 5kW 22.4 Wave 22.5 Small hydro 7.2 Wind Beyond 2600 hours 4.3 From 2400 to 2600 hours 5.1 From 2200 to 2400 hours 6.0 From 2000 to 2200 hours 7.0 First 2000 hours 8.3 In addition, investment subsidies and tax deductions are used to support renewable energies. Key factors Feed-in structure delivers investment certainty. The tariffs differ for different technologies. The various support measures are all part of one national strategy and work well together. A monitoring system will guard the process of RES development The tax measures may change with government structure or budget. Other issues The analysis of the Portuguese target must take into account the important variability of large hydro. Grid capacity problems hamper a larger uptake of renewable electricity in some Portuguese regions. Complex and slow licensing procedures have resulted in long lead times for new renewable installations. 2. Current status and potentials of RES 2.1 Current penetration The production of renewable electricity in Portugal is dominated by hydro large-scale projects, as can be seen in Figure 1. In 2001 85% of Portugal's RES-E production was from this RES-E source, while in 2002 the share of large hydro of the overall Portuguese RES-E production decreased to 72%. In the period from 1990 to 2002 large-scale hydro power production varied between 4.9 TWh (1992) and 14.2 TWh (1996), with a production of 7.5 TWh in 2002. These variations complicate the monitoring of Portugal's efforts in meeting its renewable electricity target for 2010 (see further sections). Other important RES-E sources are small-scale hydro and solid biomass, with a production of 706 GWh and 1.2 TWh in 2002 respectively. Electricity production from biowaste and wind has started to grow over the last few years. In 2002 Portugal's installed wind power was increased by 43% up to 179 MW, accounting for 362 GWh generated electricity. Since 1997, the non-large-hydro RES-E passed from 1.76 TWh in 1997 to 2.9 TWh by 2002. >REFERENCE TO A GRAPHIC> Figure 1: RES-electricity production up until 2002 [55] in Portugal [55] Based on EUROSTAT data, which are up-to-date only until 2001. For many RES, e.g. wind-onshore and PV more recent data from sector organisations and national statistics have been used. >REFERENCE TO A GRAPHIC> Figure 2: RES electricity production in Portugal up until 2002 without large hydro Table 1 shows the electricity generation from renewable energy sources in 1997 and 2002, as well as the average annual growth during the intervening period. Due to the wide fluctuations in electricity generated from hydro, the share of RES electricity in 2002 was only around 22% compared with 39% in 1997. Table 1: RES electricity production in 1997 and 2002 in GWh >TABLE POSITION> Table 2 and Table 3 show data indicating the penetration of RES-heat and RES-biofuel respectively. Biomass heat production over the past few years has been stable at around 1900 ktoe per year. Solar thermal heat and geothermal heat production is still relatively small compared with biomass heat, showing a contribution of 19 ktoe and 90 ktoe respectively. Geothermal heat production showed a very strong increase in 2001, due to a new large demo plant on the Azores. As shown in Table 3, production of biofuels is still a very small market in Portugal, with production figures of virtually zero. Table 2: RES-heat production up until 2001 >TABLE POSITION> *Biomass heat only up until 2001 Table 3: RES-biofuel production up until 2002 >TABLE POSITION> 2.1. Mid-term Potentials >REFERENCE TO A GRAPHIC> Figure 3: Mid-term potentials of RES electricity heat and transport in Portugal Table 4: Policy assessment for RES - Portugal >TABLE POSITION> >TABLE POSITION> SLOVAKIA 1. Summary of RES markets and policy Background The Slovak Republic is a net importer of relatively cheap energy from the Czech Republic and Poland. In 1999, energy imports provided approximately 85% of Slovakia's energy supply. An extensive development of small-hydro energy is going on. RES targets The RES-E target to be achieved in 2010 is 31% for Slovakia. Status of the renewable energy market There is no specific support for wind and solar energy. A very small portion of the biomass potential is used and the government's priority is to use this source only in remote, mountainous, rural areas, where natural gas is not available. For small hydro there is an extended development programme with 250 selected sites for building small-hydro. Geothermal is extendedly used for bathing purposes. Main supporting policies Energy Strategy and Policy of the Slovak Republic up to the year 2005 (1993) Energy Act No.70/1998 (2001) Key factors Current low energy prices. An extended development of the hydro potential is going on. The government does not recognise opportunity in wind and solar. The government support only biomass investments in remote, mountainous, rural areas. 2. Current status and potentials of RES 2.1. Current penetration With the exception of the hydro power the share of the renewable energy sources did not grow significantly in the last decade in Slovakia. Only the hydroelectric capacity has grown significantly in the first half of the 1990s, due to the building of the Gabcikovo hydro power plant with a capacity of 720 MWe on the Danube. As of 1999, Slovakia had approximately 2,500 MWe of installed hydroelectric capacity. It is expected that 300 MWe of small hydro capacity may be needed from a large number of smaller facilities. There are currently approx. 180 small hydropower plants with the total installed capacity of more than 60 MW in operation in Slovakia. There are no large scale wind turbines up to now. There are installed 40 pairs of photovoltaic panels to 400 kV transmission line poles between Slovakia and Poland since 1998. >REFERENCE TO A GRAPHIC> Figure 1: RES electricity production up until 2002 [56] in Slovakia [56] Based on EUROSTAT data, which are up-to-date only until 2001. For many RES, e.g. wind-onshore and PV more recent data from sector organisations and national statistics have been used. Geothermal waters in the Slovak Republic are being utilised on 35 locations offering an aggregate heating capacity of 75 MW and generation of 0,05 Mtoe to heat structures, swimming pools, greenhouses (at the town of Galanta it heats 1,240 flats and a hospital). In present, biomass provides only 0.2 % (0,1 Mtoe) of energy, although biomass represents the largest potential of renewable energy of Slovakia. Table 1: RES-electricity production in 1997 and 2002 in GWh >TABLE POSITION> Table 2: RES-heat production up until 2001 >TABLE POSITION> Table 3: RES-biofuel production up until 2001 >TABLE POSITION> 2.2. Mid-term potentials >REFERENCE TO A GRAPHIC> Figure 2: Mid-term potentials of RES electricity, heat and transport in Slovakia SLOVENIA Summary of RES markets and policy Background The new Energy Act substituting the Act on Energy Economy from 1986 was promulgated in September 1999. It gives priority to efficient use of energy and renewable energy sources over supplying from non-renewable sources. According to the law, a national energy programme shall be drawn up every five years. The programme shall promote investing into renewable energy sources and efficient use of energy. Hydropower supplies about one-third of Slovenia's electricity generating capacity. However, many of the smaller hydro plants are very old (pre-World War II) and will need to be refurbished to remain operational. RES targets The RES-E target to be achieved in 2010 is 33,6% for Slovenia. Status of the renewable energy market Renovation of hydropower plants will increase the efficiency of these units, and could add as much as 150 MWe in generating capacity. Refurbishment of existing small scale hydropower as well as increasing the capacity of the large-scale units is part of the Government's renewable energy strategy. Main supporting policies Feed-in tariff: Hydro up to 1 MW: 6.11 EURc/kWh; Hydro 1 to 10 MW: 5.89 EURc/kWh Biomass up to 1 MW: 6.98 EURc/kWh; Biomass above 1MW: 6.76 EURc/kWh Wind up to 1 MW: 6.33 EURc/kWh; Wind above 1 MW: 6.11 EURc/kWh Geothermal: 6.11 EURc/kWh Solar up to 36 kW: 27.85 EURc/kWh; Solar above 36 kW: 6.11 EURc/kWh CO2 tax introduced in 1996 amounts to 15 EUR/t CO2. Key factors The Regulation provides the framework for contractual relations between the network manager and the qualified energy producer including a contract for a period of 10 years. Complicated procedures for acquiring the administrative permissions. 2. Current status and potentials of RES 2.1. Current penetration The share of renewable energies in Slovenia's energy sector is constant since the beginning of the '90ies. The mostly utilised renewable energy source in Slovenia is hydro-power. It supplies about one-third of Slovenia's electricity generation (3300 GWh/year). Besides the larger hydroelectric generating units, there are approximately 40 very small hydro units with less than 500 GWh/year electricity generated. There are no wind power plants installed in Slovenia. The photovoltaic peak power installed is very low - about 100 kWp. Photovoltaic applications have been implemented on an experimental basis in the telecommunications and other sectors. Biomass has a minimal penetration in electricity production. >REFERENCE TO A GRAPHIC> Figure 1: RES electricity production up until 2001 [57] in Slovenia [57] Based on EUROSTAT data, which are up-to-date only until 2001. For many RES, e.g. wind-onshore and PV more recent data from sector organisations and national statistics have been used. Table 1: RES-electricity production in 1997 and 2001 in GWh >TABLE POSITION> Biomass, solar and geothermal installations have just a minimal share in the heat production. Wood is an important fuel for space heating, particularly in the residential sector. Forest residues supply about 359 MWth. The existing capacity of geothermal resources in Slovenia amount to about 103 MW of heat plant providing heat to health spas, agriculture and institutions. Table 2: RES-heat production up until 2001 >TABLE POSITION> There is no biofuel production is Slovenia. 2.2. Mid-term potentials >REFERENCE TO A GRAPHIC> Figure 2: Mid-term potentials of RES electricity, heat and transport in Slovenia SPAIN 1. Summary of RES markets and policy Background In 1997 Spain introduced a substantial programme to support RES, which has resulted in an enormous growth in new capacity, mainly wind power. Feed-in tariffs and premiums provided high transparency and certainty in the market and are therefore the main driver for this growth. After Germany Spain is the most favourable country for wind investments. RES targets The RES-E target to be achieved by Spain in 2010 is 29.4% of gross electricity consumption. Status of the renewable energy market Wind power has developed impressively. The biomass sector still needs an integrated policy which recognises the added value of environmental and rural development . Small hydro needs to overcome the administrative barriers. Main supporting policies RES producers may choose between a fixed preferential tariff or a (variable) premium price on top of the market price. Investment support is also provided. Tariffs are specified for plants <= 50MW. Tariffs specified for 2003: premium (EURct/kWh) feed-in (EURct/kWh) Solar PV (< 5kW): 36.0 39.6 Solar (other installations): 18.0 21.6 Solar thermal-electric: 12.0 Wind: 2.66 6.21 Small Hydro (? 10MW): 2.94 6.49 Primary Biomass: 3.32 6.85 Secondary Biomass: 2.51 6.05 Geothermal, wave and tidal: 2.94 6.49 Key factors * Transparent support schemes and the high feed-in tariffs deliver high investment certainty. * Feed-in tariffs are decreased and might become too low to induce new investments. * Changes due to liberalisation of the sector cause uncertainty. * Biomass feed-in tariffs were up-to-now too low to develop new capacity. Other issues The system for Guarantee of Origin has not been implemented yet. A draft has been formulated within the Ministry of Economy. Some electricity companies have started to sell green power. 2. Current status and potentials of RES 2.1. Current penetration The production of renewable electricity in Spain is shown in Figure 1. It can be seen that hydro generated electricity is by far the most important RES-E source, with a contribution of around 16 TWh in 2002, which corresponds to 41% of the total RES-E production for that year. Strong growth in the electricity production by on-shore wind parks can be observed. Spain achieved 4.100 MW at the end of 2002 (more than 6.000 MW at the end of 2003, similar to the total wind capacity installed in USA) producing 9.6 TWh in 2002. On the other hand it should be noted that the production of RES-E from solid biomass was 2.9 TWh in 2002. This accounted for 8% of the total RES-E production in that year. >REFERENCE TO A GRAPHIC> Figure 1: RES-electricity production up until 2002 [58] [58] Based on EUROSTAT data, which are up-to-date only until 2001. For many RES, e.g. wind-onshore and PV more recent data from sector organisations and national statistics have been used. >REFERENCE TO A GRAPHIC> Figure 2: RES electricity production in Spain up until 2002 without large hydro 1 shows an overview of the electricity generation from renewable energy sources in Spain in 1997 and 2002, as well as the average annual growth during the intervening period. The electricity generation from RES expressed as share of the overall electricity consumption was 20% in 1997, while it was only 16.2% in 2002. Table 1: RES electricity production in 1997 and 2002 in GWh >TABLE POSITION> * Spain uses a definition for small and large-scale hydro power capacity that is different from the commonly adopted EU definition. In Spain all production capacity lower than 50 MW is considered to be small-scale production capacity. 2 shows data indicating the penetration of RES-heat in Spain. Biomass heat production over the past few years has been stable at around 3300 ktoe per year. Solar thermal heat production is still relatively small compared with biomass heat, but an average annual growth rate of about 10% since 1997 has been reported for this technology. As can be seen in Table 3, the biofuel market has grown strongly over the past few years. In 1997 virtually no biofuels were produced, while for the year 2002 a production of 119 ktoe was reported. Table 2: RES-heat production up until 2002 >TABLE POSITION> Table 3: RES-biofuel production up until 2001 >TABLE POSITION> 2.1. Mid-term Potentials >REFERENCE TO A GRAPHIC> Figure 3: Mid-term potentials of RES electricity heat and transport in Spain Table 4: RES-Policy assessment Spain >TABLE POSITION> >TABLE POSITION> SWEDEN 1. Summary of RES markets and policy Background Sweden has followed the route of promoting new renewable sources by a combination of energy taxation and environmental bonus schemes up to early 2003. Since May 2003, however, a major policy change has been implemented by introducing a tradable certificate scheme in order to achieve the cost-effective and market-oriented promotion of renewables. RES targets The RES-E target from the EU directive for Sweden is 60% of gross electricity consumption in 2010. Sweden has set up the national target in absolute values (10 TWh additional RES by 2010) together with a 17% obligation of non large-hydro RES-E for end users by 2010. Status of the renewable energy market Renewables currently cover approximately 50% of Sweden's total electricity consumption. This supply is covered mainly by hydro power. The use of biomass has increased substantially over the past decade, but its share is still relatively small. Wind capacity installed in Sweden is relatively low although the wind resource in the south of the country is comparable to Denmark's. When the new certificate scheme was drawn up by the Government, market parties expressed fear and reluctance to invest. Main supporting policies Electricity certificates for wind, solar, biomass, geothermal and small hydro were introduced in May 2003. The system has created an obligation for end-users to buy a certain amount of renewable certificates as part of their total electricity consumption (increasing to 17% in 2010). Non-compliance leads to a penalty which is fixed at 150% of a year's average price. To secure a smooth transition, price guarantees are available for producers up to 2007. Within the system prices will be settled by supply and demand. Forecasts show expected prices in the range of 1,3 - 1,6 EUR cents/kWh for certificates traded. For wind energy investment grants which offer 15% reduction of costs will remain available. As a transition measure, an environmental bonus for wind will also be available. This bonus has a value of 1,9 EUR cents/kWh this year and will gradually decline to 0 in 2007 Furthermore exemptions for renewables on environmental taxes are applicable, which provide a benefit of around 1,79 EUR /toe for renewables used for transport or heat supply. Key factors The certificate system will form an incentive to invest in the most cost-effective options. Guarantees have been built into the system to secure a smoother transition from the previous system into the new situation. The environmental tax benefits can make some biomass CHP systems competitive. Under the certificate system, prices may fluctuate from year to year depending on production and new investments. This holds for certificates as well as the commodity price of electricity. Both elements form a source of uncertainty for investment decisions. Other issues Since the certificate system is in its start-up phase, the effects are as yet difficult to assess. It may result in a cost-effective development of renewables (thereby excluding some sources from the market). The Government has declared that in the (near) future the certificate system may be opened up for imports. This market opening may pose a threat to investments in new renewables in Sweden. 2. Current status and potentials of RES 2.1. Current penetration The development of the renewable electricity production over the past decade has resulted in a modest increase of 7% since 1990. The most important growth has occurred in the application of bio-energy which grew by a factor of 2.5 in volume from 1990. The current level is now around 4 TWh. Hydro power still remains the largest source of renewable energy in Sweden, but only a very limited growth in capacity occurred. In 2002 hydro generated 66 TWh. 2003 was a very bad hydraulic year with a total production of 53 TWh. Wind power started recently in Sweden (both on-shore and off-shore) and has a reached level of around 0,6 TWh in 2002. By the end of 2003 the installed wind power capacity was 399 MW. The current RES-E penetration is shown in 1. The fluctuations reflect the volatility in the supply of hydro power due to variations in weather conditions from year to year. According to the total demand the share of RES electricity in Sweden amounted to 46% in 2002 compared to 49% in 1997. >REFERENCE TO A GRAPHIC> Figure 1: RES electricity production up until 2002 [59] in Sweden [59] Based on EUROSTAT data, which are up-to-date only until 2001. For many RES, e.g. wind-onshore and PV more recent data from sector organisations and national statistics have been used. >REFERENCE TO A GRAPHIC> Figure 2: RES electricity production in Sweden up until 2002 [60] without large hydro [60] Based on EUROSTAT data, which are up-to-date only until 2001. For many RES, e.g. wind-onshore and PV more recent data from sector organisations and national statistics have been used. Table 1: RES-electricity production in 1997 and 2002 in GWh >TABLE POSITION> In the heat sector the use of biomass, in particular in new CHP and district heating installations, has grown substantially over the past decade (by nearly 40% compared with 1990). The current use has reached a level of about 5 Mtoe. Solar thermal collectors have been introduced in Sweden, but their contribution still remains small. The market for solar thermal applications grew by 7% in 2002 to nearly 0,2 million m2 installed capacity. For geothermal heat pumps very strong growth has been observed over recent years. Table 2: RES-heat production up until 2002 >TABLE POSITION> *Biomass heat only up until 2001 The biofuel sector has started to develop recently, but the absolute level still remains very small. Table 3: RES-biofuel production up until 2002 >TABLE POSITION> 2.1. Mid-term Potentials >REFERENCE TO A GRAPHIC> Figure 3: Mid-term potentials of RES electricity heat and transport in Sweden Table 4: Policy assessment for RES - Sweden >TABLE POSITION> >TABLE POSITION> UNITED KINGDOM 1. Summary of RES markets and policy Background In the United Kingdom renewable energy is strongly supported by a system with mandatory demand and several grants programs. Renewables are an important part of the climate change strategy. Renewable energy is therefore exempted from the Climate Change Levy (CCL). After one year of the new established certificate market, the CCL and the grants programs in full operation, the development of RES seems to be increasing apace. RES targets The RES-E target to be achieved by the UK in 2010 is 10 % of gross electricity consumption. An indicative target for RES-E of 20% for 2020 has been set. No formal targets exist for RES-H and biofuels. Status of the renewable energy market The buy-out revenues for non-compliances are recycled to the suppliers in proportion to the certificates they have used for complying with the obligation. This mechanism increased the certificate price above the buy-out price because the market is short. High prices in the first year gave the ROC (Renewable Obligation scheme) market a kick-start. Targets specified for 2010 and scheme duration specified until 2027 provide long-term security for renewable energy investors. Main supporting policies * Obligatory targets with tradable green certificate system. The non-compliance 'buy-out' price for 2003-2004 is set at £30.51/MWh (approx4.5 EURct/kWh). This buy-out price will be annually adjusted in line with the retail price index. * Climate Change Levy: renewable electricity is exempted from the climate change levy on electricity of 0.43 p/kWh (approx. 0.63 EUR ct/kWh) * Grants schemes: funds are reserved from the New Opportunities Fund for new capital grants for investments in energy crops/biomass power generation (at least £33m (EUR53m) over three years), for small scale biomass/CHP heating (£3m or EUR5m), and. planting grants for energy crops (£29m or EUR46m for a period of seven years). Major issues - The targets for the obligatory demand are set up to 2027, ensuring long-term demand. - High targets and the redistribution of buy-out revenues make RES-E investments economically viable. - A great differentiation of grant programmes with large budgets aimed at technologies and/or municipalities give a wide range of support to initiatives. - Grid connection issues and severe competition on the electricity market could disadvantage RES in of the support programs. Other issues Government has announced new plans on off-shore wind in 2003 and around 1.400 MW installed capacity has already been approved. 2. Current status and potentials of RES 2.1. Current penetration The renewable electricity production in the period 1990-2002 in the UK is shown in Figure 1. It can be seen that in this period annual RES-E production increased from 5.8 TWh in 1990 to around 11 TWh in 2002. Hydro generated electricity is the most important RES-E source, although its relative share in the RES-E production is decreasing. In 1990 hydro power was responsible for more than 90% of the annual RES-E production, whereas in 2002 its contribution was 42%. At present the second most important RES-E source is generation with biogas. Over the last decade the contribution of biogas to the RES-E production has increased from 8% in 1990 to 28% in 2002. Responsible for this increase is the production of landfill gas, which accounted for 90% of total biogas electricity production in 2002. Other technologies with an increasing contribution to the overall RES-E production in the UK are on-shore wind (11% in 2002), solid biomass (8% in 2002) and biowaste (8% in 2002). Installed wind power in the UK increased by 19% in 2002 to a total installed capacity of 534 MW. >REFERENCE TO A GRAPHIC> Figure 1: RES-electricity production up until 2002 [61] [61] Based on EUROSTAT data, which are up-to-date only until 2001. For many RES, e.g. wind-onshore and PV more recent data from sector organisations and national statistics have been used. Table 1: RES electricity production in 1997 and 2002 in GWh >TABLE POSITION> 2 shows data indicating the penetration of RES-heat in the UK. Biomass heat production in 2002 reached 700 ktoe, which is significantly lower than the 917 ktoe reached in 1997. Solar thermal heat and geothermal heat production is still relatively small compared with biomass heat, but solar thermal heat has increased by average annual growth rates of 13% in the period 1997-2002. As can be seen in 3, the production of biofuel corresponded to 3 ktoe in the year 2002, while in 1997 still virtually no biofuels were being produced. Table 2: RES-heat production in 1997 and 2002 in ktoe >TABLE POSITION> *Biomass heat only up until 2001 Table 3: RES-biofuel production up until 2002 >TABLE POSITION> 2.1. Mid-term Potentials >REFERENCE TO A GRAPHIC> Figure 2: Mid-term potentials of RES electricity heat and transport in the UK Table 4: Policy assessment for RES - United Kingdom >TABLE POSITION> >TABLE POSITION>