On 21 December 2018 a substantial part of the long-awaited Clean Energy Package ("CEP") was published in the Official Journal, notably the recast Renewable Energy Directive (EU) 2018/2001 (the “recast RED”), the Energy Efficiency Directive 2018/2002 as well as the new Energy Union and Climate Action Governance Regulation (EU) 2018/1999. This legislation enters into force on 24 December 2018; the directives have to be implemented by 30 June 2021 resp. 25 June 2020.
This blog post discusses the key changes for renewable electricity projects pursuant to the cited legislation.
EU-wide target of 32% and ‘integrated national energy and climate plans’
The previous Renewable Energy Directive 2009/28/EC set individual binding targets for all EU Member States, the sum of which should lead to a share of 20% renewable energy in the EU ‘gross final consumption of energy’ by 2020. The recast RED changes perspective and only sets an EU-wide target of 32% without any binding national targets. In other words, the 32%-target is merely binding upon the EU as a whole: “A target defined at Union level would leave greater flexibility for Member States to meet their greenhouse gas reduction targets in the most cost-effective manner in accordance with their specific circumstances, energy mix and capacity to produce renewable energy.” (recital 9)
The Member States are required to bring forward national ‘contributions’ to this EU-wide target within their ‘integrated national energy and climate plans’ (to be surrendered to the Commission by 1 January 2019). The individual national targets as set forth by the Renewable Energy Directive 2009/28/EC remain relevant as national minimum levels. Statistical transfers between Member States remain possible for the calculation of the share of renewable energy in the Member States concerned.
The Commission will reassess the 32%-target by 2023 and submit a legislative proposal to increase it insofar this is necessary to meet international commitments related to climate change or in case of further substantial cost reductions in renewable energy production or in case of a significant decrease in energy consumption.
Market-based support mechanisms for renewable energy projects
Following the ‘Guidelines on State aid for environmental protection and energy 2014-2020’ (“EEAG”), the recast RED refers explicitly to ‘market premiums’ (sliding or fixed) to be granted in an open, transparent, competitive, non-discriminatory and cost-effective manner. Technology neutral tender procedures will be the rule, but Member States may limit these procedures to specific technologies where the first would lead to suboptimal results (e.g. need to achieve diversification). Furthermore, exceptions can be made for small-scale and demonstration projects, in accordance with the relevant EEAG thresholds (§125 and 127).
Member States retain the right to decide to which extent renewable energy produced in other Member States, is allowed to compete for support. In that sense the Ålands Vindkraft and Essent Belgium cases remain relevant. If a Member State does open up its support scheme, it may require proof of physical import and therefore limit participation in its support scheme to producers from interconnected Member States. The Commission will evaluate by 2023 the need of introducing an obligation to open up to 5% of support schemes for foreign based projects by 2025, and up to 10% by 2030.
Member States may limit the possibility of renewable energy production installations to compete in tenders outside their territory, in order to retain control over the pace of deployment of renewable electricity capacity and the associated integration costs and grid investments (recital 24).The recast RED finally introduces a stability obligation: Member States may not revise the level or the conditions of support in a way that is detrimental for the economic viability of existing projects.1
Guarantees of origin
The recast RED provides for ‘guarantees of origin’ (“GOs”) to be awarded to all renewables (including renewable gas such as biomethane), and optionally also to non-renewable energy projects. Projects that already receive financial support under a support scheme may be excluded from receiving GOs. Alternatively, the support scheme must take into account the market value of the GO.
The abolition of the grid access and dispatching privileges for renewables
The priority rules for renewable energy, as included in the previous Renewable Energy Directive 2009/28/EC, were meant to ensure that all renewable energy produced could at all times be injected into the grid, if necessary, with priority over conventional energy. These privileges are now abolished under the recast RED.
The recast RED presumes that dispatching is market-based, and that renewables, often having marginal costs close to zero, will be first in the ‘merit order’ anyway. On the spot market renewable energy bids should in principle be matched by a purchase offer before any other type of electricity.
However, sometimes in case of congestion or oversupply, the grid operator does need to make curtailment choices. In that regard, the abolition of ‘priority/guaranteed access’ leaves more flexibility to the grid operators to also curtail renewable energy installations. In this regard it should be noted that an alternative ‘light’ version of the priority regime will be provided for under the upcoming recast Electricity Regulation (on which political agreement was reached on 18 December 2018).
Streamlined permitting procedures for renewable energy projects
The recast RED provides for mandatory permitting deadlines and ‘single points of contact’ to guide applicants through the whole process of obtaining all administrative permits to build, repower and operate renewable energy installations and connect them to the grid.
The whole procedure, from receipt of the application to delivery of a binding decision, may not take longer than two years. For installations with a capacity of less than 150kW or for repowering existing installations, the deadline is set on one year. These deadlines can be extended with another year, provided that the existence of extraordinary circumstances is demonstrated and duly justified.
For connection to the grid of small-scale installations (≤ 10.8 kW, or ≤ 50 kW and/or repowered projects if Member States opt for it) a mere notification to the DSO is sufficient.
Facilitating (jointly acting) renewables self-consumers
Although ‘self-consumers’ or ‘prosumers’ were already recognized in national renewable energy policies, they are – together with ‘renewable energy communities’ – addressed for the first time in EU legislation with the objective of facilitating the involvement of (household) consumers in renewable energy deployment.
End customers are now explicitly entitled to become ‘prosumers’, which means that they can generate, store and consume renewable energy as well as sell the excess production and participate in the applicable support scheme, without losing their rights and obligations as end customers connected to the grid and without being faced with discriminatory or disproportionate procedures and charges.2
Prosumers must also be entitled to engage jointly in the abovementioned activities (e.g. in case of an apartment).
Finally, the prosumer’s installation may be owned or managed by a third party, provided that this third party remains subject to the prosumer’s instructions. This is of particular relevance for ESCOs.
Facilitating renewable energy communities
End customers are also entitled to participate in ‘renewable energy communities’ without losing their rights and obligations as end customers connected to the grid, and without being faced with unjustified or discriminatory conditions or procedures.
‘Renewable energy communities’ are autonomous legal entities, based on open and voluntary participation, and effectively controlled by their shareholders or members (being natural persons, SMEs or local authorities), of which the primary purpose is to provide environmental, economic or social community benefits for its shareholders, members or for the local areas where it operates, rather than financial profits. Renewable energy communities can produce, consume (i.e. share within the community), store and sell renewable energy. In that regard they are entitled to access all suitable energy markets, directly or via an aggregator. The specificities of renewable energy communities also have to be taken into account in the design of support schemes, in order to allow those communities to compete for support on an equal footing with other (larger) participants (e.g. through the inclusion of community-focused bidding criteria).
Renewable energy communities are closely related to the broader concept of ‘citizens energy communities’, as provided for in the upcoming recast Electricity Directive (on which political agreement was reached on 18 December 2018).
Sustainability and GHG emissions saving criteria for biomass (power plants)
Finally, while the previous Renewable Energy Directive 2009/28/EC introduced sustainability and greenhouse gas (“GHG”) emissions saving criteria for biofuels and bioliquids3, the recast RED now extends these criteria to biomass used in the electricity sector (and the heating and cooling sector). Consequently, it will e.g. be prohibited to get biomass from highly biodiverse forests or grasslands.4 The GHG emissions saving criteria imply that biomass used for electricity production has to reflect at least 70% GHG savings (for installations starting operation from 2021 till 2025) and at least 80% (from 2026 onwards) compared to fossil fuel-based electricity generation.5 The sustainability and GHG emissions saving criteria apply irrespective of the origin of the biomass, so also when imported from non-EU countries.
Only electricity produced from biomass that is compliant with the sustainability and GHG emissions saving criteria, and that is generated in biomass power plants that meet certain criteria6, can contribute towards the (national contributions to) the EU-wide target and may be eligible for financial support under a support scheme.
On the other hand, in order to minimize the administrative burden, the sustainability and GHG emissions saving criteria apply only to biomass used in biomass power plants with a rated thermal input ≥ 20 MW. Member States are allowed to set a lower threshold or to impose additional sustainability criteria.
Finally, the use of biomass from food and feed crops, for which there is a high indirect land-use change risk, will be phased out gradually by 2030 for the calculation of a Member State’s gross final consumption of renewable energy. Indirect land-use change occurs when the cultivation of crops for biofuels, bioliquids and biomass fuels displaces traditional production of crops for food and feed purposes, and as such may lead to the extension of agricultural land into areas with high-carbon stock (e.g. forests, wetlands and peatland) causing additional greenhouse gas emissions (recital 81).