Cost effects of international trade in meeting EU renewable electricity targets

The European market for renewable electricity received a major stimulus from the adoption of the Directive on the Promotion of Renewable Electricity. The Directive specifies the indicative targets for electricity supply from renewable energy sources (RES-E) to be reached in European Union (EU) Member States in the year 2010. It also requires Member States to certify the origin of their renewable electricity production. This article presents a first EU-wide quantitative evaluation of the effects of meeting the targets, using an EU-wide system for tradable green certificates (TGC). We calculate the equilibrium price of green certificates and identify which countries are likely to export or import certificates. Cost advantages of participating in such an EU-wide trading scheme are determined for each of the Member States. Moreover, we identify which choice of technologies results in meeting targets at least costs. Results are obtained from a model that quantifies the effects of achieving the RES-E targets in the EU with and without trade. The article provides a brief insight in this model as well as the methodology that was used to specify cost potential curves for renewable electricity in each of the 15 EU Member States. Model calculations show that within the EU-wide TGC system, the total production costs of the last option needed to satisfy the overall EU RES-E target equals 9.2 eurocent/kWh. Assuming that the production price of electricity on the European power market would equal 3 eurocent/kWh in the year 2010, the indicative green certificate price equals 6.2 eurocent/kWh. We conclude that implementation of an EU-wide TGC system is a cost-efficient way of stimulating renewable electricity supply.     

Intra-union flexibility of non-ETS emission reduction obligations in the European Union

The EU proposal on greenhouse gas emission reduction has 28 targets for 2020: an EU-wide one for CO₂ emissions covered by the European Trading System (ETS), and one target for non-ETS emissions per Member State. Implementation is more expensive than needed. I consider three alternative proposals to reduce costs. In the Irish proposal, Member States can purchase ETS permits to offset excess non-ETS emissions. In the Polish proposal, Member States can sell excess non-ETS emissions in the ETS. In the Swedish proposal, Member States can trade their non-ETS allocations. I compare these alternatives to the default policy (no flexibility outside the ETS) and the cost-effective solution (full flexibility). I calibrate a simple model to the results of the EU impact assessment, which did not disclose all details and made odd assumptions. The non-ETS allocation exceeds the projected emissions for three Member States. The alternative flexibility mechanisms would be used to only a limited extent, but would cut the costs of meeting the target. The Swedish and Polish proposals come closest to the cost-effective solution because of the hot air. The Irish proposal performs best if there are negative surprises in either abatement costs or emissions. The Swedish proposal will become policy.     

European Union energy policy integration: A case of European Commission policy entrepreneurship and increasing supranationalism

Focusing on gas, this article explores the role of the European Commission in the process of European Union energy security policy development, and the extent to which the policy area is becoming increasingly supranational. Situating the article within the literature on agenda-setting and framing, it is argued that a policy window was opened as a result of: enlargement to include more energy import dependent states, a trend of increasing energy imports and prices, and gas supply disruptions. From the mid-2000s, the Commission contributed to a shift in political norms, successfully framing import dependency as a problem requiring an EU-level solution, based on the institution’s pre-existing preferences for a diversified energy supply and internal energy market. Whilst Member States retain significant sovereignty, the Commission has achieved since 2006 creeping competencies in the internal, and to a lesser extent external, dimensions of EU energy policy.     

An exploration of possible design options for a binding energy savings target in Europe

As Europe is not on track in meeting its 2020 energy savings target, there has been quite some debate to make the energy savings target binding instead of indicative. Although the final draft text of the Energy Efficiency Directive left the option of a binding target explicitly open for the period beyond 2014, this statement has watered down in the adopted Directive: If still not on track mid-2014, the European Commission will propose “further measures.” In this paper, we argue that a binding energy savings target could be the first EU legal initiative to look beyond 2020 serving as a beacon for other policies such as for renewables and greenhouse gases that need redefinition after 2020. We therefore explore four possible design options of a binding savings target and assess their feasibility. We conclude that a binding target at Member State level (opposed to an EU-wide target like for the EU Emission Trading System (ETS)) is the most feasible. A binding target at Member State level would ensure political accountability and commitment to deliver results while providing flexibility to choose and apply the most suitable tools to achieve the target. It could provide a framework to guide ambitious and coherent implementation of EU energy efficiency policies, as well as the strengthening of national policies. Furthermore, binding targets at Member State level will make Member States take an ambitious position in Brussels when new energy or CO₂ performance standards for appliances and transport modes are to be set. A Member State binding target applied to end-users (excluding ETS companies) is a design option that covers the vast majority of the cost-effective energy savings potential, maintains the flexibility for ETS companies, and supports the most cost-effective achievement of a greater share of renewables.     

Electricity generation from renewable energy sources in Poland

AbstractFor the European Union's Member States 2001/77/EC Directive on the promotion of electricity produced from renewable energy sources in the internal electricity market determined targets for 2010 of 21% share of electricity from renewable energy sources in total electricity consumption. Particular Member States adopted different measures for development of renewable and in consequence they achieved different results. Poland, being Member State of the EU since 2004 has accepted target of 7.5% for electricity generated from renewable energy sources until 2010. Currently, in this decade, new 2009/28/EC Directive on the promotion of the use of energy from renewable sources plays significant role in development of renewable energy sources. Directive set new target for 2020. Nowadays is a time for summary and assessment of results fulfilling Directives and monitor progress of new targets. Article presents measures implemented for renewable source energy development, also current state and perspectives of using of renewable energy sources in Poland and in the EU.     

A method for the correction of the feed-in tariff price for cogeneration based on a comparison between Croatia and EU Member States

The European Commission has adopted Directive 2004/8/EC on the promotion of cogeneration, which the EU Member States, as well as candidates including Croatia, were obliged to accept. Among other terms and conditions, the Directive requires certain support mechanisms, such as feed-in tariff prices and premiums added to market electricity prices. In this paper, the cost effectiveness of selling electricity at the feed-in tariff prices in the selected EU Member States is compared to selling it on the European electricity market, with or without premiums. The results of this comparison will indicate whether correction of the Croatian feed-in tariff price to a higher value would be justified. The cost effectiveness ratio of a cogeneration unit upgraded with mean reverting and jump diffusion processes is used for comparison. At the end of this paper, a method is suggested for the correction of feed-in tariff prices, with examples of corrected prices for the years 2008 and 2009. Such corrections have been proven to be justified and are compared to the feed-in tariff prices in most of the selected EU Member States.     

French perspectives in the emerging European Union energy policy

The debate over a common European energy policy, its necessity and its establishment has been going on for a number of decades. The discussions have been recently brought back into the spotlight by the evolution of energy market fundamentals and the taking into account of environmental protection. In spite of the energy diversity of the European Union (EU), a common vision has always been shared by all over energy development for the future. The achievements of the internal market, the fight against climate change and supply security are the common energy battles that call for a solution in common. This policy remains the responsibility of the States, but decisions vary from one country to the next. To move from a shared vision to a European energy policy, large steps are necessary. The European construction is making evolve the “typically French vision” of energy policy. France was often characterized as the “black sheep” in the EU. In the political context of president elections, the energy debate in French is of a high interest. This paper discusses the main issues with the French energy policy in the emerging European energy policy.     

Impact of the regulatory framework for transmission investments on the cost of renewable energy in the EU

Under the current regulatory frame in the EU, transmission planning is done at the national level to maximize national welfare, rather than European welfare. In this paper, we develop a competitive equilibrium model that calculates the impact of this imperfect regulatory framework on the cost of renewable energy. We apply the model to a power system with two interconnected zones, and find that the impact is case specific, but significant. We also find that the negative impact of national transmission planning on the cost of renewable energy is more significant in a state of the world in which Member States trade renewable energy, but that this negative effect is much smaller than the positive effect of renewable energy trade between Member States. We conclude that the imperfect regulatory framework for transmission investment is a significant cost for renewable energy in the EU, but that it should not stop Member States from trading renewable energy.     

Allowing foreign green electricity in

In December 1996, the Electricity Market Directive (96/92/EC) was adopted. It came into force in February 1997 with the objective to provide competition within each national electricity market and to ultimately create one European market for electric power. Some countries have since gone faster than others in opening up their market to competition (e.g. Sweden, Germany, United Kingdom). Reciprocity provisions comprised in the Directive allowed certain Member States to limit the imports of power from countries where the market was not fully deregulated. These provisions will no longer be accepted in EU regulation terms as of 31 December 2004. This means that Member States will no longer be able to limit or differentiate between imports of electricity. The question remains open as to whether the rule will also apply to green power.     

Lessons from market reform for renewable integration in the European Union

The European Union (EU) has the most advanced, mature, and liberal energy markets that gave rise to the most dramatic drop in wholesale energy prices, whose fallen, however, has not been translated into a reduction in retail energy prices. Instead, energy prices in Europe rose above inflation year-in-year-out, and are considerably higher compared with major economic partners. This paper highlights the key limitations in the EU market designs and network access toward renewable integration, and the wide range of reforms that the EU is currently undertaken across the Member States to achieve two goals: to make the market fit for renewable, and to set a practical example of how a competitive economy can be built on a sustainable and affordable energy system. This paper concludes with key recommendations to developing nations, particularly in addressing heavy renewable curtailment.     

Analysis of renewable energy progress in the western Balkan countries: Bosnia–Herzegovina and Serbia

Within the framework of achieving the European environmental targets towards climate change mitigation, as well as decreasing the fossil fuel dependence and its negative effects on global warming, renewable energy sources (RES) promotion has become a major issue of concern in most European Union (EU) countries. In the above context, most EU countries have endorsed initiatives to foster RES implementation development and inclusion in the energy mix, aiming to endeavor and further impel the benefits deriving from RES and harmonize to the EU Directive or Kyoto Protocol. Nevertheless, only few sporadic efforts have been examining countries and compare the requirements for promoting RES implementation that lack specific RES obligations or a framework set by the Kyoto Protocol or the EU Directive, and particular Balkans countries with great RES potential, such as BiH and Serbia. The main objective of this paper is to analyze the conditions and modalities for RES progress within the economic, political and institutional dimension, in these two neighboring countries located in the vicinity of EU Member States (MS), which appear to have a similar historical, political and economical background and an extensive RES potential. The analysis indicated that RES development in BiH seems to be a slow process, its institutional framework is partly established and further strengthening is required. In Serbia, the institutional framework is efficiently established, are in the process of developing new legislation to facilitate renewable energy development.     

Main drivers of natural gas prices in the Czech Republic after the market liberalisation

One of the goals of the European Commission in the energy sector is creating a single competitive European market. The decision to liberalise energy markets has far-reaching consequences not only for gas companies, but also for the rest of the real economy in view of the fact that natural gas is being used as an important primary energy source in several sectors of production and in the power industry.We aim to answer how liberalisation/unbundling has influenced gas pricing/prices in the Czech Republic. We investigate the individual components of end-customer gas prices according to the value chain and we define and structure the drivers of these components.We use a case study from the Czech Republic, one of the Central and Eastern European countries, which, contrary to the old Member States, is buying most of its gas from one supplier (high import dependence and low supply diversity) and where the transmission and distribution network is characterised by a sufficient contractual and physical capacity. We stress that next to basic conditions on the European gas market (import dependency on external gas producers) legal and institutional conditions and the initial market structure of each Member State are also important for the results of the liberalisation.     

Fruitful symbiosis: Why an export bundled with wind energy is the most feasible option for North African concentrated solar power

The idea of generating electricity in North Africa using concentrating solar thermal power (CSP) has been around for some time now but has recently gained momentum through the Mediterranean Solar Plan (MSP) and the formation of the Desertec Industrial Initiative. This paper argues that while the large-scale deployment of CSP in North Africa does not seem economically attractive for either European or African institutions or countries on their own at present, combining domestic use and electricity exports could be profitable for both parties. A detailed economic portfolio covering both solar and wind power plants can achieve competitive price levels, which would accelerate the diffusion of solar technology in North Africa. This portfolio could be financed partially by exporting electricity from solar thermal plants in North Africa via HVDC interconnections to European consumers. Sharing the costs in this way makes it possible to generate solar electricity for the domestic market at a reasonable cost. Some of the electricity produced from the solar power plants and wind parks in North Africa is sold on European energy markets in the form of a long-term contracted solar–wind portfolio, which would qualify for support from the financial incentive schemes of the European Member States (e.g. feed-in tariffs). This transfer of green electricity could help to meet the targets for energy from renewable energy sources (RES) in the EU Member States as the new EU Directive of 2009 opened the European electricity market to imports from third states.     

Voluntary agreements in the field of energy efficiency and emission reduction: Review and analysis of experiences in the European Union

A number of Member States of the EU have introduced voluntary agreements (VAs) that aim to deliver energy savings and emission reductions via increased energy efficiency in different end-use sectors, mainly targeting industry.     

Have European gas prices converged?

The development of a single European market for gas has been a goal of EU policy makers since the Single European Act (SEA) of 1986. EU Directives of 1996 and 1998 put these aspirations into action. However, casual empiricism suggests that convergence may have begun before this. This paper investigates whether gas prices in Europe have converged since 1978. Using annual data, three empirical tests for convergence are applied to gas prices for six EU Member States; a simple test for β-convergence; a cointegration test; and Nahar and Inder's [2002. Testing convergence in economic growth for OECD countries. Applied Economics 34, 2011–2022] test. The results from two of these three tests suggest that convergence did occur for most of the countries in the sample over this period.     

Energy supplier obligations and white certificate schemes: Comparative analysis of experiences in the European Union

A number of Member States of the European Union (EU) have introduced market-based policy portfolios based on quantified energy savings obligations on energy distributors or suppliers, possibly coupled with certification of project-based energy savings (via white certificates), and the option to trade the certificates or obligations. The paper provides an up-to-date review and analysis of results to date of white certificate schemes in the EU.     

Poland and the EU Electricity Directive

Poland has entered the preaccession phase of the integration process with the European Union (EU). The Polish electric power sector is proving its capability of meeting the challenges posed by the accession and, in the process, may facilitate unavoidable transformation in other areas of the Polish economy. The currently implemented legislation related to the electric power sector in Poland conforms to the IEM 96/9UEC Directive. As a consequence of Polish electric power sector restructuring, separation of generation, transmission and distribution was introduced in 1990. The generation subsector consists of over 30 generation companies, with a total installed capacity amounting to 34000 MW and with gross annual electricity generation amounting to 142 TWh. The transmission subsector is represented by the Polish Power Grid Company as transmission system operator (TSO) and is preparing itself to play the role of the operator in the balancing market. The focus is on a phased opening of the internal electricity market for internal competition, restructuring and privatization of the electric power sector, and fuel supply sectors     

Incentives for energy efficiency in the EU Emissions Trading Scheme

This paper explores the incentives for energy efficiency induced by the European Union Emissions Trading Scheme (EU ETS) for installations in the energy and industry sectors. Our analysis of the National Allocation Plans for 27 EU Member States for phase 2 of the EU ETS (2008–2012) suggests that the price and cost effects for improvements in carbon and energy efficiency in the energy and industry sectors will be stronger than in phase 1 (2005–2007), but only because the European Commission has substantially reduced the number of allowances to be allocated by the Member States. To the extent that companies from these sectors (notably power producers) pass through the extra costs for carbon, higher prices for allowances translate into stronger incentives for the demand-side energy efficiency. With the cuts in allocation to energy and industry sectors, these will be forced to greater reductions; thus, the non-ET sectors like household, tertiary, and transport will have to reduce less, which is more in line with the cost-efficient share of emission reductions. The findings also imply that domestic efficiency improvements in the energy and industry sectors may remain limited since companies can make substantial use of credits from the Kyoto Mechanisms. The analysis of the rules for existing installations, new projects, and closures suggests that incentives for energy efficiency are higher in phase 2 than in phase 1 because of the increased application of benchmarking to new and existing installations and because a lower share of allowances will be allocated for free. Nevertheless, there is still ample scope to further improve the EU ETS so that the full potential for energy efficiency can be realized.

Intra- and extra-union flexibility in meeting the European Union's emission reduction targets

The EU has proposed four flexibility mechanisms for the regulation of greenhouse gas emissions in the period 2013–2020: (1) the Emissions Trade Scheme (ETS), a permit market between selected companies; (2) trade in non-ETS allotments between Member States; (3) the Clean Development Mechanism (CDM) to purchase offsets in developing countries; and (4) trade in CDM warrants between Member States. This paper shows that aggregate abatement costs fall as flexibility increases. However, limited flexibility creates rents so that increasing flexibility raises costs in some Member States. Costs are reduced more by the CDM than by non-ETS trade. The CDM warrants market reduces costs by a small amount only; market power is a real issue. However, the warrants market is obsolete in case there is non-ETS trade. The CDM leads to price convergence between the ETS and non-ETS market. There would be one price for carbon in the European Union if the proposed limits on CDM access are relaxed slightly.     

Energy certification of buildings: A comparative analysis of progress towards implementation in European countries

The Energy Performance Building Directive (Directive 2002/91/EC) introduced the compulsory energy certification of buildings in the EU from 2006 and it has played a key role in the common policy to monitor and reduce energy consumption. In order to assess the experience gained in this field in Europe overall, and in particular against the highly diverse settings of the different European nations, this paper examines the extent to which the Directive has been implemented by the 27 EU Member States. This is done via a comparative analysis assisted by two different indicators: of uniformity and of excellence. The measure of uniformity makes it possible to assess the degree of harmony of the individual Member States with regard to the parameters laid down by the European Commission, while the measure of excellence allows the Member States to be appraised and the “best” performers to be identified, i.e. the leaders as regards energy certification of buildings. The analysis conducted reveals how varied the situation regarding energy certification in each country is in terms of implementation and scope of application and it also reveals that most countries are still at a halfway stage towards achieving excellence.