1st Plenary Meeting, 17th-18th November 2021, Online
Session 3: Administrative Barriers
The session was focused on barriers in administrative procedures and experiences with the reduction of barriers and the optimisation of procedures.
The durations of administrative processes are often influenced by conflicts between the project applicants and the public (e.g. local initiatives and action groups) during the public participation processes. Public concerns are often caused by a lack of transparency and information regarding the intended projects. An early, transparent and appropriate communication process, that goes beyond basic formal requirements and that addresses existing concerns, can contribute to a settlement of conflicts and can support the acceleration of administrative procedures.
Another important basis for the reduction of administrative barriers is the appropriate staffing and funding of the authorities, which are responsible for the administrative procedures. The authorities need sufficient staff, with appropriate expertise, who can manage the processes in due time. This needs steady training and personnel development.
In general it can be noticed, that a reduction of administrative barriers does not necessarily mean a reduction of administrative procedures but more effective procedures, which can be reached in a cooperation between authorities and project applicants.
Session 12: Joint Session CT1/CT2: CEEAG: Reconciling competition and target achievement in times of higher ambition
This session discussed experiences of Member States with supporting renewable energy development through tenders and the challenges for existing systems in light of increasing target ambitions. The session included a presentation of DG COMP on the CEEAG, the Spanish auctions on RES electricity conducted in 2017 and a presentation on auction volumes for target achievement.
State Aid is considered an essential tool in reaching Green Deal goals, although other instruments are also used by the Member States. The main objective of competition rules, however, is to preserve competition and the integrity of the internal market. A proposal for Climate, Energy and Environmental Aid Guidelines (CEEAG) has been made by the Commission and it is planned that the CEEAG enters in force in 2022. The two main buildings blocks of the revision are: a) An enlargement of the scope of the guidelines to cover new areas and technologies that can deliver the Green Deal (b) a flexibilisation of the compatibility rules including the provision of higher aid amounts (100% of funding gap) and new aid instruments (e.g. CCfD). The scope of the proposed Guidelines is extended to all technologies that reduce greenhouse gases, including renewable energy sources, and improve energy efficiency. However, specific renewable schemes continue to be possible. The new guidelines will be more flexible regarding renewable-specific support schemes and technology-specific support schemes and auctions. Also, more generally, the experience gained with tenders in the renewable electricity sector is being brought into new areas.
The General Block Exemption Regulation (GBER), a key tool, is also being revised to facilitate wider and newer exempted possibilities to support renewables and other decarbonisation measures, including renewable hydrogen and storage and recognise the importance of renewable energy communities.
The Spanish experience with RES-e auctions in 2017 was also presented. In these auctions, support was granted by assigning a quota (e.g. 50 MW), not to specific facilities, which allowed project developers to choose the best locations and reduced the price. In addition, no pre-qualification requirements were imposed on the projects. The lack of prequalification requirements was effective, reducing the administrative burdens and accelerating the auction call. Generally, there was a very good response from project developers to the call for tenders. The auctions were oversubscribed and subsidies were reduced to a minimum (zero). The penalty system in place helped ensuring a high overall execution rate (over 70%).
The presentation on auction volumes and target achievement showed that the goal should be to set the auction volume high enough to reach the RES targets but still ensure competitiveness of RES auctions. In addition, other supporting measures are necessary to increase RES supply and ensure competition such as setting reliable long-term targets and auction schedules to give RES project developers sufficient certainty and time to build up a project pipeline and supply chains. Spatial planning that allows for the designation of areas for renewables is also a key element. Moreover, simplifying and speeding up permitting procedures is helpful.
Thereafter, Member States expressed their views on a variety of questions related to exceptions from the tendering requirement (e.g. for small installations and pilot projects), the use of technology-specific or technology-neutral options to support decarbonisation and monitoring RES support.
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CA-RES4_PM1_Highlights CT1-2 Joint Session
2nd Plenary Meeting, 18th-19th May 2022, Online
Session 8: Power Purchase Agreements: Focus on sellers and purchasers
This session focused on power purchase agreements from the perspective of buyers and sellers as well as financial institutions. Article 15.8 of the RES directive 2018/2001 requires Member States to remove unjustified administrative or market barriers to corporate purchase agreements of renewable energy, in particular to accelerate the uptake of corporate purchase agreements of renewable energy by small and medium-sized enterprises. The REPowerEU plan has emphasised the measures foreseen by the RES directive. In the context of REPowerEU, the European Commission has issued a Guidance to Member States on good practices to accelerate permitting processes for renewable energy projects and on facilitating Power Purchase Agreements
The PPA market in Europe is growing and there is a diversification of sectors and markets is taking place. However, currently, PPAs have been signed only in about 11 EU Member States and companies face a number of barriers when trying to source renewables through PPAs. The main barriers identified in this session are policy uncertainty, lack of credit worthiness of off-takers in particular SMEs, risk aversion of off-takers, limited understanding of energy markets and contract complexity. Obstacles with project financing in connection to PPAs include partner risk and higher cost of capital compared to financing under government support scheme.
A presentation by the RE-Source platform and the WBCSD highlighted benefits of PPAs for buyers such as price stability and cost visibility. Benefits for sellers include risk mitigation through guaranteed offtake and diversified revenue streams, stable and bankable long-term income and brand recognition. The RE-Source platform buyers toolkit offers several resources for interested parties such as an introduction to corporate renewable sourcing, templates for PPA contracts and an European corporate sourcing directory.
Credit risks for PPAs are an issue of concern for the contracting parties. Risk hedging measures include contractual mechanisms, credit risk insurance, letters of credit and credit guarantees by a parent company or the state (e.g. through a management agent), among others. In the session, a presentation was held on a power purchase guarantee scheme to help large power intensive industrial companies obtain long term PPAs. The guarantee scheme covers risk related to electricity intensive power purchasers in key economic sectors In case of a power purchaser default, the power supplier can choose to invoke the guarantee. A new power purchaser is designated and the electricity is sold in the spot market. The designated power purchaser pays 80% of the difference between the PPA price and the average spot market price.
An example of a one stop-shop for SMEs, which is currently under development was also presented. The one-stop shop will have to rely on a close collaboration with the banks and standardized financial products for PPAs. Banks are a very important actor in mobilisation of investments and the closure of PPAs. The banks must have a good understanding of the risks such that they can price risks adequately and develop risk-hedging strategies. The banks typically prefer to have long term PPAs while off-takers such as SMEs may prefer to have a shorter tenor but with secured price stability. Banks may require standardised clauses in contracts and capacity building to understand the implemented approaches in order to gain confidence.
Some countries are developing support measures for PPAs such as digital platforms to facilitate the supply and demand of PPA contracts, electricity market opening, Guarantee funds for PPAs, PPA regulations, and revision of the regulatory framework for PPAs.
European markets for PPAs are dominated by large corporate off-takers and expanding PPA schemes to SMEs is still difficult. Demand aggregation mechanisms, which pool together multiple off-takers can be useful to facilitate the participation of SMEs in PPAs, since they help to distribute the risks. However, the multi-buyer PPAs also have complexities such as the fact that SMEs may not have in-house knowledge about PPAs and electricity markets. Thus, external knowledge may be needed to guide them through the process. Standardisation and template contracts can be also useful.
In some Member States there is a combination of support schemes and PPAs. In some approaches, the Member State retains the GOs for the part of the RES electricity that is subsidised by the support scheme and issues the GOs for the part that is sold in the framework of the PPA. Other MS are looking into the possibility of combining support schemes with 'proof of use of renewable electricity' through PPAs combined with GOs. This topic could be explored in future sessions.
Session 10: Administrative Barriers
The session continued the discussion on the barriers in administrative procedures and experiences that was started in November 2021.
Based upon the analysis of the existing procedures, an electronic contact point was established in Finland, that concentrates all permitting procedures for a certain project. In this contact point, the applicant can apply for permits, see the status of each permit, and cam exchange information with the competent authorities. Digital solutions can improve the permitting process, but the set-up requires time and resources, and should be designed from the costumer’s perspective
German examples show that offshore wind power benefits from preliminary site investigations. When all relevant information available in a standardized way at an early stage, delays during plan approval become more unlikely. With this information, wind farm operators are aware of site conditions at an early stage, which allows to plan on an efficient and reliable basis.
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3rd Plenary Meeting, 09th-10th November 2022, Athens, Greece
Session 8: Impacts of the revenue cap on Power Purchases Agreements
The Council Regulation EU) 2022/1854 of 6 October 2022 on an emergency intervention to address high energy prices sets out an approach to recover excess revenues from generators with lower marginal costs (“inframarginal technologies”), such as renewables, waste, nuclear, lignite, petroleum products and peat. These electricity generators have made unexpectedly large financial gains over the past months, without their operational costs increasing. They are paid windfall revenues well in excess of their 'levelised cost of energy' (LCOE).
The regulation sets an ex-post cap on market revenues of 180 Euro per MWh of electricity produced. The cap on market revenues should apply to realised market revenues only, regardless of the contractual form in which the trade of electricity may take place. The revenue cap has been set such that it includes a reasonable margin compared to the current levelised cost of energy (LCOE) of most RES electricity generation technologies.
Power purchase agreements could play an important role in achieving renewable expansion objectives by 2030, potentially reducing the amount of public support needed. Thus, investment signals for PPAs need to be preserved. The proposed application of the revenue cap would in principle preserve incentives to conclude long-term power purchase agreements (PPA), given that the revenue cap does not interfere with the formation of prices. However, the announcement of the revenue cap has led to uncertainty in the PPA market due to: a) the possible differences in revenue caps across MS, b) the possible extension of the duration of the cap revenue measure beyond 30.6.2023 c) the fact that generation assets partially contracted through PPAs and partially selling on the spot market may be affected, even if the cap does not affect the PPA as such and d) the fact that Member States determine whether they apply the cap when the settlement of the exchange of electricity takes place, or thereafter.
This session examined the potential impacts of the mandatory cap on market revenues (Council Regulation (EU) 2022/1854) on renewables power purchase agreements. Several aspects were discussed. Among others:
- Does the cap affect the closing of PPA deals?
- Does the application of the cap affects the revenues of PPA sellers and/or buyers?
- Does the application of the revenue cap affects investment signals for future renewable electricity projects?
- Does the revenue cap offers sufficient margin to renewable electricity technologies such as wind power and solar PV to offer PPA prices well below the current electricity prices to off-takers?
- How does a project developer chooses whether he/she applies to a support scheme, enters into a PPA or sells on the spot market or chooses to combine these options, if allowed?
Session 10: Impact of the Ukraine war on support schemes for renewable electricity
In this session, the impacts of the high electricity prices on the development of support schemes for renewable electricity generation in the Member States were discussed. In particular, the following questions were examined:
- Has the number of applications for support of new renewable generation capacities and the level of requested support changed?
- Are there any modifications planned to the existing support schemes to enable a faster deployment to deal with the energy price crisis?
- Have the priorities for the development of renewable electricity generation changed?
The results of the questionnaire show that MS states are experiencing some changes in the support schemes and the number of requests for support. Several MS experienced an increase in the number of requests for support while other experienced a decline in specific technologies. In particular, the requests for solar PV, offshore wind (where available) and biogas have increased substantially. In some cases, however, MS have seen a reduction in the number of requests in specific technologies such as biomass electricity generation.
The main current obstacles for RES-e project development appear to be availability of a qualified workforce, availability/delivery times of materials and components and grid connection issues. Actions being considered or already taken by MS to accelerate deployment of RES electricity projects as a response to the energy crisis include an increase in the RES-e deployment targets, increase in the volumes of tenders, process adjustments and information campaigns, as well as lifting some requirements for project developers.
During the session, DG ENER briefly introduced the Guidelines on State aid for climate, environmental protection and energy 2022 (CEEAG) and section 2.5 of the Temporary Crisis Framework (TCF). The TCF includes provisions for the rollout of renewable energy, storage, and renewable heat. Section 2.5 of the TCF, which was recently updated, allows MS to set up schemes to grant aid for RES electricity, RES heat and renewable gases.
Two Member States presented the impacts of high energy prices on their RES electricity support schemes. In one of the cases, plants are leaving the feed-in-tariff support scheme to profit from high electricity prices. The feed-in tariff system allows plant operators to leave the subsidy system temporarily. If they choose to return, they will have to stay in the support system for at least 12 months. The subsidy contract conditions when these plant operators return are the same as before they leave the system.
In the other case, the latest auctions have been undersubscribed. In particular, biomass projects have not applied for support. Apparently, this is because the feedstock is becoming more expensive or is not available.
In addition, some examples of how Member States are implementing Art. 6.3 of the RED II were presented. According to Art. 6(3), Member States have to publish a long-term schedule anticipating the expected allocation of support.
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4th Plenary Meeting, 24th-25th May 2023, Vienna
Session 7: Combined Session CT1/CT2: Effectiveness of support schemes
This session examined the effectiveness of support schemes for Renewable electricity in the EU Member States.
According to article 6.4 (RED II) “Member States shall, at least every five years, assess the effectiveness of their support schemes for electricity from renewable sources and their major distributive effects on different consumer groups, and on investments. That assessment shall take into account the effect of possible changes to the support schemes. The indicative long-term planning governing the decisions of the support and design of new support shall take into account the results of that assessment. Member States shall include the assessment in the relevant updates of their integrated national energy and climate plans and progress reports in accordance with Regulation (EU) 2018/1999.”[1]
The consultant that conducted the study on the performance of support for electricity from renewable sources granted by means of tendering procedures for DG ENER was invited to present the main findings. The study assessed support schemes measured against seven performance dimensions, namely: (i) achieve cost reduction; (ii) achieve technological improvement; (iii) achieve high realisation rates; (iv) provide non-discriminatory participation of small actors, where applicable local authorities; (v) limit environmental impact; (vi) ensure local acceptability; (vii) ensure security of supply and grid integration.
The report analysed how tendering procedures, as one of the forms of public support, are fostering the deployment of renewables as part of the wider transition of the energy system and how tendering procedures may evolve to address the current energy policy context, the new design of energy markets market integration of renewable energy sources.
In addition, MS were invited to present examples of their current support schemes for RES electricity and their experiences and lessons learned in the past few years. One Member State presented key areas of action: for the development of solar PV, including development of the domestic photovoltaic equipment industry (local content - increasing the share of domestic companies in the supply and value chain), development of new PV segments and PV grid integration, measures to overcome barriers limiting PV development and educational and promotional activities for the development of the PV sector.
Session 10: Effects of the Ukraine war on support schemes – part 2
This session examined the impacts of the emergency regulation and electricity price developments on the development of support schemes for renewable electricity generation in the Member States. This session is a continuation of the first session on this topic that was held during the 3rd plenary meeting in Athens.
The aim of this session was to share the knowledge gains among the MS, and to increase the understanding of the impact of the developments of the last year.
The European Commission gave a presentation on measures to mitigate the impact of high gas prices on electricity bills, protecting consumers and boosting RES investment. The objectives of the reform are as follows:
- Better protect and empower consumers
- Enhance stability and predictability of the cost of energy contributing to the competitiveness of the EU economy
- Accelerate the integration of renewables with flexibility services
- Better energy market monitoring and surveillance (REMIT)
The Commission introduced the concept of two-way contracts for difference meaning a contract signed between a power generating facility operator and a counterpart, usually a public entity, which provides both minimum remuneration protection and a limit to excess remuneration. Member States will also have to facilitate PPAs to reach NECP objectives. Credit risks for PPAs are an issue of concern. MS will also have to ensure that instruments to reduce the financial risks associated to payment default in PPA contracts are in place.
A flexibility needs assessment needs to be conducted by national regulatory authorities, considering the flexibility of non-fossil sources, demand response and storage. Based on this assessment, MS will need to adopt an indicative national objective for demand side response and storage.
Several Member States presented measures to accelerate the permitting procedures for renewable electricity plants. These measures include simplification of the planning procedures for offshore wind power plants, establishing clear criteria as to when a full Environmental Impact Assessments (EIA) is required, specifically for wind power plants and waiving of permits for small-scale installations under 100 kW.
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5th Plenary Meeting, 18th-19th October 2023, Lisbon
Session 4: Joint Session CT2/CT4: Support schemes for RES electricity plants and RECs: levelling the playing field
This session addressed the interplay between support schemes for renewable electricity and renewable energy communities. This session was a joint session between CT2 (Renewable electricity) and CT6 (Consumer´s/Citizen’s Engagement). The main findings of the session were the following:
There are barriers for RECs to access finance and to participate in auction schemes such as:
- Prequalification criteria are hard to meet for RECs
- Auctions based on price criteria do not reward the social and environmental benefits created by RECs and their unique characteristics
- RECs have difficulties to design bidding strategies relying on market knowledge that large market players may have and they cannot realise economies of scale
Different solutions to these barriers were proposed, for example:
- Separate auction envelopes where only community projects compete against each other
- Exemption from competitive bidding for RECs
- Direct investment aid for RECs
- Guarantee schemes to provide assurance to lenders
- Solutions under revised EU State Aid rules
- Subsidies for one-stop-shops for REC
- Support for investment costs of first of a kind energy communities’ pilots
- Develop an enabling framework to allow for business models which are independent of public support
It is common that REC can also use the general subsidy schemes for renewable electricity (especially investment grants). Some countries have also subsidies for the planning, development and implementation of REC.
Auctions that may consider the specialties of RECs, so that they can compete under equal conditions with other participants (including special participation mechanisms just for RECs) have also been used by some member states.
Other MS (e.g. Austria) use special subsidies for the planning and implementation phase in combination with investment subsidies for the RES installations and general support of REC (reduced grid tariffs, reduced electricity taxes).
Session 10: Support schemes for RES electricity storage and flexibility
This session addressed aspects of flexibility and energy storage in the context of electricity generation from renewable energy sources.
A major element of the transformation of the European electricity market will be the huge increase of electricity generation capacity based on wind and solar power. These renewable energy sources have the biggest potentials in the future.
At the same time, these renewable potentials have temporal characteristics that differ substantially from the energy sources that are in use today. A huge part of today’s generation capacity is providing either base load production of electricity, or it can follow the load. In contrast to these technologies, the production of electricity from wind and solar power is intermittent, based on weather conditions or due to seasonal variations.
With growing share of these intermittent sources, matching the temporal profiles of electricity supply and demand requires additional attention, and power flexibility instruments as storage and DSM become more important. Nevertheless, this aspect is only rarely addressed in most support schemes for renewable electricity generation. These (current) support instruments are mostly designed to be technological neutral, and to focus mainly on economic key indicators.
The main findings from the session were as follows:
- The presented flexibility assessment showed the significant future flexibility demand in Europe
- Different technologies for short-/medium- and long-term flexibility
- Assessment of flexibility needs should consider possible changing seasonal RES-generation patterns due to climate change (e.g. run of river hydro power)
- Tenders for storage facilities: investment grants (€/kW) and annual support (€/kW/year)
- Storage capacity active in the wholesale and balancing markets
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[1] Table 8. Assessment of the support for electricity from renewable sources pursuant to Article 6(4) of Directive (EU) 2018/2001. COMMISSION IMPLEMENTING REGULATION (EU) 2022/2299 of 15 November 2022 laying down rules for the application of Regulation (EU) 2018/1999 of the European Parliament and of the Council as regards the structure, format, technical details and process for the integrated national energy and climate progress reports. eur-lex.europa.eu/legal-content/EN/TXT/HTML/