The European Union announced Wednesday sweeping new guidelines to curtail state support for renewable energy production, while still allowing governments to shield energy-intensive industries from high power bills. The new guidelines released by the European Commission, the EU's executive, require the EU's 28 member countries to gradually replace ad hoc renewable energy subsidies with a competitive bidding process for allocating public support.
Joaquin Almunia, the EU's competition commissioner, said the new rules were designed to end "illegal" subsidies which had created market "distortions" and led to high prices which have harmed European industry. But in a move condemned by environmental groups, Almunia also said he had prepared a list of 68 "energy-intensive" industries which would be allowed to receive state support - compensation for high power bills brought about by government subsidies for renewables.
Speaking in Brussels, Almunia admitted the exemptions amounted to a "trade off" with EU member states as well as members of the European Commission itself, where the issue was divisive enough to be put to the vote in the executive's 28-member caucus - an unusual move.
"Politically, it is the best balance possible," Almunia said, adding that the trade-off was between competition and renewable energy objectives and "non-coherent economic arguments and non-coherent targets and priorities" by member states reluctant to cut subsidies. "There will still be a possibility for public support, but in a more reasonable, effective and smarter way," he said.
The release of the new rules follows Germany's overhaul of its green energy subsidies, announced last week, in which the government will cut its support for renewable energy producers while leaving the door open to maintain support for power-intensive industries - manufacturers of paper, chemicals or metals for instance. The European Green Party attacked the exemptions, describing them as a "road to nowhere" and proof that the Commission had "finally given up on its energy and climate ambitions". "The more energy-intensive an industry is, the more exemptions it receives," said the Greens' co-chair, Reinhard Butikofer, adding that the "big losers" of the guidelines would be energy efficient companies and consumer households. The new guidelines were also criticised by the European Wind Energy Association (EWEA), which said that by cutting back state support for the sector, the Commission was forcing renewable energy to compete on a level playing field which does not yet exist. In order to encourage the production of wind and solar power, which is more expensive than from gas- or coal-fired plants, many countries required electricity companies to buy the power at higher prices, which fed through to higher prices to consumers.
EWEA's Deputy Chief Executive Justin Wilkes said the Commission had put the "cart before the horse" and was "ignoring obvious market distortions that need to be tackled first, such as the majority of subsidies that go to fossil fuel and nuclear." Indeed, the Commission's guidelines, which replace earlier rules dating back to 2008, steer clear of nuclear energy altogether, with Almunia stating bluntly that the Commission's "lack of expertise" meant nuclear was not included.
The decision to sidestep government subsidies for nuclear projects means the Commission has not expressed an opinion on the United Kingdom's controversial support for the building of two nuclear reactors at Hinkley, in the south-west of England. As a result, the Commission's investigation of Hinkley over allegations of breaching EU competition laws will proceed separately. According to the EU's statistics bureau Eurostat, renewable energy accounted for 14.1 percent of the EU's energy consumption in 2012, up from 13 percent in 2011. The EU has set itself a 20-percent target for renewable energy use by the year 2020, part of its overall "Europe 2020" strategy of sustainable economic growth.