April 10, 2014

EPIA: European Commission State Aid Rules Discriminate Against Small Generation

The European Commission (EC) has adopted new state aid rules, which dictate renewable energy policy design to member states. This includes a requirement for competitive bidding processes for renewable energy plants above 1 MW, and a balancing requirement for all recipients of support.

The new Environmental and Energy Aid Guidelines set requirements for new and revised national support programs during the period 2014-2020. The European Photovoltaic Industry Association (EPIA, Brussels) describes the rules as favoring big energy players, discriminatory to small-scale generation and harmful to reaching 2020 renewable energy targets.

“A tendering schemes inevitably comes along with risks and transaction costs, making it unfit for rooftop PV systems and other small-scale electricity generators,” notes EPIA Head of Regulatory Affairs Alexandre Roesch. 

“The 1 MW threshold under which a different support regime is possible, is not enough: Cooperatives and community projects, for instance, will now be forced to place their bids in a scheme much more suited to the largest energy players.”

Balancing requirement harmful to small-scale wind, solar

While the rules generally do not affect renewable energy plants smaller than 500 kW, the requirement of balancing responsibilities from projects which receive aid is expected to be damaging to small-scale variable renewable energy including wind and solar.

EPIA notes that these forms of variable generation are not allowed by current market rules to reduce their imbalances. The EC does include a caveat that this rule is to apply unless no liquid intra-day markets exist. 

Direct marketing to make business for middle men

Under the rules, market premiums or green certificates will be the main forms of aid allowed for plants above 500 kW, starting on January 1st, 2015. 

EPIA notes that direct marketing of electricity is not possible for small and medium-sized players, who do not have direct access to the wholesale electricity market and must go through intermediaries.

Bidding processes to favor big business

During 2015 and 2016, technology-neutral bidding processes will be imposed for least 5% of the planned new renewable energy capacity. This will increase to all renewable energy capacity above 1 MW in 2017.

EPIA also objects to this measure, noting that this will force cooperatives and community players to place their bids in a program more suited to large players. 

The rules also contain language stating that if the bidding processes would lead to a suboptimal result, then technology-specific bidding programs will remain possible.

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