welcome the Commission’s RES Communication and especially the clear
call by the European Commission for a more coordinated and more
market-based approach in renewable energy policies. This shows that a
lesson has been learned and that the mistakes made while creating the
current renewable energy EU framework should not be repeated. The
present policy, based on national renewable energy support schemes, has
caused inefficiencies and market distortions as well as uncertainty
because governments have changed the systems and support levels, even
retroactively. We hope that national governments will agree with the
Commission's suggested approach and start working towards more
coordinated and market-based support systems. The economic benefits of
market-based RES support and cooperation mechanisms in particular have
been demonstrated in various analyses and should be realised as soon as
possible. The Swedish - Norwegian green certificates system could
provide a good model for an EU-wide system.
Cost-efficient decarbonisation of the energy sector is, in
Fortum's view, only possible with a fully functioning and integrated
energy market. The electricity industry has been increasingly concerned
about the impact of rapidly increasing intermittent and subsidised
renewable energy on the functioning of the internal energy market.
Therefore, we note positively the emphasis in the document on the close
link between the internal market and renewable policy. We fully agree
with the Commission's conclusion that capacity market development would
undermine an efficient European electricity market. Energy only market
design with market pricing is in our view the best model to guarantee
investments and market efficiency. It is therefore important that
investments signals are not destroyed through regulated prices.
Therefore, we encourage the Commission to focus on promoting
the development of the internal energy market, including cross-border
trade and interconnections, and the development of dynamic demand
response and storage technologies in order to facilitate renewable
energy market integration.
Although the Commission leaves the discussion on the possible
post-2020 RES target for later, the Communication seems to suggest that
there is a need for a separate renewable target for 2030. The Commission
has concluded that such a target has been requested by a majority of
respondents in the context of a public consultation organised earlier
this year. Stakeholder involvement through public consultations is
important, but a certain level of cautiousness should be applied when
drawing conclusions on the results, as it can be expected that those
respondents who have based their investments and business operations on
subsidies will be in favour of continuation of support schemes.
Similarly, those respondents who currently manage subsidy schemes will
most likely want to continue to do so also in the future. A more
qualitative analysis is therefore needed.
As stated in the Communication, a well-functioning carbon
market is necessary together with properly designed energy taxes in the
sectors outside emissions trading to give investors clear and strong
incentives to invest in low-carbon technologies and their development.
Regarding the options outlined by the Commission for the post-2020
framework, Fortum believes that establishing a single ambitious
greenhouse gas target for 2030 with market-based carbon pricing would
best support the long-term decarbonisation goal. There is no need for a
separate RES target after 2020. However, if new RES milestones (not
targets) are established, they must be seen in the context of a
post-2020 climate target and should be decided on only after there is an
agreement on the 2030 climate target. In this case, RES measures should
focus on the aspects that the climate target is not adequately
addressing (e.g. R&D, fuel availability, removing barriers from RES
Long-term investment certainty is especially important for the
energy sector, where investments are made for decades. Although Fortum
believes that renewable energy should be market-based after 2020 and
only R&D support for new RES technologies should be allowed, we
stress the importance of keeping existing support schemes intact.
Unilateral and even retroactive changes to the existing support
mechanisms that some EU countries have made or are planning have clearly
increased uncertainty among investors.
Heating and cooling sectors, including energy efficient
co-generation, are vital contributors to sustainable developments, i.e.
to mitigating climate change. Heating is a local market, as stated in
the Communication. Local heat market conditions vary substantially
across Europe – from competitive heat markets in Western Europe and the
Nordic countries to the heavy-touch regulated heat markets in new EU
countries. As part of promoting renewable energy in heating and cooling,
the Commission should increase attention and demonstrate best-practices
towards a gradual transition into competitive local heating markets all
over Europe. This development would enhance the market-based
functionality of local heating markets, and thus reduce requirements for
additional support mechanisms for RES promotion, and finally enhance
value-adding heating solutions. Competitive heat markets would also
establish a consistent and stable investment environment to attract the
necessary district heating and cooling and co-generation investments,
especially in new EU countries.
Fortum sees it useful to establish certain EU-wide, common
principles or best-practice recommendations also for the heating and
cooling sector, i.e. local heat market conditions, RES promotion and
regulatory improvements, allowing competitive pricing and risk-adjusted
returns in order to increase economical justification, transparency,
consistency, and finally enhancing effective competition between
different heating and cooling technologies. Similarly, common rules for
the sustainable use of biomass and waste in heating and cooling would be
needed. These principles or best-practice recommendations would
strongly support rapid, positive developments towards the kinds of
market models of heating and cooling that have proved their
practicality, sustainability and excellent performance already in some
forerunning EU countries, such as the Nordic countries.