Following protracted negotiations between the European Commission and European Council at the beginning of December 2008, the European Parliament officially approved the proposed new Renewable Energy Directive (the Directive) on 17 December 2008. The Directive should become law in early 2009.

The Directive was originally proposed by the Commission in January 2008 following an agreement made between EU heads of state at the EU summit on climate change in 2007 that by 2020, 20% of Europe's energy should come from renewable sources.

This forms part of a wider range of EU measures to tackle climate change, known as the '20/20/20 deal' which in addition to the Renewables Obligation includes:

  • A commitment to reduce greenhouse gas emissions by 20% by 2020;
  • Negotiations on the rules governing the Emissions Trading Scheme after 2012; and
  • A framework for regulating carbon capture and storage.  

Member State Targets

Under the Directive, each EU Member state has a legally binding minimum target for the amount of energy which must be produced from renewable sources. The UK's target is 15%, which is challenging given that currently only 1% of energy in the UK is from renewable sources.

To ensure Member States stay on track to meet their targets, the Directive provides for minimum intermediate targets and requires Member States to submit National Action Plans detailing how they intend to achieve their targets.

If a Member State's National Action Plan does not contain sufficient measures to reasonably enable the target to be met, or does not meet their minimum target by 2020, the Commission can bring infringement proceedings. Ultimately this could result in the imposition of substantial fines on non-compliant Member States.

Co-operation and Flexibility Mechanism

In order to address concerns that some Member States lack sufficient natural resources to meet their renewable energy targets, the Directive puts into place an opt-in system by which Member States can swap renewable energy credits. For example, one Member State can commit to investing in a renewable energy project in another Member State in return for the energy produced being counted towards the investing country's renewable energy target. This replaces the Commission's initial proposal that Member States would be able to purchase renewable energy credits produced elsewhere in order to meet their targets.

2014 Commission Report

The Directive requires the Commission to present a report reviewing the Renewable Energy Directive by 2014.

This proposal caused some debate while the proposed Directive was being negotiated due to concerns that uncertainty in relation to the risk of the targets being amended post-2014 would discourage investors from investing in renewable energy projects. However, the Directive provides that any proposals made subsequent to the report shall not affect the 20 % Renewables Obligation, which addresses this concern.

Priority Grid Access

Member States are also required under the Directive to take all necessary measures to provide renewable energy suppliers with priority access or guaranteed access to the grid. The transmission and distribution system operators will be required to provide complete and accurate information about connection costs on a non-discriminatory basis.

Comment

The Directive represents a milestone in that it is the first time that a group of countries have agreed to meet concrete, legally enforceable targets in relation to renewable energy. Although there has been debate over the provisions of the proposed Directive, the result certainly does not represent a 'watered down' version of the Commission's initial proposal in January 2008. The Directive's targets are ambitious and represent a strong commitment by the EU to the development of clean, green and sustainable energy. it is now up to the Member States to overcome the practical challenges in achieving these aims.