The Renewable Energy Financing Mechanism: A twisted EU compromise?
By Richard Bousfield
On the 6th May, the EU announced its new renewable energy financing mechanism; a plan designed to ensure that EU member states are able to achieve their individual and collective renewable energy targets. It is hoped that this new measure increases the rates of investment in renewable energy. It is expected to be especially pertinent and advantageous for the significantly recession- hit member states that require a jump start to their struggling economies.
Thus far, member states have been responsible for meeting their own renewable energy targets under the Renewable Energy Directive . The new Energy Financing Mechanism now opens possibilities for joint projects and statistical transfer as contributing member states will be able to pay into the scheme so as to support the development of renewable energy projects across the EU. This helps those countries that are currently struggling to meet their goals. With this additional freedom comes the flexibility to direct financial investment, time and energy into more cost-effective endeavours that lie outside of their national borders.
Essentially, the new financial mechanism is a gap-filling instrument: a means of supporting the EU as a whole to achieve its renewable energy targets regardless of issues experienced within individual member states. It is a measure to ensure that the economic recovery process after Coronavirus is compatible with the visions set out in the Green New Deal. It is also an attempt toward accommodating and placating the more coal-reliant nations that have had pervasive and prolonged issues accepting the terms of the Green New Deal.
While the concept of partnership working is positive and the goal of economic recovery an admirable one, many practical questions remain unanswered. These questions, if anything, have multiplied in recent months.
Europe’s response to Coronavirus has been fragmented rather than united- based first and foremost around the self-interests of the nation state rather than the region as a whole. Moreover, the Union has proven unable to coordinate responses and ensure a timely and uniform delivery of medical and protective equipment in the face of closing borders.
Furthermore, the concept of border partnerships is not particularly novel. That nations with differing geographical attributes and raw materials should coordinate and share for a common goal is obvious. What is less clear however, is to what extent renewable energies can fulfil the role of economic saviour after Coronavirus and in addition to this, the extent to which renewable energies can replace the demand for energy that would be left in the absence of fuel-based sources.
At this juncture, 15% of European electricity originates from Wind. Although installations of Wind farms were up 27% in 2019 compared to 2018, the rate needs to double each year in order to stay on target for a zero carbon 2050. The situation is more acute for solar energy, with a fivefold increase in capacity required by 2025, according to the annual PV status report by the European Commission. Thus far, the renewable energy ambitions set out in the Green New Deal have yet to be reinforced by commensurate action.
A further issue here is Europe’s dependence upon Chinese markets for the component parts required for solar and wind energy. The events of recent months have illuminated the risks of dependence on drawn-out, complex and globalised supply chains. With Europe’s withdrawal from nuclear energy as part of its transition away from fossil fuels, the need to solve these issues is greater still. Once again, nuclear energy is a contentious issue hotly contested between member states.
These are the questions that need discussing alongside the ambitious rhetoric deployed by the Union in recent months. While the EU’s focus upon renewable energy is important and positive, as of yet, the Union does not seem to be clear on the numbers.
While the emphasis on partnership working in the renewable energy financing mechanism is commendable, tension remains as to which forms of energy are to be favoured and when others are to be phased out. The four week consultation on the new renewable energy financing mechanism is set to end on June 8th and should be operational early next year. Whether these tensions and ambiguities can be ironed out by then remains to be seen.