The study, based on reports by leading European energy academics, said Europe must decide on the trade-offs between affordability, sustainability and security on setting its energy policy.
http://econews.com.au/wp-content/uploads/2013/05/europe-wind-biofuel.jpg“This is an ambitious policy that has not reached its targets,” said Jean Pisani-Ferry, head of the French prime minister’s policy planning unit, CGSP.
Reuters Newsagency reports in December 2008, European Union leaders approved the climate change package with three targets for 2020: cut greenhouse gas emissions by 20 per cent, produce 20 per cent of EU energy from renewable resources and improve energy efficiency by 20 per cent.
The climate package conflicted with the EU policy, in place since the mid-1990s, of trying to lower electricity prices by opening up power markets to competition, the report found.
http://econews.com.au/wp-content/uploads/2013/06/europe-eu-parliament2.jpgEven though the economic crisis had just started, EU leaders said green policies would not interfere with liberalisation and introduced major subsidy schemes for renewable energy.
Reuters reports that five years later, renewable energy has grown dramatically.
At the end of 2012, the share of renewable energy in gross final EU energy consumption was on average 14.4 per cent, and when the sun shines and the wind blows, Germany’s 65 gigawatts (GW) of renewable capacity can provide 100 per cent of its power needs.
Reuters reports with its intermittent nature, zero marginal costs and priority grid access, renewable energy has wreaked havoc on utilities’ traditional power plants.
http://econews.com.au/wp-content/uploads/2014/01/Profesor-Dieter-Helm-Oxford-University.jpg“By displacing other technologies, the intermittency of renewable energy causes everything else to become liable to intermittency too,” Oxford University’s Professor Dieter Helm wrote in the report.
He added that the overall impact has been to render investments in almost anything other than government-subsidised power generation technologies uneconomic.
Retail power prices are now higher than ever, while utilities are in crisis and security of supply is threatened by a lack of investment.
Even the climate plan has failed as polluting coal-fired generation has grown in lockstep with renewable energy.
The study proposes a series of fixes to EU energy policy:
– introduce intraday power markets that cope better with intermittent wind and solar than today’s day-ahead markets;
– boost interconnections between countries to better balance demand and supply over a wider geographic area;
– intervene in the EU carbon emissions trading market and create a carbon central bank;
– suspend subsidies for renewable energy when wholesale prices turn negative, i.e. when suppliers have to pay to offload it, due to oversupply.
http://econews.com.au/wp-content/uploads/2013/10/french-tidal-energy-push.jpg“During these periods, the renewable producer would have ‘free’ energy in excess, which could be stored for further use and would encourage investment in storage capacity,” the study said.
The report admitted there was no consensus on whether those changes would be enough to revive EU energy investment and to ensure security of supply.
Reuters reports some economists said an even more liberalised power market was the answer, while others advocated a return of some state intervention, notably via capacity mechanisms that reward utilities for keeping capacity on standby.
Cologne University’s Professor Marc Oliver Bettzuge said that if power markets no longer function well, market players’ actions must be centrally coordinated, notably by state-owned or state-regulated monopolies, as was the case in many EU states before 1998.
http://econews.com.au/wp-content/uploads/2014/01/Cologne-University-Professor-Marc-Olive-Bettzuge-.jpg“There is a fundamental choice of approach to be made: coordination by competitive prices versus coordination by a central authority, e.g., by a monopolist,” Professor Bettzuge said.
He added that while the EU opted for liberalisation, policymakers at the same time distorted markets by regulating retail prices and subsidising renewables.
Initially the effect of these distortions was minor, but as their impact increased, they required more market intervention.
“Such a spiral of state intervention into the workings of the price process will ultimately pave the way to central planning,” Professor Bettzuge wrote.
At the presentation of the study in Paris, Professor Bettzuge said that this view did not mean Europe should revert back to monopolies.
“Liberalisation is a great catalyst for empowerment, especially for a decentralised and renewable energy system.
http://econews.com.au/wp-content/uploads/2013/02/australia-power-plant-cows.jpg“ We should care for it, not go back to the old system,” he said.
Paris Dauphine energy professor Fabien Roques said some EU countries are moving to a mixed model with a larger role for the state, while keeping a role for markets and private enterprise.
Britain’s Electricity Market Reform will introduce the “Contracts for Difference” scheme, which offers price guarantees for low-carbon energies, and in October the United Kingdom agreed to give price guarantees in a nuclear deal with France’s EDF.
“The UK is the pioneer for this hybrid market format.
“There is no renationalisation but instead a market in which the state takes back its prerogative of coordinating investments,” Professor Roques said.