Investor confidence in renewable energy at risk from EU policy U-turn

EU energy ministers risk striking a blow to investor confidence in the burgeoning renewable energy sector, according to information received by Greenpeace.

Market analysts contacted by Greenpeace prior to the Energy Council in Brussels on Thursday confirmed that investors would interpret binding targets for the renewable energy sector as an important sign of security and guidance for market development.

But early indications suggest that ministers may reject the proposal for a legally-binding target to supply 20% of EU energy needs with renewable energy by 2020. At the same time, they may endorse the departure from today's sector-specific approach.

Such an outcome would represent a worst-case scenario, Greenpeace warns.

"If member states reject both an overall binding target as well as concrete support for renewables across all sectors, their decision can only be interpreted as evidence of a worrying lack of resolve to combat climate change through encouraging the safest, most sustainable energy sources available now. Instead of encouraging the growth of renewable energy, they will be trampling its first flowering buds," said Frauke Thies, Greenpeace European Unit renewable energy expert.

Background: In an attempt to secure the uptake of renewable energy across the EU, the Commission in January recommended a binding target of 20% by 2020, to be broken down into mandatory national targets. To encourage member states to accept this commitment, they offered countries the flexibility to choose which types of renewable energy to encourage at a national level. This represents a shift in policy away from the current approach, which defines indicative (non-binding) targets for the share of renewables in the three energy sectors - electricity (21% by 2010), transport (5.75% by 2010). Targets for the third sector, heating/cooling, are not yet defined [1].

According to Greenpeace and market experts, any binding target would need to be backed up with objectives for each of the three sectors. This would ensure:

• Development of renewable energy technologies in all three sectors Only a combined binding and sector-specific approach will prompt the balanced, continuous growth of renewable energy.

• Greater investor confidence The renewable energy industry depends on targets to indicate the direction of the market. Past experience suggests that these targets need to be specific:

• Continuity The directive for the promotion of electricity from renewable energy sources has helped develop technologies in this sector. Dismantling this model would cause disruption and instability. It should rather be maintained with new binding targets, and replicated for heating/cooling.

• Support where needed Renewable energy sources face different challenges in the three sectors. The electricity sector is characterised by large, centralised producers and a Europe-wide grid-network: renewable energy technologies need to be integrated into this network. For renewable heating technologies, in contrast, it is essential to inform and engage individual home-owners, and construct district heating networks. With transport, there needs to be a shift in mobility-related behaviour; technological leaps in the auto industry; and sustainable supply structures and production patterns of biofuels.