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Policy Department A: Economic and Scientific Policy ____________________________________________________________________________________________ However, such competition finds its constraints where national schemes erect barriers to trade or distort competition. Nevertheless, the cross-border effects of large quantities of wind-based electricity generation suggest that the cross-border consequences of national renewables policies have to be properly taken into account. Policy coordination or even harmonisation will be beneficial for reasons of productivity, cost effectiveness, cross-border externalities (e.g. impact on the grid and the security of supply for neighbouring countries and more generally, potential effects on the functioning of the internal energy market) or economies of scale, should a tradable certificate scheme be chosen (i.e. leading to larger, more liquid and efficient markets). In the short-term, it can therefore be argued that the potential cross-border effects need to be balanced with the reality that support schemes are emerging through a bottom-up approach, i.e. member states are experimenting with how to make such schemes best fit into national circumstances. There is, however, a medium- and long-term need for corrdination and possibly harmonisation of the entire sphere of electricity from renewable energy sources. To differentiate this sphere, national support-scheme frameworks can be separated into three distinct parts: i) level of support, ii) support-scheme models and iii) the legal framework including regulatory issues. The level of support has a direct impact on decisions related to project development by providing locational signals. With sufficient interconnections and infrastructure in place, it will be time for EU member states to reconsider their national approach to renewables support schemes. In a well-functioning internal European electricity market, support schemes should incentivise investments in the most cost effective locations (e.g. Mediterranean for solar power and coastal northern Europe for wind power). Currently, however, investments in renewable energy sources aim for maximum subsidies, which lead to a sub-optimal allocation of investments into less productive and more costly regions. Hence, different levels of support schemes may distort investment decisions and provide incentives for gaming. Gaming generally undermines the efficiency of markets and risks creating development imbalances across borders. Moreover, it may lead to inefficient investment decisions, whereby a location is chosen on the merit of the support scheme rather than its resource endowment. The level of support would also include benefits that accrue from the fact that renewables will not have to pay for the full costs in all cases. Harmonisation of the level of support would reduce incentives for gaming. Another area is harmonisation or coordination of the different models of support schemes. In order to avoid a negative impact on the internal energy market or the internal market as such, at some stage there will be a need to agree on a common support scheme at least for the same technologies. There may be no need to have a uniform system across the EU for all technologies. But the same technologies should fall under a support mechanism to be agreed upon by all member states. The third level of harmonisation of support schemes is the creation of an EU-wide regulatory framework for support. While many aspects will remain the responsibility of the member states, such as permitting and more generally the administration, the implementation of renewables support policy will need to be undertaken within a common EU framework. Different elements of this framework can be developed within different timeframes. Progress towards an increasing coordination of support schemes has been made with the inclusion of the possibility to create joint support schemes as one of the four flexible mechanisms defined in the Renewables Directive. Jansen et al. (2010), for example, argue that if well designed, such joint support schemes may well prove to be the most cost- effective of the flexible mechanisms. IP/A/ITRE/ST/2009-11 & 12 82 PE 440.278PDF Image | Policy Department Renewable Technologies
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