POWER June 2014 - 8

Europe Moves to Phase
Out Renewable Subsidies
New rules adopted by the European Commission
(EC) in April will gradually phase
out renewable energy subsidies that currently
bolster the European Union's (EU's)
€48-billion-a-year clean energy industry.
The rules stem from an investigation
into Germany's renewable energy subsidies,
which have sent renewables' share of
the country's power portfolio soaring but
led to market distortions. As it issued the
rules, the EC called on Europe to meet ambitious
2020 climate targets at the least
possible cost for taxpayers and without
undue distortions of competition in the
single market.
" Many renewables sources have reached
a scale and a level of maturity that allows
them to compete with more commensurable
sources, " EU Commissioner for Competition
Joaquin Almunia told reporters on April 9.
" It is time for renewables to join the market.
The new guidelines provide a framework
for designing more efficient public support
measures that reflect market conditions, in
a gradual and pragmatic way. "
The new Energy and Environmental
State Aid Guidelines, which will be valid
from July 1, 2014, until the end of 2020,
foresee the gradual introduction of competitive
bidding processes for allocating
public support but offer the bloc's 28
member states flexibility to take account
of national circumstances. In 2015 and
2016, a pilot phase will be launched to
test competitive bidding procedures in a
small share of new renewable power ca1.
A subsidy ceiling. New renewable
projects installed in the European Union after
July 1, 2014, will be subject to new rules that
will gradually phase out renewable subsidies.
This image shows WIRSOL's 8.1-MW crystalline
solar plant on the 11-hectare roofs of pfenning
logistics GmbH's distribution center in
Heddesheim, southern Germany. Completed
in August 2013, it is one of Europe's largest
rooftop solar projects. Courtesy: WIRSOL
pacity. Small installations (less than 6 MW
of wind power or 1 MW of other renewables
such as solar or biomass) will be initially
exempted, but tender processes will
be obligatory for all new installations as
of 2017.
The guidelines also call for the gradual
replacement of feed-in tariffs with more
market-based types of aids such as feedin
premiums. The premiums will not apply
when prices on the market are negative,
which means generators will have no incentive
to generate electricity under negative
prices. Small installations will still
benefit from a special program, however,
and the rules do not affect installations
that are already in place (Figure 1).
Significantly, the rules also seek to alleviate
the " very high burden " of charges
levied for the funding of renewables for
68 energy-intensive companies. But that
measure was criticized by energy-intensive
sectors as well as by renewable energy
advocates, who cautioned that it
would shift the costs for the transition
to cleaner energy disproportionately onto
private consumers and small businesses.
The European Aluminum Association said
more would need to be done to restore Europe's
industrial competitiveness, calling
for more compensation measures for costs
related to climate and energy policies.
The rules also back cross-border energy
infrastructure in support of a single European
energy market, and they permit aid
to secure adequate generation when there
is a real risk of a reliability lapse. That
means aid for so-called " capacity mechanisms "
is possible if a state demonstrates
that adequate capacity cannot be delivered
without state intervention.
Power Sector Link to
Water Is Deep, Complex
The interlinkages between water and energy
are complex and run deep, warns a
United Nations (UN) World Water Development
water and energy-themed report released
this March. As global water demand
(in terms of withdrawals) is projected to
increase 55% by 2050, driven by a 400%
demand surge in manufacturing, 140% in
thermal power generation, and 130% in
domestic use, freshwater availability is
expected to be badly strained.
About 90% of global power generation
is water intensive. Thermal power plants,
in particular, are responsible for 43% of
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total freshwater withdrawals in Europe,
nearly 50% in the U.S., and more than
10% of the national water cap in China,
the report asserts. Meanwhile, to mitigate
climate change and address energy security
concerns, many nations have endorsed
ambitious targets to double the share of
renewables in the total power mix by
2030-many depending on hydropower
and gas generation to address intermittency
of wind and solar. All power generating
sources use at least some water for
cooling purposes (Figure 2).
The power sector's dependence on water
introduces vulnerabilities, it finds, as
periods of water scarcity and elevated
temperatures can force power plants to
shut down or reduce their output. And,
as climate change induces more extreme
weather events, the sector is exposed to
higher levels of risk.
At the same time, energy is required for
water provision, not only for pumping and
2. Water use for electricity generation
by cooling technology. Courtesy:
World Energy Outlook 2012 © OECD/
IEA, 2012, figure 17.4, p. 510
Notes: * Includes trough, tower and Fresnel
technologies using tower, dry and hybrid cooling,
and Stirling technology. ** Includes binary,
flash, and enhanced geothermal system technologies
using tower, dry, and hybrid cooling.
POWER | June 2014
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POWER June 2014

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