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EU to change renewables subsidy

Minister for Energy Pat Rabbitte has criticised a draft European Commission plan to make member states phase out the use of feed-in tariffs for mature renewable energy technologies including wind.

Guaranteed prices to clean energy suppliers under the Renewable Energy Feed-In Tariff (Refit) scheme form the cornerstone of Ireland’s support for the sector.

The commission wants member states to move away from feed-in tariffs to other subsidy models it says are more “market-friendly”, particularly tradable renewable energy certificates or premiums paid on top of market prices. It says such a move is justified for mature renewables because their costs are falling and market penetration increasing.

In the next few weeks, the commission will adopt state aid guidelines for the energy sector for 2014-20. These are the rules by which it decides whether to approve governments’ subsidy plans. If the latest draft of the guidelines is adopted, it may not be possible for Ireland to renew or expand Refit.

However, the draft guidelines state that companies that have already been told they will benefit from existing schemes can continue to do so for the agreed duration – 15 years in the case of Refit, which currently supports just under 1,400MW of capacity.

Choose schemes

At an energy ministers’ meeting in Brussels last week, Mr Rabbitte said member states should be allowed to choose subsidy schemes that suit their national circumstances.

“The commission has recognised that Ireland’s successful feed-in tariff scheme adds only about 1 per cent to retail electricity costs. It does not make sense to me that Ireland or other member states should be prevented from using such a cost-effective measure.”

The Irish Wind Energy Association has also expressed concern. In a submission to the commission, it said if the latest draft rules were implemented it “would result in significant unnecessary reforms which would bring considerable uncertainty to the industry in the short to medium term”.

“Imposing the most stringent rules for support mechanisms to offshore wind would stifle its industrialisation process and the ensuing economies of scale which drive down capital costs. The proposal would slow progress to competitiveness instead of creating the conditions for offshore wind to become competitive,” it warned.

Refit is financed through a levy on electricity bills. In a policy paper on energy costs published in January, the commission found that the net effect of renewables in Ireland was to lower retail prices because supply is pushing wholesale prices down.

Renewables levies make up 6 per cent of the average household electricity bill in the EU, but less than 1 per cent in Ireland, Poland and Sweden.