14.09.2023 | Revision of the EU Renewable Energy Directive
On 12 September 2023, the European Parliament adopted the Trilogue agreement with the EU Member States on the Renewable Energy Directive (RED). EU Ministers are expected to formally vote on agreement soon as well, thereby bringing the 3-year legislative process to a close. The RED is part of the Fit-for-55-package, which aims to reduce greenhouse gas emissions by at least 55% by 2030 as compared to 1990.
42.5% RES by 2030
The European Union wants to significantly increase the share of renewable energies (RES) by 2030. According to the revision of the RED, RES should account for 42.5% of energy consumption by 2030. The 42.5% goal replaces the current EU target for the share of RES of 32% by 2030.
650 GW of additional renewable power capacity
The vote on the RED was adopted with a large majority of Members of Parliament (470 in favour, 120 against) during the Plenary session in Strasbourg. During the Trilogues negotiations, the negotiators representing the European Parliament and the Council had agreed on the 42.5% binding RES target by 2030 (defined based on the EU's final energy consumption) with an additional 2.5% target set as an aspirational target (45% in total). This marks a significant increase from today's RES share and would translate into approximately 650 GW of additional RES capacity, according to European Electricity Association Eurelectric.
Overall, the revision puts a lot of emphasis on making the different sectors of the European Union’s economy responsible for the uptake of higher volumes of RES, with several sector-specific targets, e.g. for transport, industry, buildings and heating & cooling. This could trigger demand from industries which have so far ignored RES.
Permitting, permitting, permitting
The biggest challenge for the massive deployment of RES across the EU are lengthy and unpredictable permitting procedures. In order to overcome this challenge, the new RED proposes a permitting framework according to which project developers would be entitles to a decision within 12 months if their project lies within a so-called RES Acceleration Area (24 months for offshore renewable energy projects), or within 24 months (36 months for offshore renewable energy projects), if it lies outside a RES Acceleration Area. These rules would be extended to networks and storage assets in case they lie in an “infrastructure area”. Furthermore the ”overriding public interest” of RES assets would have to be assumed until the EU achieves climate neutrality. Another paradigm change is the introduction of the concept of “administrative positive silence” in the relevant permit-granting procedures for small PV installations.
Sustainability criteria for hydropower plants have been revised in order not to impose additional burden on their operation and development and new rules for biomass have been adopted. Furthermore there will be an enhanced role for Guarantees of Origin (GoOs). When it comes to the implementation of RED at national level, EU Member States will have to establish an electrification framework that enables the deployment of RES in line with the new RES targets. Amongst other, this framework has to facilitate the uptake of renewable power purchase agreements (rPPAs).
EU Ministers are expected to approve the final text of the RED at one of the upcoming Council meetings. Following that, RED will be published in the EU's Official Journal. Most of the implementation processes have to be finalised 18 months after RED’s publication in the EU's Official Journal; exceptions include the permitting framework, which already applies as of 1 July 2024.
Apart from the existing challenges linked to permitting procedures, the many – mostly retroactive – market interventions triggered by the energy crisis have created great harm to the EU’s investment climate. It will be crucial to end market interventions - in particular revenue caps at national level – and create rules as part of the ongoing reform of the EU’s electricity market design that prevent a repetition of the regulatory bonanza witnessed in 2021 and 2022. The harm done to investors’ confidence does not only harm the RES investments itself but also the development of the necessary flexibility, e.g. from storages, and of the grid. As pointed out in a previous article, the EU will also have to tackle the strategic challenge of rising costs for raw materials and (geopolitical) bottlenecks along their value chain.