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Leaked Strategy Paper: EU Plans To Phase Out Green Energy Subsidies

The economic cost of the expansion of renewable energy could become prohibitively expensive. Subsidies in the EU for solar and wind power should be phased out as quickly as possible. That is what the European Commission says in an internal draft strategy paper that EU Energy Commissioner, Günther Oettinger, will present in Brussels early next month.

Günther Oettinger, EU energy commissioner

Günther Oettinger, EU energy commissioner

In doing so, the EU Commission is supporting the German government which wants to reduce solar subsidies by up to 30 percent, a plan which has met with resistance in the Upper House of the German Parliament.

The expansion and especially the maturity of renewable energy such as solar and wind power have grown much faster than expected, the strategy paper points out. The cost of photovoltaic systems, for instance, had fallen by 48 percent in the last five years. The cost for the construction of offshore wind farms had decreased by 12 percent since 2008. In light of these developments, member states would have to make their programmes more flexible to phase them out.

At the expense of taxpayers

If green subsidy programmes are too rigid, there is a risk that producers would be over-compensated and the cost of developing renewable energy would become intolerable, the paper warns. The sharp decline in the cost of many new green energy sources together with the strong expansion of solar and wind energy had driven the cost for consumers and, in some cases, for taxpayers sharply higher. For many people, energy costs were already too high, especially in light of the difficult economic situation today. The price for renewable energy such as solar and wind power would therefore have to be left entirely to the forces of the free market and as quickly as possible.

However, the Commission does not intend to abolish all forms of renewable subsidies. The development of newer green energy sources, such as geothermal or novel solar thermal power plants, that are not yet commercially viable should be encouraged even beyond the year 2020.

Harmonisation of green subsidies among member states

In its strategy paper, the Commission also calls for the harmonisation of national subsidy and support programmes. The Commission has been criticising the coexistence of different support systems for some time. This dicrepancy has led to the inefficient use of renewable energy within the EU given that they have often been developed in countries where they are simply inappropriate. Instead of subsidising the expansion of solar energy in Northern Europe, for example, the Commission wants these nations to finance their expansion in sunny countries like Greece. The paper specifically mentions the so-called Helios Project in Greece. Energy generated in such projects could then be counted towards the renewable targets which Northern Europeans have signed up.

Until now, the German government has opposed any such Europe-wide plan because it would put in question Germany’s Renewable Energy Law (EEG) in which the feed-in tariff for renewable energy is set out. Not a single German party is currently prepared to agree to such a plan.

Translation Benny Peiser

Frankfurter Allgemeine Zeitung, 19 May 2012

see also The Deepening Crisis of Europe’s Climate Policy