1. EU policy for renewable sources of energy Implications for producers and basic industries Lars J. Nilsson CANES Oslo, 20 November 2007

2. Background 1997 White Paper, EC COM(97)599 –RES share 6% in 1996 to 12% in 2010 RES-E Directive, 2001/77/EC –RES-E share to 22% (21%) in 2010 Biofuels Directive, 2003/30/EC –5.75% by 2010 New target: 20% RES by 2020 (but also 10% biofuels, -20% CO 2, and 20% energy savings in 2020) New framework Directive (climate and energy package): –Proposal comes post-Bali (in late January) and the debate will rage for 18-24 months –How distribute the burden of emission reductions and RES increase between member states? –How handle the integration of ETS and green certificates? –Certificate systems debated –Sustainability criteria debated –Heating/Cooling? –Gas?

3. Costs and prices (back of a napkin) Coal production cost: 4-8 EUR/MWh Coal at 20 EUR/tCO 2 :11-15 EUR/MWh Bioenergy price:14-17 EUR/MWh Pulp wood price (300 kr/m 3 ):~18 EUR/MWh Coal at 50 EUR/tCO 2 :20-24 EUR/MWh –N.B. Swedish CO 2 tax already about 100 EUR/tCO 2 Coal power at 50 EUR/tCO 2 :>50-60 EUR/MWh Wind power production cost:>40 EUR/MWh Oil price at $50-$100/barrel:20-40 EUR/MWh Gasoline price 12 kr/l:140 EUR/MWh

4. How can differentiated treatment between actors in EU RES-policy be explained? To what extent is there differentiated treatment between producers and consumers in the EU- level policy? Is it expressed in differentiated treatment of energy carriers? Is it expressed in differentiated treatment of renewable energy sources? Is it expressed in differentiated treatment of member states? How can it be explained by the influence of special interests and ideas represented by stakeholders, coalitions, etc?

5. Tentative elements of differentiated treatment Winners and losers in RES-policy Incumbent producers have lost some of their position to new actors Consumers may have lost through higher electricity prices? (but there is income from certificates and perhaps a slightly lower electricity price in Sweden) There is differentiated treatment between energy carriers: Focus has been on electricity (and biofuels) There is differentiated treatment between renewable energy sources: Ground source heat is not considered as RES There is (sometimes) differentiated treatment between member states: Targets for RES-E are differentiated (but not for biofuels)

7. A multi-level analysis approach Level of coordination and capacity of producers and consumers to influence the Council, Commission and Parliament? –Level of coordination and capacity of producers and consumers to influence member states? The role of global trends, international committments and ambitions (climate, trade etc.) EU-level policy outcomes and tentative explanations –National systems of RES-E support: Strong MS/coalitions prevented quota/certificates based systems –Competition for biomass was not seriously considered: Forest industry did not make its voice heard (cf noise about biofuel and food) –Strong focus on first generation EU biofuels, not imports or natural gas (or electricity?): Agricultural lobby has hi-jacked biofuels policy Differentiated treatment between actors under RES-policy mainly result from policy at the national level (details of support systems, rules of access, permit procedures, etc.)?

8. A couple of questions: Should we focus mainly on aspects relevant to electricity in a Nordic context? –Wind, hydro, biomass and heat pumps? –Heat/CHP, green gas, biofuels? What are the key future issues? –Biomass competition –Large scale wind integration –Role of electricity in transport? –More?

9. Outlook for Biofuels Share of Biofuels in Road-Transport Fuel Demand 0% 4% 8% 12% 16% 20% 24% 28% 32% WorldUnited StatesEuropean UnionBrazil 20042030 Reference Scenario2030 Alternative Policy Scenario Source: IEA, World Energy Outlook 2006