Monday, 1 June 2015

Cost Benefit Analysis obligations for Ireland's Renewable Action Plan - Part Five

A mandatory programme and we will be fined – how accurate is this claim?

By Pat Swords BE CEng FIChemE CEnv MIEMA. 

There is a website funded by the EU’s Intelligent Energy Europe Programme ‘Keep on Track’, whose function is to track the progress towards the EU’s 20% renewable energy by 2020 target, namely the implementation of Directive 2009/28/EC. Indeed, the website’s press release of 6th October 2014 couldn’t be clearer: “14 EU Member States will fail to meet their 20% renewables target by 2020, as progress stands today”.

  • According to the 2020 RES (Renewable Energy Sources) Scenarios for Europe Report, as it stands today, 14 Member States will fail to meet their 2020 RES targets and there are doubts about 4 other Member States reaching their target.

Consideration of this report provides the results below of the quantitative analysis of a Member State’s ability to meet its 2020 target given the current ‘business as usual’ scenario:

Note: The traffic light colours of the figure on the left hand-side show an achievement or shortfall 
of 2020 RES targets by Member State after possible adjustments through RES cooperation.

It is not as if these issues weren’t known already prior to the above report of late 2014. Indeed, the EU Commissions had also published a “Renewable energy progress report COM(2013) 175 final” in March 2013. In addition, the Commission published a Staff Working Document accompanying this progress report, entitled SWD(2013) 102 final. As the latter pointed out:

  • These findings are based on data from the period 2008-2010. Since then, as set out in the Report mentioned above, the economic climate has changed significantly and, as a result, the overall prospects of Member States meeting their targets for 2020 are less evident.

If we consider the main “Renewable energy progress report” itself, the same issues are to be seen. Indeed, as presented in the following graphs and bullet points.

Planned (blue) versus estimated (red/dotted) trend in EU renewable energy

  • The failure to comply with national plans is most evident in the wind sector. According to Member State plans, wind capacity is expected to reach 213 GW in 2020 (169 GW onshore and 44 GW offshore). Electricity generation from offshore capacity is planned to reach 140 TWh (roughly 12 Mtoe). However, according to the Commission's analysis, it may only reach 43 TWh (3.7 Mtoe) due to reduced national efforts and infrastructure difficulties.

  • Despite the recent strong growth in the onshore wind industry of recent years, Member States' plans for onshore wind production 354 TWh may fall short. Further efforts will be needed to reinforce measures and improve infrastructure, or only an estimated 210 TWh might be achieved.

Planned (blue) versus estimated (red/dotted) trend in EU onshore wind energy

  • Total wind generation may therefore fall short of expectations. Whereas Member State plans foresee wind generation of almost 500 TWh, current trends point to the risk of achieving only half of it, i.e. 253 TWh.

This dysfunctional renewable programme energy was impractical from the outset, so is it now surprising it has come off the rails? Furthermore, no matter how many incompetent reports are produced by the various academic computer models, the programme is not going to ‘get back on the rails’. It simply takes enormous sums of money and time to develop this amount of infrastructure, both of which are increasingly running out, as we approach 2020.

Yet the ‘bogey man under the bed’ is constantly wheeled out, i.e. as to how Ireland and other Member States will be exposed to billions of Euros in fines, if they don’t meet these targets. In reality this is a pure lie. If we take the manner in which the EU Commission takes legal proceedings against a Member State, then this process requires more than five years to progress and indeed the number of times fines have actually been levied by the European Court are extremely limited, such as less than twenty times. See the relevant blog post on ‘The Law is my Oyster’.

So are we really going to reach the situation where the majority of Member States end up in the European Court, in relation to non-compliance with a Directive, which was not only fundamentally flawed and impractical, but also legally non-compliant with Community law and Democratic Rights? There is enough resentment around Europe already with respect to the lack of Democratic accountability of the EU, as was evident in the election results of the 2014 vote on the European Parliament. To even contemplate such draconian fines ignores the reality of the complete backlash that it would generate around Europe, in particular with a population, which is becoming increasing sceptical and disillusioned with the whole programme.

However, this renewable energy programme is already in the Courts with large financial claims against the Member States and this trend is likely to rapidly increase. To digress a little first of all, the current claims against the German State in relation to their abrupt shut down of their nuclear energy sector has led to some €30 billion of compensation being sought from nuclear generators there. This includes compensation for the effective confiscation of generating rights from the eight reactors ordered shut after Fukushima in March 2011, despite safety assurances from the regulator that everything was in compliance. Business is business, and if the German State chooses to ignore its technical regulators, and instead appoint an Ethics Commission with no technical representative and two bishops, to facilitate politically populist decision making, then why should these companies carry the financial ‘can’ for it.

While a number of the German power companies are currently pursuing matters through the German Courts, Vattenfall are a Swedish company and since June 2012 are contesting the confiscation of generation rights for their nuclear power plants through the autonomous International Centre for Settlement of Investment Disputes (ICSID) in Washington, which was designed in 1965 by the World Bank and established by a Convention now signed by 143 countries.

Indeed, in the European and Asian area there is an Energy Charter Treaty, which entered into legal force in April 1998. To date, the Treaty has been signed or acceded to by fifty-two states. The Treaty includes a legal mechanism for resolving disputes, which also utilises the ICSID referred to above. Currently over sixty cases have been referred to this disputes mechanism. Of these, well over twenty cases are relating to disputes over reforms to renewable energy tariffs, principally against Spain, although Italy and the Czech Republic also feature. These reforms had to occur as the financial costs of these tariffs were simply spiralling out of control.

There are serious questions to be asked here, if for instance Spain rushed in to this renewable programme to comply with EU Directives, and as a result of it going ‘sour’ now finds itself at the wrong end of huge legal claims for financial compensation in the International Courts, who picks up the tab? Is it the Spanish electricity consumer by being fleeced even more, while the EU officials who instigated all of this walk away with massive pensions to go with their previous massive salaries? Are there more financial claims going to come from companies, who have been put at a grossly competitive disadvantage as a result of this State Aid for renewables, State Aid which wasn't legally compliant?

We all know the answer to this, plus that it is a process which is going to be replicated in a lot of other Member States in the future. Clearly it is long overdue that the plug was pulled on this illegal and dysfunctional renewable programme, the consumer has been fleeced enough and there is already enough damage done to the countryside and the people who live there.


  1. As usual, Pat cuts to the chase with three distinct scenarios:
    Scenario 1: The Government continues to sign long-term subsidy contracts and the consumer gets fleeced in running costs.
    Scenario 2: The Government reneges on subsidy contracts and the consumer gets fleeced in compensation costs under the dispute resolution mechanism.
    Scenario 3: The Government reduces the size and term of subsidy contracts, the spurious 2020 targets are not met (in common with most of the remainder of the EU), and Europe formulates yet another of its face-saving fudges.
    Given that the 2020 targets are a figment of overactive ideology and tired heads at a late night sitting, I’ll go with scenario three, thank you very much!

    1. Whatever happens there will be plenty of work for lawyers !