Energy markets alone cannot deliver the desired level of renewables in the EU, meaning that national support schemes may be needed to overcome this market failure and spur increased investment in renewable energy. If these public interventions are not carefully designed however, they can distort the functioning of the energy market and lead to higher costs for European households and businesses.
Guidance for renewables support schemes
The EU adopted guidance for EU countries when designing and reforming renewable energy support schemes. This guidance suggests that:
- financial support for renewables should be limited to what is necessary and should aim to make renewables competitive in the market
- support schemes should be flexible and respond to falling production costs. As technologies mature, schemes should be gradually removed. For instance, feed in tariffs should be replaced by feed in premiums and other support instruments that incentivise producers to respond to market developments
- unannounced or retroactive changes to support schemes should be avoided as they undermine investor confidence and prevent future investment
- EU countries should take advantage of the renewable energy potential in other countries via cooperation mechanisms. This would keep costs low for consumers and boost investor confidence.