Electricity liberalisation undermining renewable energy sector

Greenpeace say there is a need for proper environmental regulation to balance the purely market-based rules that are now defining the electricity sector.

Greenpeace’s report: The Liberalisation of Europe’s Electricity Markets – is the environment paying the price for cheap power? highlights a “policy contradiction” in the European Commission between its environmental commitments and the pursuit of electricity liberalisation (see related story). On the one hand the European Commission has proposed a Renewable Energy Directive which calls for an increase in renewable energy consumption to 22.1% of EU electricity by 2010. On the other, say Greenpeace, the EC is suing certain Member States over the mechanisms they are using to promote renewables at home.

The report also claims there are serious conflicts between the EU’s commitments to curb ghg emissions and the current business-as-usual pathway, which the EC’s own figures show will fail to reach the ghg reductions targets to which it is legally committed under the Kyoto Protocol. The EU’s Energy Outlook 2020 study predicts that EU ghg emissions will show a 7% increase by 1990-2010 compared to the 8% reduction required under the Kyoto Protocol. Within the power sector CO2 emissions are expected to be stable until 2010 and then increase until 2020 , 17% above 1990 levels.

“The problem is not liberalisation per se, instead it is the absence of environment-based standards,” says Dr Karl Mallon, Director of Energy Solutions at Greenpeace International. “We have to incorporate regulation that uses the market to drive us towards a sustainable energy Europe, rather than dragging the EU uncontrolled in the opposite direction. If not, we will not deliver on Kyoto, it’s that simple.”

Among other issues, the report points out that decreasing electricity prices, price volatility and current market distortions – such as the EU direct subsidies to fossil fuel and nuclear energy industries – provide the wrong incentive for energy efficiency and undermine the renewable energy market.

The report also warns that the current framework of electricity liberalisation in Europe could lead to the concentration of the electricity market into the hands of a few monopolies.

“There is an issue of future regulatory flight,” says Antony Froggatt, author of the report. “Without Europe-wide environmental standards – outside as well as inside the EU – the new super companies will trade from the countries with the lowest environmental standards, undermining attempts to reduce the environmental impact of the power sector.”