Feed in Tariffs in The European Union 1St Ed Edition Beatrice Cointe Full Chapter
Feed in Tariffs in The European Union 1St Ed Edition Beatrice Cointe Full Chapter
Feed in Tariffs in The European Union 1St Ed Edition Beatrice Cointe Full Chapter
FEED-IN TARIFFS
IN THE EUROPEAN
UNION
Renewable energy policy, the
internal electricity market and
economic expertise
Series Editors
Caroline Kuzemko
The University of Warwick
Coventry, UK
Catherine Mitchell
University of Exeter
Penryn, UK
Andreas Goldthau
Royal Holloway University of London
Egham, UK
Alain Nadaï
International Research Centre on Environment and
Development (CIRED-CNRS)
Nogent-sur-Marne, France
Shunsuke Managi
Kyushu University
Fukuoka, Japan
Progressive Energy Policy is a new series that seeks to be pivotal in nature
and improve our understanding of the role of energy policy within pro-
cesses of sustainable, secure and equitable energy transformations. The
series brings together authors from a variety of academic disciplines, as
well as geographic locations, to reveal in greater detail the complexities
and possibilities of governing for change in energy systems. Each title in
this series will communicate to academic as well as policymaking audiences
key research findings designed to develop understandings of energy trans-
formations but also about the role of policy in facilitating and supporting
innovative change. Individual titles will often be theoretically informed
but will always be firmly evidence-based seeking to link theory and policy
to outcomes and changing practices. Progressive Energy Policy is focussed
on whole energy systems not stand alone issues; inter-connections within
and between systems; and on analyses that moves beyond description to
evaluate and unpack energy governance systems and decisions.
This book started as an enquiry into the origins of feed-in tariffs. This
interest was raised by a study of solar energy policy in France, carried out
in the context of a PhD thesis that was written between 2010 and 2014 at
the Centre for International Research on Environment and Development
(CIRED). The first version of this account was a chapter of the aforemen-
tioned PhD thesis, which has been revised, extended, and updated. This
work benefitted from financial support from the DIM R2DS Ile-de-France
under Grant no. 2010-13 and from the French National Research Agency
(ANR) under Grant no. 2011-SOIN-003-01 (COLLENER Project). The
study has been presented in several contexts over the years, and we are
indebted to comments from colleagues at CIRED, from members of the
PhD panel, and from discussants in conferences. We would like to thank
in particular Fabian Muniesa, Noortje Marres, Peter Karnøe, Thomas
Reverdy, and Philippe Quirion for helpful insights and suggestions at dif-
ferent stages of our research. All remaining errors of course remain entirely
our own.
v
Contents
6 Conclusion 111
Index 137
vii
List of Abbreviations
ix
List of Tables
xi
CHAPTER 1
This book then tells the story of an instrument of renewable energy pol-
icy, but it also considers this story as a vantage point from which to look into
the wider evolutions, tensions, and frictions at play in European renewable
energy policy. In particular, it gives insights about the objectives of liberalisa-
tion and harmonisation that have been at the heart of the European project
for some decades now, and about the priorities that have guided them in the
case of the electricity sector (Barry 1993; Doganova and Laurent 2016).
The debates that surrounded the evolutions of FITs, and the evolution of
FITs in Member States itself, also interrogate the notion that a balanced,
well-functioning, liberalised market can serve as a device to serve the com-
mon good and solve problems that are not reduced to economic and market
activity (Geiger et al. 2014; Doganova and Laurent 2016). Even if renew-
able energy policy is a small part of the internal electricity market project,
and FITs are only one element of renewable energy policy, we argue that a
close look at FITs can shed light on these issues in several ways.
First, it leads us to look into the Commission’s perspective on liberalisa-
tion and harmonisation: the liberalisation and harmonisation agendas run
through the Commission’s discourses on renewable energy policy. The
ideal model of a smoothly running internal market for electricity largely
shapes the Commission’s conceptions and assessments of RES-E policy
intervention, so in this case we will watch it deploy in relations to a specific
issue. Second, it gives us insight into the actual unfolding of the liberalisa-
tion and harmonisation projects, and into their imperfect realisation. In
our study, we see how actual RES-E policy development in member states
sometimes clashed with the Commission’s ideals and ambitions, and how
such tensions have been resolved.
We look at how these two enactments of European renewable energy
policy—at the EU level and Member States—play out in the design and
management of one particular type of instruments and in the debates it
raised. FITs are a particularly intriguing object in this respect. The
Commission has for a long time considered them to go against the inter-
nal market project; but for a few years, between 2005 and 2011, it dubbed
them as “generally the most efficient and effective support schemes for
promoting renewable energy” (Commission of the European Communities
2008). We thus investigate to what extent different designs and concep-
tion of FITs have contributed to the integration of both RES-E and diverse
national energy policy agendas (partly informed by economic or industrial
interests) within the projected EU internal electricity market, as well as
within the EU’s overarching energy-climate and innovation agendas.
4 B. COINTE AND A. NADAÏ
of which is determined by the regulator; and a fixed period over which the
said tariff is guaranteed, usually reflecting the lifetime of an installation
(Jacobs 2010, p. 287; Couture and Gagnon 2010). They usually involve
mechanisms to compensate for the extra costs induced for utilities, often
in the form of a levy on electricity use.
FITs thus rely on a simple principle: by guaranteeing the financial
viability of RES-E generation and organising its integration in the elec-
tricity system, they provide an “almost risk-free contract” from the per-
spective of renewable energy producers (Mitchell et al. 2011, p. 50).
They are meant to be transitory: they should drive and accelerate the
uptake of still expensive energy technologies, up to the point that these
technologies reach market competitiveness and no longer need support.
They are usually classified as “price-based” instruments, in that they set
a required price for renewable electricity, but not a desired quantity—as
opposed to quota systems such as the US Renewable Portfolio Standards
or the Tradable Green Certificates adopted in some European countries
in the 2000s. The actual development of FITs, however, paints a more
complex picture.
In practice, FITs come in multiple forms, and in diverse degrees of
sophistication. As the IPCC Special Report on Renewable Energy stated,
“FITs can be very simple […] or they can be quite complex” (Mitchell et al.
2011, p. 52). Indeed, as each of their features is negotiated politically—
from the definition of what qualifies as electricity from renewable energy
sources to the level of remuneration and the modalities for compensating
utilities, including contract duration and grid-connection procedures—
FITs are shaped by political priorities, country-specific balance of powers in
energy policy, and a range of context-dependent considerations.
FITs find their origin in the late 1970s. In the US, the 1978 Public
Utility Regulatory Policies Act (PURPA) introduced an obligation for
electric utilities to purchase the electricity generated by small-scale pro-
ducers, at prices reflecting avoided costs for utilities (Loiter and Norberg-
Bohm 1999; Lesser and Su 2008). In Europe, similar mechanisms first
appeared in Denmark and Germany in 1979, in the form of voluntary
agreements between electric utilities and wind power producers, chiefly to
integrate growing wind power capacities into the electricity system. They
were introduced into German and Danish legislations in the early 1990s
(1991 in Germany, 1992 in Denmark), with Spain following a few years
later. However, they only became a widespread instrument for the support
of renewable electricity in the 2000s.
6 B. COINTE AND A. NADAÏ
(continued)
10 B. COINTE AND A. NADAÏ
1978–1995 5 Ø 4
1996–2000 8 Ø 10
2001–2008 10 3 46
2009–2015 11 7 26
Total 34 10 86
12 B. COINTE AND A. NADAÏ
FITs as Agencements
By incorporating both policy documents and academic texts in our analysis,
we approach the conception and evolutions of FITs as the joint p roduct of
political negotiations and policy implementation, on the one hand, and of
economic reasoning and expertise, on the other. This view reflects a specific
articulation of markets, expertise, and policy-making that is part of the lib-
eralisation agenda, as outlined by Reverdy (2014, p. 56): the liberalisation
of the energy sectors entails a recourse to economic expertise as a source of
information and legitimacy for market regulation, embodied by indepen-
dent regulatory authorities. It also resonates with the way the performativ-
ity tradition in economic sociology conceives of market devices (Callon
et al. 2007; MacKenzie et al. 2008). Indeed, crucial to this tradition is the
commitment not to consider theories about the economy as separated
AGENCING FEED-IN TARIFFS IN THE EUROPEAN UNION 13
In line with this recent literature, this book seeks to unpack the diversity
of ways in which so-called “market-based” instruments can embody and
enact diverse conceptions of economic engagement and diverse political
orderings (e.g. who is responsible and what is relevant for regulating what,
for designing instruments, for setting prices…). To this end, we will follow
evolutions in the relative importance of competition and investment in the
frames of references used to evaluate renewable energy policy instruments,
especially FITs. We will also look into evolutions in the references mobilised
to set feed-in tariffs. Reverdy has shown the importance of politics, regula-
tory frames, and to an extent bricolage in the establishment of energy prices
following the liberalisation of the energy sector (Reverdy 2014). Similarly,
we are interested in the debates around and the changes in the definition of
a fair price for renewable electricity, as it relates to conceptions of what can
constitute a “market basis” for policy and to shifts in political priorities, for
example from market integration to climate change mitigation.
Notes
1. EU Parliamentary documents were not analysed in as much detail because
our objective was to trace the official and general EU discourse on renew-
able energy policy and feed-in tariffs that was constituted as an outcome of
EU processes, rather than to analyse the political processes in which it was
discussed, negotiated, and shaped.
2. Empirical work was carried out as part of a PhD that was defended in 2014,
which is why the bulk of the corpus dates back from before 2013.
References
Ansaloni, Matthieu, Pascale Trompette, and Pierre-Paul Zalio. 2017. Le marché
comme forme de régulation politique. Revue Française de Sociologie 58 (3):
359–374.
Barry, Andrew. 1993. The European Community and European government:
Harmonization, mobility and space. Economy and Society 22 (3): 314–326.
———. 2001. Political machines: Governing a technological society. London:
Athlone Press.
Breslau, Daniel. 2013. Designing a market-like entity: Economics in the politics of
market formation. Social Studies of Science 43: 829–851. https://doi.
org/10.1177/0306312713493962.
Çaliskan, Koray, and Michel Callon. 2009. Economization, part 1: Shifting atten-
tion from the economy towards processes of economization. Economy and
Society 38: 369–398. https://doi.org/10.1080/03085140903020580.
AGENCING FEED-IN TARIFFS IN THE EUROPEAN UNION 19
Abstract This chapter focuses on the period between the late 1970s and
the adoption of the Directive on the internal electricity market in 1996.
This period saw the appearance of feed-in tariffs as well as the emergence
of a European Union approach to renewable energy policy, though with-
out direct connections between the two. Cointe and Nadaï retrace the
origins of FITs, starting from their introduction in Germany and Denmark
as a tool to integrate wind power into existing electricity systems and
showing how they turned into renewable energy support instruments.
They then analyse early European renewable energy policy, stressing that
it was guided by the ideal of a liberalised market as a device for economic
and social optimisation.
The first mechanisms akin to feed-in tariffs (FITs) appeared in the late
1970s. The first countries to introduce them in their legislation, Germany,
Denmark, and Spain, did so in the early 1990s. During the 1980s and
1990s, the European Union (EU) started to engage in energy policy and,
as part of this move, to consider renewable energy. This chapter is inter-
ested in the early stages of both FITs and European renewable energy
policy. It focuses on a period stretching from the late 1970s to 1996, when
the Directive on the internal electricity market was adopted, asserting the
EU’s role in ordering European electricity systems. To investigate these
two distinct but simultaneous processes, we start from two questions:
of mechanisms for feeding renewable electricity into the grid and remu-
nerating it, which is how “proto-FITs” first appeared. Initially, these
mechanisms were designed to allow small-scale electricity production and
RES-E to blend into existing markets: they were agencements that served
as “adapters” to include a new type of electricity product to be exchanged.
This is clear from the reference used to set prices for this new kind of elec-
tricity. Tariffs were indeed first defined in relation to the avoided costs of
fossil fuels, that is, the costs that would have been paid to generate the
same amount of electricity from fossil fuels, in an attempt to make RES-E
equivalent to conventional electricity. In later arrangements, they were
calculated on the basis of average sales price for electricity. Gradually, these
“proto-FITs” agencements became entangled in ambitions to promote
renewable energy, and turned into agencements to this end.
The first “FIT-like” mechanisms originate in the US, where they
appeared in the late 1970s in the form of avoided costs payment schemes.
The 1978 Public Utility Regulatory Policies Act (PURPA) required that
electric utilities purchase electricity produced by so-called qualifying facili-
ties (i.e. specific small-scale electricity producers) at prices reflecting their
long-term avoided costs (Lesser and Su 2008, p. 982; Loiter and Norberg-
Bohm 1999). In this arrangement, state Public Utility Commissions were
in charge of calculating avoided costs, and they used various methodolo-
gies for that (Loiter and Norberg-Bohm 1999). Some relied on forecast
models of future fossil fuel and electricity prices, which led to over-
estimations of avoided costs (Lesser and Su 2008).
In Europe, similar mechanisms based on the principle of avoided costs
appeared around the same time. The main ones were introduced in
Denmark and Germany to deal with the development of wind power pro-
duction and the regulation of its integration to the grid.1 In both of these
countries, they started as regularly renegotiated agreements between elec-
tric utilities and wind power producers. Legislation incorporating FIT-like
mechanisms into government regulation did not appear until the early
1990s.
objectives for 1995 and convergence of the policies of the Member States”
(European Council 1986). Following this, it issued a Recommendation on
“developing the exploitation of renewable energy sources” on 9 June 1988
(European Council 1988).
In the latter, the Council confirmed its 1986 “objective of continuing
the development of new and renewable energy sources and of increasing
their contribution to the total energy balance”. It then stressed that the
“development of renewable energy source requires appropriate legislative,
administrative and financial measures”, and recommended Member States
“to introduce, where appropriate and necessary, legislation and/or admin-
istrative procedures which would help to overcome, on a non-discriminatory
basis, obstacles to the exploitation of renewable energy sources” (European
Council 1988). The Council further confirmed its consideration of the
issue of the development of renewable energy in its Resolution of 13
December 1993 concerning the promotion of renewable energy in the
Community.
European institutions also kept track of renewable energy policies in
Member States, and in particular of their compatibility with the rules of
the Common Market. The StrEG was thus notified to the European
Commission for approval under State aid provisions. The Commission
decided not to raise objections “because of its insignificant effects and
because it was in line with the policy objectives of the Community”
(Lauber and Mez 2004, p. 602), but planned to reconsider the matter two
years later. By the time VDEW lodged its 1996 complaint, the Commission
started to worry that feed-in tariffs might provide “excessive” minimum
prices for wind power, given technological evolutions since 1990 (Lauber
and Mez 2004). In a letter to the German Government following VDEW’s
complaint, the Commission thus “expressed doubts about the continued
compatibility of the Stromeinspeinsungsgesetz with the Community State
aid rules” (European Court of Justice 2000, §19).
The greatest source of concern was the calculation of the minimum
purchase price for electricity generated from wind (European Court of
Justice 2000, §19). The Commission was particularly worried that a
minimum purchase price markedly higher than the cost of wind power
generation might distort competition between Member States, and
thereby prove incompatible with the Common Market. It proposed
alternative methods for fixing the level of the minimum purchase price
that would restore the compatibility of the StrEG with State aid rules:
FITS AND EUROPEAN RENEWABLE ENERGY POLICY BEFORE 1996: A TALE… 31
“reducing the minimum purchase price for wind electricity, limiting the
support mechanisms in time and/or according to electricity produc-
tion, or calculating the purchase price on the basis of avoided costs”
(European Court of Justice 2000, §21). The German government did
not follow these suggestions: in Germany, FITs had evolved from
agencements making RES-E equivalent to conventional electricity to
agencements for the promotion of RES-E as a distinct type of electricity.
The development of renewable energy had become an objective by
itself, and paying a higher tariff for it was justified insofar as extant mar-
ket prices did not take into account the different qualities of RES-E and
conventional electricity, as reflected by the reference to external costs
that became a keystone of the conception of renewable energy support
in the 1990s.
fact that they rely on a demand and/or a supply that are not stabilised
yet—for instance, Sandén and Azar (2005, p. 165) state that “govern-
ment supported market formation has proved to be critical when a private
demand for a product has yet to be formed […] or when costs need to be
brought down to be competitive on commercial markets”.
Conclusion
Before 1996, renewable energy policy was still in its early stages, both in
Member States and at the European level. All the same, the period stretch-
ing from the 1980s to the early 1990s was that of the emergence of
agencements for the inclusion of RES-E within mainstream electricity
grids, markets, and policy. Pioneering countries like Germany and
Denmark instituted feed-in mechanisms that have since then drawn the
contours of FITs as we know them. These first made wind power, and by
extension RES-E, equivalent to conventional electricity, and later made it
possible to promote it because of its distinct qualities. Meanwhile, the
European Community worked towards the liberalisation of the energy
sector, and began to consider renewable energy from this standpoint. It
sketched the bases of a European approach to renewable energy policy.
These bases consisted of general principles rather than of a detailed, con-
crete perspective on policy choices. They largely framed renewable energy
policy as a tool for liberalisation and for the achievement of the internal
electricity market: the promotion of RES-E was conceived in its capacity
to correct market failures.
36 B. COINTE AND A. NADAÏ
Notes
1. “Avoided costs” based mechanisms were also used for co-generation for
instance in Italy and France (Interview, energy economist 2013).
2. In 1989, the framework for electricity tariffs was modified so as to allow for
compensation of RES-E generators above avoided costs (Lauber and Mez
2004, p. 601).
References
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———. 1995a. For a European Union energy policy. Green Paper. COM(94) 659
final. Brussels, 11 January 1995.
———. 1995b. An energy policy for the European Union. White Paper. COM(95)
682 final. Brussels, 13 December1995.
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