Explanatory Memorandum to COM(2023)763 - Amendment of Regulation (EU) 2022/2577 laying down a framework to accelerate the deployment of renewable energy - Main contents
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This page contains a limited version of this dossier in the EU Monitor.
| dossier | COM(2023)763 - Amendment of Regulation (EU) 2022/2577 laying down a framework to accelerate the deployment of renewable energy. |
|---|---|
| source | COM(2023)763 |
| date | 28-11-2023 |
1. CONTEXT OF THE PROPOSAL
• Reasons for and objectives of the proposal
In 2022, the international tensions following Russia’s invasion of Ukraine, the overall geopolitical context and the very high energy prices exacerbated the need to accelerate the deployment of renewable energy in the Union with the objective to phase out EU’s dependence on Russian fossil fuels.
In particular in the second half of 2022, the situation of the energy crisis had worsened, calling for urgent action. Record spikes of the natural gas price in summer, further disruption of the supplies through the North Stream I pipeline, increased inflation and electricity price fluctuations caused economic and social hardship, placing a heavy burden on citizens and on the economy. Rising energy costs lead to reduced purchasing power for citizens and loss of competitiveness for companies. The shortage in gas and power supply and the relatively inelastic energy demand led to significant increases in prices and volatility of gas and electricity prices in the EU.
Faster deployment of renewables was considered necessary to strengthen the Union’s security of supply and lower energy prices as it immediately and structurally reduces demand for fossil fuels in the power, heating and cooling, industry and transport sectors. In addition, as a result of their low operational costs, renewables can positively impact energy prices across the EU.
In this context, on 22 December 2022 the Council adopted Regulation (EU) 2022/2577 laying down a framework to accelerate the deployment of renewable energy. This Regulation aimed to shorten and accelerate the permit-granting procedures for renewable energy projects as well as for grid and infrastructure projects that are needed to integrate renewable energy into the electricity system. If not prolonged, the Regulation will cease to apply on 30 June 2024. This proposal seeks to prolong the application of some of the provisions of Regulation (EU) 2022/2578 in view of the persisting risks for the Union’s security of energy supply and high energy prices in the Union as well as the important role of quicker renewables deployment in addressing them.
1.1.1. Reasons for prolonging the Regulation’s provisions in the current situation
At the date of adoption of this proposal, significant risks associated with the volatility of gas and electricity prices and the security of supply in the Union persist. They stem from the difficult situation in the energy markets, exacerbated by tense geopolitical environment.
Due to the significant decrease in Russian pipeline gas imports over the past year, availability of gas supplies to the Union is considerably reduced compared to the pre-crisis situation. With the current level of gas imports, the Union is expected to receive approximately 20 bcm of Russian pipeline imports in 2023, approximately 110 bcm less than in 2021.
Global gas markets remain very tight and are expected to remain as such for some time. As noted by the IEA,1 global LNG supply grew only modestly in 2022 (4%) and in 2023 (3%) because of “limited liquefaction capacity additions, outages at major export facilities and declining feedgas supply at LNG plants fed by ageing fields”. Significant new LNG liquefaction capacity globally (especially in the US and Qatar) is set to come online as of 2025 but “market balances remain precarious in the immediate future”.2 This situation is having negative consequences on gas prices which, despite being much lower than the peak experienced in summer 2022 (when prices spiked above 300 €/MWh) ) remain more than twice as high as pre-crisis levels (ranging between EUR 40/MWh and EUR 50/MWh in early Autumn 2023) with inevitable repercussions on the EU citizens’ purchasing power and the competitiveness of European businesses. Market volatility is also a consequence of the market tightness and represents an additional risk for the EU economy. Summer and autumn 2023 saw a number of episodes of significant volatility which show that gas markets are still fragile and may overreact to any unexpected and sudden shock to supply and demand, as was the case following the strike in Australian LNG facilities, the Middle East crisis and the disruption of the Balticconnector. Under these conditions, the fear of scarcity may trigger large reactions with serious repercussions on prices across the EU.
These severe difficulties are exacerbated by a number of additional risks which, if they materialised, would considerably worsen the situation. These risks include: a rebound in Asian LNG demand that reduces the availability of gas on the global gas market,34 extreme weather conditions potentially affecting hydropower storage or nuclear production which would require higher recourse to gas-fired power generation, and further possible gas supply disruptions, including a complete halt of gas imports from Russia, or a disruption of existing critical gas infrastructure. Moreover, armed conflicts affect several regions relevant for EU energy supply, such as Ukraine, Azerbaijan, or Middle East.
Recent examples illustrate the likelihood and relevance of the risks related to the disruption of energy infrastructure. In September 2022, the NordStream 1 pipeline was damaged by acts of sabotage to such a degree that it currently cannot transport any gas and will not be able to do so in the foreseeable future. In October 2023, the Balticconnector, an important pipeline connecting Finland to Estonia, was disrupted. Following the incident, the Finnish authorities declared an alert level which indicates a significant deterioration of the gas supply situation.5
It should be also noted that the significant reduction in demand for natural gas (-18% between August 2022 and August 2023) is contributing to preserve the gas balance in the EU. This reduction is a result of economic factors (e.g. high prices) and administrative measures adopted by Member States pursuant to Regulation (EU) 2022/1369 and its prolongation Regulation (EU) 2023/706 on coordinated gas demand reduction. A possible increase in demand, due to a rebound in the gas use in the residential, commercial and industrial sectors or in case the administrative measures aimed at reducing demand were not prolonged further, represents an additional risk that could undermine EU’s security of gas supply.
In three subsequent reports of December 2022, February and July 2023, the International Energy Agency (IEA) has consistently highlighted the risks for the EU security of gas supply and warned against complacency in the light of the improvement of the situation compared to the peak of the crisis in summer 2022. According to the report of February 2023, “global gas supply is set to remain tight in 2023 and the global balance is subject to an unusually wide range of uncertainties and exogenous risk factors. This includes the possibility of complete cessation of Russian piped gas deliveries to the European Union, as well as a recovery of China’s LNG imports in line with the country’s long-term LNG contracts and a potential lower availability of LNG supply”. The IEA warned that “the improved outlook should not be a distraction from the measures necessary (…) to mitigate the European Union’s exposure to the exogenous risks”.6 It developed stress scenarios with a halt to Russian gas supplies, LNG supplies remaining tight and weather-related demand increases, which could result in a potential supply-demand gap of 40 bcm in the EU. In its report of July 2023, the IEA highlighted that “risks and uncertainties remain ahead of the 2023/24 Northern Hemisphere winter” and “full storage sites are no guarantee against winter volatility and the risk of renewed market tensions”.7
In addition, the European Network of Transmission System Operators (ENTSOG) published its yearly Winter Supply Outlook with a summer overview, in line with Article 8 of Regulation (EC) 715/2009. ENTSOG concluded that although the general security of supply situation in the EU has significantly improved, additional measures may be needed if the risk of a full Russian supply disruption is realised. In addition, careful management of the storages throughout the winter of 2023-2024 is needed, as a 46% filling level is likely needed at the beginning of the injection season to achieve the 90% storage target set out by Regulation (EU) 2022/1032,
The Union’s response under REPowerEU and following initiatives, including the measures set out in Regulation (EU) 2022/2577 as regards the accelerated deployment of renewables, contributed to improve the situation as concerns the security of supply and the energy prices. In view of the interconnectivity of the power systems between Member States, the increased share of renewable energy production in one Member State can help easing a shortage in another Member State, thus fostering solidarity in the face of this crisis. An accelerated deployment of renewable energy capacity has played and will continue to play an essential role in the Union strategy to address the energy crisis and has been instrumental in increasing security of supply and in protecting consumers from price volatility by reducing the Union’s overall gas demand. The International Energy Agency estimated that average wholesale electricity prices would have been 8% higher in all European markets in 2022 without the additional installed capacity.8 While most of the effects of the Regulation will be visible in the months to come, initial available data on the production, deployment and permitting of renewable energy and related infrastructure projects for the period after the entry into force of the Regulation suggests acceleration of such projects, at least in some Member States. According to Eurostat, in the first half of 2023, renewable energy production in the EU was record high, which is key to continue replacing additional volumes of gas.9 The Commission’s report also highlights positive developments in terms of increase in renewable energy deployment in the months following the entry into force of Regulation 2022/2577. According to initial industry data, the EU has installed in three quarters of 2023 more solar photovoltaic capacities than in the whole 2022. Wind capacity also significantly increased in several Member States. Available data also signals that several Member States have experienced double-digit increases in the volume of permits issued for renewable energy projects since the entry into force of the Regulation. Additionally, at least in one Member State, grid projects important for increased penetration of renewables and amounting to over 2000 km in total are also benefitting from accelerated permitting.
Should Regulation (EU) 2022/2577 cease to apply, while the significant risks persist, this would undermine the achieved improvement as well as the EU’s resilience against potential developments as a complete halt of Russian imports.
According to Article 9 of Regulation (EU) 2022/2577, the Commission shall review that Regulation in view of the development of the security of supply and energy prices and the need to further accelerate the deployment of renewable energy. On the basis of such review, the Commission may propose to prolong the validity of this Regulation. The Commission carried out such a review and, on 28 November 2023, adopted the Report presenting its results10. The Report concluded that the application of Regulation (EU) 2022/2577 had a positive impact on the acceleration of the deployment of renewable energy in the Union and consequently helped mitigating the effects of the energy crisis. Taking into account the above-mentioned factors and the fact that some of the provisions of Regulation (EU) 2022/2577 are very similar to those in Directive (EU) 2023/2413 amending the Renewable Energy Directive (EU) 2018/2001, the Report also concluded that the conditions for a prolongation of the Regulation are met.
Regarding the scope of the prolongation, the Report takes into account the relationship between Regulation (EU) 2022/2577, which is a temporary emergency measure, and Directive (EU) 2023/2413 amending Directive (EU) 2018/2001, which is a permanent ordinary legislative act. In particular, there is an assessment to delimit which measures from Regulation (EU) 2022/2577 were not reflected in the permanent legal framework on renewable energy established in Directive (EU) 2018/2001, so that the prolongation of some of the provisions of the Regulation does not duplicate the provisions of the Directive.
In the light of the conclusions of the Report, considering the persisting severe difficulties and risks for the EU’s security of gas supply and for the volatility of energy prices as well as the positive effects that accelerated deployment of renewable energy is expected to have on addressing them, it is necessary and urgent to prolong those parts of Regulation (EU) 2022/2577 which are different than those incorporated in Directive (EU) 2023/2413 and which have been proved effective or have the potential to significantly accelerate the deployment of renewable energy. Hence, this Proposal seeks to partially prolong the application of Articles 1, 2(1), 3(2), 5(1) and 6 and 8 of Regulation (EU) 2022/2577 laying down a framework to accelerate the deployment of renewable energy. In addition, in view of the challenges raised by some Member States regarding the practical application of Article 3, and since these challenges pose a major obstacle to accelerating the deployment of renewables, as mentioned in the Report, this proposal adds a new provision to streamline the assessment on whether a project can be granted environmental derogations.
• Consistency with existing policy provisions in the policy area
The proposed instrument sets out temporary, proportionate and extraordinary measures. It complements existing relevant EU initiatives and legislation which ensure that citizens can benefit from accelerated deployment of renewable energy and replacement of the demand for fossil fuels with clean energy. The proposal is complementary to the initiatives already taken by the Commission to respond to the current crisis in energy markets. It is consistent with the “REPowerEU” Plan of 18 May 2022 which puts the massive speed-up and scale-up in renewable energy in power generation, industry, buildings and transport at the core of the strategy to accelerate the phasing out of Russian fossil fuels.
Furthermore, the proposal complements Directive (EU) 2023/2413 amending the Renewable Energy Directive (EU) 2018/2001 that was adopted on 9 October 2023 to provide for amended rules for renewables on a permanent basis. This Directive entered into force on 20 November 2023. It includes extensive provisions to streamline permitting procedures applicable to renewable energy projects in a comprehensive manner through spatial planning, simplification and shortening of procedures. All permitting rules of Directive (EU) 2023/2413, except those related to “renewables acceleration” areas, have to be transposed by 1 July 2024, immediately after the expiry of the validity of the Council Regulation. Directive (EU) 2023/2413 includes provisions covering the same subject matters as Regulation 2022/2577. However, for some of the provisions there is a substantive difference compared to the text of Regulation 2022/2577. This includes in particular Article 3 of the Council Regulation, which regulates the overriding public interest presumption but, unlike Directive (EU) 2023/2413, contains a second subparagraph which requires Member States to give priority to the projects that are recognised as being of overriding public interest whenever a balancing of legal interests is required in the individual case. Also, as regards the permit-granting process for the repowering of renewable energy plants, Article 5 of the Council Regulation contains a short six-months deadline for all permits applicable to the repowering of renewable energy projects, while Directive (EU) 2023/2413 contains a deadline of one year for the repowering of projects outside renewable acceleration areas and a six month deadline for projects located in renewable acceleration areas. Lastly, Article 6 of the Regulation provides for different conditions to make use of some exemptions from environmental legislation than the ones established in Directive (EU) 2023/2413.
Regulation (EU) 2022/2577 and the current proposal are consistent with the European Green Deal objectives, in particular the development of a power sector based largely on renewable sources, their integration into the energy system, and the faster roll-out of renewable energy projects as a tool to cut down the EU’s greenhouse gas emissions in view of the long-term strategy of achieving carbon neutrality by 2050.
• Consistency with other Union policies
Regulation (EU) 2022/2577 and this proposal are consistent with a broader set of initiatives to enhance the Union’s energy resilience and to mitigate the impact of high energy prices and potential disruptions of the energy supplies. The proposal does not compromise the functioning of the internal market and does not affect the measures for addressing interrupted energy supplies. The proposal is in line with environmental objectives, as accelerated deployment of renewable energy is key to mitigate the impacts of both climate change and pollution, which are driving biodiversity loss and threaten public health and safety. The proposal is also consistent with the objectives of the European Climate Law (Regulation (EU) 2021/1119).
The proposal is line with the recommendations made to Member States in the context of the 2022 European Semester framework to streamline permitting of renewable energy projects. It is also expected to accelerate investments in renewable energy under the Recovery and Resilience Facility, including REPowerEU chapters to be included under national Recovery and Resilience Plans.
2. LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY
• Legal basis
The legal basis for this instrument is Article 122(1) of the Treaty on the Functioning of the European Union (‘TFEU’). The conditions for the application of this provision require that the measure is “appropriate to the economic situation”, which is in particular the case if “severe difficulties in the supply of certain products” exist. The measures must also be taken in a “spirit of solidarity”, and, according to the case law of the Court of Justice of the European Union, they must be temporary and proportionate.
The current and on-going shortage of gas supplies constitutes a severe difficulty in the supply of an energy product pursuant to Article 122 TFEU. As explained above in section 1 (“Reasons for and objectives of the proposal”), severe difficulties and risks for the EU security of gas supply and volatility of energy prices persist.
The acceleration in the deployment of renewable capacity played an important role in the EU strategy to fight the energy crisis and has been instrumental in increasing security of supply and keeping energy prices in check. The main reason here was the replacement of natural gas by renewables, especially in the power sector, which then impacted overall gas demand.
Should certain measures set out in Regulation (EU) 2022/2577, which have the greatest potential for renewables acceleration and are different than those incorporated in Directive (EU) 2023/2413, cease to apply, a key tool to accelerate the deployment of renewable capacity would no longer be available to the Member States, in a time where the energy supply situation in the Union is still difficult.
Specific provisions of the Regulation are therefore necessary beyond June 2024, in addition to to address the severe difficulties and the potential risks for prices that could arise because of the current fragile balance in the EU gas system. The accelerated rollout of renewables has proven its ability to reduce risks for the Union’s security of supply, especially for gas and electricity, and has contributed to reduce energy prices for EU citizens and businesses. Member States should be able to continue to apply, for a limited period of time beyond June 2024, some of the provisions in Regulation (EU) 2022/2577 in order to facilitate the deployment of renewable energy projects in a spirit of solidarity, on the basis that in an integrated energy market, any increase in renewable energy deployment in a Member State can also benefit other Member States.
The emergency procedure foreseen in Article 122(1) TFEU applies without prejudice to other procedures foreseen under the Treaties. The reference to other procedures provided for in the treaties underscores the exceptional and temporary nature of the measures that may be adopted under Article 122(1) TFEU. The urgent and still unstable situation in the energy market and the urgent need to immediately accelerate the deployment of renewable energy sources as an instrument to mitigate the existing risks to the security of energy supply and volatility of energy prices call for such emergency and temporary measures. Moreover, the upcoming end of the mandate of the European Parliament and the time usually required to adopt legislation under the ordinary legislative procedure resulted in such procedure not being an appropriate option to have the temporary measures in place in time, also bearing mind the need for predictability and legal certainty for Member States and project developers regarding the applicable legal framework. It is therefore justified to base the proposed instrument on Article 122(1) TFEU.
• Subsidiarity (for non-exclusive competence)
This proposal is fully in line with the subsidiarity principle.
A fast and large-scale deployment of renewable energy cannot be achieved by Member States alone. Taking into account the different energy policies among Member States, action at EU level, rather than national or local action alone, is more likely to phase out EU’s dependence on Russian fossil fuels and reduce energy prices, as well as achieve the EU climate and energy 2030 targets, the EU long-term objectives of climate neutrality and zero pollution.
A coordinated European approach to shortening and simplifying permit-granting procedures and administrative processes is needed to speed up the necessary deployment of renewable energies. Considering the different procedures among Member States, and in view of the urgency to accelerate the deployment of renewable energy across all Member States, action at EU level is more likely to achieve the required objectives than national or local action alone.
Finally, the proposed Regulation introduces targeted amendments to existing pieces of Union legislation. This intervention, which will further streamline certain permit-granting procedures, justifies the need for action at Union level.
• Proportionality
This proposal complies with the proportionality principle. The measure is proportional to the dimension and nature of the problems defined and the achievement of the set objectives.
In view of the unprecedented geopolitical situation created by Russia’s invasion of Ukraine, the continuous highly volatile energy prices and the need to ensure Europe’s energy security of supply for the upcoming winter season and throughout next year, there is a clear need for coordinated and urgent action.
The provisions of this proposal seek to ensuring shorter and faster procedures to authorise renewable energy projects by establishing short deadlines and simplifying the assessment that those projects must undergo under Union legislation, while keeping a proportionate level of environmental safeguards related to species protection.
• Choice of the instrument
Taking into account the dimension of the energy crisis and the scale of its social, economic and financial impact, the provisions that the current proposal seeks to prolong are contained in a regulation, which is of general scope and directly and immediately applicable. The prolongation of the period of application of these provisions should, therefore, also be done through the adoption of a regulation.
3. RESULTS OF EX-POST EVALUATIONS, STAKEHOLDER CONSULTATIONS AND IMPACT ASSESSMENTS
• Stakeholder consultations
Due to the urgency to prepare the proposal for prolongation of Regulation (EU) 2022/2576 , a stakeholder consultation could not be carried out.
• Impact assessment
Given the temporary and urgent nature of the measures that respond to an emergency situation, an impact assessment could not be carried out.
• Fundamental rights
No negative impact has been identified on fundamental rights. The overarching aim of this proposal is to increase the use of renewable energy, which is in line with Article 37 of the Charter of Fundamental Rights of the European Union, under which a high level of environmental protection and the improvement of the quality of the environment must be integrated into the policies of the Union and ensured in accordance with the principle of sustainable development.
4. BUDGETARY IMPLICATIONS
This proposal does not require additional resources from the EU budget.
5. OTHER ELEMENTS
• Detailed explanation of the specific provisions of the proposal
The changes proposed are targeted and limited in scope to prolong by 12 months the period of application of Articles 1, 2(1), first sentence of Article 3(2), 5(1), and 6 and 8 relating to the permit-granting process.
Regarding Article 3(2), its second sentence refers to species protection which is linked to Article 3(1). The proposal does not prolong Article 3(1) since the same presumption is contained in Directive (EU) 2023/2413. For this reason, it is proposed to prolong the first sentence of Article 3(2) only.
There are also amendments to Articles 1, 5 and 8. Regarding Article 5, the amendment seeks to that as of 1 July 2024, the 6-month time limit for the permit-granting process for the repowering of projects will only apply to renewable energy projects located in a dedicated renewable area as referred to in Article 6 of the Regulation. Regarding Articles 1 and 8, the amendment seeks to target the scope of those provisions to Article 5(1).
A new article 3a is introduced to specify that the assessment of alternatives in the context of the relevant environmental assessments should take into account those alternatives that ensure the achievement of the same objectives as the project in question in terms of deployment of renewable energy capacity using the same renewable technology, same or similar timeframe and at no significantly higher cost. Regarding the timing of the proposed changes, the articles of Regulation (EU) 2022/2577 will remain in force in their current form until end of June 2024. Articles 1, 2(1), 3(2) first sentence, 5(1), 6 and 8 will continue to apply for an additional 12 months, until the end of June 2025. In the case of Articles 3(2) of 5(1), it will apply in a revised form during this additional period. The new Article 3a applies from the entry into force of this Regulation until 30 June 2025.