HomeIndustry SectorsFinance and PolicyEuropean economic downturn a setback for renewables in that region

European economic downturn a setback for renewables in that region

28 May 2012 – Growth in the European renewable energy sector brought on by government policies such as capital grants, subsidies, tax credits and energy production payments may be damaged by economic instability in the region, according to a report by GlobalData. The report says that while feed-in tariffs (FITs) have emerged in Europe as an effective way to promote the renewable industry, with wind and solar technologies particularly benefitting from this support, there are concerns that the level of subsidisation available on renewable power generation cannot be supported by the current financial environment.

FITs have been a major driver for renewable technology in many European countries. The recent introduction of attractive FITs for solar photovoltaics (PV) resulted in considerable growth for installations in many European countries, particularly in Italy, France and the UK. However, concerns relating to the over-subsidisation of renewable technologies, especially within the relatively stabilised solar PV market, have prompted the German government to decrease its FITs, and announce a cut for all rooftop solar panel systems and those constructed on disused land. The UK, Spain and France have all made similar changes to policy.
The EU’s directive on renewable energy has set a target for member states to increase their collective renewable energy share to 20% by 2020, and to achieve a 10% renewable energy share in the transport sector. Under the binding contract signed by every nation in the 27 member EU, the share of renewable energy is to be increased and will be calculated on the basis of the gross domestic product (GDP) of the region. Member countries are allowed to decide on their own mix of renewables to achieve the overall target.

The directive 2003/30/EC issued by the European Commission also sets a goal of mixing biofuels in all petrol and diesel used for transport in the European Union, to achieve the EU’s directive on the transport sector. Several countries have determined individual mandates for biofuels, ensuring the steady growth of biofuels in Europe. For example, the German government has set a quota of blending 6.25% biofuel in the future, while France has mandated the use of 15% biofuels by 2015.

However, decrease in demand may be sending mixed messages to Europe’s green industry and the public alike, as emerging markets tempt renewable industry players with huge potential for development. Reductions in FITS across Europe are being met by reductions in costs, negating direct financial impact, but caps on renewable installations in European countries such as Spain, and more impressive policies available elsewhere, will likely have a negative effect on new installations in the European renewables sector. This is likely to shift custom elsewhere, giving a knock to all those across the entire European supply chain.