EU Commission looks at 28-nation bloc’s energy costs and subsidies

17 October 2014

The EU Commission on Monday released a report detailing a dataset on the level of energy costs and subsidies found across the 28 member state bloc.

The EU’s executive branch said that it had commissioned the external study to plug an existing information gap in this area and help member states better understand the landscape of policy interventions in energy markets.

“We are now better informed about the size of public subsidies in recent years and the costs for power generation across all technologies,” EU energy commissioner Günther H. Oettinger said on Monday.

The findings reveal the level of various public interventions in different power generation technologies, with total energy support in EU nations in 2012 weighing in between €120-140 billion (US$150-180 billion).

Renewable energy sources took the lion’s share of this sum. Solar and onshore wind technologies came out top receiving an EU-wide total of €14.7 billion and €10.1 billion respectively. Biomass drew €8.3 billion and hydropower €5.2 billion.

A Commission press release said these results were unsurprising, “given efforts to expand the share of renewable energy in the EU’s overall energy consumption.”

The bloc currently has in place a target of boosting the share of energy consumption from renewable sources by 20 percent as part of its climate and energy targets for the end of the decade. EU heads of state are expected to broker a deal on new 2030 targets next week that could see a renewables goal of 27 percent set.

Monday’s report also revealed that sizeable volumes of support were directed at conventional energy sectors. Subsidies to coal in 2012 across the bloc ran to the tune of €10.1 billion followed with nuclear and natural gas at €7 and €5.2 billion respectively.

These figures do not, however, take into account indirect support granted in the form of free carbon permit allowances used in the EU’s Emissions Trade System (ETS). Fiscal support for energy consumers also does not inform the data.  

Pioneering data

According to Commission officials, while the functioning of energy markets and the impact of public support has been the subject of hot debate for some years, no consolidated dataset of EU energy subsidies existed prior to the report.

Commission spokesperson Marlene Holzner told journalists on Monday that collecting the data had been a daunting task due to the lack of availability of figures in this area at the national level.

The report also holds potential to lay to rest some of the speculation around which energy sectors attract the most subsidies in the EU.

In addition, the study includes findings on the cost of competitiveness of different power generation technologies, with the estimated ranges reflecting cost of new power generation without public intervention. One megawatt-hour (MWh) of electricity from coal is priced at around €75 while the report claims that solar power costs have fallen since 2008 to about €100-155 per MWh.

Estimates of the external costs of power generation technologies – in other words, costs impacting the environment and population health – are valued between €150-310 billion, although the report acknowledges a level of uncertainty in the calculation methodologies used.

A view of the different levels of support between EU member states suggests that Sweden, Germany, the UK, and Denmark are the bloc’s highest energy subsidisers. Croatia, Finland, and Poland are among the lowest aggregate subsidisers, according to the report. 

Fuelling the debate

The study’s findings will likely fuel the debate as to the level and type of support needed to foster low-carbon economic development. Among the factors on the table when the EU heads of state meet to discuss the bloc’s new climate and energy package will be the cost and how to achieve this transition.

Some stakeholders have in recent years also expressed concern over high gas and electricity prices in the bloc, which they say damages energy-intensive export industries.

In January, however, the International Energy Agency chief economist Fatih Birol cautioned that the EU’s green energy support and environmental policies were not the dominant factor behind the EU’s high energy prices.

The Commission has invited energy sector experts, stakeholders, academia, and member states to comment on energy subsidies report, with the expectation of more work ahead in this area. For example, further research will be required to assess the order of magnitude of the EU’s historic energy subsidies.

Meanwhile following hot on the heels of Monday’s report Germany, identified as one of the bloc’s largest green energy subsidisers, announced it was planning on reducing its renewables subsidy next year.

Federal officials said that the energy surcharge imposed to help scale up renewables in the country would fall marginally in the coming year.

ICTSD reporting; “Report: In EU, renewable energy is the first recipient of state aid,” EURACTIV, 13 October 2014; “Germany plans first ever cut to green energy levy,” EURACTIV, 16 October 2014; “Energy price gap with the US to hurt Europe for ‘at least 20 years’,” FINANCIAL TIMES, 29 January 2014. 

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