Leaked EU regulation draft: renewables receive short-term acceleration

Summary

Building on the REPowerEU plan and the Council’s conclusions from October 2022 calling for faster and simple permitting procedures for renewable energy projects, the European Commission tabled a proposal to speed up renewables roll-out across all Member States. It was tabled in the form of a Council regulation, meaning the document constitutes part of the emergency measures, bypassing the European Parliament and applicable for one year only. The proposal consists of four measures, including faster permitting times for solar installations, heat pumps and repowering of renewable energy plants, as well as introduction of the overriding public interest principle. We see the latter along with faster permitting times for repowering, as having the most impact on the market, although to a limited extent. They are expected to accelerate renewables deployment in the short and medium term, although their efficacy can be constrained given the current instability and unpredictability of the European and Member States’ legislative landscape. We therefore do not see these measures significantly bringing GO prices down in the short run, the upward price trajectory being more likely.

The proposal incorporates certain measures already listed in the REPowerEU plan: renewable energy is "presumed to be of overriding public interest" with regard to environmental rules and a one-year deadline is set for permitting to increase the capacity of renewable energy projects. However, new provisions are planned for heat pumps or solar energy.

Context

The proposal builds on the RED III amendments and follows the European Council’s conclusions from 20 and 21 October 2022, where it called for fast-tracking and simplification of permitting procedures to accelerate the rollout of renewable energy, including by means of emergency measures in response to the European Commission’s second emergency proposal to tackle the energy crisis.

Amid tight natural gas market, there are foreseeable difficulties with filling gas storages next year along with likely supply disruptions on the Russian side. This was not factored in RED III revision and necessitated further action, as per Commission’s explanation. The news arrive ahead of the Council meeting on November 8, where the Czech Presidency will try to negotiate upping the renewable energy target in the final energy consumption to 45% (the one that is currently legally in place is 32%, with the revision of the Renewable Energy Directive (RED) set to change it). (Note, the European Parliament already voted for the 45% target). The ambassadors will have to say whether they support the general approach revising the RED III (with a 40% target) or the objective included in the REPowerEU plan (45%, RED IV). At the same time, the 27th session of the Conference of the Parties (COP27) in Sharm-el-Sheikh is in full swing, where the EU wants to further assert itself as the global climate leader.

The proposal is in line with the EU’s climate and energy strategy, the European Green Deal and RePowerEU plan, the latter mandating faster permitting times to tackle the energy crisis. As a result, some Member States followed suit to speed up permitting procedures for renewable energy projects (e.g. France), however, since the duration and complexity of the permit-granting procedures vary greatly between different Member States, the European lawmaker’s rationale is to adopt a coordinated Union-wide approach. Directorate – General for Energy identified lengthy and complex administrative procedures as among the key barriers for investments in renewable energy. The proposal would allow to shorten and simplify permitting procedures and administrative processes to speed up renewable energy deployment.

Legislative train

The proposal was tabled by the European Commission in the form of a Council regulation. This means that the European Parliament is bypassed once again (similar to the previous emergency measures packages): under the emergency procedure, the European Commission can submit its proposal directly the Council, thus avoiding the co-decision process. In turn, if approved by the Council, the regulation will be adopted, and its measures would be effective immediately after the publication in the Official Journal. The proposal will be presented by the European Commission to the Council this week.

Details

The short - term acceleration of the permit-granting procedures for renewable energy projects encompass four measures that are of general scope and target specific technologies:

1. Overriding public interest. Similar to RED III amendment, this introduces a rebuttable presumption that renewable energy projects are of overriding public interest, unless there is clear evidence that they have major adverse effects on the environment which cannot be mitigated or compensated for. 
2. Permitting process for solar energy equipment limited to one month. REPowerEU introduced a maximum deadline of three months for the installation of solar energy equipment and its related co-storage and grid connections in existing or future artificial structures created for purposes other than solar energy production. This means that this provision will likely only apply to self-consumption and will not affect solar energy parks. For self-consumers with a capacity of less than 50kW, tacit approval from authorities is to be expected.
3. Permitting for the repowering of renewable energy plants limited to one year. In cases where there is an increase in energy capacity, permits related to the assets’ upgrades and their connection to the grid will not exceed one year including environmental assessments. If the repowering does not result in an increase in the capacity beyond 15%, grid connections will be permitted in 1 month.
4. Permitting for heat pumps limited to three months. Automatic permitting applies to heat pumps up to 12 kW capacity and those installed by a renewable self-consumer of up to 50kW capacity.

The application period is for one year only, with possibility for extension following an evaluation by the European Commission no later than July 2023. The provisions of this regulation only affect new permit-granting procedures, not ongoing ones.

Market impact

Measures #1 and #3 will have the most impact on the market, while the rest are oriented towards consumers. If approved, the overriding public interest principle will not affect existing renewable energy projects already in the pipeline, only new ones. As investor’s certainty is already suppressed in light of the first emergency measures package that includes a windfall profit tax on renewable energy producers, this measure might whet their appetite to a limited extent, leading to an increase in renewable energy supply short to medium term.

As regards permitting for repowering of renewable energy plants, an estimated 38 GW of onshore wind capacity is reaching the end of its normal operational life (20 years) between 2021 and 2025, as per Commission’s proposal. Considering that current total onshore wind capacity is at 207 GW, repowering of almost 20% of existing wind capacity should result in this capacity staying online rather than being decommissioned. This measure should ensure continuity in onshore wind energy capacity in short, medium and long run, limiting the effects of supply disruption.

Both of these measures are expected to accelerate renewables deployment in the short and medium term, although their efficacy can be constrained given the instability and unpredictability of the European and Member States’ legislative landscape. We therefore do not see these measures significantly bringing GO prices down in the short run, the upward price trajectory being more likely.

We will keep you updated on these developments. In the meantime, should you have any questions, please contact our Renewable Policy Analyst mary@greenfact.com.