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Support schemes for renewable energy

National support schemes can help EU countries facilitate the deployment of renewables and the implementation of specific policy objectives, and provide certainty and predictability for investors.

Decreased investment costs and energy market conditions, along with the continuous EU and national efforts for promotion, make renewable energy projects competitive even in the absence of public financial support. Energy markets alone can deliver most of the desired level of additional capacities of renewables in the EU, but national support schemes are also needed to spur increased investment in renewable energy in view of the increased ambition under the European Green Deal and REPowerEU. However, if these public interventions are not carefully designed, they can distort the functioning of the energy market and lead to higher costs for European households and businesses.

Guidance for renewables support schemes

The EU adopted guidance for EU countries when designing and reforming renewable energy support schemes. This guidance suggests that:

  • financial support for renewables should be limited to what is necessary and should aim to make renewables competitive in the market
  • support schemes should be flexible and respond to falling production costs. As technologies mature, schemes should be gradually removed. For instance, feed in tariffs should be replaced by feed in premiums and other support instruments that incentivise producers to respond to market developments
  • unannounced or retroactive changes to support schemes should be avoided as they undermine investor confidence and prevent future investment
  • EU countries should take advantage of the renewable energy potential in other countries via cooperation mechanisms. This would keep costs low for consumers and boost investor confidence.

Tenders for renewables

The transition towards a climate-neutral economy will require an accelerated deployment of renewable power generation. While this should be increasingly done on a market basis, so far, the majority of projects have enjoyed some kind of public support. Across the EU, operational support, such as certificate schemes, tariffs or premiums, is more widely applied, allocated in the case of utility-scale projects most often on a market basis through competitive tenders.

A study published in November 2022 analyses how tendering procedures, as one of the forms of public support, are fostering the deployment of renewables as part of the wider transition of the energy system. It serves as a basis for the Commission Report on the performance of support for electricity from renewable sources granted by means of tendering procedures in the Union, also published in November 2022.

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