EU "Fit for 55": Scaling up ambitions in the Renewable Energy Directive (RED II)

As part of its Fit for 55 package the Commission submitted a proposal to further amend the Renewable Energy Directive (RED II).

Overview

The goal of a climate-neutral EU in 2050, as now codified in the EU climate law, can only be achieved if the expansion of renewable energies in the EU is further accelerated. The Commission's proposal includes:

• a higher target of 40% renewables in the EU's overall gross final energy consumption by 2030;
• reduction targets for the industrial sector for the first time;
• an adjusted scope for the production and use of green hydrogen; 
• further transparency obligations aiming at strengthening the flexibility of the electricity system and allowing customers to make informed choices;
• strengthening the role of renewable PPAs and guarantees of origin;
• mandatory third-party access for providers of renewable district heat/cold to big district heating/cooling systems; 
• introduction of a credit system allowing fuel suppliers to buy credits from suppliers of renewable electricity to public charging points for electric vehicles;
• obliging member states to be part of a joint project to promote renewable energy or contribute financially to the Union renewable energy financing mechanism and to jointly plan the potential of offshore projects in their sea basins; and
• an update of sustainability criteria for bioenergy, including the cascading-principle for woody biomass.

The details

The RED II itself is relatively new - it was introduced with the Clean Energy Package in 2019 and its transposition timeline expired only two weeks before the Commission presented its Fit for 55 package on 14 July 2021. In order to pave the Union's way to climate neutrality by 2050, the Commission proposed various and mainly punctual changes to the RED II:

Raising the overall target and sub-targets

On the way to climate neutrality the share of renewable energies in gross final energy consumption in the EU needs to increase to 40% by 2030 instead of 32% as originally planned. However, the Member States are to continue to coordinate with each other and with the Commission on their individual implementation quotas in their National Environment and Climate Protection Plans (NECPs). As before, there will not be any binding national targets.

The various sub-targets in the RED II are also to be adjusted or expanded by the amendment proposal:

• The industrial sector, (i.e. mining, manufacturing, construction and information services), is to increase its renewable share by at least an indicative 1.1 percentage points (ppt.) annually. In addition, 50% of the hydrogen used in industry is to come from renewable sources by 2030.
• In the heating and cooling sector, the indicative target of increasing the share of renewables by 1.3 ppt. per year is replaced by a binding annual increase of 1.1 ppt, which the Member States are to combine with individual increases (between 0.6 and 2.9 ppt) regarding their share of renewable district heating and cooling. For Member States using waste heat and cooling, the mandatory increase shall be as high as 1.5 ppt (previously indicative 1.3 ppt), of which waste heat and cooling may be counted as up to 40% of the annual increase. 
• In district heating and cooling, Member States shall increase the share of renewable energy and waste heat or cooling by at least 2.1 ppt instead of the current one ppt. per year.
• In the buildings sector, the Member States are to jointly cover an indicative 49% of final energy consumption by renewable energies by 2030.
• In the transport sector, the Commission proposes a change of perspective: instead of aiming for a 14% share of final energy consumption in the motor vehicle sector by 2030, in future the focus should be on the greenhouse gas intensity, which fuel suppliers should reduce by at least 13% (compared to petrol and diesel or conventionally generated electricity) by 2030 through renewable fuels and renewable electricity used in the sector. 

Renewable fuels, including green hydrogen

The requirements for the sustainable use of biomass in power and fuel generation are to be increased or adapted. Energy from renewable fuels of non-biological origin (so-called RFNBOs, also including green hydrogen) is in principle to be counted in the sector where it is consumed. As a consequence, the electricity used for the production of RFNBOs themselves cannot be taken into account in the calculation.

The Commission proposes that the rules for RFNBOs and thus green hydrogen no longer apply to the transport sector only, but are also to include fuels used in other sectors, namely the industry sector. Similarly, the Union database for renewable and recycled fuels should no longer be kept only for fuel in transport, but for fuels of all uses, to allow for comprehensive monitoring of production and consumption of these fuels.

Transport sector

For the transport sector, the Commission is of the view that direct electrification helps the transition to an energy system based on renewables, and thus proposes to delete the so-called additionality requirement forbidding fuel producers to demonstrate their renewable quota through the purchase of electricity from the grid and the additional purchase of guarantees of origin. Yet the current possibility of counting biofuels and electricity from renewable energies used in the transport sector, with a multiple of their energy content, is to be largely eliminated and will in future only be possible in air and maritime transport.  

Biomass

Producers of electricity, heating or cooling from solid biomass will in future have to comply with the directive's special sustainability criteria from a total rated thermal input of 5 MW (currently 20 MW).

The generation of electricity from biomass is to be further restricted and the so-called waste hierarchy to be strengthened. In the future, energy generation from saw logs, veneer logs wood, stumps and roots will no longer be eligible for subsidies, and electricity generation from forest biomass will only be eligible for support to a very limited extent after 2026. 

Transparency obligations

With the aim of strengthening the flexibility of the electricity system, further promoting the system integration of renewables and allowing customers to make informed choices the Commission proposes various new transparency obligations:

• In future, electricity grid operators are to provide market participants and consumers with near-real-time (1h-interval) information and forecasts regarding the share of renewable electricity and greenhouse gas emissions content of the distributed electricity quantities. The data is to be made available in such a way that it can be read electronically. The draft explicitly mentions smart metering systems, electric vehicle charging points, heating and cooling systems and building energy management systems.
• Manufacturers of electric vehicles shall be obliged to provide real-time information on the batteries installed in the vehicle as well as the vehicle location to owners, users or third parties acting on their behalf (e.g. flexibility providers). Likewise, Battery manufacturers of domestic (>2kwh rated capacity) and industrial batteries are to ensure that basic information on energy management is provided.
• Member States are to make sure that consumers of district heating or cooling are informed about the share of renewable energies in their district heating and cooling system, as well as about the amount of energy required to produce one unit of heating.
• Industrial products produced using renewable energy or green hydrogen (or other RFNBOs), may only be advertised as such if the share of renewables in the production process is made transparent. 

Renewable PPAs

Member States shall further strengthen renewable power purchase agreements (PPAs). Besides removing regulatory barriers they should also examine the extent to which they can support PPAs by granting credit guarantees. The Member States are to account for the measures and the expected volume of PPAs among themselves and to the Commission via their NECPs. 

Guarantees of origin

In future, guarantees of origin for renewable energies will have to be issued in each Member State even if the producers have received support for the same amount of energy. National rules (as e.g. in Germany) forbidding to label subsidised electricity as renewable (so-called ban on double marketing) would have to be amended accordingly. Also, it shall no longer be possible to cancel a guarantee of origin immediately after it has been issued.

The Commission explicitly demands that guarantees of origin must be transferable within the framework of renewable PPAs. 

Electric vehicles

Those who supply public charging points for electric vehicles with electricity from renewable energy sources are to receive credits which could be purchased by fuel suppliers to fulfil their obligation to use renewable energy sources in the fuel mix.

Smart charging (i.e. the automatic adjustment of the electricity delivered) and ideally also bidirectional charging shall also be made available at non-publicly accessible charging points.

Member States should ensure that electric vehicles (as well as batteries) are not prevented by state rules from participating in the energy markets, in particular in congestion management and the provision of flexibility or balancing energy.

District heating/cooling

In the future, granting third party suppliers  of energy from renewable sources and from waste heat and cold access to district heating or cooling systems shall no longer be only an option for Member States, but shall be made mandatory for all systems with a capacity of more than 25 MWth - provided that they do not already fulfil the requirements for efficient district heating or cooling systems in line with the (to be amended) Energy Efficiency Directive.

Buildings sector

In order to increase the share of renewables in electricity, heating and cooling in the buildings sector, the Commission sees a need to strengthen the self-consumption of renewable energies, renewable energy communities and local storage solutions.

Member States are also to set minimum requirements for the use of renewables in buildings, whereby the use of efficient district heating or cooling should be one possibility to meet the requirements.

Cross-border projects

According to the Commission, Member States shall not only be entitled to cooperate within the framework of so-called joint projects for the production of electricity, heat or cooling, but should also be obliged to become part of at least one such joint project by the end of 2025. Alternatively, they should be able to participate in the EU's Renewable Energy Financing Mechanism. 

Member States that share the same sea basin should jointly plan the potential offshore generation capacities of offshore projects in their own sea basin - also taking into account integrated offshore grid planning - and set them down in their NECPs.

What's next

The proposal will now follow the ordinary legislative procedure. After its entry into force the Member States will have time to transpose the new rules into national law by the end of 2024.