European Renewable Energy Directive (RED III): updated ambitious targets to boost the renewable energy market

On 9 October 2023, the EU Council adopted the amended Renewable Energy Directive (“RED III”), part of the "Fit for 55" package (see press release here).

The RED III aims to increase the share of renewable energy in the EU's overall energy consumption to 42.5% by 2030, with a further indicative target of 2.5%. The Directive also introduces specific targets for Member States in the industry, transport, and building (district heating and cooling) sectors.

On 12 September 2023, RED III was adopted by the Parliament. The previous version of the Directive (RED II) entered into force in 2018 and has been legally binding since June 2021. In July 2021, the Commission proposed another revision of the Directive, raising the 2030 renewable energy target from 32% to 40% (see our previous blog post). Less than a year later, following Russia’s invasion of Ukraine and the need to accelerate the EU’s independence from fossil fuels, the Commission proposed to further increase the target to 45% by 2030. The text adopted by the Parliament and the Council reflects the political agreement reached on 30 March 2023.

Industry

In the industry sector, Red III requires a 1.6% annual increase in renewable energy usage. Member States must ensure that at least 42% of hydrogen used for energy and non-energy purposes in the industry comes from renewable fuels of non-biological origin (“RFONBOs”) by 2030, and 60% by 2035. Member States can reduce the contribution of RFONBOs in industrial use by 20% if their national contribution to the overall binding EU target is met and the share of hydrogen from fossil fuels is no higher than 23% in 2030 and 20% in 2035.

Transport

For the transport sector, Member States must choose between:

• a binding share of at least 29% renewables in the final energy consumption in the transport sector by 2030; or
• a binding target to reduce greenhouse gas intensity in transport by 14.5% by 2030.

The new rules also set a combined binding secondary target of 5.5% for advanced biofuels (generally derived from non-food feedstocks) and renewable fuels of non-biological origin (mainly renewable hydrogen and synthetic hydrogen fuels) in the share of renewable energy supplied to the transport sector. Within this target, there is a minimum requirement of 1% renewable fuels of RFONBOs in the share of renewable energy supplied to the transport sector in 2030.

Buildings

Regarding the building sector, the new rules set an indicative target of at least 49% share of renewable energy in buildings by 2030. Renewable targets for heating and cooling systems will gradually increase, with a binding increase of 0.8% per year at the national level until 2026 and 1.1% from 2026 to 2030. The minimum average annual rate applicable to all Member States is supplemented by further indicative increases calculated specifically for each Member State.

Acceleration of permitting

Member states must identify areas for the acceleration of renewables where projects will undergo a simplified and fast-track procedure. The deployment of renewables will also be of “overriding public interest” limiting possible legal objections to new installations.

Next steps

The Directive will be published in the Official Journal of the EU and will enter into force 20 days later. Member states will then have 18 months to transpose it into national law.

NOTE ADDED ON 31/10/23 - On 31 October 2023, final version of the amended Renewable Energy Directive was published in the Official Journal of the EU.