However, other EU members have implemented renewable electricity support policies with various designs and objectives. The directive codified the EU goal that 20% of total final EU energy consumption be produced from renewable energy sources by 2020. Each EU member country has discretion to decide what policies and incentives are offered that might motivate renewable energy development in order to achieve the binding EU renewable energy targets. Wind and Solar Electricity Incentive Policies in Selected EU Countries

Renewable electricity policy history, evolution, incentives, financial mechanics, and market impacts are dependent on a particular country's situation. Germany, Spain, and Italy are EU member countries that have been quite active in terms of renewable electricity policy, development, and technology deployment. As of the end of 2012, Germany and Italy were the top two countries in the world in terms of cumulative installed solar PV capacity, with 32,000 Megawatts (MW) and 17,000 MW, respectively. National Policy Evolution

Government support for renewable energy in Germany dates back to as early as 1985 with the introduction of various forms of policy support and financial incentives within certain German states. The EEG was subsequently modified to include a cumulative solar PV capacity limit of 52,000 MW, at which time FiT incentives will no longer be available for new projects. Generally, the objective of degression is to set feed-in tariffs at a level that stimulates investment in project development and expands the market for renewable electricity generation, while at the same time avoiding windfall profits for project owners and the potential for over-deployment of renewable electricity projects. Impacts on Wind and Solar Deployment

Feed-in tariff incentives are generally credited with the rapid deployment of renewable electricity generation in Germany, especially the deployment of solar photovoltaic (PV) systems. Since then, Spain has implemented a variety of policies that encourage renewable electricity generation through grid access, specified tariffs for renewable electricity, and market premium options for certain renewable power generators. As a result, Spain became the largest global market for solar power installations in 2008. In January 2012, Spain became the first European country to completely suspend FiT and market premium incentives for new renewable electricity generation. However, over the long term these retroactive measures will likely introduce an element of policy risk into the financing equation for future renewable electricity generation projects and could deter future deployment. To meet this requirement, Italy has implemented various policy measures to stimulate investment in renewable electricity generation, renewable heating/cooling, and transportation. However, in an effort to reduce the cost of financial incentive programs to electricity consumers—and since the country is very close to achieving its 2020 renewable electricity target—Italy has imposed annual FiT support limits for renewable electricity generation. Support costs for the green certificate program, feed-in tariffs/premiums for non-solar renewable power generation, and the Conto Energia FiT program for solar PV are calculated, and a surcharge is added to consumer electricity bills to pay for the financial support programs. According to the Italian government, these costs are equal to roughly 20% of the average electricity bill in Italy. Energy supply motivations may be relatively more compelling in the European Union. Renewable Electricity Incentives in the EU and U.S. are Similar, but Reversed

Both the EU and the United States offer a number of incentives that support deployment of renewable electricity generation. Generally, the European Union sets binding renewable electricity requirements for each member, and each member country provides a unique set of financial incentives to motivate deployment of renewable power systems that will achieve the EU-level targets. Solar PV market growth in EU countries provides an illustrative example. EU Countries are shifting from Electricity Production-based to Market Integration-based Incentives

Following several years of significant renewable electricity deployment, especially solar PV, some EU countries are changing financial support mechanisms to encourage electricity market integration—i.e., selling electricity in the wholesale market, allowing for curtailment under certain circumstances—instead of electricity generation. Retroactive Incentive Reductions Can Have Multi-dimensional Consequences

Multiple EU member-countries have made policy decisions to retroactively reduce financial incentives for renewable electricity projects.
European Union (EU) countries have provided support for the development and deployment of renewable energy technologies, dating back to as early as the 1980s. Today, the European Union has established binding renewable energy targets with the goal of having the entire EU derive 20% of total energy consumption (electricity, heating/cooling, and transportation) from renewable sources by 2020. EU member countries have discretion to decide how best to achieve EU-level targets. Each country uses a unique set of policies and financial incentives to stimulate renewable energy production. While EU and U.S. energy markets are very different, knowledge of the history, evolution, financial mechanics, and market impacts of EU renewable electricity policies may be useful to Congress during future debates about renewable electricity policy in the United States.
Renewable electricity generation is one component of the EU energy sector that has been emphasized. Several member countries have designed and implemented various mechanisms to encourage renewable electricity production. To date, the majority of renewable electricity deployment has been in the form of onshore wind and solar photovoltaic (PV) power generation. Feed-in tariffs (FiT) are the most commonly referenced incentive mechanism used by EU countries. However, other mechanisms, such as market premiums, green certificates, and reverse auctions are also used to motivate renewable electricity generation.
Germany, Spain, and Italy are EU countries that have deployed renewable electricity generation systems at a relatively large scale. At the end of 2012 Germany and Italy were the top two countries in terms of cumulative installed solar PV capacity with 32 Gigawatts (GW) and 17 GW, respectively. Spain was the largest global solar PV market during calendar year 2008. Those high deployment levels have established these countries as leaders in renewable electricity generation. However, political, economic, and power system concerns are causing these same countries to adjust, modify, and often reduce financial support incentives. Further, the policies, deployment profiles, financial mechanics, and incentive modifications differ for each country.
To control escalating surcharges on consumer electricity bills, German policy officials have been rapidly reducing financial incentives for solar PV and have instituted a solar PV capacity support limit of 52GW, at which point incentives will no longer be available for new projects. Similarly, Italy has placed limits on financial support—also paid through consumer surcharges—for all renewable electricity generation. In 2012, Italy's renewable electricity surcharge represented approximately 20% of the average electricity bill. As of June 2013, financial support limits for solar PV in Italy were reached and feed-in tariffs are no longer available for new projects. Spain has completely suspended FiT incentives for renewable electricity and has implemented retroactive incentive reduction policies that affect revenue, cash flow, and investment returns for existing operational projects.
EU countries are transitioning from electricity production-based incentives (i.e., feed-in tariffs) to market integration incentives such as market premiums, bonus payments for remotely controlled wind and solar projects, and flexibility premiums for renewable generation that can reduce grid instability. Power market integration of renewables, combined with declining costs of renewable electricity, may result in a more stable, albeit smaller, competitive market for renewable electricity generation. A second trend in EU countries is the implementation of retroactive incentive reductions to control costs associated with renewable electricity support. While retroactive measures may be fiscally necessary, they will likely affect future renewable electricity deployment by introducing an element of policy risk that causes financing costs, and thus production costs, to rise. These trends are likely to result in lower EU renewable capacity additions for some member countries. However, carbon policies and declining technology costs may support future EU renewable electricity market growth.