Analysis | The European Green Deal should reduce some red tape

Remark

At the European Union leaders’ summit in Brussels this week, member states will debate the Green Deal Industrial Plan — the bloc’s response to the US’s $369 billion Inflation Reduction Act (IRA).

The EU plan to boost clean technology and industrial innovation is based on four pillars: finance, trade, skills and regulatory simplification. Discussions are already emerging over proposed changes to state aid rules and funding. But if Member States need to agree on something, it is that the energy transition remains mired in red tape and urgently needs to be cleared. As if to prove the point, Denmark on Tuesday suspended all new applications for offshore wind farms over concerns it may be breaking EU law.

The precise impact of the IRA on the continent is difficult to measure, not least because there have been a host of other reasons not to invest in Europe recently. European business confidence plummeted late last year, and some industrial companies and start-ups – including battery starter Northvolt and Spanish energy company Iberdrola – have already moved operations and investments to the US.

Part of the appeal may be the new US subsidies, but Europe has other problems. It is the scene of a war that led to a historic energy crisis and the highest inflation in decades. And there are also issues of his own making: State aid rules will be changed for the third time in as many years, causing confusion. Meanwhile, bureaucracy and supply chain issues have held back renewables for years.

In short, the outlook for Europe is uncertain and expensive. That is not the environment needed to support an unprecedented energy transition. Working towards a more flexible regulatory regime would put Europe back on the map for renewable energy investment.

As my colleague Chris Bryant wrote last September, wind projects can take about a decade to complete from start to finish. Combined with inflation concerns, this has real consequences: investment in wind energy in Europe fell in 2022 and orders for new wind turbines fell by 47% compared to 2021. Similar problems have plagued solar energy projects.

The EU knows this is a problem. As part of the Green Deal Industrial Plan, the European Commission has proposed a Net-Zero Industry Act, which includes measures to speed up the permitting process. That can’t go fast enough.

A January report from the Energy Transitions Commission suggests that other measures, such as introducing one-stop shops and specific time limits to streamline planning and permitting, could cut development time by more than half. Approving certain national initiatives across the block, such as Spain’s “rule of positive silence” (where certain applications with no response are automatically allocated after a certain time) and the new French law requiring all major car parks to be covered with solar panels, would also open up new opportunities and accelerate their rollout.

The news from Denmark is the perfect example of Europe stumbling over its own red tape, even as it tries to untangle itself. Denmark has been heralded as one of the most attractive countries for wind developers and a model for the EU. The one-stop-shop service – which involves the Danish Energy Agency contacting all authorities necessary to obtain the required permits – makes the administrative process simple, and an established open-door policy allows offshore wind developers to apply on their own initiative . they have flexibility in terms of location and size.

The rest of Europe would do well to follow the Danish approach. Instead, the country has had to pause its open-door regime to avoid stepping on the EU’s toes.

Not only permits and planning can be streamlined. So-called Important Projects of Common European Interest (IPCEIs) have been a useful tool to direct funds to research and development of new green technology, such as renewable hydrogen and batteries, but there are complaints that they are too slow and too bureaucratic. Reshaping these to be more reactive could help emerging industries.

Simplified IPCEIs and streamlined regulation are indeed priorities in the EU’s new industrial strategy, but the bloc will have to be bolder.

The emergency measures taken last year in response to the energy crisis also aimed to set tighter deadlines for decisions on permits for solar and wind. Permits for wind projects, for example, now have to be granted within six months. But the emergency mandate only applies to new permits, leaving existing ongoing developments stuck in bureaucratic limbo.

The problems in Denmark show that there is a lot of work to be done to simplify and clarify EU regulations. With a sticky battle for money ahead, Europe must remember that speed is of the essence.

Analysis | The European Green Deal should reduce some red tape

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