UK may use EU small print to swerve impact of green cuts

By Susanna Twidale

LONDON (Reuters) - Britain is thinking of using an EU loophole to dodge the impact of its own subsidy cuts on renewable energy and escape fines for missing 2020 European renewable targets.

Under EU rules Britain could use the loophole, termed statistical transfer, which would see it pay other, greener, EU countries overshooting their targets, to make up the difference.

"We need to stay open to the fullest possible range of options for meeting the 2020 target, including the use of statistical transfer," a spokeswoman for the Department of Energy and Climate Change said.

Britain’s new Energy and Climate Change secretary Amber Rudd has announced changes to subsides for biomas, solar and onshore wind projects to trim spiraling costs, which she said in June were likely to result in around 250 projects not being built.

Britain has an EU target to meet 15 percent of its energy needs from renewable sources by 2020 but with just five years to go it remain wells short at just over 5 percent..

Current contributions to the target from energy used in the transport and heat sectors are well off the pace of what is needed, placing more of a burden on the electricity sector to make up the shortfall.

Analysis from consultants PWC showed Britain would need to generate more than 50 percent of its electricity from renewable sources by 2020 to meet the goal, up from around 20 percent in 2014.

"Technically the (EU) target could still be met if more renewable electricity capacity comes online but for that to happen the funding cap would need to be increased while the recent measures have all been to cap overspend," said Ronan O’Regan, director of renewables at PWC.

Latest data from the European Commission shows several countries, including the Netherlands and France, are also at risk of missing their targets, meaning there could be competition for the statistical transfers.

The 2020 renewable target is binding, which means that member states who do not comply are liable for infringement proceedings which can take many years.

It is unclear how much Britain would be fined but The EU’s highest courts in Luxembourg have the right to order payment of a fine for every day a country is found to be in breach of EU law.

Richard Slark, Director at Poyry Management Consulting said it could end up being cheaper for Britain to not comply and face fines.

"The fines for non-compliance are understood to be relatively small and they may not be levied for years, given the EU’s drawn out enforcement processes," he said.

(Additional reporting by Barbara Lewis in Brussels, editing by William Hardy)