5 Key Updates to the Renewable Energy Directive II (REDII)

In July 2021, the European Commission (EC) unveiled its proposal for the Fit for 55 legislative packages. This package aims to set Europe on course to become the first carbon-neutral continent by 2050. Fit for 55 is an extensive set of new strategies and updates to existing energy and climate legislation.

Central to the legislative updates is the revision of the Renewable Energy Directive II (RED II). The RED was originally set up in 2001 to promote renewable energy use in electricity generation. It was amended in 2018 to reflect higher ambition resulting from the Paris Agreement. The current proposals will effectively be the third revision of the Renewable Energy Directive. The team at FlexiDAO has reviewed the updates to RED II and outlined the key changes in this article.

Key updates on REDII

We have highlighted five of the most important updates:

1. More ambitious renewable energy targets: Based on the current status of the RED II, the EU-level target for renewable energy in 2030 is at least 32 percent in the overall energy mix. The update to the legislation will target a rise to at least 40 percent by 2030. Sub-targets for advanced biofuels will also be increased to 2.2 percent in 2030. And a new 2.6 percent sub-target for renewable fuels of non-biological origins (RFNBOs), including hydrogen, will be introduced. These new targets represent a significant step-up in climate ambition in the EU. The changes will bring challenges but offer many opportunities to the energy sector.
2. Wider scope of renewable fuels certification and traceability: Green Hydrogen and its derivatives have been outlined as a key aspect of the EU's net-zero strategy. To facilitate the growth of this market, new rules around the certification and traceability of these fuels will be introduced. Renewable fuels from the non-biological origin (RFNBO) including Green Hydrogen will be tracked and certified under new mechanisms. This is likely to be as part of a newly set up ‘Union Database’ or through certification schemes such as Certifhy.
3. Removing Guarantee of Origin (GO) subsidy rules: In the current GO scheme, some member states prohibit the issuance of GOs to generators that receive state subsidies. This is seen as a barrier to the uptake of Power Purchase Agreements (PPAs) as corporates won’t receive renewable certificates as part of the purchase. Under the revised legislation, all member states will be obliged to issue GOs to both supported and unsupported renewable generators. These changes should drive further growth in the accelerating market for PPAs.
4. New labelling methodology for industrial products produced using renewable energy: The commission has proposed to introduce a greater focus on the labelling of industrial products. Companies will need to indicate the percentage of renewable energy used in the raw material acquisition and pre-processing of industrial products. This has been identified as an opportunity to