EU could save billions with cross-border renewables cooperation

Thu Mar 14, 2013 2:53pm GMT

* EU nations focused on own subsidies, projects

* Cooperation could save money now, post-2020

* Little pressure to reach 2020 targets

* Challenge separating energy plans from jobs, politics

By Karolin Schaps

LONDON, March 14 (Reuters) - The next twist in European renewables policy could well be a push toward more cross-border cooperation as slimming budgets pressure governments to tap billions of euros in savings between now and 2020.

European Commission guidelines due this summer are expected to include a renewed call for such cooperation, yet analysts say it will be a challenge to steer nations away from projects that create local jobs.

Ways to cooperate were clearly spelled out in a 2009 EU directive on promoting renewables yet there has been little progress.

"It's not well accepted to meet targets with the help of foreign countries. As long as there is no pressure (from the European Commission) to carry out cooperation, there will be no movement," said Corinna Klessmann, managing consultant at renewable energy consultancy Ecofys in Berlin.

Only Sweden has set up a renewable energy trading mechanism with a neighbour - and that was with non-EU nation Norway.

Britain is in the process of signing an agreement with Ireland to import Irish wind power and Lithuania is looking at trading excess renewables with landlocked Luxembourg.

In the meantime, EU states will spend an estimated 41 billion euros a year in renewable energy subsidies in an effort to reach their 2020 targets.

Yet better cooperation would allow them to save up to 7 percent of that, or 2.8 billion euros ($3.65 billion) a year, according to an EU-sponsored study in 2011 by Technical University Vienna, Fraunhofer Institute, Ecofys and Ernst & Young.

That's enough money to build 1,000 onshore wind turbines and would offer relief to EU consumers grappling with recession, state austerity measures and shrinking spending power.

At least six EU member states - Belgium, France, Italy, Luxembourg, the Netherlands and Slovenia - already know they will need help to meet their individual 2020 targets but few have made progress with cooperation agreements.

"Luxembourg is generally interested in all the forms of cooperation," said Georges Reding, head of the sustainable energy department at Luxembourg's economy ministry. "No agreements have been concluded so far but discussions are ongoing with several member states."

JOBS AND 2020

Analysts said that domestic politics have in some instances been an obstacle, including government promises to create local green jobs and public resentment toward projects focused overseas.

A German project to build solar plants in Greece and export electricity they produce to Germany stalled last year after a public outcry over spending money to create jobs in Greece rather than at home.

"Germany is a good example of how renewable policy has been driven as much, or possibly more, by industrial and employment policy concerns than it has by climate policy," said Stephen Tindale, associate fellow at the London-based Centre for European Reform.

Energy experts say nations need to overcome their reluctance to be the first to forfeit their solo efforts in favour of joint renewable energy projects.

They argue that securing agreements would allow states to hedge against possible price risks after 2020 should, for example, there be a last-minute rush for cross-border help that drives up the price of spare renewable energy.

"Starting early gives you more options later. These are valuable to maintain when there is uncertainty around costs and viability of meeting your targets only by investment in your own country," said James Rydge, Dahrendorf research fellow at the London School of Economics' Grantham Research Institute on Climate Change and the Environment.

Others point out that governments are not as proactive as they could be because the European Commission has not set out how or whether it would punish governments which come up short on 2020 green energy goals which are legally binding.

"Almost all governments are just sitting tight and not arranging any trades, either because they have been doing quite well on their trajectory to their 2020 targets, or through inertia, or perhaps because they think nothing bad will happen if they miss their targets," said David Buchan, senior research fellow at the Oxford Institute for Energy Studies.

One Commission official who declined to be identified, said: "Member states have to report back to us regularly by national action plans on how they want to meet their national targets. But we cannot say go for more trading, or do this, we can only try to (ask them to) cooperate more."

Another hurdle is the lack of a transparent means of trading renewable power across Europe, despite a system where renewable power crosses borders.

When the German grid is unable to absorb locally generated wind power output, for example, it spills power on to grids in Poland, the Czech Republic and the Netherlands.

"The big challenge is that all the regulatory systems across Europe are all different and renewable electricity is not traded on the wholesale European market," said Jean-Pascal Boutin, a partner in the energy and natural resources practice at law firm Eversheds.

($1 = 0.7680 euros) (Additional reporting by Barbara Lewis in Brussels; editing by Jason Neely)