Europe needs to spend €1 trillion on building low-carbon power plants and overhauling its ageing electricity grid system by 2020. This figure, roughly the equivalent of eight bail-outs for Greece, will be formally announced by the European Commission next month (10 November), with further details to follow a week later (17 November).
According to a draft of the Commission’s infrastructure paper, almost half the money is needed for new electricity generation, especially offshore wind farms and marine energy, as well as upgrading existing power plants, which could mean equipping coal-fired power plants with carbon capture and storage technology.
A further €600 billion is needed to overhaul Europe’s antiquated electricity grid: building new lines, adding facilities to store renewable energy and ‘smart’ technology to the grid. Updating the grid is an urgent priority: the current grid system was built for a world powered by coal, gas or nuclear energy, which was generated near population centres. Future electricity supply will increasingly come from more remote places on Europe’s northern and southern fringes, such as off-shore wind farms or solar panels.
Part of this spending will be directed to big energy projects of European-wide interest. For the Commission, these include a ‘Baltic Interconnection Plan’ to link the Baltic countries to the rest of the EU, making them less reliant on Russian gas; the ‘Southern Gas Corridor’, to bring gas from the Caspian and Middle East; a ‘Mediterranean Energy Ring’ to reap the abundant solar and wind energy from countries around that shoreline; better east-west connections across Europe; and a giant offshore grid in the North Sea.
The total bill could add up to €2tn by 2030. But analysts say this is not an impossibly large figure, when compared to money spent on telecoms infrastructure.
“If you look at it in the context of the European economy it is not a vast amount of money,” says Tom Brookes, a director at the European Climate Foundation (ECF).
“None of our current generation capacity will be online in 2050. It all needs to be re-built. Regardless of how we do it we do have to replace Europe’s energy-generation capacity in the next 40 years.”
The important question, he says, is to stimulate investment to promote green technology, rather than carrying on building coal-fired power plants. “Generating power is not the only problem that we are trying to solve here,” says Brookes.
Without green infrastructure, meeting the EU’s climate-change goals will become harder, perhaps impossible. The 2020 target of generating 20% of power from renewable sources means that 33% of all electricity will come from renewable sources, compared to around 16% now. But even more long-term goals could be put at risk by failure to make early investments.
The ECF has argued that delaying new investments would make the final cost of a low-carbon electricity system by 2050 more expensive. Even a delay of five years, until 2015, would push up costs. It would place more demands on the construction industry, and would mean that old infrastructure, such as coal-fired power stations, would still be built, requiring costly retro-fitting at a later stage.
Brookes says a delay of ten years could mean spending €90bn on infrastructure a year by 2035, compared to €65bn a year in 2025.
The Commission expects that much of the €1tn will come from the private sector. The existence of 2020 climate-change targets has already been “a major driving force” in stimulating investments, says Daniel Dobbeni, president of the European Network of Transmission System Operators for Electricity (ENTSO-E), representing the companies in charge of high-voltage electricity transmission in 34 countries.
But this will not be enough. The companies that operate the high-voltage network (transmission system operators) also want the process of getting permits to build new lines made easier. The major stumbling block is resistance from people who don’t want new power lines in their backyard. Cross-border projects can face the biggest objections, because people often imagine there will be few local benefits.
According to ENTSO-E, the gap between planning and commissioning a power line can be as long as ten years. “This is not an easy issue,” says Dobbeni. “You need to tackle the concerns of citizens in member states, but if this [planning permission issue] is not accelerated we will not reach the 2020 targets.”
The Commission is topropose a new fast-track process for permits for power infrastructure, especially targeted at projects of European interest. But this risks a backlash from people objecting to unsightly power cables. The Commission is considering time limits of five years for a final decision on building new power lines.
Another idea is obliging national governments to establish contact points to deal with communication issues involving project developers and local, regional and national authorities.
In the short term, the biggest problem may be finding public money to kickstart the risky projects that the private sector will not finance. For instance, the Commission envisages that €100bn of public money will be needed to stimulate investment in grids.
In the Commission’s view, public money will be especially important for pan-European projects, where the sums often do not add up for any single member state because the benefits are shared between several of them.
The Commission’s energy department wants more EU funds for energy projects in the next seven-year EU budget period (2014-20). This money would be used to fund grants, for subsidised loans and to provide other financial incentives to speed up the development of new technologies.
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