The EU’s trillion-euro coronavirus recovery package may not support big renewable energy projects in the same way as initially expected.
The EU is currently working through the details of a €1.85 trillion ($2.08 trillion) recovery package. Before the stimulus was signed, a leaked document by the European Commission’s Directorate-General for Energy (DG Energy) ran through a serious of policy plans to marry the European Green Deal and the COVID-19 recovery effort.
Those plans included a possible 15-gigawatt EU-wide renewable tender designed to help make up for a shortfall in national tenders. Support for green hydrogen was also advanced as a potential item for inclusion.
But the plans have not survived a barrage of lobbying by vested interests and pushback from member states still married to a more traditional energy mix, according to multiple sources following the green recovery's development.
As things stand, Europe's stimulus package “has no green strings attached — none,” said Patrick Graichen, executive director of the Agora Energiewende think tank, speaking last week about the green recovery.
At the same time, an alternative plan is emerging for renewables — more complex and harder to quantify in scale or duration, but with the potential to be up and running much sooner. It could be a tradeoff worth making.
A new idea for EU green recovery takes shape
The new renewable energy financing mechanism (REFM) would use existing funding mechanisms to sidestep the need for new EU legislation. That means it could “kick in as soon as July,” said Aurelie Beauvais, policy director at SolarPower Europe, who added that she is hopeful for its prospects.
Under the REFM proposals, countries could pay into a central tender fund, but the winning projects could be built elsewhere. That means that European countries with grid restraints, land shortages or scant renewable resources could instead fund Mediterranean solar farms or Irish wind projects. The contribution to EU climate targets would pass to the financial backers. The economic benefits and clean power would flow to the host country.
The plans are still being finalized, but GTM understands that the intention is for auctions to take place every year starting in 2021.
"The Commission is currently working on how to use the recovery package to support renewables, which are clearly a priority for recovery investment — but we cannot comment on this idea of an EU-wide tender," a European Commission spokesperson told GTM by email.
The scale of the program would be dependent on the appetite of sponsor nations to fund it and hosts to take advantage. SolarPower Europe's Beauvais thinks the expected favorable financing conditions of an EU-sponsored, national-government-backed tender could ramp up interest.
A rebounding European solar market
The REFM could prove to be a masterful piece of political maneuvering from the European Commission, given that prospects for a discrete, standalone tender program were facing opposition.
Europe's overall recovery package is not as unequivocally green at this stage as many expected. Agora Energiewende’s Graichen points the finger at certain member states looking to water down EU climate policy more generally as the reason for this. Poland and the Czech Republic still export millions of tons of coal to neighboring EU states.
Jutta Paulhus is a German Green Member of the European Parliament (MEP) and active in the EP’s committees dealing with energy and the environment. She empathized with DG Energy’s position and blamed Europe’s less progressive utility giants for the policy headwinds.
“[DG Energy is] being lobbied a lot, and it's the people who are providing energy supply every day that tell them [various aspects of the plan are] not possible. You will tend to believe it until you really delve into the issue,” Paulhus said in an interview.
Most MEPs do not have the same level of knowledge as staff at DG Energy. Paulhus says many of the MEPs she talks to are astonished to learn of European solar tenders falling under 2 euro cents per kilowatt-hour.
“They heard years ago that solar is expensive but never updated their knowledge. If you don't keep up to date with developments, then you end up with these false truths,” she said. She gives the example of a call last week with fellow MEPs and European Energy Commissioner Kadri Simson on the bloc’s hydrogen strategy.
“We emphasized that hydrogen is only good if you produce a tremendous amount of clean electricity. [...] We cannot go down a hydrogen path where we produce hydrogen from fossil fuels.”
Near-term policy details aside, there's little question that Europe's 2050 net-zero ambition will be largely wind- and solar-powered. Wood Mackenzie expects Europe to add another 172 gigawatts of solar and 169 gigawatts of wind by 2040.
The latest SolarPower Europe Global Market Outlook report forecasts that European solar installations will fall from 20 gigawatts in 2019 to 14 gigawatts this year before climbing back steadily to 19 gigawatts by 2024.
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The European Commission has set out along the road to achieving a climate-neutral economy by 2050. But where do the opportunities lie and what technologies are poised to benefit?
Wood Mackenzie has launched a European Green Deal guide to help businesses understand how the European Green Deal will shape the future energy market and evaluate the potential new opportunities. Click here to find out more.