What stands in the way of renewables development?

Electricity grid access and public acceptance of infrastructure upgrades pose significant challenges for bringing more renewables on-line

Even though it remained the world’s top destination for renewable energy investment in 2009, the EU saw funding drop by about 10% compared with the previous year. The drawn-out financial-cum-economic crisis is clearly hindering a sector that is so heavily dependent on fresh financing to pursue its development.

But despite growing financial problems and renowned planning permission nightmares, the biggest obstacle to the large-scale deployment of renewables in Europe is the electricity grid.

The existing grid was built to handle large, predictable volumes of fossil-fuel energy, not unpredictable, fluctuating volumes of renewables. Nor was it designed to connect areas across Europe.

More transmission lines are needed to connect new renewables projects and enable energy to flow across the EU. Better grid connections also reduce the need for energy storage technologies. The grid must become more resilient and flexible, ultimately becoming a ‘smart’ grid that can absorb the variability of renewables and modulate demand in response to supply.

A monumental task

Many large-scale renewables projects are in the works, from vast wind farms in the North and Baltic Seas to concentrated solar power plants in Spain and North Africa. These will require a whole new infrastructure of monumental scale to transmit their produce. Getting this infrastructure in place is a make-or-break challenge, for Europe and for its members.

Malta’s 10.2% renewables target for 2020, for example, hinges on the construction of a grid interconnector between it and the Italian island of Sicily. Its own grid could not handle the peak-time input from the offshore wind farm the space-constrained island needs to meet its goal.

Potential renewable energy exports from Ireland and Portugal are contingent on new interconnectors. Similarly, a giant 47 gigawatt interconnector between France and Spain will be essential to transport renewables power from Spain to the rest of Europe in future. Spain will provide a large amount of Europe’s wind and solar power. These two technologies together will make up most of Europe’s energy supply by 2050, the European Climate Foundation (ECF) predicts.

Cross-border interconnection remains poor in Europe today. The European Commission in June admitted that Italy, Ireland, Spain and the UK have still not met a non-binding interconnection target of 10% for 2005 set at a Barcelona summit in 2002. Of the new member states, Cyprus, Malta and Poland are poorly connected.

To address this, the companies running Europe’s high-voltage transmission grids set out a cross-border investment plan for the next ten years this summer. The European Network of Transmission System Operators for Electricity (ENTSO-E) released a preliminary version of the ten-year network development plan it is required to draw up under the EU’s third energy package.

Excluding national and local investments, this foresees the operators building or refurbishing over 40,000 kilometres or 14% of the European transmission grid by 2020, at a total cost of €23-28bn. A super grid for offshore wind power in the North Sea accounts for about half the investment.

For all transmission projects, social acceptance remains the biggest obstacle, leading to long delays in obtaining permits for new transmission infrastructure. But financing is also becoming more of a problem, according to Konstantin Staschus, secretary general of ENTSO-E.

Where is the money?

Financing is perhaps the second biggest challenge facing renewable energy projects today. The impact of the economic crisis cannot be underestimated. But a look at Europe’s most successful renewables stories – take Germany – reveals the role that subsidies can play.

Germany’s feed-in tariff system is credited with creating the country’s enviable renewables capacity. A renewable heat premium modelled on this tariff is what is needed now to boost the green heat sector, according to the German Renewable Energy Federation BEE.

Investments in renewables can be a risky business and a feed-in tariff provides investors with a guaranteed revenue stream. “A stable and predictable support system will attract investors and commercial lenders into the renewables sector because outlays that they will need to commit will effectively be smaller,” says Andrzej Dejneka, director general at the Polish Economic Chamber of Renewable Energy (PIGEO). He says Poland will not meet its 2020 renewables target without introducing a feed-in tariff.

The very success of feed-in tariffs in some countries – Germany, Spain, Italy and France – has led to recent cuts in their levels to avoid overheating the market. These cuts do not appear to be having a negative impact so far, although the representative industry associations have uttered warning cries about cutting too much too soon.

In countries where feed-in tariffs have not been used, like the UK for example, renewable growth has been much slower. Offshore wind, which is at the heart of British plans to boost renewables capacity, needs a flow of up to €12bn a year, developers estimate.

A study by consultants PwC suggests tapping into a new Green Investment Bank announced by the British government, alongside a number of other measures. These include additional renewable obligation certificates for a limited period; underwriting risks through new taxes such as a levy on electricity consumers; making offshore investments tax-free for the public; and opening up the sector to pension providers by lowering risks through, for example, a regulated asset scheme with capped liabilities for cost over-runs.

Finding the perfect place

In some cases, planning permission presents the greatest challenge. Planning decisions are taken at local level and opposition to a useful but ‘ugly’ wind park can be hard-bitten. For onshore wind in the UK, obtaining a permit to build is the biggest problem, says Ronan O’ Regan at PwC.

A recent decision to do away with regional development agencies has removed a check on local authorities’ rulings on small wind projects that will only increase the difficulties, adds Gaynor Hartnell, chief executive of the British Renewable Energy Association.

The Italian association of renewables producers (APER) has said that better planning procedures – not higher incentives  – will enable the country to meet its energy and climate targets. Maja Wessels, executive vice-president for global affairs at solar panel maker First Solar says “40 levels of permission” can be needed for a solar installation permit in Italy.

Apart from public opposition, nature conservation can also block planning permission. Already in 2007, Poland’s Chamber of Renewable Energy warned that implementing the EU’s Natura 2000 network of protected sites could undermine the development of green energy. The Irish and Slovenian governments too have recognised that the prime sites for wind turbines tend to be the most environmentally sensitive.

Wind projects must undergo environmental impact assessments to get the go-ahead. Some say these are only as good as people want them to be, others cite examples of wind farm proposals being rejected on biodiversity grounds – for example on the Isle of Lewis in Scotland in 2008.

Delays in implementing biodiversity legislation are also problematic for renewables development. Offshore wind faces great uncertainty over its future in part because most member states have yet to designate protected marine areas.

Some problems are unique to specific countries. For example, Finland foresees a bright future for biomass, but acknowledges this is highly dependent on trends in the Finnish forest industry, strong sustainability standards and enough labour for harvesting.

Other countries spell out problems they perceive as unique but which seem to crop up elsewhere and may yet spread further. This is the case for the Netherlands, where energy experts say looming excess coal and gas capacity will make it uninteresting for utilities to invest in renewables.

A new “Priority for Renewables” law gives physical but not economic priority to renewables on the grid, CE Delft director Frans Rooijers told ENDS.
In Germany, green group Deutsche Umwelthilfe (DUH) warns of a similar problem: the government will be under pressure to curtail the priority it gives to renewables the more nuclear and coal power plants are operating in 2020.

The challenge of upgrading the grid comes down not nearly as much to national renewables action plans as to implementation of the third EU energy package. In the end, EU regulators need to set the right incentives to make network operators’ investments profitable.

Renewable Energy Europe

A special report, sponsored by RPS(energy and environmental consultants)