Renewables funds must not go up in smoke

1 October 2013, ENDS Europe

The countdown to the release of the Fifth Assessment Report of the Intergovernmental Panel on Climate Change (IPCC) is now on, and the outlook continues to be bleak, to say the least.

Last week, IPCC head Rajendra Pachauri indicated that the long-awaited report will provide further insights into worsening climate trends that are being compounded by the failure of governments worldwide to take necessary steps. Pachauri’s grim summation is that we have “five minutes beforemidnight.”

Here in central and eastern Europe (CEE), Bankwatch is working in eight of the new member states to ensure that new EU funding allocations for the period 2014-20 provide more substantial support for climate investments.

Now that heads of state and government have agreed to dedicate 20% of the next EU budget to climate-related initiatives, the imperative is to bring these projects to fruition. But we have our own ticking clock.

Member states are now racing to firm up EU spending priorities for the coming seven years after the long slog of budget negotiations. To paraphrase Mr Pachauri, it is no exaggeration to say that we have roughly one minute to go before midnight.

Yet when it comes to allocate funding to renewable energy projects, vital in the climate context, the keepers of the clocks risk taking us back in time.
Not so green

In the Czech Republic, Poland, Slovakia and Latvia, the renewables race is facing various hurdles. Most notably, and in a move criticised by the International Energy Agency, the Czech government has opted to phase out subsidies for wind and solar power. Final parliamentary approval of the plan is expected imminently, leading to a fundamental redrawing of the country’s renewables sector.

Feed-in tariff eligibility will now only apply to Czech hydropower installations of up to 10 MW, CHP plants – including those using coal and gas – and so-called ‘secondary sources’ such as biomass burnt at incinerators.

Similar difficulties are also being witnessed in Latvia, where an ongoing delay of four years in passing renewables legislation has fostered deep investor uncertainty about clean energy. One upshot of this is that the government’s proposed allocations for ‘low carbon spending’ in 2014-20 barely mention renewables.

In Slovakia, the operational programmes for clean EU energy spending are showing some positive signs, with measures that would encourage uptake of solar panels on rooftops as well as the development of small hydropower installations and regional strategies for wider integration of renewables.

However, as in the Czech Republic, what will qualify as renewables in Slovakia should be setting off alarm bells in Brussels. Indeed, the current preference for large biomass installations is opening the door for coal-fired power plants to tuck into the EU pie. Two large hydro projects are also in the running.

In Poland, the green certificate system has tended to favour carbon-intensive energy sources. According to official statistics, over 40% of renewable energy in 2012 was sourced from the co-combustion of coal and biomass. The warning signs for potential abuse of EU funds intended for clean green energy are pretty clear.

Therefore, the picture in all four central and eastern European countries is mixed, with varying degrees of investment uncertainty and competition between different energy players for scarce investment support.

What is striking is that, while new injections of EU money are intended to help bridge the gaps between their current renewables shares and 2020 targets, they may end up supporting contentious projects with questionable environmental benefits.

How, then, to ensure that EU funds designed to spur green growth across Europe get into the right hands, or at least protected from abuse?

The European Commission must be firm in its negotiations with CEE countries. Now is not the time to be turning the clock back to the twentieth century.