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DIRECTORATE GENERAL FOR INTERNAL POLICIES

POLICY DEPARTMENT B: STRUCTURAL AND COHESION POLICIES

REGIONAL DEVELOPMENT

INFRASTRUCTURE FOR RENEWABLE ENERGIES:

A FACTOR OF LOCAL AND REGIONAL DEVELOPMENT

STUDY

This document was requested by the European Parliament's Committee on Regional Development. AUTHORS Austrian Institute for Spatial Planning (ÖIR): Bernd Schuh, Erich Dallhammer SWECO International AB: Niclas Damsgaard Erin Nicole Stewart RESPONSIBLE ADMINISTRATOR Esther Kramer Policy Department B: Structural and Cohesion Policies European Parliament B-1047 Brussels E-mail: [email protected] EDITORIAL ASSISTANCE Lea Poljančić LINGUISTIC VERSIONS Original: EN Translation: DE, FR. Executive summary: BG, CS, DA, DE, EL, EN, ES, ET, FI, FR, HU, IT, LT, LV, MT, NL, PL, PT, RO, SK, SL, SV. ABOUT THE PUBLISHER To contact the Policy Department or to subscribe to its monthly newsletter please write to: [email protected] Manuscript completed in May 2012. Brussels, © European Union, 2012. This document is available on the Internet at: http://www.europarl.europa.eu/studies DISCLAIMER The opinions expressed in this document are the sole responsibility of the author and do not necessarily represent the official position of the European Parliament. Reproduction and translation for non-commercial purposes are authorized, provided the source is acknowledged and the publisher is given prior notice and sent a copy.

DIRECTORATE GENERAL FOR INTERNAL POLICIES

POLICY DEPARTMENT B: STRUCTURAL AND COHESION POLICIES

REGIONAL DEVELOPMENT

INFRASTRUCTURE FOR RENEWABLE ENERGIES:

A FACTOR OF LOCAL AND REGIONAL DEVELOPMENT

STUDY

Abstract

This study draws a picture of the infrastructure development in the main renewable energy sectors (wind, solar, biomass, hydroelectric, geothermal) in European regions. It explains how projects developing regional infrastructure for renewable energy are financed in the current programming period of Structural Funding and it analyses the quality of these provisions. Finally, the study explores the existing and future measures for renewable energy infrastructure as well as electricity network plannings in Cohesion programmes and in the National renewable energy plans.

IP/B/REGI/FWC/2010-002/Lot4/C1/SC2 May 2012

PE 474.556 EN

Infrastructure for renewable energies: a factor of local and regional development

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CONTENTS EXECUTIVE SUMMARY 13

1. INTRODUCTION 21

2. THE CONTEXT OF EU ENERGY MARKETS 25

2.1. Current EU energy policy 26

2.2. EU Energy market structures – the inconvenient heritage 28

2.3. Proposed remedies by EU policy in general 29

2.4. Remedies in the area of energy infrastructure 30

3. ERDF/COHESION FUND EXPENDITURES 33

3.1. Structural Funds and renewable energy infrastructure 33

3.2. Other support of renewable energy infrastructure through EU co-funding (2007 – 2013 programming period) 36

3.2.1. Intelligent Energy Europe Programme 36

3.2.2. European Agricultural Funds for Rural Development 37

3.2.3. Other EU funding sources for renewable energy infrastructure: 37

4. CASE STUDIES 39

4.1. Selection of the case studies 39

4.2. Methodological approach and limitations 40

4.3. Austria 41

4.3.1. Introduction 42

4.3.2. Güssing – socio-economic impact of renewable energy investments 42

4.3.3. Vöckla-Ager – aiming at supporting local economy and energy efficiency 46

4.3.4. Conclusions 50

4.4. Portugal 50


4.4.2. Madeira – facing the challenge of limited capacity of energy storage 51

4.4.3. Azores – an experimental ground for appropriate technologies 54


4.5. Romania 59


4.5.2. Romania – following a centralized approach 59


Policy Department B: Structural and Cohesion Policies

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4.6. Sweden 66


4.6.2. Upper-North Sweden - example for unused potential 66

4.6.3. Upper-North Sweden - also an example for good practise 69


4.7. United Kingdom 73


4.7.2. Scotland – funds supports offshore grid expansion 75

4.7.3. Wales – stunted by limited grid connectivity 80


5. CONCLUSIONS AND RECOMMENDATIONS 89

5.1. Research Questions 90

5.2. Smart Grids as answers to renewable energy supply? 94

5.3. Identifications of regions suitable to boost renewable energy infrastructure 94

5.4. The problem of energy (electricity) grid support 97

5.5. Recommendations 98

REFERENCES 101


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LIST OF ABBREVIATIONS ADENE Portuguese Energy Agency

AIR Annual Implementation Report

AREAM Regional Agency for Energy and Environment of Madeira

BEMIP Baltic Energy Market Interconnection Plan

CAP Common Agricultural Policy

CBC Cross Border Countries

CCS Carbon Capture and Storage

CHP Combined Heat and Power

CO2 Carbon dioxide

COP Corporate Operational Plan

DG Regio Directorate General for Regional Policy

EACI Executive Agency for Competitiveness and Innovation

EAFRD European Agricultural Fund for Rural Development

EBRD European Bank for Reconstruction and Development

EC European Commission

ECCC Edinburgh Climate Change Centre

EEM Electricidade da Madeira

EERP European Economic Recovery Plan

EIB European Investment Bank

ELENA European Local ENergy Assistance

ENNEREG Regions paving the way for a Sustainable Energy Europe

ENPI Kolarctic programme

EOWDC Aberdeen Offshore Wind Farm and European Offshore Deployment Centre

ERDF European Regional Development Fund

ESEP East of Scotland European Partnership

ESF European Social Fund

ETG Electricity Transmission Grid

EU European Union

EU ETS Emissions Trading Programme

EUR Euro

GBP Pound Sterling


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GDP Gross Domestic Product

GWh Gigawatt hour

HIPP Highlands and Islands Partnership Programme

IB/MA Intermediate Bodies/Management Authorities

ICT Information and Communication Technologies

IEE Intelligent Energy Europe

IFI International Financial Institutions

INTERREG Community initiative aiming at stimulating interregional cooperation

ISLES Irish-Scottish Links on Energy Study

JASPERS Joint Assistance to Support Projects in European Regions

JEREMIE Joint European Resources for Micro to Medium Enterprises

JESSICA Joint European Support for Sustainable Investment in City Areas

KAI Key Area of Intervention

km2 Square kilometer

kW Kilowatt

LCRI Low Carbon Research Institute Energy Programme

LEADER Liaison Entre Actions de Développement de l'Économie Rurale

LRF Farmers Federation

LUPS Lowlands and Uplands Scotland

MAC Transnational Cooperation Programme Madeira-Açores-Canarias

MW Megawatt

MWh Megawatt hours

NGO Non-Governmental Organisation

NREAP National Renewables Action Plan

NSRF National Strategic Reference Framework

NUTS Nomenclature of Units for Territorial Statistics

OP Operational Programme

OR Outermost Region

ÖROK Austrian Conference on Spatial Planning

PA Priority Axes

PPEC Consumption Efficiency Promotion Plan

PPERAMM Madeira’s Regional Energy Policy Plan


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PPP Purchasing Power Parity

PRAI Programme of Innovation Actions

PRODESA Operational Programme of the Autonomous Region of Azores

R&D Research and Development

RDI Research, development and innovation

RES Renewable Energy Source

REVA Regionalverband

RSFF The Risk Sharing Finance Facility

SEACAMS Sustainable Expansion of the Applied Coastal and Marine Sectors

SEGEC Scottish European Green Energy Centre

SME Small and Medium-sized Enterprises

SO2 Sulfur dioxide

SOP Sectoral Operational Programme

SOP-IEC Sectoral Operational Programme – Increase of Economic Competitiveness

SPD Single Programming Document

SRAM Regional Secretariat of the Environment and Sea

SSA Strategic Search Area

STRAT.AT Nationaler Strategischer Rahmenplan Österreichs

SWOT Strengths, Weaknesses, Opportunities, Threats

TAN Technical Advice Note

TEN-E Trans-European Energy Network

TSO Technical Standards Organisations

TWh Terawatt hour

TYNDP Ten-Year Network Development Plan

UK United Kingdom

USD US Dollar

WAG Welsh Assembly Government

WATERS Wave and Tidal Energy: Research, Development and Demonstration Support Fund

WEFO Wales European Funding Office


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LIST OF TABLES Table 1 EU regional policy contribution to renewable energy infrastructure in the ongoing period 34

Table 2 EU funds allocated to energy in the Member States of the case studies 40

Table 3 List of Beneficiaries of the operational Programme Burgenland 2007-2013 (Objective Convergence/ERDF) 45

Table 4 List of Beneficiaries of the operational Programme Oberösterreich 2007-2013 (Objective Regional Competitiveness and Employment/ERDF) 49

Table 5 Expected RES investments in the Azores, 2007-2013 57

Table 6 Contracted renewable energy projects under SOP IEC PA4 64

Table 7 Renewable energy projects and energy infrastructure funded under the Highlands and Islands partnership in 2011 78

Table 8 Renewable energy projects and energy infrastructure funded under the ESEP from the LUPS in 2011 79

Table 9 ERDF spending on renewable energy for East and West Wales 83

Table 10 Summative Findings of the case studies 85


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LIST OF MAPS Map 1 Budgeted Renewable Energy Funding 2007-2013 35

Map 2 Overview over the case study regions 39

Map 3 Transmission network in Madeira 52

Map 4 Proposed Area for Offshore Grid 75

Map 5 The transmission system in Wales and the West Midlands 80

Map 6 Energy capacities – Vulnerability 96

LIST OF FIGURES Figure 1 The task at hand – setting the frame for analysis 22

Figure 2 The “dramaturgical arch” of the study 23

Figure 3 Current energy use and technical potential from renewable energy 46

Figure 4 Renewable electricity production in 2010 (left) and 2020 (right) in GWh 61

Figure 5 Dilemma of Electricity Grid Support 98


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EXECUTIVE SUMMARY

This study explores the possibilities for renewable energy infrastructure development to reach the goals of the Europe 2020 Strategy, with an emphasis on the regional/local level. Both the investments of Cohesion Policy in this area to support the EU2020 goals and the effect of these investments on regions’ socio-economic development are taken into account. By assessing case studies from five regions producing renewable energy in the European Union (EU), this study makes the case for integrated production of green energies through creation of power grids, energy storage facilities, smart energy infrastructure in households and enterprises and co-generation plants for heat and power. Attention is given to expanding transnational energy exchange, with particular attention to cross-border joint ventures between neighbouring countries and a greater trans-European energy infrastructure.

In line with the Regional Policy as a key component of the EU 2020 Strategy, this study explores the variety of options to increase support for extension of existing networks and creation of new infrastructure to maximize the potential of renewable energies.

Furthermore, it assesses how projects developing regional infrastructure for renewable energy are being financed in the current programming period of Structural Funding and in which quantity and quality.

At present, EU energy markets are facing pressure from political actions, e.g. the cut-off of the natural gas flow from Russia, fluctuations in fossil fuel prices and severe weather phenomenon causing damage to existing structures and stressing the energy supply during periods of extreme hot and cold. Due to the Fukushima Nuclear Power Plant disaster in Japan, European nations have also reconsidered their nuclear energy programmes, with Germany having shut down its seven oldest reactors.

The financial hardships caused by the economic crisis since 2008 have contributed to a drop in energy consumption, and a reluctance to invest in clean energy technologies. One positive effect was to inadvertently reduce CO2 emissions due to reduced consumption, however this situation is fragile, and could lead to a shift back towards coal and gas fired plants. To prevent this backslide, now is the right time to make the case for investment in renewable energy infrastructures rather than fossil fuels, despite the heftier start up costs. The EU’s increasing dependency on imported fossil fuels and lack of sufficient energy storage facilities leaves it vulnerable to crises and regional competitiveness, as the disparity between regions of the EU is particularly pronounced in the most exposed areas.

Three key issues have been identified in terms of future energy markets:

Insufficient investments in new energy capacities, leaving aging infrastructure capable of an inadequate supply for the EU’s energy needs;

Fossil energy supply shortfall (and security), as much of the worlds’ sources and reserves are located outside of the EU, transportation, political and financial issues could all present a barrier to fossil fuel availability;

Peak energy demand (and security) becomes a problem during periods of increasingly extreme weather, which causes greater stress on energy provision.

Current EU energy policy considers the central goals to be security of supply, competitiveness and sustainability. To achieve these goals it is following a policy of deregulation in order to encourage competitiveness leading to low prices for the consumer, and to unite fragmented regional markets into a pan-European energy supply to ensure security. By striving for an overall reduction in fossil fuel consumption, a two-fold benefit is both a decrease in CO2 emissions and reliance on external providers of fossil fuels, thereby supporting both the sustainability and security of supply objectives.


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This energy will be replaced by renewable sources such as wind power, biofuels and solar energy, which can be harnessed on EU soil and through offshore plants.

Moreover, the so-called ‘’20-20-20 targets’’ to be fulfilled by 2020 include a 20% reduction in greenhouse gas emissions compared to 1990, renewable energy sources (RES) providing 20% of all energy consumed in the EU, and 20% lower energy usage than in a comparable scenario where no measures were taken towards sustainability.

Renewable energy implementation and energy efficiency measures are currently in the hands of each of the Member States, as there is no EU-wide blanketing legislation. Member States are given specific targets, however the European Commission suggests EU-level policies to help speed along progress and ensure integrated markets. It has proposed various remedies to achieve an energy-efficient Europe, chief among them improving efficiency in the largely untapped building and transport industries, such as requirements for wider usage of Ecodesign and an infrastructure for electric vehicles.

The European Commission considers the current energy infrastructure as inadequate to connect and service the whole of Europe and recognizes the challenges to improving it both from the private sector and national governments, so it proposes to introduce top-down directives from the EU-level to sufficiently modernize and interconnect national energy grids with the eventual goal of a single European market. As the output of many Renewable Energy Sources (RES) fluctuates depending on weather patterns, a well-connected infrastructure could prevent future crises by shoring up supply that can be easily transported throughout the European Energy Grid. Additional measures such as ‘smart meters’ to transparently show the consumer their energy consumption could be in place in 80% of EU households by 2020.

Regional Policv plays an important role in this context. However, while renewable energies receive comparatively greater support from the European Regional Development Fund (ERDF) than conventional electricity, in relation to the overall budget and EU contribution the total share of support for renewable energy infrastructure only accounts for 4% of the complete ERDF EU contribution budgeted for 2007 – 2013. Greater funding for countries in Southern and Eastern Europe territorially reflects the role of Cohesion Policy for infrastructure investments, with Central and Northern European countries receiving the least amount of support for renewable energy infrastructure. Overall, the amount of ERDF funding in this field is rather low, especially in support of energy grid investments.

The two major EU co-funded direct policy sources of funding for support and promotion of energy efficiency and renewable energy are the Intelligent Energy Europe (IEE) programme and the Rural Development Fund (EAFRD). The IEE plan finances individual projects based on a call for proposals, and the EAFRD primarily supports biomass energy related to agricultural production. However, both sources only contribute negligible sums in the greater picture. Additional funding can be accessed through a variety of programmes such as Joint Assistance to Support Projects in European Regions (JASPERS), Joint European Resources for Micro to Medium Enterprises (JEREMIE), Joint European Support for Sustainable Investment in City Areas (JESSICA) and sources such as the European Investment Bank (EIB).


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CASE STUDIES

Nine regions were selected as case studies and were analysed based on the existing and future measures for renewable energy infrastructure and their benefits for the social, economic and territorial development. Each case study elaborates on the following topics:

• Compatibility, complementarities and efficiency of EU Regional Funds supporting this infrastructure

• Responsibility of the various actors involved in setting up the infrastructure and handling the support (multi-level governance)

• Economic, social and territorial development impacts of the investments

Two locations in Austria were chosen as they have implemented a variety of successful actions for renewable energy use. Güssing in Burgenland and Vöckla-Agar in Upper Austria represent different economic, geographical and historical regions of the country and have had differing levels of success in renewable energy use. Güssing is a best practice example, transforming a previously poor peripheral region with bleak prospects into a model of sustainability with its entire energy production coming from renewable sources. Its energy production is a mixture of local biomass, solar energy and photovoltaic, and today 27 decentralized power plants in the Güssing district generate enough excess energy to make a profit to reinvest in funding RES.

By contrast, Vöckla-Agar is located in a wealthy industrial region of Austria in close proximity to large economic centres. Its strategy involves a Technology Centre which promotes innovative entrepreneurial activities in sustainability and the dissemination of ideas for energy efficiency, but it has not yet reached its own efficiency targets to become a model region. As in Güssing, the aim here is not only to make the energy system sustainable, but also to support the local economy, to keep as much value added in the region as possible, secure existing and create new jobs and protect the livelihoods of farmers. The strategy in Vöckla-Ager is to work across sectors and safeguard diversity.

Madeira and Azores in Portugal face special challenges as isolated archipelagos, with different population distribution and economic situations. As they are greatly distanced from substantial population centres, access is restricted to internal energy markets and must incur high costs of fossil fuel transit or produce energy themselves. Madeira employs hydroelectric, wind, waste incineration and photovoltaic energy, the development of which was largely co-funded by ERDF. Its Socorridos power plant has the capability to store energy during off-peak periods, thus improving the islands’ energy efficiency. Azores has large unexploited potential for renewable energy, particularly geothermal due to its fault-line location. Currently, two geothermal plants provide 40% of its energy, and wind and hydroelectric power are also sourced on the islands. In the 2000-2007 period, Azores was one of the most energy efficient regions of the EU. In both areas several initiatives are taking place to explore and expand the use of RES and to develop new forms of energy production (e.g. wave, tidal, hydrogen). These islands received more support from EU funding initiatives than the other case studies in question, which have played in significant role in the development of renewable energy generation capacities.

Romania follows a centralized approach to Regional Policy, which is why no particular regions in the country were singled out as case studies. While the country is well covered with electricity grids, its aging infrastructure (30% of which was built in the 1960s) is causing significant losses along energy supply chains, spurred on by increasingly high demands from the burgeoning economy. However, the potential for Renewable Energy Sources development is high, mainly from solid biomass, hydropower, geothermal and wind energy, the latter in particular on the Black Sea coast and in the mountainous areas. The EU has set a target of


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24% renewable energy production for Romania by 2020, but they have also identified large investment needs and operating costs as key barriers to the successful implementation of increased generation capacity. As a new Member State, Romania has little experience with EU funds, and is currently investing very little in renewables, however this may change in the near future.

Sweden points to Upper-North Sweden as a region that hosts good practice examples as well as unused potential. It is a sparsely populated area with favourable natural resources for hydroelectric power, wind and bio energy. The large amount of available land and lack of competing interests create excellent conditions for energy exploitation, and the region has already been producing hydroelectric power for over 100 years; such plants located throughout the country generate 50% of Sweden’s energy. Upper-North Sweden’s production of heating, biogas, wind energy, refined fuels and biomass could increase significantly, but it faces hurdles such as transmission in the national grid due to its remoteness and the lack of infrastructure developed enough to handle the large amounts of energy that could be produced. There is little unused potential in the current grid, so it would need to be greatly reinforced to expand production. Additionally, municipal governments pose a hindrance to strengthening the grid, as some municipalities do not recognize renewable energy as a growth industry, and even implement policies to discourage it. As the local authorities have quite a lot of sway in Sweden, establishing compensation systems or by highlighting good examples of how a municipality or a region can benefit from investments in infrastructure for renewable energy may be necessary to push forward progress in this field.

In the UK, Scotland and Wales serve as case studies, both with high potential in renewable energy production, but at different stages of infrastructure. The Irish-Scottish Links on Energy Study (ISLES) programme views two offshore locations in the UK as prime candidates for development of a massive offshore grid harnessing wind, tidal and wave energy; the Northern Concept in Scottish waters and the Southern Concept of the coast of Wales. As Scotland currently possesses up to a quarter of Europe’s offshore wind and tidal energy resources, the government has set ambitious renewable targets, hoping to capitalise on this vast resource and positioning the nation as a world leader in innovation, development and deployment of renewable energy. Many of the power stations are located in peripheral areas and are recipient of Structural Funds. As part of its “Energy Policy Statement, A Low Carbon Revolution”, Wales intends a twofold increase to the amount of current electricity generation to come from renewable sources by 2025, with 40% coming from marine, a third from wind and the rest from sustainable biomass power or smaller projects using wind, solar, hydro or indigenous biomass. However at present, Wales still lacks sufficient onshore grid capacity, and the issue of multi-level governance has posed a huge barrier to the uptake of renewable energy, given the delay in connecting wind projects to an onshore grid.

This study posed “cardinal questions” that were stipulated in the Terms of Reference, and the findings seek to answer the following:

• Which regional infrastructure is necessary to boost the use of renewable energies?

A mix of infrastructure on the regional level will be necessary to boost the use of renewable energy. The specific strengths of a region (e.g. wind power, biomass, geothermal, etc) must be detected and best utilized, a process that is well on its way as evidenced by the case study regions. To deal with the imbalance in renewable energies available throughout the EU, grid structures must be strengthened and integrated to create a pan-European energy market capable of delivering these energies to all regions. Smart grids, as envisioned by the European Commission energy policy blue print will be particularly relevant in the future.


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• Which are the present main measures to promote renewable energies infrastructure in ERDF programmes and national renewable energy plans and are they complementary or do they overlap?

ERDF funding has proved minimal in investing in renewable energy infrastructure in the sense of this study; rather its support lies more in renewable energy production and energy efficiency measures. Due to overall weak support of renewable energy infrastructure, the ERDF programmes and National Renewable Energy Plans do not contradict each other.

• Why have Cohesion Policy investments in regional infrastructure for renewable energy been slow so far?

Findings have shown that renewable energy infrastructure is especially difficult to fund, as there are few incentives for private investors, and administrational logic in many Member States involves various levels and branches of government in energy policy, leading to enormous frictional losses of the funding strategies and resulting in unnecessarily high transaction costs for the beneficiary of the funds. Experience and know-how in EU fund management are an essential prerequisite to safeguarding consumption of funds, and the difficulties in delivering funds to the right beneficiaries is evidenced by the Romanian case study.

• How could regional and national stakeholders be encouraged to invest more in infrastructure for renewable energies?

The chief obstacles to more support from ERDF are complex market conditions and regulatory frameworks, which are a main issue of EU energy market liberalisation attempts; however, they have not shown large-scale effects so far. The European Commission, Member State governments and regulators should intensify their efforts to remove these obstacles in order to accelerate the integration of the European Electricity Grid, improving the security of supply. Closer cooperation in the European Technical Standards Organisations (TSO) improves electricity flows’ fluidity, which in turn improves solidarity between countries during difficult periods. Regional/local investments should follow integrated plans decided on various levels of national and EU-wide policy, meaning that National Renewable Energy Plans will have to be more closely and effectively linked to national EU funding strategies.

• What are the differences between Member States in this context and what are the reasons for problems discovered?

The following differences have been identified: Overall governance mechanisms for managing Regional Policy and territorial development differ, with federal states showing higher frictional losses than centralized ones. Market power distribution in energy markets is affected by policy, e.g. economies with policy-controlled energy providers can prevent the development of alternative energy supply systems. National policy priorities can also pose impediment to renewable energy investment when funding precedence lies elsewhere.

• What is the relevance of multi-level governance, shared management and potential of public private partnerships for renewable energy investments?

To date, multi-level governance has posed more of an obstacle than a supporting factor. The extra layers of bureaucracy cause delays and barriers to renewable energy implementation.


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• What is the potential of cross-border cooperation and macro-regional strategies in renewable energy infrastructure?

Cross-border transmission of energy is vital to ensuring security of supply. The geographic conditions in Europe offer many locations where two nations could both effectively tap a natural resource, thus transnational synergies can aid in energy production capacity. The analysis indicates that national interests still take precedence, however large-scale investments in the high voltage grid are a step in the right direction.

• How could potential territorial, social and economic effects of renewable energy for the development of regions be projected?

It is difficult to directly attribute socio-economic effects to most of the investments but positive effects on renewable energy infrastructure – employment, regional value added and CO2 emission reduction can be observed, as a decrease in spending on fossil fuels allows for increased public spending on socio-economic development structures and improvements in the energy infrastructure.

To meet the challenge facing massive industrial electricity storage, various solutions to improve the renewable energy supply have been proposed such as ‘smart grids’, which would require large investments. Transmission and distribution tariffs would have to be redesigned (and increased) in order to incentivize grid operators to invest as needed.

VULNERABILTY

In order to assess the future needs and emphasis of support it is necessary to analyse where the territorial need indicates such support. All regions of the EU were assessed for vulnerability indicators in new energy capacities and susceptibility to fossil fuel shortfall. Highly dependent on fossil fuels, Europe currently imports 53.1% of primary energy consumed. Vulnerability to fossil energy shortfall shows a clear distinction between Western Europe and Eastern Europe. Most regions in Western Europe – except in Ireland – are prepared for fossil energy supply shortfall while in Eastern Europe the vulnerability is above average, with Romania and the Baltic States being the most vulnerable. Gross Domestic Product (GDP) per capita is the driving factor for the vulnerability; high GDP stands for high adaptive capacity in Western Europe vs. low GDP in Eastern Europe and Ireland.

CONCLUSION

To use these findings to identify suitable regions in which to boost investment in renewable energy infrastructure, it is useful to compare the vulnerability maps with the European Commission’s blueprint for renewable energy. European regions differ in suitablility for renewable energy production and especially in modes of renewable energy production which is why the balancing of supply and demand between regions and within regions will be necessary when paving the way towards the EU energy policy goals and to reducing the dependency on fossil fuels. Regional policy is an essential means to do so successfully as a more regionalized approach of renewable infrastructure support will be needed in the future.


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These key factors must be met to further development of renewable energies:

Increase of investments in regional strength of renewable energy production – e.g. wind energy potential as well as solar energy in southern regions, and biomass energy heavily forested regions where the potential is still not fulfilled.

The distinction between “high tech” renewable energy (electricity) and “low tech” renewable energy (heat) will be necessary for a more effective and efficient use of these energy forms. It will be necessary to better distinguish which energy supply covers which energy demand.

The establishment of smart grid solutions in combination with high voltage TEN solutions will safeguard a better distribution of the relatively valuable energy from electricity. The market structure obstacles will have to be tackled in order to establish a smooth and efficient exchange on this level.

The most vulnerable regions with respect to energy supply shortfalls and dependency on fossil fuels should be targets for EU/national support in order to counteract these vulnerabilities in the long run.


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1. INTRODUCTION

Renewable energy activities have a large potential to contribute to different goals of the Europe 2020 Strategy1. They foster the economic development in the European Union’s (EU) regions, creating new jobs, generating new social impetus and fulfilling sustainability goals by increasing the share of renewable energy. Regional Policy as a “place-based” policy2 plays an essential role in driving the shift towards investment in renewable energy and its infrastructure, as more electricity will be generated in a decentralised way in future3. This includes the creation of power grids, energy storage facilities, smart energy infrastructure in households and enterprises and co-generation plants for heat and power.

In view of confirming Regional Policy as key element of the EU 2020 strategy, it is important to see how the different actors in Regional Policy can support increased investment in regional renewable energy infrastructure and how these investments can impact the development of the regions. Therefore, the present study assesses the quantity and quality of the fincancing of projects developing regional infrastructure for renewable energy in the current programming period of Structural Funding.

The definition of what is to be defined as “Infrastructure for Renewable Energies” is difficult from a systemic perspective: renewable energy infrastructure in the narrowest sense are the facilities for renewable energy production such as solar panels, wind turbines, biomass plants etc. However as energy is grid dependent, the facilities for distributing and handling energy have to be considered as part of the infrastructure for renewable energy as well. In line with that the question arises if energy grids are particularly designed and set up for renewable energy distribution purposes. In recent years the establishment of “smart grids” have been linked to the setting up of renewable energy- in the sense that such grids are capable of tapping on the energy production by renewable energy sources more effectively. The idea behind these smart grid solutions is basically to counteract the “natural” disadvantages of some renewable energy sources – i.e. of being produced independently from the energy demand4 on the regional scale. These grids allow for a counterbalancing of temporal discrepancies between supply and demand of energy through storage, and more equal distribution of demand patterns. This is accomplished by various technical measures – such as smart metering (i.e. the precise billing of energy throughout the day which allows the consumer to adapt his/her behaviour according to the energy prices) and establishment of energy storage facilities (e.g. electric cars as night storage of surplus electricity). These infrastructure measures are all established on the regional – i.e. low voltage level of energy distribution and basically favour the general idea of regional energy autarchy of regions. Still this will not necessarily lead to efficient and sustainable energy solutions all over Europe. The linking of these “islands” and the pursuing of the overall goal of energy markets to produce energy security will call for trans-regional (i.e. high-voltage) linkages as well. Such linkages are envisaged in EU TEN-E energy connections (see Chapter 2 below).

1 European Commission (2010a): A European strategy for smart, sustainable and inclusive growth 2020

COM(2010). 2 Barca F. (2009): An Agenda for a Reformed Cohesion Policy: a place based approach to meeting European Union

challenges and expectations; Independent Report at the request of the Commissioner for Regional Policy; Brussels.

3 Electricity production from renewable sources show the characteristic of less centralized, large scale power sources, but will focus on tapping on small scale, decentralized sources, which are located at favourable places: see e.g. the development of designing buildings not only as zero-energy buildings, but as power stations (heat-power co-generation, PV power on the roofs etc.), or small scale local biogas plants serving the purpose of minimizing the ecological footprint per KWh of electricity.

4 Energy from the sun is dependent on daylight (however not necessarily direct sun rays), wind energy is dependent on wind blowing, etc.


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Yet, defining these as “renewable energy infrastructure” as well, is analytically not really correct, as high voltage power lines as established under the EU TEN-E, are not entirely distributing renewable energy, but to the larger extent distributing non-renewable energy (e.g. nuclear power).

Thus this study defines “Infrastructure for Renewable Energies” (especially on the regional scale) as: electricity and heat production infrastructure from renewable sources (i.e. solar/Photo-voltaic, wind, heat-power co-generation, biomass, biogas – electricity production, tidal and wave power), electricity grids and storage, district heating and cooling networks as well as smart grids (i.e. regional grids on the low voltage level designed for regional power exchange).

Against the backdrop of the recent Commission's initiatives giving Regional Policy a key role for investing in this field5, this study will also analyse the potential and the challenges of future investments in regional networks for renewable energy by Structural Funds. Figure 1 provides an overview of the tasks at hand.

Figure 1: The task at hand – setting the frame for analysis

Source: Author

The decisive element of the analysis will be the link between the trans-European energy grids to the decentralised small scale grids and plants via the European wide energy policy and energy markets. In the Cohesion Policy context, this regional infrastructure produces regional value added in the form of economic, social and environmental benefits and contributes to a balanced development.

The study follows a “dramaturgical arch” presented in Figure 2. The main source of information will be drawn from the regional operational programmes (OP) and their

5 European Commission (2010b): Energy infrastructure priorities for 2020 and beyond – A Blueprint for an

integrated European energy network; COM(2010) 677, 17.11.2010.


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implementation as well as from a set of best practise case studies. The starting point will be a brief description of the EU energy markets and energy policy (chapter 2). An analysis of the overall influence of European Regional Development Fund (ERDF) expenditures on renewable energy infrastructure (chapter 3) will prepare the ground for a detailed regional view of the situation in the case studies covering five Member States (Chapter 4).

Figure 2: The “dramaturgical arch” of the study

Vision for renewableenergy and smart grids post 2013:# 2020 strategy, vision of householdsas „power stations“, decentralized energyproduction

Status quo in EU:# results of energymarket analysis (WP 1)# results of ERDF expenditures (WP 2) # results of Case Study analysis (WP 3)

Conclusions for theERDF fundingprocedures andgeographicaldistribution post 2013

Source: Author

The study then provides a final overview and conclusion of the findings (Chapter 5). These will follow the eight “cardinal questions” that were stipulated in the Terms of Reference:

• Which regional infrastructure is necessary to boost the use of renewable energies?

• Which are the present main measures to promote renewable energies infrastructure in ERDF programmes and national renewable energy plans and are they complementary or do they overlap?

• Why have Cohesion Policy investments in regional infrastructure for renewable energy been slow so far?

• How could regional and national stakeholders be encouraged to invest more in infrastructure for renewable energies?

• What are the differences between Member States in this context and what are the reasons for problems discovered?

• What is the relevance of multi-level governance, shared management and potential of public private partnerships for renewable energy investments?

• What is the potential of cross-border cooperation and macro-regional strategies in renewable energy infrastructure?

• How could potential territorial, social and economic effects of renewable energy for the development of regions be projected?


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2. THE CONTEXT OF EU ENERGY MARKETS

KEY FINDINGS

• Energy is one of the most critical issues facing the EU today. Key challenges for the EU energy market include insufficient investments in new energy capacities, high fossil fuel dependency and the inherent threat of a supply shortfall as well as peak energy demand due to extreme weather events.

• Hence, EU energy policy aims at securing the supply, ensuring sustainability and encouraging competitiveness. The first two goals, emphasized by the 20-20-20 targets, focus on energy efficiency, a general decrease in energy consumption and a higher share of the energy consumed coming from renewable sources. Modernizing energy infrastructure is an integral part of the policy. To foster competitiveness, EU policy encourages the deregulation of national energy markets and market integration.

• Evaluation of the current policy indicates that it is inadequate to achieve its medium and long-term targets. While the CO2-emissions trading programme (EU ETS) successfully contributed to reduce emissions level, no EU-wide policy instruments to increase energy efficiency and stimulate the adoption of renewable energy have been developed. The state of market integration and energy infrastructure also demand policy attention.

• Proposed remedies include increased energy efficiency in transport, buildings and industry as well as in energy production and distribution. The European Commission is currently elaborating on enhanced measures to encourage investments in energy infrastructure projects.

Energy is one of the most crucial issues Europe is currently facing and will continue to face in the future. Since 2008, European regions have been challenged by various crises and changes in the energy markets: the oil price spike of July 2008 and the cut-off of the gas supply from Russia via Ukraine and Belarus had severe effects on account of the fact that Russia provides approximately 25% of the natural gas consumed in the EU. Additionally, extreme weather events such as the storm Kyrill in January 2007, and also generally increasing extreme high and low temperature periods, temporarily disabled energy infrastructures and energy supply.6

The Japanese Fukushima nuclear plant accident and its negative consequences on the security of the energy supply meant another significant external shock to EU energy markets. As a consequence, some European countries decided on a moratorium on nuclear energy: Italy, following the mid-June 2011 referendum, abandoned its plan to build the country’s first four reactors with the French company EDF. The Swiss government decided during the spring and summer of 2011 to phase out present reactors by 2034, but it has not closed the door to building new generation plants. On May 30, 2011 Germany took the radical decision to immediately stop its seven oldest nuclear reactors and not to restart its Kruemmel reactor, already stopped. This decision that deprives the European network system of 8,000 MW, impacting the European Electricity Grid balance, was made without consultation at the EU level. Reversing its December 2010 decision, the German coalition also decided to phase out its remaining nine reactors between 2015 and 2022.7

6 DG Regio (2011a): Regional Challenges in the Perspective of 2020 – Phase 2: Deepening and Broadening the

Analysis; Contract Study; Directorate General for Regional Policy – Unit C1; Brussels. 7 Capgemini (2011): European Energy Markets Observatory: 2010 and Winter 2010/2011 Data Set; Thirteenth

Edition; Paris.


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The biggest challenge however was the economic and financial crisis, which has massively weakened the final energy demand. There is clear evidence that energy investments in most regions and sectors dropped sharply in 2009. There was a positive (external) effect of the crisis: GHG emissions decreased due to economic decline. However, in the medium-term, the economic crisis may lead to higher emissions in a scenario of increasing reliance on fossil fuel capacities. If recovery takes longer than expected, a shift to coal- and gas-fired plants in addition to the prolongation of nuclear power plant operation at the expense of more capital-intensive options – such as renewable energies – is expected.

Cutbacks in investments in energy infrastructure will affect capacity with a time lag. In the short-term, weaker demand is likely to result in an increase in spare or reserve production capacity. But there is justifiable danger that sustained lower investment in supply could lead to a shortage of capacity and result in a severe increase of energy prices, just when the economy is on the road to recovery. In light of this, it is expected that the effects of the crisis on investments in the EU energy sector, the EU’s increasing dependence on fossil fuel imports from non-EU countries and extreme weather events will affect regional competitiveness and that some regions may be more exposed than others.8

2.1. Current EU energy policy

The three central goals of current EU energy policy are security of supply, competitiveness and sustainability9. European energy consumers should have access to the energy they need, at the lowest possible cost, and the environmental impact of the production, distribution and consumption of this energy should be minimal.

To encourage competitiveness, EU policy has encouraged the deregulation of energy markets and the amalgamation of national energy markets into integrated, pan-European markets. The policy is based on the assumption that competitive energy markets will lead to the lowest possible cost for consumers, but that the full potential of deregulation can only be achieved if fragmented national markets are integrated into larger markets where locally dominant actors lose their ability to exert market power.

To ensure security of supply and sustainability, EU energy policy aims at reducing energy consumption in general, and consumption of energy based on fossil fuels in particular. Since fossil fuels for the most part are imported from countries outside the EU, reducing their use increases security of supply. Since the use of fossil fuels leads to greenhouse gas emissions, reducing their use contributes positively to sustainability.

EU energy policy is based on the assumption that the use of fossil fuels cannot be reduced by a general reduction in energy use nor by an increase in conventional low-carbon alternatives such as hydropower and nuclear power. Fossil fuels will have to be replaced by increasing the use of Renewable Energy Sources (RES) such as wind power, biofuels, and solar energy. Renewable energy can for the most part be sourced from within the EU, and its use thus contributes positively to security of supply. Furthermore, the use of renewable energy does not lead to the large-scale emission of greenhouse gases, and therefore contributes positively to sustainability.

8 Ecofys (2009): Analysis of impacts of climate change policies on energy security. (Greenleaf, J., Harmsen, R.,

Angelini, T., Green, D., Williams, A., Rix, O., Lefevre, N., Blyth, W.). November 2009. 9 European Commission 2010b.


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In current EU energy policy, the three central goals have been concretized by the three so-called 20-20-20-targets which state that by the year 202010:

1. Emissions of greenhouse gases from the EU should be 20% lower than what they were in the year 1990.

2. RES should provide 20% of the energy consumed in the EU.

3. More efficient use of energy should lead to primary energy consumption being 20% lower than it would have been in a reference scenario where no measures against inefficient use of energy are taken.

These three targets aim mainly at achieving the security of supply and sustainability goals. However, it can be argued that a general reduction in energy use also has positive effects on competitiveness as lower demand for energy strengthens consumers and reduces market power of producers and suppliers.

In addition to the 20-20-20 targets and an ambition to foster competitiveness and market integration, current EU energy policy is also heavily focused on modernizing energy infrastructure. European energy infrastructure is ageing, posing a threat to security of supply. Furthermore, the infrastructure is not suitable for large volumes of renewable energy. Unless energy infrastructure is reinforced and expanded, renewable energy will not be able to replace fossil fuels, thus threatening security of supply and sustainability.

Finally, it is worth pointing out that market integration is important not only for the competitiveness goal, but also for the adoption of renewable energy. If energy markets remain fragmented, it will be difficult to compensate for the intermittent nature of some RES. These sources require large, interconnected regional and pan-European energy markets.

Having these targets in mind and taking the realities in EU energy policy implementation into account, the European Commission has evaluated its energy policy to see how long-term policy beyond 2020 should be shaped, and to what extent existing medium-term targets are realistic. In summary, the findings are that current policy will not lead to fulfilment of the medium-term targets, and is wholly inadequate for the long term targets11.

The status today on both deregulation and market integration is that both efforts are incomplete. While most wholesale energy markets are fully deregulated, many retail markets are only partially deregulated, and many national markets have not merged into larger regional or pan-European energy markets. The European Commission regards this as a threat to the competitiveness goal (see chapter 2.3. below).

The most important policy instrument implemented by the European Commission has been the EU ETS12. The programme has had a direct impact on emission levels and has forced the large industrial actors that are obliged to participate in the programme to become more energy efficient. The EU ETS has been successful in reducing emission levels, and given tougher conditions in the third phase of the programme, which will run between 2013 and 2020, the European Commission believes that the target to reduce emissions levels by 20% by 2020 compared to 1990 will be achieved. The European Commission has also indicated that it is prepared to raise the reduction target for 2020 to 30% if countries outside the EU agree to raise their targets as well. For the period beyond 2020, the European Commission believes that in order to avoid the most serious impacts of climate change, emission levels

10 European Commission 2010b. 11 European Commission 2010b. 12 European Parliament and Council (2009a): Directive 2009/29/EC of the European Parliament and of the Council of

23 April 2009 amending Directive 2003/87/EC so as to improve and extend the greenhouse gas emission allowance trading scheme of the Community (Text with EEA relevance).


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must be reduced by 80 to 95% by the year 2050, compared to 1990 levels. It believes that the current set of policies will not achieve these reductions, and is therefore planning new measures to reduce emissions.

There have been no EU-wide policy instruments to stimulate the adoption of renewable energy13 – instead the European Commission has given each Member State country specific targets, and has left implementation in the hands of each of the Member States. Member States have been obliged to submit progress reports – called National Renewable Energy Action Plans (NREAP) – to the Commission. Although progress has been patchy, the Commission currently believes that the 20% renewable target for the year 2020 will be met. However, the Commission believes that the use of RES has to increase even more in the longer term.

There have been no EU-level policy instruments to increase energy efficiency – again the European Commission14 has given each Member State country specific targets and has left the implementation to the Member States. In its evaluation of the 20% target for energy efficiency, the European Commission does not currently believe that the target will be met and has proposed a number of measures to ensure that this goal will be achieved.

2.2. EU Energy market structures – the inconvenient heritage

The European Commission is also very concerned with the state of energy infrastructure in the EU and with the lack of integration between national energy markets. It does not believe that sufficient investment in energy infrastructure will take place by itself, and that this, in conjunction with fragmented energy markets, will severely hamper the further adoption of RES. The European Commission believes that neither commercial actors nor national regulatory agencies have the necessary incentives to build the energy infrastructure that Europe needs, and therefore proposes EU-level policies to accelerate infrastructure development and market integration.15 In the light of these obstacles it might be useful to have a closer look at these market structures:

“EU energy markets are still reflecting the borders of principalities of the 19th century”16. In other words, the energy market concentration still reflects the 'old' market structure, characterised by national or regional monopolies – usually dominated by vertically integrated companies -which control electricity prices in the wholesale market and block new entrants to the market. In the gas sector, "incumbents tend to control imports and/or domestic production," according to the European Commission.

The European Commission (EC) tried to break up these structures along the lines of free markets and exchange of goods and services by introducing two directives on energy market liberalisation17. However, even long after the first EC Directive on Electricity Liberalisation, there are still huge differences among market structures and competition of Member States.

13 European Commission (2009a): Directive 2009/28/EC of the European Parliament and of the Council of 23 April

2009 on the promotion of the use of energy from renewable sources and amending and subsequently repealing Directives 2001/77/EC and 2003/30/EC.

14 European Commission (2006): Directive 2006/32 of the European Parliament and of the Council of 5 April 2006 on energy end-use efficiency and energy services and repealing Council Directive 93/76/EEC (“The Energy Services Directive”).

15 Capgemini 2011. 16 Quote from EU energy commissioner Oettinger; Die Presse 5.XI.2011. 17 European Parliament and Council (2003): Directive 2003/54/EC of the European Parliament and of the Council of

26 June 2003 concerning common rules for the internal market in electricity and repealing Directive 96/92/EC; European Parliament and Council (2009b): Directive 2009/72/EC of the European Parliament and of the Council of 13 July 2009 concerning common rules for the internal market in electricity and repealing Directive 2003/54/EC (Text with EEA relevance).


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Looking at the broad European scenario, it is quite clear that only UK and Northern countries (Sweden, Finland, Norway and Denmark) present a complete sector liberalisation, although competition in Austria and the Netherlands is well developed.

Obstacles to the introduction of competition are not only legal/political. There are other factors involved, such as lack of interconnection including vital transmission lines (creating bottlenecks within the European space), use of uncoordinated and discriminatory methods to manage congestion (which impede new entrants) and the presence of generating companies with an excessive degree of market power at national or regional level. Since investment decisions in a competitive market are based on price signals from electricity markets and expectations about the longer term, then (price) volatility becomes a major item to analyse18.

2.3. Proposed remedies by EU policy in general

To ensure that medium-term targets are met, and to make sure that the achievement of long-term goals becomes realistic, the European Commission has presented a number of proposals.

To achieve an energy efficient Europe, the European Commission first of all wants to focus on the two areas with the largest untapped potential for energy savings – buildings and transport. It wants to accelerate the energy efficiency renovation rate by investment incentives, innovative financial instruments and financial engineering at European, national, and local levels. The European Commission also wants to make energy criteria critical components of all public procurement, and believes that energy efficiency of the transport sector can be considerably improved by making vehicles more efficient.

Improving energy efficiency in industrial sectors that are currently outside the EU ETS can also bolster overall energy efficiency. This could be achieved by widening the Ecodesign requirements for energy and resource intensive products, and by making sure that energy-management schemes (e.g. audits, plans, energy managers) are implemented in industry and in the services sector.

Finally, the European Commission wants to improve energy efficiency by requiring that energy efficiency measures are applied to the production, distribution and consumption of energy. Energy efficiency should become an essential criterion for the authorisation of new production and distribution facilities, and energy suppliers should be required to secure documented energy savings among their customers.

To realize the long-term sustainability goal, and to boost security of supply, the European Commission wants to increase the use of renewable energy in the transportation sector. For instance, it wants to increase the use of electric vehicles to reduce emissions from petroleum-powered vehicles and to reduce the dependence on imported oil. Electrifying the transportation sector will drive up the demand for electricity considerably, and will require that an infrastructure for electric vehicles is built from scratch. Furthermore, since the electricity used to power the new electric vehicles will most likely come from RES that require an overhaul of the electricity transmission grids (ETG), the need for infrastructure investments becomes greater still.

18 Isabel M., Soares R. T. (2004): Restructuring of the European Power Industry: Market Structure and Price

Volatility, online publication - http://www.sessa.eu.com/documents/wp/D23.2_Soares.pdf.


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2.4. Remedies in the area of energy infrastructure

The European Commission’s thoughts on infrastructure development are detailed in the Commission communication: “Energy infrastructure priorities for 2020 and beyond – A Blueprint for an integrated European energy network”19 where it describes the challenges already illustrated here, and proposes measures to overcome these challenges. The Commission believes that the EU’s existing energy infrastructure is inadequate in both the medium and longer-term, and that the necessary developments will not take place unless forceful action is taken at the EU level. Commercial actors do not have the financial incentives to build the necessary infrastructure, and national regulators do not have sufficient incentives to support infrastructure development needed by Europe as a whole.

The European Commission considers it its task to ensure that national energy grids become sufficiently interconnected to support the integration of national energy markets into larger regional markets that will subsequently evolve into a single European market. It also intends to ensure that electricity grids are modernized to ensure security of supply and to facilitate the integration of large amounts of renewable energy. The Proposal for the Council Regulation laying down the multiannual financial framework for the years 2014-2020 stipulates quite clearly that flexibility for the implementation of energy and telecommunications networks and infrastructure shall be increased20. Well-connected, large markets that can compensate for fluctuations in output can better handle the intermittency of electricity generation from RES. Longer-term, the Commission wants to see investment in energy storage, and to support the construction of the infrastructure that will be required for the electrification of the transport sector. Finally, the Commission wants to invest in Carbon Capture and Storage (CCS) in order to facilitate the continued use of European carbon reserves while still reducing greenhouse gas emissions. One of the seven EU 2020 Flagship Initiatives is explicitly called “A resource-efficient Europe” targeting at the establishment of a series of coordinated roadmaps dealing e.g. with EU needs to create a low-carbon economy in 2050, how the EU can create an energy system by 2050 which is low-carbon, vision for a low-carbon, resource-efficient, secure and competitive transport system by 2050 and medium and long-term objectives and means for achieving these goals with the main aim to decouple economic growth from resource use and its environmental impact21.

Following the February 2011 European Council asking for “determined action to tap the considerable potential for higher energy savings”, the Commission developed a new draft, the “Energy Efficiency” Directive published on June 22, 201122, focusing on instruments to trigger better energy efficiency of public buildings, the launch of demand response programmes through the rollout of smart meters, white certificate mechanisms and better usage of cogeneration, especially for district heating.

In 2013, the European Commission will check whether Member States will be able to deliver the European 20% cut objective. If shown that the overall EU target is unlikely to be achieved, the Commission will consider proposing legally binding national targets for 2020. One way to enable energy management is through smart meter installation combined with boxes providing the consumer with easy access to their consumption and related expenses.

19 European Commission 2010b. 20 European Commission (2011a): Proposal for a COUNCIL REGULATION laying down the multiannual financial

framework for the years 2014-2020; COM(2011) 398 final; Brussels. 21 European Commission (2011b): Communication from the Commission to the European Parliament, the Council,

the European Economic and Social Committee and the Committee of the Regions. A resource-efficient Europe – Flagship initiative under the Europe 2020 Strategy; COM(2011) 21; Brussels.

22 European Commission (2011h): Proposal for a Directive of the European Parliament and of the Council on energy efficiency and repealing Directives 2004/8/EC and 2006/32/EC.


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According to the Third Directive, 80% of the European population should benefit from smart metering by 2020.

In Europe, the fragmentation of interests created by the EU directive’s obligation to unbundle the utilities’ value chain and to split between regulated and non-regulated entities has led to an uncertain return on investment for smart metering projects at the distributor level. This difficulty, combined with the 2009 crisis, explains their slow adoption in Europe. In addition to smart meters and other devices, time-of-use tariffs, electricity curtailment incentives and public education are key elements to implement. Renewable energies and more flexible consumption patterns are strongly impacting grid management.

However, the European Commission has reason to believe that the necessary infrastructure development will not happen quickly enough. First, commercial actors do not have the financial incentives to build new infrastructure quickly enough – profits are too uncertain, and risks are too high. Second, the main focus of national regulators is to minimize national tariffs, often neglecting the benefits of cross-border infrastructure projects. Finally, permit procedures take too long – especially for cross-border projects.

The European Commission is currently working to identify high priority investment areas as well as a methodology to derive prioritized lists of investment projects from these investment areas. It intends to promote the creation of regional clusters to facilitate the planning, implementation and monitoring of the identified priorities and the drawing up of investment plans and concrete projects. Concrete investment projects, deemed to be of “European interest”, will be given special treatment at EU-level:

1. New permitting measures to streamline, better coordinate and improve current processes will be introduced.

2. For each project, a contact authority (“one-stop shop”) will be formed. This authority will serve as a single interface between project developers and the competent authorities involved at national, regional and/or local levels.

3. The introduction of a time limit for a final positive or negative decision to be taken by the competent authority will be explored.

4. Guidelines to increase the transparency and predictability of the process for all parties involved will be developed

5. A system of rewards and incentives, including of a financial nature, to regions or Member States that facilitate timely authorisation of projects of European interest will be developed.

6. A dedicated policy and project support tool to accompany infrastructure planning and project development activities at EU or regional levels will be developed.

7. Guidelines or a legislative proposal to address cost allocation of major technologically complex or cross-border projects, through tariff and investment rules, will be developed

8. The European Commission also intends to play a direct role in mobilising, pooling and leveraging public and private financial resources for infrastructures of European interest. It intends to strengthen the EU’s partnerships with International Financial Institutions (IFI) and build on existing joint financial and technical assistance's initiatives. It also intends to develop new tools to combine existing and innovative financial mechanisms that are different, flexible and tailored towards the specific financial risks and needs faced by projects at the various stages of their development.


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3. ERDF/COHESION FUND EXPENDITURES

KEY FINDINGS

• The establishment and improvement of renewable energy infrastructure and its supporting grids are seen as an important prerequisite to overcome the challenges energy poses for Europe.

• However, only 4% of total ERDF funding in the programming period 2007-2013 is allocated to measures related to renewable energy infrastructure. While the emphasis is on energy efficiency and relatively high budgets are foreseen for RES, electricity and trans-European energy networks (TEN-E) are rather weakly supported.

• Explanation for the minimal support for energy grid investments can be found in complex market structures and the low level of returns.

• The territorial distribution of ERDF funding follows the pattern of Cohesion Policy (supporting mainly South and Eastern Europe) rather than the logic of “place based” policy.

• Apart from ERDF there are other funding sources which support renewable energy infrastructure like the Intelligent Energy Europe (IEE) programme, Rural Development Fund (EAFRD), EIB etc. Overall, EU funding for renewable infrastructure has not been significant.

3.1. Structural Funds and renewable energy infrastructure

In 2011 the General Directorate for Regional Policy published a communication “Regional Policy contributing to sustainable growth in Europe”23, which listed the support for renewable energy infrastructure as “indirect” regional policy support attributed to sustainable growth. However “Investing in renewable energy provision” is then listed as one contribution of Regional Policy and Güssing (see our Case Study below) is mentioned as good practice. We will see in our detailed case study description that the role of Regional Policy in supporting these initiatives is rather overrated, but let us look at the contributions of Regional Policy to renewable energy infrastructure in more detail:

Within the communication of the European Commission on Smart Grids: From Innovation to Deployment24 a long list of intended activities of the Commission is provided. Amongst others:

“... The rollout of smart grid technologies is identified as a European infrastructure priority requiring particular attention in the Energy Infrastructure Package25. It outlines the necessary toolbox for the planning and delivery of the energy infrastructure, including through an instrument for EU financial support to leverage private and public funds. The Commission will also examine the possible use of other EU funding instruments, including the Structural Funds, to offer tailored financing solutions involving both grant support and repayable

23 DG Regio (2011b): Regional Policy contributing to Sustainable Growth in Europe; Brussels. 24 European Commission (2011c): Communication from the EU Commission to the European Parliament, the

Council, the European Economic and Social Committee and the Committee of the Regions. Smart Grids: From Innovation to Deployment, COM(2011) 202 final.

25 See e.g. section 5.4.2. in European Commission (2010b).


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assistance26, such as loans and guarantees, as well as support to innovative actions and technologies. ...”

Under these premises and taking into account the general importance of the establishment of renewable energy supply infrastructure and the supporting grids, one would assume that Cohesion Policy and especially the ERDF would substantially support projects in this field.

In principle, the OP under all three Objectives (Convergence, Regional Competitiveness and Employment and European Territorial Cooperation) show measures which support renewable energy infrastructure – this includes support for27:

Table 1: EU regional policy contribution to renewable energy infrastructure in the ongoing period

Measures Total EU contribution

budgeted 2007 – 2013 (in mio EUR)

Renewable energy: solar 986.5

Renewable energy: hydroelectric, geothermal and other 1,102.4

Renewable energy: biomass 1,793.8

Renewable energy: wind 786.6

Electricity 275.4

Energy efficiency, co-generation, energy management 4,276.7

Electricity (TEN-E) 313.2

Source: DG Regio 2009

It is clear that a major emphasis has been put on energy efficiency measures, which corresponds to the idea that energy efficiency is one of the most cost-effective ways to enhance the security of the energy supply and to reduce emissions of greenhouse gases. This is why the EU has set a target for 2020 of reducing its primary energy consumption by 20%.

The relatively high budgets for the RES biomass, hydroelectric, solar and wind show the willingness to support the supply side as well. Electricity and electricity (TEN-E) are weakly supported in comparison. This reflects the difficulty of supporting the grid infrastructure, while energy production and consumption – as source-related technology – is more easily funded. The problem of lower returns on investments into grid infrastructure compared to energy production and efficiency may serve as explanation for this low support as well.

However, in relation to the overall budget and EU contribution, it becomes apparent that the total share of support for renewable energy infrastructure only covers a very small proportion of the overall ERDF budget. Only 4% of the overall ERDF EU contribution budgeted for the 2007 – 2013 programming period is earmarked for these measures.

The following map shows the territorial distribution of ERDF expenditures throughout Europe on renewable energy infrastructure. What becomes apparent is that the ERDF funding 26 For example, within the current Cohesion Policy framework, urban development funds (established under the

JESSICA initiative) are providing repayable assistance for sustainable urban infrastructure development: http://ec.europa.eu/regional_policy/funds/2007/jjj/jessica_en.htm.

27 Data from DG Regio (2009): The Potential for regional Policy Instruments, 2007-2013, to contribute to the Lisbon and Göteborg objectives for growth, jobs and sustainable development, contract study commissioned by Directorate- General for Regional Policy, Evaluation Unit.


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territorially follows the pattern of Cohesion Policy – i.e. stronger support of the European East and South. This is obvious as the map depicts absolute funding figures, and thus the larger the underlying OP of a region is in general, the larger the budget for renewable energy infrastructure will likely be. Still, even within the Cohesion regions, the high share of renewable energy infrastructure allotment in the budgets of the Czech Republic and Southern Italy seems quite striking. While the Czech Republic finances primarily biomass energy production and energy efficiency, Southern Italy provides support in the fields of energy efficiency and solar energy. In the Western European countries there are some “islands” of significant support to be seen (Northern Sweden, some regions in France and Cornwall).

Map 1: Budgeted Renewable Energy Funding 2007-2013

Source: “The Potential for regional Policy Instruments, 2007-2013, to contribute to the Lisbon and Göteborg

objectives for growth, jobs and sustainable development”, NORDREGIO 2009; map developed by ÖIR


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The support of renewable energy infrastructure is also quite high in Poland and the Baltic countries. In terms of total expenditures, the Central and Northern European regions receive the least support for renewable energy infrastructure.

Although the absolute figures look significant, the relative share of renewable energy infrastructure support – even in regions with a high absolute budget – is rather small. Despite the fact that there appears to be quite a significant contribution to the support of renewable energy infrastructure the overall share of this support in the total ERDF budget (EU contribution) only amounts to less than 5%. This low level of support does not really match the investment necessities as pointed out by the European Commission itself (Directives 2009/28/EC and Decision No. 406/2009/EC) as well as by independent observers. The European Energy Markets Observatory 2011 by Capgemini28 states: “Energy system investment needs for 2020 were estimated by the EU13, before the Fukushima accident. Total investment in the electricity and gas sector between 2010 and 2020 would amount to around EUR 1.1 trillion (EUR 500 billion for power generation plants and EUR 600 billion for transmission and distribution grids). This estimation will certainly be revised upwards as it does not include German investments linked to the nuclear phaseout (EUR 250 billion) and other investment needs linked to the consequences of the Fukushima accident.”

What can also be taken from this first analysis of ERDF support for renewable energy infrastructure and connections to the complex structure of energy distribution is that energy grid investments (regardless of being high voltage grids or regional/local smart grid solutions) are especially low. The only support in this field may be found in regional/local district heating grids. The reason for this lack of support can be found in the comparably low returns on investment in the grid infrastructure as well as in the complex market structures (as described in Chapter 2). There are a limited number of ERDF OPs having foreseen support in electricity grids – only Greece, Romania and Poland have dedicated budgets for these investments. However, from first experiences (see Case Study Romania below) we see that these budgets have not lead to real expenditures so far, as structural and administrational hurdles are too large to put these investments into practice.

3.2. Other support of renewable energy infrastructure through EU co-funding (2007 – 2013 programming period)

Apart from the ERDF, there are several other financing sources for the support of renewable energy infrastructure available at EU level - In terms of direct policy support two will be more thoroughly depicted: the Intelligent Energy Europe (IEE) programme and the EAFRD (2nd Pillar of the Common Agricultural Policy (CAP)).

3.2.1. Intelligent Energy Europe Programme

The IEE programme funds three different types of activities:

• Funding projects: The majority of the programme's budget goes to funding projects across the EU that support and promote energy efficiency and renewable energy. Funds can be used to cover up to 75% of the project's costs. Applicants have to respond to a call for proposals setting out their project idea and plan. Calls are published annually.

• Procurement of products and services: Procurement is used to obtain any studies and services the EC or the Executive Agency for Competitiveness and

28 Capgemini 2011.


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Innovation (EACI) need to achieve the objectives underlying the IEE Programme. The EACI subcontracts services to private companies and organisations via calls for tender.

• Financing facility for cities and regions: European Local ENergy Assistance (ELENA) is a technical assistance facility that makes funds available to cities and regions across the EU that are investing in sustainable energy. ELENA covers a share of the cost for technical support that is necessary to prepare, implement and finance the investment programme, such as feasibility and market studies, structuring of programmes, business plans, energy audits, preparation for tendering procedures.

Money is available through each of these different financing streams, although the majority of the budget is given over to funding projects. EUR 730 million is available from 2007-2013. As indicated in this brief description, this fund would effectively support renewable energy infrastructure in principle. However, taking into account the total budget available for the programming period of 2007 – 2013 (the EUR 730 million is less than the EU contribution for renewable wind energy support alone under ERDF programmes) it becomes clear that the multiplier effects triggered through these support schemes will be limited.

3.2.2. European Agricultural Funds for Rural Development

The second Pillar of the CAP provides a wide range of measures supporting rural development. Among these measures, there is no explicit support for renewable energy infrastructure. Still, there are a number of measures where programme implementation in the Member States shows, that renewable energy infrastructure is funded. These measures are: “modernisation of agricultural holdings”, “improvement of the economic value of forests”, “adding value to agricultural and forestry products”, “infrastructure related to the development and adaptation of agriculture and forestry”, “diversification into non-agricultural activities”, “business creation and development”, and “basic services for the economy and rural population” as well as support within Axis 4 of the programme – i.e. Liaison Entre Actions de Développement de l'Économie Rurale (LEADER).

The main support within the EAFRD is linked to agricultural production and thus the main support is to be found in biomass energy and biomass-related energy grids (local heating grids, biogas plants, etc.). The total amount of funding stemming from the EAFRD is not to be assessed in detail, as the fund does not provide earmarked funding data in this respect.

3.2.3. Other EU funding sources for renewable energy infrastructure:

European Investment Bank (EIB) – The EIB furthers the objectives of the EU by making long-term financing available for sound investment. Within its Corporate Operational Plan (COP) the Bank has established challenging targets to drive its contribution to energy lending. While lending targets are reviewed annually, since 2006 the Bank has stepped up its energy lending from EUR 4 billion to a lending forecast of EUR 14.6 billion in 2010 for projects belonging to at least one of the following priority areas:

• Renewable energy and energy efficiency

• Research, development and innovation (RDI) in energy

• Security and diversification of internal supply (including TEN-E)

• Security of external supply and economic development (Neighbour and Partner Countries)


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European Bank for Reconstruction and Development (EBRD) – The EBRD helps countries in the region which stretches from Central Europe and the Western Balkans to Central Asia to become open, market economies.

Joint Assistance to Support Projects in European Regions (JASPERS) – JASPERS assists beneficiary countries (principally the new Member States and acceding countries of the EU) to prepare major infrastructure projects. The environment, energy efficiency and renewable energy are key areas of the initiative.

Joint European Resources for Micro to Medium Enterprises (JEREMIE) – The project is designed to promote increased access to finance for the development of micro, small and medium-sized enterprises (SME) in regions of the EU.

Joint European Support for Sustainable Investment in City Areas (JESSICA) – A programme designed to promote sustainable development for urban areas.

The Risk Sharing Finance Facility (RSFF) – A joint project of the EC and the EIB, the RSFF is a plan to improve access to debt financing for private companies or public institutions by promoting activities in the field of RDI.


39

4. CASE STUDIES

4.1. Selection of the case studies

In order to gain insight views about the role of Cohesion Policy in the development of infrastructure for renewable energies nine case studies in 5 Member States have been conducted covering regions with different economic and geographical contexts: central European regions and outermost regions, regions with a tradition in implementing renewable energy actions and regions where this in a new issue.

Different teams with local expertise took over the case study countries. In Austria, Güssing and Vöckla-Agar were chosen as case studies as they have implemented a variety of successful actions for renewable energy use. The two Outermost Regions (OR) Madeira and Azores in Portugal face special challenges as isolated archipelagos, with different population distribution and economic situations. Romania follows a centralized approach to Regional Policy, which is why no particular regions in the country were singled out as case studies. Sweden presents Upper-North Sweden as a region that hosts good practice examples as well as unused potential. In the UK, Scotland and Wales serve as case studies, both with high potential in renewable energy production, but at different stages of infrastructure development. This scope allows conclusions to be reached in light of the variety of regions in the EU Member States.

Map 2: Overview over the case study regions

Source: Author


40

4.2. Methodological approach and limitations

The case studies aimed at determining whether spending on renewable energy infrastructure as defined in the scope of this study has any impact on regional development. The policy input was based on a review of existing spending under the ERDF.

All Case studies followed an assessment grid covering five main topics:

• General information regarding the selected case study region

• The framework of programmes and plans in the region which are relevant for renewable energy deployment

• Current renewable energy infrastructure and regional policy impacts

• The role of governance and cooperation in renewable infrastructure provision

• Addressing problems and challenges and identifying future possibilities

The quantification of actual impacts rests upon information available in the Annual Implementation Reports (AIRs) for the relevant regions. Apart from desk research, government authorities and other experts were consulted in order to find the right type of information.

Nevertheless, there are a number of research challenges associated with the evaluation of spending under Cohesion Policy. First of all, the data on the disbursement of Structural Funds cannot be readily assigned to any category or region. To allow for comparison, the table below shows the community amount allocated to energy issues in the Member States of our case studies.

Table 2: EU funds allocated to energy in the Member States of the case studies

Member State of case studies

Energy focus EUR (2007-13)

% (out of total Structural and

Cohesion Funds allocated to the

country)

Austria Renewable energy 24,237,408 2.0

Energy efficiency 5,956,013 0.5

Total 30,193,421 2.5

Portugal Renewable energy 104,650,199 0.5


Other 18,067,152 0.1

Total 269,356,221 1.3

Romania Renewable energy 191,542,611 1.0


TEN 95,771,306 0.5

Other 63,209,061 0.3

Total 603,746,705 3.1

Sweden Renewable energy 52,342,949 3.2


Total 61,513,737 3.8


41

United Kingdom Renewable energy 136,776,913 1.4


Other 2,298,983 0

Total 289,133,100 2.9

Source: "The Potential for regional Policy Instruments, 2007-2013, to contribute to the Lisbon and Göteborg objectives for growth, jobs and sustainable development", NORDREGIO 2009

Secondly, although the European Commission systematically audits the disbursement of Structural Funds, its impact on economic development is not easily attributed to individual projects or even, in some cases, to themes. Given the way in which data is often aggregated or presented, it is difficult to establish a direct correlation between Cohesion Policy and precise outcomes such as job creation. In addition, the full impact of renewable energy investment on job creation may only be partially described, given that current data is often unavailable.

Furthermore it has to be stated, that while OP can be relevant to the development of infrastructure and renewable generation capacity, their respective objectives are often geared towards specific regional interests. Project outcomes are not only an outcome of EU policy drivers such as Cohesion Policy, but also of local and national policy priorities.

Considering the selection, it is apparent that the initial situation varies from case to case. Consequently, each case study is organized slightly differently in order to accommodate the regional particularities and regulative frameworks. Nevertheless, each case study elaborates on the following topics:

• Compatibility, complementarities and efficiency of EU Regional Funds supporting this infrastructure

• Responsibility of the various actors involved in setting up the infrastructure and handling the support (multi-level governance)

• Economic, social and territorial development impacts of the investments

4.3. Austria29

KEY FINDINGS

• Güssing in Burgenland and Vöckla-Agar in Upper Austria were chosen as the case studies in Austria.

• They have different economic, geographical, and historical backgrounds and have had different successes in renewable energy use.

• Güssing transformed from a previously poor peripheral region into a model of sustainability, producing its entire energy from renewable, local sources like local biomass, solar energy, and photovoltaic.

• The power plants in the region create undeniable socio-economic affects and generate enough excess energy to make a profit to reinvest in funding RES.

• Vöckla-Agar is located in an industrial region in close proximity to large economic centres. Its strategy is to work across sectors, encourage research and development (R&D) and safeguard diversity, aiming at supporting the local economy more than energy autarky. It has not yet reached its own efficiency targets to become a model region.

29 This chapter is mainly based on the input of the case study author Sigrid Stagl (Vienna University of Economics

and Business).


42

4.3.1. Introduction

For decades, Austria has promoted the use of RES, especially large hydroelectric power plants, alongside others. This long-term energy policy has resulted in a mix of energy sources characterised by significant importance of RES. With 65% of electricity consumed provided by RES, Austria is a European leader on RES contribution to gross electricity consumption. Recently the share of RES has declined as demand has increased more than the use of RES. The most significant source of renewable energy is biomass, followed by hydropower. With 47% of Austrian territory being covered by forests, its share of woodland is one of the highest in Europe. Consequently, the use of biomass has been extensive in Austria.

Energy policy in Austria is divided spatially and thematically. On the national level, several ministries are responsible for different dimensions of energy policy. National policies such as the Green Electricity Act shape the decision context and thus are also relevant. The Green Electricity Act states that anyone who generates electricity in a decentralised way, is allowed to feed into the grid and will be compensated at pre-determined prices; this obligation consists for 13 years from the start of operation for PV, wind, geothermal, landfill gas, and sewage treatment plant gas, and 15 years for biomass, waste and biogas. The Green Electricity Act of 2002 led to an increase of the green electricity supply (without hydro) to users from 0.9% in 2002 to 8.1% in 2008.30 Since then promotion of electricity generation from renewable sources has fallen.

The Austrian National Strategic Reference Framework (NSRF), STRAT.AT, provides the framework for Austria's Regional Policies 2007-2013. With regard to the ERDF programmes, there are specific areas which are programmed for precisely this purpose; however, at this time mostly national instruments are used in this context. The areas “Renewable Energies” and “Energy Efficiency” have been implemented as planned with a portion of approximately 5.1% of committed ERDF funds (plan value: 4.4%). To date, relatively few projects have been attributed to the area “Assistance to SMEs for the promotion of environmentally products and processes”31.

Austria offers a wide variety of case studies where different avenues of good practice have been tried and tested; still there are many regions with unused potential in all provinces. The two regions chosen are characterized by a diversity of actions for energy efficiency and renewable energy use, but their level of activity and success achieved so far differ widely. They are also located in two states which differ in economic structure and history; Güssing is located in Burgenland and Vöckla-Ager in Upper Austria. Güssing was chosen as the good-practices case because of its pioneering history in implementing energy efficiency and renewable measures and an innovative approach which matured over the years. It exemplifies a successful development model for a remote and previously disadvantaged region. Vöckla-Ager only has a few years experience of working on energy efficiency and the increased use of renewable energy, but it promises great opportunities for future development. Unlike Güssing, which is based in Austria’s only former Objective 1 region, Vöckla-Ager only gained access to Structural Funds through INTERREG and Objective 2 funding.

4.3.2. Güssing – socio-economic impact of renewable energy investments

Güssing, a town of 4,000 inhabitants in Southern Burgenland, and a district of around 27,000 inhabitants, is the first community in the EU to generate all of its energy demand – electricity, heating/cooling, fuels – from renewable resources from within the region. 30 Republik Österreich (2002): Ökostromgesetz. Bundesgesetzblatt 149/2002. 31 ÖROK (2010): STRAT.AT REPORT 2009 – Strategic Report for Austria pursuant to Article 29 Regulation (EC) No

1083/2006. Vienna.


43

Situated in the southeast corner of Austria, the town had long suffered from its peripheral position. It was one of the poorest regions of Austria where unemployment and population loss were characteristic until biomass was discovered as source of energy and as a key to development.

During the 1990s the so-called “Güssing Model” was developed. It is a strategy of de-centralised, local energy production from renewable resources available in the region aiming at energy autarky, while strengthening the regional value added. In this decade, heat generation from biomass was augmented by biodiesel and biomass power facilities. Appropriate wood logistics were organised and wood-drying equipment was installed, which made it possible to use the district heating plant all year round.

In 2001, electricity generation from biomass and photovoltaic was begun. As result of the energy optimisation of buildings in the town, expenditure on energy was reduced by almost 50%. After 15 years the goal of energy self-sufficiency was achieved. In Güssing, more heat, fuel, and electricity are being generated from regional raw materials over the year than the city actually needs.

In 2004, a process of expanding the Güssing model from town to district had begun. National funding helped to systematically survey the potential for efficiency and resources in the district and to study options for realising the potential32. The strategies were ambitious and helpful. However the focus was firmly on the use of biomass. Expansion to the district level proved slow due to low feed-in tariffs and varying interest in the region’s communities. In 2008, key research projects (production of synthetic natural gas and production of synthetic liquid fuels) were started and a new research institute opened. In 2011 a pilot project 2 MW demonstration plant for the gasification of waste was added. It has to be noted however, that while funding and technologies were essential ingredients of Güssing’s success, it was also strong personalities that drove the development of the region.

In Austria the successful Güssing model is scaled up to the state level (Region “südburgenland plus”) and national level (Energieautarkie Österreich 2050).

4.3.2.1. Status quo of renewable energy

The total energy demand of Güssing is roughly 139,000 MWh/a; this is composed of a 60,000 MWh/a demand for heat, a 50,000 MWh/a demand for electricity and a 29,000 MWh/a demand for transport fuel. About 40% of the energy demand is from households. With more than 50 firms starting up in the region over the last 15 years, industrial demand is on the rise. After industrial production, energy demand is highest in the health and social sectors and agriculture.

In Güssing, five biomass heating plants and three combined heat-and-power plants as well as PV and solar thermal generate heat and electricity. By use of sunrays, scrap wood, sawdust, wood chips and renewable primary products from the region, the entire heat and electricity demand from both the private and public sectors can be covered.

The electricity generated in the region mostly comes from two biomass power plants in Güssing and a combined heat-and-power biogas facility in Strem. The total generation capacity of the three plants is 4.2 MW, which is fed into the grid. In December 2010, another biogas plant capable of producing 500 kW was started up33.

32 Koch et al. (2006): Energieautarker Bezirk Güssing Teil 1 u. 2. Berichte aus Energie- und Umweltforschung

82/2006. 33 Europäisches Zentrum für erneuerbare Energie Güssing GmbH. (2011). Regionales Energiekonzept – Klima- und

Energie Modellregion Güssing.


44

The energy sector in Güssing turns over approx. EUR 14 million p.a., and part of the profit is invested back into renewable energy projects. As a result, energy prices are stable and do not fluctuate with international oil and gas prices. Together with the innovative atmosphere, this has attracted 50 new companies to the town bringing more than 1,000 direct and indirect jobs. Güssing has since developed into an important location for industries with high energy demand, such as parquetry production or hardwood drying. Bringing Blue Chip Energy, the first high-efficiency solar cell producer in Austria in a joint venture with Solon AG, to Güssing was celebrated as a major success; the company located itself in Güssing because they can power the plant with clean energy from the renewable resources. In the course of Güssing’s rise to a renewable energy model region, R&D played a significant role as a number of new technologies were adapted and developed.

The Güssing model also helped to diversify the local economy. As more and more people became interested in visiting and learning from the Güssing model, a small but steadily rising tourism sector formed. A new hotel was built and the tourism concept has matured from improvised to professional provision. Currently five tour guides are employed, conducting tours in German, English, Hungarian and Slovakian which are tailored to the needs of different types of visitors, esp. engineers, stakeholders, journalists, students, and the interested public. Annually, between 10,000 and 15,000 visitors from around the world come to Güssing.

The Güssing model also had an impact on the surrounding area. In 2005, ÖkoEnergieland, an association of 14 towns and villages in the Güssing region of roughly 10,000 inhabitants, was formed. Attracted by the projects in these communities and the possibility to see the idea of decentralized energy generation in action, an increasing number of so-called ‘‘eco-energy tourists’’ visit the region. However, 80% of visitors stay for one day only; only 20% take accommodation in the region.

While Güssing has embraced high energy efficiency and the use of RES, there are still weaknesses in the areas of efficiency, energy accounting, awareness, advice and service for households and incentives for the installation of renewable energy technologies such solar thermal, photovoltaic and ground-source heat pumps.

Public relations with the resident population of the region have not been a focus and need strengthening. Despite these challenges that lie ahead of the Güssing region, continuous efforts to improve the energy system have already proved to be a catalyst for innovation and endogenous development under difficult conditions.

4.3.2.2. Framework of programmes and plans relevant for renewable energy deployment

In 2003 the regional government of Burgenland launched an energy concept aimed at reducing energy consumption of households and businesses by a fifth within 20 years time. Renewable energies shall make up a third of the total energy production.34 In 2009 the regional government stated more ambitious goals: Burgenland targets to be independent from external electric power supply by 2013 and wants to base its total power supply on renewable energies by 2020. This matches with the overall guiding principles for spatial development in Burgenland. Hence the state government fosters a regional approach by

34 Burgenländische Energieagentur (2003): Burgenländisches Energiekonzept, available at:

http://www.eabgld.at/uploads/tx_mddownloadbox/Energiekonzept_Burgenland_2003.pdf (accessed 24 Jan, 2012), p. 12-15.


45

supporting cooperation of communities on one hand, and on the other hand maintains transnational cooperation in terms of sustainable energy policy.35

4.3.2.3. The role of Cohesion Policy in improving renewable energy infrastructure

About EUR 177 million is spent on the “Convergence Phasing-out” programme in Austria’s only former Objective 1 region, Burgenland. The Structural Funds that Burgenland received while being an Objective 1 area were key to the establishment of the model energy region. “Research, technology and innovation” was one of five focal areas of the target 1 area strategy 2000-2006 of the Burgenland state. Within this framework and funding stream, R&D projects such as the biomass power plant at Güssing and the competence network “Energy from Biomass” were realized. Corresponding training and skills development measures facilitated the widespread use of these technologies.

In the course of the current phasing-out funding, almost EUR 800,000 was invested in renewable energies or energy efficiency projects in Burgenland until the end of 2011. Güssing received about EUR 400,000 for the expansion of its district heating system, which obtains heat from a cogeneration plant burning biomass. Since 2007, it has received EUR 15 million from European, national and regional sources. In 2010, a golf and spa resort was supported with EUR 5.4 million from the ESF funded training programmes.

Table 3: List of Beneficiaries of the operational Programme Burgenland 2007-2013 (Objective Convergence/ERDF)

Beneficiary Location Name of

operation

Allocated public

funding (EUR)

Status

Bioenergie Burgenland Service GesmbH

Güssing Investment in renewable energies

403,693 C

Cherub Hotelbesitz GmbH Jennersdorf Investment in renewable energies

50,797 C

Burgenländische Elektrizitätswirtschafts AG (BEWAG)

Eisenstadt Investment in renewable energies

90,824 C

Hella Fahrzeugteile Austria GmbH

Großpetersdorf Improvement of energy efficiency

64,415 C

Lumitech Marketing und Vertrieb GmbH

Jennersdorf Improvement of energy efficiency

180,000 C

789,729

Note: Allocated public funding comprises EU and national co-financing; Status C = Committed Source: RMB Regionalmanagement Burgenland GmbH 2011

35 Amt der Burgenländisches Landesregierung (2009): Durch nachhaltige Energiestrategien zur energieautarken

Region!, available at: http://www.burgenland.at/aktuell/1688 (accessed on 24 Jan, 2012), Burgenländische Energieagentur (n.d.): EKKO, available at: http://www.eabgld.at/index.php?id=807 (accessed 24 Jan, 2012).


46

4.3.3. Vöckla-Ager – aiming at supporting local economy and energy efficiency

The region Vöckla-Ager has 53,000 inhabitants and consists of 17 communities in the North-eastern part of Vöcklabruck district. Up until 2006 the region’s population grew, but has since stagnated. In the North the region borders on the Hausruck area, a beautiful range of rolling hills. In the South the region borders on the Salzkammergut with its many lakes.

Vöckla-Ager has benefitted from geographical proximity to the economic centres Linz and Wels. Over time it grew into the third strongest economic area in Upper Austria. Austria’s main traffic link from east to west (motorway A1, national road B1 and the Westbahn railway) cut through the region, and easy access to transport has facilitated the area’s industrial development.

The Vöckla-Ager region is characterized by agriculture, while the cities Vöcklabruck, Attnang-Pucheim, and Schwanenstadt, and the industrial area of the ‘Vöckla-Ager Furche’ are predominatly industrial areas.

More than half of the employees in the Vöckla-Ager region work in manufacturing. While the region has 664 microenterprises with 1-4 employees and 188 with 6-8 employees, the large leading companies in Lenzing, Vöcklabruck, Attnang-Puchheim und Vöcklabruck are the main economic forces and employers in the region.


The region’s total energy use is 1,134 GWh/a, which costs EUR 103.7 million per year based on 2010 figures. More than half (617 GWh/a) was for heating and warm water; about one third is for transport, and the rest (16%, 182 GWh/a) is for the generation of electricity. 61% of the energy is supplied by fossil fuels. The energy balance is negative, i.e. the region uses more energy than it extracts with oil and gas remaining the main sources of energy for households. Until 2001, oil and gas heating in the region’s households increased, while wood, wood chips, straw and wood pellets decreased. The region’s past may be one of the reasons for slow adoption of renewable energy; unusual for Austria, the region had coal and gas deposits. Only 16% of its heating comes from wood, and only 2% of energy is from solar sources. Four biogas plants are in operation in the region.

A recent study36 conducted for the Vöckla-Ager region indicates that the technical potential from renewable energy is significantly higher than current energy use. The economic potential of renewable energy depends of course on the opportunity costs.

Figure 3: Current energy use and technical potential from renewable energy

0

20

40

60

80

100

120

Electricity

Coal

Liquid gas

Natural gas

Heating oil

Motor- & Diesel fuel

Solar

Wood

Total energy consumption

GW

h/a

0

20

40

60

80

100

120 Geo thermal

Biogas livestock

Biogas plants

Biomass oil plants

Biomass energy grass

Biomass wood

Hydro power

Wind power

Photovoltaic

Solar thermal

Technically feasible potential

GW

h/a

Source: Verein für Regionalentwicklung Vöckla-Ager 2011

36 Verein für Regionalentwicklung Vöckla-Ager (2011): Umsetzungskonzept Vöckla-Ager Energieregion.


47


Beside the Austrian national guidelines as described in chapter 4.3.1 the regional government of Upper Austria pursues additional energy strategies. Up until 2010 there were two relevant frameworks on energy policy: The “Energy 21” programme (2000-2010), which mainly aimed at doubling the usage of biomass and solar energy and the “Energy Efficiency Programme” (2004-2010), which encouraged efforts for saving energy in the region by 1 to 1.5% per year. The subsequent programme “Energiezukunft 2030” is based on a scenario for a regional energy turnaround by 2030. This implements that Upper Austria will be able to completely rely on regional energy production from renewable resources to meet the demand for heat and electricity. Furthermore energy consumption and emission of CO2 shall be lowered likewise. For example the demand for heat shall decrease by 39%. 37

In its regional energy strategy, the Vöckla-Ager region aims to develop cooperations and networking across community borders and sectors with experts in order to increase competitiveness, e.g. for entrepreneurs in energy technologies and education. As part of the energy strategy, the region sets out to become energy efficient and energy competent. These are the areas which have received the most attention so far.

The avenue to a low-carbon transition is difficult. This is not only so because of the region’s energy-rich and manufacturing-oriented history, but also because of its high share of large employers. Large firms tend to be less flexible and hence take longer to embrace such change.

Just like in Güssing, the aim here is not only to make the energy system sustainable, but also to support the local economy, to keep as much value added in the region as possible, secure existing jobs and create new ones and protect the livelihoods of farmers. The strategy in Vöckla-Ager is to work across sectors and safeguard diversity. A specific initiative of the energy competency region is the development of an education stream with a focus on energy management. By 2013, the region aims to reduce its use of fossil fuels by 20% and to develop specific plans for the expansion of renewable energy technologies.

The Vöckla-Ager region aims to become an energy model region recognised by the Austrian Climate and Energy Fund (public funds of EUR 147 million in 2011). Expansion of the use of renewable energy for electricity, heat and transport supplied by solar, biomass, hydro and wind sources is a key element of the strategy. Households and especially companies operating in the region need to become more energy efficient in order to realize the goal.

4.3.3.3. The role of Cohesion Policy for improving renewable energy infrastructure

By the end of 2011, about EUR 5.7 million was invested in Upper Austria in projects dealing with either the improvement of energy efficiency, renewable energies, or technology transfer and cooperation of SMEs. For example, Bio-Wärme-Spitz Gmbh, a company located in the Vöckla-Agar region, received about EUR 540,000 for the company’s own biomass power station, which also provides district heating from renewable energies.

In the Vöckla-Ager region itself Cohesion Policy plays a minor role for improving renewable energy infrastructure . Other funding sources are more relevant. Since November 2007, the region has been a LEADER region with a focus on energy as one of four focal activity areas

37 Dell, Gerhard (2009): Energiezukunft 2030 – Die oberösterreichische Energiestrategie available at:

http://www.esv.or.at/fileadmin/esv_files/Info_und_Service/Energie_in_OOe/Broschuere_Energiezukunft_2030_fin_01.pdf (accessed 24 Jan, 2012) Oberösterreichische Energiesparverband (n.d.): The Energy Strategy of Upper Austria, available online: http://www.esv.or.at/english/energy-in-upper-austria/(accessed Jul, 2011).


48

(agriculture; economy and education; tourism, leisure, sports and culture being the other three). Significantly increasing energy efficiency and expanding the use of RES are key to the Vöckla-Ager development strategy.

The Technology Centre Salzkammergut-Bezirk Vöcklabruck GmbH, based in the town of Attnang-Puchheim, is an organization providing advice and support for innovative entrepreneurial activities. By organizing events, seminars, technology days and broadening information exchange, it helps the diffusion of technologies in the region. The Technology Centre aims specifically at attracting technology firms to the area, creating an innovation centre as a contact point for firms from the region, organizing active technology transfer, enabling cooperations for companies, and offering video conferencing facilities. The technology centre is part of the project “Netzwerk der OÖ Impulszentren” which is funded by ERDF, “Regional competitiveness 2007-2013 (Regio 13)” and funds from the state of Upper Austria.


49

Table 4: List of Beneficiaries of the Pperational Programme Oberösterreich 2007-2013 (Objective Regional Competitiveness and Employment/ERDF)

Beneficiary Location Name of

operation

Allocated public

funding (EUR)

Status

Benteler SGL Composite Technology GmbH

Ried im Innkreis Improvement of energy efficiency

24,190 P

Bioenergie Perg GmbH Perg

Investment in renewable energies

327,104 C

Bio-Wärme-Spitz GmbH Attnang-Puchheim

Improvement of energy efficiency

537,746 C

Hehenberger Baugesellschaft GmbH & Co KG

Peilstein Investment in renewable energies

147,434 P

JOSKO Fenster und Türen GmbH

Kopfing Improvement of energy efficiency

561,500 P

Kremsmüller Beteiligungsgesellschaft m.b.H.

Steinhaus bei Wels

Investment in renewable energies

389,297 P

Linz Textil GmbH Linz


847,883 P

Nettingsdorfer Papierfabrik AG & Co KG

Haid bei Ansfelden


1,027,242 P

Rosenbauer International AG

Leonding Improvement of energy efficiency

134,882 P

Senftenbacher Ziegelwerk Flotzinger GmbH & Co KG

Senftenbach Improvement of energy efficiency

773,115 P

Stroissmüller Betriebe Gesellschaft m.b.H.

Wels Investment in renewable energies

138,795 P

SUN MASTER Energiesysteme GmbH

Eberstalzell Investment in renewable energies

372,580 P

Technologiezentrum Salzkammergut-Bezirk Attnang-

Puchheim

Technology transfers, Cooperation of SMEs

183,063 C

Zementwerk Hatschek GmbH

Gmunden Improvement of energy efficiency

187,005 P

5,651,836

Note: Allocated public funding comprises EU and national co-financing; Status C = Committed, P = Paid out Source: Amt der Oberösterreichischen Landesregierung 2011


50

4.3.4. Conclusions

The analysis of the two Austrian case studies points to real success under adverse conditions. Wind and solar, which have been struggling to prosper next to the dominant large hydro power plants, have matured and are on the rise again.

In the past, Structural Funds have provided support for helping regions to materialize their innovative ideas by funding R&D as well as infrastructure development, such as the expansion of the district heating system or new power plants. These helped the region to become more energy efficient and rely increasingly on the use of RES. However, the regions combined various funding sources for financing the relevant projects in the field of renewable energy.

The case of Güssing shows very clearly that renewable energy infrastructure can play an important role in the development of poor regions. When Güssing started its journey it was one of the poorest regions in Austria in marginalized area with inadequate infrastructure, and has now become a thriving town and region with in-migration of people and companies. Embracing a future-oriented energy system, the agricultural base of the economy in Güssing proved essential to a successful development path. However, the skills gap presented a major hurdle. Since then, essential capacities have been built up with technical infrastructure and social capital alongside each other. The development of renewable energy know-how also induced diversification of the local economy, especially in the field of tourism.

As the case of the Vöckla-Ager region shows, EU Structural Funds have not yet made a substantial contribution to low-carbon transitions in Austria’s wealthier regions. To achieve ambitious carbon reduction targets of minus 80 to 95% within less than 40 years, these regions will need to see substantial changes.

4.4. Portugal38

KEY FINDINGS

• Madeira and Azores in Portugal face special challenges as isolated archipelagos, with different population distribution and economic situations and a high dependency on fossil fuel imports.

• These islands received more support from EU funding initiatives than the other case studies in question, which have played in significant role in the development of their renewable energy generation capacities.

• Madeira employs hydroelectric, wind, waste incineration and photovoltaic energy, the development of which was largely co-funded by ERDF. Its Socorridos power plant has the capability to store energy during off-peak periods, thus improving the islands’ energy efficiency by combining wind and hydroenergy.

• Azores has large unexploited potential for renewable energy, particularly geothermal due to its fault-line location. Currently, two geothermal plants provide 40% of its energy, and wind and hydroelectric power are also sources on the islands.

38 This chapter is mainly based on the input of the case study authors Shailendra Mudgal, Lorcan Lyons, Débora

Dias, Andreas Mitsios (Bio Intelligence Service S.A.S.), Additionally the regional contacts listed on the DG REGIO website were all contacted. (http://ec.europa.eu/regional_policy/manage/authority/authority_en.cfm?pay= 114&list=no.) A particularly detailed response was received from Filipe Oliviera, Agência Regional da Energia e Ambiente da Região Autónoma da Madeira (AREAM).


51

4.4.1. Introduction

The two case study regions chosen are Madeira and Azores, two island regions that face similar challenges, but that are different in some important respects. Both Azores and Madeira are OR – a set of permanent economic and territorial circumstances that make the process of convergence and overall regional development more difficult. For example, ORs face great difficulty in supplying fossil fuels because they are provided at a higher cost. These difficulties are caused by the large distances from the mainland.

Isolated island energy systems, as in the cases of Madeira and Azores, have particular characteristics that deserve special treatment. The distance of island systems from large population centres restricts access to the advantages of the internal energy market. The limited size of the market also induces significant additional costs in terms of both fuel supply and electricity production. In addition, islands are highly dependent on imported fossil fuels, facing higher fuel costs, but are also an opportunity for research, demonstration and development of RES and energy efficiency. RES are in abundance and their development can have a significant impact on alleviating islands’ permanent structural handicaps, providing socio-economic benefits to their inhabitants.39

Although both islands face similar challenges, they also have significant differences. In 2007, the Gross Domestic Product (GDP) per capita (Purchasing Power Parity (PPP)) index in Madeira was 96 (EU27= 100, Portugal = 76) whereas in Azores it was as low as 6840. In addition, Azores has a comparably more uneven population distribution between municipalities and population density ranges between 30 and 250 inhabitants per km2. The differences between the two sets of islands call for different approaches according to the specific circumstances and environmental pressures expected in each region.

4.4.2. Madeira – facing the challenge of limited capacity of energy storage

The Autonomous Region of Madeira (hereafter referred to as Madeira) is an archipelago consisting of Madeira island (737 km2), Porto Santo island (42 km2), the Desertas islands (14 km2) and the Selvagens islands (4 km2). Its population in 2011 is estimated at 267,938 inhabitants, of which 262,456 live on Madeira island and the rest on Porto Santo. There is no interconnection between the inhabited islands (Madeira and Porto Santo) and no access to European electricity grids. There are also no district heating or cooling systems in existence on the islands.


In 2009, 92% of the primary energy demand of Madeira of about 4,240,954 MWh was imported. Most of the electricity produced in Madeira came from thermal power plants (77.90%), which burn fuel oil. The remaining 22.10% was from renewable sources – hydro (14.40%), wind (3.95%), urban solid waste (3.72%) and photovoltaic (0.03%). However, these outputs vary significantly from year to year. In good years, the hydro component can reach 20% of electricity supply.41

39 European Parliament (2011): Written Declaration on the establishment of the Pact of Islands as a European

initiative. 40 European Commission (2011d): Growth Factors in the Outermost Regions, part 1, available at

http://ec.europa.eu/regional_policy/sources/docgener/studies/pdf/rup_growth/rup_growth_vol1_en.pdf (accessed Sept 8, 2011).

41 Regions202020 (2011): ENNEREG Pioneer Region - Madeira, Portugal, available at: http://regions202020.eu/cms/home/pioneers/madeira/ (accessed Sept 01, 2011).


52

Renewable energy capacity for electricity production on Madeira in 2011 was made up of:

• Wind farms: 44 MW (Madeira island: 43 MW; Porto Santo 1 MW);

• Hydropower: 50.39 MW (Madeira island);

• Waste incineration: 8 MW (Madeira island);

• Solar photovoltaic: 10 MW (Madeira island: 8 MW; Porto Santo 2 MW).

Map 3: Transmission network in Madeira

Source: Empresa de Electricidade da Madeira 2010

In Madeira, the public sector built the electricity infrastructure while the private sector installed wind and PV power capacity. This pattern of public-private investment is set to continue. The electric utility (a public company) is in the process of building a new water storage facility and pumping system that will allow an additional 18 MW of wind farms. Also, dynamic compensation systems are being studied on Madeira and Porto Santo to minimise the impact of variations in wind and PV production.

Madeira has set an ambitious target that corresponds to a 30% share of RES in the energy mix by 2011 (double the 2008 level). In addition, in recent years, several major investments have been made to upgrade the transmission and distribution system. In 2007, the Empresa de Electricidade da Madeira (EEM) upgraded the Socorridos hydroelectric power station. Since then, energy can be stored and provided throughout the year, regardless of rainfall levels. The project was co-funded by ERDF. In order to continue to increase the penetration of intermittent power generation (wind, PV, etc.), it will be necessary to increase the capacity of reversible hydro to allow the reception of renewable energy during off-peak hours.


In the EU Regional Policy programmes currently being implemented, Madeira is recognised as a ‘Phasing-in Region’. Of a total of EUR 320 million ERDF funding, approximately 4.6% was spent on renewable energy related projects in Madeira.


53

Madeira has been involved in energy planning since 1988.42 Madeira’s Regional Energy Policy Plan (PPERAM)43 sets ambitious goals regarding the share of RES use in the island’s energy mix setting higher targets than the EU 2020 Strategy (share of RES 2008: 14.4%, 2010: 22.0%, 2011: 29.5%).44 PPERAM aims to increase the share of RES in the energy mix and simultaneously decrease the use of fossil fuels minimising the environmental impact of energy production on the island.

The renovation and expansion of the electricity grid was carried out according to PPERAMM45 as well as other relevant policies such as the Action Plan to Minimise Environmental Impacts, integrated with the Pollution Prevention and Control46 and the Consumption Efficiency Promotion Plan (PPEC). The measures to improve the environmental performance of the network include the landscape integration of the LV and MV overhead lines network, removal of the deactivated MV supports, study of the electric lines’ network impact, effects on Madeira’s bird fauna and implementation measures for impact minimisation.

The regional agency for energy and environment of Madeira (AREAM) promotes the development of renewable energy infrastructure supporting more than 80 projects and actions related to renewable energy, energy efficiency and environment. Most of the activities of AREAM are related to co-operation involving other island regions and local actors including regional governments, local authorities, associations, companies and the general public. AREAM is developing Sustainable Energy Action Plans for Madeira and Porto Santo islands in the framework of the Regions paving the way for a Sustainable Energy Europe (ENNEREG) project.47

The 2007-2013 Portuguese NSRF greatly supports innovation, especially in regards to SME innovation incentive schemes.48 Both Azores and Madeira benefit from the resources allocated in the Territory Valorisation OP for wind power (EUR 15 million) and for hydro, geothermal and other RES (EUR 10 million)49.


The development of the energy infrastructure was largely co-funded by ERDF. These developments allowed renewable power generation to be increased, namely: increased capacity and robustness of the electricity transmission network in Madeira and Porto Santo, construction of reversible hydro power plants (one in operation and one at the project phase) to store energy during off-peak hours and to increase intermittent energy penetration in Madeira.

The ERDF-co-financed upgrade of the Socorridos hydroelectric power station increased the capacity of the tank and allowed energy to be provided during peak hours. Energy is generated during the day and pumped back up to reservoirs during the night. The pumps can be connected to wind farms and the energy produced by the system becomes carbon-free.

42 PPERAM (2002): Plano de Política Energética da Região Autónoma da Madeira, available at www.aream.pt/

index.php?option=com_content&view=article&id=52&Itemid=49&lang=pt. (accessed Sept 01, 2011). 43 PPERAM (2002). 44 Empresa de Electricidade da Madeira (2008): Annual Report 2008. 45 Empresa de Electricidade da Madeira 2008. 46 Ministério do Ambiente e do Ordenamento do Território (2000): Decreto-Lei n.o 194/2000 de 21 de Agosto. 47 Regions202020 2011. 48 European Commission (2010d): Expert evaluation network delivering policy analysis on the performance of

cohesion policy 2007-2013, task 1: Policy paper on innovation. 49 European Commission (2011e). Development Programmes: Portugal – Operational Programme 'Territorial

Enhancement', available at http://ec.europa.eu/regional_policy/country/prordn/details_new.cfm?gv_OBJ=ALL&gv_PAY=PT&gv_reg=ALL&gv_THE=ALL&gv_PGM=1222&LAN=7&gv_per=2&gv_defL=7 (accessed Aug 24, 2011).


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The capacity of the plant is 24 MW, and 44 MWh are provided daily. The objectives also include the use of 12 MW of wind power to supply the pumps. The project also increased the volume of water supplied for domestic use and irrigation. Since water is pumped back up to the reservoir the constraint on the production of electricity that was imposed by the needs of water for public supply and irrigation has now been removed. The total cost of the Socorridos project was EUR 34.7 million, of which 50% was contributed by ERDF (EUR 17.3 million).50 Compared to the previous programming period, funding has fallen by 50% as Madeira no longer falls under Convergence objective.

4.4.3. Azores – an experimental ground for appropriate technologies

The Azores archipelago of 2,333 km2 consists of nine islands: to the west Flores and Corvo, in the centre Grasiosa, Terceira, São Jorge, Pico and Faial, and to the east São Miguel, Santa Maria and the Formigas Reef. The islands extend for more than 600 km and because of this, the exclusive economic zone is 1.1 million km2. The largest industries are agriculture, dairy farming and tourism. The total population is 245,374 (2009), with a density of around 100 inhabitants per km2.


Azores is a region with large unexploited renewable energy potential. Several projects have been carried out to tackle technical issues related to the generation and distribution of renewable energy in small and isolated electricity grids. Experiments have been carried out with flywheels (a technology that stores rotational energy) on the islands of Graciosa and Flores. Projects are also being carried out to examine the potential of enhancing electricity storage by, for example, integrating latest-generation batteries with wind and solar energy. In this context, investment in the expansion of renewable energy in peripheral regions such as Azores can potentially contribute to the development of renewable energy infrastructure in other regions of the EU.

Due to its location at the point of convergence of three tectonic plates, Azores has a large geothermal resource in many parts of the archipelago. Two geothermal plants on the São Miguel meet 40% of local electricity needs. (ADENE) A 12 MW capacity plant is under construction on Terceira Island. In addition, research is being carried out on processes to capture energy at greater depths and thus at higher temperatures. On six islands, energy is generated by wind farms. On Graciosa and Flores, the net-expansion rate reaches 15%. The Serra do Cume wind farm in Terceira (4.5 MW) accounts for 8.5% of the electricity generated on the island, operating 99% of the time. Small hydropower stations have been established on four islands, which produce 4% of total electricity. On the island of Flores, 40% of total production is generated by a hydroelectric station.

In terms of energy consumption, Azores was among the most efficient EU regions in the period 2000-2007. The share of renewable in total energy consumption increased by 4.5% between 2000 and 2007 and the share of renewable electricity in total electricity consumption increased by 7.9%.51

In Azores, one company (EDA) monopolises either directly or through subsidies, the production, transport and distribution of electricity. EDA is primarily owned by the government of Azores (50.1% share). 50 IRDF (2008): Optimising the Multiple Purpose Function of the Socorridos Hydro Power Station for Use All Year

Round to Produce Water for Public Supply, Irrigation and Electricity, available at www.ifdr.pt/ResourcesUser/ AplicacaoFundos/Documentos/pt_ren_energies_Madeira.pdf. (accessed Sept 02, 2011).

51 ADE (2009): Ex-post Evaluation of Cohesion Policy Programmes 2000-2006 Co-Financed by the European Fund for Regional Development (Objectives 1 and 2) – Work Package 5b: Environment and Climate Change, available at http://ec.europa.eu/regional_policy/projects/practices/download.cfm?sto=1951&lan=7.


55

Annual electricity production in the Azores was 849,636 MWh in 2010. Between 2000 and 2008 there was a significant increase in energy production in the region, and the share of geothermal increased. The share of hydro declined but increased in absolute terms. It is estimated that in 2010 renewable energy expanded by 37%.52 By 2012, it is expected that geothermal energy will be three times the 2005 level, that wind energy will double and that hydro will increase by 38%.53


Azores is a Convergence Region. The Azores ERDF OP stems from a regional development strategy formulated by the regional government and is at an advanced stage of implementation. The Azores OP has a total budget of around EUR 1.2 billion, of which EUR 966 million is provided by the EU. However, renewable energy is not listed among the priorities.54

The OP of the Autonomous Region of Azores (PRODESA) (2000-2006), co-funded by ERDF, promoted the development of RES. The total budget for investment in R&D related to renewable was set at EUR 41.9 million. This investment supported the development of new geothermal capacity (10 MW) and a further increase in the capacity of wind farms and mini-hydro plants.

Like Madeira, the Azores are participating in the “Transnational Cooperation Programme Madeira-Açores-Canarias (MAC) 2007-2013” with a total ERDF contribution towards renewable energy promotion of EUR 6.8 million. The Programme of Innovation Actions (PRAI) invested EUR 2.44 million (the ERDF provided EUR 2 million) in energy projects such a feasibility study on the use of hydrogen in the archipelago.55

The thematic “Territorial Enhancement” OP falls within the Convergence Objective and has a total budget of EUR 6.6 billion, including around EUR 1.6 billion ERDF and EUR 3.1 billion Cohesion Fund. Priority 4 is “Structural Networks and Equipment in the Autonomous Region of the Azores”, which includes environmental protection by promoting renewable energy production achieved through investment in mini-hydro plants and wind energy. It has a budget of EUR 100 million, of which the EU contribution is EUR 70 million.56


The Regional Direction of Energy57 states that the large increase in the share of renewable was due to the development of the geothermal plant “Pico Vermelho”, which was co-funded by ERDF through PRODESA (2000-2006). PRODESA aims at increasing the capacity of electricity production, the reliability and effectiveness of the distribution of electrical energy

52 European Commission (2008b): The Autonomous Region of the Azores Regional Government – An Assessment of

“Strategy for the Outermost Regions Achievements and Future Prospects, COM (2007) 507 Final, available at http://ec.europa.eu/regional_policy/consultation/rup/contri/regions/acores/acores_en.pdf. (accessed Jul 27, 2011).

53 ADE 2009. 54 Região Autónoma dos Açores (2007): Operational Programme ‘Azores’ 55 European Commission (2011g): Development Programmes: Portugal, Spain – Operational Programme ‘Madeira –

Açores – Canarias’, available at

http://ec.europa.eu/regional_policy/country/prordn/details_new.cfm?LAN=7&gv_PAY=PT&gv_reg=ALL&gv_PGM=1255&gv_PER=2&gv_defL=7 (accessed Aug 24, 2011).

56 European Commission (2011e): Development Programmes: Portugal – Operational Programme ‘Territorial Enhancement’, available at

http://ec.europa.eu/regional_policy/country/prordn/details_new.cfm?gv_OBJ=ALL&gv_PAY=PT&gv_reg=ALL&gv_THE=ALL&gv_PGM=1222&LAN=7&gv_per=2&gv_defL=7 (accessed Aug 24, 011).

57 ADE 2009.


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as well as the share of renewables. These aims were also achieved by the construction and renovation of transportation and distribution systems. Of the total budget devoted to energy, ERDF contributed EUR 79.1 million, which corresponds to 10% of the total budget of PRODESA. About 53% (EUR 41.9 million) of this amount supported investments and research into renewables.

Interestingly, due to PRODESA two geothermal projects were carried out instead of the one that was initially programmed. In addition, five additional wind farms were developed, which represent 62% of the target. However, not all were funded by ERDF due to difficulties in the funding procedures that are met in the archipelago58.

Through PRODESA, the contribution of the ERDF is reflected in the following projects:

• creation of a new geothermal production capacity of 10 MW (corresponds to a 5% increase of the RES penetration in the region);

• a total increase of 2,100 kW in the installed power at three wind farms (Santa Maria, Graciosa and São Jorge);

• construction of two new wind farms, adding a capacity of 2,400 kW (wind farms on Faial and Flores).

Overall, PRODESA, supported the installation of 4,500 kW additional wind power capacity. Moreover, PRODESA supported the deviation of creeks, improvement of the dam, and refurbishing in three hydropower plants.

For the programming period 2007-2013, large investments in energy infrastructure are being co-funded by the Cohesion Fund through the Territorial Enhancement Programme (Table 5). Over the same period, the OP PROCONVERRGENCIA has been developed to support energy-related schemes, amongst others.

One of these schemes is PROENERGIA which targets households and SMEs. The objective of this scheme is to support the use of RES (hydro, wind, biomass, solar photovoltaic and solar thermal) and to increase the energy efficiency in buildings. The focus is to develop auto-consumption and micro-generation schemes with a scope to sale a maximum of 20% to the grid.

58 ADE 2009.


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Table 5: Expected RES investments in the Azores, 2007-2013

Type of Production

Type of investment

Power to be

installed (kW)

Yearly average energy (MWh)

Avoided fuel consumption

Co2 emissions avoided (tonnes)

Wind Increase capacity & new plant power

7,500 16,454 1,067,862 litres

(diesel) 2,623,345 kg (fuel)

10,970

Geothermal Increase capacity/ renovation & new plant power

32,000 263,112 54,319,207 kg (fuel) 168,043

Hydro Increase capacity & new plant power

3,620 13,383 3,763,903 litres

(diesel) 10,060

Total

43,120 292,949 4,831,765 litres

(diesel) 56,942,552 kg (fuel)

189,073

Source: ADE 2009

The challenges at the beginning of the OP were the following59:

• Due to losses in the distribution grid and other distribution stability problems, variability in renewable energy systems (especially wind and hydro) could not easily be accommodated by the system;

• The profitability of geothermal energy needs a minimum energy consumption, whereas in Azores, only two islands have significant consumption;

• In general, it is difficult to attract private investment in small and remote areas such as Azores.

As the EDA is the only player, absorption of funds depends strongly on its performance. Some RES projects were funded entirely by the company, as ERDF support could not be obtained. For this reason, some of the PRODESA targets were not met. For example, seven wind farms were built in total, but only five were co-funded by ERDF60.

Difficulties are often faced in carrying out technical feasibility studies to assess potential renewable energy projects. Specifically, studies for geothermal energy take several years to complete and greatly required investments especially concerning the capacity of power plants are delayed. Wind energy farms take less time to complete61. In this context, public funding needs to be adjusted according to the specific characteristics of a project.

The assessment of the effects of the OP is difficult due to a lack of data, especially regarding the link between renewable energy development and job creation62. It can be assumed that the projects co-funded by ERDF have contributed to the creation of temporary indirect jobs (e.g. supply of materials, construction etc). However, the development of renewables infrastructure may also have contributed indirectly to a loss of jobs. Due to the reconstruction of the hydro plants and the construction of geothermal plant and wind farms that are now

59 ADE 2009. 60 ADE 2009. 61 ADE 2009. 62 ADE 2009.


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operated remotely, no staff are required for maintenance and control. For example three workers from the geothermal plant have either been relocated or retired.

Other socio-economic effects of such investments are reflected in increased public spending on socio-economic projects permitted by the decrease in spending on fossil fuels. In addition, the improvement in the efficiency of the energy grid allows the reduction of electricity tariffs. Overall, it can be argued that improvements in energy infrastructure can have a significant impact on the region’s economic growth.

4.4.4. Conclusions

In both Madeira and Azores, several initiatives are taking place to explore and expand the use of RES and to develop new forms of energy production (e.g. wave, tidal, hydrogen). As autonomous regions, Madeira and Azores are interesting case studies from a governance perspective.

EU Regional Policy through its funding mechanisms has played a significant role in the development of RES in Azores and Madeira. OP have been very supportive in the development of such infrastructure and renewable generation capacity. However, project outcomes are not only an outcome of EU policy drivers such as Cohesion Policy, but also of local and national policy priorities. This makes it difficult to determine whether project outcomes can be attributed to EU policy drivers only. It remains difficult to estimate the exact contribution of the ERDF to this achievement since other parties or programmes also had significant roles (e.g. private companies, the MIT Green Island Programme, etc.).

Regarding EU initiatives, apart from the OP co-funded by the ERDF (described earlier), other EU initiatives such as INTERREG have played an important role in supporting RES development in the islands. One of the priorities of the MAC 2007-201363 is to strengthen environmental management and risk prevention including the sustainable management of energy.

In small islands, the capacity for integration of intermittent renewable energy into the electricity grid is limited by the load profile (very low off-peak demand). In order to maximise the development of renewable electricity production, it is necessary to provide energy storage through reversible hydro (pumping, storage and production) and demand-side measures to shift electricity consumption from peak hours to off-peak hours. Examples might include the use of ice banks for cooling storage and the charging of electric car batteries during the night in order to smooth the daily load profile of the electricity system.

The specific challenges faced by these regions and those of the world economy demand an innovative approach and sustainable solutions. This underlines the need to develop and implement Sustainable Energy Action Plans for the Madeira and Porto Santo islands that take into account the advantages and disadvantages of an isolated island region. The Sustainable Energy Action Plans address energy efficiency in final use and RES, mainly for electricity production, including wind, solar photovoltaic, hydro and biomass. In the future, wave energy, offshore wind and geothermal energy will be studied and implemented if feasible.

EU Regional Policy should continue to fund such initiatives for three main reasons. First, there is still great unexploited potential for further use of RES in energy production. Second, although private funding is starting to play an important role in co-funding RES projects (e.g. the Green Island Project in Azores), public funding is still needed due to the small size of the local economy and the uncertainty that investors still have about some RES. Finally, despite the relatively small scale of RES development in these two regions, some of the facilities (e.g.

63 European Commission 2011g.


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the Socorridos hydropower station in Madeira) can act as pilot projects and good examples for wider development of RES at EU level. Further development of renewable energy will create jobs, increase regional added value and reduce fossil fuel imports.

4.5. Romania64

KEY FINDINGS

• Romania follows a centralized approach to Regional Policy, which is why no particular regions in the country were singled out as case studies

• The country is well covered with electricity grids but its aging infrastructure is causing significant losses along energy supply chains, spurred on by increasingly high demands from the burgeoning economy.

• The potential for RES development is high, mainly from solid biomass, hydropower, geothermal and wind energy, the latter in particular on the Black Sea coast and in the mountainous areas.

• Large investment needs and operating costs were identified as key barriers to the successful implementation of increased generation capacity. In addition, Romania’s lack of experience with the management of EU funds hampers its uptake.

4.5.1. Introduction

The Romanian territory is divided into eight development regions, which correspond to the NUTS 2 level. All eight regions in Romania are Convergence Regions65. The Regional Policy objectives are defined in seven different OP, including four sectoral OP (Transport, Environment, Increase of Economic Competitiveness (IEC) and Human Resources Development), one regional OP and OP on Administrative Capacity Development as well as on Technical Assistance.

The case study provides a picture of the use of EU Structural Funds for renewable energy infrastructure development in Romania discussing both the absorption of funds and their effectiveness in fostering renewable energy infrastructure. Due to the centralized management of Structural Funds in Romania (reflected in OP at national level) it is not useful or feasible to select and describe two separate regions within Romania as case studies but to cover the whole territory. Also, as will be seen, the small number of contracted projects in areas relevant for this case study does not yet allow for any cross-regional comparisons.

4.5.2. Romania – following a centralized approach


The Romanian potential for the development of RES is good. Sources include mainly solid biomass, hydro power and geothermal. Romania also has relatively high potential for the development of wind energy, especially on the Black Sea coast and in the mountainous areas. However, the most suitable sites for wind turbines are situated in the Danube Delta

64 This chapter is mainly based on the input of the case study authors Bettina Kretschmer, Keti Medarova-Bergström

(Institute for European Environmental Policy). 65 Government of Romania (2007a): National Strategic Reference Framework 2007-2013, available at

http://www.fsenordest.ro/BIBLIOTECA/csnr-en.pdf. (accessed Jul 18, 2011), p. 33.


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Biosphere Reserve, where their development might compromise other environmental objectives such as nature conservation66.

The National Institute for Economic Research identified large investment needs and operating costs as key barriers to the successful implementation of increased generation capacity67. Other challenges include the country’s relatively limited experience with the development of such projects, hence institutional capacity problems are to be expected and need to be tackled. The EU Renewable Energy Directive stipulates a target for Romania of 24% renewable energy by the year 2020, up from the 2005 renewable energy share of 17.8%.

Renewable heat is dominated by the use of solid biomass, a situation that will prevail up to 2020. In 2010, 96% of all renewable heat was biomass used in households. This share is anticipated to decrease to 66% in 2020 due to an increased reliance on district heating.

An important characteristic of the Romanian energy sector is its good coverage of electricity grids as well as relatively high coverage of district heating schemes. Worn equipment and networks, however, cause large losses along the energy supply chains. The high efficiency losses are reflected in the high energy intensity of the Romanian economy, which, in 2009, was 3.5 times as high as the average EU27 energy intensity.


The National Renewable Energy Action Plan (NREAP)68 prepared in 2010 as part of Romania’s obligation under the Renewable Energy Directive69 further spells out the current situation in the Romanian energy sector and its sub-sectors, pointing to the ‘advanced degree of physical wear (approximately 65%) of the low, medium and high voltage (110kV) electricity [distribution] lines, the transformer stations and transformer substations’ and at the out-dated state of ‘30% of the plants being equipped with machinery produced in the 1960s’70. The NREAP highlights in particular the need for modernisation in the heating sector, the ‘most neglected of the energy subsectors’ where RES ‘received the least attention at legislative level’ and whose ‘centralised district thermal energy and co-generation supply systems represent […] the most deficient energy sub-sector’71. Adequate coverage of the district heating infrastructure is beneficial as it allows for utilization of excess heat from efficient combined heat and power (CHP) generation. In Romania, however, there is a tendency for households to opt out from the centralised heating system. This is due to worn and obsolete infrastructure and associated distribution losses, rising energy bills and decreasing quality in service72. Providing district heating based on renewable energy is still ‘at an early stage’.

66 GHK (2006): National evaluation report for Romania. Strategic evaluation on environment and risk prevention

under Structural and Cohesion Funds for the period 2007-2013. Report for DG Regional Policy. 67 National Institute for Economic Research (2004): Workshop documentation as quoted by GHK (2006). 68 NREAP (2010): National Renewable Energy Action Plan, available at http://ec.europa.eu/energy/renewables/

transparency_platform/doc/national_renewable_energy_action_plan_romania_en.pdf (accessed Sept 08, 2011). 69 European Commission 2009a. 70 NREAP 2010, p. 58. 71 The NREAP further states that ‘approximately 80% of the thermo energy units in CHP supplying the centralised

heat supply systems from the Romanian cities were installed in the period 1970 – 1980’ with their usual lifetime having expired by now leading to low performance (NREAP 2010, p. 74f).

72 NREAP 2010.


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The NREAP maps out in detail how Romania envisages meeting its binding national renewable energy target. Legislation of particular relevance for infrastructure development includes the following:

• The main piece of national legislation in the context of energy grid requirements is the ‘Electricity Law 13/2007’73;

• In terms of grid development, the ‘ETG Development Perspective Plan for the period 2008-2017’ prepared by the Romanian TSO TRANSELECTRICA provides the roadmap for modernising the Romania grid;

• Regarding storage capacity, important for balancing the grid with increased integration of intermittent renewables (such as wind), the NREAP highlights the ‘Energy Strategy of Romania for the period 2007-2020’ that outlines the construction of the 1000 MW pump storage hydro power plant Tarnita-Lapustesti.

Figure 4: Renewable electricity production in 2010 (left) and 2020 (right) in GWh

Source: NREAP 2010, retrieved from Beurskens and Hekkenberg 2011

The NREAP states that there are ‘no renewable installations ready to come online but not connected due to capacity limitations of the grid’74. Thus, the capacity of the grid is not a hindrance to investments in renewable generation capacity.

Romania falls within the area defined in the EC’s blueprint for an integrated European energy network as the Central/South Eastern Electricity Connections Corridor75. Regarding the strengthening of interconnection capacity, the NREAP lists projects with Serbia, Turkey, Republic of Moldova and Ukraine76.

These projects correspond to the long-term (2015-2010) investment needs that have been identified in the ENTSO-E’s77 Ten-Year Network Development Plan (TYNDP). This development plan lists all ‘planned or envisaged transmission investment projects of European importance’ proposed by European Transmission System Operators. Romania is part of two ENTSO-E regions, Continental Central East and Continental South East.

73 NREAP 2010, p. 57. 74 NREAP 2010, p. 64. 75 European Commission 2010b. 76 NREAP 2010, p. 61. 77 ENTSO-E is the European Network of Transmission System Operators for Electricity.


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The TYNDP also indicates that Dobrogea, a prime location for wind parks, as an area of ‘future generation evacuation’ in the long-term78. This shows that while grid capacity might not be a bottleneck for renewables integration currently, the situation is anticipated to change with enhanced wind energy production79. Regions with enhanced need for grid infrastructure improvement are Dobrogea, due to the high-anticipated installed capacity for wind, as well as the Moldavia region of Romania. Due to high rates of power generation in Dobrogea (including from a nuclear power plant), and lack of appropriate infrastructure, grid congestion and difficult transmission to the rest of the country are potential risks.

Furthermore, the NREAP outlines in detail the support mechanisms for renewable energy in the electricity, heat and transport sectors. Renewable electricity is supported by a mix of policies including an obligation scheme involving green certificate trading, state aid and other co-financing schemes granting investment support80. Renewable heat generation is supported by financing from Structural Funds, from the Environment Fund and further co-financing schemes81.


The relevant OP for renewable energy objectives are OP Environment and OP IEC. The priority axes (PA) three of the OP Environment aims at reducing pollutant emissions and mitigating climate change by restructuring and renovating urban heating systems in identified local environmental hotspots. Thus ground level concentrations of pollutants as well as public health shall be improved. PA four of the OP IEC targets a more efficient and sustainable energy system, the promotion of RES and the diversification of interconnection networks in view of strengthening the security of energy supply.

While OP Environment assists the NSRF’ priority ‘Promote Balanced Territorial Development’, the OP IEC adds to ‘Increase the Long-Term Competitiveness of the Romanian Economy’. Both OPs contribute to the NSRF’s priority ‘Develop Basic Infrastructure to European Standards’ which includes the aim to improve energy infrastructure and reduce efficiency losses along energy supply chains.

Priority considerations include tackling persisting poor air quality and dealing with depreciating energy production and distribution capital82. The NSRF identifies main measures to improve energy efficiency in order to ‘rehabilitate and expand the national grids as well as to expand and interconnect the operational networks for electricity transmission with the European networks’83.

Out of the total funds of EUR 19.2 billion, EUR 604 million, or 3.1%, are spent on energy-related projects. The split according to different energy objectives is illustrated in Table 2 in the chapter 4.2.

The regional OP further promotes the energy-efficient renovation of the housing stock so as to reduce losses from poor insulation (as part of the programme ‘District heating 2006-2015

78 ENTSO-E (2010): Ten-Year Network Development Plan 2010-2020, European Network of Transmission System

Operators for Electricity. 79 This impression was confirmed by a Romanian expert on renewable energy (pers comm with Cristian

Tantareanu). 80 NREAP 2010, p. 83. 81 NREAP 2010, p. 129. 82 According to the NSRF, the following have exceeded operational lifetime: 37% of hydro power plants, 50% of

electricity power lines, 60% of electricity sub stations, 69% of gas transport pipelines. Similarly large shares of the gas and electricity distribution grids are obsolete (Government of Romania, 2007a, p33).

83 Government of Romania 2007a.


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– heat and comfort’), hence complementing the investments in the urban heating system (plants and networks) under the Environment SOP84.

In comparison to other EU Member States large amounts of Structural Funds are dedicated to projects promoting renewable energy and energy efficiency in Romania’s regions. However, analysis shows that only a small number of projects have been implemented. This circumstance required an analysis of the relevant OPs in order to find an explanation.

One main problem of investments in renewable energy infrastructure supported by the Cohesion funds in Romania is the slow absorption of the funds towards meeting the objectives set out in the NSRF. The Strategic Report85 acknowledges difficulties in the first implementation stage, mainly because this is the first time that Romania has used Structural Funds. Especially, the renewable energy sector under SOP IEC has seen a ‘slow implementation pace […] with a contracting rate much below expectations despite of the extremely high interest of potential beneficiaries’86

With regard to the projects under Key Area of Intervention (KAI) 4.2 ‘Renewable Energy’, the 14 projects contracted so far (out of 52 submitted) still fall short of the overall target for the programming period of 30 projects according to the AIR87. It was not possible to establish a clear regional pattern of absorption of funds; an exception is a concentration of wind park projects in the Dobrogea region (around Constanza, Black Sea, corresponding to NUTS 2 development region ‘South-East’) of Romania88.

Regarding infrastructure projects no grid related projects (electricity/gas) have been contracted so far, but this is expected to change in autumn 2011. In response to a call in 2011, 5 project proposals for transport grids and 52 for distribution grids have been submitted which could serve for improved renewables integration indirectly89.

As a sectoral legislative barrier to the higher absorption of funds, the Strategic Report mentions in relation to energy the ‘lack of application norms for the Law No 220/2008 on the system for promoting energy from renewable sources and the possibility/risk to amend this Law, with an impact on the financial forecast’90. It appears that this uncertainty should at least partly be resolved as the EC established compatibility with the EU internal market of the green certificates scheme for renewable electricity introduced Law No 220/200891.

84 Pers comm with Managing Authority for SOP Environment. 85 Government of Romania (2010a): National Strategic Report 2009 on the implementation of the Structural and

Cohesion Funds, available at http://ec.europa.eu/regional_policy/policy/reporting/document/ro_strategic_report_ en.pdf. (accessed Jul 07, 2011).

86 Government of Romania 2010a, p. 63. 87 Government of Romania (2011b): Raportul Anual de Implementare pe anul 2010 al Programului Operaţional

Sectorial “Creşterea Competitivităţii Economice” 2007-2013 Proiect. Ministerul Economiei, Comertului şi Mediului de Afaceri, Autoritatea de Management pentru Programul Operaţional Sectorial “Creşterea Competitivităţii Economice”, Mai 2011, p. 11.

88 Pers comm with Cristian Georgescu. 89 Pers comm with Cristian Georgescu. 90 Government of Romania 2010a, p. 70. 91 In particular, the recent Commission decision approves of a newly introduced technology-specific banding of

green certificates based on production cost differentials: European Commission C (2011) 4938 of 13.07.2011 on ‘State aid SA. 33134 2011/N – RO Green certificates for promoting electricity from renewable sources’.


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Table 6: Contracted renewable energy projects under SOP IEC PA4

Type of resource

Project number

Capacity (MW and/or MWt)

Total value (included VAT)

Total value of approved financing

Hydroeletric 6 10.7 176,647,395.5 61,202,526.6

Geothermal 1 44,988.6 – thermal 16,686,889.9 13,740,648.0

Biomass 3 5.2 – electricity 5.1 – thermal

118,477,330.4 58,413,917.0

Wind 3 44.0 297,159,636.0 136,180,602.0

PV 1 0.3 8,868,552.4 6,185,629.0

Approved projects 14

60.2 electricity 44,993.7 thermal energy

617,839,804.2 275,723,322.6

Source: Presentation received from Cristian Georgescu (IB Energy for SOP IEC). Approved projects shown have all been contracted by now, as confirmed by the list of all SOP IEC projects as of 31 August 2011: Government of Romania 2011a.

Regarding SOP Environment the focus of implementation is on water related measures; according to the Strategic Report, other intervention areas ‘may be considered more like pilot programmes – investments for improving the efficiency of thermal energy supply systems […] – still with a high expansion potential in the next time period’92.

Regarding the use of funds from the EERP, the Strategic Report mentions that the priority for Romania was ‘state budget co-financing’, among others for infrastructure investments including energy. It is furthermore mentioned that limited use of EERP funds has been made, e.g. in relation to ‘introducing in the OP a change to increase the amounts allocated to energy efficiency investments’. The reason for not picking up on this particular opportunity is that energy efficiency investments ‘are still pilots in Romania and […] the implementation is extremely difficult’93. Further, the Strategic Report states that OP have not been amended ‘to open the scope of actions to energy efficiency and renewable energies in housing’.

We have furthermore attempted to derive potential territorial effects from information given for projects funded through other mechanisms with the following results:

A co-financed EBRD project ‘National Power Transmission Co. “Transelectrica”SA’ on Romanian-Hungarian interconnection capacity (see Annex C) states is envisioned to have positive socio-economic effects. Specifically, it is foreseen that the ‘proposed project will have a positive effect on the zonal infrastructure, but it is not a job-creating project’94.

The ESIAs for the two co-financed EBRD wind parks in Cernavoda and Pestera state that their construction ‘will have beneficial effects on the local community and will make significant contribution to both the local budget and create new jobs’95. The non-technical summary of the ESIA further mentions that ‘local residents should be employed for non-specialist construction jobs where possible to provide a positive contribution to the local economy.

92 Government of Romania 2010a, p. 42. 93 Government of Romania 2010a, p. 77. 94 Compania Naţională de Transport al Energiei Electrice ”Transelectrica” S.A. (2008): 400 kV Overhead

Transmission Line Oradea – Békéscsaba. Executive summary of environmental impact assessment, available at http://www.ebrd.com/english/pages/project/eia/33354e.pdf.

95 Cabinet expert mediu Petrescu Traian (2008): RAPORT LA STUDIUL DE IMPACT ASUPRA MEDIULUI PENTRU „PARC EOLIAN PESTERA”, available at http://bo.edprenovaveis.pt/upload/Site_1/Files/EIA%20Study_%20Pestera%20WF.pdf.


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The land will be returned to agricultural use during operation of the wind farms, thus continuing to provide an income for farmers’96.

Three recent submissions for project co-financing by the EIB for wind parks in the regions of in Dobrogea and Moldova Noua included estimates for overall potential effects from developing Romania’s wind power sector in their ESIAs. Given that a generation of 6000 GWh of electricity from wind power (based on a technical and economical potential for wind power in Romania of 2500 MW installed capacity, out of a 14,000 MW theoretical potential) would offset the combustion of fossil fuels, over 7 million tons of CO2 production could be avoided. Referring to the 6000 GWh generation figure, 7,500 permanent jobs and also ‘an equal number of’ temporary jobs could be created. These figures should be treated with extreme caution as no derivation for them is provided97.

4.5.3. Conclusions

The analysis has shown that while there is the potential to develop renewable energy and related infrastructure in order to reduce the large efficiency losses of the Romanian energy sector, decrease the energy intensity of the economy, improve air quality and mitigate greenhouse gas emissions, so far the uptake of EU funds has been extremely low based on the information retrieved. The situation is especially striking for infrastructure-related projects, where no projects have been contracted particularly given the advanced stage of the programming period (though this is anticipated to change soon in autumn 2011??).

The slow absorption rate is one of the main reasons for the lack of adequate data. As a new Member State, Romania does not have much experience using EU funds; this lack of experience represents a weakness for any kinds of projects including renewable energy generation and infrastructure. In terms of infrastructure improvement and efficient resource use, the focus of SOP Environment is much more on water management. Hence an in-depth analysis is difficult to undertake due to a lack of available data and the fact that there are no completed projects in the field of renewable energy. Longer term socio-economic impacts including job creation effects can hardly be established at this point in time.

Romanian renewable energy strategies do not perceive the grid integration of renewables as a particular bottleneck in the medium-term (up to 2020). This helps to explain the lack of focus on renewable energy infrastructure projects. According to renewable energy experts consulted, and also in accordance with European network development plans, the situation is, however, likely to change. Increasing wind generation capacity in the Dobrogea region coupled with the nuclear power plant in that area will pose challenges for transmitting electricity to other parts of the country. Future studies will be needed to properly quantify the emerging challenges98. At the same time, grid improvements are needed for increasing Romania’s interconnection capacity within the European grid.

As an alternative to the use of EU funds, some private initiative is observed, with wind park developers investing in improving transformer stations hence guaranteeing the injection of their generation capacity99. This could be interpreted as challenging the official view that grid capacity is not a barrier to renewables’ deployment.

96 EDP Renewables (2010): Proposed wind farms Pestera and Cernavoda, Dobrogea Region, Romania. Non-technical

summary of the environmental impact assessment, available at http://bo.edprenovaveis.pt/upload/Site_1/Files/EDP_NTS_English%20version.pdf.

97 All ESIAs can be found here: http://eib.europa.eu/projects/pipeline/2011/20110247.htm. 98 Pers comm Cristian Tantareanu. 99 Pers comm Cristian Tantareanu.


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4.6. Sweden100

KEY FINDINGS

• Sweden points to Upper-North Sweden as a region that hosts good practice examples as well as unused potential in the field of renewable energy infrastructure. It is a sparsely populated area with favourable natural resources for hydroelectric power, wind and bio energy.

• The traditional expertise of producing hydroelectric power, together with large amount of available land and lack of competing interests create excellent conditions for energy exploitation.

• Upper-North Sweden’s production of renewable energy could increase significantly, but it faces hurdles such as transmission in the national grid due to its remoteness and capacity. There is little unused potential in the current grid, so it would need to be greatly reinforced to expand production.

• Additionally, municipal governments pose a hindrance to strengthening the grid, as some municipalities do not recognize potential benefits for the region.

• As the local authorities have quite a lot of sway in Sweden, establishing compensation systems or by highlighting good examples of how a municipality or a region can benefit from investments in infrastructure for renewable energy may be necessary to push forward progress in this field.

4.6.1. Introduction

The following case studies will focus on Upper-North Sweden and both the good practices and the unused potential in the region. This region is a good example of the diversity of actions for renewable energy that may take place in a single region and illustrates how one region can host both good practices and unused potential. The case studies therefore also explore the complexity of multi level governance and the extended role of the local level in Sweden.

4.6.2. Upper-North Sweden - an example for unused potential


Upper-North Sweden is a sparsely populated area with favourable natural resourses for hydroelectric power, wind and bio energy. The energy sector is strong due to the regions’ natural resources and conditions, and the energy and environmental technology field is also given priority. Renewable energy is prioritized in the region’s growth and development plans.

Upper-North Sweden has several wind energy parks and great potential for the establishment of large-scale wind power. The establishment of wind power in northern Sweden has advantages compared to southern Sweden, where the economic potential is in some ways better due to production being closer to the users. Nonetheless, northern Sweden has more available land, often with less competition from other interests. The production capacity is comparably greater at the same wind profiles due to higher air density (cooler air with higher appropriations power). Good wind conditions and economical solutions for offshore power plants make the area attractive for this purpose, although transmission capacity today is limited.

100 This chapter is mainly based on the input of the case study author Helena Lund (SWECO Eurofutures AB).


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Hydropower has been used in Sweden to generate electricity for more than 100 years; the hydroelectricity plants produce renewable electricity by running water through turbines and supply almost 50% of Sweden’s total energy needs. Hydroelectric power plants can be found all over Sweden, but the majority of them are located on the big rivers in the north. Hydropower in northern Sweden makes a major contribution to Swedish welfare. From a growth perspective, it is therefore important that this type of energy is developed in a sustainable manner. As the world's fossil fuels will be phased out, hydroelectric power is assumed to take on an increasingly important role in the conversion of the energy system to a more sustainable model. Development of hydropower through efficiency and capacity-building is thus important from a climate and energy perspective.

Upper-North Sweden still has vast unused potential in the area of renewable energy production. A pilot study commissioned by the Farmers Federation (LRF)101 in Norrbotten and Västerbotten shows that the areas where it is possible to find and spur profitability are heating, biogas, wind energy and refined fuels in various forms. Studies in the region also indicate that usage of biomass from the forest could increase significantly102. The gap between annual growth and harvesting is larger in Upper-North Sweden than in the country as a whole. The region is also looking at the possibilities of small-scale wind and hydro power facilities, as the nature resources in northern Sweden offer potential for increased production of especially wind and bio energy. Three bottlenecks for further development in the area of renewable energy in Upper-North Sweden will be discussed below.

Due to favourable conditions and unused potential in the field of renewable energy, Northern Sweden has great potential to produce more energy than is consumed in the region. Already, energy is by and large produced in northern Sweden and consumed in the south of the country. However, in order to export energy and make use of the full potential for renewable energy in Upper-North Sweden, the transmission grid would have to be reinforced.

Svenska Kraftnät is a state enterprise that manages and operates the national grid, in which electricity is transported from the large power plants to the regional electricity networks. Compared to other countries periphery areas, the national grid system is extensive in northern Sweden due to the early establishment of hydro energy in the region and its importance for Swedish energy supply as a whole (Upper-North Sweden hosts the largest hydro electronic plants in Sweden). However, an expansion and improvement of the national grid is necessary to take advantage of the full potential of future wind farms.

For example, a wind energy park in the municipality Piteå is planned with the investment of 1,100 wind turbines. Today, the capacity of the national grid will only be able to transfer half of the electricity that can be produced in the large wind park planned for Piteå. This is one of the largest investments in wind energy in Europe, and several other wind parks already running in the region are producing electricity for the national grid. There is a need to strengthen the grid and gradually develop technical solutions in order to transfer and take advantage of the electricity produced. Hydropower is currently used to balance the uneven supply of wind, but when the proportion of wind power increases in the region alternative solutions regarding storage and transportation of energy will be needed. Something that has been discussed, but still is no more than an idea, is an undersea cable in Bottenviken to combine several large offshore parks from north to south.

The existing regional grid in Upper-North Sweden has little unused capacity. In the long run, it is imperative that the expansion of wiring be done in such a way that the grid does not become a bottleneck in the development of renewable energy, in the case that the parties

101 LRF (2008): Nuläge och potentialer för förnybar energi i Norrbottens och Västerbottens län. 102 SKOGFORSK (2010): Inlandsbanans potential i Sveriges skogsbränsleförsörjning, NR 727, LRF 2008.


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responsible for the extension of the regional grids are the corporate promoters of an investment.

The same accounts for the local grid network. Small-scale wind and hydropower are good candidates for development in sustainable energy use and renewable energy, however, the fact that the promoter of an investment bears the cost of expanding the local electricity grid can be an obstacle for expansion of small-scale wind and hydropower. Development of smart grids allowing small-scale producers to sell energy could be important in order to increase usage of these renewables.

There is a need to implement measures at the national level in order to make it easier for local involvement in expansion of wind power. If the unused potential in Upper-North Sweden is explored by wind farming, Upper-North Sweden can ensure the availability of renewable energy and strengthen growth in the region through export of electricity. For example, the total planning of wind power (permits, applications and consulting) is 15-20 TWh in the region, including investment in Markbygden stand for 8-12 TWh. This represents the entire national planning objective by 2015 and 40-60% of the proposed land-based target by 2020.


The local and regional frameworks for renewable energy in Sweden are influenced by national guidance. National energy policies are based on the same pillars as energy cooperation in Europe, and aim to reconcile ecological sustainability, competitiveness and security of supply. Although policies for promoting renewable energy in itself are not a novelty, there are new components with binding European targets, as awareness of climate change has increased the number of international agreements.

As a result of Sweden's commitments, the parliament adopted new plans for expansion of wind power in Sweden. The goal is that by 2020, conditions will exist for an annual production of electricity from wind power of 30 TWh. Achieving this requires the building of several hundred wind turbines every year. The vision for Sweden in 2050 is to have a sustainable and resource-efficient energy system without net emissions of greenhouse gases.

The Swedish Parliament has adopted 50% as the national overall target share for renewable energy, i.e. one percentage point above the mandatory national target under Directive 2009/28/EC. The EU directive also includes a mandatory requirement stating that all Member States must have 10% RES in the transport sector by the year 2020, without the use of cooperation mechanisms.

The Swedish national plan for renewable energy103 includes implementation of the European Parliament and Council Directive on the promotion of the use of energy from renewable sources and amending and subsequently repealing Directives 2001/77/EC and 2003/30/EC (förnybartdirektivet). The EU directives establish a common framework for the promotion of energy from RES and propose measures to promote greater use of renewable energy. During the work with the Swedish national plan, it was recognized that most of the measures already were implemented in the Swedish regulatory system. These include simplifying permitting processes which have been done recently in the area of wind energy, adapting building regulations, ensuring that guarantees of the origin of renewable electricity can be issued, increasing information technology and support systems and facilitating access to electricity and gas networks for renewable energy.

103 Government of Sweden (2009): Regeringens proposition 2009/10:128. Genomförande av direktiv om förnybar

energi Prop. 2009/10:128, available at http://www.regeringen.se/content/1/c6/14/24/85/3e6bdec0.pdf (accessed Sept 09, 2011).


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For the programming period 2007-2013, Sweden has allocated some EUR 15 billion in Structural Funds. Structural projects in Sweden are financed by both the ERDF and the ESF. Around 6% of the Structural Funds are invested in projects regarding renewable energy and energy efficiency.104 The Structural Fund programmes in Sweden have been developed in eight regional programmes covering the entire country, Upper-North Sweden being one of them.

Much of Upper-North Sweden’s resources are located in economically peripheral areas that were formerly part of the ERDF Objective 1 Programme. Upper-North Sweden has a number of EU programmes running in the region: Structural Fund programme for Upper-North Sweden, INTERREG IVA North, Rural Development Programme and the regional plan for Upper-North Sweden in the social fund programme. INTERREG IVA North and the Kolarctic programme (ENPI) support a variety of development projects to strengthen growth and opportunities for both business and public sectors. The County Administrative Board manages the work in collaboration with other actors – municipalities, counties, the Sami Parliament and companies and counterparts in Norway and Finland and northwestern Russia. The ENPI 2007-2013 promotes cross-border cooperation between the countries of the Arctic and northwestern Russia, with the overall purpose is to promote transnational cooperation. The programme also aims to help regions in the programme area to develop their cross-border economic, social and environmental opportunities.

Additionally, Upper-North Sweden is located in the area of the EU priority corridor for electricity, gas and oil. The BEMIP Electricity & Gas. BEMIP (Baltic Energy Market Interconnection Plan) is a project aiming for an integration of the Baltic States into the European market through reinforcement of their internal networks and strengthening of interconnections with Finland, Sweden and Poland, and through reinforcement of the Polish internal grid and interconnections east and westward.

Although the Structural Fund programmes for Upper-North Sweden have no specific measures with earmarked capital for projects in the field of renewable energy, there are so-called ‘priority growth areas’ designated in the operative programme that run across the programmes overall criteria and regional priority areas. These criteria are set to help fulfill the vision and objectives in the region's development and growth programme (RUP and RTP). One of these priority-added criteria is Energy and Environmental Technology. Therefore, projects with a focus on renewable energy can be approved and prioritized in several steps.

4.6.3. Upper-North Sweden - also an example for good practise


Despite the unused potential as described above, it is recognized that production in large parts of Upper-North Sweden results in good examples of renewable energy projects. In many ways, the region is in the front row in the process of R&D in energy and environmental technology – a successful outcome of a long-term cooperation between research, industry and society. A high proportion of energy-intensive companies and businesses are also located in Northern Sweden, which is an impetus for further development in the area.105

104 Regerigskanselet (2011): Regionala strukturfondsprogram för konkurrenskraft och sysselsättning, available at

http://www.sweden.gov.se/sb/d/9724/a/91344 (accessed Sept 09, 2011). 105 Strukturfondspartnerskapet för Övre Norrland (2007): Regional plan för Europeiska socialfonden i Övre Norrland

2007-2013, available at


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The Framework of programmes and plans relevant for renewable energy deployment is described in chapter 4.6.2.2 above.


In chapter 4.6.2.3 the composition of EU funding in the region was described. In the following passages some examples for the induced development in the area of renewable energy will be described.

Luleå University is the beneficiary of an EU project that aims to, with help from regional actors, develop and demonstrate an environmental solution for small hydropower producing green energy at low cost in terms of both investment and maintenance expenditures. The overall project objective is to develop, build and evaluate a pilot plant, showcasing the technology's applicability.

Solander Science Park is another EU project involved in R&D and financed through the ERDF programme. It aims at becoming a world-leading centre for research and business development in forest industry-based biorefining technology. The aim of the project is partly to develop efficient processes in optimally integrated systems in order to make it possible to use biomass in an efficient manner. Research is one part of the Science Park and another is Solander Business Center which helps companies within forest-based biorefinery to be more competitive. The initiators believe that the region offers unique opportunities to become an important actor and pioneer in this field. Many of the local authorities in Upper-North Sweden are more or less involved in this project; the beneficiary is Piteå municipality.

There are a number of bio energy facilities in Upper-North Sweden, but this is also an area under development. Biogas production is also highly relevant to the industry and in particular the forest industry. Another example is Bio Fuel Region (Biogas Norr), a joint venture in northern Sweden between municipalities, companies, regional councils, county boards, county councils and universities. The aim of the cooperation is to increase the production of bio fuel in northern Sweden. Together with wind energy and hydropower, bio fuel is a prioritized area in the counties of Upper-North Sweden. Research in this area is important in order to find market solutions to use the forest as a renewable energy resource and to encourage private investments in bio energy.

Piteå municipality is an example of a region that grasps opportunities from investments in infrastructure for renewable energy and tries to increase the benefits for the local area. Piteå has both the space for wind farms and areas with excellent wind conditions such as Markbygden, a sparsely populated area with great wind conditions and a relatively small degree of conflicting interests. In addition, this area is crossed by three major power lines that can be used for transmission of electricity. The project in Markbygden is a major industrial project in renewable energy with the potential to become one of the largest industrial investments in renewable energy in Sweden and the EU. The company Svevind, together with a German company, is planning to build Europe’s largest wind energy park with a total of 1,101 wind turbines. Total estimated production capacity of the wind farm is 12 TWh/year. The expected investment cost is EUR 50 billion over a 10 year period.

In order to make Piteå more attractive for investments, there are plans for an expansion of the port in order to increase the capacity to take in ships. Piteå municipality applied for

http://bd.lst.se/publishedObjects/10009798/Reg%20ESF-plan%20version%200_4%2020071005.pdf (accessed Sept 09, 2011).


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funding from the EU via the Structural Funds to rebuild the port but its application was rejected. The financing situation is not solved at the moment. Large infrastructure investments will be necessary in order to complete the large scale wind farm.

As discussed under “Upper-North Sweden - an example for unused potential” there is no certainty that such large investments will benefit the local or regional area. Piteå municipality therefore started the EU project, with co-funding from ERDF, “Vindkraftscentrum” in 2009. This “wind power centre” aims to increase the exploitation of the positive effects from the large-scale wind power development in the area. It aims to make Piteå a hub for manufacturing, information, research and education in wind energy in cold and forest climate in the Barents region – everything in order to create growth and employment opportunities in Piteå municipality.

Production of these volumes requires industrial backing in the region, since it is not possible to transport concrete foundation from Germany to the extent necessary. The municipality council is campaigning to move the manufacturing of the towers (3.7-meter-high concrete building blocks) and the huge rotor blades required, to the municipality. The idea is that all production will eventually spin off and result in an industry producing turbines for wind farms in other regions. In this way, a new industry can be kept alive even after the 10-15 years required for the 1,100 wind turbines for Markbygden is over.

Every ten wind turbines create a permanent job in the service and maintenance industry, adding up to 110 new jobs. Up to 600 km of new roads will be required within the region, which represents 15% of the total municipal land area. Projectors are also negotiating with the municipality to establish a dedicated energy module in secondary education, to equip students with skills for the future. These developments are the basis for strengthening local and community services. In connection with the construction of the wind farm, a fund is instituted for the development of the area. The purpose of the fund is to provide profits to the villages, associations and organizations that are affected by wind power in various ways. Due to the plant's overall size, announcing a manufacturing plant for the production of wind turbines towers, and possibly even the turbine assembly and rotor blades, may be necessary to encourage relocation to the region, which would mean further development and growth.

All in all, the area of renewable energy is a growth factor for a peripheral municipality and can contribute to the creation of new employment opportunities. But to what extent this will benefit a municipality or a region depends on the actions undertaken by local authorities and other actors involved in the region.

Cross-border cooperation and transnational partnerships are of great importance for the region, especially in the field of R&D. Upper-North Sweden is located in an arctic environment, which implies a cold climate and sensitive nature. The result is that energy-related advances conducted in Europe cannot always be applicable in the region. Therefore, it is of great value to conduct further development based on arctic climatic conditions. Transnational and cross-border cooperation involves several universities and various development companies that can complement each other, creating added value related to R&D within Upper-North Sweden and its neighbouring regions.

For the same reasons, it is important that transnational cooperations continue to develop. EU programmes, such as INTERREG IV A North, have had a positive impact on the region's development in renewable energy. Cross-border cooperation creates synergies between countries and is an important forum for knowledge sharing; an example of one such area is wind power. An advantage of INTERREG IV A North is that the programme document is written with respect to all three countries' regional conditions, however, there may be other obstacles towards cooperation between countries such as the impact of renewable energy on nature, e.g. the EU Network for valuable nature – Natura 2000, or financial constraints.


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An improvement of the national grid is of great importance for the possibility of large-scale expansion wind power in the region. Northern Sweden currently exports large amounts of electricity, mainly from hydropower, but it is also experiencing increasing expansion of wind power. In the northern regions, increased transmission capacity is desirable, but even without improvements of the national grid there are great possibilities in increasing energy supply in northern Sweden. Lower energy prices can be a competitive advantage to attract energy-intensive companies and other energy-intensive activities to a peripheral region.

4.6.4. Conclusions

The discussion above gives examples of how EU Cohesion programmes influence the regional level and illustrate how funding in R&D as well as cooperation networks is important and spurs further development in the area of renewable energy. However, it also illustrates the importance of the local level, and that initiatives often grow from the bottom upwards.

There is a top-down effect of influences from the EU level to the national level and further down to the regions in different ways. One effect is, of course, that national policies have been influenced by EU policies as shown earlier in this report. Another example is the awareness of the need for increased capacity of the national grid.

There are only a few Cohesion Policy investments in regional infrastructure for renewable energy in Sweden in total, which is the case even in the Upper-North Sweden case study region, one of the areas with most EU funding in Sweden. One reason is the limited amount of the Structural Funds given to Sweden. Investing in infrastructure for renewable energy would result in few projects with few agents having access to the Structural Funds. The slow development of Cohesion Policy investments in regional infrastructure for renewable energy can therefore be seen as an allocation problem. The Structural Funds’ overall target is to stimulate regional growth and regional development, but renewable energy investments do not always coincide with this overall target of stimulating processes of regional growth. The connection between a project and regional growth is perhaps easier to understand by granting money to a cluster involving academia and the regional business economy as well as public actors.

Through funding of projects such as Wind Power Center and Solander Science Park, the EU is indirectly contributing to increased regional and local benefits from the extensive infrastructure for renewable energy. The Wind Power Center aims at creating benefits from the ongoing expansion of wind power in the community in terms of new employment possibilities, additional investments and greater potential for personal services and the SMEs in the municipality or the region. Solander Science Park helps develop both existing and prospective businesses in the bio energy industry, possibly a future growth factor in the region. Hence, these types of projects are all important for further development of renewable energy in Upper-North Sweden.

Due to the level of independence on the local level, there is a need in Sweden to increase the local benefits from renewable energy and develop systems that benefit the local level. There is, however, great need for additional infrastructure investment in the region in order to spur further development and increase usage of renewable energy. Improvements of roads, rails and ports would facilitate, indirectly, the expansion of renewable energy in the region. Today, local agents express that substandard maintenance of the infrastructure in the region means higher expenses of cargo. The plans for an expansion of the port in Piteå in order to attract industries related to wind power is one example of this complexity.


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4.7. United Kingdom106

KEY FINDINGS

• Scotland and Wales serve as case studies in the UK, both with high potential in renewable energy production, but at different stages of infrastructure.

• The ISLES programme views two offshore locations in the UK as prime candidates for development of a massive offshore grid harnessing wind, tidal and wave energy; the Northern Concept in Scottish waters and the Southern Concept of the coast of Wales.

• As Scotland currently possesses up to a quarter of Europe’s offshore wind and tidal energy resources, the government has set ambitious renewable targets, hoping to capitalise on this vast resource and positioning the nation as a world leader in innovation, development and deployment of renewable energy. Many of the power stations are located in peripheral areas and are recipient of Structural Funds.

• As part of its “Energy Policy Statement, A Low Carbon Revolution”, Wales intends a twofold increase to the amount of current electricity generation to come from renewable sources by 2025, with 40% coming from marine, a third from wind and the rest from sustainable biomass power or smaller projects using wind, solar, hydro or indigenous biomass.

• At present, Wales still lacks sufficient onshore grid capacity, and the issue of multi-level governance has posed a huge barrier to the uptake of renewable energy, given the delay in connecting wind projects to an onshore grid

4.7.1. Introduction

A transnational European electricity grid or “super-grid” is crucial for the long term potential of renewable energy in the United Kingdom (UK). In 2010, the EC proposed a network of energy super highways across the EU.107 The expanded grid would carry renewable energy from the periphery of the Union to major consumption areas in central Europe. The system would also offer further connection opportunities for offshore RES108. In an electricity supply system with high renewable generation, an expanded grid offers many benefits. A large diversity of renewable generation across the EU would increase security of energy supply, helping to compensate for periods of below average generation in some areas. In periods of excess generation, pumped storage in Norway and alpine regions would act as significant energy storage centres.

For the 2007-2013 programming period, a total of EUR 10.6 billion in Structural Funds has been allocated to the UK. Spending on renewable energy initiatives cross cuts all objectives as part of a range of OP109.

The UK has 22 regional OPs, under both the Convergence and Regional Competitiveness and Employment Objectives. West Wales and the Valleys, Cornwall and the Isles of Scilly, and the Highlands and Islands110 fall under the Convergence Objective, which covers approximately

106 This chapter is mainly based on the input of the case study authors Jane Desbarats, Robbie Watt, Keith Whiriskey

(Institute for European Environmental Policy). 107 European Commission 2010b. 108 Fichaux & Wilkens (2009): Oceans of Opportunity. European Wind Energy Association. 109 Northern Ireland Assembly (2010): Future Cohesion Policy and Structural Funds. Research Paper 31/10. 110 The Highlands and Islands will no longer be eligible for funding under the Convergence Objective in the future.


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10% of the UK’s population. All the other regions of the UK fall under the Regional Competitiveness and Employment Objective.111

The draft of the next EU budget (the Multiannual Financial Framework for 2014-2020) has allocated EUR 200 billion worth of funding for the implementation of grids for electricity, oil and gas, as part of the “Connecting Europe Facility”.112

In this instance, the analysis focuses on the impacts related to the potential installation of an offshore grid in the North Sea, looking at impacts on regional development in Scotland and Wales. The connectivity of the UK to the European continent is a key factor in supporting the expansion of renewable technology in the UK as a whole, including Wales and Scotland. The scope of potential economic improvements as they relate to the development of an offshore grid, namely power grid expansion and upgrades, includes a wide range of indirect economic spinoffs that are secondary to the installation of the infrastructure itself.113

To illustrate the economic benefits associated with the installation of an offshore grid, the analysis refers herein to the ISLES project. It is currently investigating the future potential of an offshore grid, and what this will mean in terms of leveraging investment in additional renewable capacity for offshore wind, tidal and wave energy. However, the development of a potential offshore grid in the UK remains at the feasibility stage, despite some new inter-connections such as the 500 MW undersea cable connecting Ireland and Wales.114 The map outlined below provides an illustration of the geographical coverage of a potential offshore grid.

There are two proposed concepts for the development of an offshore grid: a Northern Concept, and a Southern Concept. The Northern ISLES Concept looks at grid connections between Northern Ireland and the west coast of Scotland, while the Southern ISLES Concepts looks at grid connections between the Irish Republic and Wales. In total, the entire ISLES development zone is expected to generate up to 16.4GW of installed capacity, 12.1GW of which is attributed to offshore wind. The remaining generation capacity is attributed to wave and tidal power.

To date, the project has considered how the installation of this grid will feed in to the existing connection capacities in the UK. To contrast the benefits associated with existing infrastructure that has received funding, with those for a region that has future potential for renewables, we have compared regions in Scotland with regions in Wales.

• Scotland: Highlands and Islands as well as Lowlands and Uplands Scotland (LUPS), which comprises North Eastern Scotland, Eastern Scotland and South Western Scotland;

• Wales: East Wales, West Wales and the Valleys.

111. European Commission (2009d): European Cohesion Policy in the United Kingdom, available at

http://ec.europa.eu/regional_policy/sources/docgener/informat/country2009/uk_en.pdf. 112 DG Regio 2011b. 113 We should note that data as presented in the Annual Implementation Reports makes it difficult to attribute

spending on renewables to the total number of jobs created. 114 National Grid (2011): Connection of On-Shore Wind Farms in Mid Wales, Project Need Case, National Grid House,

Warwick Technology Park, Issue 1, March 2011, available at http://www.interconnector.org/. The feasibility study is funded by the EU’s INTERREG IVA OP. The EU grant accounts for three-quarters of the GBP 1.6 million project budget, with three governments (Scotland, Ireland and Northern Ireland) contributing match funding.


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Map 4: Proposed Area for Offshore Grid

Source: www.islesproject.eu

Multi-level governance can be an issue in the UK with respect to the planning process and the application of the UK Electricity Act. Under Section 36 of the Act, Wales and Scotland are only able to approve projects that fall below 50MW. For this reason, larger scale projects would need to be managed and approved by UK authorities.

In some cases, the complexity of the planning and approval process can result in delays to projects, including those funded by the Structural Funds due to the devolved policy system in Scotland and Wales. With respect to distribution and grid expansion, the development of an onshore grid in Wales has delayed the potential for increased uptake of generation from wind power. As of March 2011, 874MW of wind power from farms seeking connection to the grid were outstanding, waiting for approval from National Grid.115

4.7.2. Scotland – funds supports offshore grid expansion


Due to Scotland’s position on the north-western fringes of Europe, and with its surrounding maritime zone, Scotland possesses up to a quarter of Europe’s offshore wind and tidal energy resources116. Much of Scotland’s vast wind, wave and tidal resources are located in economically peripheral areas, with many of these areas in receipt of Structural Funds.117 This is of particular importance to northern Scotland where declining oil revenues and employment in the North Sea may be offset by a successful offshore wind industry. Scotland is home to Europe’s largest onshore wind farm, situated on the Eaglesham Moor east of

115 See

http://www.nationalgrid.com/NR/rdonlyres/D367F257-6423-4095-A169-64FD89BDEC01/46008/ MidWalesProjectNeedsCaseIssue121March2011.pdf.

116 The Offshore Valuation Group (2010): The Offshore Valuation. Public Interest Research Centre. 117 Projects in the Highlands and Islands were in receipt of Cohesion funds under the current or last programming

period. However, it is no longer considered a Convergence region.


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Glasgow. Whitelee wind farm consists of 140 turbines and is set to expand by a further 75, increasing the capacity to 452 MW. The policy mechanism in place to incentivize the project was the renewables obligation, which legally obligated each licensed electricity supplier to supply a specified proportion of their electricity supplies from renewable sources118.

Due to the expanding aspiration of the UK and Scottish governments to produce more energy from renewables, both governments have actively encouraged the deployment of offshore wind. The preference for offshore wind reflects pressure from landscape protection interests, which have slowed the adoption of traditional wind generation, with only 40% of planning applications having been successful119.


The Scottish government has set ambitious renewable targets, hoping to capitalise on this vast resource and positioning the nation as a world leader in innovation, development and deployment of renewable energy. At present, Scotland has an installed capacity of 3.7GW with the potential to reach 68GW by 2050120.


Over the past 20 years, GBP 2 billion worth of Cohesion Policy funding has been spent on a variety of projects in Scotland; spending which has typically been matched by national governments, local governments and the private sector. The management of funding provided through the Structural Funds (ERDF and ESF) for each OP, is overseen by a combination of multi-level stakeholders in the devolved implementation system in place. There may be up to 200 members in each programme area, and every agency has equal status.

The Scottish Executive delegates responsibility to the partnerships to prepare the “single programming documents” (SPDs), which set out the priorities for how the funds are to be spent. There are currently two partnerships covering the designated areas of Scotland that include OP of interest to this contract. These are the Highlands and Islands Partnership Programme (HIPP) and East of Scotland European Partnership (ESEP), which manages projects for the Lowlands and Uplands.

Over the previous years the ERDF has been used to encourage the development of offshore wind in the north of Scotland and to increase investment in R&D, developing offshore wind supply chains and improving port infrastructure121.

In 2009, GBP 1.6 million was invested in Aberdeen’s Scottish European Green Energy Centre (SEGEC) with funding from the ERDF122. In 2010, the Aberdeen Offshore Wind Farm and European Offshore Deployment Centre (EOWDC) site was awarded EUR 40 million from the European Economic Recovery Package (also considered Structural Funds).123 The centre

118 Lauber & Volkmar (2005): Switching to renewable power: a framework for the 21st century. London:Earthscan. 119 Toke (2011):The UK offshore wind power programme: A sea-change in UK energy policy? Energy Policy: 526-

534. 120 Scottish Government (2010): Offshore Energy Potential, available at

http://www.scotland.gov.uk/News/Releases/2010/05/19100623 (accessed July, 12, 2011). 121 Scottish Government (2011): A European Supergrid: Memorandum submitted by the Scottish Government,

available athttp://www.publications.parliament.uk/pa/cm201012/cmselect/cmenergy/writev/1040/esg2.htm (accessed July 12, 2011).

122 ESEP (2009): Lowlands and Uplands Scotland European Regional Development Fund Programme 2007 – 2013, Annual Implementation Report 2009. The Scottish Government.

123 Projects receiving funding under the European Economic Recovery Package were a result of accelerated access to structural funds allocated in the 2007-2013 period to help cope with the economic crisis. More funds were simply


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plans to install eleven offshore test turbines124. The ERDF has also part-financed the Wave and Tidal Energy: Research, Development and Demonstration Support Fund (WATERS) and the European Marine Energy Centre in Orkney; the latter has become a world leader in pioneering R&D for wave and tidal energy.

The continued expansion and success of Scottish renewables will be reliant on large scale national investment in the UK grid, but also on the development of a large transnational European grid. A European Networks Strategy Group report (Vision 2020) calls for strengthening of the north-south UK grid to enable Scottish wind generation to supply high energy demand areas in England125. In order to further expand offshore renewable sources such as wind and wave power, Scotland has sought to develop, strengthen and reinforce terrestrial and subsea grids. Scotland successfully attracted a further EUR 74 million from the European economic recovery package for the development of the Shetland North Sea Grid Node. This will assist the connection of offshore renewable energy to the mainland126.

The Scottish government has championed EC proposals to expand European grid infrastructure describing it as a potential “renewable export bonanza”127. Scotland is well placed to exploit a “supergrid” due to its huge renewable resource and offshore engineering experience. The EC has funded preliminary research into the development of a transnational grid and offshore hubs in the North Sea through the OFFshoreGrid project128. A North Sea grid would vastly increase the market for Scottish renewable energy, allowing the renewable sector to grow beyond indigenous energy demand to achieve the expansion of generation capacity, and sustained employment.

It is widely acknowledged that investment in Scotland’s renewable energy sector is likely to have a number of positive spin-off effects in terms of creating employment, developing new skills, and incubating new industries and services. This will also create new opportunities for export and technology transfer. Table 7 provides an overview of the amount of spending allocated to specific projects as part of priorities 1 and 2. Although the relevant OP include a few programming priorities, only the first two (R&D and Enterprise Growth) include projects that could be directly or indirectly related to renewable energy. Given the difficulty in obtaining data that allocates funding to specific renewable energy projects, this total number of projects may not coincide with the total number of projects recorded in the AIR.

made available sooner. See: p. 13; European Commission (2008): Communication from the Commission to the European Council. A European Economic Recovery Plan, COM(2008), 800 Final.

124 Marinescotland (2010): European offshore wind development centre (EOWDC) – Aberdeen. Scottish Government. 125 ENSG (2009): Our Electricity Transmission Network: A Vision for 2020. London: DECC. 126 ESEP (2009). 127 Scottish Government 2011. 128 Woyte, Decker, McGarley, Cowdroy, Warland, and Svendesn (2010): OFFshoreGrig Draft Final Report. Brussels:

Intelligent Energy Europe.


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Table 7: Renewable energy projects and energy infrastructure funded under the Highlands and Islands partnership in 2011

Recipient Amount (GBP)

Description

PRIORITY 1: RESEARCH AND DEVELOPMENT

Forestry Commission 540,000 Scottish Biomass Support Scheme

Scottish Intellectual Assets Management Ltd

135,000 Valuing Intellectual Assets in Energy and Renewable Energy SMEs

Scottish Enterprise 2,057,532 Scottish Co-Investment Fund

Orkney Islands Council 1,190,000 Lyness Marine Renewables Facility – Hoy

Shetland Islands Council

266,700 Promoting Business Energy Efficiency in Shetland

Sealladh na Beinne Moire

2,500,000 Loch Carnan Community Wind Farm (conditional offer – share revenue issues to resolve)

North Highland College 3,386,667 North of Scotland Engineering & Energy Centre

Argyll & Bute Council 3,953,022 Kintyre Renewables Hub

PRIORITY 2: ENTERPRISE GROWTH

Scrabster Harbour Trust

2,499,998 Scrabster Harbour Marine Renewable Infrastructure

Scottish Enterprise 3,160,000 Marine Energy R&D Fund

Orkney Islands Council 3,360,000 Orkney Marine Renewables Infrastructure – Hatston and VTS

Shetland Islands Council

800,000 Low Carbon Shetland – Thermal Storage to Support Renewables

Scottish Enterprise 2,000,000 Scottish Investment Bank Loan Fund – HIE Area 2010-2

Total 25,848,919

Source: EUROSYS 2011

Up to now only three renewable energy projects have been supported by the ERDF, although four research centres have received funding for renewable, and 30 projects have been allocated funding for energy and resource efficiency. Nonetheless, the data we have obtained for 2011 indicates that 731 jobs were created as a result of ERDF spending to date. The spending indicated in Table 7 above represents roughly 7% of total ERDF spending for Scotland for 2007-2013; one could therefore deduce that spending on renewables in this region created 61 jobs129. That number is subject to tremendous uncertainty given the lack of information available to determine how projects are classified in the context of Cohesion Policy spending.

129 EUROSYS (2011): Indicators Performance Report. A total of EUR 375,957,844 or (approx £338,362,060 at an

average exchange rate of 1 EURO = £0.90 or £1 = 1.11) has been allocated to the ERDF Programme during the 2007 – 2013 programming period.


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The most recent data available from the Scottish government regarding the impact of ERDF spending in the Lowlands and Uplands (LUPS), contrary to the information outlined in Table 8, indicates that 186 renewable energy projects have been supported by the ERDF to date, and 2,685 projects have been allocated funding for energy and resource efficiency. Nonetheless, the data we have obtained for 2011 indicates that 11,959 jobs were created as a result of ERDF spending in the Lowlands and Uplands to date. Given the way in which information is projected for renewable energy projects, we are unable to determine the total amount of spending and thus percentage contribution of renewable energy projects to job creation.

Table 8: Renewable energy projects and energy infrastructure funded under the ESEP from the LUPS in 2011


Description

PRIORITY 1: RESEARCH AND INNOVATION

Edinburgh Napier University 613,872

Edinburgh Climate Change Centre (ECCC)

Edinburgh Napier University 581,620 National Biofuel Resource Centre

Fife Council 715,120 Fife Renewable Hub Capital

Sustainable Energy Technology and Innovation Centre

501,900 Accelerated Development Programme for Renewable SMEs

The Hydrogen Office Ltd 574,476

Hydrogen Office Wind Turbine Procurement

The Scottish Government 1,303,141 SEGEC 2

RENEW-NET Phase 2 325,930 University of Edinburgh

University of Edinburgh 1,637,500 University of Edinburgh

University of St Andrews 411,944

Hydrogen Office – Hydrogen Technology Optimisation

Scottish Environmental Technology Network (Phase Two)

408,137 University of Strathclyde

PRIORITY 2: ENTERPRISE GROWTH

Offshore Wind Supply Chain Development Programme

582,000 Scottish Enterprise

Lanarkshire Sustainable Business Programme

778,851 South Lanarkshire Council

University of Abertay Dundee 449,972 Industrial EcoPark

Dundee College 817,928 Dundee Renewables Training Tower

Total 10,348,314

Source: EUROSYS 2011


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4.7.3. Wales – stunted by limited grid connectivity


The most significant barrier to the implementation of more renewable energy projects in Wales is the lack of sufficient onshore grid capacity. In 2009, both the British Wind Energy Association Cymru and the National Grid sponsored studies looking at the barriers to grid implementation in the region.130 The delay in approving renewable energy transmission in Wales is threatening the potential for renewable energy distribution and its longer term profitability.

The National Grid’s proposed Mid Wales Connection and North Wales Connection projects would serve to address this issue. Mid Wales, particularly, is characterised by an absence of grid connectivity. Proposed wind farm projects to be located in at least three of the WAG’s SSA for wind (as set out in TAN 8) in Mid Wales would require this connection project in order to generate power, as stated as part of the National Grid’s first phase of public consultation which closed in June 2011.131

Map 5: The transmission system in Wales and the West Midlands

Source: National Grid Publication132


As part of its “Energy Policy Statement, A Low Carbon Revolution”, Wales has also issued an Energy Statement indicating how its economy will make the transition to renewable energy. Twice the amount of current electricity generation is to come from renewable sources by 2025, with 40% coming from marine, a third from wind and the rest from sustainable biomass power or smaller projects using wind, solar, hydro or indigenous biomass.133

130 BWEA Cymru (2009): Wind energy in Wales – State of the Industry, London. 131 See www.midwalesconnection.com. 132 National Grid (2011): Connection of On-Shore Wind Farms in Mid Wales, Project Need Case, National Grid House,

Warwick Technology Park, Issue 1, March 2011. 133 Welsh Government (2011): Technical Advice Note (TAN) 8 Review of Wind Farm Developer Interest 2011,

available at http://www.renewableenergyfocus.com/view/8374/wales-can-dramatically-increase-renewable-energy-capacity-by-2025/.


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In 2005, the Welsh Assembly Government (WAG) published Technical Advice Note 8 (TAN 8): Planning for Renewables, for any projects with an installed capacity below 50 MW (outlining a target of 1000 MW by 2010). Seven Strategic Search Areas (SSA) were identified as zones suitable for large onshore wind farms with an installed capacity exceeding 25 MW. TAN 8 also set the target for increasing renewable energy generation by 1000 MW over the next five years. By July 2008, 18 Welsh projects were approved with one project over 50 MW. In 2011, the installed capacity for wind farms had substantially increased to 333 MW, yet this remains well short of the targets set out in TAN 8.134 Most delays in the implementation of wind projects have been attributed to the planning system.

Out of the 1,000 MW needed to reach a target of 4TWhr of generation by 2010, 200 MW was expected to come from offshore wind, and 800 MW from onshore generation at a cost of GBP 700 million.135 Other sources of renewable energy, such as biomass, were only expected to make a very small contribution to the target.


The Wales European Funding Office (WEFO), on behalf of the WAG, delivers GBP 1.9 billion worth of European Structural Funds between 2007-13 for three types of programmes: Convergence, covering West Wales and the Valleys; Regional Competitiveness and Employment, covering East Wales; and Territorial Co-operation, including the Ireland-Wales Cross-border programme. The first two of these programmes are investigated as part of this case study.

By the end of 2010, in West Wales and the Valleys, GBP 774 million worth of EU Grants had been committed to 109 approved projects under the ERDF Convergence Programme, out of a total of GBP 1.1 billion available. Only a small amount of this money has been committed to renewable energy projects – 1% towards wind energy and 1% towards energy from biomass.136 Pipeline projects for the deployment of tidal marine turbines and renewable energy projects in housing (see below) are expected to add to the Convergence Programme’s contribution to the UK’s Climate Change Strategic Framework. Examples of projects in this area that support renewable energy are the Low Carbon Research Institute Energy Programme (LCRI) and Sustainable Expansion of the Applied Coastal and Marine Sectors (SEACAMS).137

In East Wales, by the end of 2010, GBP 37 million worth of EU Grants from the ERDF Regional Competitiveness and Employment Programme had been committed to 17 approved projects, bringing total project investment to GBP 133 million.138 By the end of 2010, three projects had been approved under the Climate Priority, representing a total investment of GBP 17.8 million and using 65% of the EU Grant available for the Priority.139 Twenty-five GWh of renewable energy is expected to be generated by these approved projects, although this amount significant in the context of Wales’ target to achieve 4,000 GWh of renewable energy by 2010.

134 See http://wales.gov.uk/topics/planning/planningstats/windfarminterest/?lang=en. 135 BBC (2005): Windfarm map unveiled for Wales, available at news.bbc.co.uk/go/pr/fr/-/1/hi/wales/4674207.stm

(accessed Jul 5, 2011). 136 West Wales and the Valleys, ERDF Convergence Programme 2007-2013, Annual Implementation Report 2010,

page 24. 137 See http://www.lcri.org.uk/and http://www.seacams.ac.uk/. 138 Welsh European Funding Office: East Wales ERDF Regional Competitiveness and Employment Programme 2007-

2013, Annual Implementation Report 2010. 139 Welsh European Funding Office, Annual Implementation Report 2010, page 16 & 76.


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The document “Capture the Potential: A Green Growth Strategy for Wales” supports the integration of the cross-cutting themes of environmental sustainability and equal opportunities into all Structural Funds projects in order to support green jobs.140 This is separate from the number of jobs created to date; given the delay in approving a number of wind projects in Wales, it is difficult to determine whether spending has created actual jobs. Table 9 provides an overview of the amount of spending allocated to specific projects for both East and West Wales based on a review of a project overview list.

According to the AIR for East and West Wales, roughly 257 jobs have been created through investment in renewable energy.141 With increased grid capacity for Welsh renewable energy projects in the future, it is possible that this percentage figure will rise.

140 Welsh Assembly Government ( 2009): Capturing the Potential, a green Jobs Strategy for Wales, available at

http://wales.gov.uk/docs/det/publications/090709capturingthepotentialagreenjobsstrategyforwalesen.pdf. 141 According to the Welsh European Projects Office, to date 241 projects have been approved totalling

GBP 1,550,954,752 (correct as of 02/11/2011).


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Table 9: ERDF spending on renewable energy for East and West Wales


Description

PRIORITY 1: Building the Knowledge Based Economy/THEME: Innovation R&D and Technology

Finance Wales/Jeremie Fund

5,845,000 Joint European Resource for Micro to Medium Enterprises

Finance Wales/Jeremie 10,855,000

PRIORITY 2: Improving Business Competitiveness/Business Finance

Finance Wales/Jeremie Fund

5,099,996

Finance Wales Jeremie 37,895,000

PRIORITY 3: Developing Strategic Infrastructure for a Modern Economy/THEME: Climate Change

Forestry Commission Wales

992,600 Wood Energy Business Scheme

Pembrokeshire College 1,422,373 Energy Sector Skills

WAG Desh Climate Change

639,748 Community Scale Renewable Energy

PRIORITY 4: Creating an Attractive Business Environment/THEME: Climate Change

Forestry Commission Wales

6,805,000 Wood Energy Business Scheme 2

WAG Desh Climate Change

6,398,544 Community Scale Renewable Generation

Tidal Energy Limited 6,399,999 DeltaStream Demonstration

Tidal Energy Limited 572,652 DeltaStream Prototype

Total 82,925,912

Source: Welsh European Funding Office

4.7.4. Conclusions

The case studies for Scotland and Wales provide some interesting lessons learned in terms of determining how Structural Fund investment in renewable energy will help meet Cohesion Policy objectives.

• The issue of multilevel governance has posed a huge barrier to the uptake of renewable energy in Wales, given the delay in connecting wind projects to an onshore grid. Despite existing or potential investment through the ERDF, the benefits of renewable energy generation will only materialize once National Grid expands onshore transmission in Wales. This is less of an issue for Scotland, although in both cases, projects above a 50 MW threshold involve approval on the part of the central government in the UK.


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• Apart from creating delays in the absorption of funds and the realization of Cohesion Policy objectives, the implementation of renewable energy projects may be incentivized in several ways. Although Cohesion Policy has supported the development of the suitable infrastructure for renewable energy in Scotland, offshore wind has been driven largely by the Renewables Obligation in the UK. And while Cohesion Policy has helped enhance existing policy drivers in the UK, it is not the only explanation for the benefits derived from renewable energy.

• The ability to create more jobs related to renewable energy in both Scotland and Wales will also be a question of skills development. The Welsh Green Jobs strategy states the need to embrace the transition and to provide the right type of education to meet a growing demand for skills related to the implementation of renewable energy projects. A review of ESF funding should be undertaken in greater detail to determine how new skills will be developed.

• In Scotland, despite the potential for renewable energy and the possibility that it will result in job creation, to what extent will jobs in this market be competitive with those in the oil and gas sector in the North Sea? The Global Energy Group estimates that up to 2,000 jobs will be created in the Highlands both for offshore renewable and subsea oil and gas projects.142 At the current time, other sources indicate that new jobs continue to be created in the North Sea despite anticipated declines in oil revenue and loss of jobs in the oil and gas sector.

• The UK provides a unique example of how Structural Funds can help establish offshore grid expansion. Although UK policy can make it difficult to attribute jobs created by renewable energy to Cohesion Policy, it has the potential to add value to national policy by improving energy distribution as demonstrated by the ISLES project. The establishment of an EU supergrid will be tantamount to improving the overall profitability of renewable energy in the UK, thus increasing the possibility that it could create more jobs and result in other positive contributions to socioeconomic development.

4.8. Summary of case studies

The following table provides an overview over all case studies undertaken for this study, depicting the most crucial findings and providing comparative results the case study work.

142 See

http://www.heraldscotland.com/news/home-news/highland-yard-owner-expects-2000-new-jobs-1.1130515.


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Table 10: Summative Findings of the case studies

Country Region Characteristics Status of renewable energy infrastructure Role of ERDF Austria Burgenland/

Güssing # Formerly an objective 1 region Burgenland was classified as a Phasing-out region in this period. # Güssing is aiming at energy autarky and serves as a best practice example

# For decades Güssing worked on decentralised energy production from renewable resources. # Today, the region employs 27 power plants providing energy from renewable sources. #The most significant source of renewable energy derives from biomass.

# In the former programming period, Structural Funds have provided crucial support for R&D in the renewable energy sector. # Güssing is not benefitting from the current funding period.

Oberösterreich/ Vöckla Agar

# Oberösterreich is a comparibly higher developed region, receiving funding under the "Regional competitiveness and employment" objective. # Vöckl-Ager is planning to become a energy model region.

# The region relies heavily on fossil fuels – the adaption of renewable energy is rather slow. # Subsequent efforts focus on the production of renewable energy as well as knowledge generation. # Four biogas plants are in operation in the region. Geothermal and hydropower could play an important role in the future.

# ERDF funding co-financed a technology centre in the region, which could serve as a focal point of innovation in the energy sector. # Structural Funds in this wealthier region, has not yet made a substantial contribution to renewable energy infrastructure

Portugal Madeira # The outermost region and archipelago Madeira is classified as a Phasing-out region.

# As islands, Madeira and Porto Santo, are highly dependent on fossil fuel imports but not connected to the mainland grid. # The share of renewables energy production is low, deriving mainly from hydropower and wind parks. # The limited capacity to store energy during off-peak hours is a great challenge.

# ERDF funding played a significant role in the development of renewable energy plants and an increased capacity and robustness of the grid. # JEREMIE, in particular, co-financed the upgrade of a hydro-electric power station and contributed considerably to an increased share of renewables. # Private companies, local and national initiatives and other EU programmes such as INTERREG also played a significant role.

Acores # The Acores are an outermost region. The archipelago is recognised as convergence region.

# Being an archipelago, the Acores face challenges in energy suppl, since they are not connected to the mainland grid. # The islands have a large unused potential for geothermal energy production, due to their fault-line location. # Geothermal, wind and hydro energy are the main renewable energy sources used.

# Large investments in new power plants and in an increased capacity were co-funded by the Cohesion and Structural Funds. # Private companies, local and national initiatives and other EU programmes such as INTERREG also played a significant role.


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Country Region Characteristics Status of renewable energy infrastructure Role of ERDF Romania all regions # As a less developed country,

all regions in Romania are eligible under the Convergence Objective. # As Romania follows a centralised approach to regional policy, and there are only a small number of relevant projects this case study does not focus on regions but on developments in the country.

# Romania falls within the envisioned Central/South Eastern Electricity Connections corridor. # Romania is well covered with electricity grids and district heating schemes. Worn and obsolete infrastructure cause significant losses along energy supply chains. #The primary source of renewable electricity is hydropower. Onshore wind has a great potential to contribute on a large scale to the energy production. Renewable heat is dominated by the use of solid biomass.

# Overall only a small share of ERDF funding was used to promote renewable energy infrastructure. # Furthermore, the absorption of available funding was very low. # If funds were channelled for renewable energy infrastructure, they were used for wind and hydro power production. No focus was laid on projects aiming at grid integration.

Sweden Upper North Sweden

# Upper North Sweden is a high developed but sparsely populated area. # It is classified as competitiveness and employment region.

# Upper North Sweden employs several wind energy parks and provides a high density of hydroelectricity plants. Nonetheless, there is still potential for increased production, in particular wind and biomass energy. #Bottlenecks for further development is the limited capacity of transmission grid and low incentives for local players to develop infrastructure for renewable energy. # Upper North Sweden is located in the area of the EU priority corridor for electricity, gas and oil, within the Baltic Energy Market Interconnection Plan.

# Structural funds play an important role in this rather peripheral region. About 6 % of total ERDF funding until 2013 will be spent on renewable energy related projects. # No particular thematic focus is apparent.

United Kingdom

Wales/ West Wales and the Valleys; East Wales

# West Wales and the Valleys is recognised as convergence region # East Wales is eligible under the "Regional competitiveness and employment" objective.

# Wales has a significant potential of renewable energy production, in particular through tidal energy and wind power. # The greatest barrier to the implementation is the limited capacity and connectivity of the onshore grid. Mid Wales is especially bad connected.

# Only a small share of Structural Funds has been committed to renewable energy projects. # The absorbation of available funding is lagging behind. # West Wales and the Valleys, as a convergence region, could benefit from increased investment in the coming programming periods.

Scotland/ Highlands and Islands; Lowlands and Uplands

# North Eastern Scotland, Eastern Scotland and South Western Scotland receive funding under the "Regional competitiveness and

# In Scotland the renewable energy infrastructure is quite advanced. # There are substantial offshore wind and tidal energy parks with planned expansions in operation.

# Structural Funds were used to increase investment in R&D, developing offshore wind supply chains and improving port infrastructure. # Overall the share of ERDF contribution spent


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Country Region Characteristics Status of renewable energy infrastructure Role of ERDF employment" objective. # The Highlands and Islands are recognised as phasing-out region;

# Still, Scotland holds a great potential in offshore renewable energy sources. # The challenge lies strengthening the transnational European grid and linking it with the potential renewable energy sources in Scotland.

on renewable energy projects is comparably small.


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5. CONCLUSIONS AND RECOMMENDATIONS

KEY FINDINGS

• While focussing on region-specific strengths, the development of effective pan-European energy grids is essential to boost the use of renewable energies. Hence, transnational cooperation is vital to successfully implementing and securing energy supply.

• The main emphasis of ERDF funding in this field and the programme period (2007-2013) has been on energy efficiency and renewable energy production and not on renewable energy infrastructure in the wider meaning we have used within this study. ERDF programmes and National Renewable Energy Plans neither contradict nor support each other.

• The uptake of Structural Funding in the Member States has been rather slow due the complex administrative logics, regulative frameworks, stakeholder structures and market conditions. Aligning the national policies more coherently with EU funding strategies and building capacity in EU fund management could improve that situation. Multi-level governance has proven challenging, as the extra layers of bureaucracy cause delays and barriers to renewable energy investments.

• It is difficult to attribute positive socio-economic effects directly to investments in renewable energy (infrastructure). It can be argued however that these investments have positive effects on employment, regional value added, CO2 emission reduction and an overall improvement on the region’s economic growth.

• Smart grids are proposed as a possible solution to the challenge of massive industrial electricity storage. While an efficient storage method once in place, construction of smart grids must cope with various challenges such as the need for large investments and redesigning of transmission and distribution tariffs, enhancement of equipment and the development of communication standards.

• Additionally, more attention should be paid to financing the most suitable energy supply for the given demand. The distinction between “high tech” renewable energy (electricity) and “low tech” renewable energy (heat) will be necessary for more effective and efficient use of these energy forms.

• In order to provide accurate support it is necessary to assess the regions vulnerability towards energy capacities and fossil fuel supply shortfall and deduced needs. The most vulnerable regions should be targets of specific national and EU funding.

This concluding chapter will focus on the guiding research questions of this study. In the following pages, the aspects of smart grids, the allocation of renewable energy support in the future as well as the dilemma of electricity grid funding will be elaborated in more detail. Finally, recommendations for MEPs for proposals in the short and long term aimed at increasing investments in renewable energy infrastructure at the European, national and regional levels of Regional Policy will be provided.


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5.1. Answers to research Questions

Which regional infrastructure is necessary to boost the use of renewable energies?

The findings of this study show that a mix of infrastructure on the regional level will be necessary to boost the use of renewable energy. On one hand it will of course be necessary to focus on regional specific strengths of RES (biomass, hydropower, wind, solar) according to the regional potential. All case studies have shown that the detection of these regional strengths has worked quite well, and that the first steps into exploitation of these potentials are well on their way. However, the more successfully these potentials are tapped, the more important it becomes to establish the grid capacities and supra-regional linkages to safeguard both energy security and inter-regional exchange of supply surpluses.

Some of the regional case studies follow the idea of “island solutions” (e.g. Austria) – promoting energy autarchy and advocating an energy mix (electricity and heat), which allows for such an independent solution. In the European scheme of energy policy, such an approach will still call for trans-European energy solutions, as not all regions will be sufficiently equipped with such a balanced mix of energy sources. Therefore, although these regional strategies are certainly useful to raise awareness and boost renewable energy production, the necessity for effective and pan-European energy grids will prevail.

One important issue, which will be especially vital to link regional renewable energy production with the energy consumers, will be the rollout of smart grid solutions as foreseen in the European Commission energy policy blue print. A more thorough discussion of this aspect will be provided in chapter 5.2 below.

Which are the present main measures to promote renewable energies infrastructure in ERDF programmes and national renewable energy plans and are they complementary or do they overlap?

ERDF does not play a big role in supporting renewable energy infrastructure in the sense of this study143. In some cases, regional heating grids in combination with biomass energy production have been funded, but overall it has to be stated that the main emphasis of ERDF funding has been the support of renewable energy production and energy efficiency measures. Still, the case studies have shown that EU policy support (regardless of stemming from ERDF or EAFRD) has played the role of putting the “initializing push” factor into renewable energy production strategies on the regional/local level. The previous programming period (2000 – 2006) seemed to show a higher contribution in this respect than the ongoing one.

The only larger scale support scheme under Cohesion Policy, which we have depicted in our case studies, has been provided through the INTERREG support of the ISLES project of the installation of an offshore grid establishing links to offshore wind generators in Scotland and Wales.

Due to this overall weak support of renewable energy infrastructure, it does not come as surprise that ERDF programmes and National Renewable Energy Plans do not contradict each other. But they do not explicitly support each other either.

Although Cohesion Policy has supported the development of the suitable infrastructure for renewable energy, investments in this field have been driven largely by the Renewables

143 With regional renewable energy infrastructure being defined as electricity grids and storage, district heating and

cooling networks as well as smart grids (i.e. regional grids on the low voltage level designed for regional power exchange).


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Obligation as stipulated through EU energy plans144. And while Cohesion Policy has helped enhance existing policy drivers, it is not the only explanation for the benefits derived from renewable energy.

Why have Cohesion Policy investments in regional infrastructure for renewable energy been slow so far?

It must be noted that EU co-funded programmes have generally been slow in their uptake, which is not specific to renewable energy support. Nevertheless, findings have shown that renewable energy infrastructure is especially difficult to fund. The reasons for this are embedded in the complex market structures of both (renewable) energy supply and energy distribution as well as the dilemma of providing national funding for the support of renewable energy infrastructure whereas transnational or even EU wide funding would be needed (for a more detailed description see Chapter 5.4. below). Private investment incentives were relatively higher in the field of renewable energy production. However there has been the problem of a multitude of potential beneficiaries (house owners) on the other hand. Conversely, in the case of large-scale infrastructure investments (e.g. wind parks, solar energy plants) one large investor would be necessary. Such an investor would be difficult to secure due to the restrictive entry into the energy markets.

Another factor contributing to the difficulty in funding renewable energy infrastructure through EU co-financed funds (especially ERDF), is the character of energy supply and demand as horizontal policy field. In many Member States, the administrational logic of thematic responsibilities cuts through the energy field concerning sometimes up to four different administrational units (e.g. in Austria the Ministries of Technology, Economic Affairs, Agriculture and the Provincial Governments acting as managing authorities for the ERDF).

This fragmentation of responsibilities on the state and regional levels leads to enormous frictional losses of the funding strategies and results in unnecessarily high transaction costs for the beneficiary of the funds. Additionally, restrictions in the eligibility of beneficiaries of the funds cause difficulties – e.g. the example of Romania (only public authorities are eligible beneficiaries in some of the programmes). Moreover, experience and know-how in EU fund management are an essential prerequisite to safeguarding consumption of funds. Romania may again serve as an example for problems in encouraging beneficiaries to apply for funds, but this phenomenon can be observed in almost all new Member States.

How could regional and national stakeholders be encouraged to invest more in infrastructure for renewable energies?

The chief obstacles to more support from ERDF in this field may be identified in the areas of complex market conditions and regulatory framework, which are a main issue of EU energy market liberalisation attempts as described in Chapter 2, but have not shown large-scale effects so far.

The EC, Member State governments and regulators should therefore intensify their efforts to remove these obstacles in order to accelerate the integration of the European Electricity Grid and thus improve the security of supply. In addition to investments in infrastructure, tighter European Technical Standards Organisations (TSO) cooperation is improving the electricity flows’ fluidity, which in turn improves solidarity between countries during difficult periods.

On the regional/local level the access to funding should be facilitated. Regional/local investments should follow harmonized regional – national and EU energy plans, which means

144 European Commission (2010c): Communication from the Commission to the European Parliament, The Council,

The European Economic and Social Committee and the Committee of the Regions. Energy 2020. A strategy for competitive, sustainable and secure energy, COM/2010/0639 final.


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that the National Renewable Energy Plans will have to be more closely and effectively linked to the national implementation of EU funding strategies.

What are the differences between Member States in this context and what are the reasons for problems discovered?

All Member States seem to be aware of the importance of investments into renewable energy infrastructure. The case studies as well as EU studies145 show that the establishment of the National Renewable Energy Plans is widely completed. Still, there is a varying degree of putting these plans into practice and harmonizing them with the other territorial development plans – e.g. the regional development plans.

There are differences in the effectiveness and efficiency of implementing and encouraging renewable energy infrastructure development. The reasons may include the following:

• Differences in the overall governance mechanisms for managing Regional Policy and territorial development: This issue is not exclusively related to renewable energy support, but touches upon all regional development issues in Member States. The study on “Regional governance in the context of globalisation: reviewing governance mechanisms and administrative costs” conducted by DG Regio has shown quite well that small federal states show higher frictional losses in conducting regional development than centralized ones. As stated above, the more administrational levels and thematic policy fields that are involved in handling territorial development issues, the more watered down the final implementation will be, and the more transaction costs will have to be borne by the beneficiary. This especially affects renewable energy infrastructure due to its special market conditions.

• Differences in market power distribution in energy markets: energy market liberalisation is more developed in some Member States than in others (see analysis in Chapter 2 above). Some Member States are still strongly dependent on one (policy-controlled) energy utility (see e.g. EDF in France, or EDA in our Portuguese case study), which brings about market barriers and unnecessary welfare losses for the Member State economies. Moreover, these structures effectively prevent the development of alternative energy supply systems.

• Differences in national policy priorities: the implementation of the energy plans is dependent on the various national priorities on policy fields. In some cases the path dependency on fossil fuel based energy supply and related distribution systems could be explained by national/Regional Policy priorities, which effectively prevent a strong paradigm shift towards renewable energy infrastructure.

What is the relevance of multi-level governance, shared management and the potential of public private partnerships for renewable energy investments?

Multi-level governance is potentially an important factor in the game of boosting renewable energy infrastructure. However, to date it has been rather an obstacle than a supporting factor:

Market structures do not encourage public private partnerships as energy supply and grid monopolies prevail and do not allow for innovative solutions – see Chapter 5.4 below.

Multi-level governance considerably multiplies the layers of administration involved in decisions and does not foster quick and un-bureaucratic approaches at the regional level for

145 DG Regio (2011c): Expert evaluation network delivering policy analysis on the performance of Cohesion policy

2007-2013 – Theme: renewable energy and energy efficiency in residential housing.


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the establishment of renewable energy infrastructure. As shown in the British Case Study, energy solutions are rather policy-driven than entrepreneurial: “The issue of multi-level governance has posed a huge barrier to the uptake of renewable energy in Wales, given the delay in connecting wind projects to an onshore grid. Despite existing or potential investment through the ERDF, the benefits of renewable energy generation will only materialize once National Grid expands onshore transmission in Wales”.

What is the potential of cross-border cooperation and macro-regional strategies in renewable energy infrastructure?

Cross-border cooperation will be imperative as energy supply based upon RES is a cross-border issue. Synergies in tapping common resources (e.g. favourable wind sites, biomass, small-scale hydropower along border rivers) will have to be utilized more effectively in transnational cooperation. Still, our analysis shows that national interests prevail – e.g. in the case of Austria where hardly any Cross Border Countries (CBC) projects in the field of energy have been developed despite that fact that biomass resources in Hungary are already used, and technology transfer would increase the energy production capacity. The only exception in our case studies showing successful cross-border cooperation was the large scale infrastructure investments in the high voltage grid. This leads to the conclusion that TEN and transnational energy planning could serve as a guiding rod and good example. On the smart grid level and regional/local exchange level these cooperations are not yet established. However, the past has shown some good examples of regional trans-border cooperation in other thematic areas (e.g. CBC in the field of natural disaster management (flooding)), which allows for some optimism that maybe in the future (if pressure for these issues increases) such cooperations will come about.

How could potential territorial, social and economic effects of renewable energy for the developments of regions be projected? What is the potential for future investments in renewable energy infrastructure through Regional Policy programmes?

Directly contributable socio-economic effects of most investments in this area are difficult to measure, however positive effects are definitely to be observed due to investments in renewable energy infrastructure – employment, regional value added and CO2 emission reduction.

Other socio-economic effects of such investments are reflected in increased public spending on socio-economic projects permitted by the decrease in spending on fossil fuels. In addition, the improvement in the efficiency of the energy grid allows the reduction of electricity tariffs. Overall, it can be argued that improvements in energy infrastructure can have a significant impact on a region’s economic growth.

One caveat facing the economic crisis should be borne in mind: the present European Member States’ huge deficits and financing problems should push them to reduce their spending and thus slow down their subsidizing policies to renewable energy infrastructure.


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5.2. Smart Grids as answers to renewable energy supply?

Despite R&D efforts, there are presently no good answers for massive industrial electricity storage. This is why the new challenges (renewable share increase, decentralized generation, new consumption patterns, etc.) have to be addressed through the implementation of a grid with more intelligence (smart grid). This would require large investments; currently worldwide, smart grid investments are estimated during 2008-2015 to be USD 200 billion (out of which USD 53 billion is in the United States)146. One large investment component is Information and Communication Technologies (ICT) systems. For example, Cisco sees USD 15-20 billion of investment opportunities to link smart grids with ICT systems over the next seven years.

However, a lot of issues have to be worked out, among which:

• Transmission and distribution tariffs will have to be redesigned (and increased) in order to incentivize grid operators to invest as needed. Regulators, governments and customers will have to accept these price increases;

• Industrial R&D is necessary to develop new equipment (such as large competitive storage) or improve existing equipment (such as HVDC connections);

• Communication standards are crucial and have to be established and implemented at all levels of grid equipment and on the grid backbone itself.

Regulators have a key role to play in gathering all stakeholders and establishing a comprehensive new retail market model.

5.3. Identification of regions suitable to boost renewable energy infrastructure

In order to assess the future needs and emphasis of support, it will be necessary to analyse where the territorial need indicates such support. Unlike the blueprint for an integrated European Energy Network147, which concentrates mainly on the larger-scale territorial potentials, it will be necessary to concentrate on the regional needs and potentials on a smaller territorial scale.

The study on vulnerabilities of regions in the light of the EU 2020 strategy has analysed regional vulnerabilities and highlighted regions where these vulnerabilities are the largest with respect to secure, sustainable and competitive energy supply:

The current energy system within the EU is heavily dependent on imported fossil fuels. Over 53.1% of primary energy consumption in 2007 was imported, and this dependence on imported fossil fuel has been rising steadily (from 51% in 2000). Dependency is increasing rapidly for natural gas and coal. Natural gas imports accounted for some 60% of the total gas-based primary energy consumption in 2007, while hard coal-based primary energy imports accounted for 58.5%. Oil imports accounted for as much as 82.6% in 2007 up from 75.9% in 2000 – driven by substantial increases in demand from the transport sector, reflecting a lack of real alternatives in this sector and low EU oil reserves. Between 1997 and 2007, EU27 primary energy production recorded a 12% reduction due to a decrease in all fuels except for nuclear energy and renewables. In contrast, the production of renewable

146 Pike Research (2011): publication on their website http://www.pikeresearch.com/last look-up Jan 2012. 147 European Commission 2010b.


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energy showed a significant increase (50%) and in 2007 accounted for 16% of the total EU27 primary production.

At first glance, vulnerability to the impact of supply shortfall due to resource concentration appears to be only an “average” challenge for most of the regions in Western Europe. This is to some extent a result of a decrease of energy intensity in all EU Member States as well as the increased use of RES. In the new EU Member States, recent macro-economic reforms have led to a particularly strong economy shift toward less energy-intensive activities. However, the trend is going in the direction of Europe producing less and less and importing more and more energy. Most regions with ‘above average’ impact towards this challenge are located on the outskirts of Europe in Ireland, the Baltic States and Bulgaria. Sweden and Poland are below average due to their high energy prices being an incentive for increased energy efficiency. Regions with low adaptive capacity are located in the new EU Member States, while the EU15 show average or above average adaptive capacity.

The vulnerability map of in the Regions 2020 report shows a clear distinction between Western Europe – with the exception of Ireland – and Eastern Europe. Most regions in Western Europe - except in Ireland - are prepared for fossil energy supply shortfall while in Eastern Europe the vulnerability is above average, with Romania and the Baltic States being the most vulnerable148.

148 GDP per capita is the driving factor for the vulnerability; high GDP stands for high adaptive capacity in Western

Europe vs. low GDP in Eastern Europe and Ireland. – Although the use of GDP as indicator in this context is disputable it is still the indicator with the best availability and may thus be seen as “second best“ approach.


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Map 6: Energy capacities – Vulnerability

Source: Eurostat; map developed by ÖIR

When drawing conclusions from these findings to identify a selection of suitable regions to boost investment in renewable energy infrastructure, it is useful to compare the vulnerability map with the blueprint for renewable energy of the Commission; it becomes clear that a more regionalized approach of renewable energy infrastructure support will be needed.

• Increase of investments in regional strength of renewable energy production – e.g. wind energy potential as well as solar energy in the southern regions are well on the way (as foreseen in the European Commission renewable energy blueprint) – however especially in the field of biomass energy the potential is far from exploited (see the Swedish case study above).

• The distinction between “high tech” renewable energy (electricity) and “low tech” renewable energy (heat) will be necessary for a more effective and


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efficient use of these energy forms: the use of electricity for heating purposes is rather a waste of energy while renewable energy production by biomass fulfils the same purpose with a lower carbon footprint. In other words, it will be necessary to better distinguish which energy supply covers which energy demand: low tech energy demand services (e.g. heating) could be more effectively and efficiently supplied locally/regionally and should be supported on this territorial level, while high-tech demand (e.g. production processes) should be supplied pan-regionally , by smart grid solutions safeguarding the net-stability. Local biomass grids and solar thermal solutions may substitute electricity heating in an effective way and set free the potential of electricity supply for other purposes. The regional potential for this substitution is especially high in France and other countries with relatively high shares of nuclear power.

• The establishment of smart grid solutions in combination with high voltage TEN solutions will safeguard a better distribution of the relatively valuable energy from electricity. The market structure obstacles will have to be tackled in order to establish a smooth and efficient exchange on this level (see chapter 5.4 below).

• The most vulnerable regions with respect to dependency on fossil fuels should be targets of EU/national support in order to counteract these vulnerabilities in the long run. While the regions with fossil energy dependency (especially in Eastern Europe) already seem to be starting to benefit from regional support of establishing renewable energy infrastructure, some Western European regions (see e.g. especially Eastern Germany and Denmark) should focus their support on the support of renewable energy production and distribution.

5.4. The problem of energy (electricity) grid support

One of the objectives of this study has been to check the existing and future measures for renewable energy infrastructure in EU Cohesion programmes and in the National Renewable Energy Plans, as well as electricity network planning regarding their compatibility, complementarities and efficiency. In this context, the level of responsibility (European, national and/or regional) – both for problems and for solutions – is often neglected in the debate.

National renewable energy plans are certainly compatible with Cohesion Policy – however there is no substantial support from Cohesion Policy in establishing these plans. The initial successful attempts to foster renewable energy infrastructure in the field of production and regional/local small-scale heating grids can be evidenced. Still, no real support of establishing electricity (smart) grid solutions were to be detected in our analysis. The reason may be explained by the “dilemma of electricity grid support” – see figure 5 below:

The dilemma may be seen in the split between renewable energy productions, which shows good support by public funds due to the favourable returns on investment, which are partly induced by the subsidies of production in many Member States. The technical drawback of these energy sources is that they are territorially decentralised, bringing about relatively higher transaction costs for collection. Moreover, the management and administration of the energy supply in terms of market organisation is also inflicted with comparably higher transaction costs for the utilities handling the connecting grids.

On the other hand, the distribution of electricity shows relatively low returns on investments due to their cost structures (higher share of fixed and variable costs compared to the energy production). The ownership is not split up into many private hands, but mostly state controlled, which is an advantage for funding, as the beneficiary is easily located and


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administrative costs for handling the support are minimized. Yet, this structure is also a drawback due to the problems of bridging borders and the historical burden of different technical standards controlled by nation states. Electricity grids, due to their cost structures, are still often seen as natural monopolies, which necessitate careful handling of any market liberalisation attempt.

Figure 5: Dilemma of Electricity Grid Support

energy end consumerprice control(utility/regulators)

Power Grids– return on investment± ownership: Energy

Utilities (state & region controlled)

+ easy to support– trans-regional/

transnational linking– ? natural monopolies

Renewable Energy Production

+ return on investment+ subsidies of production

prices– decentralized– (private) ownership mixed

& multiple

Hydropower

Wind

Solar

Biogas

Source: Author

Furthermore, this liberalisation of energy markets – as attempted by the European Commission – will pose the threat of decoupling the electricity price control vis-à-vis the end consumer. The providers of the electricity grids would no longer be the ones collecting payment from the energy consumers, but would be renting out infrastructure to energy producers, which might not be willing to provide energy supply at all costs (e.g. in remote areas).

The main question in this respect will be whether an instrument such as the ERDF with clear regional/national delimitations will be sufficiently suitable to overcome these dilemmas, which would be better dealt with on the transnational scale.

5.5. Recommendations

In the following, recommendations for MEPs for proposals in the short and long term aimed at increasing investments in renewable energy infrastructure at the European, national and regional levels of Regional Policy shall be provided:

At EU level:

• The efforts with respect to EU energy market liberalisation have to be continued and intensified. However, the special conditions of electricity grid management (ownership issues, control and maintenance of the grids) will have to be considered.

• The rollout of smart grid solutions will have to be emphasised and supported through a EU co-financed fund.


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• The horizontal cooperation of policy fields within energy supply and distribution will have to be intensified on the EU scale (inter DG working groups under participation of the General Directorates of Regional Development, Agriculture, Enterprise, Energy and Climate may bundle efforts on supporting renewable energy infrastructure). The complementarities of policies at the EU level should be strengthened.

• In this respect the multi-fund approach, as envisaged in the upcoming programming period of EU funds, certainly hampers support at the beneficiary level. ERDF, EAFRD as well as national and regional programmes are one way or the other supporting renewable energy infrastructure and in many Member States the cooperation and horizontal linkage between the funds does not run smoothly enough to ensure an effective support.

• EU Regional Policy should continue to fund initiatives in the field of renewable energy infrastructure for three main reasons. First, there is still a great unexploited potential for further use of RES in energy production. Second, although private funding is starting to play an important role in co-funding RES projects, public funding is still needed due to the small size of local economies and the uncertainty that investors still have about some RES. Finally, despite the relatively small scale of RES development in some regions, some of the facilities can act as pilot projects and good examples for wider development of RES at EU level. Further development of renewable energy will create jobs, increase regional added value and reduce fossil fuel imports.

• Cross-border cooperation and inter-regional tapping on resources should be foreseen in the CBC programmes and facilitated.

At Member State level:

• The horizontal linkages between policy fields and funding sources around energy and energy distribution should be established, and clear, transparent responsibilities shall be distributed.

• The National Renewable Energy Plans should be streamlined with all national and EU co-financed regional development plans. The complementarity of policies on the national level should be safeguarded.

• National energy market liberalisation must be a prerequisite to establish renewable energy infrastructure, which goes beyond “island” solutions.

• Know-how in managing funds and in the special conditions of renewable energy infrastructure investments will have to be built up, especially in new Member States.

At regional level:

• Regional potential for renewable energy production should be better utilized – however, pan-regional linkages and exchanges of energy with the use of smart grid solutions should be taken on board as well.

• Cross-border cooperation and inter-regional tapping on resources should be intensified.

• Regional development plans (e.g. local development plans of LAGs) should be harmonized with national energy plans and EU transnational renewable energy plans.

• Private initiatives and entrepreneurship should be encouraged and guided towards realisation.


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Interviews case studies

• Austria • Mag. Sabine Watzlik, Geschäftsführerin des Technologiezentrums (TZ) Attnang-

Puchheim • DI Wilhelm Prehofer, Direktor der HTBLA Vöcklabruck, als Vertreter für das

Aktionsfeld 1

• Portugal • All regional contacts listed on the DG REGIO website were contacted


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• A particularly detailed response was received from Filipe Oliviera, Agência Regional da Energia e Ambiente da Região Autónoma da Madeira (AREAM).

• Romania • Cristian Georgescu from the Ministry of Economy, Trade and Business Environment

(Intermediary Body Energy) • Gheorghe Zaman/Anca Cristea form the Institute for National Economy/The Ecological

University of Bucharest • Malina Frateanu from the Ministry of Environment and Sustainable Development (MA

SOP Environment) • Lavinia Andrei form the Terra Mileniul III (NGO) • Cristian Tantareanu from the ENERO (Centre for Promotion of Clean and Efficient

Energy in Romana) • Representatives of Ministry of Agriculture and Rural Development

• Sweden • Responsible for Environment and Energy in Piteå and Malå municipalities • Representatives from Länsstyrelsen in Norrbotten • Vindkraftscentrum (Piteå municipality) • Programme manager Upper North Sweden, Swedish Agency for Economic and

Regional Growth – Tillväxtverket

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