Analysis: Europe could lose renewables lead?

Many governments are backing green energy to kickstart their ailing economies - but European enterprises are missing out.

As the bottom falls out of financial markets around the world, national governments and regional organisations have been rushing out a series of financial rescue plans to stimulate a much-needed recovery.

With climate change and sustainability at the top of the global agenda, you would have thought that this is an ideal opportunity to give enterprises tackling these issues the boost that they have long required to gain a firm financial platform.

But while green technologies have featured prominently in packages around the globe, European governments have been less than lavish with the allocations, particularly to renewable energy.

The financial stimulus packages from the EU and the national states in Europe fall well below what is required to allow green technologies to lead the recovery.

The EU economic recovery plan sets aside over €890m for key strategic interconnections in the power grid (see 'Eire-UK power link to go ahead', p4) and €565m for offshore wind that includes the initiation of the first stage of a North Sea offshore grid. These measures will help unlock the largest European indigenous energy resource and stimulate Europe's lagging economies.

A sector that fares badly in the package is onshore wind, a market that is entirely ignored, probably because it is already viewed as mature. That may be a valid point, but if quick wins are the target then providing funding to onshore wind would see faster returns than other renewable sectors.

But the European figures pale beside the whopping hand-outs that US President Barack Obama's economic stimulus plan offers. This includes $7bn in loan guarantees for renewable energy projects, $13bn tax credits for renewable energy production and the $11bn that will be put into modernising the power grid. $1.25bn is being earmarked for research and development in renewables and $500m is going to workforce training for renewable and energy-efficiency careers.

According to Christian Kjaer, chief executive of the European Wind Energy Association, the European Commission's recovery plan is vital for the technologies of tomorrow and to ensure a green recovery, but falls some way short of ensuring that Europe maintains its lead in the green energy sector.

He does concede that the €565m that the plan dedicated to finance offshore wind will create jobs, provide new R&D opportunities to make the power sector more efficient and less expensive, improve operations and maintenance, and speed up market deployment.

"The Member States would do well to be proportionally ambitious if they want to ensure their economies get a real stimulus and retain and consolidate their global technological leadership in renewable energies," Kjaer adds.

"Governments need to offer loan guarantees to wind energy and other renewables projects, prioritising the technologies of tomorrow, otherwise their stimulus will fail."

Indeed, the United Nations Environment Programme recommend that one third of the around $2.5tr-worth of planned stimulus packages worldwide should be used to 'green' the world economy, as this would help "power the global economy out of recession".

While Kjaer bemoans the paucity of the European Union (EU) funding he reserves his anger for the individual plans of the national governments within the EU, which do not even come close to those levels.

A recent survey carried out by a Brussels-based research organisation looked in detail at the recovery plans of the 13 largest EU economies. It revealed that the stimulus packages announced in the last quarter of 2009 committed a total of €90bn to reinvigorate flagging economies. From this, only €1.2bn was allocated or earmarked for green investments in the broad sense. That equates to a trifling 1.3 per cent.

That is far below both the EU, which is directing about 15 per cent to green technologies, and the level recommended by the United Nations (UN). The UN is suggesting that recovery plans should allocate at least 30 per cent to green technologies.

In Asia there is a similar picture, with sustainable spending high in priorities. A case in point is South Korea, where 81 per cent of the recovery plan money is going into clean technology.

In light of these figures it is hard not to agree with Kjaer, who cautions that there could be dire future consequences for European states if they let other nations take the lead in green technology.

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