A Christmas present for EU renewables

December 20, 2012 | 00:00

A Christmas present for EU renewables

"Christmas has come early," announced EU climate commissioner Connie Hedegaard in Brussels on Tuesday in awarding €1.2bn of EU grants to 23 innovative renewables projects. This is money raised on the EU carbon market over the past year by selling the first 200 of 300 million carbon allowances ("NER300") set aside specifically to raise funds for innovative renewables projects – and for carbon capture and storage (CCS). CCS was the initial target in mind when this fund was created back in 2008 as part of the EU Emission Trading Scheme (ETS) review. Yet not a single CCS project was funded on Tuesday.

In the weeks leading up to the decision, the European Commission had already hinted that this was going to happen, because the NER300 rules stipulate that to be eligible for EU funds, projects had to be backed by a national government that could prove adequate co-financing of at least 50%. “It is only with confirmed projects that we can continue our journey,” the European Commission’s Director-General for Climate Change Jos Delbeke warned in early October. But CCS is expensive and the likeliest candidates for a share of the money – up to €337m per project – fell by the wayside one by one (see "The CCS mess").

In the end, the French-led Ultra-Low CO2 Steelmaking (ULCOS) project was the only CCS candidate reported to have met the co-financing requirements. Originally last on the shortlist, this unlikeliest of candidates – its blast furnace was actually shut down a year ago – nonetheless seemed set for success. Until project owner ArcelorMittal withdrew the project earlier this month due to “technical difficulties”. This leaves the €265m that had already been allocated to it, plus another €10m in admin money, up for grabs. What will happen to them? They will be booted over to join revenues from the sale of the remaining 100 allowances of the NER300 next year, said Hedegaard on Tuesday. So they could end up funding either CCS or renewables projects.

Unlike CCS, the renewable energy sector stands ready to welcome this early Christmas present from the EU. Funds will go to projects in bio-energy, concentrated solar, geothermal, wind and ocean energy, and smart grids (the only notable absentee from this list is photovoltaic power). The largest individual share, or €200m, will go to a Dutch biomass refinery project called Woodspirit. Hedegaard spoke of “a major milestone in EU climate policy” when she announced the awarding of the grants.

So is the era of renewables finally upon us? Renewable energy reps certainly think so. Rémi Gruet from the European Wind Energy Association (EWEA) said: “EWEA warmly welcomes the award of about €1.2bn for renewable energy projects, including 6 wind projects. The number of projects ready for funding shows the responsiveness and great innovation potential of the wind and renewable energy industry.”

Not everyone was satisfied, though. Greg Arrowsmith, a consultant who has advised several renewable energy NER300 projects and also works as policy officer to an association representing renewable energy research centres (EUREC Agency) said: “€1.2bn is a welcome shot in the arm for those involved in bringing new and comparatively risky technology to market. But the 1st-call pot was €1.5bn, not €1.2bn. Under a fair interpretation of NER300 rules... the entire pot should go to renewable energy projects.”

Hedegaard made clear on Tuesday however, that this will not be the case. “There is a dual purpose in this legislation, it is for renewables and it’s for CCS,” she told reporters. “Therefore it also makes sense when in the first call, for a number of different reasons there will be no CCS projects, that at least we take care that the possibility will be there for the next round. I have reasons to believe that there will be some CCS projects that will make it to the second call.” Certainly EU sources said at least one CCS project – the Dutch Green Hydrogen project, originally a favourite for funding – had this very Tuesday finally confirmed co-financing. It came too late for this round of money – the confirmation deadline was the end of October – but it bodes well for the second round.

Insiders say it’s likely the Dutch project, a UK project and perhaps ULCOS after all – assuming the French government finds a solution to re-open the blast furnace – will benefit from EU funds in the second round. The criteria for awarding money to CCS projects – cost-effectiveness per tonne of CO2 stored – will not be changed, Hedegaard said, meaning that coal projects will continue to be heavily advantaged compared to gas.

Revenues from the remaining 100 million allowances should be awarded by the end of 2013, Hedegaard said. The Commission aims to kick off this process “as soon as possible” next year. This second round could actually raise more money than the first if the Commission has its way and member states and the European Parliament agree to short-term measures to boost the carbon price (see "Crisis in the ETS comes to a head").

For more information, see also NER300.com, an unofficial, independent (and very useful) portal dedicated to renewable energy and grid integration projects vying for access to these funds.

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