Green power advances depend on ability to compete on equal terms

Date: 07/03/02

MEP Claude Turmes tells Laurence Frost he believes the handling of liberalisation is crucial to the future of renewable energy.

THE liberalisation of EU energy markets will, if all goes according to plan, increase competition between power generators and bring down prices for ordinary consumers.

But another consequence of the proposals on the table in Barcelona next week will be that electricity from wind, wave and solar sources could soon compete head-to-head with coal, gas and nuclear power for Europeans' euros.

Even the most informed opinions differ wildly over the role that so-called 'renewables' can play in addressing the chronic environmental, economic and geopolitical problems of a society that is ever more dependent on imports from finite fossil-fuel reserves.

So, to what extent will green power be able to hold its own against the fossil-fuel establishment, once the markets are thrown open?

Claude Turmes is about as optimistic as they get, with an important proviso. According to the Green MEP, 'it all depends on how fairly you organise the liberalised market'.

His report on energy liberalisation - published in January this year and likely to form the basis of the European Parliament's position - is a bid to level a playing field he believes would work against green power generators under the Commission's proposals.

Turmes comes across as an accomplished technician, certainly by MEP standards. The Luxembourgeois is as happy talking about 'feed-in laws' or 'green certification schemes' as about the broader political points. But his overriding vision is uncomplicated.

'I think it would be not so difficult for Europe to run on renewables alone by 2050 if it's done right,' says Turmes.

A study commissioned by the Parliament and due to be released in April is expected to show that green energy could account for 35-50 of the EU's power needs by 2020.

Member states are already introducing tax breaks and other incentives to boost green power's EU market share to 22 under last year's renewables directive, but progress beyond that target will depend on renewables' ability to compete.

The technology is there, Turmes believes, for a large-scale shift to green power forms such as gas turbines, fuel cells or 'co-generation' - the production of heat and power in one plant, yielding efficiency savings.

But the new economic viability of renewable technologies is unlikely to be reflected in actual plant prices until policymakers and investors take the plunge.

'In the beginning computers were prohibitively expensive,' says Turmes. 'But as with computers, every time you double the production of solar cells or wind turbines, costs go down by 15-20.'

The leap of faith required offers just one reason why merely throwing the sector open to market forces is no guarantee of 'fair' competition between new green power producers and the large established fossil-fuelled operators.

Another reason is the determination of those incumbents to use unfair pricing policies to keep smaller green producers off the market - a tendency Turmes believes is already in evidence.

'They use the fact that they are active in distribution grid operation [as well as generation] to avoid competition,' said Turmes, who singles out France's state-owned power monopoly EdF for particular criticism. 'In France there are high [grid access] rates for everything that's small and artificially low prices for large operators. This shows that if we liberalise without giving fair access to the grid and grid pricing this will favour large-scale existing production in nuclear and coal.'

The Parliament's industry committee last month rejected Turmes's answer to the problem - full 'ownership unbundling' to force the break-up of energy companies into separate generation and distribution firms. But the MEP is undeterred. 'It was rejected by a very small majority,' he says, adding that he plans to re-submit the proposal to next Monday's full Parliamentary plenary (11 March).

Turmes also wants to see financial incentives for the development of localised power production - with large numbers of small renewables plants situated close to residential areas or industrial consumers - as opposed to existing centralised generation, where power from large plants is carried long distances to customers over the grid.

Under an amendment backed by the committee, Turmes says the grid tariffs charged to small green producers for local power distribution should be reduced to reflect their low use of distribution infrastructure.

Smaller green power producers should be compensated because, he explains, 'all the grid investments that have been done in the last 40 years are in fact a subsidy to centralised production'.

Traditional power generators already enjoy an unfair advantage by not paying the environmental and safety costs they incur. 'Coal and gas don't pay the full cost of their climate change damage and nuclear doesn't pay for the risk of nuclear accidents, which is covered at the expense of taxpayers,' he adds. 'These are clear distortions of competition.'

Turmes blames nuclear plants for another source of market distortion, in the form of the former state monopolies' 'decommissioning funds', accumulated over years to cover unpredictable future costs of dismantling abandoned plants and processing waste.

'We can't have a level playing field when EdF [Europe's largest power company] has a €60 billion war chest to buy up other firms, while Enel [the second largest] doesn't have enough capital to acquire other companies.

'Historically, the companies with decommissioning funds are those that have been against renewables. This is a form of indirect discrimination against clean energies.'

An endorsement for Turmes' amendments in Monday's Parliamentary vote promises to complicate talks between EU governments in the run-up to the summit four days later. With the Commission and Spanish presidency desperate for a deal to reanimate the all-but-stalled 'Lisbon process' of economic reform, member states are discussing compromises that could see the independence of proposed energy watchdogs watered down, along with their powers to intervene to ensure fair pricing.

Turmes is determined to resist any weakening of the proposal in intergovernmental horse-trading: 'This just means it's even more important that the European Parliament takes a strong position,' he says.

Interview with Green MEP Claude Turmes. Article is part of a survey on renewable energy.