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The European Union looks set to overhaul the way renewable energy projects and power grids are financed, launching a new type of infrastructure bond and converging the EU's tangle of overlapping subsidies, writes Reuters. European leaders (European Council) will meet in Brussels for a February 4 summit to reconcile an EU goal of getting 20 percent energy from renewable sources by 2020 with a debt crisis that has driven several EU countries to the brink of insolvency.
"Don't kid yourself - we don't have the machine to print new money," EU energy commissioner Guenther Oettinger told a European Parliament hearing this week.
"The European Investment Bank can help us, but they are not a charitable organization. Member states... need to look at this in an innovative manner," he highlighted the difficulties ahead.
The plans to harmonize national subsidies for renewables in the long term has caused worries in Germany, where generous subsidies have led to a surge in green power which now faces a national overhaul.
The Netherlands and Spain, where wind and solar power have boomed, are also overhauling support schemes.
Big savings achievable
A draft strategy paper on financing renewables, seen by Reuters on Wednesday, estimates the EU could save EUR10 billion (USD13.7 billion) a year by harmonizing such schemes.
Typically, EU states support renewable projects at a national level via a complex toolbox of quotas, grants, tax exemptions and feed-in tariffs.
"We need a greater convergence of national support schemes and to move to a pan-European trade in renewable energy," says the draft, to be launched next week.
"Billions of euros could be saved if member states treated renewable energy as a commodity in a single European market," it added.
'Project bonds' included
European leaders at the February 4 summit are expected to give EU energy commissioner Guenther Oettinger a mandate to explore innovative ways of financing useful energy projects that companies have ignored or blocked in their quest for profits.
One example would be investment in pipelines to bring northwards a Spanish glut in gas from north Africa - infrastructure that would benefit European consumers, but holds little allure for the French utilities receiving that gas.
EU sources said the push for innovative financing includes "project bonds", a new initiative launched late last year by Commission President Jose Manuel Barroso in his speech 'State of the Union 2010'.
EU states invested around ERU35 billion in renewable energy infrastructure in 2009, but EU support amounts to just EUR3.3 billion per year, mostly loans from the European Investment Bank (EIB), the Commission says.
Subsidies are needed for renewables to compete with fossil fuels which, according to the International Energy Agency, receive more than five times more subsidies worldwide.
Hydropower, electricity from waste and photovoltaics in the Mediterranean are starting to compete economically with traditional energy sources, but most other renewable sources will need a decade more of subsidies in Europe.
Energy, innovation - Council's topics
The European Council will discuss energy policy in next week in Brussels, including how it can best support the shift towards an efficient low-carbon economy and greater security of supply - including through a better integrated and interconnected energy market, according to the Council's website.
The leaders are expected to set orientations on improving the functioning of the European energy market, especially as regards key missing links, on promoting innovative solutions for sustainable energy and on ensuring effective coordination and coherence of the Union's external energy action.
They will also discuss how to boost Europe's innovation potential to tackle the most critical societal challenges Europe is facing.
Particularly, the leaders are expected to set orientations as regards completing the European Research Area, improving framework conditions for innovation, facilitating access to finance, and simplifying and rationalizing EU programs.
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