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Energy Bosses Call for End to Subsidies for Wind, Solar Power

Energy Bosses Call for End to Subsidies for Wind, Solar Power
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Παρ, 11 Οκτωβρίου 2013 - 18:35
The chief executives of 10 energy companies accounting for half of Europe's electricity production capacity issued a joint call Friday to end subsidies to wind and solar power, saying the mechanisms have led to whopping bills for households and businesses and could cause continent-wide blackouts.
The chief executives of 10 energy companies accounting for half of Europe 's electricity production capacity issued a joint call Friday to end subsidies to wind and solar power, saying the mechanisms have led to whopping bills for households and businesses and could cause continent-wide blackouts.

Speaking at a news conference in Brussels , the CEOs also urged European Union authorities to set up a system that would compensate electricity companies that agree to maintain spare capacity on standby--a practice that helps increase the security of Europe 's highly interconnected power grid.

The informal group, which includes utilities such as Germany 's E.ON AG (EOAN.XE), France 's GDF Suez SA (GSZ.FR) and Italy 's Eni SpA (E), blamed the trend on policies introduced at the turn of the century, when most European governments sought to promote renewable energy.

The criticism from Europe 's commercial power producers isn't new. The industry has long been critical of the continent's shift to renewable energy because it threatens their core nuclear and coal-based power production. Europe 's economic woes, however, have sharpened the debate, as companies and private citizens alike complain about the rising cost of power.

In the late 1990s and early 2000s, Germany , France , Italy and some other EU countries subsidized solar and wind power in an effort to minimize the bloc's reliance on imported fossil fuels and reduce power prices.

"We've failed on all accounts: Europe is threatened by a blackout like in New York few years ago, prices are shooting up higher, and our carbon emissions keep increasing," said GDF Suez CEO Gerard Mestrallet ahead of the news conference.

The European Commission, the bloc's executive body, is scheduled to discuss the issue next week.

Under the subsidy mechanisms, wind and solar power producers benefit from priority access to the grid and enjoy guaranteed prices. In France , for instance, even as wholesale prices hover around EUR40 ($54) a megawatt, windmill electricity goes at a minimum of EUR83 a megawatt, regardless of demand. The difference is charged to customers.

The system certainly lured investors into wind and solar power projects. Germany now has 60 gigawatts of wind and solar capacity--about 25% of the country's total power-generation capacity.

Members of the CEO group said the subsidy mechanisms became deeply flawed in 2008, when the financial crisis hit and many European countries descended into economic recession. Although demand for electricity stalled or fell in some countries, pushing down wholesale electricity prices, investors kept plowing money into new wind and solar power capacity thanks to the guaranteed tariffs for renewables.

Meanwhile, electricity prices continued rising. On average, after-tax power prices rose 17% for households and 21% for businesses in Europe over the past four years, according to Eurostat data.

To cope with overcapacity, utilities decommissioned or mothballed some of their fossil-fuel power plants that had become unprofitable to operate. Over the past four years, 51 GW of gas-fired capacities have been idled across Europe , Mr. Mestrallet said.

"That's like wiping out half of France 's power-generation capacity, or those of Belgium , the Czech Republic and Portugal combined," he said.

Analysts say the trend is dangerous because, unlike renewable wind and solar sources, which are intermittent, gas-fired plants are a key element to improving the reliability of the grid because they can be turned on or off at short notice. Some fear that Europe is now ill-equipped to weather a cold spell.

"The importance of renewables has become a threat to the continent's supply safety," Colette Lewiner, an energy analyst at Capgemini consultancy, warned in a report released this week. "There could indeed be a blackout."

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