There are less than three months until the next climate-change conference in Durban. As pledged in previous summits, can we really achieve a 20-30% emission cut by 2020?
To do so, experts agree that our grids must become at least carbon-neutral. Last December, the European Commission unveiled its plan for a Super Smart Grid joining up the electricity networks of the EU and North Africa by 2050 to bring low-cost, low-carbon electricity and better investment opportunities in renewable energies. But it estimates that all infrastructural upgrades will need €1 trillion investment. So, the Pan-European Supergrid can’t go ahead unless the financing arrangement is sorted out soon.
In the current debt crisis, our government won’t have much money to spare to foot this bill. Hundreds of billions of private funding will have to be mobilised through either the user-pays principle or nationwide electricity retail tariff.
Some propose a European Network Fund, funded by a fixed and additional tariff charged to consumers, and guaranteed by European Investment Bank (EIB). However, tariff levels set by other national regulators tend not to sufficiently consider cross-border priorities. Also, the investment risks of high-cost infrastructures that coexist with uncertain profits distributed over decades cannot be insured by a bond insurer (so-called ‘monoliner’) since the outbreak of Eurozone crisis.
To offer private investors partial risk transfers, “project bonds” 20-30% guaranteed by EIB or our Green Investment Bank should be more feasible. A project company financing, implementing and operating an infrastructural project would be more attractive to investors as even government bonds look insecure under the current debt crisis. Thus, investors can distribute their risks among various projects.
Noteworthy is that EIB guarantees should only be used for trans-European network projects, not for those limited to one member state.
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