March 28, 2009
The generation of electricity has traditionally been in the hands of municipalities, in Europe, or small private companies, in the USA.
This business model belongs to the past. In the future power generation – and separately transmission – will be concentrated in the hands of big transnational companies operating globally.
European companies have been the front-runners. As a consequence of market liberalisation and EU-wide energy and climate policy Europe’s power industry has undergone an unprecedented concentration. In less than a decade, the industry has expanded beyond regional and national borders. Today, a dozen big players dominate the European electricity and gas markets, though they will have to abandon the full control of the transmission lines.
But in the future, even the European market may no longer offer sufficient economies of scale in what has become a highly capital-intensive business. That is one of several reasons why European utilities have discovered the US market for their future expansion, especially in C02 free power generation:
· The USA, the world’s biggest market for electricity, is still more fragmented than the EU market, due to the absence of federal regulation.
· It offers much bigger scope for the generation of wind and solar power, thanks to better climatic conditions and the sheer size of empty space, especially in the West.
· Individual US states offer attractive tax incentives.
· EU climate legislation allows energy companies to credit the generation of renewable energy in the USA – and elsewhere – to their “C02 emission account”.
The likelihood of an effective US climate policy, similar to that of the EU, will further enhance the attractiveness of the USA for European investments in renewable energies.
If China, India, Russia, Brazil, not to speak of the Maghreb countries, were to follow suit and offer the right incentives for investing in renewable energies, coupled with reliable guarantees for their protection, the flow of trans- national investments in renewable energies would grow substantially. The recent take-over by Mitsubishi Trading Company of a 25 percent stake in the second biggest PV solar farm in Portugal demonstrates the potential for such investments.
It is time to focus on these practical issues for effectively fighting climate change!
Brussels, 25.03.09 Eberhard RheinAuthor : Eberhard Rhein