Cooperation between Southern-Eastern Mediterranean countries and the EU: The Renewable Energy Sector

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Issue: Renewable energy technologies are becoming more widespread in southern Mediterranean countries, thanks to developed countries’ cooperation programmes and international aid. However, it is still not clear what is the best way for programmes to meet real renewable energy needs.
Relevance: The European Community Development Programme has begun to focus on the question of how it may develop after the year 2000. The outcome will depend particularly on two processes: the expiry of the Edinburgh principles on the EC budget (1999) and the revision of the Lomé Convention (February 2000). Decision makers need to be informed by considerations regarding the most effective cooperation strategies.

The Mediterranean region and the European Union

Although not a major partner in terms of trade, non-EU Mediterranean (SEM) countries are a priority target for cooperation programmes, absorbing around 25% of the total EU budget for cooperation programmes.

The main areas of cooperation with SEM countries can be extracted from the Council resolutions taken between 1992 and 1997. Listed in order of importance, these are coordination and coherence, health, food aid, the fight against poverty, population control, education, and social policy. In the same vein, the main areas of cooperation identified by the World Bank, United Nation Development Programme, and the European Union (1997) in the SEM countries are summarized in Table 1.

Since 1995, Community cooperation with the Mediterranean region has been channelled within the framework of the Barcelona Declaration for a Euro-Mediterranean partnership. This defined the MEDA programme, which represents the starting point of the cooperation system with all south-eastern Mediterranean (SEM) countries. The countries included in that declaration, and consequently that can access MEDA funds are Algeria, Cyprus, Egypt, Israel, Jordan, Lebanon, Malta, Morocco, Palestine, Syria, Tunisia and Turkey.

The average annual commitment for the MEDA programme over the last years has been 800 millions ECU. However, the 1997 and 1998 MEDA budget has been increased to 1,100 MECU. That figure has been only surpassed by the cooperation funds addressed to CEEC and CIS countries. The financial perspectives of external actions for this year (EC budget) and estimates of appropriations for the European Development Fund (EDF) are expected to increase for the MEDA programme.

Table 1 would seem to suggest that cooperation on energy issues is not considered a strategically important area, and the same phenomenon can be detected when the World Bank and other International funds are analysed. The cooperation programmes between the SEM and the EU-15 countries in the energy field normally take the form of commercial transactions between the energy utilities from the north and the south. The energy interconnection between the two sides of the Mediterranean sea has been the most important cooperation issue in recent years. For instance, the projects for the electrical connection between Greece-Turkey and Turkey-Israel, the electrical connection already established between Italy and Tunisia, the gas pipeline between Algeria and Spain and the electrical connection between Morocco and Spain are some of the business-oriented energy projects linking both sides of the Mediterranean. However, there is also a pressing need to provide the population in SEM countries with electricity.

Electricity sector in southern-eastern Mediterranean countries

Electricity is provided by a state-owned monopoly in all of the south-eastern Mediterranean (SEM) countries, and in each there is a need to extend the network to reach the whole population. In some countries the rate of electrification needs to be very high if governments are to satisfy the increasing electricity demands from a growing population and/or to increase of the general welfare of the population. With the exception of Israel and Algeria, a tremendous economic effort is needed for these countries to bring electricity to the whole population. Turkey, Lebanon, Egypt and Jordan are the countries that need to make the greatest economic effort (in terms of infrastructure cost for the electrification divided by GNP) to build new electricity infrastructure. Estimates from the World Bank and The Financial Times show that around 110 billion ECU are needed for the next ten years to electrify the region. Nevertheless, as the table below shows, the electricity sector is not the same situation in all the SEM countries.

Renewable energies in the non-European Mediterranean countries

The increasing use of renewable energies (REs) in the Mediterranean region is fully consistent with most scenarios of social and economic development in the region and this will continue over the coming decades. A rapidly expanding energy market together with major changes in the structure of the energy sector is a trend that can only continue to increase as European Union markets and those of the southern Mediterranean become more and more integrated. These two elements offer themselves considerable opportunities for renewable energies, and it will be up to the industry to seize them. Using renewable energy sources has local, regional and global advantages.

SEM countries have the common characteristic of high levels of solar radiation (4 to 6 kWh/m2/day). The wind resources are also extensive, sites with good wind resources being available in almost all the countries. Thus, given the scarcity of fossil resources in some of the SEM countries, and their social and environmental benefits, renewable energies are ideally placed to meet their growing demand at local, regional and national levels. Aware of these factors, the European Commission is promoting renewable technologies strongly inside and outside of the Union. Both UNESCO and the EC have detected a number of projects or programmes in the field applicable to these countries.

Nevertheless, renewable energies have not generally been taken into account in electrification plans in these countries. RE technologies are considered to be a possible solution in those national electrification plans where the electricity grid is not scheduled to reach outlying areas within the next ten years. In those cases, renewable energies can be considered as an option for electrification. Table 3 summarizes the renewable energy plans implemented or to be implemented in the near future in some SEM countries.

The cooperation projects or programmes between the EU and the SEM countries in the renewable energies sector are small in relation to the potential of the region. The most widespread technology across the region is solar energy. The main reason for this is that it is modular and so more affordable for the cooperation funds. Wind energy has very good opportunities in specific locations but is not widespread. Biomass and solar thermal technologies are less popular as a result of technical problems or difficulties in adapting them to the region. However, the potential for rural electrification is enormous considering both the expected increase in the population and the potential for increasing the welfare of the population.

Nevertheless, the record of disseminating RE technologies into rural areas in SEM countries has not been particularly good. The main reason has been the lack of infrastructure support, as the systems are mainly beyond the capabilities of local commercial operators. This support includes training local technicians and entrepreneurs, research and development of new products, marketing, financing and credit schemes, education and networking. As a result, it has not been possible to develop well-targeted projects, undertake complementary initiatives, provide close continuous support and respond rapidly to unexpected problems. Local management has brought a number of benefits when compared to similar projects run by large companies. These initiatives normally reduce the costs of operation and administration, increase the payment rates and involve local industries.

 It is important to mention that renewable energy technologies are not market competitive with conventional energy technologies. Less developed countries such as SEM countries cannot afford the extra cost, so cooperation aid is essential if these technologies are to become widespread in SEM countries. Consequently, if Europe wants to reinforce its renewable energy industry, solve environmental problems of the Mediterranean area and contribute to reducing the carbon emissions of SEM countries, the funds to promote those energies need to be increased. Reinforcing the multilateral approach of development aid against the national approach may contribute to a better-defined strategy for the diffusion of this kind of technology in the area. This type of cooperation can make more ambitious projects affordable and help make planning more consistent. This aid is quite crucial for the development of a strong and coherent renewable energy market in the SEM countries.

A coherent cooperation programme is essential for a coherent RE market in the Mediterranean area. However, there are a number of obstacles. These include the fact that Member States keep a close control over the European development programme; EC budgets for Development Aid (ODA) have increased rapidly since 1990 and some management problems have appeared as a result; the overall contributions of EU countries to multilateral institutions is being reduced; approximately half of the budgeted funds for development cooperation are not actually spent; Member States do not seriously engage in a process to improve EU aid.

Conclusions

Most southern-eastern Mediterranean countries are interested in the renewable energy technology sector. Successful implementation of renewable energy technology projects is vital for countries that are trying to create the infrastructure necessary to sustain economic development.

Approaches to encouraging the widespread uptake of renewable energy systems vary greatly depending upon the technology and organizations involved. But from the lessons learned from renewable energy projects in the region we can highlight the following:

Stakeholder participation is beneficial in tailoring a technology to the demand environment. In addition, costs may be reduced through mobilization of local resources and expertise and increasing participation often raises local levels of responsibility and commitment.
Well-planned, well-assessed proposals should give a higher project success rate, encourage proposals of a similar calibre lower financial and other barriers. It is also important not to debase the delivered energy service by offering free gifts. Consumers will resist purchasing goods when others have received theirs free, and the lack of intrinsic value would hamper the establishment of important second-hand markets.
Funding bodies may be bilateral or multilateral aid organizations. Ideally, their programmes need to be independent of day-to-day political involvement whilst remaining compatible with relevant government strategy.
Provision of basic energy services to communities is a specific niche energy market. In such markets a classic dilemma is the competition for land to provide fuel for energy, a direct cash return, and food. Such conflicts make it difficult to establish a sustainable fuel market. Such schemes are invariably intended to address social or technology transfer rather than economic needs. Targeted incentives are probably necessary but should be planned for phase-out, and payment schemes need to suit customer’s cash and credit situations.
Rural electrification programmes, which encourage development beyond simple provision of basic energy services, are another niche market. The programme should also aim to encourage local employment, with development of the associated education, training and infrastructure.
The cooperation aid budget in the EC has faced a number of problems. Nevertheless, this aid is crucial for the development of a coherent renewable energy market in the SEM countries. More emphasis should be placed on EC cooperation funds than on national (bilateral) cooperation funds. Multilateral aid funds can afford bigger projects and can focus better on the needs of the countries. The budget spent in multilateral cooperation funds are discussed more thoroughly and consequently can tackle the real problems of those countries better. It is true that more discussion can result in longer implementation times, but the outcome is usually projects for which there is greater agreement between donors and receivers. Another positive aspect is the possibility of defining a strategy for the Mediterranean region. The joint implementation of energy projects in the SEM countries is also another possibility and now seems as very promising strategy for increasing commercial exchanges and involving the industry to cooperate.

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