Greece, Italy, Portugal, Spain and Ireland offer excellent conditions for harvesting renewable energy from the sun, wind and geothermal sources. Why not give these countries the opportunity to pay off a substantial part of their debts in this way? How? By giving creditors concessions for large scale investment programs in renewable energy in these countries that offer enough long-term financial profit. We are talking solar panels, wind parks or geothermal power stations.
Last week, the Dutch economist Sweder van Wijnbergen published an article in 'NRC Handelsblad' claiming that the troubled European economies need both debt reduction and an investment program in order to give their people new hope and a growth prospect. This can be achieved by partly converting debts into renewable energy concessions.
A 30% debt reduction should be possible – assuming a 2,5% average yearly inflation, a modest 1,5 Eurocent profit per kWh in the 2020-2045 period and a conservatively estimated yield of 70 Gigawatt hour per square kilometer per year. Having a 40 billion Euro debt, Ireland ought to give 550 square kilometer into concession. This is less than one percent of Ireland's total surface. For Portugal, with 78 billion Euro debt, this would be 1,000 square kilometer or one percent of its total territory. And Greece with a 210 billion debt would amount up to 2,800 square kilometer which is two percent of Greek territory. The energy projects don’t have to exclusively be large-scale and on a few big pieces of land. They could capitalize on vast opportunities for decentralized energy locally as well.
This plan only has winners. The concessions allow the creditors to get their money back, which is quite uncertain in the current situation. The indebted countries will not only be paying off a substantial part of their debts, but they will also receive a positive stimulus for their economy and employment from the construction and maintenance of the projects. Especially the young generation in these countries who now face a tremendously high unemployment rate will enjoy a new perspective for a debt-free future with many opportunities for healthy growth. And Europe will have more renewable energy with which to contribute to a cleaner, healthier and safer environment for its citizens.
Through a specially founded consortium for this purpose, creditors should be able to exert their concession rights by financing their renewable energy projects at a low interest rate with the European Investment Bank (EIB). This fits very well within the EIB mission and supports the EU policy to establish an energy transition over the next decades. A low interest rate has a strong positive effect on the profitability of these projects because renewable energy installations typically have a relative high initial capital investment and a very low operational cost since the “fuels” - solar, wind and geothermal - are free.
Additionally, the exertion of concession rights should accompany the continued expansion of the European Supergrid which is already being built. Through HVDC underground or submarine power cables energy supply and demand of different EU members will be connected. This will lead to better functioning trade and will contribute to more varying energy sources with a more reliable and well-balanced supply. The plan will also support the Desertec project that invests in renewable energy projects in Northern Africa to partly provide in the European need for electricity.
A plan as presented here can only work if the creditors are willing to think and act from a long-term perspective, one of at least several decades. The advantages are numerous: the land-lease cheap or for free, a low interest rate and a structurally rising wholesale price for conventional energy. Because the demand for land with favorable circumstances (a lot of sun, wind or geothermal heat) is likely to grow, it would be in fact no more than a clever anticipation.
Source: this opinion article was published in NRC Handelsblad (The Netherlands) on June 4th by Prof. Dr. Klaas van Egmond (Professor in Geosciences – Utrecht University), Prof. Dr. Sylvester Eijffinger (Professor Financial Economy – Tilburg University), Prof. Dr. Herman Wijffels (Professor Sustainablity and Societal Change – Utrecht University), Prof. Dr. Wim Sinke (Professor Sustainable Energysystems – Utrecht University) en Marco Witschge (initiator of this article and Director of the New Energy for The Netherlands Foundation)
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