1. Introduction

Europa's economy has grown quickly over the past decade. Its membership in the European Union (EU) has been of major benefit. Per capita GDP is increasing rapidly, having reached the EU average in 1995, with per capita energy consumption almost equal to the European average. More than 90% of Europa's primary energy supplies are met by imports.

Europa has access to a variety of indigenous energy sources which include coal and wood, and limited amounts of natural gas. The primary indigenous source has historically been subsidised wood production produced from major state forests, and some hydropower. Tourism is important to Europa, and therefore, environmental issues are of growing concern to the country's national and rural leaders. Therefore, improving the environment, by increasing renewable energy utilisation, and by improving energy efficiency, is of major importance to the country. The rural domestic sector is a major energy consumer of woodfuels. At a national level, as in much of Europe, households are switching from coal to gas as new import agreements, and the distribution pipeline become more extensive. This is driven by consumer preference, and also because of government environmental and economic legislation. A natural gas pipeline has been constructed from Europa's northern neighbour, and the distribution system is adding consumers at a rate of 20% per annum.

The Electricity supply of the country is currently controlled by a single utility, the ENEC (Europa National Electricity Corporation). There is considerable pressure under new European energy market liberalisation, and from domestic economic and political groups, to open up the power sector. ENEC plans to sell of its seven regional distribution companies (maintaining 25% shares in each), while maintaining the monopoly on all distribution, and on the country's largest coal electricity generation plant (2000 MW) in Freydonia , the nation's capital.. The potential to increase renewable energy in the nation's overall energy balance is great, and new price supports and environmental legislation is accelerating renewable energy development.

The western seashore of Europa has one of Europe's highest wind energy resource potentials. The potential for wind to contribute to the country's energy supplies is greater than 20 TWh per year, although less than 10 MW of generating capacity have been installed, with another 90 MW of wind capacity currently planned and approved under governments Renewable Energy Electricity Directive (REED). REED requires ENEC to purchase a certain amount of electricity generated from renewable sources. ENEC is now in its second round of REED (REED II), with over 30 MW in REED I (small hydro and wind), and over 70 MW under the current REED II (mainly wind).

The grid needs strengthening in many areas where the wind resource is highest, and there are plans to obtain the necessary finance for this strengthening. However, ENEC's privatisation plans for its regional distribution companies may contradict these plans unless government puts forward a stronger legislative support and incentive programme.

The potential for wave power is enormous and could be as much as 300 TWh, but the technology for exploitation is not presently economic. Nonetheless, Europa has a leading position in wave energy research and prototypes are in operation.

Over 400 MW of hydropower is installed producing 1600 GWh each year, or some 10% of electricity supply. The country's large hydro sites are almost entirely utilised. However, considerable potential exists for small hydropower (<10 MW) development. Estimates put this as high as 200 MW, although less than 10 MW have been developed thus far (primarily under REED I).

Biomass contributes approximately 1 TWh to energy supply. Over 50% of this is utilised for household heating from wood. Approximately 15% of Europa's land area is forested, and considerable potential exists to exploit these resources at higher, sustainable levels, to contribute more to the country's energy supplies. Europa has an extensive arable land area, although less than 25% is farmed intensively. Scope exists for energy crops, particularly short rotation coppice (SRC), although work in this area is still in its early stages. Approximately 2000 ha have been planted commercially in SRC, and plans are in place to plant nearly 20000 ha over the next four years primarily for domestic and industrial heat production, and some CHP. Government policies are currently under review to stimulate and encourage wood production both from natural forests, and from SRC.

The potential for municipal and industrial wastes is site specific and is estimated between 800 and 1000 Gwh of electricity from all sources by combustion and digestion. However, Europa has developed only two systems (under REED I), which generate a combined total of less than 2 GWh per annum. However, plans are in place for six more systems under the current Renewable Energy Electricity Directive, with a combined generating capacity of over 45 GWh per annum.

With the exception of hydropower and biomass, renewables have experienced slow commercial development in Europa. Until last year only two 5 MW wind farms had been installed through the REED I process, with EU support. This is changing with rapidly under the second round of REED. Contracts have been awarded by ENEC under REED II at price levels of Euro 0.055/kWh for wind, 0.349 per kWh for CHP and 0.62/kWh for small hydropower. Rapid growth is also being observed in the use of ambient energy in heat pumping installations and these already provide a greater contribution than solar and geothermal sources.

3. Market Conditions

Re-structuring of ENEC is in progress to permit greater competition and network access for electricity generated from a number of "new" sources (renewables, gas and liquid fuels) to replace ENEC's aging coal plant. Gas is expected to take an increasing share of new energy demand and to replace solid fuels in existing heating applications. Security of supply has been an important objective for development of Europa's energy sector and diversification of energy sources has been an important driver of energy policy. Europa's increased integration into the EU has spurred more diversification of electricity and heating sources of energy, and the environment has become one of the most important political issues in the country. Given the country's outstanding physical beauty, and the significance of tourism (over 15% of GDP), renewable energy and gas have assumed ever greater importance in government's development objectives.

Energy market liberalisation is occurring at a rapid pace, in line with EU directives, and in line with Europa's current and previous government philosophy. While ENEC will maintain 25% shareholdings in its regional companies, the private sector (and outside investors) will play a major role in the electricity sector by the year 2000. Likewise, with the connection of the country to the European gas networks, government has opened up distribution to private investors. Currently three companies are licensed gas distributors, with a further seven companies under government application for licenses. Private investment accounts for over 80% of all new gas distribution network investment, and government's role in the gas sector will diminish to that of regulator by 2002.

While government plays an active role in the forestry sector, production from forests will also be completely privatised by 2002. Government is preparing an ambitious set of plans for promoting biomass for energy production, particularly CHP. Likewise the REED process is now in its fourth year, working through the marketplace. This has added major market stimulus to renewables without major government subsidies.

4. Policy and Planning

Privatisation of the energy sector is the key element of government strategy in the energy sector. The legal and institutional frameworks necessary to implement this strategy have been put rapidly in place over the past four years.

Europa has the possibility to source at large proportion of domestic electricity supply from renewables (at least 15% by 2020). Having seen the progress made in other European countries, and encouraged by the EU support for renewables, Europa has introduced rapid changes in power sector policy to encourage the development of private investment in new, indigenous energy supply projects and in the burgeoning gas sector. The Renewable Energy Electricity Directive has added substantial stimulus to the development of renewable energy resources in Europa. This, coupled with major tax incentives (additional to the REED), and a package of other policy tools ("fast track" planning approval, rapid depreciation on capital investment in renewables, reductions in capital gains taxes for sales of renewable energy generating plant, etc.) has stimulated the renewable energy sector enormously.

EU policy and support towards renewables has also had a strong influence on government policy. Europa has been successful with a number projects under the JOULE, THERMIE and ALTENER Programmes. Government committed itself to achieving 10% renewables for total energy supply by 2010 and to reducing carbon emissions by 15% by 2010 under the Kyoto Convention. Europa has quickly become one of the leading countries in the field of renewables in Europe over the past several years.

Government is presently engaged in even wider reaching reviews of energy sector policy options covering renewables, and including a more detailed resource survey. Evaluation of the first REED is proceeding on a number of issues relating to the interface between energy producers and the electricity network such as grid connections, connection costs and network impact. Government is increasingly interested in utilising the REED process, and other government policies, to have more positive impacts on the environment, and to have more positive contributions to national employment, regional development and local manufacture of renewable energy equipment.

5. Contacts

Europa Energy Centre

State Industrial Agency for Energy and Economy (Electricity)
Sean O'Donahue
John Smith
J Paukennen
Eu-3922, P O Box 9, Freydonia 3,
Europa
Tel. 4 91 333222
Fax 4 91 444111

ENEC
(Electricity)
Frans Schmidt
Jose Garcia
Jorge Carvlho
Eu-4122, Ave Ecce Homo, Esperanto 9, Europa
Tel. 4 89 43 21 90
Fax 4 89 43 22 91

National Forestry Research and Development Institute
(Forestry and Biomass)
S Primafortini
P Andrews
T. Schneider
A Tinbergen
Eu-4097, Pro Unitaris Place, Regeneratio 2, Europa
Tel. 4 87 99 88 77
Fax 4 87 99 88 66

National Science and Research Council
(Renewables)
H Andreassen
G Arnofini
S Andrapolous
Eu-4097, Quo Vadis St, Regeneratio 3, Europa
Tel. 4 87 12 34 56
Fax 4 87 87 65 43

6. Bibliography

G Angello, "SRC - the answer to Europa's renewable energy needs?", Vol 2, No 4, Europa National Academy of Sciences Newsletter, 1997.

P Mangolis, "Small scale hydropower development in Europa since the turn of the century - new prospects under liberalised markets", Europa Today, 22 January 1998

K Andresson, "Electricity and renewables - is there a true 'free' market?", ENEC Monthly Newsletter, March 1997.

G Lambertini, "The potential for landfill gas and sewage gas for renewable energy", Europa Green Issues Quarterly, February 1998.

H Schmied, "New issues in foresty for combined heat and power/CHP", Europa Forestry Journal, Vol 28, No 12, March 1996

S Papadopolous, "CAP and Europa's Agricultural Sector Policies - New Prospects for Energy Crops", Ministry of Agriculture, Forests and Fisheries, Sessional Paper No 14, February 1998