With increasing transnational cooperation, renewable energy may be about to surge

With signs of increasing international cooperation on climate change, including the Biden Administration’s commitment to halve America’s net greenhouse gas pollution by 2030, we may finally see new levels of momentum for transnational or cross-border renewable energy projects. The United Nations has cited these projects as required for the achievement of Sustainable Development Goal 7: Affordable and Clean Energy.

Last month, the European Commission welcomed the agreement on the Connecting Europe Facility (CEF) to fund greener, more sustainable transport and energy networks as well as digitalisation. The CEF specifically references the role of transnational or cross-border projects in Europe’s energy future: “This agreement marks an important milestone on our way towards climate-neutrality and a green energy system. The strengthened CEF will support the revised trans-European energy networks policy by investing in smart and sustainable cross-border infrastructure and, for the first time, incentivising new cross-border renewable energy generation projects,” said Commissioner for Energy Kadri Simson.

And although Europe is arguably positioned to lead the way on cross-border renewable energy projects, other regions may not be far behind. The International Renewable Energy Agency’s Collaborative Framework, established in 2020, includes three main focuses, and one of these is “cross-border interconnections to promote cross-border trade of renewable electricity,” reflecting the priority placed on this issue by its international membership. In Asia, evaluation of the potential Asia Super Grid continues. The Asian Infrastructure Investment Bank has written that “Asia has a huge untapped potential for renewables, and regional networks could help develop more capacity, boost access and support stronger economic integration. Whatever the eventual time frame, what is clear is that further (cross-border) connections within Asia are likely, making regional power grids one more of the many options to reach our global climate and sustainable development goals.”

Cross-border projects often have significant potential to help governments achieve higher-level objectives, and cross-border renewable energy projects are an excellent example of this. By enabling capacity and access to be balanced regionally, they can help maximise de-carbonisation. NeuConnect, a proposed electricity interconnector that will create the first direct link between the United Kingdom and German electricity networks, connecting two of Europe’s largest energy markets for the first time, is an example of this. Northern Germany’s vast renewables infrastructure generates energy surplus to local requirements, creating frequent bottlenecks that require turbines be powered down. Neuconnect will channel this surplus renewable power to the UK, which is a net importer of energy and has a clear need for new sources of low-carbon energy. (Whilst the initial flow of surplus energy is expected to be from Germany to the UK, the interconnector allows flow in both directions, providing flexibility that offers significant benefits on both sides.) The project will help deliver a 16 million tonne reduction in CO2 – the equivalent of planting 28 million new trees or removing 400,000 cars from the road in one year.

However, transnational or cross-border projects depend – even more than national projects – on more than the social, economic or environmental case for the infrastructure itself. Delivery depends extensively on the ability of the jurisdictions involved to address legal, technical and regulatory issues. These issues are more complex when projects operate across borders.

In the case of NeuConnect, the energy markets of the UK and Germany are structured differently and have different legislation on the financing of high-voltage transmission infrastructure. As a project-financed scheme, NeuConnect required harmonisation of this legislation. Harmonisation of legislation is a key learning that the GI Hub explored in our guide to cross-border infrastructure, Connectivity Across Borders. A major milestone for NeuConnect in this regard was the introduction of new regulatory measures that better support project financed schemes. In the UK in 2020, energy regulator Ofgem approved a series of variations to existing regulations to support project financed interconnectors, and Germany recently passed new legislation allowing private finance of high-voltage transmission infrastructure. These changes enable NeuConnect to progress and set an important precedent for other privately financed schemes in the future, opening the door to continued investment in secure, sustainable infrastructure across Europe.

The harmonisation and alignment of legal, regulatory and stakeholder issues can be facilitated by the adoption of regional policy and planning frameworks. In Europe, the Trans-European Networks for Energy (TEN-E) strategy supports the European Union’s (EU) objective of creating an internal energy market, particularly by supporting projects that have strong non-economic benefits but that are not fully commercially viable and need public support. The overall strategic aims are to connect isolated regions, strengthen cross-border interconnections and integrate renewable power. The EU maintains a list of projects of common interest (PCIs) for the electricity, gas, smart grids and CO2 networks, which are key to meet the EU’s climate and energy objectives. The NeuConnect project has been designated a PCI by the European Commission.

The GI Hub’s Connectivity Across Borders emphasised the role of regional policy and planning frameworks as enablers for efficient cooperation and achievement of mutual goals and objectives. In particular, such frameworks help project parties:

• Identify national and regional goals and objectives
• Prioritise projects that can help achieve this vision within the context of national and regional infrastructure plans and broader economic development strategies
• Ensure the institutional capacity required to deliver projects or programs in line with the goals and objectives.

These frameworks, like the TEN-E, are particularly pertinent where multiple national laws, regulations and decisionmaking bodies are involved. Not only do they facilitate delivery of a successful project that achieves development outcomes for all countries involved, but they can also contribute to the achievement of broader, economy-wide benefits and investment spill overs. They are often associated with financing instruments to facilitate the development of cross-border infrastructure projects.

As governments move to address climate change more comprehensively through international cooperation and strive toward the achievement of the UN Sustainable Development Goals, cross-border infrastructure projects have an important role to play. The momentum on cross-border renewable energy projects is an encouraging indicator that international cooperation may gather to shape a more sustainable energy future.