European countries are shifting from a system based on fossil fuels to one dominated by clean, renewable electricity in order to help fight climate change. However, the shift is not an easy task and requires a profound change in the energy system. It is worth looking at examples of islands that have already implemented a sustainable energy system. Lessons learned from these islands can be translated to the mainland.
Due to the location of islands, the weather conditions are ideal for generating renewable energy. The number of hours of sunshine and the wind speeds are generally above average. In addition, the transition to a sustainable energy system is smaller in scale and more manageable in terms of geography, energy consumption, population and economy. This makes it more manageable to realise energy generation and storage. Islands can thus serve as an example for the energy transition on the mainland.
Windpowernl spoke to two graduates who conducted research into sustainability on islands for their studies in the Netherlands. Each from a different perspective. Annabel de Gheldere from Belgium researched the business case and financing options for increasing the sustainability of islands in Southern Europe. The Dutch Tessa Terhoeve looked into the possibilities of generating sustainable energy on an island closer to home, on Schiermonnikoog. This was done as part of the Sustainable Island Program that was set up by the Dutch company Energy Investment Management, in partnership with the Clean Energy For EU Islands initiative, Erasmus University, TU Delft and the Indonesian University SBM ITB.
In this article we focus on the research conducted by Annabel de Gheldere. In a following article we will discuss Tessa Verhoeve’s research.
Financing sustainable energy systems on islands
Annabel de Gheldere has a Master’s degree in Global Business and Sustainability from Erasmus University in Rotterdam. Her parents own a house on a Greek island and there she noticed that the island was far from sustainable. This inspired her to do this study. In collaboration with Energy Investment Management, she conducted research into the financing mechanisms behind renewable energy projects on southern European islands.
The starting point is that islands are often remote, isolated parts of Europe and depend on the expensive import of fossil fuels from the mainland for their electricity supply. The economy on these islands also tends to lag behind that of the mainland, with the result that many young people leave. Due to their location, they are also very vulnerable to climate change, which in turn has an impact on the economy, inhabitants and the ecosystem. To truly evaluate which funding is most appropriate to support the introduction of energy transition on islands, an understanding of local conditions and project risks is needed.
Annabel’s research looked at the financing mechanisms for renewable energy systems already in place on several European islands. Annabel took five southern European islands as case studies: Tilos in Greece, Salina in Italy near Sardinia, Unije in Croatia, the Canary Island of La Graciosa in Spain and Graciosa in the Azores in Portugal. The research was based on desk research and interviews.
On each of the islands a sustainable energy supply system has been implemented. This mainly involves generation from sun, wind and sea, the use of batteries or a microgrid. For example, Tilos, with about 800 inhabitants, is a Greek island that has implemented a microgrid. The mayor at the time was committed to making his island more sustainable. Until that time, the island obtained its electricity via a cable from Kos. However, this electricity was still generated by diesel generators. An 800 kW wind turbine, a 400 kW solar park and a 2.4 MWh battery storage were eventually realised on the island. In 2018, the hybrid system was completed. Together, depending on the tourism season, they now account for 70 to sometimes 100 % of the island’s electricity use.
Combination of public and private investments
The research showed that each island applied a different financing structure, Annabel explains. In general, it was a combination of mainly public investment and to a lesser extent private investment. Public funding was mainly used for the construction and implementation of systems. National or regional public capital was complemented in three of the five islands by funding from the European Union (EU), such as from the Horizon 2020 fund.
The EU sees the importance of stimulating economic growth in disadvantaged areas, also to counteract ageing. Infrastructure and sustainable energy offer good solutions. Tilos was one of the islands that
received funding from the Horizon 2020 programme. This accounted for 11 of the total 15M Euros required investment. The remaining 4M Euro was financed by Greek private investors. On the Croatian island of Unije, funding (9.5M Euro) was arranged in a similar way. On two islands, La Graciosa (2.5M Euro) and Salina (4M Euro), the inhabitants themselves also took action to participate financially. Both
islands also received funding from the national government. La Graciosa also received funding from the EU.
The largest investment took place on Graciosa. Here, an energy system was realised consisting of wind, solar, battery storage, pumped hydro and microgrid. The financing method was also the most complex here. The required 24M Euro was realised by both the regional government, a bank loan, convertible debt and equity by shareholders of a private company and financing by a supplier.
The study shows that the financing of renewable energy projects on islands contributes to the successful introduction and development of the transition to renewable energy on islands. Moreover, it was clearly demonstrated that the implementation brought economic benefits. To take the example of Tilos again, here the implementation of a renewable energy system ultimately led to a visible reduction in electricity costs and fewer power cuts. In addition, the publicity the island received led to a growth in the economy through tourism and an incentive to take further steps towards sustainability, such as electrification of transport.
The islands also proved to be very open to sharing their experiences. Both public and private financing solutions have a great influence on the introduction of sustainable energy projects on islands. EU funding also speeds up the process of energy transition and long-term economic growth. Good coordination and cooperation of financing instruments and relevant stakeholders is necessary. The right mix of stakeholders will not only deliver strong, operational projects but also provide a solid base of knowledge and experience to the island communities. The results of the study should provide insights for national EU governments to better tailor their policies to inject the required capital into island renewable energy projects, with additional funding support and guidance to stimulate the uptake of the transition to sustainable and green energy on islands.
To learn more on energy islands, watch this video where Annabel participated.
This article appeared in the 2022-April edition of Windpowernl magazine and is part I of a longer article on Energy Islands. To receive the next edition of Windpowernl magazine: subscribe here.