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Investing in renewables in China: relatively good times

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Investing in renewables in China: relatively good times

by Joe Mitton, July 9, 2019

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With the Chinese state increasingly confident of its renewable energy technologies and manufacturing, European firms are finding conditions right to invest in the sector there. Joe Mitton looks at the conditions for investors, and why EU-Chinese energy partnerships must not be caught up in the US trade war. Energy Post’s Matthew James spoke to Sebastian Meyer, Vice President at EDF Renewables, about his experiences.

A new law for the renewable energy superpower

We previously looked at the large scale of Chinese investment in European energy sectors. But the EU has long been seeking reciprocity of conditions for Europeans investing in China. The recent launch of the EU-China Energy Cooperation Platform sent an important signal that China wants to work with Europe, and is willing to give and take, including on investment conditions. Put simply, the deal is for the EU to help China meet its energy goals, in exchange for greater access for EU firms. Several energy executives told Energy Post the platform represents a genuine, meaningful step forward by both parties.

This comes after China passed a new Foreign Investment Law, which will come into effect on 1 January 2020. The law applies to both wholly foreign-owned enterprises and Sino-foreign joint ventures, and seeks to allay concerns about unfair restrictions and forced technology transfers. It will “build a market environment of stability, transparency, predictability, and fair competition”, said the government. The law has been welcomed as a positive move for investors, through some have called for greater clarity on its detail. The CEO of Engie China, Charlotte Roule, told Energy Post she welcomed the law, though the wording was “very general” and she was looking forward to more practical details about its implementation.

China is increasingly confident in its home-grown renewable energy technology. A report for the International Renewable Energy Agency (IRENA) said China is best placed to be “the world’s renewable energy superpower”, with one-third of the world’s wind power, a quarter of its solar capacity, six of the top ten solar-panel manufacturers and four of the top ten wind-turbine makers. (Still, it is worth noting that fossil fuels also remain big in China – it is the largest consumer of coal and second only to the US in oil consumption).

Growing investment in renewables

Foreign companies are pouring more money into renewables, relative to the size of the sector. This may be especially true for European investors. While some reports suggest 80 percent of foreign investment in Chinese energy is in the fossil fuel sector, even the remaining 20 percent going to renewables is still disproportionately large, relative to the size of the renewable sector in China. According to The Economist’s special report on Chinese renewables, China sourced 12 percent of its electricity from renewables in 2018. China says it is on track to meet its target of 15 percent renewable energy by next year.

European firms continue to have some concerns about forced technology transfers. We spoke to the Vice-President of the European Chamber of Commerce in China, Charlotte Roule, about the issue (in a separate role, Ms Roule is CEO of Engie China as noted above). She pointed to the Chamber’s latest Business Confidence Survey (2019), which showed that 20 percent of respondents felt compelled to transfer technology to Chinese entities or partners in 2018, compared to 10 percent the previous year. Nevertheless, the survey shows that a majority consider Chinese companies at least as innovative, or more so, than European firms. The vast majority of European enterprises – 81 percent- surveyed saw opportunity for themselves in domestic Chinese innovation.

China Dialogue, an independent organisation monitoring environmental issues in China, charts the rise, and fall, and rise again of foreign investment in Chinese energy. It says that by 1997 there were at least 40 foreign firms active in China’s energy sectors, owning 10 percent of electricity output, mostly in coal. Companies exited the Chinese market in the early 2000s when price-setting, over-supply and unfair treatment became a problem, but China Dialogue now reports that investment is back in solar, wind, hydro and battery storage, with companies like Engie and Total establishing a presence. The think-tank warns investors that some problems remain, however, saying “the power dispatch process remains opaque, with no data being released on a plant-by-plant basis even when existing investors ask for it”.

Case Study: EDF Renewables

EDF Renewables is another EU firm active in China. Talking to Energy Post’s Matthew James at the EU-China Cooperation launch in Beijing, EDF’s Vice President of Strategy and Power Markets, Sebastian Myer, said, “the innovation that has come from China is amazing”. He spoke about a clean energy consultancy he set up in 2004: “My partners were American citizens from top universities committed to the renewables dream, who couldn’t follow that in the US. We’re here because China was open to it when the US was focussed on gas and oil”. Myer said EDF Renewables is the “only owner of large-scale wind projects that are owned 100 percent” by a foreign firm. A much more common model is a joint-venture with local Chinese partners; something the government used to insist on.

EDF’s Chinese wind and solar projects are aimed at serving corporate needs for renewables rather than serving the grid. Supplying the grid brings challenges. Myer said that instead of investing in storage, curtailment is a more common way to address over-capacity in China. “There is a shift in some provinces […] towards an economic curtailment. That is a concerning development. It’s creeping in under the auspices of market liberalisation. It is problematic vis-à-vis renewables integration and grid reform”. It is understandable for companies like EDF to point out problems in the market, but the scale of investments shows that many firms reckon it is still a market worth entering.

Febrile atmosphere for a trade war

Complicating the mostly positive picture, the current US administration has raised tensions with China over trade. Earlier this year the US introduced additional tariffs on imported solar panels, most of which come from China. It is not the first time; the Obama government also added such tariffs in 2014, and the European Commission launched anti-dumping and anti-subsidy investigations into Chinese solar-panel imports, before reaching an agreement with China in 2013. While the trade disputes do not seem to have affected investments, it is nevertheless a concern for investors seeking strong export markets and regulatory certainty. The EU will need to show diplomatic dexterity to avoid European interests in China getting caught in the American dispute.

Chinese soft power

A cause of optimism, however, is President Xi’s interest in soft power, which makes his government keen to protect its reputation as a renewable energy champion. Soft power means essentially promoting a more positive view of a country internationally as a diplomatic tool. The US Council for Foreign Relations says China may be spending US$10 billion a year on foreign aid, positive media coverage, Chinese cultural and language institutes and so forth, to improve its image. Xi has called for a stronger national effort to link China’s popularity to its meteoric rise.

China’s reputation has problems for several well-founded reasons, but on renewable energy the narrative is fast emerging that China is increasingly progressive. There is real substance to this narrative. China showed global leadership during the Paris Agreement (COP21) negotiations, helping to break the cycle of blame for CO2s between developed and developing nations. China will want to preserve this reputation and not hurt the renewables sector, both for economic and strategic diplomatic reasons. And this should give investors some cause for optimism.

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Transition funding: can Eastern Europe follow Lithuanian lead?

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Transition funding: can Eastern Europe follow Lithuanian lead?

by Joe Mitton and Matthew James – May 3, 2019

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The funding plan received cross-party support in the Seimas (Lithuania's parliament hall)

Lithuania is committing itself to renewable energy in a significant way, which could help shift the way other Eastern European countries define their interests in the energy sector. The EU is signalling its strong willingness to support countries that follow Lithuania’s lead, says political analyst Joe Mitton. Crucial decisions on the EU’s Modernisation Fund will be made in the coming months, allocating spending in the ten lower-income EU Member States.

Energy Post’s Matthew James, spoke to the Lithuanian Vice-Minister for Energy, Rytis Kėvelaitis, about his government’s €385 million fund for renewable energy projects, which was cleared by EU competition authorities last week.

Lithuanian Vice-Minister for Energy Rytis Kėvelaitis

The scale and ambition are impressive. Lithuania plans to double its domestically-produced renewable energy output to 38 percent of its energy mix by 2025 and reach 45 percent by 2030. By 2050 it plans to reach 80 percent of energy renewables (100 percent if you exclude the electricity market). A €385 million fund is a significant investment for any country. For Lithuania, with a GDP of under €50 billion and a population of just 2.8 million, it is phenomenal.

New projects which use renewable sources such as solar, wind and hydro will receive grants, in amounts to be determined through competitive auctions. The grants will help bridge the gaps between the market prices for energy and the costs of producing it with renewable sources. While the programme rewards energy production, not research, it will no doubt spur private-sector investment in R&D and could help make Lithuania a leading source of new technologies.

Support for energy independence

Committing almost one percent of the country’s annual GDP to a project needs widespread support. “There is political and societal support for this”, says Vice-Minister Kėvelaitis, noting that the National Energy Independence Strategy was approved with cross-party support in parliament last year.

The concept of “energy independence” clearly carries weight in this country with a long history of resisting domination by foreign powers. In this respect, the move to renewables can be seen as much a foreign policy objective as it is an economic and energy policy objective. Kėvelaitis notes that two-thirds of Lithuanian electricity is imported, a level matched only by Luxembourg in the EU. With the closing of the Ingalina nuclear power plant in 2009, imported electricity spiked up. A government report in 2015 showed that Lithuania had approximately halved its dependence on Russian gas but remained heavily dependent on electricity from other EU nations.

Regional leadership?

Asked if Lithuania plans to take a regional leadership role in the renewables market, Kėvelaitis replies diplomatically that each national situation is different. (Unlike neighbouring Poland, Lithuania has virtually no coal sector, making this transition politically easier for Vilnius). But he does admire the ambition for renewable energy development in Germany and Denmark and says that Lithuania could be an example in Central Europe. He notes that within ten years, his country managed to increase the share of domestic biomass for central heating systems from 30 percent to 70 percent.

The industry body, WindEurope, welcomed the ambitious Lithuanian targets. WindEurope’s Head of Advocacy Viktoriya Kerelska said, “there’s 9 GW of offshore potential in the Baltic Sea that can easily be exploited by 2030. The National Plans process this year gives Lithuania and its neighbours the opportunity to work on a regional scale and pin down concrete offshore deployment targets and measures to exploit their common resource in the Baltic.” She also called for the auction schedule to be incorporated in Lithuania’s National Energy & Climate Plan to give legal certainty for investors.

Wind and solar: costs are falling

WindEurope’s positivity was echoed by Aistis Radavičius, Executive Director of the Lithuanian Wind Power Association, who said, “the Lithuanian Wind Power Association views this as a clear signal for project developers and investors that the Lithuanian wind energy market is stable”. He added that “so far Lithuania focuses on developing onshore wind energy projects and offshore projects are not yet included in the support scheme. There is still a need for explicit research and clear legislation before we can expect offshore wind parks in the Baltic Sea. It might take up to a couple of years to start these developments”.

It would seem that onshore wind projects are best placed to take advantage of this scheme, at least in the short-term. But Vice-Minister Kėvelaitis says that the fund is neutral regarding the types of renewable sources. “Its difficult to forecast [which sources will dominate] but […] the main competition will be between onshore wind and solar”. The Vice-Minister says, “the price of renewables has been significantly reduced in recent years”, adding later that “there may be a subsidy-free energy market in the following decade”.

Thumbs up from the EU

The European Commission is clearly proud of Lithuania’s commitment to renewables, and it ruled that the scheme abides by EU regulations. EU State Aid rules generally prohibit market-distorting subsidies, though in 2014 the Commission clarified the way incentives can be used in the energy market to achieve environmental goals.

This is not the first time the European Commissioner for Competition Margrethe Vesager has ruled in favour of cleaner energy incentives in Europe’s East. Earlier this month a €5 billion Polish scheme to promote high-efficiency cogeneration of electricity was also approved. In January Vesager approved a €36 million Polish subsidy for electric vehicle battery production. (The Commissioner is not always so accomodating for other sectors – for example, she has ordered the UK to recover tax incentives given to foreign tech companies, even as the UK prepares to leave the EU).

Lessons from Vilnius

As noted earlier, Lithuania is free from some of the thorny political issues that nearby countries face with energy transition. Poland, with 60 percent of its energy from coal, and entire communities dependent on coal-mining jobs, has to balance political pragmatism with its EU and international commitments on carbon reductions. The Czech government is in a similar position.

Nevertheless, Lithuania’s special way of understanding of energy security is worth noting by other countries. Greater energy independence has become a whole-of-government goal, indeed a national goal that largely seems to transcend ordinary political debate. The Latvian and Estonian economies are in a good position to complement and support the renewable revolution in Lithuania. Just outside the EU, the idea of investing in renewables seems particularly apt for Ukraine, which worries about its dependence on gas from an antagonistic Russia.

There are also lessons to be drawn from the way the European Commission has supported these policy aims. The Commission is now more joined-up in promoting its environmental aims through all directorates, including the competition authority. When the next set of Commissioners takes office on 1 November this year, Eastern European governments should use the Lithuanian example to lobby aggressively for support for their own clean energy initiatives.

Future EU funding

The €100 billion Horizon Europe fund for research and innovation will be a windfall for developers of clean energy technologies in the next five years. But countries already strong in those technologies, such as Germany, are best placed to win this funding. Eastern European countries may not all be technology leaders, but they can be large-scale convertors to renewable energy.

Spending decisions for the EU’s Modernisation Fund will begin to be made from the middle of this year. The fund, administered under the Emissions Trading Scheme, targets the ten lower-income Member States – all except Greece and Portugal are in the former-Communist East of the continent. Decisions will be made about what kinds of projects will count as “modernisations”. (Some will argue for example that switching from coal to gas is modernising, but that would be a far cry from modernising to renewables). This presents a key opportunity for governments to secure funds for projects that best suit their national energy circumstances and their economic strategies.

Lithuania has shown that under the right conditions, Eastern European countries can make seismic shifts in their energy policies. But strong political will, and a change in the understanding of energy security, will be needed first.

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EU oversight of foreign investment in energy projects lacking

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EU oversight of foreign investment in energy projects lacking

by Joe Mitton, 18 April, 2019

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European Council President Donald Tusk, left, with China's Prime Minister Li Keqiang and EC Commission President Jean-Claude Junker

At the 21st EU-China Summit on 9 April, both sides hailed a new era in the trade relationship. Increasingly confident of its domestic technological capabilities, China will soon no longer oblige foreign companies active in China to share their tech know-how. And a new Foreign Investment Law in China allows for greater inward investment to the country, but maintains restrictions and scrutiny mechanisms on 48 sectors of key strategic interest (the “negative list”), including the energy sector. In the EU, there is no such coordinated approach to inward investments in energy. Scrutiny of foreign investments in energy is left to the discretion of Member States and is often not done at all. According to Joe Mitton, recent events laid that fracture in EU policy bare.

The ‘Belt and Road’ reaches Italy

Europe’s energy sector is increasingly integrated, as the European Commission Vice-President for Energy Union, Maroš Šefčovič, made clear in his State of the Energy Union speech last week. Yet oversight of foreign investments in the sector is patchy. In the age of populist governments, it may fall to the EU to scrutinise large foreign investments in European energy. Italy joining China’s ‘Belt and Road Initiative’ last month – the first G7 country to do so – drew criticism from leaders such as France’s President Macron. The Sino-Italian deal includes commitments on natural gas, and it has brought the question of Chinese intentions in this sector to the fore.

The great majority of Chinese foreign direct investment (FDI) in the sector benefits Europe and is commercially-driven. The European energy sector needs investment, particularly in the south and the east. In public debate, concerns about Chinese investments are sometimes driven by a generalised fear about the intentions of the greatest rising power, rather than by specific issues. (This article examines Chinese FDI in the sector, but the benefits and risks raised here could also apply to investments from other governments).

Nevertheless, given the scale of the FDI from the People’s Republic of China (PRC), coupled with the high degree of government participation in investment decisions, mean that more a uniform approach to scrutiny would be prudent. At present, the EU Foreign Investment Screening Framework (presented only in late 2018) encourages cooperation and information-sharing between Member States and the Commission, and allows the Commission to issue opinions on specific FDI projects. But it is explicit that “Member States keep the last word whether a specific operation should be allowed or not in their territory”. It also notes that 14 Member States – half of the Union – have no mechanism for reviewing FDI on national security grounds, and it does not oblige states to adopt such mechanisms.

State funds bring state priorities

The scale of PRC investment in the EU warrants more scrutiny than that. In all sectors, Chinese FDI in the EU totals about €20 billion annually. Over a five-year period, the largest share – 28 percent – of Chinese FDI in Europe went to the energy sector. Between 60 and 70 percent of investment comes from the PRC’s sovereign wealth funds and state-owned enterprises, and even the remaining investment from the private sector may come with government strings attached. The Chinese government often attaches conditions on companies wishing to transfer capital abroad, and the extent of state involvement in private sector investments is not always clear.

These investments are diverse, and cover fossil fuel energy, renewables, electricity grids and nuclear power (such as the the state-run China Nuclear Power Group investing in the UK’s Hinkley Point development). The geographic spread of the investments is also diverse. The large energy markets in France and Germany attract much Chinese capital, but increasingly so do the smaller markets in southern Europe. In some cases, China has been able to take advantage of privatisation sales following the last recession, such as when China’s State Grid bought a quarter share of Greece’s electricity grid following privatisation under the international bailout plan.

Tech transfer can be a two-way street

Part of the motivation for these investments appears to be technology transfer. A recent academic study found that ‘technology integration’ was a motivation in Chinese acquisitions in wind and solar companies, particularly in Germany. The PRC government’s “Made in China 2025” initiative is explicit about the aim of acquiring technology from overseas. Of course this is a strategy pursued by many countries, but the level of Chinese investment in Europe’s energy sector may give it unprecedented access to new technologies. Some relatively small investments can give access to leading technologies, for example a PRC state-owned firm’s stake in Solibro, the German company with the world’s most efficient thin-film solar cell technology. In other cases, the investments are large and give access to major firms. In 2011 a Chinese sovereign wealth fund bought 30 percent of the exploration arm of French giant Engie (formerly GDF Suez), allowing it to nominate 2 of the 7 international Board members. This allows the PRC not only to shape the company’s direction, but also to know about commercially sensitive information and R&D initiatives not in the public domain.

Technology transfer need not be negative, if it is done with respect for existing intellectual property law. Europe can gain new ideas from Chinese participation in our energy market. Preparing the world for cleaner, more renewable energy requires some coordination and sharing of technology. And as a recent report commissioned for the International Renewable Energy Agency points out, China is emerging as a major source of new renewable energy technologies in its own right. “No country has put itself in a better position to become the world’s renewable energy superpower than China”, said the report. China is the world’s largest producer, exporter and installer of solar panels, wind turbines, batteries and electric vehicles. It also has the most renewable energy patents – 150,000 as of 2016, 29 percent of the global total, much higher than the US.

Welcome investment, but scrutinise properly

The approach of EU Member States to investigating investment deals has been inconsistent and without a coordinated strategy. When Italy joined the Belt and Road Initiative, the decision seems to have been rushed through, and led by political considerations. There was disagreement within Italy’s ruling coalition, with the Five Star Movement in favour of the deal, and the League more sceptical of it. Deputy Prime Minister Salvini made his concerns publicly known. The Commission also had concerns about a Member State joining an initiative that is as much about Chinese foreign policy as it is about commerce.

The EU’s energy sector ownership is highly internationalised, and much Chinese investment is not cause for alarm in itself. But the EU and its members collectively need to decide how much foreign ownership of its energy sector is desirable, and what kinds of ownerships would constitute a genuine strategic or security risk. With scrutiny and decision-making on FDI so inconsistent between Member States, there is a role for the EU to play in ensuring consistency and transparency. Matters of energy security and safeguarding leading technologies affect the whole of Europe, so it is right for the Commission to take an active role in reviewing investments, particularly by state-owned bodies. A first step would be to build on and strengthen the EU’s Screening Framework over the course of the next European parliament.

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EU election risk: policymakers should go for real decarbonisation now while efficiency savings can help

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EU election risk: policymakers should go for real decarbonisation now while efficiency savings can help

by Joe Mitton, March 15, 2019

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With elections in May, the balance of opinion in Parliament is a climate policy risk factor on the minds of many in Brussels. The national draft 10-year energy plans, just in to the Commission, project widespread growth in costlier renewables. But populists who see climate as a globalist rather than nationalist-first agenda may prove hard to bring on side with an expensive and disruptive transition. The public will be influenced by climate awareness, leadership and their wallets. The EU’s efficiency-first programme won’t be enough in the long term but while it’s delivering savings there’s a chance to use that to support real decarbonisation. This could be crucial to keep citizens supportive in a more climate-hostile political landscape. Political observer, Joe Mitton considers the opportunities and threats ahead…

EU energy policy has so far accommodated an expanding gas sector, and has tolerated the coal sector, while focusing on efficiency and subsidised renewables. This has helped keep household energy prices relatively low. But as the 2020s dawn, difficult choices will need to be made in order to meet the EU’s carbon reduction goals. Balancing the drive for decarbonisation with the need for public support will become trickier in the next decade.

Recent events show that when prices rise, environmental concerns quickly give way to popular indignation. The gilets jaunes protests started as a revolt against a planned increase in the tax on diesel. Even in environmentally-conscious France, the government had misjudged public willingness to accept a higher fossil fuel tax.

The threat of climate change denialism and “anti-European forces”

First, let us consider the threat that political climate-scepticism could pose to decarbonisation policies if prices rise steeply. At the 5th annual EU Energy Summit last week (5 March), former Polish Prime Minister and former President of the European Parliament, Jerzy Buzek, raised the need for social acceptance of the energy transition. He warned that the transition could be threatened by “anti-European forces”.

Buzek made an important point there. Beyond the simple economics of consumers preferring cheap energy, there are also political forces at work in several countries against energy transition. Some examples:

  • Russia has strong economic and political interests in Arctic resources and in European dependence on its gas exports. President Putin has questioned climate science.
  • Some high-profile pro-Brexit politicians in the UK have argued the planet may be cooling, not warming.
  • The United States’ leadership denies the existence of man-made climate change.
  • In Europe, climate scepticism is popular with right-wing parties such as the German AfD and the Sweden Democrats.
  • The Polish labour union, Solidarity, issued a joint statement with a US climate change denying think-tank, Heartland Institute, rejecting the UN IPCC reports on the risks of climate change. Poland currently relies on 60 percent of its energy from coal.
  • A recent study by Professor Martin Hultman shows a strong correlation between right-wing nationalist views and climate change denialism among Norwegianmen. Among the right-wing, addressing climate change is often viewed as putting global interests ahead of national interests.
  • Australia is very dependent on coal and has climate-sceptic ministers in its government.

Climate change denialism in not a mainstream opinion in Europe yet, but if energy prices go up, more citizens could move to populist parties on the right. In recent German state elections, voters showed increased polarisation. The Greens did very well, but so did the far-right AfD. The same may happen in May’s European parliamentary elections.

More of the same policies?

To date, the EU has accommodated an expanding gas sector and has not picked a political fight with its more coal-dependent Member States. All 28 Member States (even the UK) have recently submitted their draft National Energy and Climate Plans (NECPs) to the Commission. These plans include many laudable proposals for renewable energy sources, but also a continued reliance on gas. Seventeen of the plans say natural gas is necessary to meet the 2030 goals. In Germany, the nuclear and coal sectors will be completely shut down and the Nord Stream 2 gas pipeline from Russia will supply much of Germany’s energy in the next decade.

“the EU needs to help governments such as in Poland and the Czech Republic avoid a public backlash if they decarbonise”

The Commission’s European Decarbonisation Pathways Initiative (EDPI) delivered a report in November 2018. The report includes just one short paragraph on phasing out coal. It says the need for near-term phasing out of coal is “obvious and necessary” but concedes that “such an objective is of course more ambitious and difficult for countries which rely heavily on coal”. This suggests that the EU needs to help governments such as in Poland and the Czech Republic avoid a public backlash if they decarbonise. The report also explains that “from an economic viewpoint”, it makes sense to still use gas while creating negative emissions by other methods.

The report prioritises an “energy efficiency first” principle. Greater efficiency in lighting, heat insulation, energy delivery and storage will lower prices for consumers, after initial investment costs. This achieves both the aims of supporting decarbonisation and being popular, but efficiency has its limits. The popularity of those savings will be an important political asset to offset any price rises from “an increasingly restrictive carbon space”. Particularly because although consideration is given to “an inclusive and just transition”, the report leaves aside the question of the funds required, and who exactly will pay for it.

Towards a citizen-led strategy

Energy efficiency programmes can only reduce carbon emissions so far. Eventually the sources of that energy, no matter how efficient, will need to be renewable and clean. The EU may introduce a “citizen-led” strategy for popular support for its policies. The concept of “citizen-led” policy is already in Commission reports. For EU politicians, the lesson from Brexit has been not to assume that the wisdom of their policies will translate automatically into popular support.

Good progress is being made towards affordable renewables, and eventually for renewables to operate in the market without subsidies. But it remains to be seen whether current policy will deliver the carbon reduction required by the EU’s goals, while also keeping energy prices affordable and keeping citizens supportive.

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Joe Mitton is an independent political consultant, former diplomat and former adviser to the Mayor of London.

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2019: A good year for the Greens (and everyone else)

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BRUSSELS INSIDER #1 - December 7, 2018

2019: a good year for the Greens (and everyone else)

by Joe Mitton

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Clean energy and climate policies do well when the economy and public opinion allow. Still, governments must demonstrate tangible short term benefits if ‘green’ campaign promises are to be kept and to avoid the type of angry backlash witnessed in France. But with a stable economy (Brexit aside) and public opinion right behind the EUs over-arching climate strategy, 2019 should go down as a landmark year for implementation across the continent. Political commentator Joe Mitton explains why.

Green parties have had a very good year in Northern Europe by increasing their vote shares significantly in some key elections. Moreover, they have demonstrated the ability to convert minority support into political power, affecting real policy changes. As 2019 approaches, the Greens are poised to influence energy policies at the regional, national and EU levels, particularly if they do well in the European Parliament elections in May.

How Green parties work

The Greens are purposefully pan-European in character. There is a level of coordination between national Green parties not seen in any other political movement. The European Greens is an organisation representing 34 national parties with an important role in setting the agenda for Green politics across the movement, so their election of two new “leading candidates”, Bas Eickhout of Groenlinks and Ska Keller of Alliance 90, last week is significant.

The European Greens’ “Leading Candidates”

Ska Keller began her political career in 2002 by campaigning for a referendum in the state of Brandenburg to ban new coal mines. She has been a Member of the European Parliament since 2009, working on development of anti-corruption issues.

Bas Eickhout has been a member of the European Parliament since 2009. He is a member of the Dutch GreenLeft (GroenLinks) party, one of Europe’s most electorally successful parties of the movement. He was formerly the spokesperson on biofuels at the Netherlands National Institute for Public Health and the Environment.

Energy policy is central

Of the current key political figures in the movement, almost all have backgrounds in renewable energy activism. Many of the continent’s Green parties were established in the early 1980s to voice opposition to nuclear power. The West German party was arguably the leading organisation of its kind in Europe, providing the model for Green parties established across the continent. Today the “Alliance ’90 / The Greens” is the successor of that party and it is more relevant to German and European politics than ever.

Influence demonstrated in Germany

There was a time when Green parties were dismissed as a fringe distraction. That changed in 1998 when they joined the ruling coalition in Germany and exercised real influence by forcing the government to adopt a policy of gradual denuclearisation of the German power grid starting in the year 2000.

Even out of office, the Greens have shown the ability to generate and utilise political capital effectively. After the Fukushima nuclear plant accident in Japan in March 2011, the Greens skilfully presented that event as relevant for German audiences, pushing for an accelerated denuclearisation of German energy. In regional elections two weeks later, they made major gains in Rhineland-Palatinate and Baden-Württemberg. Widespread protests against nuclear power followed and Chancellor Merkel announced that all German nuclear power plants would close by 2022.

Going mainstream

Perhaps the Greens’ strongest influence on policymaking has been indirect, through introducing new ideas and applying pressure on larger parties’ policies. The UK’s only Green MP Caroline Lucas admitted as much in the 2015 election when she said her party would “put forward some radical ideas which this political system needs so badly … [and] push Labour to be far more progressive”.

In the European Parliament, the Green movement has struck an effective partnership with the European Free Alliance, effectively binding popular separatist parties such as the Scottish National Party and the Republican Left of Catalonia as well as Basque separatists into the Green movement’s agenda. Even prominent centre-right parties have flirted with the concept of “green conservatism” from time to time.

This fact that the Greens’ policies are co-opted by the mainstream parties when, as now, the conditions suit them, is a reality they have learned to live with. Jenny Jones, the UK Green politician (now Baroness Jones), once told me “You can achieve a lot in politics if you are prepared not to take the credit for it”. In any case, a recent study carried out by the London School of Economics and Oxford University found that, in general terms, Greens actually improve their support when mainstream parties attempt to emulate the positions of the Greens on their core issues.

Tough sell

Yet, even as Green movement policies influence larger parties’ agendas, selling those policies to the wider electorate becomes the next challenge. In France, President Macron presented his new fuel tax as an important step towards promoting a renewable energy economy. Effectively, this is a long-standing Green movement policy gone mainstream. But the backlash against the policy has been astounding, with so-called “Yellow Vests” protests gripping France and forcing the government to suspend the proposed tax earlier this month.

Similarly in Italy, the Cinque Stelle (Five Star) movement went mainstream in part with Green-ish energy policies, such as opposing a new gas pipeline across the Adriatic Sea and aiming to close energy-intensive steel plants. Now in power and faced with the costs and compromises of coalition government, the party has been forced to backtrack on many of these environmental promises.

Remaining popular when the bills come

The LSE / Oxford study (Grant and Bailey) tracked Green parties’ successes over 40 years across 32 countries, and found the parties do best electorally when economies are strong and there are tangible environmental disputes to campaign on. With this in mind, 2019 should be a very good year for the movement. Brexit could upset things but Young Europeans in particular now view climate change as a threat as tangible and urgent as nuclear proliferation a generation earlier.

Under these conditions mainstream parties look set to continue co-opting Green environmental policies so the EUs climate agenda will be easier to implement. For example, Ms. Merkel’s government can retain its commitment to have 65 percent of German energy coming from renewable sources by 2030 with decent support.

So I believe 2019 will be good for the Greens, directly and indirectly – especially if governments heed the lesson from France in the last month that these policies need to demonstrate tangible shorter-term benefits and offset the costs of change for voters if they are to be accepted and succeed.

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Joe Mitton is a European political commentator, formerly a diplomat and adviser to the Mayor of London.

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