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Renewable Energy Development Status Review and Outlook 12 October 2015

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By Niels Bisgaard Pedersen, Senior Advisor the Danish Energy Agency, nbp@ens.dk

Update on Energy and Climate Policies beyond 2020 in Europe

The decarbonisation of EU economies is at the core of the EU’s agenda for climate change and energy. As on overall long-term policy, the EU wants to contribute to limiting the global warming to 2 degree celsius. The EU has formulated legally binding targets for 2020 and supplementary goal for 2030 and 2050. We will briefly review their status and the mechanisms to achieve the targets with emphasis on the renewable energy targets.

The 2020 climate and energy package

The core of the 2020 climate and energy package is as set of binding legislative targets aiming to ensure the European Union meets its ambitious climate and energy targets by 2020. It requires the member states to cut their greenhouse gas emissions by 20%, to produce 20% of their gross energy consumption from renewable energy sources and to reduce their gross primary energy consumption by 20% compared to a reference scenario. It represents an integrated approach to increase the EU’ energy security and strengthen its competiveness.

The GHG emissions from the member states are divided into to two groups: Those that are covered by the Emission Trading System (ETS) – an emission cap and trading system covering all 28 member states – and the non-ETS. ETS covers power production and large industries and represents app. 40% of the emissions. The remaining 60% are non-ETS and covers important sectors like transportation and agriculture. The emission reduction targets for the non-ETS are allocated on member states by an allocation formulation based on economic wealth, and the span for country targets range from -20 % to +20%.

The renewable energy targets by country represent the different starting points and potential for increasing renewable energy production and range from 10% in Malte to 49% in Sweden. The roadmap to reach the target is formulated in socalled National Renewable Energy Plans (NREAP) being monitored by the European Commission semi-annually. The table below show the target for 2020 and the expected fulfilment of the target for each country, and the variety in the countrywise target and the expected level of fulfillment.

Expected re-deployment in member states and 2020 retargets

Expected RE-development in Member States and 2020 RE-targets

The member states performance in relation to the target for 2020 is monitored by the European Comission. Regarding the targets for green-house gasses, all projection shows that EU will overfulfill the 20% target and probably achieve a 24% reduction.

For renewable energy the current estimation for 2020 is indicating 21% for the EU as a whole vs. the current level (2014) of 15 %. However, there is great variation in the level of fulfilment among the member states. Countries like France, the Netherlands are UK will probably not reach their renewable energy target, while countries like Sweden, Denmark, Finland and Belgium will overfulfill their target.

It is encouraging that the overall targets are close to being fulfilled for the EU. One important lesson is hower that the targets were formulated before the economic crisis of 2008 and the associated reduced economic activity is is one of the major reasons for the achievement of the GHG targets. The disencouraging part is however that the mechanism intended ensure the achievement has not been effective. The carbon prices on the European market are far below the anticipated level of 50 – 70 EUR/tonne, because of oversupply due to the economic crises. The spot price of the EUA declined sharply in the beginning of 2009. The EU has not been able politically to cope with collapse of the carbon price, and the price has been in the low end since. As a consequence the cost of fossils fuels still does not include the costs of their negative environmental impacts.

The 2030 – targets

In late 2014 EU formulated its targets for 2030, which are 40 % reduction of GHG and 27% renewable energy and 27 % improvement of the energy efficiency. The targets are also approved for the EU’s Intended Nationally Determined Contributions (INDC) for the COP21.The national targets to fulfill the 2030 will is for discussion and will be formally decided later in 2015 or next year. Current projections of the GHG emissions indicate that it will be impossible for EU to fulfill the 2030 targets without a change in the current policies.

A the center of ensuring the achievement of the 2030 targets is the socalled Repowering of the ETS market addressing the surplus of emission allowances built up during the recent years. The major initiative is to establish a market stability reserve fund from 2021, and secondly will the cap of emissions be reduced with a higher pace than previously anticipated also from 2021.

The introduction of the EU Energy Union, where power and natural gas will become a part of the internal market, will further enhance the integration of the European power systems with the aim of ensuring transition to a low-carbon society that is built to last.

The 2050 – targets

The Roadmap for moving to a competitive low-carbon economy in 2050 has also been formulated by the EU Commision. The Roadmap suggests reducing emissions to 80 – 95 % below the 1990 levels, and covers all the emitting sector power, industry, transport, buildings, construction and agriculture. The plan includes a large investment program of an average of 270 bn annually in improved infrastructure, and will actually take the EU back to the level of investment before the crisis of 2008 and contribute substantially to economic growth. A number of new transmissionlines and other project has been identified as Projects oF Common Interest (PCI) in the long term strategy, and will be granted special priority by the EU Commission.

Renewable energy and Energy Efficiency will play a crucial role achieving the 2050 goal. The relationship between carbon prices inside EU and outside EU may become a decisive element for the deployment of renewable energy. The risk of carbon leak to the neighbouring countries is one the concerns in case EU are opting for a very ambitious goals and higher carbon prices than the surrounding countries.

Conclusions

The EU has ambitious short, medium and long term goals and a political framework for combatting climate change. Deployment of renewable energy is one of the main pillars of the strategy.

The EU member states are generally on the pathway to fulfill the 2020 targets for renewable energy with important exceptions, like France and the Netherlands. Achieving the 2030 targets will require adjustments of the current policies with focus on an efficient Emission Trading System.

The legally binding country specific GHG, Renewable and Energy Efficiency targets and policies for the EU member states creates a stable framework for the development of renewable energy.

The introduction of carbon market is a delicate process, where instruments for timely adjustments to compensate for economic cycles are required.

Mr. Niels Pedersen gave a presentation at the CNREC workshop on “RE Development Situation and Outlook—Focus on 2020, Prospect of 2030″ Download it here: EU RE and Climate Policy Update 151012