A cleaner and smarter European electricity system: The cheapest option available

22 November 2017 | Markets

Energy Union Choices consortium report argues more ambitious renewables policies could deliver big emissions cuts while proving far more cost effective than current approaches

The business-end of the UN climate change summit in Bonn last week saw big hitters such as German Chancellor Angela Merkel and French President Emmanuel Macron deliver speeches extolling the virtues of the Paris Agreement and taking firm action to decarbonise the global economy. Their speeches followed European Commission President Jean-Claude Juncker intervention in September when he said he wanted the EU to remain a "world leader" in the low carbon transition. You would be forgiven for thinking that Europe remains the world's premier green business and clean energy hub.

And yet Europe presently finds itself ensconced in a period of uncertainty on climate policy. While Macron talked a strong game at COP23 on how the EU can fill the climate leadership void created by the US, Merkel made few commitments on low carbon energy and the vexed topic of Germany's continued reliance on dirty coal power. And to make matters worse, the 'Climate Chancellor' now faces the prospect of another German election after talks to form a so-called Jamaica coalition government failed over the weekend, partly because of deep divisions over environmental policy.

Meanwhile, next year's COP hosts Poland remains one of the biggest barriers to the EU adopting more ambitious climate policies, as the country continues to defend the short term interests of its domestic coal industry. For its part, the UK government may be committed to a coal phase out, but it is also focused on leaving the European Union altogether and is reportedly willing to use climate policy as a bargaining chip. The Telegraph reported this week the UK could try and scupper reforms to the EU Emissions Trading Scheme (ETS) designed to stop UK firms flooding the market with emissions allowances if the country leaves the cap-and-trade scheme post Brexit.

In the midst of all these competing positions on the pace and scale of clean energy deployment that the bloc should pursue, EU lawmakers are currently considering the Commission's Clean Energy Package, which proposes increasing the binding renewable energy share target - including both electricity and heat - from 20 per cent by 2020 to 27 per cent by 2030.

The package is expected to be adopted next year, but for many observers the target is not nearly ambitious enough and belies repeated talk of urgency and ambition from political leaders in Bonn over the past fortnight. As the so-called Talanoa Dialogue gets underway in January with its call for countries to ratchet up their emissions reduction efforts pre-2020, green businesses and campaigners are keen to see the EU opt for bolder targets.

Given the political uncertainty though, is the EU likely to scale up its ambition and put in place a more rigorous 2030 target for renewables generation and wider climate action?

In what should prove a compelling analysis for European leaders, the report not only contends that faster decarbonisation of the electricity system than currently sought is technically feasible, but that this scenario would prove more economically attractive than the current proposed targets.

It argues that with slightly more ambitious policies added to the Clean Energy Package focused on swifter retirement of Europe's coal fired power plants in favour of a smarter electricity system incorporating more renewables, flexibility and electric vehicles, Europe's emissions in 2030 could fall by more than half compared to today.

These more ambitious policies also present the best value for money for European citizens, with rapidly declining renewables costs boosted by investments shifting away from coal potentially delivering €600m of savings in 2030, alongside the creation of an additional 90,000 jobs across the continent.

And, further cost savings for Europe can also be delivered by increasing interdependency between member states' power systems through interconnection and resource sharing - potentially to the tune of €3.4bn in 2030, according to the report.

Simply put, it shows that a combination of grid infrastructure, demand side flexibility and smart electrification is more than capable of balancing very high shares of renewables that could replace more than half of existing European coal and gas generation - and all at a lower cost than current policies.

Indeed, unless the EU adopts a stronger position to deepen market integration and create an enabling environment for smarter electricity technologies, the costs for the power sector and for European consumers could be "significantly higher", the report warns.

"Ahead of the global stocktake on climate ambition, next year, this is great news," said Laurence Tubiana, the current head of the European Climate Foundation (ECF) and former French Minister who was one of the leading architects of the Paris Agreement. "The economics are now decisively tipping in favour of clean energy, making an even stronger case for higher EU ambition for 2030. We need higher ambition from the EU if we are to honour the Paris Agreement and as a basis for Europe's future prosperity."

At present, the proposed Clean Energy Package target of 27 per cent renewable energy by 2030 amounts to 49 per cent of Europe's electricity production coming from renewables. Yet today's report argues Europe's power system can in fact incorporate far more renewables onto the grid accounting for at least 61 per cent of generation by 2030. However, such a renewables heavy grid can only be enabled if it is supported additional policy measures are put in place to scale up demand side flexibility and phase out coal power, following the lead of the near-30 signatories to the Powering Past Coal Alliance launched at COP23 last week.

There is little room for gas generation in the report's vision of a potential 2030 EU power outlook, either. It argues that even under current levels of ambition, gas generation is set to decline due to heavy competition from low cost renewables and existing coal plants, suggesting that countries looking to phase-out coal are best looking to renewables straight away rather than leaning on gas as a medium term 'transition' power source.

The findings add further evidence of the economic imperatives of moving away from high-carbon power sources such as coal, and transitioning as rapidly as possible to a cleaner electricity system characterised renewables, storage and flexibility.

Yet amid political instability in Germany, Polish support for coal power, and British Brexit confusion just how willing EU member states and lawmakers will be to grasp this opportunity and strengthen the European Clean Energy Package next year remains to be seen.



Source: Business Green