In the coming months, the EU will decide on its future energy mix and the role of renewables. So far, the outlook is bleak. Silvia Brugger explains why the EU should opt for a much more ambitious program: Renewables are cheaper and reduce Europe’s foreign energy dependence.
The decision on the EU’s climate and energy targets for the year 2030 is expected in October. EU Member States are entering the final bargaining game about the level of ambition and as to whether the goals will be binding in the post-2020 climate and energy framework. While the Commission only proposed at least 27% renewables in the energy mix by 2030, there is still some hope for Member States to agree on a 30% target for renewables. To put this into perspective, at least 45% would be a number that deserves to be called ambitious.
However, even the modest objective to ratchet the renewables target up by merely three percentage points turns out to be a huge fight against powerful interest groups that – in fear of losing profitable business models – have managed to capture big parts of public opinion across Europe: Many believe that renewables are expensive and them being the major reason for high energy prices. However, the Heinrich Böll Foundation’s study ‘Renewables: The Only Path to a Secure, Affordable and Climate-friendly Energy System by 2030’ demonstrates that choosing the renewable path actually pays off in the medium and long term.
Renewables most cost-effective option for EU energy mix
The cost assessment of different decarbonisation pathways, which is based on a cost-effective delivery of the greenhouse gas target, is the main driver behind the reasoning for the 2030 decisions. If you take a closer look at the modeling of the cost-effectiveness scenarios as a basis of the Commission’s 2030 proposals, it becomes clear that misleading cost estimates make renewables appear more expensive than they are in reality. In fact, renewables are the most cost-effective option for the EU’s future energy mix.
In order to make informed decisions for the medium and long term, the macroeconomic costs of a ‘business as usual’ pathway should be compared with a renewables strategy. The recent International Energy Agency (IEA) report on the global renewable energy market highlights that investment costs for renewable energy continue to fall and that the gap between renewables and conventional electricity-generating technologies is expected to further narrow down. This means that renewable technologies are becoming increasingly cost-competitive in a number of countries and circumstances, while fossil fuels and nuclear power become more expensive in comparison. This is even more true if the external costs of climate damage or insurance against the risk of nuclear accidents, for example, are factored in.
Fossil fuels bear high risks for costs of energy system
The Ukraine crisis and severe tensions in the EU-Russia relationship have led to increasing awareness of the volatility of energy security and the risks of an energy strategy that depends heavily on fossil fuel imports. Adding to this are the numerous crises in the Middle East. There are many uncertainties around the cost scenarios for fossil fuel imports. The dependency on fuel imports thus presents a major risk for the European economy. An adequate cost-benefit analysis should factor in this risk.
On the other hand, an energy strategy that is based on renewable energy does not bear these risks. The expectations for production costs for renewable power generation are not suspect to external policy influences, but rather the result of (partly foreseeable) technology development curves. An increased use of renewable energy, ideally combined with strong energy efficiency measures, would thus lessen energy import dependency and benefit the European economy by an estimated €370 billion by 2030.
Only moderate costs for the integration of variable renewables
The need for back-up systems for variable renewables such as wind and solar does not change this calculation. A recent report written for the European Commission assesses the cost of integrating renewables into the energy system. Based on more recent cost estimates for renewable technologies, the report concludes that total system costs of an electricity system with a high share of renewables may be roughly similar to that of one featuring less renewable energy.
While there is a range of different options to better integrate renewable energy, demand-side management seems to be one of the most cost-effective flexibility options. Grid expansion costs would be offset by the reduced need to purchase fossil fuels.
In addition, a shift towards renewables stimulates growth and creates new jobs. The research EMPLOY-RES II that is currently being conducted by the Fraunhofer-ISI and others for the European Commission is expected to provide helpful scientific insights into the benefits of enhanced deployment of renewable energies for growth and employment.
The fact that the ageing European power plant fleet will need to be modernised in the next years provides a huge opportunity to accelerate the European energy transition. Policy certainty is crucial to enhance a shift towards renewables. In order to tap into the cost advantages of a renewables-based energy scenario, the EU must therefore adopt an ambitious, clear and reliable climate and energy framework for 2030.
By Silvia Brugger, Director Climate and Energy Programme, Heinrich-Böll-Stiftung European Union