EU Energy Roadmap Calls for Energy Efficiency, Power Prices to Reflect Costs
A report was released last week by the European Commission that outlines possible ways European Union (EU) members can ensure energy security and competitiveness while meeting an ambitious goal of reducing their greenhouse gas (GHG) emissions from 80% to 95% below 1990 levels by 2050.
The EU had in March this year released a “Roadmap for moving to a competitive low-carbon economy in 2050” in which it analyzed implications of meeting its GHG goal. That report found that if investments to reduce GHGs were postponed, they would cost more from 2011 to 2050 and “create greater disruption in the longer term.” The new report, “Energy Roadmap 2050,” essentially provides directions as to what should follow the 2020 agenda, exploring routes toward decarbonization.
“Uncertainty is a major barrier to investment,” the commission says in its new report. “The analysis of the projections conducted by the Commission, Member States and stakeholders show a number of clear trends, challenges, opportunities and structural changes to design the policy measures needed to provide the appropriate framework for investors.”
Using a number of possible outlooks, including current trend scenarios and decarbonization scenarios (ranging from high energy efficiency and high renewables to low nuclear), the report concludes that decarbonization “is possible” and could be less costly than current policies in the long run. One reason for this is that “Exposure to fossil fuel price volatility would drop in decarbonisation scenarios as import dependency falls to 35-45% in 2050, compared to 58% under current policies.”
All decarbonization scenarios show that by 2050, the EU could have an energy system based on higher capital expenditure and lower fuel costs, the report claims. The scenarios would require immense development of the grid, however, which could result in investment costs of between 1.5 trillion and 2.2 trillion euros by 2050 (with the higher end of the range reflecting support of renewables).
The average capital costs of the energy system would also greatly increase, but this could be a positive for the EU because it could have a “widespread impact on the economy and jobs” for European industry and services, the report says.
Power will play a much greater role than it does today under all scenarios, the report says—almost doubling its share in final energy demand to 36% to 39% in 2050. Power prices are also expected to rise to 2030 under most scenarios, but fall thereafter. The highest power price hikes are shown in the high renewables scenario, which implies a 97% share for renewables by 2050 in the EU, and the lowest would be in the high energy efficiency scenario and diversified supply technology scenario (which assumes a 60% to 65% share of renewables by 2050). The report notes that power prices in some member states “are currently artificially low due to price regulations and subsidies.”
Most scenarios show that coal will be needed to boost energy security, so carbon capture and storage (CCS) “will have to contribute significantly,” making up a 32% share in the case of constrained nuclear production and 24% in other scenarios (with the exception of the high renewables scenario).
Gas power will be critical for the transformation of the energy system, substituting for coal and oil. Nuclear power will also be needed, especially in the delayed CCS scenario, if the EU is to reach its GHG goals by 2050. Decentralization of the power system and heat generation increases (from combined heat and power plants) will also be significant, and most scenarios show that a centralized large-scale system would need to work in conjunction with decentralized systems. “In the new energy system, a new configuration of decentralised and centralized large-scale systems needs to emerge and will depend on each other, for example, if local resources are not sufficient or are varying in time,” the report says.
The report also outlines several conditions that must be met in order for the EU to achieve its new energy system, including dramatically increasing energy efficiency, promoting renewable development, and speeding up commercialization of low-carbon solutions through research and development.
The EU, which is committed to a fully integrated market by 2014, should also address market regulatory and structural shortcomings, the report says. Finally, energy prices must better reflect costs, especially of new investments needed throughout the system. “The earlier prices reflect costs, the easier the transformation will be in the long run,” it says
The EU had in March this year released a “Roadmap for moving to a competitive low-carbon economy in 2050” in which it analyzed implications of meeting its GHG goal. That report found that if investments to reduce GHGs were postponed, they would cost more from 2011 to 2050 and “create greater disruption in the longer term.” The new report, “Energy Roadmap 2050,” essentially provides directions as to what should follow the 2020 agenda, exploring routes toward decarbonization.
“Uncertainty is a major barrier to investment,” the commission says in its new report. “The analysis of the projections conducted by the Commission, Member States and stakeholders show a number of clear trends, challenges, opportunities and structural changes to design the policy measures needed to provide the appropriate framework for investors.”
Using a number of possible outlooks, including current trend scenarios and decarbonization scenarios (ranging from high energy efficiency and high renewables to low nuclear), the report concludes that decarbonization “is possible” and could be less costly than current policies in the long run. One reason for this is that “Exposure to fossil fuel price volatility would drop in decarbonisation scenarios as import dependency falls to 35-45% in 2050, compared to 58% under current policies.”
All decarbonization scenarios show that by 2050, the EU could have an energy system based on higher capital expenditure and lower fuel costs, the report claims. The scenarios would require immense development of the grid, however, which could result in investment costs of between 1.5 trillion and 2.2 trillion euros by 2050 (with the higher end of the range reflecting support of renewables).
The average capital costs of the energy system would also greatly increase, but this could be a positive for the EU because it could have a “widespread impact on the economy and jobs” for European industry and services, the report says.
Power will play a much greater role than it does today under all scenarios, the report says—almost doubling its share in final energy demand to 36% to 39% in 2050. Power prices are also expected to rise to 2030 under most scenarios, but fall thereafter. The highest power price hikes are shown in the high renewables scenario, which implies a 97% share for renewables by 2050 in the EU, and the lowest would be in the high energy efficiency scenario and diversified supply technology scenario (which assumes a 60% to 65% share of renewables by 2050). The report notes that power prices in some member states “are currently artificially low due to price regulations and subsidies.”
Most scenarios show that coal will be needed to boost energy security, so carbon capture and storage (CCS) “will have to contribute significantly,” making up a 32% share in the case of constrained nuclear production and 24% in other scenarios (with the exception of the high renewables scenario).
Gas power will be critical for the transformation of the energy system, substituting for coal and oil. Nuclear power will also be needed, especially in the delayed CCS scenario, if the EU is to reach its GHG goals by 2050. Decentralization of the power system and heat generation increases (from combined heat and power plants) will also be significant, and most scenarios show that a centralized large-scale system would need to work in conjunction with decentralized systems. “In the new energy system, a new configuration of decentralised and centralized large-scale systems needs to emerge and will depend on each other, for example, if local resources are not sufficient or are varying in time,” the report says.
The report also outlines several conditions that must be met in order for the EU to achieve its new energy system, including dramatically increasing energy efficiency, promoting renewable development, and speeding up commercialization of low-carbon solutions through research and development.
The EU, which is committed to a fully integrated market by 2014, should also address market regulatory and structural shortcomings, the report says. Finally, energy prices must better reflect costs, especially of new investments needed throughout the system. “The earlier prices reflect costs, the easier the transformation will be in the long run,” it says
You can return to the main Market News page, or press the Back button on your browser.
