The Future of Energy in Europe
Out with the old and in with the new:
If Europe does not make that change, then who is going to?
When trying to understand what energy in Europe might look like in the future, the most important question to ask is simply what does energy in Europe look like today?
With a few exceptions, electricity across the continent is obtained primarily through coal and gas, with oil playing a significant part. Coal, gas and oil also contributes the most to the total final consumption of all fuels in Europe. So here is a look at how much energy most of Europe is consuming as of 2013:
Gross inland consumption of energy, 1990–2013 (million tonnes of oil equivalent)
Whilst only behind China and the United States in terms of total energy consumption, Russia still only consumes about double the amount of energy than Germany, which when you consider their respective sizes, is a staggeringly low amount. Belarus only consumes around the same amount as Denmark or Bulgaria, proving that the future of energy in Europe will be largely impacted by actions taken within EU Member States, particularly France, Germany and the United Kingdom.
Then comes the all important question of sustainability: a responsibility that the EU is not taking lightly, either. To this end, the European Commission has proposed the following targets for 2030:
• A 40% cut in greenhouse gas emissions compared to 1990 levels
• At least a 27% share of renewable energy consumption
• At least 27% energy savings compared with the business-as-usual scenario
In March 2014, policymakers and leaders in the energy industry convened in Brussels to discuss the European Union's 2030 framework for climate and energy policy. Entitled "Europe’s Energy Future: Efficiency and Competitiveness through Innovation and Smart Integration", the event was organised was by the Knowledge 4 Innovation (K4I) network and set out a road map for a more efficient articulation of a sustainable European energy system highlighting new business models, new opportunities and synergies.
In the following year, March 2015 to be precise, EU leaders approved European Commission proposals for an EU Energy Union with a forward-looking climate policy, to give households and businesses across Europe secure, sustainable and affordable energy. What is abundantly clear is that these are not empty targets, and the every effort is being made to meet them.
Decarbonisation beyond 2030
The EU has committed to reduce greenhouse gas emissions to 80-95% below 1990 levels by 2050. The Committee on Climate Change highlights that this relies on emissions from the power sector being reduced by around 40% by 2020, and by around 90% by 2030.
The importance of a renewable energy mix
If the targets for the reductions of emissions from the power sector are to be met, then the development and application of renewable energy is for many proving to be the stand out solution. The 2009 Renewables Directives has set binding targets for all EU Member States, and wind, solar photovoltaic, geothermal, solar thermal and biofuels all have an important part to play in achieving them.
Renewable energy is not a choice. It is quite literally the only option to ensure not only a limit to climate heating increase below a 2 degrees, but the opportunity for future generations to inherit an entirely carbon free energy industry.
It is not as if this is an impossible ask, either. Norway, Iceland and Albania all produce virtually all of their electricity from renewable sources. The combined use of renewable energy in the European Economic Area and other countries undoubtedly leave some room for improvement:
Share of renewable energies in gross final energy consumption by country in the European Economic Area, Switzerland and Turkey
Ukraine promises to grow its renewable energy portfolio tenfold by 2020, with particular emphasis on the development of solar PV and biomass. Russia is within the world's top five producers of renewable energy, and four out of five Eurasian Economic Union Member States have pledged to GHG (Greenhouse Gas) targets, but still the renewable energy markets, particularly in solar PV, have room for significant development. The good news is that the next few years could begin to see the start of a new renewable energy revolution of sorts within non-EEA countries, as the demand for renewable energy rises, it will simply become too lucrative a business case to ignore. Not just for production, but for the manufacturing of the technology itself, as might be the case with Russia, which is currently considering large scale production of silicon wafers for the creation of photovoltaic cells.
As we work towards bringing CO2 emissions down to safe levels, Europe will inevitably become more and more entwined on energy related matters. The distribution of energy is made all the easier when it right on your doorstep, after all, and if the cost of generating all of this clean energy is zero, then all the better. Which brings us neatly on to the next point.
The cost of energy
When we look at a half-yearly breakdown of electricity and gas prices in Europe in the years 2012-14, electricity prices for households were the highest in Denmark, Germany and Ireland, whilst the lowest were in Bulgaria and Hungary. For industrial consumers, Cyprus, Malta and Italy wore the highest, whilst Bosnia and Herzegovina, Sweden and Serbia were the lowest.
On the other hand, natural gas prices for household consumers were highest in Sweden and Portugal, whilst the lowest were to be found in Romania and Hungary. For industrial consumers, the highest and lowest gas prices were found in Finland and Turkey respectively.
The figures paint a fairly varied pattern, although what remains a constant is that the energy price challenge seems to be growing across all of Europe. However, it hasn't always been this way. Back in the late 1800s, not many people could actually afford electricity. There simply wasn't any large scale generation until Charles Parsons' production of turbogenerators began in 1889. In real terms electricity is today over 20 times cheaper and significantly more available in Europe.
Furthermore, the free energy market of microgeneration is rapidly growing. Its presence is helping to drive the cost of electricity down even more. As Europe reaches grid parity, we should begin to see a significant decrease in the cost of electricity per kWh, which will more than offset the increase of the past few decades. By that time, fossil-fuel powered electricity companies will have no option but to lower their prices in order to remain competitive. As the climate change issue becomes more prevalent in society (and judging by current affairs, then this is an inevitable development), non low-carbon technologies will begin to lose favour with consumers who will increasingly seek out cleaner energy options.
Those who continue to cling on to the old ways of generating and extracting energy will find themselves increasingly marginalised, and whilst the economic profit of choosing new technologies might be smaller, everybody will be profiting in an entirely new way. Then there's the fact that technology is enabling electrical appliances to become more and more efficient these days. This will help to balance out the increases in electrical consumption which will result from increases in population and the increase in energy needs, and should also help to bring the aggregate cost of energy down.
In short, clean energy means cheaper energy. In fact, it seems that the only way we can guarantee energy prices to continue increasing is if we continue to rely upon a fossil fuel generated energy industry.
Energy storage and future technologies
Energy storage will play a key role in the future, as it can balance supply and demand to the grid, providing a back-up to intermittent renewable energy. Peaks and troughs in demand can often be anticipated and satisfied by increasing, or decreasing generation at fairly short notice. It can improve the management of distribution networks, reducing costs and improving efficiency by making sure that energy is both stored and distributed locally. Again, this will impact cost, even if only because of the reason that it will enable people to only purchase their electricity at off-peak rates.
Several European governments do not believe that energy storage is likely to be deployed widely under the current market framework, but that does not mean that it is not going to happen. When natural gas and petroleum arrived on the scene, many European governments scoffed at the idea that it could ever have as much impact as coal, yet that's exactly what ended up happening. One only has to take a look at how many of their predictions regarding the future of energy have fallen flat on their face to realise that if there is one thing certain about the future of energy it is that governments seldom get it right.
Which is probably just as well for UK green energy company, Ecotricity, and US electric car firm, Tesla, who have both already developed battery storage packs which can store up to 10kWh of electricity. They believe that once energy storage reaches the mainstream, the real energy revolution may begin. And we tend to agree with them.
Whilst on the surface, the European energy sector is all about embracing the vital innovation that is required, there also lies segments of an energy industry which feels threatened by new, uncertain technologies. This is putting the future of market-led investment in doubt. Equity investors are being increasingly selective and for many of them, the expected revenue is inadequate. At the same time, investors in the fossil fuel energy industry are quite literally feeling the heat as they are being gradually forced to work towards bringing CO2 emissions down to safe levels (kicking and screaming, nonetheless).
But here's the thing: whether we are talking about the EU, the EAEU, or any other European country, the energy sector is undergoing rapid transformation in response to the climate change agenda. And the climate change agenda is changing on an increasingly frequent basis.
According to the latest State of Nature in the EU report, up to 60% of species are struggling. Flooding is becoming more and more prevalent across northern Europe (between 1980 and 2011 floods affected more than 5.5 million people and caused direct economic losses of more than €90 billion). Melting of the Greenland ice sheet has doubled since the 1990s and glaciers in the Alps have lost nearly two thirds of their volume in the past 100 years alone. The Mediterranean, southern and central Europe are seeing more frequent heat waves, droughts and wildfires. A recent EU report entitled 'Time is of the essence: adaptation of tourism demand to climate change in Europe' stated that Mediterranean tourist destinations could become simply too hot to visit, with countries like Spain experiencing a loss of up to €5.6 billion in tourism revenue every year.
The climate change deniers are fast approaching dinosaur status: an extinct species who've enjoyed far too much influence on this planet for far too long. Rightly so: investors are finding out that they are no longer having the only say when it comes to the future of energy in Europe.
When we began work on Sustain Europe in 2009, there were many who still believed climate change was a myth: a conspiracy designed only to upset the status quo which would disappear as quickly as it had arrived. Over the years, I have watched plenty of those deniers take back those words and change their tune drastically. Now please don't get me wrong: I am all for that and it can only be a good thing.
It is for this reason that as we move forward, we may well find that the future of energy in Europe is being dictated by the environmental crisis instead of the debt providers; particularly as the environmental crisis threatens to wipe out many of the revenue streams that debt providers have traditionally come to rely upon - unless they too can learn how to adapt.
According to the International Energy Agency, renewable electricity generation outpaced natural gas in August 2015 to become the second largest source of electricity worldwide. This was unthinkable even 6 years ago, and is testament to the fact that things definitely are moving in the right direction.
So the safest bet for the future of energy in Europe may well turn out to be the one which bets on the safest future for Europe.
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