The Big Question: How Should Europe Structure Its Energy Policy?

“Efforts must be especially made in creating certainty for investors, reducing the administrative burden and increasing clarity in planning,” said the European Commission in opening its consultation on a European climate and energy framework for 2030. We asked readers how such a framework should be structured to address their sector’s current concerns, and which concerns are most important for promoting the sector’s future development.

Fraser McLachlan, Chief Executive, GCube Insurance

When it comes to discussing future European energy policy frameworks, the City of London has a canny ability of switching off. The system’s too bureaucratic, they’ll argue, and there’s limited scope to exert real influence.

And for that reason, many of those within the square mile will focus instead on more immediate opportunities.

Only the thing is, now that the renewable energy market is beginning to find its feet, it’s this early stage opportunistic attitude that is changing.

As the markets look for greater stability and more long-term growth, it’s inevitable that in order to achieve these new levels of industry assurance, certainty from government policy must be encouraged.

Any future European policy framework must provide clear, transparent targets, backed by clear and transparent economic support. Policies need to be set early, promoted and reinforced on a country-by-country basis and carefully managed throughout the lifecycle of the economic incentive.

What’s more, and with a market like offshore wind in particular, it’s worth considering a longer term shift away from specific steadfast calendar timeframes and instead towards wider measurements and parameters that evaluate policy success based either in pure capacity terms or alternatively, pegged against individual country targets, market percentages and sector goals.

Whatever the case, as the new framework takes shape, it’s imperative that a close working relationship is established early on between policy makers, developers, investors and financiers, in order to ensure that all interests are aligned. Setting policy in Brussels is one thing. Constructing, operating and safeguarding renewable energy assets for the long-term is quite another.

Xavier Noyon, Secretary General, European Solar Thermal Industry Federation

According to the Heat Coalition, of which ESTIF is a member and which is a platform gathering 11 European associations with a stake in the heating and cooling sector, the forthcoming climate and energy policy framework must adequately address the future role of the heating and cooling sector, as it accounts for no less than 45 percent of the final energy consumption in Europe today.

Unfortunately, the stance taken on heating and cooling in the Green Paper confirms the recent conclusion from the IEA Energy Technology Perspectives publication, arguing that 'heating and cooling remain neglected areas of energy policy and technology, but their decarbonisation is a fundamental element towards a low carbon economy’. With virtually no mention of this sector or any reference to the challenges it faces, the Green Paper fails to consider the relevant issues.

However, the Heat Coalition strongly believes that this is the right time to develop a comprehensive European approach for heating and cooling towards making energy more affordable and keeping European businesses competitive, as requested by both the European Parliament and the Council.

Recently, the European Parliament responded to the European Commission’s Energy Roadmap 2050 by calling on the Commission to consider the “full integration of the heating and cooling sector into the transformation of the energy system”; stressing that “readily available renewable energy solutions (geothermal, biomass including biodegradable waste, solar thermal and hydro/aerothermal), in combination with energy efficiency measures, have the potential to decarbonise the heat demand by 2050 in a more cost-effective way, while addressing the problem of energy poverty”. Moreover, the Council’s conclusions on the renewable energy Communication, agreed last December, stated that “more attention should be paid to the widely untapped potential of renewables in the heating and cooling sector”.

Given these clear signals from both the European Parliament and the Council, the heating and cooling sector should be considered as a crucial pillar supporting the 2030 framework.

Today, the Heat Coalition calls on the European Commission to put forward a comprehensive strategy, which must include improved statistics and data collection process, to promote innovative renewable energy sources and energy efficient solutions throughout the entire renewable energy supply chain.

Tobias Rothacher, Senior Manager, Renewable Energies, Germany Trade and Invest

One of Germany’s most-debated subjects right now is the rising cost of its Energiewende policy, which aims to enable the country to decommission its nuclear generation capacity. Furthermore, the policy is designed to allow generation from renewable energy sources to take an 80 percent share of Germany’s total electricity consumption from renewables by 2050 (currently about 23 percent).

The cost of the new infrastructure has proved unpalatable to most, however, with debate rife as to how best to structure this cost in the wake of the global economic downturn, and particularly how to spare the consumers from shouldering this cost directly. Germany’s government has set up several incentive programmes in key sectors to encourage private direct investment and/or research in certain sectors – incentives including low-interest loans, employee benefits and government grants. As a result, although the debates rage on, Germany’s Energiewende is progressing extremely well.

One of the by-products of all this has been that Germany last year exported more energy than ever before. This was not only because of the increased production, but also because of the current grid’s comparative inflexibility when it comes to either absorbing the energy exactly where it is produced, or in storing the seasonal highs in energy production from the different renewable sources. Thus most of the incentives now are for companies to help come up with smarter grids and energy storage systems.

The more smart grids and energy storage capacity systems grow, the more – theoretically – transnational co-operation and liberalisation in this subject has to improve, as a fully-integrated, pan-European smart grid becomes more and more possible. Much is already being done here. Grid control co-operation is already underway in Germany, Denmark, Belgium, Holland, Switzerland and the Czech Republic, while Austria and Poland are making preparatory work to also join this cooperative transmission initiative.

There needs to be emphasis now on integration of renewable energy into the grids, including data exchanges and pro-actively examining how grids would deal with future renewable energy volume increases rather than reactively.

Work also needs to be done on ensuring that the benefits of network extension are seen to be acceptable at their cost, both socially and publicly, especially in an environment/structure of more decentralised energy producers.

Davis Swan, President, Debarel Systems

Every few weeks we see an announcement out of Europe regarding renewable electricity generation records being broken. In January it was announced that 30 percent of electricity generated in Denmark in 2012 was from wind farms.   Italy and Spain reported record solar generation in 2012.  On April 15, 2013 Germany produced a record 22.68 GW from photovoltaic solar for a few minutes. 

These press reports would seem to indicate that the growth of renewables is without problems and on track to free Europe from a continued reliance on hydro-carbons.  Nothing could be further from the truth.
Are renewables reducing the amount of coal and natural gas being burned to generate electricity?  Yes – so in the big picture that is a positive development.  Is renewable electricity production reliable enough to allow for the decommissioning of a single thermal generation facility in the entire Euro zone?  Not that I know of.
Germany is committed to shutting down their nuclear reactors but all of the generation capacity will have to be replaced by conventional thermal plants and imports.  In fact, the ever-increasing imports of electricity by both Germany and particularly Denmark are indicative of the problem with renewables. 
When demand starts to peak in the late afternoon PV Solar fades away.  If the winds are calm both Denmark and Germany are forced to crank up the old but reliable coal and natural gas plants and/or import electricity from Norway and Sweden.  One of the ironies of this situation is that a significant portion of imports from Sweden come from nuclear reactors.
The expanded use of renewables throughout the Euro zone only works because all of the existing non-renewable generating assets are still in service.  But that may be about to change.
Coal and natural-gas fired base-load plants are designed to run 7x24x365.  That is how they are most efficient and the revenue projections used to finance these plants require that mode of operation.  As these plants are pushed off the grid more and more by renewables the economics of running them has deteriorated.  Major utilities in Germany are in financial difficulty.  In another ironic turn of events German utilities are now closing some of the cleanest, most efficient combined cycle natural gas plants in the world and instead are choosing to operate polluting coal-fired plants because they are still marginally profitable.   In a note published November 6, 2012 Moody’s Investors Service warned that it expected “rising levels of renewable energy output to further affect European utilities’ creditworthiness”.  With declining credit ratings and no price certainty it is difficult to imagine new non-renewable generation plants attracting financial backing.
The result will be an increasing reliance upon inherently unreliable energy sources.  This will not end well.
Wind without energy storage is untenable and it will take many years and billions of dollars in R&D to commercialize utility-scale storage technology.  PV solar is pointless unless it is paired with an equivalent amount of CSP with thermal energy storage to provide 7×24 operation.
We must transition to renewable electricity generation technologies.  But we must do it in a sensible way that acknowledges and addresses the limitations and vulnerabilities of renewables.  The simplistic approach of rolling out more and more wind and PV solar is a recipe for disaster.

Lead image: European Parliament building, courtesy EU Observer

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