Europe’s Energy Transition: Insights for Policy Making
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About this ebook
Europe’s Energy Transition: Insights for Policy Making looks at the availability and cost of accessing energy and how it significantly affects economic growth and competitiveness in global markets. The results in this book, from a European Commission (EC) financed project by INSIGHT_E, provide an overview of the most recent analyses, focusing on energy markets and their implications for society. Designed to inform European policymaking, elements of this book will be integrated into upcoming EC policies, giving readers invaluable insights into the cost and availability of energy, the effect of price increases affecting vulnerable consumer groups, and current topics of interest to the EC and ongoing energy debate.INSIGHT_E provides decision-makers with unbiased policy advice and insights on the latest developments, including an assessment of their potential impact.
- Presents answers to strategic questions posed by the European Commission
- Coherently assesses the energy transition, from policies to energy supply, markets, system requirements, and consumer needs
- Informed the EC "Clean Energy for All Europeans" package from end of 2016, e.g., regarding aspects of energy poverty
- Endorsed by thought leaders from within and outside of Europe, including utilities, energy agencies, research institutes, journal editors, think tanks, and the European Commission
Manuel Welsch
Dr. Manuel Welsch’s work on this book is based on his previous role as Deputy Director at the Division for Energy Systems Analysis at KTH Royal Institute of Technology. He is currently employed as energy planner and economist at the International Atomic Energy Agency (IAEA). Manuel has over 15 years of experience working in the energy sector, comprising engineering offices, research institutes, United Nations organizations, and the European Commission.
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Europe’s Energy Transition - Manuel Welsch
612743.
Section I
Introduction
Outline
Chapter 1 Europe’s Energy Transition
Chapter 2 Insights for Policy Making—About this Book
Chapter 3 INSIGHT_E—A Think Tank Informing the European Commission
Chapter 1
Europe’s Energy Transition
Manuel Welsch
Abstract
This chapter sets the scene for the book by highlighting that energy transition
is more than a catchphrase. Rather, the transformation of our energy system is an essential requirement to comply with international agreements and EU ambitions to curb climate change. It is also a reality that can already be witnessed today. This chapter outlines some key features of this transition focusing on energy supply in general, and more specifically on the electricity, heating and cooling, and transport sectors. The transition is however not just limited to these energy sectors, but will also affect the role of consumers, who are expected to form a much more central part of the energy system of the future. In addition to society, the changes foreseen will naturally also affect our economy, both regarding the required investments, but more importantly regarding the novel market designs that are needed to trigger these investments, while ensuring cost-competitiveness and system reliability. Numerous challenges are therefore ahead of us, challenges policy making in Europe will need to address.
Keywords
Energy transition; climate change; energy supply; electricity; heating and cooling; transport; consumers; markets
From a climate policy perspective, 2016 was a historic year. It was the year in which the world’s very first comprehensive and legally binding climate deal entered into force, the Paris Agreement. With its ambition to limit global warming to well below 2°C, while pursuing efforts towards 1.5°C, this agreement will directly impact how energy roadmaps and strategies are designed globally. Naturally, in order to deliver on this ambition national pledges on how to achieve this need to match the challenge and, crucially, also have to be implemented. National energy policy making will therefore be assessed in light of these targets, whilst having to demonstrate the feasibility of such a low-carbon future in view of the costs and benefits to society.
The European Union (EU) has an important role in this context. As the third largest emitter of greenhouse gas emissions globally after China and the United States, it has the opportunity to lead by example and be in the driving seat of the global energy transition. While concerted action across all major emitters will be required, a firm signal from Europe to other countries is increasingly important at a time when commitments of other large emitters are uncertain. And the EU remains determined to provide such a signal. Already back in 2011, a roadmap was formulated towards an 80% to 95% reduction of greenhouse gas emissions by 2050. While it may need to be revised in light of the Paris Agreement, it does give a clear strategic direction to where we will be heading, together with the EU’s vision to achieve a more secure, affordable, and sustainable Energy Union.
Energy is central to efforts to mitigate climate change, as close to 85% of greenhouse gas emissions in the EU are energy-related. Europe’s energy consumption today is largely based on fossil fuels (~70%). A radical energy transformation is thus required by 2050. Currently, the EU consumes 1.2 billion tons of fossil fuels per year (Gtoe). Diverging from commonly applied units but more practical to envision, this equates to 46 train wagons filled with fossil fuels that are being consumed every single minute of the year, day and night¹. To achieve the transition to a low-carbon energy system, this train would basically have to come to a halt.
While this ultimate goal is well defined, there is no single set of clearly defined actions that need to be implemented to achieve this goal, given the many uncertainties of how our societies and economies will evolve both within Europe and globally. It will therefore be key to diversify efforts and take actions that do not limit the available future low-carbon options, but rather create new choices through support to research, innovation, and development. While the specific choice of actions in the near term will often be a matter of national preference and differ by country, there is a much broader consensus regarding the most promising overarching areas of action, as outlined below.
Electricity Generation
When looking at the three energy-consuming sectors electricity, heating and cooling, and transport, the biggest potential clearly lies in electricity generation. There, almost complete decarbonization is possible, and required. The electricity sector is also the sector where it is most visible that the transition has already gained traction, both within and outside the EU. For example, renewable policies and support schemes in the EU have caused solar photovoltaic (PV) capacity to literally explode from 0 to over 100 GW in the last 15 years, corresponding to around 10% of the total installed capacity. This contributed to the significant reductions of PV system costs, which went down by two-thirds within the period 2008–13 in competitive markets such as Germany and Italy. This trend is expected to continue for some time to come, albeit in a slowed-down fashion: current costs are projected to halve at the latest by 2040. Another example for this transition is the United Kingdom, which was able to reduce the amount of CO2 emissions per kilowatt hour by around 40% over the last 5 years, largely due to an increasing uptake of renewable energy and reduced coal