Eurelectric - Power Choices Reloaded: Europe's lost decade?
In March 2009, sixty-one Chief Executives of electricity companies representing more than 70% of total EU power generation signed a Declaration committing to action to achieve carbon-neutrality by 2050. The Declaration was immediately followed by EURELECTRIC’s Power Choices study, examining how this vision could be made reality along with efforts by other sectors of the economy.
Carbon-neutrality by 2050 requires a radical transition through continuous investment by the power sector into new generation assets, new storage, smart technologies and new grids. To find better technologies and cost-effective solutions, enhanced research and development is necessary. But the case for investment and research in the power sector depends crucially on the strength of the carbon signal that European policy is giving to the economy as a whole.
Today, European policy is not sending a clear signal. Instead it offers several conflicting and contradictory signals. For an investor it is almost impossible to identify a clear path through the regulatory jungle: in painful contrast to the coherent objective of the European internal energy market, we experience a variety of different and not very stable national policies for low-carbon. The EU Emissions Trading Scheme (ETS) – a truly EU-wide harmonised approach – is
being undermined by the national implementation of the Renewables Directive and the Energy
Efficiency Directive. And not only are these national policies very loosely harmonised at best, but they also strongly influence price formation in the ETS allowances market. This raises a key question whether a strong ETS would be a better way to promote renewables and energy effi ciency. Investors are hesitant to take decisions in this policy environment, which they judge to be unsustainable.
This Power Choices Reloaded study revisits EURELECTRIC’s 2009 model in light of changing economic and political assumptions. It shows that sooner or later the 2050 goal will require a major reform of the entire European and national framework of low-carbon policies. But it also shows that until the current confl icting and contradictory signals are resolved, investors will avoid the European electricity market. Increasingly this problem is even seen in the supported renewables sector. Meanwhile, the delay while we wait for a policy signal poses a serious threat to security of supply and to the feasibility of meeting climate targets. Crucially it puts at risk the goal of affordable energy.
This key message summary publishes the main results of the Power Choices Reloaded study.