The European Union is doubling down on renewables and is looking to speed up the installation of solar and wind power capacity and reform the electricity market design to protect consumers from volatile fossil fuel prices.
The EU is also looking to boost its competitiveness in clean technology manufacturing, and increased its targets for renewables share in the energy mix with recent legislation and proposed regulations.
Electricity Market Reform
The European Commission proposed in the middle of March a reform of the EU’s electricity market design to speed up renewables rollout and the phase-out of gas. The proposed legislation is also aimed at making consumer bills less dependent on volatile oil and natural gas prices and better protecting EU consumers from future price spikes and potential market manipulation. Finally, the Commission aims to make the EU’s industry clean and more competitive with the proposed reform.
The EU Council and the European Parliament will now have to discuss the proposal for a market reform and vote on a final new electricity market design later this year.
The legislation, as proposed by the European Commission, would introduce measures that incentivise longer-term contracts with non-fossil power production and bring more clean flexible solutions into the system to compete with gas, such as demand response and storage.
“This will decrease the impact of fossil fuels on the consumer electricity bills, as well as ensure that the lower cost of renewables gets reflected in there,” the Commission said.
The reform is also expected to promote open and fair competition in the European wholesale energy markets by enhancing market transparency and integrity.
Commenting on the Commission’s proposed reform, Naomi Chevillard, Head of Regulatory Affairs at SolarPower Europe, said, “Homes and businesses will be able to access PPAs more easily. Businesses are set to benefit from new government de-risking schemes that backup their ability to sign these long-term energy supply contracts.”
The proposal “considers the role of electricity grids in facilitating access to green, low-cost, energy. Developers planning new solar projects will have more information on where, when, and how they can connect their solar to the grid,” Chevillard noted.
The WindEurope association said, “The Council and Parliament must now stick to this balanced proposal and end the current investment uncertainty caused by uncoordinated national market interventions.”
“The market design has been extremely efficient in matching supply and demand – and has given consumers years of affordable electricity prices,” said WindEurope CEO Giles Dickson.
“It’s good the Commission proposal builds on the strengths of the existing market design. What’s needed is an evolution not radical changes.”
Net-Zero Industry Act
The European Commission has also proposed the so-called Net-Zero Industry Act, aimed at scaling up the manufacturing of clean technologies in the bloc and making sure the EU is well-equipped for the clean energy transition.
The Act will improve conditions for investment in net-zero technologies by enhancing information, reducing the administrative burden to set up projects, and simplifying permit-granting processes. Under the Act, carbon dioxide capture targets are increased, to remove a major barrier to developing CO2 capture and storage as an economically viable climate solution, in particular for hard to abate energy-intensive sectors.
The Commission also presented ideas on the design and functions of the European Hydrogen Bank, an initiative to support the uptake of green hydrogen in the EU.
“This sends a clear signal that Europe is the place for hydrogen production,” the Commission said.
The first pilot auctions on renewable hydrogen production will be launched under the Innovation Fund in the autumn of 2023. Selected projects will be awarded a subsidy in the form of a fixed premium per kg of hydrogen produced for a maximum of 10 years of operation.
The Commission has also proposed a set of actions to ensure the EU’s access to a secure, diversified, affordable and sustainable supply of critical raw materials.
The Critical Raw Materials Act “will significantly improve the refining, processing and recycling of critical raw materials here in Europe. Raw materials are vital for manufacturing key technologies for our twin transition – like wind power generation, hydrogen storage or batteries,”
European Commission President Ursula von der Leyen said.
“And we’re strengthening our cooperation with reliable trading partners globally to reduce the EU’s current dependencies on just one or a few countries.”
EU Raises Renewables Targets
At the end of March, the European Parliament and the Council reached a provisional political agreement to raise the EU’s binding renewable target for 2030 to a minimum of 42.5%, up from the current 32% target and almost doubling the existing share of renewable energy in the EU. Negotiators also agreed that the EU would aim to reach an indicative target of 45% of renewables by 2030.
The provisional agreement includes accelerated permitting procedures for renewable energy projects, with the purpose to fast-track the deployment of renewables as part of the EU’s REPowerEU plan to become independent from Russian fossil fuels, after Russia’s invasion of Ukraine.
“The agreement reaffirms the EU’s determination to gain its energy independence through a faster deployment of home-grown renewable energy, and to meet the EU’s 55% greenhouse gas emissions reduction target for 2030,” the European Commission said, welcoming the deal.
“A massive scaling-up and speeding-up of renewable energy across power generation, industry, buildings and transport will reduce energy prices over time and decrease the EU’s dependence on imported fossil fuels,” the Commission added.
Walburga Hemetsberger, CEO of SolarPower Europe, said, commenting on the higher renewables target, “This sends a clear message to all stakeholders to prepare for system change. That means scaling investment, electricity grids, and our workforce, and of course, 45% is a floor, not a ceiling. We’ll be working to deliver as much renewable energy by 2030 as possible,” Hemetsberger added.
Increased Cross-Border Cooperation
Several European countries have recently signed new agreements to deepen cross-border cooperation on clean energy and climate goals.
Norway and the EU established in April a Green Alliance to strengthen their joint climate action, environmental protection efforts, and cooperation in clean energy and the industrial transition.
“Several areas have been specifically mentioned, including carbon capture and storage, offshore wind power, hydrogen, critical raw materials, batteries and green shipping. These are areas where Norway can play a leading role,” Norwegian Prime Minister Jonas Gahr Støre said.
Norway and the EU announced the Green Alliance just before the summit on offshore wind of the leaders of countries of the North Sea. Nine Heads of State and Government and the President of the EU Commission met in Ostend, Belgium, at the end of April and agreed new commitments on the build-out of offshore wind in the North Sea.
The leaders set ambitious combined targets for offshore wind of about 120 GW by 2030 in the North Sea, with the aim to more than double the total 2030-capacity of offshore wind to at least 300 GW by 2050.
“We will continue planning for multiple energy hubs and islands as well as hybrid cooperation, multi-purpose projects and increased connectivity by carrying out, where appropriate, a screening of the potential for offshore wind, and hydrogen production, in our entire North Seas,” the leaders said in the final declaration.
European Commissioner for Energy, Kadri Simson, said at the summit, “The North Sea is set to become Europe green powerhouse, leading the way in deploying offshore renewables to decarbonise our economies and to increase our energy security.”
In an Industry Declaration, more than 100 companies representing the whole value chain of offshore wind and renewable hydrogen in Europe welcomed the reinforced offshore wind ambitions at the North Sea Summit. The Industry Declaration outlined the urgent need to strengthen Europe’s wind energy manufacturing capacities. The signatories stress that an expansion of offshore wind in the North Sea in line with Europe’s net-zero targets must be made in Europe.
“Major new investments are needed in manufacturing capacity and key infrastructure such as grids and ports,” the industry says.
As part of the North Sea Summit, the UK and the Netherlands jointly announced plans for a first-of-its-kind electricity link to connect offshore wind between the Netherlands and the United Kingdom. The interconnection, ‘LionLink’, aims to support decarbonisation, market integration, and strengthen security of supply. Connecting offshore wind via the first cross-border direct current cable of this size would be an important next step towards an integrated offshore grid in the North Sea, the Dutch government said. LionLink is a multi-purpose interconnector, which is designed to link a Dutch offshore wind farm of 2 GW to both countries via sub-seainterconnectors.
Norway announced at the end of March its first competitions for offshore wind areas, with which the Norwegian government takes a big step towards its ambition of allocating areas for 30,000 MW offshore wind by 2040.
“We are looking forward to receiving many good applications from relevant developers, so that we can allocate the project areas later this year,” said Norway’s Minister of Petroleum and Energy Terje Aasland.