Utility scale solar plant in the US (photo Duke Energy)
Europe can win back its lost clean energy leadership by moving away from subsidy-powered renewables, writes Christopher Burghardt, Vice-President Business Development Europe at First Solar and a member of the Board of Directors of Solar Power Europe. Rather than subsidizing renewables, Burghardt argues, Europe should stimulate utility-scale energy production by independent power producers, just as other markets around the world are successfully doing.
Ernst and Young’s recently launched Renewable Energy Country Attractiveness Index 2016 tells a powerful story. The Index looks at the drivers behind the deployment of, and the investment in, renewables: macro fundamentals, the energy imperative, policy enablement, project delivery and technology potential. Significantly, almost every European nation listed in the 40 country index, saw a decline in its ranking as an attractive market for developing renewable energy. The only exceptions were Denmark, ranked at 15; Finland, ranked at 36; and Greece, which retained its position at 40.
The latest Renwable Energy Global Status Report from REN21, the UN-affiliated Renewable Energy Policy Network, tell a similar story. Renewable energy investment was up last year in most parts of the world, but saw a 21% decline in Europe.
Although groundbreaking new programs in the Middle East, Latin America and India now steal the headlines, European expertise continues to play a pivotal role in driving the industry forward
This is in sharp contrast to a decade ago, when Europe was truly at the forefront of the renewable energy revolution, with programs like Germany’s Energiewende establishing the foundation for the eventual global energy transition. I would go a step further and say that Europe in general and Germany, in particular, enabled the global energy transition that we see today, by creating a market – albeit a subsidy-driven one – for commercial renewable energy technologies.
Thanks largely to demand from Europe, the solar industry was able to scale up manufacturing and supply, while aggressively driving down costs. This reduction in costs and improvements in technology were by no means a benefit limited to Europe; encouraged by just how affordable solar had become, countries around the world began to embrace the potential of clean solar electricity.
Pivotal role
This does not mean that Europe does not play an important role anymore in the renewable energy sector. Although groundbreaking new programs in the Middle East, Latin America and India now steal the headlines, European expertise continues to play a pivotal role in driving the industry forward, particularly in the emerging markets.
European developers such as EDF Energie Nouvelles, Neoen, Engie, Fortum, and ENEL Green Power are bidding for and winning utility-scale solar tenders in international markets. The engineering experience of European consulting firms such as Fichtner, Arup, and Tractebel, is highly valued around the world. European engineering, procurement and construction (EPC) companies such as Belectric, Groupo TSK, and Scatec Solar are constructing solar power plants in Africa, Latin America, and the Middle East. And European lenders such as KfW Development Bank and the EBRD are funding projects in a number of developing markets.
Despite instigating the global energy transition to renewables, Europe appears to be settling into a state of status quo
Yet, the scale of activity driven by European entities abroad is not matched at home.
Despite instigating the global energy transition to renewables, Europe appears to be settling into a state of status quo and, some would argue, is in danger of losing its position as a global renewable energy superpower. Apart from France, which stands out as the exception, we have yet to see any major efforts to further decarbonize the power generation sector in Europe by raising renewable energy targets. In fact – almost counter-intuitively – policymakers have placed a long-term bet on gas.
Cornerstone
To some extent this is understandable. European policymakers are understandably wary about costs and about triggering a repeat of the boom-bust cycle we experienced a few years ago, by ramping up subsidies. But the fact is that the future of the region’s renewable energy program depends on its ability to evolve into a truly sustainable market, unhindered by the inevitable complications that subsidy programs bring.
The cornerstone of such a sustainable market would be updated renewable energy targets that take advantage of the fast declining economies of scale. Reviewing the region’s current clean energy goals, set out in 2014, is particularly critical in the context of commitments made around COP21. In order to successfully achieve deeper emission cuts, organizations like Solar Power Europe have called on the European Union to revise its renewable energy targets and increase them to 35 percent, to be achieved by 2030.
Once new targets are set, it will be critical for European governments to be reminded that the fastest and most cost-effective route to achieving economically sustainable renewable energy programs is through scale. More specifically, utility-scale.
There needs to be a broader understanding that the future of renewables in Europe must be underpinned by competitiveness
While Europe must have a comprehensive renewable power generation portfolio and there is room for a variety of technologies and models to thrive, the fact is that clean utility-scale energy production is the most effective alternative to fossil fuel-powered utility-scale energy production. By encouraging Independent Power Producers to competitively generate clean energy on a utility scale at market pricing, Europe can effectively move away from subsidy-powered renewables, as other markets around the world are successfully doing.
With some countries across Europe already working on a range of tender-based programs, there needs to be a broader understanding that the future of renewables in Europe must be underpinned by competitiveness. And while it makes sense for these initiatives to be nationally-driven, they need to be encouraged by robust European policy.
Europe today faces a unique opportunity to set a new standard for the adoption of economically sustainable renewable energy that goes well beyond the current business-as-usual levels. Now is the time for policy and policymakers to reignite the region’s competitiveness and passion for innovation, while reinforcing its leadership position.
Editor’s Note
Christopher Burghardt is First Solar’s Vice President of Business Development for Europe. He also serves on the Board of Directors of Solar Power Europe.
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In my opinion this article gets it right about the need for competitive markets, but wrong on what targets the EU should set.
First, the EU should eliminate all renewable energy targets, and replace them with *clean* energy targets.
Second, it should set targets for the long term, not only for the current period. The energy transition is a long-term process and the best way to ensure cost-effective completion of the transition is to set targets now which run until completion. That way, EU members can do long term planning. For example, by setting a target for 35% clean (!) energy in 2030, and simultaneously target for 2040, 2050, 2060 and so on, all the way to 100%, all EU members can decide what investments they should make to best achieve the intermediate *and* final targets.
After all, if there is only the 35% target and nothing beyond that, than some countries might make the mistake of investing all their resources in achieving that 35% target using technologies which actually *hamper* achieving the ultimate 100% target.
The impact of such a mistake could be devastating. For example, an EU member may calculate that the most cost-effective way to achieve a 35% target is to replace it’s energy infrastructure with solar, wind and natural gas. But then when if the next target is to achieve 50% or 70%, that country will suddenly be faced by the horrific fact that the solar, wind and natural gas option is *only* cost-effective for reaching a 35% target. For reaching greater percentages of clean energy, that technological combination doesn’t work, because of the crippling cost of storage which would be necessary to continue deploying more solar and wind power.
But if the EU formulates binding target now, on a reasonable timeline, all the way up to 100% clean energy, the EU member states will not make such mistakes. They will calculate that reaching 35% by switching to solar, wind and gas will not help them achieve 100% target. On the contrary, it will make it much harder! Those countries will be able to choose an investment pathways that actually has the potential of getting them to 100% without going bankrupt along the way, for example by diligently and carefully rolling out the nuclear option. They can then easily and predictably reach about 50% clean energy by making their electricity supply nuclear, and they can continue to 100% by deploying nuclear powered synfuel production in the later periods.
Making sure that the EU has *clean * energy targets (as opposed to “renewable” targets), and that the EU has not just one target in one period, but a series of legally binding targets for subsequent periods all the way to 100%, is the only way the EU will succeed in reaching 100% clean energy in a timely and cost-effective manner. Anything else will predictably result in disaster for the EU and our environment sooner or later.
Your “horrific fact” that wind+ solar +gas is only cost-effective up to 35% penetration is a myth. It is a fact that nuclear “baseload” (what was that, Grandpa?) is not cost-effective in any remotely plausible scenario. The more cheap variables you have, the more nuclear reactors are forced to run in load-folliwing mode, making their disastrous financials even worse.
I replied to your comment, but it was deleted by the moderator.
The content was – summarized – that the financials of nuclear are excellent and that baseload is not a myth.
What would you built?
Hinkley point: Nuclear: 129 Euro/MWh
Horns Rev3: Wind off shore: 103 Euro/MWh
Wind with existing power plants is the new base load.
Mark you are wrong about the FIT for Hornsrev3.
It was won by Vattenfall that bid 77Øre per kWh but the fit only last about 8-10 years depending upon the achieved capacity factor the chosen Vestas 164 turbines will achieve.
77Øre/kWh is €0.1035/kWh.
If you assume average Nordpool rate for the remaining 15-17 years of the wind turbine designlife then the average is around €0.06/kWh.
Hickley point FIT is for 35 years and you also have to factor in that the FIT is adjusted for inflation in all 35 years.
The cost difference between offshore wind and Hinckley is much greater than you seem to realize and growing fast because offshore just like onshore is going down in price.
Even the conservative IEA concludes that at least 45% of variable renewables can be integrated in the grid at acceptable cost using existing technology.
Spot on Joris , we need more rational thinkers like you
Thank you. Actually there are a lot of people who think like I do, but most of them are (too) quiet. In a world dominated by asinine sustainababble, being rational poses a risk to your reputation.
Thank you for speaking out. Eventually, the truth will win. It always does, sooner or later.
Nuclear power emits less GHG & CO2 than electricity generated by natural gas, but it is only 50% less, which is not very good.
Nuclear fanatics often state much less but they conveniently ‘forget’ the emissions of the mining and processing of the nuclear fuel; uranium!
Worse, they also forget the emissions due to handling and guarding the nuclear waste during thousands of years.
Furthermore the emissions of the staff working at all those facilities.
Hence calling nuclear power clean regarding the climate is far beyond reality!
Also because a 1GW nuclear plant inserts 3GW heat into the biosfeer!
Renewable, wind+solar+solar don’t have these problems.
The only fanatic here is you Bas.
You deny the conclusion of the IPCC that nuclear is as good as wind and better than solar at reducing co2 emissions, across the lifecycle.
Worse, you deny this even though it has been explained to you countless times.
Offshore is heading for €40/MWh short term with a good trajectory towards much lower cost points.
The average capacity factors for new offshore are well above 50% and will most likely breach the 60% threshold this year when the new Adwen 8MW is erected at Østerlid.
Interestingly wind power delivers the most during winter time and therefore match solar pretty well.
This would be a very stupid move… ADEME in France has made a very detailed model on the economics associated with high share of renewables…
http://www.ademe.fr/en/a-100-renewable-electricity-mix-analyses-and-optimisations
What happens when you decide your energy policy based on regulated call for tender and not based on consumer’s freedom of choice is that all your solar energy will be in the South… and if you go for a european energy market this will turn into all the PV in Spain…
When you do this your cost of transmitting this power to the final consumer is gigantic and far more expensive than producing energy closest to the consumer by having powerplants next to cities.
So you get cheap power plant but a very large energy system cost… and what the consumer is paying is the system cost.
So let’s go further… When the consumer is faced with such a huge bill what will he do : he’ll turn to locally based production because that will be cheaper to build a microgrid than to connect to the centralised system created by call for tender… So we’ll end up with the choice of having unused solar park in Spain or subsidizing the grid with more money that we would have need without call for tenders…
Europe, especially Denmark and Germany, is clearly leading. Hence exporting the gained know how.
Denmark will have reached 100% renewable electricity (mainly generated by wind, which now generates >40%) in 2040. Germany is now at 33% renewable, clearly years ahead of the scheduled scenario which delivers >80% renewable in 2050.
Both countries are making steady progress according to their planning.
Alas, there is little sign that other countries are catching up.
The author is confuses that big projects with lot of publicity are the same as fundamental progress.
Please note: I am ending the debate on nuclear here. The article is not about nuclear power at all. Please address comments to the topic of the article. All off-topic comments that come in will not be published. The editor
First of all: tenders (or auctions) are a just way to set feed-in-tarifs. If traditional feed-in-tarifs are seen as a subsidy, so should feed- in tarifs set by auctions. The title of the article is therefore quite misleading. The real question is: which way to set a feed-in-tarif is more effective. Feed-in-tarifs with dynamic degression , or “with a breating lid” as the Germans call it, work very much the same as an auction:
1) Just as for auctions the government set a quota for new installed power per year.
2) The feed-in-tariff for the next period is set dependent on the growth in the current period: If the installed power is growing quicker than desired the feed-in-tariff for new installations is reduced more than the standard reduction. If it is growing too slow the feed-in-tariff is reduced less than the standard reduction.
This results in the lowest feed-in-tariff for which the desired amount of installed power can be achieved, just like an auction. However, the disadvantage of an auction is that it creates extra bureaucracy for governments, extra overhead for auction participants and a high risk for participants. This means in reality that companies will have to compensate for the risk by increasing their bid-prices and small companies and co-operative projects cannot participate. So the diversity of ownership decreases.
However, in Germany the problem is not so much how the government sets the feed-in-tarifs, but in the fact that it is reducing the annual quota for new renewables. Renewables are now really eating the lunch of lignite and coal power plants. Since different levels of government own stock in the companies that operate these plants and the socialist party is strongly intertwined with the coal miners unions this scares them so much they are putting on the breaks. When you follow the news on the power sector it seems to be a global trend that traditional power producers are using all of their influence to make governments sabotage renewables. This is the real issue that Burghardt should address, rather than the technicalities of how feed-in-tariffs are set.
Furthermore, if you really want to get rid of subsidies and feed-in-tariffs, you should plea for a propoer prices on CO2 emmissions about 80€ per tonne.
Agree with you that auctions exclude small producers. The bidding cost a lot with substantial chance that it becomes wasted money. So the German system to adapt the FiT’s every 3 months (only for new installationd), depending on the installation rate in the past 12 months, is almost perfect.
Germany didn’t reduce it’s renewable expansion targets but increased those even a little in the past years. It was and is 5GW/a for new onshore wind+solar (50% for each). They increased the offshore wind target substantially.
So now they are ~3 years ahead of their original Energiewende scenario which scheduled 35% renewable in 2020 (they had last year already 32.7%).
Your idea may be caused by the reduced solar installation rate in the past few years compared to the high installation rate during the years (2010-2013) of big pricefalls. Those high installation rates were far more than scheduled and caused problems such as an increase in the Energiewende levy. It was possible because in those years the FiT’s were adapted only once a year. The responsible minister reacted too slow to the pricefalls as it took him 2 years before he realized he could also adapt FiT’s every three months. So he was replaced by the present minister (Gabriel).