The energy transition22/06/17
Consultant at Royal HaskoningDHV and POWER-GEN Europe and Renewable Energy World Europe Advisory Board member, Jantine Zwinkels, examines Europe’s energy transition and the opportunities and challenges it presents for the renewables industry.
The importance of energy transition
The transition from fossil fuels to cleaner and more sustainable renewable energy sources is the most pressing challenge in the global energy industry and its related sectors: private, built environment and transport sectors.
At COP 21 in Paris, many countries committed to limit global warming to 2°C above pre-industrial levels. Our shared vision is a sustainable future, including electrified heating and transport networks. To achieve this ambition, we need to maximise renewable energy sources. In the Netherlands, this topic is high on the political agenda.
But what does this entail for society? And what opportunities and challenges does this transition bring for those operating and investing in the renewable energy industry?
The energy transition is a vision of a future which will require vast changes. Those that can anticipate them will be first to take advantage of opportunities and have the chance to influence policy direction through early leadership.
Looking at the electrification of transport, the Netherlands was the sixth country in the world to reach 100,000 electric vehicles (EVs) and the long-term plan is that, from 2035, only clean-fuel cars can be sold – a target that is more than achievable. This will provide a substantial reduction in CO2 emissions. At Royal HaskoningDHV, we’re piloting an EV fleet of 26 cars – saving up to 100 tonnes of CO2 every year.
However, this move towards EVs means a huge rise in electricity demand. The European Environment Agency (EEA) estimates that EVs could account for 9.5% of European electricity demand by 2020 – up from 0.03% today. Governments are aware of this – perhaps it’s why many are reluctant to accelerate the phase-out of coal. It’s up to the renewable industry to step forward with solutions and campaign for change.
Renewable finance: standing on our own two feet
Subsidies have been hugely successful in getting renewable sources off the ground. In the Netherlands, the Stimulation of Sustainable Energy Production (SDE+) scheme has been a great triumph; last year’s €9bn funding has been increased to €12bn in 2017.
However, subsidies are not the only answer and weren’t designed to be long-term. What’s more, they are vulnerable to political changes and can have negative, unpredicted side effects on the transition.
The challenge is to move away from public funding. However, when developing new financing methods, we should be aware of the challenges – renewable energy projects have higher risk profiles, longer-term Return on Investment (ROI) and relatively complicated division of profit. A number of innovative sources of finance are used in the Netherlands, including revolving funds, crowdfunding and financial participation.
A smart approach
Though the Netherlands’ size doesn’t lend itself to vast solar fields, Germany’s does. Similarly, the land-locked Czech Republic is unlikely to build a large offshore wind industry. The situation in each country differs, but a more interconnected, smarter European grid could create enhanced opportunities for working together. By making use of smart grids, we can begin to locate resources more logically.
On a local level, adjustments to the grid are also part of the solution. While the supply of wind and solar energy fluctuates, storage technologies could help ensure a stable energy supply.
Co-operation and competition
Businesses thrive on competition, but they also thrive on support and collaboration. For the renewable energy industry who are looking to realise the energy transition, some support will come from governments – either through subsidies or supportive regulatory regimes.
However, more support can come from industry peers; working together to further the interests of the industry and collaborate on challenges is a more promising route to a clean energy future than cut-throat competition. It is therefore important that companies across Europe come together to discuss their challenges and opportunities and work through solutions together, whether they be focused on renewables or conventional generation. POWER-GEN Europe 2017 will see more than 400 companies from Europe’s power industry come together to do just that.
Consultant Sustainable Development