Ember’s recent “European Electricity Review 2022” authored by Charles Moore analyses full-year electricity generation data for 2021 in all EU-27 countries to understand the region’s progress in transitioning from fossil fuels to clean electricity. It is the sixth annual report on the EU power sector published by Ember (previously as Sandbag). The report compares electricity generation in 2021 to benchmark pre-pandemic levels in 2019, providing an insight into how the gas crisis is affecting the region’s power sector after its recovery from the pandemic. REGlobal presents a renewables focused extract from this research report.
The gas crisis created a paradigm shift for the EU’s electricity transition. Historically, Europe’s growing renewables replaced coal power, the most emissions-intensive fuel. However, as a result of soaring gas prices in the second half of 2021, new renewables replaced fossil gas instead. The interruption to the EU’s coal phase-out slowed emission reductions.
With market prices indicating that the gas crisis will continue for at least the next two years, Europe’s climate goals could be at risk if countries fail to step up renewables deployment and legislate to close coal plants.
Renewables replaced gas not coal in the second half of 2021
Using 2019 as the baseline, the growth in renewables output predominantly replaced coal in the first half of 2021. However, in the second half of the year, with fossil gas power more expensive than coal, new renewable output replaced fossil gas instead. Furthermore, the second half of 2021 saw some direct replacement of fossil gas with coal, equivalent to approximately 5% of total coal power generation in 2021.
The new pricing dynamic meant that new renewables predominately replaced expensive fossil gas instead of more emissions-intensive coal generation.
Europe’s renewable electricity continues to expand, with average annual growth of 44 TWh in the last two years. More than half (52%) of this new renewable generation since 2019 replaced gas, and a third replaced nuclear, while only a sixth replaced coal. However, prior to this, from 2011 to 2019, over 80% of new renewables replaced coal. Increased nuclear outages and plant closures since the end of 2019 also reduced the extent to which coal generation fell.
The largest falls in fossil gas compared to 2019 were seen in the Netherlands (-17 TWh / -24%) and Spain (-15 TWh / -18%), the two countries with the strongest growth in renewable generation (primarily wind and solar), but there were also notable declines in Belgium (-17%) and France (-14%).
Renewables break new records but growth slows
In 2021, electricity generated from renewable sources in the EU reached a new high of 1,068 TWh, a 1% increase (+12 TWh) year-on-year, and a 9% (+88 TWh) increase compared to 2019. Renewables accounted for 37% of EU electricity production in 2021, up from 34% in 2019.
Wind and solar power have been responsible for the majority of the renewables growth since 2019. Wind and solar output reached another new record in 2021 (547 TWh), for the first time generating more electricity than fossil gas (524 TWh). Wind and solar generated 19% of EU electricity in 2021, up from 17% in 2019.
However, year-on-year wind and solar output growth of 1% was modest, due to lower wind speeds, which were below average across the EU, most notably in Germany. 2020 was also a windy year, especially the first quarter, amplifying the difference in 2021. EU wind power output saw a small fall yearon-year (-2% / -10 TWh), but this is equivalent to just 0.3% of total EU electricity production. A 10% (+14 TWh) increase in solar output, which is booming across Europe, more than offset the decline in wind, to ensure continued growth in wind and solar.
It is not unexpected to see year-on-year variations in output from renewable sources like wind and solar. Modernised, flexible grids supported by long-term energy storage (such as green hydrogen) will ensure future energy security as the share of variable sources increases.
Installed wind and solar capacity across the EU continued to grow in 2021. Wind and solar capacity grew an estimated 8% (+15 GW) and 16% (+22GW) respectively.
The electricity price crisis began in earnest in the second half of 2021, as fossil gas price rises accelerated. Despite claims to the contrary, wind and solar power have delivered throughout the crisis. EU wind and solar power output was the highest on record for each month in the second half of 2021 except September.
Despite concerns raised about low wind output in particular, wind output alone grew 2% in the second half of 2021 compared to the same period in 2020. In reality, the extraordinary rise in fossil fuel prices, especially fossil gas, is by far the largest driver of the electricity price rises seen this year.
The EU has three new engines of wind and solar power growth
Spain, the Netherlands and Greece have become the new engines of EU wind and solar power growth. In each country, wind and solar power’s market share grew by about 10 percentage points in just three years, after slow to minimal growth in the previous three years.
Wind and solar provided a third of Spain’s electricity in 2021, and at least a quarter in the Netherlands and Greece. Together these countries have been responsible for over half of all growth in wind and solar output in the EU since 2019, despite accounting for just 16% of electricity demand.
Wind and solar growth in these countries is being driven by supportive policy frameworks, falling costs and ambitious targets. Both Spain and the Netherlands plan to provide about two-thirds of their electricity from wind and solar by 2030, with Greece targeting 50%. This is in sharp contrast to countries such as Poland and Italy, where renewables are still not expanding fast enough, or countries such as Bulgaria, Czechia and Romania which have failed to deploy almost any wind and solar.
After seeing very limited growth since 2015, bioenergy grew 4% (+7 TWh) between 2019 and 2021, almost entirely driven by new biomass co-firing in coal power stations in the Netherlands. Hydro output was normal in 2021 and broadly unchanged year-on-year, but it was 9% (+28 TWh) higher than 2019 which was a relatively dry year.
The gas crisis has made renewables even more competitive
Wind and solar power were already cheaper than fossil gas for electricity generation before the gas crisis hit and they have become even more cost competitive since, despite global commodity prices increasing their production costs. The International Energy Agency (IEA) recently confirmed that ‘higher natural gas and coal prices have improved the competitiveness of wind and solar PV, despite historic equipment price increases due to high commodity and energy prices’.
Furthermore, with the advancements in storage technologies and the associated cost reductions, wind and solar combined with storage will progressively challenge fossil gas for the provision of flexible as well as bulk electricity generation, as wind and solar become the backbone of Europe’s future electricity system.
The crisis has provided a powerful reminder that as long as Europe remains reliant on imported fossil fuels it is exposed to volatile energy prices. Coupled with an expensive and uncertain outlook for fossil gas power and further increases in the competitiveness of domestic alternatives such as wind, solar and clean flexibility solutions, the prospects for fossil gas as a transition fuel look severely damaged.
Many countries were relying on renewables to replace more emissions-intensive coal while ignoring their gas problem, but with gas more expensive than coal, market forces alone can no longer be guaranteed to drive this forward. There is now increased urgency to phase out both fuels on economic as well as climate grounds. Renewables will need to be deployed at sufficient scale to rapidly
replace both coal and gas.
To limit global warming to 1.5°c, advanced economies (including the EU) must reach zero emissions in the power sector by 2035. Accelerated deployment of renewables in conjunction with increased investment in energy efficiency offers a way out of both the energy and climate crises. In the wake of the crisis more countries look likely to choose this path rather than sticking with fossil gas.
Solar’s moment has arrived
For the first time across Europe, wind and solar power combined (547 TWh) generated more electricity than gas (524 TWh). In a year of below average wind speeds, the growth in solar power was vital for passing this milestone: solar produced over 25% more power in 2021 than in 2019 and now produces 6% of Europe’s electricity. Many European countries have now laid the foundations
for rapid growth in solar, and not just in southern Europe where solar potential is the highest. However, progress across Europe is extremely uneven, with some countries yet to embrace solar.
Spain’s solar story is a textbook example for other countries in Europe to follow, almost doubling solar generation since 2019 from 15 TWh to 26 TWh. Spain has the sunshine and the policy framework for this acceleration to continue, and its Minister for the Ecological Transition, Teresa Ribera, has won plaudits for enabling coal areas to directly transition to a growing solar industry. On current plans, solar is set to provide nearly 30% of Spain’s electricity generation by 2030 (up from 10% currently).
Further North, Europe’s growth in solar generation has been driven by the Netherlands (+6 TWh / +115% since 2019). Almost 10% of the country’s power demand was met by solar in 2021 and it has ambitious plans for further growth this decade, despite being a higher latitude country. Taken together, Spain and the Netherlands account for half of Europe’s solar growth since 2019.
From a low base, Poland has seen impressive growth in solar, more than doubling since 2019 (from 1 TWh to 4 TWh). Indeed, Polish wind and solar combined (20 TWh) have now overtaken gas generation (16 TWh). However, recent changes in government support for residential solar means growth may slow in 2022. Hungary (+67% / +1 TWh) has also seen growth and now meets over 5% of its demand with solar.
Following its neighbour’s impressive increase, Portugal is now beginning to catch up with Spain and making the most of a similar latitude, with almost 4% of demand met by solar. The first auctions for floating solar farms on Portuguese reservoirs are happening, and promise a new way to utilise solar technology.
After rapid growth in solar, supported by government incentives in the early 2010s, Italian solar growth has plateaued (+7%, +2 TWh since 2019). It may surprise some observers of the European electricity transition that Italy’s absolute growth is now slower than long-time renewable laggard Poland.
Much of this stagnation in Italy is due to delays in securing planning rights, and the Italian government is attempting to streamline the process.
Czechia and Romania are notably larger countries with almost no growth in solar since 2019, and little over the last decade. Kick-starting solar industries in these countries would bring jobs, help lower bills as the energy crisis continues, and will be essential to ensure one fossil fuel (coal) isn’t replaced with another (fossil gas) now that both countries are targeting coal phase-outs in the early 2030s.
Countries with both higher irradiance (Spain and Cyprus) and lower irradiance (Netherlands and Germany) are now generating around a tenth of their national power demand from solar. Government policy, if sustained, can help create a market for solar anywhere in Europe.
With cheap solar power now appearing across Europe, we expect more countries to raise their solar power targets. For example, Germany’s new coalition agreement recently raised the country’s solar ambitions, with a new target of 200GW by 2030. This is a significant step up from its current capacity of ~ 59GW, which met 9% of electricity demand in 2021. Across the continent, solar’s moment has arrived – if governments choose to embrace it.
The complete report can be accessed here