Investment gap is threatening low-carbon energy transition, EURELECTRIC tells policymakers

As Europe advances to a decarbonised economy, a new energy landscape is emerging. In 2013, for the second year running, more than half of the electricity generated in Europe came from low-carbon sources. The share of renewable electricity continued to grow: from 24% is 2012 to 27% in 2013. As a result, 2013 also saw a marked decline in CO2 emissions. At the same time, however, investment in renewables substantially declined between 2011 and 2013. These are some of the key findings of a new report on electricity industry trends and figures, presented at a EURELECTRIC conference in Brussels today.

The rapid energy transition is creating new challenges: the power system needs to adapt to the growing share of variable electricity production while ensuring a stable electricity supply and continued low-carbon investment. Yet the report shows that the power sector is experiencing a persistent investment gap, as wholesale prices are too low to incentivise investment in most existing technologies.

“To pursue Europe’s decarbonisation pathway, 740 GW of additional generation capacity would be needed by 2035, making the EU the second largest economy after China to revamp its generation fleet to such an extent. This can only be achieved if EU policymakers recognise the urgency in putting forward a regulatory framework that empowers companies to cost-efficiently meet the decarbonisation agenda”, Oluf Ulseth, CEO of Energi Norge and Chairman of EURELECTRIC’s Energy Policy and Generation Committee, said today.

Today’s conference outlines that the energy transition requires prompt policy and market adaptations that let power companies bridge the investment gap and provide a continued safe and affordable electricity supply to their customers. In particular, it is vital to strengthen the EU Emissions Trading Scheme (ETS) so that it delivers a robust carbon price that supports investments in low carbon technologies. Achieving a well-connected and integrated power market where flexibility is achieved through demand side response, flexible generation, storage and interconnectors, and with a market design that secures long-term system adequacy, will be another important test case for EU policymakers.

Speakers from the European Commission, investment banks, agencies, and the energy sector also used today’s conference to examine the role of the Energy Union in leading a cost-efficient energy transition.

The report, entitled ‘A sector in transformation: Electricity industry trends and figures’ is based on the latest available industry figures (2013) gathered from the EURELECTRIC statistical experts and complemented by a number of policy messages directed to the new European Commission and Parliament. The data cover 34 countries, namely the EU-28, Norway, Switzerland, Iceland, Turkey, Serbia and Ukraine, and address demand, generation, capacity and investment.