Renewables trading could save EU €17 billion a year – Eurelectric

www.environmental-finance.com/
London, 5 March:

Allowing EU member states full flexibility to meet their renewable energy targets by trading certificates could save €17 billion ($21 billion) a year by 2020, according to a study commissioned by electricity industry association Eurelectric. But, without any trading, at least six member states will struggle to meet their targets.

In December 2008, the EU signed off on targets to source 20% of energy supplies from renewable sources by 2020. According to Eurelectric, renewable electricity generation will need to reach 30-35% by 2020, if the target is to be reached. The burden for meeting this target is shared out across the member states and governments can use co-operation mechanisms, for example carrying out joint projects, to meet the targets.

However, the ability to trade between countries is limited. But reaching EU RES Southern Cross Targets in an Efficient Manner - Benefits of Trade, carried out for Eurelectric by the consultancy Poeyry, says that savings of €17 billion a year by 2020 would be possible, compared to the effort required for each member state to meet its own target.

Allowing member states to meet 20% of their targets through trade, with 80% through domestic action, would cut costs by €14 billion a year, but some countries will still struggle to meet their targets, the report says. But if no trading is allowed, six countries will face very high costs, of more than €500 per MW hour (MWh) to meet their targets, compared to costs under €200/MWh for the other member states.

Romania, Belgium and the Netherlands would face costs of more than €1,000/MWh if they are forced to meet their targets domestically, as they would be forced to install more expensive technologies, such as solar photovoltaics (PV). According to Poeyry, if member states rely on domestic action alone, they will need to produce 12.1 terrawatt hours (TWh) of electricity from solar PV, 2.9TWh from solar thermal, 3.6TWh from tidal stream technologies and 1.4TWh from wave power.

In a partial trading scenario, these figures would be greatly reduced and, if full trading was instituted, member states would be able to avoid adopting them entirely. The report also says that meeting the 20% renewables target will put a "significant downward pressure" on carbon prices within the EU emissions trading scheme, as the electricity generation portfolio shifts away from fossil fuelled generation.

The EU has set a target to cut greenhouse gas emissions by 20% from 1990 levels by 2020, but has said it will increase its target to 30% if an ambitious global climate change deal is signed. Poeyry calculates that meeting the renewable energy target will effectively cut prices for EU allowances by €8/tonne in the 20% scenario, or €10-11/t if the 30% target is adopted.