The European Union’s electricity consumers are set to save EUR 100 billion between the 2021-2023 period because of newly installed low-cost solar PV and wind capacities, according to a report from the International Energy Agency (IEA). However, these savings could have been 15% higher if the region had accelerated capacity expansion with robust policy backing.
Despite commendable strides in renewable capacity, energy poverty in the region surged from 6.9% in 2021 to 9.3% in 2022 due to escalating electricity prices. The main contributors to this were severe gas shortages and reduced nuclear and hydropower generation.
Wärtsilä’s President and CEO, Håkan Agnevall, underscores the imperative for a comprehensive approach to meet Europe’s future energy needs. “We stand at the precipice of a transformational shift in European electricity systems, as wind and solar become the dominant power source to achieve net zero. However, the transition cannot be delivered by renewables alone.”
Energy market reforms are not going to be a one-off but continuous exercise and we need to accept it as such. We can’t tick a box and say it's done. We will have to regularly recheck to make sure whether the market’s performance is still serving the transition.
The IEA estimates that only half of Europe’s gas supply-demand gap of 57 billion cubic meters in 2023 is addressed by ongoing actions that are already visible. But the success of these actions hinges on a robust policy framework, grid modernisation, and enhanced connectivity.
The inadequacy of European grids to cope with the rapid growth in renewable energy has become evident. For instance, Spain and Italy are each awaiting grid connections for over 150 gigawatts of wind and solar capacity. Reports suggest a hefty EUR 584 billion investment by 2030 is required to upgrade grids for seamless renewable integration.
Louis Strydom, Director of Project and Market Development at Wärtsilä, advocates a multi-dimensional strategy, encompassing the integration of renewables, bolstering the carbon market, creating a level-playing field for new technologies and enhancing cross-border energy cooperation to fortify Europe’s energy security and the decarbonisation journey.
“Energy market reforms are not going to be a one-off but continuous exercise and we need to accept it as such. We can’t tick a box and say it's done. We will have to regularly recheck to make sure whether the market’s performance is still serving the transition. Flexible generation is going to be crucial in this context.”
“We will have to look at technologies that can provide baseload and balancing to catch up with the transition to renewables. You can run engines today as baseload and as renewables increase you can switch technologies used in baseload today for balancing purposes tomorrow.”
Wärtsilä's advanced power system modelling unveils an optimal energy mix that could cut Europe's energy costs by EUR 323 billion by 2030. This model factors in various renewable sources like wind and solar PV and grid-balancing technologies. It also takes into broader account market dynamics such as increased LNG imports, no Russian gas imports, and additional renewable capacity aligned with the European Commission’s RePowerEU policy plan.
The proposed model posits that Europe needs at least 1,100 GW of renewable capacity by 2030, supported by 19 GW of flexible gas capacity and 50 GW of storage for reliability during periods of low generation.
It demonstrates that grid-balancing technologies such as reciprocating engines and energy storage will play a crucial role in the EU power system and account for a 19% share of electricity generation by 2030. To achieve a 100% renewable energy system, these gas engines can later transition to sustainable fuels like hydrogen.
A McKinsey report reinforces this assessment, projecting a tripling of Europe's need for flexibility in power systems by 2030 due to increased renewable energy generation. Approximately 70% of the existing gas network must be upgraded to facilitate hydrogen blending, necessitating additional capacity support for green hydrogen.
We stand at the precipice of a transformational shift in European electricity systems, as wind and solar become the dominant power source to achieve net zero. However, the transition cannot be delivered by renewables alone.
Strydom underscores the necessity to comprehend energy systems intricately, urging a shift from only major structural planning to one including detailed flexibility, likening the former approach to soccer. “That’s like saying, I have a coach, a team, and I’m playing in a match. That doesn’t guarantee victory. To win, the coach and team must understand every nuance, role, and part of the game – planning the match minute by minute and constantly adjusting the strategy. The same applies to successful power systems in the energy transition.”
“For instance, if we have simply added storage capacity without understanding how it interplays with other critical balancing infrastructure, we would never know what is the best balancing mix. If you think of this in terms of soccer, having more players doesn't improve your chances if you're not bringing in the right players at the right moments in the match. It's about understanding how to deliver the next stable electron in the next minute efficiently and effectively rather than just looking at how many resources we need. Once you start approaching it this way, you get the full picture,” explains Strydom.
Integrating distributed energy sources acknowledges the shift from centralised power plants to a landscape of renewable-driven nodes.
“This gradual shift towards a landscape dominated by renewable-driven nodes has now rapidly captured attention due to its exponentially growing impact. Since renewable nodes and users don’t always match, integrating them isn't just about extending power lines; it involves a comprehensive suite of balancing technologies and a complete ecosystem of localised, bespoke balancing solutions that collectively uphold the entire system.
With the recent COP28 ending with a clear call to transition away from fossil fuels, enhancing energy system efficiency and diversifying sources is the need of the hour in Europe. The road ahead is challenging, but Europe must embark on this transformative journey sooner rather than later.
