Also by EU-China Energy Cooperation
Platform Project
2020
EU China Energy Magazine Spring Double Issue
EU-China Energy Magazine Summer Issue
中欧能源杂志夏季刊
EU-China Energy Magazine Autumn Issue
中欧能源杂志秋季刊
EU-China Energy Magazine 2020 Christmas Double Issue
中欧能源杂志2020圣诞节双期刊
2021
EU-China Energy Magazine 2021 Spring Double Issue
中欧能源杂志2021春季双期刊
EU-China Energy Magazine 2021 Summer Issue
中欧能源杂志2021夏季刊
EU China Energy Magazine 2021 Autumn Issue
中欧能源杂志2021秋季刊
EU China Energy Magazine 2021 Christmas Double Issue
中欧能源杂志2021圣诞节双刊
2022
EU China Energy Magazine 2022 February Issue
中欧能源杂志2022年2月刊
EU China Energy Magazine 2022 March Issue
中欧能源杂志2022年3月刊
EU China Energy Magazine 2022 April Issue
中欧能源杂志2022年4月刊
EU China Energy Magazine 2022 May Issue
中欧能源杂志2022年5月刊
EU China Energy Magazine 2022 June Issue
中欧能源杂志2022年6月刊
EU China Energy Magazine 2022 Summer Double Issue
中欧能源杂志2022年夏季雙刊
EU China Energy Magazine 2022 September Issue
中欧能源杂志2022年9月刊
EU China Energy Magazine 2022 October Issue
中欧能源杂志2022年10月刊
Digest of the Handbook on Electricity Markets - China Edition
Digest of the Handbook on Electricity Markets - International Edition
电力市场手册 （精华版）- 中国发行
电力市场手册 （精华版）- 国际发行
EU China Energy Magazine 2022 November Issue
中欧能源杂志2022年11月刊
EU China Energy Magazine 2022 Christmas Double Issue
中欧能源杂志2022年12月刊
2023
EU China Energy Magazine 2023 February Issue
中欧能源杂志2023年2月刊
Joint Statement Report Series
Electricity Markets and Systems in the EU and China: Towards Better
Integration of Clean Energy Sources
中欧能源系统整合间歇性可再生能源 - 政策考量
Supporting the Construction of Renewable Generation in EU and China:
Policy Considerations
中欧电力市场和电力系统 - 更好地整合清洁能源资源
支持中欧可再生能源发电建设: 政策考量
ENTSO-E Grid Planning Modelling Showcase for China
ENTSO-E 电网规划模型中国演示
Accelerating the Incubation and Commercialisation of Innovative Energy
Solutions in the EU and China
加速中欧创新能源解决方案的孵化及商业化
Comparative Study on Policies for Products’ Energy Efficiency in EU and
China
Table of Contents
Also By EU-China Clean Energy Cooperation Platform Project
Letter from the Team Leader
1. The EU in a hard gas crisis: what reform of its internal electricity
market?
2. Russia–Ukraine war has not led to increased fossil fuel consumption in
the EU
3. How will EU’s ‘green tariff’ impact China’s carbon market?
4. 30-60 carbon targets provide new opportunities for China's pumped
storage development
5. Airborne wind energy is finally ready for lift-off
6. News in Brief
7. Featured Publication
Sign up for EU-China Clean Energy Cooperation Platform Project's Mailing
List
Also By EU-China Clean Energy Cooperation Platform Project
Letter from the Team Leader
Dear all,
Welcome to the February 2023 issue of the EU-China Energy Magazine.
This month we asked ChatGPT, the notorious AI writing tool, what its
opinion is of the EU-China Energy Cooperation Platform and received this
answer:
“As an AI language model, I don't have personal motivations or interests,
but I am programmed to support and promote sustainable energy
development and cooperation between regions, including EU-China energy
cooperation.
That being said, there are many reasons why EU-China energy cooperation
is important. The EU and China are among the world's largest energy
consumers and greenhouse gas emitters, and their actions have a
significant impact on global energy and climate policies. By working
together, they can promote the adoption of sustainable energy practices and
reduce their carbon footprint.”
Buoyed by this accolade, we are currently working intensively on three
Joint Statement reports on commercialisation of clean energy innovation,
gas, energy efficiency financing as well as a follow up report on net-zero
carbon energy infrastructure planning. EU and Chinese companies with
experience in commercialising their innovative energy technologies outside
their own domestic markets are encouraged to share their experiences and
insights with us - please contact us at flora.kan@ececp.eu if you would like
to contribute.
In this issue, we take a closer look at the context of EU’s recent attempts to
reform the internal electricity market and the path forward. We also
examine the trajectories of EU fossil fuel consumption and CO2 emissions
in the past year under the shadow of the Russia-Ukraine war. In addition,
special focus is given to the possible impact of EU CBAM on China’s
carbon market, as well as recent policies supporting the burgeoning pumped
hydro storage sector. Lastly, an interesting clean technology - airborne wind
energy - is put under the spotlight, which, although niche, may have a role
to play in the net zero future.
I hope that you will enjoy the issue.
Once again I would like to say a big thank you to our editors Daisy Chi and
Helen Farrell for their hard work in delivering this issue of the magazine
under extreme pressure.
Flora Kan
ECECP Team Leader
1. The EU in a hard gas crisis: what
reform of its internal electricity market?
On Monday, 23 January 2023, the European Commission launched a
consultation for the reform of the existing electricity market to cope with
the hard crisis that has hit the gas supply chain. Let’s take a step back to
understand why this proposal came to be and what is the path forward.
Today, the European electricity market suffers the consequences of a
tremendous natural gas crisis. Electricity is not a primary energy resource.
It is an energy vector which is generated by transforming primary energy
resources into flows of electrons. At the time the EU internal electricity
market was created, about 25 years ago, gas was the most promising
primary energy resource for electricity generation (that time was nicknamed
as the ‘dash for gas’). In a few years’ time, combustion cycle gas turbines
(CCGTs), running on natural gas, became a dominant feature of many
European electricity systems and are still so today. Because of this feature,
the EU wholesale electricity market propagates to electricity buyers the
currently very high gas prices it meets in the wholesale gas market.
However, the EU wholesale electricity market does not just propagate high
gas prices. It also exacerbates them, because CCGTs need approximately
two MWh of gas to generate one MWh of electricity. This means that when
the price of one MWh of gas increases by 100 euros, the new normal in the
year 2022, the price of CCGTs’ electricity output increases by 200 euros per
MWh. Finally, the existing pricing mechanism in the EU wholesale
electricity market also amplifies the effects of the rising cost of gas on the
wholesale gas market, because it gives the price corresponding to the
highest accepted bid to all the winning sellers of electricity. This wholesale
pricing rule is called ‘marginal pricing.’ If the highest bidder is frequently a
CCGT and electricity demand cannot be met without any CCGT output, all
the sellers get the same ‘gas cost-based’ price despite not all of them buying
gas to generate electricity.
Public opinion and the public authorities can look for ways and tools that
can block the transmission of a genuinely higher gas cost to electricity or
the generation of windfall profits in the wholesale electricity market. Many
emergency actions are possible for the EU Member States: spreading the
payment of wholesale price increases over a longer period, prohibiting any
retail price increase, using ‘claw-back’ mechanisms in the wholesale
electricity market, taxing ex-post the extra profits made by energy
companies, regulating the wholesale electricity prices, capping the
wholesale revenues in ‘contracts for differences’, regulating the price of gas
used to generate electricity, capping the wholesale price of gas, transferring
revenues to energy consumers, etc...
As the EU is not short of emergency tools to deal with a genuine gas price
shock or an electricity price shock, one wonders how to balance the use of
emergency tools to deal with emergency phenomena and the use of
structural remedies (as in an EU market design reform). In other words,
what is the best way to deal with emergency phenomena? With emergency
tools or with structural remedies?
A pragmatic answer can be the following. It will take a minimum of one
year (if we are lucky) to agree at the EU level on a draft market reform, and
two years more to have this new EU frame transposed into national law.
This takes us to the end of 2025, with a new EU Parliament being elected in
Spring 2024 and a new Commission being formed in Autumn 2024 – not a
very effective way to address a gas or electricity price shock supposed to
calm down from 2025.
A more analytical answer looks at the characteristics of the aims and tools,
and analyses whether they match. Let’s assume that the aim is to deal with a
gas price shock which is expected to decrease from winter 2025-26 (as a
warm beginning of January 2023 also suggested), and to protect some
categories of consumers from its direct (gas price) and indirect (electricity
infra-marginal rent) redistributive effects. Using emergency redistributive
tools seems, a priori, the best option as it permits national authorities to
better define their own particular national aims and better control for the
adequacy of the national outcomes. The variety of emergency tools
available gives the EU countries many alternative national choices, which a
single uniform EU mechanism can hardly match or beat.
Furthermore, changes made to the electricity market framework are rarely
unidimensional. Reducing by reform the price of a commodity when we
face a direct shortage (as with gas) or an indirect shortage (as at peak
electricity demand) does not cure the roots of the problem but feeds them.
Any structural reform of the electricity market has to take this into
consideration. More generally, the core rationale for a market reform cannot
be to avoid passing on to consumers the total cost of supply, including a
normal profit. Voluntarily unbalanced retail pricing schemes, if they
become the norm, have strong long-term effects on the structure and
evolution of the electricity sector. The typical long-term effect is termed
‘low equilibrium’: low quality of service, low security of supply, low
investments, etc., exactly the opposite of what the EU wants. The EU
electricity sector has strong primary goals of high quality of service, high
security of supply, high levels of investment, high shares of electrification
of final energy consumption, and fast and deep decarbonisation of
electricity generation. All these primary goals call for preserving the short-
term (i.e., day-ahead or intraday) EU electricity market from intrusive price
regulation and keeping its two legs working as they do now (short-term
efficiency in the ranking of assets generating at each moment; and long-
term financing of fixed costs neglected in the marginal bidding of each
generator, via the receiving of infra-marginal rents).
In the EU, the existing daily electrical energy market plays another
fundamental role which also has to be carefully considered. This daily
exchange platform is the core of the European internal electricity market,
because it allocates daily the cross-border transmission capacity to the
sellers of electrical energy. This daily functioning of the EU internal
electricity market among countries is fully automatized. Delivery of
electrical energy between countries is executed according to market
equilibria realised in the various power exchanges. This automation of
European cross-border delivery is a key feature and an important result of
the Europeanisation of the electricity trade. It would be irresponsible to
break or breach this remarkable ‘electricity system first aid’ tool. For
example, in the December 2022 cold snap, France got up to 20% of all its
electricity consumption from neighbouring countries, and 15 TWh net from
Germany in the whole year 2022, without any drama, threat or diplomatic
crisis thanks to this common mechanism known, practised and trusted by
the hundreds of companies working in the European electricity industry.
Even if emergency tools are able to deal with unwanted consequences of the
current gas price shock or of the infra-marginal electricity rent shock, public
opinion and public authorities can still wonder whether structural reforms
could better prepare the EU electricity market for future energy shocks. Can
the EU internal electricity market be made more resilient to price shocks?
It makes sense to look at a reform of the EU internal electricity market to
strengthen it against future energy shocks. Three main pillars appear
significantly able to strengthen the EU electricity market. They are:
● long-term contracts for price hedging;
● long-term contracts for energy delivery; and
● long term contracts for capacity remuneration.
These three new pillars do not weaken our EU global strategy of
accelerated decarbonisation and fast electrification. There is no fundamental
conflict at stake here, only adjustments and care.
It has to be noted that these three components of the reform do not touch the
core of the existing EU coupling of national electricity markets, which are
the short-term markets for energy and (in some sense) for reserves. The
future EU electricity market design could therefore have five market pillars:
the three types of long-term contracts and the existing two types of short-
term markets (energy ahead & balancing reserves). One must also note that
to address the other issue of deeper decentralization (typically pushed by
prosumers and flexsumers), other new markets will have to be built and
nurtured, by adaptation to the very special – including local –
characteristics of their products, nature of their trade agreements, and
governance.
This new configuration combining long-term contracts, short-term central
markets and local trade is not a surprise discovered during the European
crisis. Leading electricity researchers at MIT arrived at the same conclusion
in their studies of the main consequences of the push for decarbonisation in
the US sector. Both in the US and in the EU, we are entering a new era of
‘electricity hybrid markets’ combining private and public, centralized and
local, dimensions. What the EU adds to this general finding is a need to
build a strongly independent European energy security when accelerating
its decarbonisation push and electrification pull.
However, reforming the EU internal electricity market around a five to six
pillar architecture cannot guarantee the success of our core European aims.
The EU also needs a much stronger policy with both transmission grids and
distribution grids, and several other types of infrastructure such as storage
and flexibility assets. Without these new infrastructures, the European
policy of higher RES targets and deeper electrification cannot be fully
implemented both on time and with the expected effect of market price
softening. However, it is the Member States and not the EU authorities
which hold most of the key decision-making rights in these key areas (long-
term contracts for hedging, energy and capacity; local trade; transmission
and distribution grids plus other infrastructures). It is unlikely that the
already existing coordination tools at the EU level can easily deliver both
increased energy security and an accelerated energy transition and
electrification (see Tubiana et al., 2022). New governance tools have to be
found and implemented soon because the current EU crisis is a very serious
one, threatening even our European industrial and economic future. We
have seen that uncoordinated national rushes to fill gas storages can push
market stress and prices too far. We have not seen yet a solid planning of
options and a robust study of a minimum set of European infrastructures
needed to reach our ambitious EU targets for 203O and 2050. And, at these
horizons, we also have to assume a fully electric European mobility
sector...
Unfortunately, other conditions for success are not guaranteed. The
European Central Bank is tightening its monetary and financial policy while
many investments that the EU needs to multiply are fixed-cost assets, very
sensitive to the interest rate. Furthermore, the national finances of the
Member States are deteriorating due to their enormous budgetary support
for the consumption of energy and fossil fuels. The coming years do not
promise any growth in fiscal revenue. And the ‘green macroeconomics’ of
progressive recovery through public expenses and investments does not
have an easy hand against direct redistribution of revenue to the vulnerable,
the losers and many other potential plaintiffs. It is also likely that, after
such a crisis, the general European aim of a ‘just transition’ will have to be
seriously reviewed to keep legitimacy and credibility in the public.
However, the EU has no other way forward to address the many industrial,
economic and social challenges it will inevitably face during the 30 years to
2050. The EU literally has a war to win against itself: either it wins it and
reinvents a bright future for itself; or it lets the other major world powers
decide what the EU is allowed to become.
Reference:
The corresponding whole paper is accessible on our FSR Website and at the EUI Library: Jean-
Michel Glachant Reforming the EU internal electricity market in the middle of a huge energy crisis :
an absolute short-term emergency or preparation for the future? | Florence School of Regulation.
Tubiana Laurence, Jean-Michel Glachant, Beck Thorsten Harald Leopold, Ronnie Belmans,
Colombier Michel, Leigh Hancher, Andris Piebalgs, Nicolò Rossetto, Rüdinger Andreas, Runge-
Metzger Artur (2022)
Between crises and decarbonisation : realigning EU climate and energy policy for the new ‘state of
the world’ | Florence School of Regulation (eui.eu)
By Jean-Michel Glachant
Republished with permission from Florence School of Regulation
2. Russia–Ukraine war has not led to
increased fossil fuel consumption in the
EU
Coal consumption and CO2 emissions remained below pre-COVID levels
and have been falling since September 2022.
Many observers have suggested the EU is increasing fossil fuel, and
particularly coal, consumption as a reaction to Russia’s war against
Ukraine. However, data shows this is not true. In fact, consumption of both
gas and coal have sharply fallen in the second half of 2022, and coal use in
particular is set to fall further in 2023.
EU coal consumption and emissions plummeted in 2020 due to the COVID-
19 pandemic. They started rebounding from early 2021 until summer 2022.
Besides the rebound in electricity demand, coal consumption increased until
summer 2022 due to a widespread drought that affected hydropower
production, and serious but temporary technical issues at French nuclear
power plants.
However, coal consumption and CO2 emissions peaked below their pre-
COVID level, and both have been falling since September 2022. As
hydropower and nuclear power operation normalize and more solar and
wind power capacity comes online, coal consumption is set to fall further
this year. The record-high fossil fuel prices caused by Russia’s decisions to
cut supply to Europe have also resulted in a major increase in investments
in clean energy and strengthening of clean energy policies that will
accelerate reductions in fossil fuel consumption in the coming years.
Data sources: CREA analysis using Eurostat monthly coal consumption data. For the most recent
months for which Eurostat data is not available, ENTSO-E daily power generation data is used for
power sector coal consumption and the trend in consumption outside the power sector is
extrapolated. Non-power sector consumption is a small share of the total.
What caused the energy crisis
Starting in summer 2021, the EU has experienced an energy crisis. The
crisis was caused by Russia's decisions to limit gas supply to Europe in
preparation for the invasion of Ukraine, and to further cut supply after the
start of the invasion. The supply cuts came just as EU energy demand was
rebounding from the drop caused by COVID-19. The reduced gas supply
from Russia over the winter 2021–22 had led to very low levels of gas
storage which made the situation more precarious.
Source: CREA analysis of daily data from ENTSOG transparency platform.
EU emissions and coal use increased in the first half of 2022, leading a lot
of observers to draw a connection between the energy crisis and the
increase. The growth in coal use and emissions however started already in
early 2021, making it clear that the fundamental reason was the rebound in
energy demand. In early 2022, several additional factors contributed to the
increase in coal and gas demand: widespread drought, affecting hydropower
production; historical heatwave in the summer, which boosted electricity
demand; and a drop-off in nuclear power generation. Germany closed down
three nuclear reactors, in accordance with the country’s nuclear phase-out
plan, at the end of 2021. An even larger drop in nuclear power generation
happened in France due to neglected maintenance of the country’s nuclear
reactors and the discovery of stress fractures affecting the majority of the
nuclear fleet.
None of these factors were structural and none of them were caused by the
war or the energy crisis. They merely happened at the worst possible time in
terms of Europe’s energy supply security. The only consistent bright spot
throughout the summer and autumn was solar power generation, which set
new records every month, easing the pressure on gas and coal-fired
generation.
The figure below shows that both hydropower and nuclear power
generation fell far below their levels in the preceding five years in 2022. As
a result, both coal and gas-fired power generation increased year-on-year
until August but started falling in September. In November, power
generation from both coal and gas were at their lowest levels in at least
30 years.
Source: CREA analysis of daily power generation data from ENTSO-E transparency platform.
Following the gas supply cuts, the EU in turn banned the imports of coal
from Russia in August and imports of crude oil in December 2022. As a
result of the almost complete stoppage of fossil fuel imports from Russia,
the EU increased imports from practically all other exporting countries,
with policymakers paying a lot of attention on securing gas and oil supplies
in particular. These imports were not covering for increased demand
inasmuch as they were covering for the loss of supply from Russia. This
‘hunger’ for fossil fuel imports, however, contributed to the impression that
demand in the EU was increasing.
Another factor creating the impression of ‘return to coal’ was decisions to
re-activate mothballed coal power plants and extend the lifetime of some
plants that were set to retire. In total, these decisions affected 26 power
plant units. This back-up measure helped ensure the availability of capacity
at some critical times but contributed very little to coal consumption, as the
plants were on average operated at a utilization rate of 18%.
Why are emissions falling now?
The basic laws of supply and demand suggest that a dramatic reduction in the supply of fossil fuels,
especially gas, will lead to an increase in prices and a reduction in demand. This is exactly what
happened: as prices shot up, gas demand started falling significantly below the previous year’s levels
in May 2022 and electricity demand in August 2022.
In other words, without the cutbacks to fossil fuel supply and the high prices, emissions would very
likely have increased more and for a longer time.
The temperature-corrected data also shows that unseasonably warm weather connected to the
warming climate is a contributing factor but not the main cause of lower demand.
CO2 emissions stopped increasing in July and have been falling since September. Besides the
reduction in electricity and gas demand, the contributing factors are growth in wind and solar power
generation, normalization of hydropower availability and progress in restoring nuclear power
operation in France. Germany’s decision to extend the life of the country’s remaining nuclear
reactors, which were set to retire at the end of 2022, also helps reduce coal and gas-fired power
generation in the first quarter of 2023.
Emissions likely increased in calendar year 2022, due to the large rebound early in the year. There is
still a long way to go to restore the full operation of the French nuclear fleet, which means that
improved availability of nuclear power, together with increased capacity of solar and wind power,
will help reduce emissions throughout 2023.
Both coal and gas fired power generation are falling. Gas has been falling faster, due to the extremely
high gas prices. Therefore, there has been a shift from gas to coal in power generation in relative
terms, but it's misleading to call this a return to coal since coal consumption is falling too.
The energy crisis is accelerating the energy
transition
● The market response
The security of supply implications of the fossil fuel crisis and the price
implications of the broader energy crisis have resulted in forceful responses,
both from energy markets and policymakers. Some of these responses may
be observed as the spectacular growth in solar power, heat pump
installations, as well as electric vehicle sales.
According to SolarPower Europe projections, nearly 40 GW of solar PV
capacity was installed in Europe in 2022. This is a 45% gain compared to
2021 which itself broke a decade-long record in capacity installations. Solar
is becoming an important source of energy in Europe, generating a record
12% (99.4 TWh) of EU electricity from May to August 2022, up 9% from
the 77.7 TWh generated last summer. Thereby, solar power generation is
just 4% points behind coal which currently produces 16% of the
EU’s electricity.
The boom in solar power generation is widely spread across the Union, with
18 of 27 EU countries breaking their former records in solar power
generation as a share of total electricity generation this summer. This is the
result of multiple years of investment in solar, like Poland’s 26-fold
increase in solar power capacity since 2018 and Hungary’s and Finland’s 5-
fold expansions in the same period.
Europe’s installed solar power capacity was sufficient to substitute 210
TWh of fossil gas from May through August, the equivalent of 44% of the
imports from Russia over that period in 2021. These imports would
otherwise have cost the Union EUR 29 billion, and increased its
vulnerability to Russian gas cuts. However, while solar is seeing a boom
that raises the resilience of the European energy system, wind power is still
being held up by restrictions and slow permitting processes in many
countries despite the economics of wind power being highly favorable.
Even with high electricity prices, high and volatile prices for gasoline and
diesel have made electric vehicles much more competitive and their sales
volumes have increased since the beginning of the war. In the second
quarter of 2022, which is the first full quarter after the war began, the sales
of passenger EVs in Europe increased by 16% year-on-year. This comes on
top of a 70% increase in 2021. In some markets, including the Netherlands,
Sweden, and Norway, EVs already had a market share exceeding 50%,
becoming the default option for new car buyers. In Norway, their share
hit 85% of all passenger cars in the second quarter of 2022.Building owners
are also scrambling to install heat pumps to reduce their energy
consumption and reliance on gas in heating. This is mirrored in the
European Heat Pump Association’s projection of a 30% increase in heat
pump sales in 2022 compared to 2021 which itself saw a growth of 35%.
Some of this growth is already apparent in Germany, where high gas prices
have increased heat pump deliveries by over 50% in 2022, compared with
2021 which in itself was a record year.
● The policy response
Supporting the market reaction is a host of EU and national policies
promoting clean energy. The REPowerEU plan launched in May 2022
envisions that 45% of the EU's energy mix in 2030 will consist of
renewable energy, up from 40% in the earlier Fit-for-55 plan. This includes
all uses of energy spanning from heating, transportation, industry, as well as
electricity. Reaching the target will require the EU to install a total capacity
of 1,236 GW of wind and solar by 2030, which is 16% higher than the
1,067 GW envisaged in the Fit for 55 strategy.
A report by Ember and CREA shows that the EU’s heightened ambition is
supported by accelerated decarbonization plans in most EU member states.
By June 2022, 19 governments had already announced plans to accelerate
the green shift in response to the COVID-19 pandemic and Russia’s threat
to their energy supply and security. In the power sector, these plans are set
to deliver an 82% share of non-fossil energy sources in EU power
generation by 2030, which is a substantial increase from the share of 74%
projected following plans in place at the end of 2019. This means an almost
complete phase-out of coal and a substantial reduction in the use of fossil
gas in the power sector — the share of fossil fuels in EU power generation
was 36% in 2021.
Overcoming bottlenecks that have suppressed wind power expansion in
Europe is key to realizing these goals, and EU governments have
announced plans to do so. One example is the ‘Wind-on-Land-Act’
launched by the German government which seeks to overcome hurdles that
have slowed the expansion of German wind power capacity over the past
years. The act will allow wind power installation on 2% of Germany’s land
area, and seeks to install 10 GW of onshore wind power capacity annually
— almost five times more than the average installation over the years
2018–2021. Another example includes the agreement between eight EU
countries bordering the Baltic Sea on increasing offshore wind power
capacity seven-fold by 2030 to reduce their dependence on Russian energy.
Such measures will contribute to a more energy secure Europe with less
dependence on CO₂ emitting fuels and their insecure value chains.
Simultaneously, the EU and its member states are boosting their targets for
energy efficiency and energy savings to directly cut the need for Russian
gas. On the EU level, this includes heightening the Union’s energy
consumption reduction target from 9% to 13%, meaning that the EU will
cut its energy use by an additional 4% points by 2030 compared to the
reference scenario. This target is complemented by several measures,
including increasing the energy efficiency of buildings and installing 10
million new heat pumps in European households within the next five years.
The German government has already embraced this approach, and has
called upon the heat pump industry to ramp up production capacity to aid
Germany to install 500,000 new units yearly from 2024.
EU emissions are not yet falling fast enough to align with climate targets
but policies and market trends are moving in that direction. The key
challenges are permitting processes, which in many EU countries are slow
and cumbersome, particularly for wind turbines and for transmission lines;
and input cost increases for equipment manufacturers which have led many
of them to struggle despite strong market demand. EU policymakers are
also concerned about the high degree of import reliance for some key raw
materials and technologies that are central for the energy transition, such as
rare earth metals, polysilicon and batteries. Policy proposals to address
these issues are emerging.
In conclusion, the high energy prices and supply concerns have led to
reductions in EU coal consumption and CO2 emissions. The rebound in coal
and other fossil fuel use that was associated with re-opening and economic
recovery after COVID-19 has ended, and coal use or CO2 emissions never
rose above the pre-pandemic levels. They fossil fuel supply shock has also
accelerated clean energy investments and the energy transition, leading to
faster coal phase-down and emissions reductions in the coming years than
previously expected.
By Lauri Myllyvirta, Lead analyst at Centre for Research on Energy and
Clean Air (CREA)
Dimitri de Boer, Regional Director for Asia & Chief Representative of
China, ClientEarth
Republished with permission from CREA and ClientEarth