The EU needs to take significant action to generate more electricity from wind and solar power and meet its targets on renewables, according to a new report by the European Court of Auditors. Although both wind and solar power have recorded strong growth since 2005, there has been a slowdown since 2014, say the auditors. The Commission should urge member states to support further deployment – by organizing auctions to allocate additional renewables capacity, promoting citizen participation and improving conditions for deployment. At the same time, the auditors warn that half of the member states will face a significant challenge in trying to meet their 2020 renewables targets.
The EU aims to generate a fifth of its energy from renewables for electricity, heating and cooling and transport use by the end of 2020. Indeed, between 2005 and 2017, the generation of electricity from renewables in the EU doubled from around 15% to almost 31%. The wind and solar photovoltaic power sectors currently make up the largest share of renewable electricity, and falling costs make them an increasingly competitive alternative to burning fossil fuels.
The auditors assessed the progress made by the EU and member states towards the renewables targets. They went to Germany, Greece, Spain and Poland to examine whether financial support for electricity generation from wind and solar power had been effective.
The auditors found that initial support schemes had been over-subsidised in a number of cases, resulting in higher electricity prices or increased state deficits. After 2014, when Member States eventually reduced support to lighten the burden on consumers and national budgets, investor confidence was dampened and the market slowed down.
“Member States incentivized investment in wind and solar power, but the way they reduced support deterred potential investors and slowed deployment,” said George Pufan, the member of the European Court of Auditors responsible for the report. “The slowdown in shifting towards renewable electricity implies that we might not meet the EU 2020 target.”
Organizing auctions to allocate additional renewables capacity, to determine the bidding price and promote citizens’ participation in the green economy, is crucial for increasing investment, say the auditors. Also, additional improvements are required to improve conditions for participation in the renewables market, including overcoming restrictive spatial planning rules, lengthy administrative procedures and grid insufficiencies.
The auditors also found that half of the member states were already closing in on their national 2020 renewables targets by 2017, but warn that the remaining half will require much further effort if 2020 targets are to be met. The auditors express concerns as to whether the efforts of the high-achievers in renewables will be enough to compensate for the renewables’ under-achievers in order to meet the overall EU target.
The current rules do not ensure timely reporting on progress on renewables, and the Commission does not have a mandate to address slower deployment by the member states, say the auditors. They point to the EU’s 2030 renewables target of at least 32 % and say that,in the absence of binding national targets, this may be hard to achieve. They also warn that meeting this target will require a significant amount of public and private national funding in addition to the EU funding the report focuses on.
To improve matters, they make the following recommendations:
- Focus on closing gaps to meet the 2020 targets;
- simplify procedures and improve timeliness of statistics;
- plan sufficient auctions and promote investment in grid infrastructure, and;
- ensure better monitoring.
Wind and solar power generation in the EU rose by 400% and 8,000% respectively between 2005 and 2017. Between 2007 and 2020, the EU provided around €8.8 billion to renewable energy projects through the European Regional Development Fund and the Cohesion Fund, including around €972 million for wind and €2.9bn for solar investments. Support schemes generally offered guaranteed selling prices, top-up premiums or additional income through tradable certificates. For 2021-2027, the Commission proposes around €71.8bn for operations supporting climate objectives, including the promotion of renewable electricity.
The EU set national targets for combined energy use for the purpose of electricity, heating and cooling, and transport for 2020. The Commission may bring legal action against member states for failing to meet these targets. Member states were free to set their own, more ambitious, renewables targets. However, for 2030, the national targets were abandoned, and a global EU target was set.
The ECA presents its special reports to the European Parliament and Council of the EU, as well as to other interested parties such as national parliaments, industry stakeholders and representatives of civil society.
Special report 8/2019 Wind and solar power for electricity generation: significant action needed if EU targets to be met is available on the ECA website in 23 EU languages.
Big business seeks unified, market-based approaches ahead of climate summit
Corporate executives and investors say they want world leaders at next week’s climate summit to embrace a unified and market-based approach to slashing their carbon emissions, write Ross Kerber and Simon Jessop.
The request reflects the business world’s growing acceptance that the world needs to sharply reduce global greenhouse gas emissions, as well as its fear that doing so too quickly could lead governments to set heavy-handed or fragmented rules that choke international trade and hurt profits.
The United States is hoping to reclaim its leadership in combating climate change when it hosts the 22-23 April Leaders Summit on Climate.
Key to that effort will be pledging to cut US emissions by at least half by 2030, as well as securing agreements from allies to do the same.
“Climate change is a global problem, and what companies are looking to avoid is a fragmented approach where the US, China and the EU each does its own thing, and you wind up with a myriad of different methodologies,” said Tim Adams, chief executive of the Institute of International Finance, a Washington-based trade association.
He said he hopes U.S. President Joe Biden and the 40 other world leaders invited to the virtual summit will move toward adopting common, private-sector solutions to reaching their climate goals, such as setting up new carbon markets, or funding technologies like carbon-capture systems.
Private investors have increasingly been supportive of ambitious climate action, pouring record amounts of cash into funds that pick investments using environmental and social criteria.
That in turn has helped shift the rhetoric of industries that once minimized the risks of climate change.
The American Petroleum Institute, which represents oil companies, for example, said last month it supported steps to reduce emissions such as putting a price on carbon and accelerating the development of carbon capture and other technologies.
API Senior Vice President Frank Macchiarola said that in developing a new U.S. carbon cutting target, the United States should balance environmental goals with maintaining U.S. competitiveness.
“Over the long-term, the world is going to demand more energy, not less, and any target should reflect that reality and account for the significant technological advancements that will be required to accelerate the pace of emissions reductions,” Macchiarola said.
Labor groups like the AFL-CIO, the largest federation of U.S. labor unions, meanwhile, back steps to protect U.S. jobs like taxing goods made in countries that have less onerous emissions regulations.
AFL-CIO spokesman Tim Schlittner said the group hopes the summit will produce “a clear signal that carbon border adjustments are on the table to protect energy-intensive sectors”.
Industry wish lists
Automakers, whose vehicles make up a big chunk of global emissions, are under pressure to phase out petroleum-fueled internal combustion engines. Industry leaders General Motors Co and Volkswagen have already declared ambitious plans to move toward selling only electric vehicles.
But to ease the transition to electric vehicles, US and European automakers say they want subsidies to expand charging infrastructure and encourage sales.
The National Mining Association, the US industry trade group for miners, said it supports carbon capture technology to reduce the industry’s climate footprint. It also wants leaders to understand that lithium, copper and other metals are needed to manufacture electric vehicles.
“We hope that the summit brings new attention to the mineral supply chains that underpin the deployment of advanced energy technologies, such as electric vehicles,” said Ashley Burke, the NMA’s spokeswoman.
The agriculture industry, meanwhile, is looking for market-based programs to help it cut its emissions, which stack up to around 25% of the global total.
Industry giants such as Bayer AG and Cargill Inc have launched programs encouraging farming techniques that keep carbon in the soil.
Biden’s Department of Agriculture is looking to expand such programs, and has suggested creating a “carbon bank” that could pay farmers for carbon capture on their farms.
For their part, money managers and banks want policymakers to help standardize accounting rules for how companies report environmental and other sustainability-related risks, something that could help them avoid laggards on climate change.
“Our industry has an important role to play in supporting companies’ transition to a more sustainable future, but to do so it is vital we have clear and consistent data on the climate-related risks faced by companies,” said Chris Cummings, CEO of the Investment Association in London.
How the EU wants to achieve a circular economy by 2050
Find out about the EU’s circular economy action plan and what additional measures MEPs want to reduce waste and make products more sustainable. If we keep on exploiting resources as we do now, by 2050 we would need the resources of three Earths. Finite resources and climate issues require moving from a ‘take-make-dispose’ society to a carbon-neutral, environmentally sustainable, toxic-free and fully circular economy by 2050, Society.
The current crisis highlighted weaknesses in resource and value chains, hitting SMEs and industry. A circular economy will cut CO2-emissions, whilst stimulating economic growth and creating job opportunities.
Read more about the definition and benefits of the circular economy.
The EU circular economy action plan
In line with EU’s 2050 climate neutrality goal under the Green Deal, the European Commission proposed a new Circular Economy Action Plan in March 2020, focusing on waste prevention and management and aimed at boosting growth, competitiveness and EU global leadership in the field.
The Parliament called for tighter recycling rules and binding 2030 targets for materials use and consumption in a resolution adopted on 9 February 2021.
Moving to sustainable products
To achieve an EU market of sustainable, climate-neutral and resource-efficient products, the Commission proposes extending the Ecodesign Directive to non-energy-related products. MEPs want the new rules to be in place in 2021.
MEPs also back initiatives to fight planned obsolescence, improve the durability and reparability of products and to strengthen consumer rights with the right to repair. They insist consumers have the right to be properly informed about the environmental impact of the products and services they buy and asked the Commission to make proposals to fight so-called greenwashing, when companies present themselves as being more environmentally-friendly than they really are.
Making crucial sectors circular
Circularity and sustainability must be incorporated in all stages of a value chain to achieve a fully circular economy: from design to production and all the way to the consumer. The Commission action plan sets down seven key areas essential to achieving a circular economy: plastics; textiles; e-waste; food, water and nutrients; packaging; batteries and vehicles; buildings and construction.
MEPs back the European Strategy for Plastics in a Circular Economy, which would phase out the use of microplastics.
Read more about the EU strategy to reduce plastic waste.
Textiles use a lot of raw materials and water, with less than 1% recycled. MEPs want new measures against microfiber loss and stricter standards on water use.
Electronics and ICT
Electronic and electrical waste, or e-waste, is the fastest growing waste stream in the EU and less than 40% is recycled. MEPs want the EU to promote longer product life through reusability and reparability.
Learn some E-waste facts and figures.
Food, water and nutrients
An estimated 20% of food is lost or wasted in the EU. MEPs urge the halving of food waste by 2030 under the Farm to Fork Strategy.
Packaging waste in Europe reached a record high in 2017. New rules aim to ensure that all packaging on the EU market is economically reusable or recyclable by 2030.
Batteries and vehicles
MEPs are looking at proposals requiring the production and materials of all batteries on the EU market to have a low carbon footprint and respect human rights, social and ecological standards.
Construction and buildings
Construction accounts for more than 35% of total EU waste. MEPs want to increase the lifespan of buildings, set reduction targets for the carbon footprint of materials and establish minimum requirements on resource and energy efficiency.
Waste management and shipment
The EU generates more than 2.5 billion tonnes of waste a year, mainly from households. MEPs urge EU countries to increase high-quality recycling, move away from landfilling and minimise incineration.
Find out more
- Environment committee's circular economy report
- Check legislative progress
- Procedural steps
- European Commission page on the circular economy
- Infographic: circular economy
- The environmental impact of plastics and micro-plastics use, waste and pollution(October 2020)
- Faebook interview with lead MEP Jan Huitema
- Circular economy
- Circular economy: definition, importance and benefits
- How the EU wants to achieve a circular economy by 2050
- The impact of textile production and waste on the environment (infographic)
- E-waste in the EU: facts and figures (infographic)
- EU waste management: infographic with facts and figures
- How to promote sustainable consumption
- New EU industrial strategy: the challenges to tackle
- MEPs call for measures to ensure products last longer
- Ecodesign directive: from energy efficiency to recycling
- Food waste: the problem in the EU in numbers [infographic]
- The circular economy package: new EU targets for recycling
- Circular economy: More recycling of household waste, less landfilling
- Plastic in the ocean: the facts, effects and new EU rules
- How to reduce plastic waste: EU strategy explained
- Plastic waste and recycling in the EU: facts and figures
- Microplastics: sources, effects and solutions
- EU restricts the use of plastic bags to protect the environment
Winds of change: How Enel and Iberdrola powered up for the energy transition
Europe’s biggest utilities Enel and Iberdrola saw the clean energy transition coming decades ago when others baulked at the high cost of producing energy from the sun and wind and instead stuck with coal and oil, write Stephen Jewkes and Isla Binnie.
Thanks to early decisions to buy power grids and build renewable plants, the once-staid utilities are now among a handful of global green energy majors going into battle with Big Oil to supply low-carbon power full of confidence.
European oil giants such as BP, Royal Dutch Shell and Total have sharpened their focus on power, seeing it as the sector to build their businesses around as they reinvent themselves as clean energy suppliers.
But they will need to wrestle market share from incumbents such as Enel and Iberdrola that have been positioning themselves for years to profit from the shift to cleaner energy, betting the demise of fossil fuels was inevitable.
“The energy transition has been part of my life,” Enel Chief Executive Francesco Starace told Reuters. “There was no eureka moment for us. We just said this is too stupid to be continued for a long time.”
The transformation of the two companies into global green powerhouses has helped boost their profits and share prices while generating cash and dividends despite a global pandemic. Over the last two years their shares have skyrocketed as investors shifted from oil stocks to buy into businesses they felt had the financial footing and skill sets to lead the accelerating energy transition. tmsnrt.rs/3fwgdeJ
Enel and Iberdrola have built clean energy capacity in key markets such as the United States and Latin America and are now aiming to have a combined 215 gigawatts of their own renewable capacity by 2030 - enough to power some 150 million European homes, based on an estimate by consultancy Wood Mackenzie.
Other leading green utilities that have also benefited from the shift away from fossil fuels include wind and solar power giant NextEra Energy in the United states and Denmark's offshore wind farm specialist Orsted. (Graphic: Stock markets favour green utilities, )
‘KISS THE FROG’
Even before joining Enel at the turn of the century, Starace was pushing companies hooked on oil and coal to switch to less-polluting gas turbines.
“This is not the first energy transition, before there were coal steam cycles which then transitioned to gas steam and so on,” he said. “I liked the sustainable side of renewables, the fact you keep reusing the same energy from the sun.”
The turning point for Enel was its creation of Enel Green Power (EGP) in 2008, just after it launched a 39 billion euro takeover of Spain’s Endesa, a deal that boosted its access to Latin America’s fast-growing markets. Starace was tasked with running EGP as a viable independent business which did not rely on the generous incentives governments were offering then to kick-start their green drives.Slideshow ( 2 images )
“Renewables were a whole different ball game - smaller plants, less competitive, costlier. It needed its own space with the right footprint and technology mix to deliver,” a source who worked at EGP said. By the time Starace became chief executive of the Enel group in 2014, he lost little time in buying back the part of EGP listed in 2010 so the growth engine was fully in-house.
Iberdrola Chief Executive Ignacio Galan made an even earlier switch away from coal and oil when he took the helm at Spain’s largest private utility in 2001.
He started closing fuel oil power plants - 3.2 gigawatts (GW) of capacity had been decommissioned by 2012 - and shut the company’s last two coal-fired plants in 2020.
At the same time, Iberdrola boosted its spending on building renewable plants, mainly wind farms, in Spain from 352 million euros ($413 million)in 2001 to over 1 billion euros in 2004.
Galan met with internal and regulatory resistance, though Swiss bank UBS said in a 2002 report entitled “Kiss the Frog” that Iberdrola’s new low-carbon focus could produce profits.
Investors still needed convincing. One Iberdrola source recalled a U.S. asset manager’s doubts about wind farms in 2004, calling them pretty white darts stuck on a hillside. He changed his mind when he visited one in Spain in 2007.
"He was sceptical, but three years later he said we were right," the source said. (Graphic: Ambitious targets, but long way to catch up to the renewable energy majors, )
Consultancy Rystad Energy says oil giants have a long way to catch up with the renewable energy majors in terms of capacity, despite their ambitious target. By 2035, it estimates Enel will still be leading followed by Iberdrola and NextEra.
Enel and Iberdrola have another significant advantage that analysts say oil majors will struggle to match – thriving power grids businesses. Almost half of Enel and Iberdrola’s earnings come from millions of kilometres of power lines carrying electricity into homes in Europe, the United States and Latin America.
“Grids are the backbone of the energy transition,” says Javier Suarez, head of the utility desk at Milan’s Mediobanca. “Owning them means steady cash flow and lower investment risk.” Most grids are monopolies with regulated, guaranteed returns and operators rarely put them up for sale. “Any new entrant into the industry is not going to be able to get access easily or certainly not cheaply to the really good legacy assets that Iberdrola and Enel have - the infrastructure assets,” said Wood Mackenzie analyst Tom Heggarty.
Networks built to take one-way power flows from fossil-fuel plants now need a massive round of investment to accommodate electricity generation from sources such as rooftop solar panels that can also inject power back into the grid.
Incumbents like Enel and Iberdrola are the most likely candidates to provide capital, analysts say.
Because returns are typically locked in with contracts, more spending on grids and renewable power generation assets will translate into more profit for the major green utilities, said Goldman Sachs. By the U.S. bank’s calculations, reaching international targets to cut carbon emissions to net zero by 2050 will require a 200% jump in spending on such power infrastructure. Enel is now looking to expand its grid network in Europe, Latin America, the United States and the Asia Pacific region, sources said.
In November, it said it would spend 150 billion euros of its own money to help cut its carbon emissions 80% by 2030 and nearly triple its owned renewables capacity to 120 GW, with grids soaking up almost half the overall investment. Iberdrola, meanwhile, has earmarked more than a third of its spending plans for grids, mostly in the United States, which will become its biggest market for regulated assets.
It has pledged to spend 150 billion euros on tripling its renewable capacity and doubling its network assets by 2030. The sums dwarf amounts European oil majors have pledged for their fledgling green businesses so far.
“I don’t think it was simple to decide to spend money in renewables,” Pierre Bourderye of PJT Partners said of Enel and Iberdrola. “If it had been simple others would have done it at the same time, but they did it 10 years later.”
($1 = 0.8516 euros)
Reporting by Stephen Jewkes in Milan and Isla Binnie in Madrid
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