L R AS Published on Monday 30 May 2022 - n° 406 - Categories:Europe

3rd critical opinion on REPowerEU: The amount to be invested is grossly underestimated

The European Union's REPowerEU plan is based on a large budget and an ambitious energy plan. However, according to Rystad Energy, the European target may not be met.

The Commission's aim is to reduce the European Union's dependence on Russian fossil fuels and accelerate the transition to renewable energy sources. However, the European Commission's cost estimate may not be enough: Rystad Energy estimates that the plan will require at least €1,000 billion in investment to achieve the main objective of increasing renewable production from 40% to 45% of total energy supply by 2030. Additional investment will be needed to meet the targets, including the development of the grid and battery storage to ensure a stable energy supply, as the entire European electricity system will have to be restructured.

The plan is to bring online 320 gigawatts (GW) of photovoltaic solar power by 2025 and almost 600 GW by 2030, to replace 9 billion cubic metres (Gm3) of gas. Europe currently has around 189 GW of installed solar photovoltaic capacity, which means that 131 GW needs to be installed by the middle of the decade, equivalent to 44 GW per year. This would almost double the annual rate of installation, which was 24 GW in 2021 and is expected to be 29 GW this year.

To reach the target of 600 GW by 2030, around 56 GW of new solar PV capacity would need to be installed annually over the following five years.

Assuming an average cost for solar PV of €1.1 million per megawatt (MW) of installed capacity, installing 411 GW by 2030 would represent an investment of €452 billion.

Achieving 45% renewable energy supply by 2030 also requires significant investment in wind power - for which the plan does not give many details. According to Rystad Energy's estimates, an additional 450-490 GW of wind power capacity would need to be installed by 2030 to meet the 45% renewable energy target, which would require €820 billion in additional investment.

So far, the European Commission has been unclear about the total amounts allocated to meet its targets. Recent announcements and communications mention that €225 billion is already available in the form of loans and that an additional investment of €300 billion may be needed by 2030.

The figures seem to fall far short of the additional investment needed in electricity transmission, storage, gas infrastructure and hydrogen production. Furthermore, such a large demand for new capacity will put additional pressure on the supply chain for the manufacture of solar panels and wind turbines. This could lead to a further increase in the cost of these technologies.

The ambition of the REPowerEU plan is enormous. Utilities and energy markets will be looking for details on investment and infrastructure.

The six key areas for achieving the REPowerEU objectives:

- Smart investment

- Tackling the slow and complex permitting process for large-scale renewable energy projects.

- Saving energy

- Diversifying fossil fuel supplies

- Accelerating the deployment of renewable energies

- Reducing fossil fuel consumption in industry and transport

And the means that will be implemented:

- Cutting red tape and speeding up authorisation declarations

- Declare that renewable energies represent the "overriding public interest

- Creating so-called "reference zones".

https://www.rystadenergy.com/newsevents/news/press-releases/REPowerEU-Europes-big-budget-and-bold-energy-plan-may-fall-short-of-objectives/

Rystad Energy of 24 May 2022

Editor's note There are two types of investment in the REPowerEU plan: Solar and wind power plants, which can be financed by private capital in the same way as power purchase agreements or plants selling energy on the market. The political authorities do not have to finance this expenditure unless this is done in response to calls for tender.

The other capital cost is that of networks, geographical development and connections, which are the responsibility of the state, but also of incentives for the installation of pumps.There are also incentives for the installation of heat pumps and storage batteries, to encourage energy savings and change behaviour.

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