▷ Steady expansion of renewable energies means CO2 prices and electricity costs continue …


27.10.2021 – 09:05

Aurora Energy Research

Berlin (ots)

  • Study by Aurora Energy Research on the development of the European CO2 price and electricity costs up to 2030 under the conditions of the Fit-for-55 package of the EU.
  • If the expansion of renewable energies were accelerated, the CO2 price in European emissions trading would stabilize at today’s level by 2030. If, on the other hand, expansion remains sluggish, it would be around 80 percent higher.
  • A coal phase-out that is too slow would result in an even higher CO2 price: the currently targeted Polish phase-out scenario alone would cause it to rise by a further 20 percent to twice as high as in mid-2021.
  • Faster expansion would also stabilize wholesale electricity prices: In Germany, these would then be around 14 percent lower in 2030 than in the first half of 2021. If expansion continued to slow, however, they would rise by 31 percent.
  • In order to secure the competitiveness of European industry in the long term, the governments are called upon to quickly remove the obstacles to the expansion of renewables. This would also reduce the demand for natural gas for the electricity sector and thus counteract geopolitical dependencies.

The slow expansion of renewable energies endangers the competitiveness of German and European industry: If the expansion of wind and solar continues as slowly as before, the CO2 price in 2030 will be 80 percent higher than if the expansion were adjusted to the targets that the EU has set for itself with the Fit for 55 package. This also has an impact on wholesale electricity prices: in Germany, if expansion continued to slow down, they would be 31 percent higher in 2030, but with adjusted expansion they would be around 14 percent lower than the average value for the first half of 2021 (before the current price peak). This is the result of a study for which Aurora Energy Research modeled the development of CO2 and wholesale electricity prices up to 2030.

The more ambitious climate targets that the EU has set in its Fit-for-55 package are to be achieved in large part in the electricity and industrial sectors through the Europe-wide emissions trading system ETS: “By reducing the number of CO2 certificates, the targeted reduction in emissions results automatically, “says Casimir Lorenz, who led the study at the energy market analyst Aurora Energy Research. “However, this is no guarantee that the electricity market will develop in such a way that the competitiveness of European industry will be maintained in the long term. Because depending on how the energy mix develops, both the CO2 price and the wholesale electricity prices can be very different – and these two are crucial for companies. ”

As an interim solution, gas-fired power plants increase CO2 and electricity prices

For the analysis on behalf of the European Climate Foundation, the Aurora experts have developed a new type of model that simulates the development in the electricity and industry sectors on the basis of falling emissions budgets and other measures such as the promotion of renewable energies or carbon contracts for difference . The study looks at two scenarios: The first, pessimistic, assumes that the European countries will not manage to remove the existing hurdles for the expansion of renewables, that is, too little space will continue to be designated for solar and wind power, the distance rules remain rigid and the approval process continues to take a long time. “In this scenario, we will need even more electricity from gas-fired power plants in the coming years to meet the growing demand while simultaneously phasing out coal,” says Linus Beer, Senior Analyst at Aurora Energy Research. The price will rise by around 80 percent by 2030 – with corresponding consequences for wholesale electricity prices. ”

The increased prices would put a considerable strain on the competitiveness of German and European industry. There is also another factor: “More electricity from gas-fired power plants also means more gas imports and thus an even greater geopolitical dependence of the EU on the supplier countries,” says Lorenz. “We are currently experiencing the effects of this with the massive increase in the price of gas, which is also driving up electricity prices and thus burdening our entire economy.”

Germany is benefiting in particular from the rapid expansion of renewables

In the second scenario, the study authors assume that the states will adapt their expansion targets for renewables to the Fit-for-55 targets and remove the existing hurdles. Then significantly fewer gas-fired power plants are required and there are fewer fossil fuels in the system. As a result, the Europe-wide CO2 price would stabilize at today’s level and, as a result, electricity prices would also stagnate, in some countries even fall: “Germany in particular would benefit from this,” says Beer. “According to our calculations, German wholesale electricity prices in this scenario will drop by 14 percent by 2030 compared to today. In the pessimistic scenario, on the other hand, they would be 31 percent higher than today or one and a half times as high as in the optimistic scenario.”

In both scenarios, the share of coal-fired power plants in electricity generation plays a decisive role: “We must ensure that coal is phased out as quickly as possible so that CO2 and wholesale electricity prices do not rise unnecessarily,” says Lorenz, head of the study. A modeling based on the Polish government’s currently discussed exit scenario shows how extreme an excessively slow coal phase-out can have: In the pessimistic scenario, the so-called PEP2040 plan increases the CO2 price by a further 20 percent to more than double the values ​​in the middle 2021. That would have considerable consequences for electricity prices in the other EU countries as well.

Incidentally, although the EU targets are largely met in both scenarios, the German 2030 climate targets are not met. The expansion of renewables would therefore have to be even more ambitious in order to meet the German targets.

With regard to competitiveness, the conclusion of the study is clear: A continued sluggish expansion of wind and solar, in the worst case combined with a slow phase-out of coal, harbors a considerable risk of rising energy costs and is a danger for Germany and Europe as an industrial location. “The EU countries could use the Fit-for-55 plan as an opportunity to switch from coal to renewables in such a way that as few gas-fired power plants as possible would be necessary as an interim solution,” says Lorenz. “For this it is necessary to increase the pace of the expansion of wind power and photovoltaics significantly, so first and foremost to remove the existing hurdles. In Germany in particular, the expansion targets for 2030 need to be increased in order to be in line with the EU goals and to meet the requirements that the Constitutional Court made in its ruling on the Climate Protection Act. ”

The study can be found at https://auroraer.com/insight/preserving-the-competitiveness-of-european-industry-and-power-prices

About Aurora Energy Research

Aurora Energy Research is a specialist in analysis and modeling of the European and global energy markets. Founded in 2013 by economists at Oxford University to meet the increasing need for high-quality data and facts on the energy market, we are now, among other things, the largest provider of electricity market analyzes in Europe. With more than 170 energy experts and offices in Berlin, Oxford, Sydney and the USA, we support companies, governments and institutions along the entire value chain in making long-term strategic decisions. For more information, see www.auroraer.com/

Press contact:

Matthias Hopfmüller
Tel.: +49 176 48864196
Email: [email protected]

Original content by: Aurora Energy Research, transmitted by news aktuell


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