European Green Deal

On 11 December 2019, the European Green Deal was introduced. This initiative of the European Commission aims to make Europe the first climate neutral continent by 2050. One aspect of this goal is the ambition to reach “net-zero” greenhouse gas emissions. To achieve this target by 2050, a drastic transformation of the European energy sector is necessary. This ambitious strategy of the European Commission is met by some with skepticism and despite the vast scale of this project, the public is still quite unfamiliar with it one year after its kick-off. In order to raise awareness on this important topic and to get answers to some of the questions of the skeptics, YERA spoke to a representative of the European cabinet of energy.

Net-zero emissions?

Probably the most ambitious goal of the European Green Deal is to reduce the emissions of greenhouse gasses to net-zero by 2050. But what does this mean exactly and how can it be achieved? The emission of greenhouse gasses is inevitable in any sector of the economy. However, the European Commission expects that with the current set of policies, the emissions of the polluting sectors will be offset by sectors that are net-absorbers of greenhouse gasses, such as forestry and horticulture. As such, the European economy will not exceed the capacity of nature to absorb the emitted greenhouse gasses.

For some, this scenario seems too good to be true. Is the European Commission not too optimistic in its outlook? And doesn’t this ambition rely on an unrealistically fast development of new technologies to support a green economy? In fact, the projections of the European Commission are based only on technologies that have been proven feasible. Carbon capture and Storage (CCS) for example, despite being an interesting technology, is not considered as a significant contributor to the goals of the European Commission. Advancements in battery technology are expected by 2050, but not in an unrealistic way. The performance of batteries is actually increasing at a faster pace than earlier assumed.

What will it cost us?

Apart from the feasibility of the European Green Deal, some are worried about the cost of the strategy. In particular the influence of the transition towards solar and wind energy on electricity prices has people worrying. An increase of the cost of European electricity in the coming years is indeed very likely. The main reason for this increase is the fact that a generation of power plants is reaching the end of its lifetime. In Belgium, this is clearly illustrated by the closure of the nuclear power plants. The necessary investment in new power plants will inevitably lead to a higher cost of electricity. So, independently of the green ambitions of the EU, the price of electricity is poised to increase. Investing in renewables instead of building new coal or gas power plants, will barely push the electricity prices since the cost of solar and wind installations have decreased to competitive prices.

Moreover, the price that the consumers pay for electricity depends only to a limited extent on the actual cost of producing the energy. In Belgium, the Value Added Tax (VAT) on electricity makes up 17% of the electricity bill for consumers, levies make up 32% of the bill, transmission and distribution costs another 28% and only 23% of the electricity price relates to the actual cost of energy production. Therefore, changes in the cost of energy production have a relatively small effect on the total electricity prices.

But aren’t renewables too unpredictable?

The fact that solar and wind energy is unpredictable compared to energy from fossil fueled or nuclear power plants is often used as an argument by skeptics of the green transition. In the past, electricity was sold 24 to 48 hours in advance. If an energy producer fell short of the promised amount of electricity, a significant fine had to be paid. This made the predictability of electricity production very important. Nowadays however, electricity is sold just 15 minutes before it is used. The capacity of solar and wind installations in the next 15 minutes can be predicted excellently. Therefore, the variation in the capacity of these installations doesn’t impede a continuous balance of supply and demand of electricity. 

With the advance of battery technologies, it will also become possible to cheaply store energy from renewables for times when the demand for electricity is higher than what can be produced. Companies are starting to sign long-term contracts (for 5 years, 10 years, or even longer) to get their electricity directly from large renewable installations. Becoming independent from the grid is not just a publicity stunt for these companies. It is the cheapest way for them to get their electricity. Even for individual consumers, having a personal set of solar panels and batteries will become cheaper than staying connected to the grid, according to the European Commission. So, the worries about the cost and the unpredictability of renewables are often quite exaggerated.

What will be the role of hydrogen gas?

The decarbonisation of the gas sector is one of the key aspects of the European Green Deal. With the current policies and technologies, it is expected that 50% of all energy use in Europe in 2050 will be electrified. So, a large part of the energy use will still depend directly on gas. Nowadays, residential heating is the largest category in European energy consumption, and it relies mostly on the combustion of natural gas. Very energy-intensive industrial processes such as aluminium melting will probably also remain mostly powered by gas. If the natural gas in these applications could be replaced by hydrogen gas, huge amounts of carbon emissions could be saved, since the combustion of hydrogen is carbon free. However, this method only makes sense when the hydrogen is produced with clean energy. Therefore, the EU must keep working to create a green hydrogen economy.

How will the EU make sure that no one is left behind in this transition?

It is pivotal for the European Commission that every person and region is involved in this transition and profits from it. Coal regions in Europe, which can already not compete anymore with for example Russia or Australia, are being supported in the so-called “coal region in transition” programmes. The European Commission has established country teams dedicated to increase the knowhow in these regions to build new sustainable industries. As such, the EU is helping local communities to figure out economic growth strategies for the future. This type of projects is not limited to coal regions, but extends to all regions in Europe that are at risk of falling behind in the transition.

Moreover, the EU will invest in buildings and renovations for European citizens whose housing situation is dire. More than 30 million Europeans have no healthy home. Better insulation, among other measures, will improve the health of the inhabitants and their energy efficiency. As such, the European investments will help the very poorest. The Just Transition Fund (JTF) will be the agreed upon framework that divides the necessary funds over the countries and regions of the EU.

In conclusion, the European Green Deal is a broad social and economic strategy that will make Europe climate neutral. The wellbeing of the European citizens is at the heart of all policies. The period since the implementation of the European Green Deal on 11 December 2019 has been dominated by the ravaging impact of COVID-19. However, Europe now has the chance to reboot its economy in a sustainable and lasting way to the benefit of all its current and future citizens.