EU backs renewables expansion as insurance against future energy price shocks

The European Commission as part of a ‘toolbox’ to react to recent gas and power price spikes continues to support investments in renewables, energy efficiency and storage, in a move welcomed by the green power sector.

The toolbox aims at protecting vulnerable consumers and reduce the EU’s exposure to future energy price shocks similar to the one seen today.

“Rising global energy prices are a serious concern for the EU. As we emerge from the pandemic and begin our economic recovery, it is important to protect vulnerable consumers and support European companies,” Energy Commissioner Kadri Simson said.

“The Commission is helping Member States to take immediate measures to reduce the impact on households and businesses this winter. At the same time, we identify other medium-term measures to ensure that our energy system is more resilient and more flexible to withstand any future volatility throughout the transition.”

Simson stressed that the current situation is exceptional, and the internal energy market has served the EU well for the past 20 years.

“But we need to be sure that it continues to do so in the future, delivering on the European Green Deal, boosting our energy independence and meeting our climate goals.”

High gas prices in some countries have also led to higher electricity prices due to the mechanisms of wholesale power markets in which the price of the most expensive power source – currently gas in many markets – determines the overall price. Renewables, which have lower operational and no fuel costs, have not pushed up the wholesale price.

Some countries such as France - which has a power system dominated by nuclear that has low fuel costs and power plants that in most cases have been amortised for years – had lobbied to change the pricing mechanism in the EU’s wholesale power market in order to achieve lower electricity prices at home.

Short-term measures in the toolbox include tax reductions on electricity, temporary support mechanisms against energy poverty and power cuts (as have already been adopted in some EU member states), as well as the set-up of a European ‘energy poverty coordination group.’

The EU Commission as part of the toolbox in the medium term aims to step up investments in renewables and energy efficiency, and plans to issue guidance for member states next years on how to simplify and speed up permitting for renewable energy projects. The commission also encourages countries to accelerate renewables tenders, develop additional power storage capacities and invest in cross-border electricity grids.

“With its new toolbox the commission is doubling down on renewables as the key to stable electricity prices. Spot on – Europe needs to reduce its dependence on imported fossil fuels and exposure to volatile gas prices,” said WindEurope chief executive Giles Dickson.

“And it’s good the commission recognise that slow and complex permitting is the main barrier to the rapid expansion of renewables.

“And excellent that they’ve announced they’re going to issue guidance on how to simplify permitting processes.”