Ten years ago, when the Strategic Energy Technology (SET) Plan was launched, the energy transition was in the making but still looked distant. While the challenge of successfully transforming our energy system still lies ahead of us, few would deny that the chances of success seem today much brighter than a decade ago.
A radical transformation is underway in the way energy is produced and used to fulfil societal needs. Clean renewables gradually replace fossil fuels. Rotating wind turbines generate power onshore and offshore. The sunlight is converted into electricity by increasingly efficient photovoltaic (PV) cells. Biofuels can already be produced from sources that used to be incinerated. Many other examples could be given – and this publication features some of the most important.
What is perhaps less obvious, but certainly not less important, is the employment re-structuring effect at the heart of this energy transition. By 2015, the European Union (EU) had 1.6 million people working on renewables and energy efficiency. This represents a growth of 13 % since 2010 – more than seven times greater when compared to the 1.7 % employment increase for the whole EU economy. Given the potential for job creation, growth and exports, the EU industry needs to remain globally competitive in the low-carbon energy sector. Strengthened research and innovation (R&I) is indispensable for that endeavour.
The energy transition is motivated by the decisive challenge facing humankind – to protect our planet and its inhabitants from catastrophic climate change. The landmark Paris Agreement of the United Nations Framework Convention on Climate Change in 2015 was a real breakthrough in the worldwide efforts to keep global warming well below 2 ºC above pre-industrial levels. As the energy sector produces at least two-thirds of the total greenhouse-gas (GHG) emissions, the clean energy transition, also powered by consumers, is essential to reach the objectives of the Agreement.
There are numerous signs to suggest that the energy sector is heading in the right direction. Remarkable technological and deployment progress has been driving renewable energy costs down – often drastically, as in the case of wind, PV and batteries – and their performance up. Thanks to this, onshore wind and the top-performing utility-scale PV are already cost competitive against newly built fossil fuel power generation in Europe. The EU-wide share of renewable energy use increased from 9.7 % in 2007 to 16.4 % in 2015. In 2016, newly installed renewables’ capacity excluding large-scale hydropower amounted to 55 % of all the generating capacity added globally – the highest proportion in any year to date – while investment in ‘new renewables’ was roughly double that in fossil fuel generation for the fifth successive year.
These positive trends are likely to continue in the future, strengthening further the economic case for renewables. A tipping point will probably be reached by the mid-2020s, when building a new wind farm is expected to become cheaper than running an existing gas plant5. And it will mean faster, more widespread renewables’ deployment. By 2040, projections indicate that renewable energy sources will represent 60 % of the European electricity mix, up from 24 % in 2015, with solar representing half of the additional installed capacity and wind receiving half of all power capacity investment6. The consumers’ role will be enhanced, with small-scale PV deployed on rooftops of households and businesses (often combined with battery storage) making-up around half of Europe’s solar capacity. On the transport sector there are also reasons to be optimistic, as it is estimated that by 2030 low-emission mobility will represent 15-17 % of transport energy demand7 and by 2040 electric vehicles will make up to 25 % of the global car fleet8.
Notwithstanding all the above, national commitments under the Paris Agreement so far are not commensurate with limiting global warming to well below 2 ºC. Attaining this target would require around double the current levels of investment in the energy sector – as much as $3.5 trillion on average each year until 20509. Market diffusion investments need to be complemented by a very ambitious technology push effort. For instance, under the Mission Innovation initiative, members have pledged to double their clean energy R&I expenditures. This means that the impressive progress made so far will be stepped-up.
Financing availability must therefore adapt to the future needs of clean energy R&I. Although not a funding mechanism per se, the SET Plan can be instrumental in that regard by promoting a more targeted and efficient spending, and mobilising additional finance both from national and private sources. More targeted because it focuses on those technologies with the greatest potential for future development; and more efficient because it leverages impact through increased R&I agenda alignment and implementation of joint R&I activities in SET Plan countries (EU Member States, Norway, Iceland, Switzerland and Turkey). EU funds are also key in supporting R&I activities with a high European added value.
Emerging opportunities in the energy system must also be exploited. Consumers, empowered by numerous innovations, will influence the system dramatically. The flexibility they can bring by responding to price signals via demand response and by producing their own energy will likely contribute to a better grid management, enabling the grid to cope with rising shares of renewable energy. Other measures such as increased energy storage capacity, strengthened interconnections and smart grids will further support that.
Furthermore, widespread deployment of energy efficiency solutions across the European building and industry sectors is needed. While the goal is first and foremost to reduce carbon emissions, efficiency also brings about enhanced competitiveness and export potential. For both sectors, the European industry needs result-oriented research that provides innovative answers to challenges such as accelerating the refurbishment rates of buildings and the adoption of more performing technologies and processes.
2017 marks the 10th anniversary of the SET Plan, born out of acknowledging the dire need to reshape Europe’s energy future. In the long run, new-generation technologies must be developed through breakthroughs in research if we are to meet the greater ambition of reducing EU GHG emissions by 80 % by 2050. Further cost reductions in clean energy generation will be required, and the EU industry will feed on that progress to keep the forefront position it enjoys globally in most clean energy sectors. The SET Plan, within the overarching Energy Union strategy and the ‘Clean Energy for all Europeans’ legislative package, aspires to make the European energy system fit for the next decades.