The renewables revolution has been surging worldwide and shows no signs of stopping anytime soon. With the signing of the Paris Agreement in 2015, a global consciousness to collectively reduce our carbon emissions was cemented. At this monumental conference, 195 countries signed the first legally binding agreement to take climate action and established their Intended Nationally Determined Contributions to reduce carbon emissions and keep the global temperature rise under 2°C. To fulfill this objective, renewable energy was recognized as a vital tool to decarbonize in a cost-effective and efficient way.
According to the International Renewable Energy Agency (IRENA), the accelerated deployment of renewables and energy efficiency can achieve around 90 percent of carbon emissions reductions in the energy sector necessary by 2050 to keep the global average temperature rise to well below 2°C above pre-industrial levels, thus meeting the goal put forth in the Paris Agreement. With world electricity demand set to increase another 28 percent by 2040, the current ways of producing and consuming energy will no longer be sustainable. Technological advancements have made renewable energy solutions competitive with conventional energy sources for fulfilling the world’s energy demand. These advancements and growing demand have triggered massive price drops in renewable technologies, making them more accessible to consumers. In many cases it now makes economic sense to go renewable for individuals, businesses, and governments alike as it can help them lower the cost of their energy bill. Not only this, but going renewable saves the state millions of euros if you take into consideration the socioeconomic benefits of a clean energy system. From decreasing health costs related to air pollution, to creating more local jobs, to preventing environmental damage, more renewable energy means a more prosperous society overall. As the world’s energy system embraces the renewable revolution, Europe will be at the frontlines. Although Europe has slipped from its top spot in the past decade as the global leader in renewables, it is now hungrier than ever for clean energy.
The sun is rising on Europe's energy system
One of the key tools Europe can use to catalyze its energy transition in the most cost-effective way and to reassert itself as a global renewable leader is solar power. Solar power is the fastest-growing new source of energy in the world, and it is still just scratching the surface of its potential. It continues to exceed everyone’s expectations, as it’s price is getting lower and it has scaled up faster than even the most optimistic forecasts. SolarPower Europe estimates that the global solar market could grow from around 306.5 GW installed in 2016 to nearly 1TW by the end of 2021. This is a massive increase and will be a major motor used to power the global energy transition. Although Europe’s solar growth has been sluggish since its first solar boom, it is now back on track and is paralleling the global average. In 2017, global solar additions increased by 28.8 percent to 98.5 GW in comparison to 76.5 GW in 2016. The European solar market grew at nearly the same growth rate, increasing by 28.4 percent to 8.6 GW, up from 6.7 GW of newly installed capacity the year before. This continued growth of solar is great news for Europe and demonstrates its potential to once again become a leading solar market. While the usual suspects in Europe, such as the U.K., France, and Germany, have been leading this renewed growth, it is the new players in the European solar market that have been crucial for its revitalization. In 2017, it was Turkey who led the solar charge in Europe, growing around 213 percent year-on-year and connecting at least 1.79 GW to the grid. Spain, a country which was once unenthusiastic about the solar boom, has now embraced the solar revolution, holding large auctions and adding significantly to their solar fleet. In the next few years, it is predicted that other countries, such as Poland, Hungary, and Romania, will realize their solar potential with new programs to help meet their renewable energy targets, and these new solar champions will be crucial to ensure Europe’s bright future. One of the principal reasons for this second solar boom in Europe is a dramatic decrease in costs for the technology. Solar is now one of the cheapest forms of energy in over 60 countries, as prices of installation have dropped by 75 percent since 2009, and are projected to further decrease another 75 percent by 2025 according to the International Energy Agency (IEA). Electricity originating from solar is also one of the cheapest in the world – IRENA estimates that the global average levelized cost of electricity (LCOE) of solar fell 73 percent between 2010 and 2017 dropping to $0.10 per kilowatt-hour. This is a remarkable price decrease, considering that the average price of fossil fuel power ranges from $0.05 to $0.17 per kilowatt-hour. This trend will continue as more and more solar is deployed, and it becomes increasingly competitive on the global energy market. These impressive price decreases can be credited to a triad of drivers: rapid technological advancements, new business opportunities and political appetite at the European level for more renewable energy.
Lighting the path to the future of Europe's energy system
New technologies emerging in the solar industry are revolutionizing the energy system in Europe and making solar even cheaper and more efficient. Storage will increasingly become more important to ensure energy security so that all Europeans have access to cheap, clean energy. Although storage has been developing for decades, solar-plus-storage solutions are now becoming the new standard for clean energy production. Whether it be large-scale utilities or small-scale home installations, solar and storage will be at the core of the new energy system. Solar and storage make the perfect pair. With a solar panel on your roof and a battery in your home, you can produce and consume clean energy 24 hours a day, 365 days a year, no matter if the sun is shining or not. This also allows more solar to be integrated into the energy market while unlocking the flexibility potential at consumer level by offering services to grid operators. Overall, this will be the key to building a more secure and decentralized energy system to meet the increasing electricity demands of European citizens in a cost-effective way. However, Europe’s storage industry continues to remain behind the rest of the world as the E.U. makes up a mere 2 percent of the global battery industry. Nevertheless, the recent launch of the Battery Alliance by Energy Union President, Maros Sefcovic, will be an important boost to Europe’s storage industry to power the energy transition. Another element which will be essential to boost solar-plus-storage solutions in Europe will be the increasing digitalisation of the energy system. Smart grids with full sensoring and control, digitally-enabled demand response, and algorithms to better manage congestion will allow energy consumers to use energy when and where they need it the most. This will revolutionize the way Europeans produce and consume energy, with innovations such as blockchain technology even allowing direct peer-to-peer trading of energy, turning the traditional electricity system on its head.
Digitalization, storage, and solar together can deliver a new level of flexibility and allow for better planning in the system. This will greatly facilitate more integration of solar into the energy system, dramatically reducing the curtailment of solar. Analysis has shown that a combination of solar and digitalized “grid supporting” storage can double the grid capacity to absorb solar feed-in without any other additional infrastructure. These innovations in the solar sector will be the new standard in the future clean energy system and will open the doors to exciting new opportunities in the industry.
Solar-powering business opportunities
As solar continues to grow in Europe, so too does the pool of business opportunities available. One of the most important opportunities in the sector that will transform Europe’s energy system is self-consumption. With the advent of the new digital solar and storage technological era, consumers can now become empowered energy prosumers, as access to cheap, clean, and efficient energy is easier than ever. This will power a decentralized energy system which blurs the traditional lines between energy producers and consumers. A decentralized energy system offers countless new opportunities across the entire solar value chain. More energy prosumers means that there will be more demand for solar, helping to spur further technological innovation to make solar technology even more cost-effective and efficient. Utilities, such as EDF in France, have now begun to expand their menu to include solar-plus-storage solutions and smart home systems for their customers. This is also powering another new trend in Europe’s energy system - sector-coupling. These new technologies, coupled with the increased use of electricity in the transport and building sectors, can facilitate solar system integration. We will soon be witnessing a whole new paradigm in the electricity sector. With more solar-powered electric vehicles and building-integrated PV plugging into the E.U.’s energy system, solar can help reduce peaks and maximize local use of clean energy. This offers unheard of opportunities for European business in the solar, energy, transport, and construction sectors to expand beyond their typical value chain and into exciting unchartered territory to create a symbiotic low-carbon economy. As the price of solar continues to drop in Europe, investing in the sector is becoming more attractive. Some of the biggest corporations globally, such as Google, Amazon, Microsoft, and IKEA, are now banking on solar to power their business because it is better for their bottom line. Innovative business models, such as corporate renewable energy sourcing with Power Purchase Agreements (PPAs), have facilitated the uptake of solar by big businesses, offering opportunities for them to slash their energy bill and lessen their environmental impact in the process. With more investment and interest in the solar sector, we are now even witnessing an era of subsidy-free solar, with Europe’s first ever subsidy-free solar farm opening in 2017. This won’t be the last, as production, installation, and operation & maintenance costs continue to drop and investment increases. All of these opportunities will also spill out of Europe’s borders and into new emerging markets. As Europe is a seasoned veteran in the solar industry, its expertise will be essential to help put young solar markets on the right track to a clean energy future. From project financing and development, to giving access to innovative technologies, to offering advice on regulatory frameworks fit for solar, there are an abundance of opportunities in these emerging markets just waiting to be grasped. Taking advantage of all these opportunities will be an important driver of local socioeconomic growth in Europe. The solar industry alone is expected to provide over 175,000 jobs by 2021 and generate nearly €9,500M in gross value added to the economy in Europe. As over 75 percent of these jobs and economic opportunities will be downstream, more solar means a bright future for local development for Europeans.
Barriers to European solar growth
In Europe, there has been political appetite for more solar as there is a renewed interest to become a global leader in renewable energy, but many obstacles continue to exist which are hindering solar’s growth potential. The E.U. has taken important steps to boost the solar industry, such as the launch of the Clean Energy Industrial Forum at the beginning of 2018. With this Forum, the E.U. and industry players will be able to actively take part in the policy making process to develop supply side strategies to increase the industrial competitiveness of European solar. However, as the Clean Energy Package negotiations reach their final phase with the first stage of trialogues now beginning, the three E.U. institutions continue to differ on some key issues which will be crucial to power Europe’s energy transition. Disagreement on whether to increase the current renewable energy target for 2030 has been a major challenge to solar’s development. At the Parliament level, there is support for a more ambitious 35 percent renewable energy target by 2030, up from the current 27 percent. Yet the Commission’s position continues to vote for the status quo, despite recognizing that a 27 percent target is currently 14 billion euros cheaper than when it was initially set in October 2014. A more ambitious 35 percent target will be a decisive step in the right direction for Europe’s energy transition, as it could mean 120,000 new jobs in the solar industry alone and send a strong signal to investors that Europe’s renewable industry is open for business. Another vital point of negotiation is the regulations on small-scale renewable installations, which could make or break the E.U.’s objective of a consumer-driven energy transition. Recognizing the rights of energy prosumers in Europe while removing burdens to the deployment of these technologies will be essential to drive the energy transition from the bottom up. Removing priority dispatch and imposing balancing responsibilities on small-scale renewables would threaten their potential uptake in the European energy system and must be avoided until we have a market design fit for renewables. Finally, and perhaps one of the greatest obstacles to solar’s growth potential in Europe has been the obstructive trade measures imposed on imported solar panels and cells. These tariffs have made solar much more expensive than necessary, inevitably leading to a decrease in demand. According to a recent report by the European Commission’s DG Justice and Consumers, the removal of solar trade measures would lead to a consumer uptake of solar of some 20-30 percent in almost all E.U. member states. Not only that, but by keeping these measures in place, Europe is missing out on over 45,500 additional solar jobs according to a recent EY study. These numbers are significant and must be taken into account when the Commission makes the decision in September on whether to prolong or remove the five-year-long trade measures, tariffs that have created no benefits.
A crucial time for the European market
Although there is still work to be done to realize Europe’s full solar potential, many important steps have been taken in the right direction which makes this a truly exciting moment for European solar. The demand for solar continues to grow, with nine out of ten European citizens agreeing that they want more solar in the energy system. From more jobs, to consumer empowerment, to CO2 savings - the solar revolution will benefit all Europeans. The technology is available, the business opportunities are there - now it is just time for the E.U. to jump on board and ride into the sunny energy future.
James Watson is the Chief Executive of SolarPower Europe since July 2014. Prior to taking the helm at SolarPower Europe, Watson worked as the Director of Public Affairs for Weber Shandwick, specialising in energy and trade policy for 7 years.