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Europe’s solar, wind industries eye electricity tax cuts ahead of boom era

12 May 2021 Cristina Brooks

Renewable energy advocates speaking at the SolarPower Summit on 10-11 May said they believe regulated taxes on electricity dampen demand for renewable power.

The EU's governing bodies agreed to legislate for a 55% cut to emissions that would entail a massive renewable generation rollout on 21 April, but fees embedded in electricity prices are an obstacle to a fully renewable energy-based Europe, speakers told conference attendees.

Tariffs and levies on electricity accounted for 30% of the average EU electricity bill in 2019, according to trade association WindEurope.

Some energy bill charges go to paying for decarbonization and renewable energy programs in member states, but panelists said certain charges were interfering with the growth of the renewable power that is a key driver of decarbonization.

Kristian Ruby, the secretary general of electricity transmission trade body Eurelectric, called for a revision of the EU's Energy Taxation Directive, which lays out the minimum excise duty rates for fuel, transportation, and electricity. "We don't have a level playing field today. We have a number of polluting sources that are enjoying a free ride whereas electricity is heavily taxed and heavily burdened," said Ruby.

Some other energy sectors are not as burdened as renewable electricity. "For instance, if you have a gas stove at home. You're getting gas into your home, you're burning it, and you're not paying a carbon price for that. That needs to change. We need to make sure that the polluters pay," Ruby said.

European Parliament member Jutta Paulus, speaking during a separate panel, also supported taxing higher-carbon energy sources rather than carbon-free electricity. "We have to take off taxes, surcharges, whatever we have put on electricity in order to make it make it the most efficient, and we have to put all these levy surcharges and so forth on carbon fuels," said Paulus.

This, she said, would allow an easier energy transition for the power, heating, cooling, and transportation sectors.

Electricity demand spike

A 150% increase in electricity consumption is expected as a result of the 55% emissions cuts target and other EU climate goals, according to Ørsted Head of Regulatory Affairs Ulrik Stridbæk.

"Getting rid of fossil fuels in our current electricity system is going to be the least of our challenges. The biggest challenge is to meet this enormous new demand," he told the online SolarPower summit.

As a result of more demand for renewable electricity, end-users may wind up competing for it. "I think there's a puzzle still to cover … which is the volume we're going to need, and the fact that we're all going to need it at the same time," said Marco Mensink, director general of the European Chemical Industry Council.

This is a major issue for the electric vehicle sector and industrial users of large amounts of energy, said Mensink. "They need electric chargers to electrify the automotive sector, and then the electricity is simply not there for industry," he said.

Industry's green hydrogen demand could put A further strain on renewable electricity supplies. "One of the things we're going to need that is good and underrated is a bit of orchestration on who gets what first, and when," said Mensink.

Missed connections

The European Commission is planning to require member states to use a greater share of renewables to meet electricity demand.

It aims to double today's required levels of 32% to 65% by 2030 under a revision of the Renewable Energy Directive (RED II), according to a September communication to the EU's governing bodies. Trade body SolarPower Europe has called for an 80% share.

Distribution grids, energy storage, and smart girds are needed to enable this massive scale-up. "Regardless of whether we're talking 65% electrification or even 80% or more, by 2050 we are looking at very, very steep curves. That's why we're talking about an electric decade," said Eurelectric's Ruby.

Upgrading and expanding the transmission network would require €400 billion ($483 billion) over the next decade. Already, 30% of the existing grid is over 40 years old, Ruby added.

Wind and solar today are providing the cheapest electricity in history, said SolarPower Europe CEO Walburga Hemetsberger.

But Europe's cheap wind and solar power aren't as useful "if we don't have the grid that will take those renewables to the consumer," said Giles Dickson, CEO of WindEurope.

A lack of interconnectors and smart grids, whether onshore and offshore, restrains new wind generation, he noted.

Posted 12 May 2021 by Cristina Brooks, Senior Journalist, Climate & Sustainability, IHS Markit

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