Europe leads renewables boom

Europe is the frontrunner in the global renewables boom, as wind and solar have become the fastest growing electricity sources in history. Listen to a discussion on why the massive growth in capacity is set to continue this year, while coal and gas generation set to fall further. However, there are headwinds. Curtailments and public acceptance are obstacles that the industry and policy makers need to address, while negative prices may be a concern to some they should provide incentives for innovation in storage and flexibility.

 
Host: Snjólfur Richard Sverrisson, Editor-in-Chief, Montel
Guest: Dave Jones, Global Insights Director at Ember.

Transcript

Snjólfur Richard Sverrisson, Editor-in-Chief, Montel: 0:06

Hello listeners and welcome to the Montel Weekly podcast, bring Energy Matters in an informal setting. In today's pod, we take a deep dive into European and global renewables markets. Hot off the presses. This week is a report by Think Tank Ember, which says that wind and solar are the fastest growing electricity sources in history. In fact, growing faster than global power demand. In Europe, electricity sector emissions fell at their largest absolute number since 2000, and it appears we have passed peak carbon emissions. Within the electricity industry. Joining me, Richard Sverrisson, to discuss these issues and much, much more is Dave Jones, author of the Report and Global Insights Director at Ember. A warm welcome to you, Dave.

Dave Jones, Global Insights Director at Ember: 0:47

Thank you so much, Richard. Lovely to be invited.

Snjólfur Richard Sverrisson, Editor-in-Chief, Montel: 0:50

So I'd like to start off by asking you you know, a key question here is that so is the world. Racing towards the end of fossil fuels. Is that, that, that's, that, that's what, we'd like to to start off with. I think.

Dave Jones, Global Insights Director at Ember: 1:01

That's the hope, isn't it? We're, we've got a big shift to turn. Fossil fossil used has been rising for a while, and in the power sector. There's no exception. Within the power sector for 2023 coal and gas still hit a record high. But when you look back to see how much impact wind Minnesota have already had to slow that rise. It's been it's been very clear that Lincoln. What we think within our numbers now and analysis for this year, for 2024 is a power sector emissions. Were full by, we estimate 2%. And that will set a new era of 14 power sector emissions through the rest of this decade. What's unclear yet is quite that trajectory for how fast that may happen. I'm hoping that we get a bit of an opportunity to talk around that as well.

Snjólfur Richard Sverrisson, Editor-in-Chief, Montel: 1:49

Yeah, absolutely. I mean, I'd like to focus before we delve deeply into 2023, we can talk just briefly about the outlook for this year. You mentioned 2024. Where do you think are gonna be the hotspots, the growth areas for renewables over the coming, what is it? Seven, eight months?

Dave Jones, Global Insights Director at Ember: 2:07

Yeah, I think the. F one's really used to talking around the, that growth in solar and got very excited about it over the months. But actually what happened was so much of that solar capacity only came online towards the end of last year. So when you actually start looking at the impact on, on, on generation, and especially what it means for its impact on coal, gas generation. It's only just started to be felt. And our forecast for 2024 is a boom in renewables because we think that we can see that that rise in solar that will come through from all that capacity that was added towards next year. So we think twice as much solar generation will will be added compared to last year. And against that there's also a natural step up and wind. Wind was very low last year with some low wind speeds in the us. And you've had three years of drought across some really major hydro basins. So there's where hydro has been a real drought, like a real book kind of corn on renewables growth. In the last three years we expect to see a big rebound, so that'll create a real bumper. Year this year, which we expect will be outpace even faster electricity demand than what's happened last year and lead to a fall in fossil generation.

Snjólfur Richard Sverrisson, Editor-in-Chief, Montel: 3:20

In terms of Europe where are the sort of hotspots or where are the, you know, the growth areas and where are the laggards?

Dave Jones, Global Insights Director at Ember: 3:26

The it's clear that when you look across the global picture is Europe. That's leading the trend on this. You gave a bit of an introduction to the fallen emissions record fall last year in coal ag gas generation across Europe. You had four years in a row of falling gas generation, and now gas generation is lower than wind's overtaken at a EU level for last year. Wind overtake gas generation, which is when you are trying to look at what, like politically, what we're trying to do with reducing of gas. It's great to see that happening at the same time as you're seeing record falls. Falls in coal generation. Look, location wise, I guess that the, I guess what if it was like start on the technology side, 'cause I'm not the only person that, that uses slight whole hyper bowl around the solar and gets excited about it. But within Europe, two thirds of that solar and wind total is still from wind. And when we when we are looking at expanding within that's. That's where as much growth coming from solar when you're looking at a megawatt hours of actual generation will be coming from. So that's really that's interesting in itself because I think there's a perception that the solar's really leading on this, but wind is absolutely critical. The offshore industry is booming. The onshore outside of Germany is really continues to struggle as it does indeed across the world. In total. And I guess the big change that that we would see for this year is just during those those really sudden periods, just a complete saturation of electricity. Like we've I know that people have talked around negative prices so far and seen some of what's been happening the last month during April. But still it's I don't think it's an exaggeration to say that even where we are in early May we still haven't seen a proper study day across the whole of Europe and seen the full impact of. How that sun hits when it is there, and just what that means for flexibility within the grid. So really exciting for Europe. A little bit scarier just about what Europe now needs to do to build the flexibility around that.

Snjólfur Richard Sverrisson, Editor-in-Chief, Montel: 5:24

I think we'll touch later on some of the problems with this rapid expansion, which is, renewables, curtailments, and potentially negative prices. But where, what for you were the main positives of last year?

Dave Jones, Global Insights Director at Ember: 5:36

The main positives is the is the, I think that out of all the concern around wind, that's in a large part is sorting itself out, especially on the offshore wind side. So much attention from policy makers has really turned that picture around. Like I say, onshore is still lacking somewhat, but in total wind is on a linear growth. And when you've got in your head that you reset expectations that Solar's gonna do most of the growth and wind doesn't need to do as much as maybe we had in our mind before because of how solar is stepping up into that. That's no bad thing. I, when we look at the different regions and where we are, there's now 33 countries that last year, on average across the whole of the year, got at least a 10th of their electricity generation from solar alone. And if I was to, um. Kind of, if there's any kind of highlight that coming out of the transition for me it is just, it's just so good to see it like happen as a global transition. This isn't happening in isolation in Europe and in China. It's happening throughout the world,

Snjólfur Richard Sverrisson, Editor-in-Chief, Montel: 6:37

but we've seen some sort of headwinds, especially for offshore winds over the last sort of 12 to 24 months with, failed auctions, companies pulling out of certain processes very high interest rates, et cetera and hitting profitability, supply chain issues. Do you expect that just to be a temporary blip here or is is that more of a bigger concern for you? Dave.

Dave Jones, Global Insights Director at Ember: 7:00

I'm sure you've spoken to people that are on the podcast that are more educated with this on me, but from where, like just at the highest level, you've now got a peak of interest rate where you know that, where you where that's not a concern about them increasing further. You've got some of those cost pressures really easing where so much concern about all elements of the supply chain. 12 months ago. And also there's just been a higher acceptance I guess from policy makers that they need to pay to make this happen. And just keep searching for that lower price Wasn't working for the industry. They've got to be profitable in that. And policy makers shouldn't be afraid to let that happen, pass that through to those consumers. When we, everyone's keep looking for that next cheaper installment of electricity, but fundamentally offshore wind even with some of the inflation's been hit is still delivering some cheap electricity onto the grid.

Snjólfur Richard Sverrisson, Editor-in-Chief, Montel: 7:52

When you are compiling this report that you published this week Dave, was there anything that surprised you?

Dave Jones, Global Insights Director at Ember: 7:57

Yeah, the, Like I say, just the number of countries coming through is always a nice surprise to be able to see that. I think that it's very easy to, like I say, it's easy to assume that all of this is happening in a in isolation of a few countries. One of the, there's all sorts of interesting things that we were sighting way for. One of the things is that, one of I said about 10, about 33 countries being more than 10th of electricity from solar, but China in itself is only 8% when we're talking around the dominance of China that's certainly true from a supply side, from a manufacturing side is true from a deployment side in so many ways, but because of the size of China. Actually it's not there are many countries that are going as fast as that when you kind of proportion that down to the mix. And and that in itself is is quite interesting and quite exciting that so many countries are moving. We did a, actually did mapped out the solar insulation of different countries against their generation. And there's gonna be a weird negative relationship almost between the sunnier countries having less solar generation and, the less sunny countries having more solar generation, they're still I guess what's exciting for me when I look forward is that how some of those sunny countries will really step up into, and how quickly they can step up into electricity sorry, into solar dominating their electricity mix when you look at the plans. But Saudi Arabia to have half their electricity coming from. Renewables by 2030 in six years time, where only a couple of percent did last year. You can just get a sense of how fast progress there can be from one technology alone.

Snjólfur Richard Sverrisson, Editor-in-Chief, Montel: 9:31

Absolutely. And I think, but staying with Solar Dave, we've seen this week some issues coming out, for example, of a very sunny country like Italy, which is then banned. So on arable land, I mean, is that something that, that is of a major concern to you here? For this year in terms of renewables rollout in that country in particular?

Dave Jones, Global Insights Director at Ember: 9:49

The one of the, sorry for always talking slightly generally on this I do a bit across all of the countries. So within Ember, there's I there's an awful lot of people that know a lot more about the the transition in Europe than I do. When I, one, one of the bits about the transition that's excited me, like it unlocked of potential more than anything, is this. Horrible word called a voltaic, which was which is obviously as like trying to either work with solar panels on either on the farmland for grazing or like in a way to encourage biodiversity around that. And that's completely changed the whole of the kind of branding of where solar farms were two years ago where they were seen as big industrial parks that were being built within the countryside. I think it's quite. Reasonable to expect that you're not gonna be building solar panels on high value agricultural land. That doesn't make any sense. This at least a big country, there's enough space to to avoid doing that. And I can understand that, that does roll people. Like you've gotta be careful about where you cite these things. The same with wind turbines. You don't want to be part of them in places of special importance where where it is gonna aggregate people. You need to social the license for the transition and you need to be careful to some of people's wishes coming through and that. The question is how do you. How do you get that balance right, that you can get policy makers to put the right things there without having a complete knee jerk reaction on the other way. And the extreme is, the UK of having a decade low onshore wind ban.

Snjólfur Richard Sverrisson, Editor-in-Chief, Montel: 11:14

It's a very fine balance. And when we've seen it in Norway with with onshore wind and the native samami population there's a conflict of interest there. It that, as you say Dave, it's a very fine balance. And I think, striking advantage is certainly gonna be the key for the transition going forward. And I'm, it's by no means impossible, but it's it's not it's not straightforward, put it that way. If I can ask you as well then, Dave what about the transition and what globally, what keeps you awake at night? What really worries you about this green transition. It may be nothing but,

Dave Jones, Global Insights Director at Ember: 11:45

Oh. So much. I think the just the, our ultimate speeds that we need to move at. That's the problem. If all of this, if we could take our time a little bit more if we're at this stage where another 10 years can budget more than we have at the moment fantastic. We can be a bit more chilled about all of this. And it's really the speed that's unnerving. So like everything. To achieve that that, that remarkable speed. You've just gotta get everything in place at the right time. And and that's just so hard, especially for, governments that aren't used to setting policies that aligned up across all the different departments. Like I just give we would just talk about it from a policy side, for example okay, climate Ministries may have got the memo now, but you need, when you're rolling out the energy transition, you need all of the departments to have a role, whether it's on you know, large use designation and planning commissions. Whether it's on the flexibility and the grid structure, you need all of the different ministries all lined up with a high focus on that. And I think that. Underpinning all of that. So that, that, that's one concern. But the real concern, right? The bottom, all this that drives action is ultimately the public votes for governments. You has the public that have that fill for whether the negative energy that comes in then brings in policies like you said on the agricultural land of solar in Italy. And how do you keep firstly, how do you. Keep them on side, that they're not too anxious about it all. But probably for me, the biggest thing is how do you keep the most progressive people that have been biting at governments for more effort? How do you keep that momentum going? Because I I I do see that, as you go through the transition, things are harder, they become a bit more complicated. You need the results from it. You need to be able to deliver the benefits that was promised, which are just, the first just most basic one mis reductions in fossil fuel use. But much broader benefits than that. And if they're not being delivered, then I think people will lose a will become a little bit more indifferent and you need them really biting or the whole, you need to be biting the whole of the time on governments on this, otherwise they are gonna ease back. And that creates a real challenge. One of the reasons why we led on this piece about power sector emissions and kind the new sec, new a new era falling power sector emissions in 20 from 2024 is really to try and inspire and show how wind and solar is actually delivering on emissions reductions because you don't believe that's gonna happen at a global level because you're looking at China and other emerging countries. And seeing emissions rise, you're not gonna have the confidence that we're doing the right thing, that all of this is going to be worth it.

Snjólfur Richard Sverrisson, Editor-in-Chief, Montel: 14:22

I think you've touched on something really important there, Dave. And that's the public buy-in here. And we've got, we've seen, the government of the country where you are based in the UK roll back. Some of its green ambition. We've seen some big oil and gas majors also doing the same. And coming up in Europe are European elections, which may also be a bit of a backlash against some of the policies in some countries. What, is this a worry for you as well? If we, if one that on the topic of concerns certainly this year, would, is that something that you think is a, is something that you fear?

Dave Jones, Global Insights Director at Ember: 14:55

It is and I just , I think that everyone always has a natural tendency to look at look at governments changing and assume the worst is gonna happen when they come in about. Policies being cut back. Like ultimately there's so much momentum for the transition. This isn't gonna be a completely and utter abrupt stop in any way. There's questions about how it goes through, like there's all sorts of issues there are in the UK for example, but fundamentally we're still. On to build enough clean electricity to get to 90% of clean electricity in a mix by 2030. Even with all of what's going on, which is which is a really historic achievement when you look at, our dependency on gas even today.

Snjólfur Richard Sverrisson, Editor-in-Chief, Montel: 15:33

But of course this is very expensive. I've seen some figures band around 9 trillion US dollars et cetera, et cetera. Who, who needs to pay for this transition?

Dave Jones, Global Insights Director at Ember: 15:42

It's so much of it is just an upfront investment that you need. It's a CapEx heavy, it's a CapEx heavy industry which is unfortunately in many ways, which is so different from the fossil fuel system. We've been used to where you pay for the fuel as you go along, as it's being dug out. If you're paying for, you know, 30 years worth of wind power, 50 years worth of solar or power up front, of course it's gonna cost a lot of money on that part. I think the focus has got to be, is like, how do you do that as cheaply as possible? I don't think that when you work the numbers back, they're not extortionate numbers. It doesn't mean exorbitant bill rises where we are at the moment and what we've just been through in terms of that spiking fossil fuel prices over the last two years has been completely exorbitant. And completely incomparable to, what we're talking about for costs for the consumer, for as we move towards a more renewable economy. So for me it's just really how do you do that in the most common why common sense way to to keep costs as low as possible and, my my concerns around that are, and really around the flexibility side. I think on the wind and the solar side, we've got cheap electricity coming through, but you need to have that integrated in the system. So it's really those integration costs, the flexibility, the grid cost, the flexibility cost that you build around that. There's gotta be a real focus on on the consumer side where you moving to world of heat pumps and electric cars. There is a bit of a challenge there where you are able to access cheaper CapEx for a wind farm or a solar farm because you've got a multi-billion listed company. But for an individual to access enough money to to redo their heating system or to change their car. Certainly is an issue from a CapEx perspective. So I guess that they're the issues that know people are looking at and thinking of as we go along.

Snjólfur Richard Sverrisson, Editor-in-Chief, Montel: 17:26

But again, you've highlighted rising fossil fuel prices. So the costs aren't coming down there in the foreseeable future. And, conversely. The costs of climate change are gonna be much higher if we do nothing than if we put, make those investments. Now is then is another argument, but. If I can ask you Dave as well, there you, you talked about the cost of the network, cost of flexibility, and you highlighted in your report, one European country in particular, the Netherlands, but the Netherlands has seen a lot of renewables. Curtailments has been hit by negative prices, which I expected to double this year compared to last year. How should we deal with these kind of issues as well? This is the sort of flip side of that success story, isn't it?

Dave Jones, Global Insights Director at Ember: 18:09

Yeah, I firm, I mean, first I think governments have been a bit slow on the grid side. So I, I think that if I was to characterize the kind of what, like the big thing that happened in the global electricity transition last year in 2023, it was a real, really get to grips where, how important grids are, how much investment there is, and how governments need to proactively step into that space. And if you don't do that, you are gonna be stuck with electricity in in the wrong place. The, on the flexibility side, I still don't think the governments have been through that same learning process. I think that this summer in Europe, I think that there's gonna be a moment like that extension and negative prices that we've seen will continue. And I think that it'll gain traction. I think there'll be a lot more discussion a around, around it this year and political focus on it. I certainly hope so. But also some of those solutions that are coming through are really encouraging. So just on the where last year was the kind of year of solar with solar prices, having halved and manufacturing capacity stepped up so much. The same's happening for battery this year. And when you can see how battery can unlock a lot of that flexibility that's really encouraging. There's a lot of work going on cost of use tariffs as well, which is really good because if you are. This whole move towards electric cars. You, you need people to be charging when they're. Either the sun or wind is there. So you need to have the right tariff in place. So they're charging their car during the middle of the day and not charging their car at night. So you need a battery to charge a battery.

Snjólfur Richard Sverrisson, Editor-in-Chief, Montel: 19:36

So you need, that's, and I'm sure those kind of incentives will come, people will look at this and think, yeah, there is massive amount of potential for batteries, for storage, for, that, those flexibility options going forward. There. We already have them to some extent, but, unlocking this will of course be something like seasonal storage, but we're a long way off that, don't we?

Dave Jones, Global Insights Director at Ember: 19:53

Indeed. And I think that for Europe it's really interesting because actually the wind and the solar balance out quite nicely across the year that you've got more wind during winter and more solar during summer, and you don't need as much of that seasonal work you do need. Longer duration than the two hours that we have within our batteries at the moment. And I that there's still a definite need to try to encourage kind of mid duration storage of days worth of electricity come in. It's really interesting to see some of the district heating plants being built with thermal storage in there that are gonna be. Using the electricity from on the days of high wind and then storing it through for weeks at a time, which is encouraging. So that'll play a role. But there's lots of other technologies that are coming through that will be able to provide that mid-range. But they're relatively early stages of deployment,

Snjólfur Richard Sverrisson, Editor-in-Chief, Montel: 20:44

but lots of opportunities there for very smart and creative people, I would've thought.

Dave Jones, Global Insights Director at Ember: 20:48

And if there's one thing that's really interesting about the whole electricity transition is just. How quickly innovation is happening. It really is. On all sorts of levels. The technology's being developed and the answers, but just, but also the cost that they're doing it and the speed at which the deployment can happen. And and it's really interesting to see the development of the US over the last two years really strike up since the IRAs first started being discussed. And I don't think anyone would've thought that they would've come so far already with, some of the technologies and manufacturing they've got where manufacturing clean manufacturing is so big. It's really driving a whole change to the

Snjólfur Richard Sverrisson, Editor-in-Chief, Montel: 21:26

economy already. The European Union is looking for its own response to that as well as you've got other types of regimes in, in, in China and other parts of the world. But just on one note, you mentioned it earlier on Dave, and that's hydro. And as we see the effects of climate change, hydro has been massively hit, has it not? And do you expect this to. To be exacerbated in, in, in the coming years and potentially in, in the next decade.

Dave Jones, Global Insights Director at Ember: 21:50

Yeah, we it's clear that there's a link there. There's a di, there's a question about how about the rainforest itself that fall into that, into the rivers and the reservoirs. But you've also got that feedback, which is the warmer it is, the more it gets used for irrigation. They never hit the rivers in the first place where farmers in irrigate so much of their land. There's a real need in a warming world for for that water and that there will be moments that it gets really, it gets really curtailed and and I struggled to see there's been across four major hydro basins in the last three years. There's been a real short real droughts, which have led to a global shortage, which culminated and hydro generation being the lowest last year for five years. Even as capacity has been stepped up. I doubt you'll get that. That generation is low again, in the coming years, but clearly it's gonna be, it's gonna be delivering on average below where where people would've expected it to be. Absolutely. Dave, just finally, do you have solar panels on your roof? I have. I have a new build and I moved into two and a half years ago and it has. All the solar panels just just hanging around on the roof, which is not doing a huge amount, like giving you a little bit of a top up when you need it. It's not it's not the definition of of of of self generation. My partner got a new electric car last year, which we're very excited about. She does quite a lot of mileage. My, my sturdy old sit there and does about a thousand miles a year. It's really worth replacing. Electric cars. Wow. I never realized quite how awesome they are to drive and I suppose it's the first time I've ever got excited about owning a car before. It's, it's been great.

Snjólfur Richard Sverrisson, Editor-in-Chief, Montel: 23:27

Absolutely. And then when you can charge 'em with solar panels, it's perfect. That's what, it's a setup. I, at home it's it makes a world of difference. Yeah. And now it's become, coming into the summer, it's it's a no brainer really. If but again, it's about costs and meeting those costs and the CapEx here for individual households. That's the challenge, isn't it? Trying to bring that down even further?

Dave Jones, Global Insights Director at Ember: 23:43

It is and at the moment, the cheapest electricity terrace we have are overnight. We're charging overnight. You're assisting here in a really steady day with with almost zero wholesale electricity prices and they charge and then charging it at night. There's a real need. For the system to sort itself out from a tariff perspective. I know there's big plans. That's really interesting to see that requirement in Germany for utilities to offer dynamic tariffs from next year.

Snjólfur Richard Sverrisson, Editor-in-Chief, Montel: 24:06

Dave, fantastic. We could talk for hours. So once again, thanks very much for being on the Montel Weekly podcast.

Dave Jones, Global Insights Director at Ember: 24:12

Thank you so much for the invitation Richard. Great chat. Thank you so much.