Electricity Is Becoming More Sustainable, But Traditional Plants Cannot Be Shelved Yet
In 2017, according to the OECD-affiliated International Energy Agency (IEA), investment in renewable energy plants represented two-thirds of total spending on new generation capacity installed worldwide, surpassing investment in new coal-fired power plants . Not surprisingly, therefore, according to a recent report compiled by UNEP (United Nations Environmental Program) and Bloomberg New Energy Finance, in 2017 alone, about $160 billion were spent globally to install 98 GW of new solar capacity (+18% compared to the previous year) as compared to the 70 GW added to gas and coal-powered electricity generation at the cost of about $70 billion. It is also interesting to point out that $49 billion out of the $160 billion spent on solar went to build small-scale photovoltaic systems, i.e. a power capacity smaller than 1 MW, mostly for domestic consumption and connected to the grid behind the house meter.
Looking at the near future, IEA estimates that between 2017 and 2023 the installed capacity of electricity generation coming from renewable energy sources will increase by 43%, while green energy will increase its share from 25% to 30% of the global electricity generation mix.
Despite having recently lost the leadership for investment in renewables in favor of the United States, China and India, Europe maintains the lead in having understood and started ahead of other world regions the decarbonization of the energy system through policies and incentives aimed at particularly ambitious environmental targets: according to European Commission projections, the share of electricity coming from green sources will increase from 25% in 2009 to 55% in 2030 in the EU.
Aways in Europe, since 2009 the renewable energy revolution has gradually undermined the traditional utility model that relied on large gas or coal plants for electricity generation and distribution through the grid to end users. However, this does not mean that traditional power plants will have to be shut down, as their contribution is still needed for several years to come.
In fact, as EU countries increase the percentage of energy produced from intermittent renewable sources, on the other, they will have a greater for reserve capacity. In particular, most scenarios converge on the idea of gas continuing to play a critical role in electricity generation for a number of years, both as a substitute for the much more polluting coal-fired plants, and as a reserve buffer when the wind does not blow or the sun does not shine and there is no sufficient storage capacity (e.g. batteries). An analysis of grid operators, ENTSO-E, shows the potential risk of energy scarcity in certain Italian areas after 2025.
Therefore several EU countries have introduced capacity remuneration mechanisms, which means that financial incentives are given to operators to guarantee the availability of the power supply in the future regardless of whether the plant has the turbines going or not, in order to ensure energy security. The European Commission has finally given the seal of approval on the measures of capacity payment put forward by France, Germany, Belgium, Greece, Poland, and Italy. The choice between the various remuneration mechanisms is complex and their implementation must be carefully managed and, especially, monitored, because these are economic tools capable of having a significant impact on the fixed components (not being linked to variable costs) of electricity bills paid by consumers and, what's worse, they interfere with the efficiency of the wholesale electricity market. From this point of view, it is positive that the new European Electricity Market Regulation introduces stricter rules on electrical capacity, including a limit to emissions of 550 grams of CO2/kWh, which effectively excludes the most polluting fossil-fueled plants from the mechanism. The hope is that this EU regulation will contribute to better trade-off between security of energy supplies and reduction of carbon emissions. The Old Continent has begun the transition towards a more innovative and sustainable energy system, but the latter will still require the require the contribution, limited in time and cost, of some of the old carbon-based technology.