Agora State of Affairs - Agora Energiewende

Energy Transition in the Power Sector in Europe: State of Affairs in 2015 Review of the Developments and Outlook for 2016

AnAlysis

* RES-Share of Gross Electricity Consumption

*

Energy Transition in the Power Sector in Europe: State of Affairs in 2015

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AnAlysis

Energy Transition in the Power Sector in Europe: State of Affairs in 2015

Review of the Developments and Outlook for 2016

Written by:

Agora EnergiewendeRosenstrasse 2 | 10178 Berlin | Germany Patrick Graichen

Mara Marthe Kleiner [email protected]

Matthias Buck [email protected]

097/02-A-2016/EnPublication: April 2016

Please cite as:

Agora Energiewende (2016): Energy Transition in the Power Sector in Europe: State of Affairs in 2015. Review of the Developments and Outlook for 2016.

www.agora-energiewende.de

bAseD On CAlCUlAtiOns OF:

Öko-Institut e.V. Merzhauser Str. 173 | 79100 Freiburg | Germany

David Ritter, Christoph Heinemann, Lothar Rausch, Lukas Emele

Proofreading: Translationes, BerlinLayout: UKEX GRAPHIC, Ettlingen Cover image: Own illustration

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Preface

Dear Reader,

The energy transition – the transformation of the power sector from a fossil-based to a decarbonised world with renewables at the centre – is a joint European project. The power sector will play a crucial role in attaining the Euro-pean climate targets, which aim to cut greenhouse gases by at least 40 percent by 2030 compared with 1990.

In this analysis, we present the state of affairs in the Eu-ropean power sector in 2015. Where are we coming from? Where do we stand today? These are the two key issues that need answering. Key topics include power generation, power consumption, emissions and prices. Overall, it is clear that the current power system is not yet fully equipped to deal with the main challenges ahead: securing power supply at a reasonable price with as little emissions as possible. How-

ever, Europe is on the right path: more than a quarter of the electricity produced already comes from renewable energy sources.

The following paper is mainly based on data retrieved from ENTSO-E and Eurostat. The data is still preliminary in na-ture or incomplete, which is often the case when it comes to European statistical data. We would therefore be glad to receive feedback and comments as to better data sources or methods concerning the available data sets.

Kind regards

Patrick Graichen,Executive Director of Agora Energiewende

Key Findings at a Glance

As of 2015, renewable energies are Europe’s dominant power source, with a 29 percent share of the power mix. Nuclear power comes in second with 27 percent, coal (hard coal and lignite) amount to 26 percent. Among RES, wind power increased significantly by more than 50 terawatt hours to 307 terawatt hours in total. Hydropower produced much less due to less precipitation.

Three key trends in European power production have emerged in 2010-2015: gas and nuclear power are losing ground, renewables are on the rise while coal is in 2015 back on 2010 levels. From 2010 to 2015, gas demand fell by more than a third, while renewables increased by 35.9 percent. Nuclear power production decreased slightly (-6.3 percent) and, following a slight decrease in 2014, coal (hard coal and lignite) returned to the 2010 level in 2015.

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Outlook: Four major developments will probably characterise 2016: more RES, less coal, less consumption and lower CO₂ prices. Additional capacity in mainly the onshore and offshore wind energy sector will increase RES production by another 50 terawatt hours. The carbon floor price in the UK, yielding a CO₂ price signal of some 30 euros per tonne, will push out coal in the UK in favour of gas. Further efficiency developments and the relatively mild winter will lower power consumption. The demand for CO₂ allowances will therefore decrease, leading to lower CO₂ ETS prices in 2016 than in 2015.

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CO₂ emissions in the European power sector increased in 2015 by 2 percent. They could be lower by some 100 million tonnes if the decline in fossil power production since 2010 had been coal instead of gas. The average price of a tonne of CO₂ in 2015 was 7.60 euros, which leads to coal-fired power plants having lower marginal costs than gas-fired power plants. Coal therefore outcompetes gas throughout Europe, which has resulted, for example, in the high coal power exports in 2015 from Germany to its neighbours.

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Content

1 electricity production 7

2 electricity consumption 11

3 Development of renewables 13

4 Development of conventional power generation 19

5 Fuel prices and marginal costs 23

6 Cross-border trade 25

7 electricity exchange prices 27

8 CO₂ emissions 29

9 summary and outlook 31

10 Methodology 33 10.1 Calculation of annual data 33 10.2 Calculation of daily data 34

literature 39

Agora Energiewende | Energy Transition in the Power Sector in Europe: State of Affairs in 2015

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European net electricity production January-March 2015: High demand profile in winter (up to 386 GW), little solar power generation and modest wind power generation

Data ENTSO-E 2016a, 2016b, Eurostat 2016b, 2016c; Calculation Öko-Institut, data for the first week of January is incomplete.

Solar ConventionalsHydro WindBiomass

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1 Apr 8 Apr 15 Apr 22 Apr 29 Apr 6 May 13 May 20 May 27 May 3 Jun 17 Jun 24 Jun10 Jun

Net electricity production April-June 2015: Lower power demand, rising solar power production and less wind energy

AnAlysis | Energy Transition in the Power sector in Europe: state of Affairs in 2015

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Net electricity production July-September 2015: Low hydropower and wind power production, relatively high shares of solar power production

Data ENTSO-E 2016a, 2016b, Eurostat 2016b, 2016c; Calculation Öko-Institut, data for November and December is incomplete.

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Net electricity production October-December 2015: Power demand is rising again, low hydropower generation and little to none solar power production

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1 Oct 8 Oct 15 Oct 22 Oct 29 Oct 5 Nov 12 Nov 19 Nov 26 Nov 3 Dec 17 Dec 24 Dec10 Dec 31 Dec


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1 Electricity production

The electricity generation mix within the EU did not change significantly from 2014 to 2015. Generally, most electricity was produced by renewable energy sources (28.8 percent), closely followed by nuclear power (26.8 percent). Hard coal and lignite made up a quarter of the electricity produced (26 percent) while gas, oil and other conventional sources made up the remaining 18.3 percent.

Compared with 2014, the RES share increased slightly from 28.5 percent in 2014 to 28.8 percent in 2015.1 A remark-able aspect, however, is that the distribution among re-newable energy sources changed substantially. Whilst in

1 It is important to note that these RES shares deviate from the figures published by the European Commission. This is due to differing underlying data – while the EC uses normalised data which corrects actual hydropower and wind data to a “normalised weather year”, we calculate the shares for all sources (RES plus conventionals) based on the actually observed power production.

2014 only 8.0 percent of the electricity was generated from wind energy, in 2015 this amounted to 9.6 percent. Due to a less precipitation, the share of hydropower decreased from 11.9 percent in 2014 to 10.6 percent in 2015.

Nuclear power was the only conventional power source to experience a reduction in its share: in 2015, 26.8 percent of the electricity generated was from nuclear power (2014: 27.7 percent). The share of coal and lignite remained the same, while the share of gas-generated power – after years of continued decline – increased slightly from 14.6 in 2014 to 15.1 percent in 2015 (see Figure 1).

The changes from 2014 to 2015 become clearer when the changes in hydropower are viewed separately from the rest of the renewable energy sources. Due to less precipitation, hydropower sources produced much less power in 2015

Generation mix in 2014 and 2015 Figure 1

Data ENTSO-E 2016b, Eurostat 2016b, 2016c; Calculation Öko-Institut

Hard Coal15.6%

Lignite10.5%

Nuclear26.8%

RES-E28.8%

Gas15.1%

Oil and other3.2%

Hard Coal15.4%

Lignite10.4%

Nuclear27.7%

RES-E28.5%

Gas14.6% Biomass

5.3%Biomass

5.3%

Solar3.1%

Solar3.2%

Generation mix in 2014 Generation mix in 2015

Hydropower 11.9%

Hydropower 10.6%

Wind8.0%

Wind9.6%

Other renewables

0.2%

Other renewables

0.2%

Oil and other3.3%


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Changes in gross electricity generation and consumption 2014 to 2015 Figure 2

Data ENTSO-E 2016b, Eurostat 2016b, 2016c; Calculation Öko-Institut

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Gross Electricity generation by source 2010-2015 in the EU Figure 3

Data ENTSO-E 2016b, Eurostat 2016b, 2016c; Calculation Öko-Institut * preliminary

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62 61 51 48 4669 75 55 58 58

3.337 3.270 3.266 3.238 3.158 3.204


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than in 2014. The large decrease in hydropower is masked by an even larger increase in power generation from other renewable energy sources: these sources produced 59 ter-awatt hours more electricity than in the previous year. Nuclear energy produced 17 terawatt hours less, coal 17 ter-awatt hours more, and gas power increased by 24 terawatt hours. Overall power demand increased by 58 terawatt hours, a 1.8 percent plus compared with 2014 (see Section 2). 2

When viewing the trend for the past five years, there is one clear winner: renewable energy sources have increased production significantly, producing 36 percent more power in 2015 than in 2010. Coal (both hard coal and lignite) is in 2015 at the same level as in 2010, nuclear power decreased slightly – mainly due to the decision to phase-out nuclear power made in Germany in 2011. Most striking is the de-creasing use of gas for electricity production, which is more than a third lower than in 2010.

2 Please note that generation data may deviate from other known datasets. This is due to different data sources. Data availability and methodology is discussed in Section 10.


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The energy efficiency of the power sector has increased considerably over the past 10 years. Although in 2005 most experts predicted continuous growth in the power demand across Europe, demand actually peaked in 2008 and is now slightly below 2005 levels. This contrasts with the overall European GDP growth of 10 percent over the past 10 years. Electricity consumption and economic growth have there-fore decoupled during the past few years – increasing gross domestic product is no longer automatically linked to in-creasing electricity consumption. Drivers for this trend in-clude more efficient industrial processes, the effects of the European eco design directive and an overall increase in the energy efficiency of appliances. Nevertheless, more efforts are needed in order to achieve the 2020 efficiency target that foresees a 20 percent increase in the energy efficiency in Europe.

The top five countries, Germany, France, UK, Italy and Spain, consume more than half of the total electricity. In total, 2,851 terawatt hours of electricity were consumed in 2015, 112 terawatt hours or 3.3 percent less than in 2010. The in-crease of 56 terawatt hours compared with 2014 was mainly because Europe experienced a warm winter in 2014, which reduced the power demand. Nearly 20 percent of European electricity is consumed in Germany, and about 15 percent in France. These countries are followed by UK, Italy and Spain.

2 Electricity consumption

Electricity consumption and gross domestic product of the EU Figure 4

Data ENTSO-E 2016b; European Commission (EC) 2016a, Eurostat 2016a, 2016b, 2016c; Calculation Öko-Institut

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Gross electricity consumption from 2010 to 2015: European total and top 5 countries Figure 5


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1.173 1.172 1.158 1.148 1.175

3.277 3.285 3.251 3.174 3.232


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Figure 6 shows the increasing share of renewable energy sources relative to the gross electricity consumption. When looking at the total share of renewables, the steep increase from 2011-2014 does not continue in 2015, when there is an increase of only 0.3 percentage points. However, the poor precipitation in 2015 leading to poor hydropower exploita-tion masks the real increase – when looking at the share of renewables without hydropower, the steep increase contin-ues in 2015 as well. The EU is on track to deliver the power sector’s anticipated contribution to the overall EU RES tar-get for 2020. The Commission’s most recent progress report on the Renewable Energy Directive shows, however, that there might be difficulties in delivering the anticipated con-tributions from the transport and heating & cooling sectors.3 As the indicative trajectory towards the EU RES target gets

3 European Commission, Renewable energy progress report, COM(2015) 293 final of 15.6.2015.

steeper towards 20204, this means that the power sector’s contribution might have to be increased in order to meet the EU RES target for 2020.

In terms of the overall figures, the power generated from all renewable energy sources except hydropower has increased during the past five years. Wind energy produced more than twice as much energy in 2015 (307 terawatt hours) than in 2010 (149 terawatt hours); power generated from solar en-ergy even increased almost fivefold from 23 terawatt hours in 2010 to 101 terawatt hours in 2015, and the power gen-erated from biomass increased by about 45 terawatt hours to 169 terawatt hours in 2015. These three energy sources experienced tremendous capacity expansions, while the ca-

4 See Annex I.B to Directive 2009/28/EC.

3 Development of renewables

Renewables share of gross electricity consumption Figure 6


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RES-E RES-E without hydropowerHydropower

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26.4%28.3% 28.6%


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RES production by source 2010-2015 Figure 7


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RES production 2010-2015: European total and top fi ve countries Figure 8


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pacity of hydropower has not significantly changed during the past five years 5.

When the total renewable energy production is differen-tiated in terms of the five top producers, it becomes clear that almost two thirds of the total renewable energy pro-duced comes from five countries. Germany produced about 20 percent of all renewable energy within the EU (193 ter-awatt hours), followed by Italy (109 terawatt hours), Spain (99 terawatt hours) and Sweden (97 terawatt hours) with about eleven percent, and France with about ten percent (90 terawatt hours). The main increases from 2010 to 2015 came from Germany and Italy, whereas in Spain the increase in wind and solar energy roughly balanced out the decrease in hydropower production.

5 Eurostat (2016d).

Electricity production from wind turbines has experienced a strong increase over recent years, with a particularly strong expansion from 2014 to 2015 (see Figure 9).

The Member States with the largest wind production are Germany, Spain, UK, France and Italy. The concentration of production from wind energy is relatively high: Ger-many (87 terawatt hours), Spain (50 terawatt hours) and UK (39 terawatt hours) are responsible for more than half the overall production within the EU. In 2014, Germany over-took Spain as the largest wind power producer. The produc-tion from wind turbines in Spain has even decreased from 2013 onwards.

Germany made the largest contribution to the increase in the overall wind production within the EU from 2014 to 2015, which was primarily due to large capacity increases in the offshore sector. In 2015, an additional 3,018.5 MW

Wind power production 2010-2015: European total and top fi ve countries Figure 9


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of offshore wind capacity were connected to the grid, more than two thirds of it in Germany (2,282.4 MW)6.

Although the electricity produced from solar energy, total-ling 101 terawatt hours, has considerably increased since 2010, the annual growth rate has decreased recently, so that the increase from 2014 to 2015 has been reduced to a mere three terawatt hours. The largest increase was from 2010 to 2011, when an additional 24 terawatt hours were produced. The Member States with the largest solar production are Germany, Italy, Spain, France and the UK. Germany and Italy alone account for about 58 percent of the overall production from solar energy (see Figure 10).

The electricity produced from hydropower plants is highly dependent on the overall precipitation each year. Whilst the installed capacity of hydropower plants has not changed significantly, the production has varied by 38 terawatt hours within the last five years. After years with consider-

6 EWEA 2016.

able hydropower production in 2013 (372 terawatt hours) and 2014 (375 terawatt hours), there has been a significant decrease in the hydropower production from 2014 to 2015 (down to 339 terawatt hours).

The largest hydropower producers are Sweden, France and Italy. They account for about half of the overall production from hydropower.

Solar power production 2010-2015: European total and top fi ve countries Figure 10

Data ENTSO-E 2016b, Eurostat 2016b, 2016c; Calculation Öko-Institut * preliminary; Data for 2015 are own estimates on basis of ENTSO-E 2016.

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Hydropower production 2010-2015: European total and top fi ve countries Figure 11


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hours in 2015. It accounts for 47 percent of the overall Euro-pean production from lignite in 2015. Other major producers of electricity from lignite power plants are Poland, the Czech Republic, Greece and Bulgaria.

The electricity production from hard coal-fired power plants peaked in 2012 and 2013 with over 540 terawatt hours before returning to the 2010 level in 2015 with 500 terawatt hours. Germany, the UK and Poland domi-nate the overall production from hard coal-fired plants and account for 58 percent of the overall production from hard coal in 2015. Other major producers of electricity from hard coal-fired power plants are Spain and Italy.

The UK has seen a decrease in the electricity produced from hard coal-fired plants during the past three years, which is linked to the implementation of the carbon floor price in 2013 and its annual increase.

Europe’s overall power production from nuclear power plants has slightly decreased, though the trend varies be-tween Member States. Half of the EU’s nuclear power production sources stems from France, which produced 429 terawatt hours in 2015, 8 terawatt hours more than in 2010. In contrast, Germany has decreased its nuclear power production from 141 terawatt hours in 2010 to 92 terawatt hours in 2015. This trend will continue, as Germany has de-cided to phase out nuclear power by 2022. Further impor-tant producers are the UK, Sweden and Spain, each generat-ing around seven percent of the total.

The electricity production from lignite-fired power plants has stayed almost constant during the past five years with a slight peak in 2011 (348 terawatt hours) and 2012 (352 ter-awatt hours). Germany dominates the overall power pro-duction from lignite-fired plants and even increased its production from 147 terawatt hours in 2010 to 158 terawatt

4 Development of conventional power generation

Nuclear production 2010-2015: European total and top fi ve countries Figure 12


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Whilst the production from other conventional power plants has stagnated, the electricity production from gas-fired power plants has constantly and significantly decreased from 2010 to 2014 by about 15 percent annually. The data for 2015 shows a slightly different picture: the production from gas-fired power plants increased by 24 terawatt hours, a five percent increase from 2014 to 2015. This was due to the increase in the power demand in 2015, which was partly met by gas and hard coal. Italy, the UK, Germany, the Neth-erlands and Spain were the main gas power producers in 2015, accounting for about 75 percent of the total gas power production.

Lignite power production (including peat) from 2010-2015: European total and top fi ve countries Figure 13


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Hard coal power production from 2010-2015: European total and top fi ve countries Figure 14


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Power production from gas fi red power plants 2010-2015: European total and top fi ve countries Figure 15


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Fuel prices on the global markets significantly decreased in 2015. While the 58 percent decrease from 46.75 euros per megawatt hour in 2014 to 29.63 euros per megawatt hour in 2015 for oil was the highest, the decreases for hard coal (minus four percent) and natural gas (minus 15 percent) were less severe. The oil price is now at a similar level to the 2005 and 2009 prices.

In contrast, the CO₂ emission certificate price increased slightly from 2014 to 2015, from 5.95 euros per allowance to 7.62 euros per allowance.

This increase has impacted on the marginal costs of power plants: whilst the marginal costs for old lignite and old hard coal plants increased, the marginal costs for new gas-fired power plants decreased. Whilst in 2014 old lignite plants had marginal costs of 13.34 euros per megawatt hour, this increased to 15.41 euros per megawatt hour in 2015. Elec-

tricity from old hard coal power plants had average mar-ginal costs of 24.06 euros per megawatt in 2015, which only slightly increased to 24.93 euros per megawatt hour in 2015. In contrast, gas-fired power plants had marginal costs of 46.58 euros per megawatt hour in 2014, which decreased to 41.15 euros per megawatt hour in 2015. If the CO₂ emission certificate price had been around 35 euros, the marginal costs of these power plants would have been at the same level: around 50 euros per megawatt hour. With even lower fuel prices in the first months of 2016, a CO₂ price level of around 30 euros would be sufficient for a switch in mar-ginal costs.

5 Fuel prices and marginal costs

Nominal fuel prices in Europe 2000-2015 Figure 16

The World Bank 2016; BP 2016, Bundesbank 2016, DEhSt 2016; own calculations; Note: Hard coal prices are average Australian, Columbian and South African prices; Natural gas prices are European, all fi gures are nominal. Due to the 2015 exchange rate EUR-USD, price declines may appear less severe.

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Marginal costs of standard-type power plants 2000-2015 Figure 17

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There is a lively cross-border power trade taking place in Europe. The overall volume of trades reported has increased in 2015. In total, the reporting countries imported 473 ter-awatt hours electricity and exported 476 terawatt hours. The difference is made up of trades made outside of Europe.

The countries with the largest net exports are France, Ger-many, and Sweden. Italy, Belgium and the Netherlands are the largest net importers. However, when this figure is viewed relative to the countries’ consumption, the countries with the largest trade flows are Lithuania, which imports about 47 percent of its consumption, Croatia, which im-ports about 40 percent of its consumption and Latvia, which

6 Cross-border trade

Net-cross border trades Figure 18

ENTSO-E 2016

DE+56.7

ES-5.3PT

-2.2

PL-1.7

FR+62.7

UK-12.9

NO+15.7

SE+22.4

FI-13.6

IT-42.2

AT-15.5CH

-6.1

IE-1.2

CZ+12.6

EE+0.9LV-1.9

LT-5.4

GR-4.0

HR-7.6

SK-3.1

HU-9.5

SI-0.01

RO+6.9

BG+4.5

AL-1.3

BA+2.0

UA+0.1

ME-0.2 MK

-2.3

NL-17.1

BE-20.9

DK-5.9

RS+0.7

BY+1.4

Negative values represent net-importsPositive values represent net-exportsAll figures are trade flows in TWh

TR-0.3


26

imports about a quarter of its consumption. Countries in a similar situation where a large part of the national con-sumption is covered by imports include Austria (20 percent of the consumption), Belgium (23 percent of the consump-tion), Denmark (16 percent of the consumption), Finland (16 percent of the consumption), Italy (13 percent of the con-sumption), the Netherlands (14 percent of the consumption) and Slovakia (10 percent of the consumption).

The biggest net export increase in 2015 came from Germany, which increased by 20.6 terawatt hours. This is due to the fact that although Germany saw large amounts of additional wind power, this did not lead to a decrease in German con-ventional power production but rather to exports: German coal power plants were outcompeting gas power plants in its neighbouring countries Austria, Netherlands and (via Swit-zerland) Italy.


27

Prices at the electricity exchanges showed an unclear pat-tern in 2015 after decreasing for three years in a row from 2011 to 2014. The mean price per megawatt hour within this sample for 2015 was 41.7 euros. This is more than 20 percent less than in 2011. Increases in 2015 were experienced in the UK, Spain and France, whereas power prices decreased in Scandinavia, Germany and Poland. Scandinavia had the lowest day-ahead prices with 21.04 euros per megawatt hour, followed by Germany and Austria with 31.63 euros per megawatt hour. On the upper end of the range were the UK (54.95 euros per megawatt hour) and Italy (52.31 euros per megawatt hour).

7 Electricity exchange prices

Day-ahead prices in selected European countries Figure 19

EEX 2016, EPEX 2016, APX 2016, OMEL 2016, GME 2016, PGE 2016, Nordpool 2016, Matthes 2016

80

70

60

50

40

30

20

10

0

[EU

R/M

Wh]

2010 2011 2012 2013 2014 2015

UKITPTESNLFRPLDE/ATNordpool

Germany/Austria

Spain

Portugal

France

Italy

Netherlands

Nordpool

Poland

UK


28


29

In 2015, CO₂ emissions from the power sector were 18.3 percent lower than in 2005 and 12 percent lower than in 2010. After decreasing from 2007 to 2014, emissions in-creased again in 2015.

The decrease in emissions between 2010 and 2014 mainly stems from the large reduction in the electricity produced from gas-fired plants (see Figure 22). If this decrease in con-ventional power production had instead been taking place in coal-fired power plants, the emissions from the power sector in 2014 could have been lower by some 100 million tonnes of CO₂ 7. The increasing CO₂ emissions from 2014 to 2015 are mainly due to the increase in the electricity pro-duced from hard coal- and gas-fired plants as a result of the increase in demand in 2015. In 2015, about three quarters

7 Assuming a difference in CO₂ intensity between coal and gas of 400 g/kWh

of the total CO₂ emissions stem from coal- and lignite-fired power plants, even though they only make up one quarter of the total European electricity generation.

When looking at the overall greenhouse gas emissions trends within Europe, EEA data shows that in 2014 the EU already reached its 2020 target of minus 20 percent greenhouse gas emissions relative to 1990, with emissions 23 percent below 1990 levels.8

8 EEA 2015

8 CO₂ emissions

CO₂ emissions (2005 = 100)

Development of the power sector’s CO₂ emissions since 2005 (2005=100) Figure 20

European Commission 2016b, Öko-Institut EU ETS Database; Calculation Öko-Institut; Note that the data is not normalised for EU accessions, i.e. the 2007 peak is due to the new membership of Bulgaria and Romania.

110

100

90

80

70

60

100

107

92 92

86

82

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015


30

Power sector CO₂ emissions relative to 2010, by energy source (2010=100) Figure 21

ENTSO-E 2016b, Eurostat 2016b, 2016c, UNFCCC 2015; Calculation Öko-Institut * preliminary

2010 2011 2012 2013 2014 2015 *

100

105

108

76

101

109

100

99100

98

66

99

6291

75

97

74

59

93

75

99 98

9386 88

100

100

100

100

105

Lignite Hard coal Gas Oil and other


31

The EU climate and energy targets for 2020 and 2030 are signposts on the way to achieving an almost complete de-carbonisation of the power sector by 2050. Our analysis provides a snapshot of where Europe stands in this transi-tion and tracks developments over the past few years.

Today, RES-e provides the largest share of the EU electric-ity production (28.7 percent), closely followed by nuclear power (26.8 percent) and coal (hard coal 15.6 percent, lig-nite 10.4 percent). The contribution of gas has decreased by one third during the past five years to a current share of 15.1 percent. These figures also indicate that the power sec-tor in Europe seems on track in terms of delivering its antic-ipated contribution to the EU’s overall RES target for 2020.

The share of RES-e in the gross electricity consumption has continuously increased during the last five years, but was somewhat slower in 2015. This is due to the comparatively low contribution of electricity from hydropower as a result of poor precipitation, which masks a continuously steep increase in power production from other renewable energy sources, in particular from wind and solar PV. The grow-ing significance of wind and solar PV compared with other renewable energy technologies reflects the comparatively low costs of these two technologies (that are projected to decrease even further) as well as economic and natural con-straints in increasing biomass and hydropower beyond cur-rent levels. This trend is most likely to continue.

Nuclear energy has seen a slight decrease during the past few years, driven by the planned and gradual closure of nu-clear power plants in Germany, while the share of nuclear electricity produced in other member states has remained almost constant.

The electricity production from coal (lignite and hard coal) is currently at the same level as in 2010, with a slight peak in the electricity production from hard coal-fired power plants in 2012 and 2013.

In contrast, gas-fired electricity generation has seen a con-stant and significant decrease from 768 terawatt hours in 2010 to 485 terawatt hours in 2015, which is a decrease of more than one third.

These figures also show that while the EU has progressively reduced its CO₂ emissions from the power sector and al-ready reached its overall greenhouse gas reduction target for 2020 in 2013, the power sector’s contribution has not been achieved by reducing the relatively carbon-intensive power generation by coal, but by reducing the less CO₂-intensive gas-fired power generation.

This gradual decline of gas in the mix reflects a carbon price from the EU ETS that consistently remains below the price level needed to push for a fuel switch from coal to gas.

Looking ahead to 2016, we expect:

→ a further increase in the power generated by renewable energy sources of approximately 50 terawatt hours (+/- 10 terawatt hours depending on hydropower year) as a result of the newly established RES-e capacity that is just starting to generate power – this additional supply, how-ever, will mostly stem from only a few countries

→ a slight decrease in the share of coal-fired generation as a consequence of the UK government’s policy on coal, in-cluding the fact that the carbon floor price was raised to £18 in April 2015. Since this is added on top of the ETS price and gas prices are falling, this will lead to the shut-down of several hard coal-fired power plants in the UK in 2016

→ a continuous slight decrease in the production of elec-tricity from nuclear power plants, as the shutdown of the Grafenrheinfeld nuclear power plant in Germany in mid-2015 will only show its full effect in 2016

→ power demand to slightly decrease again due to the over-all energy efficiency trend and because of the relatively mild winter at the beginning of 2016

9 Summary and outlook


32

→ a decrease in CO₂ prices (after the slight increases in 2013-2015) due to the further increase in the ETS allow-ance surplus resulting from the RES, coal and demand trends outlined above

Looking beyond 2016, there is considerable uncertainty about future trends: both the further development of renew-ables in the power sector and the coal/gas mix will heavily depend on the outcome of the broad legislative package on climate and energy for the 2020-2030 decade. This will be negotiated between the European Parliament and Member States in the Council beginning in the summer of 2016. This package includes reforms of the emissions trading system, effort-sharing in the non-ETS sectors, new rules on the functioning of power markets in Europe, revisions of the EU legislation on energy efficiency and renewables, and more stringent rules on government interventions to ensure sys-tem adequacy.

Therefore, although Europe is generally still on track in 2015/2016 in gradually transforming its power sector, the outlook for the European energy transition beyond the next few years is still very uncertain. Without a reliable frame-work for RES investments post 2020 and a strong stance on old coal power plants, the decarbonisation pathway taken by the European power sector might slow down considerably.

ANALYSIS | Energy Transition in the Power Sector in Europe: State of Aff airs in 2015

33

When working with recent European power data, vari-ous obstacles occur. This applies mostly to generation data, but also export data is not always complete. Annual Euro-stat data for generation is in most cases available until 2014, some only until 2013. Monthly Eurostat data is not available for separate conventional thermal power but only on an ag-gregated level. ENTSO-E did not start reporting all relevant data until mid-January 2015 and data is incomplete for some countries for November and December 2015.

However, we believe, that it is crucial for European power market politics to work with reliable and most recent data in order to react to developments of the past few years, evaluate whether certain regulation has impact or not and develop market frameworks for the next decades. This is why we asked the Oeko-Institut e.V. to develop a methodol-ogy, which grasps development of the last year and draws a picture of the status of the energy transition within the EU. All data for 2015 and in few cases for 2014 in this report is therefore preliminary and therefore marked. For some countries, recent and reliable data is already available, but in order to work with coherent data on an EU level, we have decided to use Eurostat and ENTSO-E data.

We welcome insights to better, more reliable, more recent data and to the used methodology for the EU. The following sections describe the applied methodology.

10.1 Calculation of annual data

Most data in this report is taken from the Eurostat data-bases. However, this data is sometimes incomplete or not yet available. To aggregate data in order to show a consistent picture, the following scheme has been applied. Where there was neither annual nor monthly Eurostat data available we used data from ENTSO-E or, in rare cases, relied on our own estimates.

10 Methodology

If not indicated otherwise, all fi gures in this report are gross values. Gross consumption is calculated as follows:

Gross consumption = gross production - exports + imports – grid losses – pump storage losses

Eurostat reports annual data in a very detailed fashion. We aggregated the various energy sources according to the fol-lowing table:

Flow chart: Calculation of annual electricity generation

Öko-Institut

Does annual Eurostat data

exists?

Does monthly Eurostat data

exists?

Does monthly ENTSO-E data

exist?

Extrapolate data via previous

month and scale with relative

seasonal factor

Aggregation of diff erent energy

sources and producers

Disaggregation of conventional thermal using

generation share from previous year

Use monthly data from ENTSO-E

Yes

No

No

No

Yes

Yes


34

The monthly reported fossil generation from Eurostat is not as detailed. We disaggregated these values using the gener-ation mix from the prior year based on Eurostat annual data. The retrieved monthly values were then weighted using the more comprehensive annual data.

If not available from previous steps, we retrieved monthly data for solar power and other energy sources from EN-TSO-E. This data had to be weighted with a unique factor, as ENTSO-E reporting does not cover all production units in the countries. This factor is determined via the Euro-stat monthly data and ENTSO-E monthly data from 2014. Data from the end of 2015 (mainly November and Decem-ber) is still not available for several countries. We extrapo-lated these values from the last existing month using a rela-tive seasonal factor derived as an average from the previous years.

Öko-Institut

energy sources as used in this report Detailed energy carriers used in eUrOstAt

Lignite Lignite, peat, patent fuels and BKB (Braunkohlebrikett)

Hard Coal Hard coal, blast furnace gas, coke oven gas

Oil Bitumen, crude oil, diesel, naphtha, kerosene, residual fuel oil

Gas LPG, natural gas liquids, gas work gas and other recovered gases

OtherIndustrial waste, non-renewable municipal waste, shale oil, oil sands, gas coke, coal tar, coke oven coke, coking coal, petroleum coke

BiomassGaseous, liquid and solid energy carriers plus the renewable share of waste, if reported separately

Other renewables Geothermal plus tide, wave and ocean

Hydropower

Should include run-of-river and storage, but no pumped storage for our purpose. However, hydropower from annual EUROSTAT data includes gen-eration from pumped storage. Therefore, hydropower is calculated from hydropower as reported by EUROSTAT minus pumped storage. Generation from pumped storage does not include energy from natural inflow; natural inflow is included in stored water.

Solar Photovoltaic and solar thermal

10.2 Calculation of daily data

The daily data, which is used for the quarterly net produc-tion in the first part of this analysis, is based on ENTSO-E hourly values, which is partially incomplete. Reporting of these values started on 5 January 2015. Some countries re-ported before this date but the overall picture is not com-plete. Some countries have still not yet reported their data for the end of 2015. This means that the first week and the last two months of 2015 display incomplete data. Croatia, Luxembourg and Malta did not report any data. Because, however, these countries have a relatively small energy sec-tor, no adjustments were implemented.

The reported data does not cover all production units in the countries. Therefore the production profiles per type have been scaled up for every country using the annual data on a monthly base. For biomass, only 40 percent of the generated electricity has been reported. The difference between the


35

reported biomass values and the annual data has been con-sidered as a constant production. The main countries with missing biomass production are Italy (approx. 19 terawatt hours), the UK (approx. 20 terawatt hours) and Sweden (ap-prox. 10 terawatt hours).

There are some errors in the national data sets where no values were reported. Obvious errors (dates shown) were extrapolated:

→ SI: 08.01.2016 until 13.01.2016 → DE: 13.01.2016 → RO: 29.01.2016 until 31.01.2016 → BG: 23.08.2016 until 10.09.2016

39

Literature

APX Power (2016). Market Results. Retrieved from http://www.apxgroup.com/market-results/apx-power-nl/dashboard/ and http://www.apxgroup.com/market-results/apx-power-uk/dashboard/

BP (2016). Statistical Review of World Energy 2015. Available at http://www.bp.com/en/global/corporate/energy-economics/statistical-review-of-world-energy.html.

Bundesbank (2016). Makroökonomische Zeitreihen.

DEhSt (2016). Versteigerungen von Emissionsberechtigungen in Deutschland.

EEA (2015). Trends and projections in Europe 2015.

ENTSO-E (2016a). Actual Generation per Production Type. Available at https://transparency.entsoe.eu/generation/r2/actualGenerationPerProductionType/show.

ENTSO-E (2016b). Detailed monthly production for all countries. Available at https://www.entsoe.eu/db-query/production/monthly-production-for-all-countries.

EPEX Spot (2016). Market Data.

European Commission (EC) (2016a). Winter 2016 Economic Forecast: Weathering new challenges. Available at http://europa.eu/rapid/press-release_IP-16-214_en.htm.

European Commission (EC) (2016b). European Union Transaction Log. ETS.

Eurostat (2016a). GDP and main components (output, expenditure and income): [nama_10_gdp].

Eurostat (2016b). Supply of electricity - monthly data: [nrg_105m].

Eurostat (2016c). Supply, transformation and consumption of electricity - annual data: [nrg_105a].

Eurostat (2016d). Infrastructure - electricity - annual data. [nrg_113a].

EWEA (2016). The European offshore wind industry – key trends and statistics 2015.

GME (2016). Results of the Electricity Market. Retrieved from http://www.mercatoelettrico.org/En/Default.aspx

Matthes (2016). The current electricity cost of energy-intensive industries in Germany. Retrieved from http://reinhardbuetikofer.eu/wp-content/uploads/2016/01/Matthes-2016-Memo-Electricity-costs-of-energy-intensive-industries-in-Germany-v19final.pdf .

Nordpool (2016). Market Data. Retrieved under http://www.nordpoolspot.com/Market-data1/Elspot/Area-Prices/ALL1/Monthly/?view=table.

OMEL (2015). Market Data. Retrieved under http://www.omel.es/files/flash/ResultadosMercado.swf.

PGE (2016). Day-Ahead Market. Retrieved under http://wyniki.tge.pl/en/.

The World Bank (2016). Commodity Markets. Pink Sheet. Retrieved on 10 March 2016. Available at http://www.worldbank.org/en/research/commodity-markets.

UBA (2015). Entwicklung der spezifischen Kohlendioxid-Emissionen des deutschen Strommix in den Jahren 1990 bis 2015.

UNFCCC (ed.) (2015). National GHG inventory submissions 2015. Available at http://unfccc.int/national_reports/annex_i_ghg_inventories/national_inventories_submissions/items/8812.php.

40

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Agora Energiewende is a joint initiative of the mercator Foundation and the European Climate Foundation.

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How do we accomplish the Energiewende? Which legislation, initiatives, and measures do we need to make it a success? Agora Energiewende helps to prepare the ground to ensure that Germany sets the course towards a fully decarbonised power sector. As a think-&-do-tank, we work with key stakeholders to enhance the knowledge basis and facilitate convergence of views.

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