2015 saw a record 2.5% increase in renewables generation in Europe, which now makes up 29% of total European electricity supply,reports UK think tank Sandbag. However, as a result of lower output from hydropower and nuclear power stations, the amount of fossil fuel generation barely changed. CO2-emissions from the power sector fell only 0.5% after a 7.5% fall in 2014, but according to Sandbag this year will see a rapid fall again.



In its Review of the European Power Sector 2015, based on Eurostat data through 2013 complemented by more recent data from sources like ENTSO-E, Sandbag reports that renewables generation (including hydro) jumped to a record 87 TWh in 2015. Over three-quarters of the incresae came from just three countries: Germany, the UK and Italy.

The renewables increase in each of these 3 countries far outstrips any other European country (see figure2), Sandbag notes. Sweden and France are the only countries that even seem to be readable on figure 2, and generation actually seemed to fall in Spain and the Netherlands.

The renewables increase corresponds to 2.5% of European electricity demand. This means that 29% of Europe’s electricity demand is generated from renewables, up from 17% in 2008 (see figure 3)[1].

However, the massive increase in renewables generation did not lead to a fall in fossil generation, notes the report. A fall in nuclear and hydro levels, and an increase in total electricity demand, meant that fossil generation was roughly unchanged in 2015 (see figure 4). Lignite and hard coal only very marginally fell in total, and gas generation saw its first increase since 2010.

The changes in fossil generation were dominated by the collapse in UK coal generation, which was offset by increases in coal generation in the Netherlands and Spain (see figure 5). German and Italian fossil generation barely moved, despite record renewables growth.

Electricity demand rose around 1.1% in 2015, rebounding from a fall of 2.3%. Power sector CO2 emissions fell just 0.5% after a drop of 7.5% in 2014.

The two long term trends of increasing renewables and falling electricity demand mean that conventional generation is being crushed. However, CO2 emissions are not falling as fast as hoped. This is because the dirtiest generation of all – lignite generation – is the same level in 2015 as it was in 2010. In addition, only 9% of the fall in conventional generation since 2010 can be attributed to hard coal generation (see figure 11).

Instead, most of the fall was from gas generation: in fact gas generation from 2010 to 2015 fell by the same amount as renewables increased. This is because the marginal cost of gas is more expensive than coal, when using a low carbon price.

If the fall in gas generation since 2010 had instead happened on coal generation, EU power sector emissions in 2015 would be 15% below were they actually are now, Sandbag notes.

Figure 12 shows how this trend has been slowly developing over the last years, and that the large falls expected in hard coal generation lignite are yet to come.

Coal closures

Looking forward, there a number of reasons to be confident power sector emissions will begin to fall rapidly again in 2016, besides the trends of increased renewables and falling electricity demand:

There are many upcoming coal closures in 2016. Closure of old Dutch coal plants – 3 old Dutch coal plants have closed in November 2015, and more are required to close in 2016 and 2017 – in total 2.7GW. Closure of 3 UK coal power stations – around 5.8GW of coal plant will close in the UK in March 2016, which means UK coal generation is likely to continue its rapid descent. Closure of a further 4.3GW of old coal plant across the remaining EU in 2016 alone; although virtually none of which is in Germany, the largest coal generator.

Two Belgian nuclear reactors (2.4GW) returned in December 2015, reducing the need for fossil generation.

Nuclear plants in Sweden, Switzerland and the Czech Republic also had problems in 2015, which are expected to be resolved for 2016.

The new Spanish-French interconnector went live in November 2015, which will likely help reduce Spanish coal generation in 2016, as will a return-to-normal in Spanish hydro levels.

Unexpected slowdown

But the question of how fast emissions will fall even in the next few years is uncertain, Sandbag notes. There are many factors that may lead to an unexpected slowdown in how quickly emissions will fall. And the root of much of this uncertainty comes from government policy.

How quickly will renewables generation be built? The renewable build-rate in many European countries is falling, and it is unclear how much renewable capacity will be built in the future, especially post-2020 when there are no longer legally-binding renewables targets. Also, is it worrying it is concentrated in just 3 countries?

How quickly will lignite and hard coal be phased out? The worsening economics of lignite and hard coal power stations and tightening air quality standards means they will be under pressure to close over the coming years, but it is hard to know how fast – the fall in gas prices may accelerate closures. On the political side, there were substantial developments in 2015 on phasing out coal generation: The UK has committed to phase-out all coal by 2025, although it has yet to decide how to legislate this, and what that would mean for the path to 2025. Germany committed to pay to put a small number of lignite units into a reserve for closure, but it is unclear how quickly the remaining old units will close. The Netherlands has realised that, like Germany and the UK, emissions from coal power stations are undermining national CO2 targets, and is considering whether a coal phase-out is desirable.

How quickly will nuclear generation fall? Record-low wholesale electricity prices mean nuclear power plants may close sooner than thought, as they simply cease to be economic, meaning an increased reliance on fossil generation. A tax on Swedish nuclear output was the final straw for EON and Fortum, who in 2015 announced they will close 2 units of their Swedish nuclear plant, Oskarshamn – one unit has been offline since May-2013 so will never return, and the other unit needs a permit before a date is set, but is expected to be 2017-2019.

Will interconnection keep lignite base-loading? Lignite is the cheapest generation when carbon prices are low. Because of this, when interconnectors are expanded, it can flow into other countries, displacing lower-carbon generation. This is especially true of Germany, where new interconnection will keep increasing German exports even further than now (as reported by Agora Energiewende).

When will eastern and southern European countries delink electricity demand from economic growth? In October 2014, Sandbag forecast European electricity demand would fall by 10% this decade on the basis of efficiency improvements that are happening in western European countries being rapidly replicated across all European countries; this may have been optimistic.

Coal / gas switching is not yet happening. Even as gas price has collapsed, coal is still cheaper than gas. The exception is the UK, where an additional carbon tax means that UK power stations effectively schedule off a €30/tonne carbon price, which is more than enough to ensure gas comfortably runs ahead of coal.

Editor’s Note

Source: Sandbag. The full report from Sandbag, Review of European Power Sector 2015, is available here.

[1] Note, because hydro is included in the “official” renewables definition in figure 3, but not included in our analysis above, the increase in renewables including hydro in 2015 was only of 1.6% demand, not 2.5%, due to poor 2015 hydro conditions.