How Europe’s energy transition can save over €1trn towards 2050
Image: E.ON
E.ON in its ‘Energy Playbook’ sets out a scenario towards Europe’s energy transition that is estimated to save around €1.5 trillion ($1.6 trillion) on the EU’s reference scenario by 2050.
The basis of E.ON’s scenario is the prioritisation of decarbonisation strategies with targeted measures based on electrification first, as the most cost effective abatement option for the majority of the energy transition.
Additional volumes should help to keep unitary power cost in balance as power system costs get shared by broader shoulders, but it suffers from being taken for granted and is at risk to materialise with delay, E.ON reports.
The scenario suggests that temporary support should be provided where needed. Technologies like EVs and heat pumps are nearing mainstream economic viability and incentives must continue to push adoption rates beyond their tipping points.
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To reveal the true cost benefits of power, taxes also should be reduced and levies removed.
There also is the need for a timely build-out of grids to enable a coordinated ramp-up of solar and wind generation and the demand for electrification, along with a strong acceleration of digitalisation to integrate and increase demand side flexibility.
For example, this latter could help avoid around 240GW of reserve capacity, leading to annual savings of around €40 billion ($43.5 billion), E.ON estimates.
“Europe is now at a crossroads. With the Energy Playbook, we show that climate neutrality is not only possible but also economically advantageous,” says Thomas Birr, Chief Strategy Officer at E.ON.
“Together, we can now pave the way for a sustainable, carbon-neutral Europe by 2050. However, we must move away from planned approaches with detailed goals over decades and towards an agile, market-oriented, and pragmatic energy policy.”
Affordable energy transition
E.ON indicates in the Energy Playbook that to ensure an affordable energy transition, it is crucial to align the ramp-up of supply and demand. If these elements decouple, the energy system risks inefficiency, leading to over-subsidisation and stranded assets.
Hydrogen remains essential in the long term but its development is slower than anticipated as high costs of renewable hydrogen are not attracting demand as expected.
Adjusting to a delayed ramp-up will bring opportunity to refocus and optimise the solution mix beyond 2030.
Rescaling the system also can cut the renewables ramp-up by 30% by 2030, reducing subsidies for new assets by more than €20 billion ($21.8 billion) annually.
Overall, the Energy Playbook scenario suggests that the projected increase in energy system costs would be reduced by around 30% by 2030, compared with current EU Green Deal and REPowerEU plans.
This reduces the investment uptake to 2030 by 27% and effectively doubles the time to peak investment, with €1 trillion ($1.1 trillion) in energy-related investment estimated by 2040 accumulating to around €1.5 trillion by 2050.
Another finding is that while total power system costs are set to increase in the Energy Playbook scenario, a doubling of electricity demand driven by electrification ensures the costs are distributed across a larger energy volume leading to specific power system costs declining by 20% by 2050, from €119/MWh in 2023 to €95/MWh in 2050.
