Skip to main content

The transition to a renewable electricity system and its interactions with other policy aims

Periodic Reporting for period 3 - TRIPOD (The transition to a renewable electricity system and its interactions with other policy aims)

Reporting period: 2020-10-01 to 2022-03-31

In order to meet its long-term climate targets, the European Union has decided to make its energy and electricity systems carbon-neutral by 2050, fully eliminating energy-related CO2 emissions. Given the resources available in Europe, this implies that Europe needs to embark on a transition to a largely, or fully, renewable power system.
This is however not the only European energy policy aim: besides a transition to renewables, further aims include an energy efficiency increase and demand reduction; liberalisation of the power markets and exposure of renewables to competition; and europeanisation of renewable energy policy, power grids, and the creation of a European internal power market. In TRIPOD, we investigate whether and how these policies interact and affect the chances for and costs of a transition to a renewable power system; how the other aims constrain the options for renewables; and how identified policy conflicts can be resolved.
Climate change is a societal challenge of enormous proportions and it is important that transition policies are as effective as possible. Hence, if other policy aims – which are no less legitimate than climate-related ones – reduce the chances of a successful energy transition, it is important to first of all know about such conflicts and then, if possible, to identify ways to resolve them. Because current policy discourse and the scientific literature treat these policy aims as either independent or synergistic, investigating in detail how distinct but related policy processes interact is a step beyond the current state-of-the-art.
The overall objective of TRIPOD is to explore the mechanisms by which policy aims and processes may interact with each other – be it in a synergistic or antagonistic way – and understand how these interactions work, so as to be able to identify solutions to identified conflicts. Such interactions may include factors such as how reaching the other aims influences the transition dynamics, including technological innovation and regime change; how key actors may alter their behaviour due to policy changes in fields outside the renewable energy policy arena; and how reaching another policy aim impacts the functioning of a fully renewable power system. The answers from TRIPOD contribute to both the disciplinary and the policy-driven renewable energy research, and provide insights to help policymakers define less conflicting policies, thus supporting the European transition to renewables.
Our work has progressed well across all three interaction themes, on track or exceeding the planned output.
Regarding the interaction energy efficiency – transition to renewables, we have showed that there is significant potential for conflict between the two areas. The key to decarbonising energy is that all energy is entirely carbon neutral: this is the only way in which energy-related CO2-emissions can reach zero. At the same time: if every kWh generated is fully CO2-neutral, it does not matter how large Europe’s energy demand is – it is still carbon-neutral. Hence, we have shown that reducing demand is neither sufficient nor necessary for a Paris Agreement-compliant energy future.
For the interaction liberalisation – renewables, we report at two important findings. First, if Europe wants to phase out renewable power support as technologies become economically competitive, it matters how countries coordinate their actions. If support is phased out across all technologies and countries simultaneously, the effect must not be large. If support is phased out technology-by-technology as each becomes competitive, the effects can be profound: our results show that investors will flock to still supported technologies. As the most expensive technologies are likely to leave support schemes last, an uncoordinated support phase-out could lead to an overly strong expansion of the most expensive renewables, exaggerating the cost of the transition. Second, we have shown that carbon pricing, which the main market-based policy strategy to decarbonise society and especially the power sector, is unsuited to support a system transformation to a renewables-based future, for two reasons. First, renewables tend to get cheaper over time as they are deployed – and hence they need high initial support and lower support over time. This is exactly the opposite carbon pricing, which starts low and increases over time. Second, the main barrier to renewables expansion today is not cost but the regime – the infrastructure and institutions. As the existing electricity regime is based on the needs of fossil power, it must be adapted to the needs of renewables – but the necessary processes are ignored in the carbon price discourse.
Regarding the interaction europeanisation – renewables, we have focused on the geographical scale of the (renewables-based) electricity system: should Europe expand renewables as a continental system, or rather each country or region by itself? We have shown that Europe has the potential to supply its entire electricity demand with only renewables on all geographic scales, from the continental to the regional scale; only municipal renewable electricity autarky is sometimes problematic, as some cities have an insufficient potential to supply themselves alone. We have also shown that the fluctuations, a main problem with solar and wind power, can be handled on all scales from the continental to the regional, and that the costs of balancing the system on all these different scales must not be very different. Instead, the central question for how to achieve 100% renewable power is where to build which assets: do European citizens prefer a system based on generation in remote and less populated regions supplying the central demand centres through long power lines, which would be the consequence of a continental-scale renewable power system? Or do they rather prefer regional self-sufficiency with generation near the cities themselves, reducing the transmission need but putting large generation fleets near population centres? For this interaction, we have found no conflict: Europe has plenty of options for designing a fully renewable power system at low cost, but must choose one.
In the first half of TRIPOD, we have progressed beyond state of the art in several ways.
The first set of findings, described above, hold a range of new insights, relevant for both science and policy. So far, we have moved beyond the state of the art by showing that there are indeed several types of conflicts between policy aims – none of which have been investigated in detail in the existing literature. We have identified two particularly important conflicts – between efficiency and renewables policy, and between liberalisation/reliance on “markets” for renewables deployment – that were previously not discussed in the literature. Because the mainstream view among energy policy researchers is that these fields are synergistic, our evidence of conflicts is particularly important.
Conceptually, TRIPOD adds to the existing literature on policy mixes by investigating not only the interactions between policy instruments within a policy field, but also looking at interactions across different policy fields. This is an important conceptual addition to the (energy) policy literature – especially as we have shown that our initial hypothesis of several cross-field conflicts holds.
Methodologically, especially our modelling work deserves mention. The Euro Calliope model and the underlying model for assessing renewable power potentials with higher resolution than in other models, are methodological advances for renewable power system analysis in Europe. Both are openly available for anyone to use and develop further. In particular, the model reduction method (polynomial chaos expansion) used and for the sensitivity analysis of Euro Calliope results is a major advance, allowing for thousands of model runs without losing the benefits of highly-resolved system modelling.
In the second half of TRIPOD, we are going to first finish the reductionist analysis of potential conflicts between the different policy aims and the transition to renewables, and perform follow-up studies on particularly interesting identified interactions. In particular, we will keep going down two paths and examine the interaction between energy efficiency and renewables on the one hand and that between liberalisation, in particular in the form of carbon pricing, and the transition to renewables on the other. For example, we will investigate the efficiency and effectiveness of support instruments – are auctions, which are more market-friendly than past support tools and are becoming the default choice in Europe, less effective than other policies? In the next project phase, we will also focus on ways to reconcile other policy aims with the transition to renewables: are there possible policy additions or alterations to enable both? This will include whether the carbon price instrument can be re-designed to be useful for renewables, for example through revenue recycling into renewables deployment, or if the two fields must be delimited so as to minimise their interference with each other. It will also include detailed analyses of the mechanism by which efficiency policy and renewables support (may) cannibalise on each other: assuming that our preliminary finding of a conflict between them holds, why are they in conflict? And can policies be redesigned to overcome this conflict, or is the conflict mechanism too fundamental?