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

Periodic Reporting for period 4 - TRIPOD (The transition to a renewable electricity system and its interactions with other policy aims)

Reporting period: 2022-04-01 to 2023-01-31

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: further aims include an energy efficiency increase and demand reduction; liberalisation of the power markets and exposure of renewables to competition; and europeanisation of energy policy and markets. In TRIPOD, we investigate how these policies affect the transition to a renewable power system and how identified policy conflicts can be resolved. Because current policy debates and the scientific literature treat these policy aims as either independent or synergistic, our work exploring how these policy processes interact is a step beyond the state-of-the-art.
In TRIPOD, we explore the mechanisms by which policy aims and processes interact with each other to be able to identify solutions to possible conflicts. 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 across all three interaction themes, on track or exceeding the planned output.
For the interaction energy efficiency – transition to renewables, we have showed that there is potential for conflict between the two areas, not in technical but in political terms. 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. Hence, reducing energy demand is only important for decarbonisation to the extent that it makes zero-carbon energy easier or cheaper. Our findings suggest that there may be political competition between efficiency and renewable energy policies, and that countries struggle to progress equally on both. For full decarbonisation, focusing on zero-carbon energy supply is essential.
For the interaction liberalisation – renewables, we identified several conflicts. First, if Europe cancels renewable power support as technologies become economically competitive, coordination across countries is important to avoid undesired cross-border effects. Cancelling auction schemes may slow down renewable deployment. As different investors manage market risks differently, abandoning support would likely trigger a shift from small-scale decentralised to large-scale investment. As the most expensive technologies will leave support schemes last, an uncoordinated support phase-out could lead to higher costs and skew the deployment to the presently cheapest technology.
Second, we show that carbon pricing seems unsuited to trigger a system transformation to a renewables-based future. Because renewables tend to get cheaper over time as they are deployed, they need high initial support and lower support over time. This is the opposite of carbon pricing, which starts low and increases over time. Further, the main barrier to renewables expansion today is not cost but the infrastructure and institutions, and this is not addressed by a carbon price. Indeed, our reviews of the empirical literature on effects of carbon pricing show that existing carbon pricing schemes have triggered small emission reductions, but they have not triggered investments in the necessary zero-carbon technologies, questioning the usefulness of this tool as the lead, or only, instrument for the transition to renewables.
Regarding the interaction europeanisation – renewables, we found mainly political synergies. We show 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, and often even the municipal scale. We also show that solar/wind power fluctuations can be handled on all geographical scales, at similar costs across scales. The key question for 100% renewable power is not cost, but where to build which assets. Europe has many options for designing a renewable power system, but must choose one. Further, we show that energy and climate policy has been europeanised, which has often benefitted renewables as the policy initiative have shifted towards the oftentimes more ambitious European level. The economic crises – both the financial crisis and the Corona crisis – have accelerated this europeanisation, and largely supported faster deployment of renewables, both through recovery packages and policies to “build back better” after the crises.
The findings of TRIPOD hold a range of new insights relevant for both science and policy. We showed that there are several types of conflicts between policy aims. We identified two particularly important conflicts, between efficiency and renewables policy, and liberalisation and renewables. Both were rarely discussed in the literature but are now emerging as new research frontiers.
Much of the work in TRIPOD helped push the state of the art, for example our work on how energy efficiency and renewable energy policies interact, or the effects of auctions and auction design on actors and investments. Some work, including our carbon pricing research, has contributed to define the current state of the art in energy policy research; it also found the way into both the IPCC WGIII report and to the IPCC Synthesis report 2023, Summary for Policymakers.
The modelling work was an important step in terms of methods, both by placing political decisions at the beginning, and not the end, of modelling, explicitly seeking to inform decisions about trade-offs, and by pioneering surrogate models as a new tool for sensitivity analysis. In TRIPOD, we developed ways to include stakeholder preferences in modelling Both approaches are presently being further developed in collaboration with colleagues across Europe.
The carbon pricing work was originally designed to explore the interaction between “free” markets and investment, but instead found that carbon pricing has not, and should hardly be expected to, be a critically important instrument for full decarbonisation. This finding, which questions conventional climate policy wisdom, triggered heated political and academic debates and was involved in a flurry of articles and responses in 2018-2022. Our work has contributed to the emerging energy/climate policy research paradigm, centred on systemic change and investment directed to entirely eliminating emissions instead of incrementally reducing emissions.
Finally, our work on crises, originally designed to explore the drivers of cases of absolute decoupling, took an unexpected turn by showing that “market-based” policies have not played a big role in decarbonisation. Instead, we show that the public policies enabled by economic crises and especially the economic destruction and the following, more resource-efficient reconstruction of the economy were important. This work suggests that decarbonisation polices targeting investment are essential during normal times, but external events such as economic crises can act as catalysers to accelerate already started climate policy progress and help make structural changes towards zero-carbon economies permanent.