Renewables confirm again their potential economic benefits in the EU

02 Sep

Renewables confirm again their potential economic benefits in the EU

In CROSSBOW we are not in doubt about renewable energies competitiveness, however, once again the European Commission confirms so in a new report.

According to a new two-part study published by the European Commission’s Directorate-General for Energy, investment in the renewables sector can provide major benefits in terms of the competitiveness of EU industry. The study identifies a number of potential solutions to bottlenecks and administrative hurdles that would provide an even greater boost to certain sectors.

In this sense the report shows that the renewable energy sector has a significant contribution to the EU economy since its employed around 1.4 million Full Time Equivalents (FTEs) considering direct and indirect employment with a turnover of around EUR 154.7 billion in 2017. A rough estimate indicates that nearly half of those jobs (45%) are within heating and cooling industry (considering biomass, biogas, heat pumps and solar-thermal segments).

The combined turnover of those four technologies is EUR 67.2 billion and EUR 82.3 billion when biofuels and geothermal sectors are included. In 2016 and 2017 the use of renewables in heating and cooling sector contributed to 33% of the total avoided fossil fuels.

Increasing the share of renewable energy sources used in heating and cooling could have a positive impact on the EU economy and simultaneously on its citizens and environment, however, the study also finds that there are significant barriers to achieving full industrial competitiveness.

To address this issue the Commission recommends creating a European heating and cooling market where carbon prices are internalised, thereby providing a level playing field and increasing the competitiveness of renewables alternatives compared to fossil solutions.


Drivers and barriers

Most of the companies operating in the European Union decide to source renewable electricity primarily to improve their corporate social responsibility strategy, which differences their offer and generates a competitive advantage, as well as, brings  more value to shareholders, especially if one considers that investors are increasingly concerned about environmental sustainability. Many companies rely on renewable electricity to meet green requirements established by their customers and to participate in green supply chains.

In some sectors (e.g. construction), corporate sourcing of renewable electricity also paves the way for opportunities stemming from green public procurement. Impacts of renewable electricity on production costs are less clear, as some companies emphasise cost reductions linked to renewable electricity while others point at negligible impacts in terms of cost savings. In any case, for most of the companies, a reduction in energy costs is the ‘deal maker’/’deal breaker’ for sourcing renewable energy.

Nevertheless, policy uncertainty and regulatory barriers are deemed to be the most relevant challenges to corporate sourcing of renewable electricity, followed by higher electricity costs compared to ‘standard’ grid electricity, company culture preferring investments with higher returns, the fluctuating nature of renewable electricity (e.g. wind and solar) and financial barriers. When it comes to policy uncertainty, changes in support schemes and, more importantly, changes in the regulated components of the electricity prices (e.g. network costs, RES levies, etc.) hinder the decision to source renewable electricity. Rules change too fast and are quite different across Member States, thus making the sourcing strategy of companies operating in multiple EU countries less efficient.

Against this background, supporting corporate sourcing of renewables requires actions that can be categorised in three main groups: fostering corporate investments in renewable technologies, fostering corporate demand for renewable energy, and fostering demand for green products and services.


Future scenario

This assessment shows that if EU-based industrial and commercial companies committed to source renewable electricity to meet 30% of their total demand of electricity by 2030, then the EU renewable energy sector would generate more than €750 billion in gross added value and over 220,000 new jobs.