What is the future of the energy industry in the EU? Our new Deloitte study answers this question, examining various economic trends and predicting what changes the European energy market will see in the coming years. But the pace of development is rapid, as the European Commission is aware, which is why it has presented a proposal to update the ‘Fit for 55’ package. This promises a fundamental transformation of energy strategy and a clear vision for the future. One of the main themes addressed by the new legislation is the development of renewable energy sources. And the waste that is produced upon their disposal presents an opportunity for the circular economy and the application of circular principles in renewables.
Take a look at other topics that we address in our EnviLaw newsletter #7:
- New standard for European green bonds to facilitate raising capital for sustainable projects
- Environmental litigations are on the rise and drive the fight against climate crisis
- EU to focus more on the greening of agriculture and forestry, aiming to mitigate climate change
- The European Commission presented the most comprehensive set of climate and energy proposals to date
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The future of electricity in the EU
What will the future of electricity in the EU look like? The Deloitte European Electricity Market Model (DEEM) discusses market developments and presents trends and forecasts in the context of Europe. In terms of challenges, we are facing the need to achieve climate neutrality by 2050, the ageing of first-generation wind and thermal power plants, the continued dependence of some countries on coal, and the unstable supply of wind and solar energy, which has implications for the stability and reliability of supply in the market.
The study presents four scenarios until 2050 that deal with different levels of electrification, technological progress, implementation of energy policies and society’s sentiment. The trend will be an increasing capital intensity of the sector coupled with the refurbishment of current capacities and investments in capacity expansion and infrastructure. The use of coal will be on the decline due to political direction, ageing infrastructure and low financial viability. In contrast, a golden age of natural gas is beginning, serving both as an alternative to coal and as a transitional solution before a complete transition from fossil fuels. Electricity trading is facing growing volatility and price fluctuations that are being increasingly driven by wind and sunshine. Accurate weather forecasts will be key for trading. All these aspects will manifest themselves with varying intensity in each of the four forecasts. What is certain, however, is that cooperation and a coordinated setting of standards at a European level will be the most important aspect.
Fit for 55: An ambitious revolution not only in the energy sector
On 14 July 2021, the European Commission presented a set of proposals to revise and update EU legislation, including the legal regulations in the energy sector. The aim is to ensure that EU policies are in line with the EU’s climate goals, the so-called Fit for 55.
The European Commission is preparing a revision of the Renewable Energy Directive that will increase the EU’s binding renewable energy target to 40%. It will also increase the support of electrification and the use of renewable fuels. The Energy Efficiency Directive will also be amended, which should lead to a 9% reduction in energy consumption. And new regulatory features can also be expected in the Energy Taxation Directive, which should harmonise minimum fuel tax rates and remove exemptions that encourage the use of fossil fuels.
However, these forthcoming changes are just the tip of the iceberg – for a full overview of the Fit for 55 proposals, see the climate change section of our EnviLaw newsletter.
Opportunities and challenges of the clean-energy transition from a circular economy perspective
Renewable energy technologies are resource-intensive throughout their entire lifetime. As they become more widespread, the waste produced upon their disposal will also increase, opening up opportunities for recycling, upgrading and repairing in order to reduce the consumption of valuable raw materials, as discussed in an article published by the European Environment Agency. The rapid pace of technological development means that infrastructure can become obsolete quite quickly. This creates a source of waste that is difficult to dispose of. However, even the reuse of materials in the production cycle faces problems in terms of logistics (large volumes, often from distant locations) or technology design that does not take into account recyclability or the presence of hazardous substances. Policymakers and dominant players in the sector can address these waste problems through circular economy tools such as eco-design, setting material-specific recycling targets or extending producer responsibility.
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