European Power Grid Group Says More Fossil-Fuel Plants Needed

Europe’s share of renewable power capacity will rise to more than 40 percent by 2020, spurring a need for additional back-up coal and natural gas plants, according to Entsoe, the region’s grid-operators group.

Total generating capacity in 2020 is projected at about 1,185 gigawatts, Entsoe said in a report today. Renewable sources will account for 512 gigawatts, an increase of about 50 percent from now and more than the 471 gigawatts estimated for coal, natural gas and oil plants. The rest will come mainly from nuclear reactors. Europe will need 38 gigawatts of “reliably available capacity” in addition to already confirmed investments to maintain the balance between supply and demand.

“Depending on the penetration of variable generation to the overall energy mix, this could imply that the level of needed investments in installed capacity is significantly higher,” Entsoe said.

The European Union’s drive to generate 20 percent of its power from renewable energy by 2020 and cut reliance on carbon-heavy coal and oil output is increasing the need for flexible back-up plants that can provide electricity during times of unfavorable weather when wind and solar output is limited. Germany may prevent closures of unprofitable plants to ensure that the lights stay on in Europe’s biggest economy.

Complementary Measures

Germany, the U.K., France, Italy, Poland and Belgium are among EU member states considering compensating fossil fuel-fired plants for low or negative returns caused by increased renewable energy usage, weak demand and depressed prices. Capacity markets allow utilities to fix electricity prices for guaranteeing backup supply in advance.

“Wind, solar and biomass power plants are expected to increase, while the share of hydropower plants is expected to decrease,” Entsoe said. The increasing volume of variable renewable generation urgently requires “complementary measures” to ensure the balancing of the system, it said.

Norway will remain the country with the most electricity produced from renewables with 96 percent in 2020, followed by Switzerland with 73 percent, Montenegro with 69 percent and Latvia with 68 percent, Entsoe said.

Among nations relying most heavily on coal, lignite, oil and gas for their generation needs, Estonia will produce 83 percent of its power from fossil fuels, the Netherlands 80 percent, Cyprus 78 percent and Poland 75 percent in 2020.

“A clear replacement trend of coal, lignite, oil by natural gas is forecast” for the entire region, Entsoe said.

Nuclear capacity is expected to increase until 2015, and then decline until 2020, Entsoe said. France will remain Europe’s biggest nuclear generator by 2020, with around 63 gigawatts of capacity.

Before it's here, it's on the Bloomberg Terminal.