Reshaping the Energy System Could Save Europe Up to 81 Billion Euro

July 2, 2014
Reshaping the European energy system could reduce energy expenditure by a range of €27 billion to €81 billion a year by 2030, according to a new study.

Reshaping the European energy system could reduce energy expenditure by a range of €27 billion to €81 billion a year by 2030, according to a new study, Forging a Joint Commitment to Sustainable and Cost-efficient Energy Transition in Europe, carried out by Accenture for EURELECTRIC.

The study shows that European expenditure on electricity and gas, the product of prices and the volumes consumed, has surged by more than 18 percent in recent years, from €450 billion in 2008 to €532 billion in 2012, with electricity accounting for most of this increase. Rising prices were almost solely responsible for the jump, driven largely by charges for renewables support, while the volumes consumed remained largely stable. Without a concerted effort by the industry, policymakers and consumers to more effectively manage the energy system, total energy expenditure could be 50 percent higher by 2030.

"A step-change is urgently needed in the restructuring of the European energy system if we are to gain the support and trust of energy consumers without destroying the competitiveness of our industry," said Hans ten Berge, secretary general of EURELECTRIC. "Our study shows that with the right policies in place, the energy transition could cost each European citizen over €100 less a year than if we continue with business as usual."

Sander van Ginkel, managing director in Accenture's utilities strategy practice, said that the implementation of the energy transition across Europe has so far lacked optimisation. "This analysis shows the main cause to be the lack of a single European energy market, but also slower than expected cost reduction of some new energy technologies and slower deployment of energy efficiency than envisioned. Stakeholders from all sides have recognised the major impact of rising energy expenditure on Europe's households and industry, and all share a sense of urgency about the issue, but we still see a considerable gap between awareness and action," he added.

Improved renewable energy systems could save up to €20 billion

By optimizing renewable energy systems, the report estimates savings in the range of €10 billion to €20 billion in annual energy expenditure. In generation, the coordination of renewable energy deployments across Europe could significantly reduce the costs by ensuring that new capacity is in the optimal location for sun and wind, and at the most appropriate mix, to optimise load factors and integration costs, irrespective of national boundaries.

"This could be achieved by aligning national support systems in the short term, while gradually exposing renewables to the electricity market, renewables generators to the costs of operational integration, and allowing full target sharing for renewables across Europe. Over time, an effective CO2 price mechanism could gradually replace national renewable support," said Sander van Ginkel.

Increased market integration could save up to €27 billion

Full market integration across trading and transmission and increased cross-border infrastructure interconnection could limit the costs of managing increasingly variable load supplies, improve the functioning of the energy market and safeguard security of supply, generating estimated savings of between €8 billion and €27 billion in annual energy expenditure.

"While progress is already being made, the increasing expenditure on energy calls for faster movement. This would require instilling confidence in key stakeholders that these integrated markets would be effective in delivering security of supply. The level of interconnection across current markets will also need to be increased," continued Sander van Ginkel.

More intelligent grid management could save up to €15 billion

The growth of distributed generation places significant financial and technical stresses on distribution networks. Already, projects for local energy production are being delayed by a lack of hosting capacity on the grid. The solution lies in the move to an active system management in which capacity, demand and asset performance is managed remotely and closer to real time, using advanced analytics and smart grid technologies.

This could result in estimated annual energy expenditure savings ranging from €5 billion to €15 billion, but to realise this value, regulators would need to create a framework that allows network operators to manage their assets more actively.

Improved demand response and energy efficiency could save up to €20 billion

The electricity system has traditionally been designed to meet capacity requirements and so peak demand is a major driver of overall costs. Flattening this load shape by shifting some peak demand could significantly reduce costs and improve reliability, resulting in overall savings of between €5 billion and €20 billion a year on energy expenditure.

Sander van Ginkel commented that the progressive removal of barriers to energy efficiency could provide consumers with easier, cheaper ways to reduce energy consumption. "Options include improving usage data through smart metering and in-home devices, as well as providing support for utilities to develop new business models and partnerships that could increase incentives for energy management, along with new financing mechanisms that would enable energy-efficiency investment," he added.

Hans ten Berge concluded that the success of this approach hinges on a genuine commitment by the energy sector, policymakers and regulators, consumer representatives, industrial players, and environmental groups to bridge their differences and move forward together to develop a joint agenda for change.

Research Methodology

Accenture and EURELECTRIC combined existing data sources on trends in energy use and expenditure, and existing dedicated analysis, to assess recent developments and project these on future scenarios, building on the EURELECTRIC PowerChoices Reloaded study from 2013. Literature research, expert input and Accenture modelling and analysis were the basis for identifying and valuing the four critical cost saving factors. The analysis was confined to eight countries: France, Germany, Italy, the Netherlands, Poland, Spain, Sweden and the United Kingdom.

Voice your opinion!

To join the conversation, and become an exclusive member of T&D World, create an account today!