New Generation: Building a clean European electricity system by 2035

Ember modelling of least-cost power system pathways reveals that a clean power system (70-80% wind and solar) by 2035 should be at the core of energy planning for a net-zero continent by mid-century.

Dr Chris Rosslowe

Senior Energy & Climate Data Analyst

Elisabeth Cremona

Energy & Climate Data Analyst

Tom Harrison

Electricity transition analyst

22 June 2022 | 17 min read

Highlights

70-80%


Wind and solar power in 2035

<1%


Coal power in 2030

<5%


Gas power in 2035

About

This study explores the least-cost pathways to a clean power system in Europe, compatible with the Paris Agreement climate goals (1.5C). 

Detailed, country-by-country, hour-by-hour power system modelling confirms the feasibility of almost completely decarbonising Europe’s power sector by 2035, while expanding the electricity supply. Key metrics are quantified in order to benchmark progress, while accounting for a range of uncertainties. Crucially, the costs of competing routes are assessed, including the costs of developing the power system according to current plans. 

This report summarises the results of three modelled pathways for the European power sector. The Stated Policy pathway is aligned with stated national policies until 2035. The other two pathways – Technology Driven and System Change – are computed to minimise cost while remaining within a carbon budget compatible with the Paris Agreement climate goals. The latter two pathways expand clean electrification, but differ in their assumptions about available technologies and the levels of energy savings resulting from societal change.

The term Europe is used in this study to refer to the collection of countries included in the power system modelling: EU27 + UK + Norway + Switzerland + the Western Balkan six (AL, BA, KX, ME, MK, RS). Turkey and Ukraine are not included.

See our Pathway Explorer

Executive summary

A clean European electricity system by 2035

A clean power system in Europe can be achieved by 2035; at no extra cost above stated plans and without compromising security of supply.

In least-cost pathways, wind and solar scale rapidly this decade to provide the backbone of an expanded power system. This enables higher electrification that could halve Europe’s fossil fuel consumption by 2030.

Upgrading the system and quadrupling growth in wind and solar capacity requires an additional upfront investment of €300-750bn. The avoided fossil fuel consumption would save Europe an estimated €1 trillion by 2035, with multiple benefits to climate, health, and energy security.

See our Pathway Explorer

This analysis reveals that an expanded and (~95%) clean power system in Europe can be achieved by 2035 at no extra cost above stated plans. Larger upfront capital costs for wind and solar in the power system are offset by avoided carbon costs and avoided costs associated with new nuclear and fossil capacities. There is no cost penalty for choosing the clean power path, even when the electricity supply is simultaneously expanded to enable further electrification. If the full potential of electrification and energy savings can be realised, Europe’s consumption of fossil fuels could fall by 50% by 2030. At the EU level, this represents a greater reduction than the REPowerEU plan, albeit not as targeted at reductions in fossil gas. Nonetheless, it would deliver major improvements in Europe’s energy sovereignty at a time when reducing fossil fuel dependence is an urgent priority for climate, the economy, and security. 

The resulting fossil fuel savings – mostly delivered by electrification – could save Europe at least €530-1010bn in total by 2035. This amount is likely an underestimate given high fossil fuel prices are likely to persist. A clean and expanded power system is the critical enabler of this wider energy sector decarbonisation and the huge potential cost savings that follow.

Building a bigger, cleaner, cheaper power system


In the least-cost pathways, wind and solar provide the backbone of an expanded electricity supply by 2035.

These technologies expand to provide between 70-80% of electricity generation by 2035. To achieve this, annual growth in wind and solar capacity must quadruple by 2025 compared to the last decade; this is the central challenge to deliver a clean power sector by 2035. Over the period 2025-2035 the combined deployment rate should reach 100-165 GW per year, compared to an annual growth of 24 GW per year between 2010-2020. There are signs of acceleration, with additions hitting a record 36 GW in 2021, but a big deployment challenge lies ahead. Meeting the challenge requires permitting times to be slashed, and supply chains and manufacturing capacity to be secured. In least-cost pathways Europe’s wind fleet quadruples to 800 GW by 2035, and solar expands 5-9 fold reaching 800-1400 GW.

Stated policies would deliver just 45-65% of the wind and solar capacity required by 2035. Ambitions for 2030 set out previously by the European Commission as part of the Fit-for-55 package also fall short. However, recently enhanced proposals in the REpowerEU plan go a long way to closing the gap between stated ambition and the pathways to 2035 clean power presented here. While this is encouraging, major challenges remain in translating this higher ambition into European and national policy, and deploying the infrastructure on the ground.

Despite leading to lower overall energy system costs, building a clean, wind and solar dominated power system by 2035 will require an additional upfront investment of between €300-750bn above existing plans. While larger upfront investment is needed, cost savings are rapidly realised (as stated above). Extra investment needs are dominated by wind and solar, which require €460-720bn above existing plans by 2035. These additional capital requirements are partially offset by avoided investments in new nuclear capacities (€170bn by 2035) and unabated coal and gas (€100bn by 2035). Further investment is also required in infrastructure to increase system flexibility, such as doubling interconnection by 2035, adding clean dispatchable power sources, and deploying an electrolyser fleet to supply green hydrogen. Cost savings are quickly delivered, providing strong justification for these additional upfront investments.

Coal must be phased out by 2030 and unabated gas reduced to <5% of generation by 2035 to make Europe’s power system fit for the Paris Agreement.

Planned investments in unabated fossil capacities – particularly baseload gas power stations – are currently higher than what is needed for clean power by 2035. While the conventional gas fleet maintains a role in balancing until 2035, current energy plans deliver an estimated 60 GW of excess baseload gas assets. Instead, modelling reveals that no new baseload (unabated) gas plants need to be commissioned beyond those expected by 2025. 

The varied paths to a more flexible, reliable power system


A clean and expanded power system, dominated by wind and solar, is reliable and resilient to extreme weather events.

Granular modelling reveals that Europe can operate a 95% clean power system by 2035 without compromising reliability and that the weather-dependent, intermittent nature of wind and solar does not pose a threat to the resilience of the grid, even when faced with unfavourable climatic conditions. 

Enhancing system flexibility through a varied portfolio of technologies is key to cost-effectively integrating wind and solar, while maintaining the power system’s ability to supply growing demand. As the power supply transforms into one dominated by wind and solar, a parallel system transformation is required to provide for their distinct flexibility needs, and to efficiently integrate new types of power demand. Maximising system flexibility reduces dependence on thermal (gas) capacities for balancing. Enhancing system flexibility ensures that – if adequate wind and solar can be deployed – fossil assets can be phased out without compromising system reliability.

Fully leveraging demand flexibility enables the cost-efficient operation of the future power system. Electrification provides challenges but also opportunities if demand-side flexibility (such as smart charging EVs and flexible heat pumps) and battery storage, including that carried by electric vehicles, can be activated. This is particularly important for the integration of solar power, as shifting demand by a few hours can boost the alignment of demand with daylight hours. These flexibility services also enable peak shaving, a key tool supporting grid resilience and managing the growth of demand peaks.

Three key technologies emerge as the cornerstones of flexibility in a clean power system, maintaining system balance over a range of temporal scales: electrolysers, interconnections, and clean dispatchable generation. 

By 2035, wind and solar output frequently exceed demand, at which point electrolysers convert excess supply into green hydrogen. The electrolyser fleet grows to 200-400 GW by 2035 and supplies 14-27Mt of green hydrogen, enough to cover the majority of estimated European domestic demand while maximising the value of renewables output. The REPowerEU plan broadly puts the EU27 on track for this by 2030, aiming for more than 65 GW of electrolyser capacity and 10Mt of hydrogen production. If green hydrogen is instead imported or produced off-grid, it is found that a smaller fleet of ~100 GW by 2035 would still provide sufficient flexibility to the clean power system. 

Exchange over interconnectors enables system balancing when mismatch between supply and demand is geographic. The least-cost path for the European grid sees interconnections at least double by 2035 compared to 2020, enabling the cost-efficient expansion of wind and solar capacities by allowing their deployment in countries with the most favourable conditions. 

New clean dispatchable power sources enter the system by 2035, but the complete replacement of declining fossil and nuclear capacities is not required. As such, the general trend in all modelled pathways is towards a smaller and cleaner fleet of dispatchable sources by 2035, despite increases in electricity demand (and peak demand). Maintaining the existing hydropower fleet through continued investment and modernisation is strongly recommended. New clean dispatchable capacities can take a variety of forms. Differences in system cost are small, but each technology has a unique risk profile which decision makers must consider.

The wind and solar deployment levels are unaffected by choices between dispatchable capacity options, which have bigger implications for Europe’s dependency on fossil gas. This reinforces that accelerating wind and solar deployment is the central challenge for power sector decarbonisation, as it remains essential across a range of possible system configurations.

Gas with CCS only plays a small role by 2035 in pathways that include it. The role of this technology becomes larger if interconnection expansion is limited, as wind power cannot be as effectively moved across the grid. This would compound two risk factors: the possibility that CCS technology will not reach maturity before 2035, and a prolonged gas dependence. Conversely, the need for gas CCS can be entirely replaced, at minimal additional cost, by a combination of additional solar, earlier deployment of hydrogen turbines, and some additional unabated gas capacity.  

Bringing forward investment in clean dispatchable technologies can remove the need for any new unabated gas deployment after 2025. Alternative flexibility options, such as  hydrogen turbines, gas with CCS and utility-scale batteries can be used, at minimal additional cost, to build a resilient and clean power system by 2035. 

No new nuclear is found to be cost-competitive in modelled pathways, but sensitivity analysis reveals that developing new nuclear according to national plans does not incur significantly higher system costs. Doing so would quicken the transition away from gas in the medium term, and lower long-term reliance on this fuel by providing an alternative form of clean generation to abated gas. These benefits of course need to be weighed against safety risks and the issue of nuclear waste disposal. 

Foreword

A new vision for Europe’s electricity generation

Dr Chris Rosslowe, Senior Energy & Climate Data Analyst

There have never been more reasons to end the fossil age in Europe. Continued reliance on fossil fuels endangers the climate, damages public health, and undermines the sovereignty and affordability of Europe’s energy. Transformation of the power sector will be central to building a new energy system that addresses these challenges. Wind and solar provide the key tools to decarbonise power production, and are abundant and cheap. Moreover, electrification can unlock fossil fuel reductions across the economy, meaning an expanded clean power system should be considered the crucial enabler of wider decarbonisation. In this context, this study explores the least-cost pathways to clean power in Europe compatible with the Paris Agreement climate goals (1.5C). 

Evidence is growing that power systems in advanced economies can and should be decarbonised in the 2030s. The IEA’s 1.5C-compatible global energy scenario strongly recommends that advanced economies achieve this milestone by 2035. Accordingly, the G7 have committed to a goal of achieving ‘predominantly decarbonised’ electricity sectors by 2035. 

The modelled clean power pathways present an optimistic vision for the future power system that will require coordinated action by governments, manufacturers, system operators, and consumers to realise. The results reveal that taking early action could unlock billions in cost savings over the coming decades, in addition to the climate and health benefits of phasing out fossil energy. Achieving a clean power system by 2035 should be at the core of credible plans for a net-zero continent by mid-century. Making this vision a reality will require substantially higher investment in wind and solar power and key flexibility technologies this decade, above and beyond existing plans. Such a mobilistion would cement the EU’s position as a climate leader and boost the European economy. As such, the up-front investments required to build a cleaner and bigger power system could be viewed as a down-payment on the quality of life and prosperity of future Europeans.

Now is the moment for Europe to grab the opportunity for cleaner, cheaper energy. 

Summary for Policymakers

Emergent Themes

Main conclusions drawn from the modelled pathways

Clean power is cheaper than stated policies


An expanded and (~95%) clean power system in Europe can be achieved by 2035 at no extra cost above stated plans. 

Larger upfront capital costs for wind and solar in the power system are offset by avoided carbon costs and avoided costs associated with new nuclear and fossil capacities.

The additional electricity (and green hydrogen) supply unlocks further electrification in the economy, leading to substantial cost savings of €530-1010 billion in total by 2035 as a result of avoided fossil fuel consumptionThis is likely an underestimate as the unprecedented increase in fossil fuel prices in 2021-2022 are not taken into account. The expanded power supply in clean power pathways allows direct electrification to reach 40-47% by 2035, compared to 30% under Stated Policy. 

As a result of expanded supply and lower costs, the price of electricity in clean power pathways is lower than in Stated Policy. By 2035 the average cost of electricity in clean power pathways is 23-30% lower than under stated policy.

Building a clean, wind and solar dominated power system by 2035 will require an additional upfront investment of between €300-750bn above existing plansWhile larger upfront investment is needed, mostly in wind and solar, these are strongly justified by the cost savings which are rapidly realised (as stated above), as well as benefits to climate, health, and energy security.

Table 1: summary of pathway costs in the clean power pathways versus Stated Policy.

 Stated PolicyTechnology DriveSystem Change
Power system costs* until 20354,6604,6104,560
Energy system costs until 20358,1507,6207,140
Energy system cost savings by 2035-5301010
Investment requirements** before 20351,3301,6302,080
Additional investments by 2035-300750
*Both power system and energy system costs are given as a cumulative sum of annualised costs between 2020 and 2035. **Investment requirements are the sum of overnight investment in the power system between 2020 and 2035.

Fossil fuel consumption halves this decade


The EU27 is highly dependent on imports of all major fossil fuel types. This state of high exposure to price-volatile energy sources poses a clear risk to the EU27’s energy sovereignty and economic stability. Pursuing an energy system based on domestic renewables presents a safer path with better outcomes for European consumers.

A combination of clean electrification and energy savings can reduce Europe’s (and EU27) fossil fuel consumption by up to 50% by 2030, improving energy sovereignty.

The modelled clean power pathways would reduce total fossil fuel consumption in Europe (and the EU27) by an estimated 38-50%. This is compared to an estimated 25% reduction under stated policies. The Fit-for-55 plan, if implemented, would reduce EU27 consumption by 33%. The REPowerEU plan, which represents increased ambition above Fit-for-55, reduces consumption by 40%. REPowerEU is particularly focused on gas consumption which in 2030 is halved compared to the Fit-for-55 plan. However, this is at the expense of additional coal consumption in 2030, and little extra progress on oil reduction. 

Electrification contributes to approximately 70% of fossil fuel reductions.

Electrification of end uses often delivers major efficiency improvements compared to conventional use of fossil fuels. This is most obvious in the case of space heating (heat pumps) and light-duty transport (electric vehicles), which represent the low-hanging fruit for decarbonisation through electrification. Direct and indirect electrification, combined with the efficiency savings from these technology switches, deliver approximately 70% of estimated fossil fuel reductions by 2030. The remainder are delivered through energy savings, primarily from building renovation and modal shift in transport, showing that societal change also has a role to play.

Wind and solar deployment quadruples


Annual growth in wind and solar capacity must quadruple by 2025 compared to the last decade; this is the central challenge to deliver a clean power sector by 2035.

Over the period 2025-2035 the combined deployment rate should reach 100-165 GW per year, compared to an annual growth of 24 GW per year between 2010-2020. There are signs of acceleration, with additions hitting a record 36 GW in 2021, but a big deployment challenge lies ahead. Meeting the challenge requires permitting times to be slashed, and supply chains and manufacturing capacity to be secured. In least-cost pathways Europe’s wind fleet quadruples to 800 GW by 2035, and solar expands 5-9 fold reaching 800-1400 GW.

Required solar deployment aligns with ambitious industry estimates, but wind deployment would need to exceed industry’s best expectations.

The required growth rates in solar (55-115 GW per year), coincide with ambitious industry estimates that EU27 expansion can reach 53-90GW/yr by 2025. In contrast, the required wind growth (47-52 GW per year) is significantly higher than best case industry estimates, which forecast just 18GW per year (EU27) by 2025.

Stated policies would deliver just 45-65% of the wind and solar capacity required by 2035. Ambitions for 2030 set out previously by the European Commission as part of the Fit-for-55 package would also fall short. However, the recently announced REpowerEU plan goes a long way to closing the gap between stated ambition and the modelled pathways to 2035 clean power. While this is encouraging, major challenges remain in translating this higher ambition into European and national policy, and deploying the infrastructure on the ground.

Wind and solar become the backbone


In the least-cost pathways, wind and solar provide 70-80% of the electricity supply by 2035.

Such high shares of wind and solar are robust to sensitivity analysis, demonstrating a clear cost benefit to maximising the contribution of wind and solar. Stated Policy puts these technologies on track for a 52% share by 2035. While the increased penetration of wind and solar does present challenges to system operation, there are some important (and sometimes overlooked) complementarities that benefit system operation.

Wind and solar outputs are complementary over a range of timescales.

Studies have shown that a degree of complementarity exists between wind and solar outputs over timescales of hours to months for many regions in Europe. Key to exploiting these natural patterns is the development of flexibility solutions, and notably interconnection, to create a more dynamic system capable of balancing temporal and geographic imbalances.

Wind and solar deliver across a large fraction of the year. 

While there are some periods in the year where wind and solar output are anomalously low (see main finding 6 for analysis of a dunkelflaute period), there are many hours of the year where wind and solar provide or exceed total demand at the system level. At such times, excess generation can be shared between regions, or converted into hydrogen through electrolysis, or stored for later use. Enabling these routes with the right infrastructure is vital to maximising the value of renewables output. 

System operators must start planning and adapting now for very high instantaneous shares of wind and solar. There are lessons to be learned from countries that already regularly manage this.

A paradigm shift in power system operation is needed, as an increasing share of weather-dependent sources means the system must become more responsive to available supply rather than demand. Maintaining system stability will require new approaches, as unlike conventional generation, wind and solar are variable on short timescales and have a non-synchronous interface with the grid. Technical studies and real world experiences are accumulating, and evidence suggests that engineering and technical challenges can be overcome. Some parts of the European grid already regularly operate with close to 100% renewables – Portugal and Denmark have experienced periods of instantaneous wind and solar exceeding 100% of demand. 

Increasing flexibility is crucial


Enabling demand flexibility and deploying key power technologies facilitates the cost-efficient integration of wind and solar, while avoiding unnecessary gas investments.

As the power supply transforms into one dominated by wind and solar, a parallel system transformation is required to provide for their distinct flexibility needs, and to efficiently integrate new types of power demand. Maximising system flexibility reduces dependence on thermal (gas) capacities for balancing. 

Electrification provides challenges but also opportunities if demand-side flexibility (such as smart charging EVs and flexible heat pumps) and battery storage, including that carried by electric vehicles, can be activated. This is particularly important for the integration of solar power, as shifting demand by a few hours can boost alignment with daylight hours. 

Three key technologies emerge as the cornerstones of flexibility in a clean power system, maintaining system balance over a range of temporal scales: electrolysers, interconnections, and clean dispatchable generation. 

The electrolyser fleet grows to 200-400 GW by 2035 and supplies 14-27Mt of green hydrogen, enough to cover the majority of estimated European domestic demand while maximising the value of renewables output. The REPowerEU plan broadly puts the EU27 on track for this by 2030, aiming for more than 65 GW of electrolyser capacity and 10Mt of hydrogen production. 

Total interconnections at least doubles by 2035 compared to 2020, enabling the cost-efficient expansion of wind and solar capacities by allowing their deployment in countries with the most favourable conditions. 

New clean dispatchable power sources enter the system by 2035, but the complete replacement of declining fossil and nuclear capacities is not required. As such, the general trend is towards a smaller and cleaner fleet of dispatchable sources by 2035, despite increases in electricity demand (and peak demand). 

A clean system is reliable and resilient


A highly renewable power system is reliable and resilient even to extreme weather events.

Granular modelling reveals that Europe can operate a 95% clean power system by 2035 without compromising reliability and that the weather-dependent, variable nature of wind and solar does not pose a threat to the resilience of the grid. This remains the case with unfavourable climatic conditions – the 2035 clean power system is stress-tested using a year notable for both record low temperatures and severe heat waves (2010).

Resilient to a simultaneous cold spell and dunkelflaute.

The modelled ~95% clean power system delivers through a harsh cold spell – which drives up power demand – and a simultaneous prolonged reduction in wind and solar (dunkelflaute). Even during this period, there remains a sizeable contribution of wind and solar (~30%) at the system level, because it is exceedingly rare for meteorological events to affect the entirety of the European power system simultaneously. The successional impact of unfavourable weather conditions moving over Europe highlights the importance of interconnections in alleviating regional or national supply tightness.

Resilient to the hottest summer days.

Large solar capacities on the system lead to extreme daily supply variations, and increased cooling demand is expected in a warming climate, meaning summer months can also present challenging conditions. This modelling shows that a greater alignment of hourly supply and demand can be created through a combination of demand shifting (especially electric vehicle charging), storage, and electrolysis, successfully managing solar output that would otherwise far exceed demand.

Limited room for new fossil fuel capacity


Coal must be phased out by 2030 and unabated gas reduced to <5% of generation by 2035 to make Europe’s power system fit for the Paris Agreement. 

This study agrees with multiple previous analyses that coal must be phased out by 2030. Any use beyond this – with the possible exception of a small reserve fleet – is neither cost-competitive nor compatible with climate goals. For similar reasons, unabated gas contributes only 4-6% of Europe’s power supply by 2035. The outlook could be worse if gas supply pressures and price volatility persist.

No new baseload (unabated) gas plants need to be commissioned beyond those expected by 2025.

Planned investments in baseload (unabated) gas power stations are currently higher than what is needed for clean power by 2035. While the conventional gas fleet maintains a role in balancing until 2035, stated plans deliver an estimated 60 GW of excess baseload gas assets. Instead, least-cost pathways see no expansion beyond what is expected by 2025. After this, investment quickly pivots away from baseload to peaking capacities, at least until low or zero-carbon gas capacities become available in the 2030s.

Bringing forward investment in clean dispatchable technologies can remove the need for any new unabated gas investments after 2025, with minimal impact on costs. If all deployment of unabated gas (peaking and baseload) stopped after 2025, the resulting shortfall in dispatchable capacity could be compensated by earlier investment in hydrogen turbines, gas with CCS and utility-scale batteries, at minimal extra cost. 

A smaller and cleaner dispatchable fleet


Reductions in fossil capacity do not need to be fully compensated by growth in clean dispatchable capacities. 

As a result, the total dispatchable fleet declines over time, which is perhaps unexpected given that electricity demand (and peak demand) increases over time. New clean dispatchable technologies – gas CCS and hydrogen turbines – enter the system by 2035 in sufficient quantities to compensate for the decline in nuclear, resulting in a similar sized but more flexible clean fleet.

The composition of the dispatchable fleet may take a variety of forms and still achieve clean power by 2035. The technology choices present different risk profiles, but estimated cost differences are minimal.

New nuclear is found not to be a cost-competitive option in clean power pathways. However, sensitivity analysis reveals that economic cost does not significantly distinguish between pathways using (or not) different clean dispatchable technology options. This includes a scenario in which new nuclear is developed in line with national plans, and a scenario in which CCS technology is not available. Instead of cost, decisions require balancing different risk profiles.

The wind and solar deployment challenge is largely unaffected by choices between dispatchable capacity options, which have greater implications for Europe’s dependency on fossil gas.

None of the alternative pathways explored – from additional nuclear to an absence of CCS technology – significantly change the wind and solar deployment requirements by 2035. This confirms that deploying wind and solar, plus supporting power system infrastructure, is the central challenge for power sector decarbonisation. The composition of the dispatchable fleet has a more notable impact on the consumption of natural gas in the power sector. In 2035, alternative clean power pathways with i) no gas CCS or ii) new nuclear (in line with current plans) see reductions of 13% and 15% in gas consumption respectively.

Supporting Material



Methodology

Power system modelling

The pathways are computed using the Artelys Crystal Super Grid power system modelling platform – a leading tool in European energy system planning. As input, assumptions about the energy sector (outlined above) are converted into hourly electricity demand profiles across entire years, taking into account increasing demand from a variety of new sources. Each type of new demand changes the profile of electricity demand in a unique way, across hours and seasons. While the study is focused on power system evolution (and decarbonisation) by 2035, all pathways were computed in 5-year time intervals between 2020-2050. This ensures investments before 2035 have foresight of possible energy system configurations beyond 2035. Hourly power system modelling was carried out, by which investments in and operation of the power system is optimised, minimising cost, while ensuring security of supply over the year – in line with European system security standards. Three years of actual historic weather data was used to simulate every modelled year, of which an average is typically presented. This ensures that a variety of weather conditions and their impact on wind and solar output are accounted for. The impact of weather (temperature) on demand is also included, particularly important as heating is increasingly electrified and cooling demand grows.