Small Step Up for Renewables, Giant Fall for Gas

The gas crisis and the resulting skyrocketing prices have had dire economic consequences across the EU. Urgent actions have been implemented to lessen the immediate impact but now is the time to put longer-term policies in place to ensure that the EU cannot be held to ransom by the global gas market in future.

RPE and the associated 45% renewable energy target will cut 2030 gas imports to half those in the July 2021 Fit for 55 package (FF55). FF55 expects EU gas imports to be 236 billion cubic metres (bcm) in 2030 so RPE’s 45% target will avoid 118 bcm of these. FF55 assumes 2030 gas imports are only reduced by 85 bcm (-26%) from 2020 levels. REPowerEU reduces gas imports by 206 bcm (-63%) over the same period.

Total installed renewable energy capacity will increase from 1067 GW to 1236 GW under RPE and provide 69% of all power generation. Wind and solar will do the heavy lifting, accounting for 55% of the electricity mix by 2030. European countries have already raised their renewables ambitions since the war began, with current plans already putting the EU on track for 63% renewable electricity by 2030, up from 55% previously.

The 118 bcm reduction in imports equates to €43 billion in additional avoided gas costs in 2030 if the 45% target is adopted rather than 40%. Based on current forecast Title Transfer Facility (TTF) gas prices in 2030, EU gas imports would cost €86 billion with the 40% target, tumbling to €43 billion with 45%. Across the period from 2025 to 2030 this could amount to an estimated €200 billion in additional savings.

Analysis shows that the savings increase further with even more ambitious EU renewable energy commitments. The avoided gas costs versus FF55 would be €48 billion and €55 billion for 50% and 56% targets respectively in 2030. And calls are growing from industry and civil society that a 50% renewables target is required to align with the Paris Agreement.

The war in Ukraine and the energy crisis have made it abundantly clear that fossil gas does not create energy security. Instead it brings geopolitical instability and skyrocketing energy bills and inflation. It is critical that the EU Member States do all that they can to end reliance on imported fossil fuels as quickly as possible. The 45% renewable energy target offers a golden opportunity to achieve this. 

Fossil gas diversification through increased Liquefied Natural Gas (LNG) imports is not the solution and is simply replacing one risky dependency with another. LNG leaves the EU exposed to global price spikes and supply constraints and could result in Member States being locked into expensive and unnecessary long-term contracts and infrastructure. The costs of FSRU units in Germany are already spiralling upwards before the projects are even operational, with the government’s budget more than doubling to €6.6 billion. 

The EU’s ‘rush for gas’ is also damaging its international reputation and harming developing economies, with countries in Asia being unable to secure LNG supplies. And the availability of LNG supplies cannot be relied upon. It appears the currently severe global supply constraints are set to continue until at least 2026.

The EU also cannot afford to tie itself into prolonged fossil gas dependence due to the climate implications. Imported LNG has high methane emissions, particularly from the United States. 

To achieve the 55% emissions reduction by 2030 target, fossil fuel consumption must rapidly decline and the transition to clean energy accelerate. The majority of Member States have already stepped up their renewables targets beyond pre-war commitments. The EU must not open itself up to accusations of reneging on climate commitments. The war and energy crisis have acted as a catalyst and heightened the urgency to increase investment in and deployment of renewables. The adoption of the more ambitious 45% target would be confirmation of this progress.