Energy research institute Rystad Energy expects the EU's 2030 solar and wind power generation targets to be exceeded.
After experiencing the turmoil in European energy markets in 2022, governments are beginning to focus on meeting long-term energy needs in a sustainable and secure manner. It is expected that renewable energy power generation will definitely grow exponentially, but high proportions of solar and wind power generation still have problems to be solved, such as the need to deal with grid dispatch and the balance caused by sudden increases in seasonal demand.
In 2022, affected by the outage of Russia's natural gas pipeline to Europe, the outage of French nuclear power, and low hydropower generation in Europe, European electricity prices reached an ultra-high level of more than 700 euros per megawatt hour. This has led governments around the world to sacrifice sustainable development and turn to coal for power generation again in order to ensure energy security. Data show that European coal-fired power generation increased by 5% in 2022 compared with the same period last year.
However, the European energy crisis also provides an opportunity to develop new norms. Take the European Union's REPowerEU plan as an example, which increases the target of renewable energy power generation from 40% to 45% of total power generation in 2030. Building more renewable energy generation capacity will help accelerate the EU's carbon neutrality goal while reducing dependence on imported fuels. By the end of this year, Rystad Energy expects the EU to reach 211 GW of installed solar PV capacity and 214 GW of wind capacity. Wind and solar power generation will account for 31% of the EU's power generation, and the EU's total power generation is expected to reach 3,019 terawatt hours (TWh) in 2023.
Furthermore, the levelized cost of electricity (LCOE) for solar PV and onshore wind in Europe has fallen to around €50 per MWh, half the LCOE of natural gas and coal-fired power. From an economic perspective, it is more economical to build new solar and wind power than to continue to use existing natural gas power plants.
It is estimated that by 2030, the installed capacity of solar photovoltaic power generation will reach 490 GW and the installed wind power capacity will reach 375 GW. By then, wind and solar power generation will account for 53% of the EU's total power generation, exceeding the 45% target proposed by REPowerEU.
Of course, newly installed renewable energy power generation capacity must not only replace part of fossil fuel power generation, but also need to be able to meet the expected new power demand. Electricity demand is expected to grow at a compound annual growth rate (CAGR) of 2% over the next 30 years.
At the same time, dispatchable generation capacity is critical to ensuring long-term reliable power systems and balancing and supporting the fluctuating nature of solar and wind generation. To some extent, battery energy storage systems (BESS) can provide this balancing capability, but the development of battery energy storage technology needs to be improved to make it more price competitive. Because the current average levelized cost of energy storage (LCOS) per MWh is €135, which is more expensive than existing gas-fired power plants.
It is estimated that the installed capacity of BESS is expected to increase to 55 GW by 2030 and 418 GW by 2050. However, battery storage of these capacities still cannot meet all the expected demands of this process. Therefore, it will also be supplemented by natural gas generation, especially during Europe's winter period when energy demand is high. As a result, these power plants will need to receive capacity subsidies to remain operational despite low utilization rates for natural gas generation, and will also need to continue to use underground gas storage facilities to meet seasonal demand.