The European Union's REPowerEU seeks to reduce the European Union's dependency on Russian fossil fuels and accelerate the transition away from carbon intensive energy sources.
The European Commission's cost estimate, however, may fall short as Rystad Energy analysis suggests the plan will require at least EUR1 trillion in investment to meet the core objective of increasing renewable generation from 40% to 45% of total energy supply by 2030. Additional investment will be required to meet targets, including grid and battery storage developments to ensure a stable supply of energy as the whole European power system will need to be restructured.
While the plan defines different angles to tackle the current crisis, the most detailed section outlines the roadmap for solar PV. The strategy aims to bring online 320 gigawatts (GW) of solar PV by 2025 and almost 600 GW by 2030, aiming to displace 9 billion cubic meters (Bcm) of gas demand. Europe currently has around 189 GW of installed solar PV capacity, meaning 131 GW need to be installed by middle of the decade, or an equivalent of 44 GW per year. This would mean almost doubling the installation rate, which was 24 GW in 2021 and is expected to be 29 GW this year. To reach the targeted 600 GW by 2030, around 56 GW of new solar PV capacity would need to be installed during the following five years.
Assuming an average cost for solar PV of EUR1.1 million per megawatt (MW) of installed capacity, installing 411 GW between now and 2030 would represent an investment of EUR452 billion. Reaching 45% renewable energy supply by 2030 additionally requires significant investments in wind capacity - for which the plan does not have a lot of detail. Rystad Energy's estimates suggest another 450-490 GW of wind capacity would need to be installed by 2030 to reach the target of 45% renewable energy supply, requiring an additional EUR820 billion in investments.
Such a transition will require huge investments but thus far the European Commission has been unclear about the total amounts allocated to achieve its goals. Recent announcements and communications mention that EUR225 billion is already available in loans and that an additional investment of EUR300 billion could be needed by 2030.
'The ambition of the REPowerEU plan is huge. Power companies and energy markets will be looking for details on investments and infrastructure. While the targets are achievable, it will require wartime-like planning, levels of investment, construction, and production to meet goals by 2030,' says Carlos Torres Diaz, head of power research at Rystad Energy.
Carlos Torres Diaz
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