Thesis-Avetik

CENTER FOR MANAGEMENT STUDIES
What are the consequences of
change to alternative energy
sources in EU economies?
A Thesis
Presented to the Faculty of European
University
In Partial Fulfillment of The Requirements for
The Degree: Bachelor in Business
Administration
By: Promoter:
Avetik
Afrikyan
John
Wethrell

2

Executive summary
Apart from traditional power sources, energy can be derived from alternative
powers that derive energy from country’s own resources such as wind, solar,
geothermal, biomass and hydro. The main advantage of these power sources is
that they are ecologically friendly and produce no emissions. Also, their capability
of producing electricity exceeds capacity of traditional energies and much
cheaper in electricity cost.
Today, the major part of the energy mix consists of conventional sources such as
nuclear, oil, gas and coal. Renewable sources occupy only 10% of the share out
of which 56%-biomass, 24%-hydro, 9%-biofuels, 9%-wind, 1%-geothermal and
1%-solar. Each type of renewable energy brings different benefits depending on
segment it is specified in. Diversifying the present share 10% by sector, 5.5% is
consumed by heating, 4% by electricity and finally, 0.8% by transport.
Today, European Union sees an opportunity to switch from conventional to
modern energy sources. Consistent with the future plans, renewable energy
share expects to increase up to 20% by year 2020 out of which 61%-bioenergy,
14%-Wind, 12%-hydro, 10%-solar and 3%-geothermal. The classification of the
sector by sector expects improve to: 10% for renewable electricity, 12% for
renewable heating and 3% for biofuels (transport).
By changing to alterative powers, EU expects to achieve different benefits.
Considering that half of primary energy use is imported, the Union has an
opportunity avoid growing energy dependence by changing to modern energies.
As a result of that, the reliance on fuels imports can decrease to 45% in 2020
and to 38% in 2030.
As previously stated, the nature of renewable energies is to be environmentally
friendly. Therefore, by increasing their consumption, CO2 predicts its amount to
fall by 30% in 2020 and around 50% in 2030. Such rapid reduction of carbon
dioxide will certainly prevent global warming. Also, air quality expects to improve
too. Such emissions as sulfured dioxide, that cause air pollution, expect to
decrease by approximately 20%-30% in 2020. Hence, ecosystem will stop being
under danger. The same year, the acidification of forests and water along with
eutrophication are expected to decrease by around 30%-50%
Apart from environmental benefits, EU can achieve social ones as well. By
developing new energy sector, there opens a new resource market, which then

3

attracts more jobs. According to assumptions, the employment in renewable
energy sector will increase from 550,000 jobs to 2.7 million in 2020 and 4.4
million in 2030. As a result of jobs increase, the Member States will avoid social
crisis because of unemployment.
In addition, costs of fuels are increasing soon because of their upcoming scarcity.
From the forecasts, with the help renewable energy deployment, EU can avoid
around €158 billion fuel cost in 2020 and €235 billion in 2030. Furthermore, the
cost of oil also can be avoided. From the present cost of $82/barrel, the Union
can avoid $100/barrel cost in 2020 and 120$/barrel in 2030. Economically
speaking, the avoidance of the growing will increase government savings and
increase the Alliance’s GDP.
However, if EU doesn’t switch to renewable energies, the consequences mainly
expect to be pessimistic. As the assumptions say, the energy dependence will
increase up to 60% in 2020 and up to 70% in 2030. From political point of view,
such big growth of the energy reliance has very negative impact on the European
Union.
Furthermore, environment will more be in danger. The growth of amount of
carbon dioxide will provoke global warming. According to forecasts, the amount
of CO2 will up to 4.16 gig atones in 2020 and to 4.4 by 2030 causing climate
change. In addition, because of the air pollution caused by emissions expanded
into atmosphere, 2/3 of Scandinavian water will be polluted along with 14%
decrease in wood production.
Furthermore, Because of air and water polluted, the amount of premature deaths
increases which then cause fall in life expectancy. According to forecasts, life
expectancy from 8 to 5.5 months by 2020 and to 3 by in 2030. In addition,
because of the growth of the carbon dioxide that causes global warming, the sea
levels start rising. As the assumptions say, the level of Mediterranean Sea will
rise up to 15.4 cm in 2020 and even up to 17.3 cm in 2030. As a result of that,
the Union’s physical capital (land) becomes under risk.
By changing to alternative energies, European Union can escape many
upcoming problems that are mentioned above and also, gain lots of benefits such
as energy independence, environmental safety, employment growth and avoid
future fuel costs. Today, people think that switching to renewable energies is
beneficial for us. Therefore, the purpose of the thesis was to prove whether it’s
true or not.

4

List of contents

1. INTRODUCTION……………………………………………………8

2. ALTERNATIVE
ENERGY
SOURCES
DEFINED…………10

3. TYPES
OF
ALTERNATIVE
SOURCES….............................11

3.1
Wind……………………………………………………………...11

3.2
Solar………………………………………………………………12

3.3
Geothermal…………………………………………………….13

3.4
Biomass…………………………………………………………14

3.5
Hydro.....................................................................................15

3.6
Comparison.........................................................................16

4. EU
TODAY....................................................................................19

4.1
The
percentage
of
usage
today...................................20

4.1.1
Traditional......................................................................21

4.1.2
Alternative......................................................................23

5. SENARIO
2020..........................................................................28

5.1
EU
future
overview.........................................................29

5.2
Renewables
2020
by
technology..............................30

5.3
Consumption......................................................................32

5.3.1
Electricity.........................................................................33

5.3.3
Heating..............................................................................34

5.3.4
Transport.........................................................................35

5.4
Overview
by
Member
State.........................................36

6. CONSEQUNECES
.....................................................................44

6.1
What
if
we
change-‐2020...............................................45

6.2
What
if
NOT
change........................................................57

6.3
Points
to
consider............................................................67

7. CONCLUSION.............................................................................69

8. BIBLIOGRAPHY........................................................................71

5

List of Tables
Table 1. Biomass cost by technology............................14
Table 2. EU Energy Production, 2006...........................21
Table 3. EU RES by Sector and Technology................32

6

List of graph
Graph
1.
Electricity
Cost
by
Technology............................................................16

Graph
2.
Average
Capital
Cost
by
Technology.................................................17

Graph
3.
Capacity
by
Technology..........................................................................18

Graph
4.
EU
Energy
Mix,
2008................................................................................20

Graph
5.
EU
Oil
and
Gas
Imports,
2006...............................................................22

Graph
6.
Renewable
Energy
Consumption
by
Technology,
2008...........23

Graph
7.
EU
breakdown
of
Final
Energy
Consumption,
2008..................24

Graph
8.
EU
Renewable
Electricity,
2008..........................................................25

Graph
9.
EU
Renewable
Heating,
2008...............................................................26

Graph
10.
EU
Renewable
Transport,
2008........................................................27

Graph
11.
RES
by
Technology,
2020....................................................................30

Graph
12.
RES-‐Electricity,
2020.............................................................................33

Graph
13.
RES-‐Heating,
2020..................................................................................34

Graph
14.
RES-‐Transport,
2020.............................................................................35

Graph
15.
EU
GDP
by
State,
2010..........................................................................36

Graph
16.
Germany
RES
Mix
by
Sector,
2020..................................................37

Graph
17.
France
RES
Mix
by
Sector,
2020.......................................................38

Graph
18.
Spain
RES
Mix
by
Sector,
2020..........................................................39

Graph
19.
UK
RES
Mix
by
Sector,
2020...............................................................40

Graph
20.
Italy
RES
Mix
by
Sector,
2020............................................................41

Graph
21.
RES
by
Member
State,
2020...............................................................42

Graph
22.
Increase
in
RES
by
Sector
and
Member
State.............................43

Graph
23.
EU
Energy
Dependence
Decrease....................................................46

Graph
24.
EU
Gas
Dependence
Decrease...........................................................47

Graph
25.
EU
Oil
Dependence
Decrease.............................................................48

Graph
26.
CO2
Reduction..........................................................................................49

Graph
27.
Avoided
Emissions.................................................................................50

Graph
28.
Environmental
Improvement............................................................51

Graph
29.
Employment
in
Renewable
Energy
Sector...................................53

Graph
30.
Employment
in
Renewable
Energy
Sector
by
technology.....53

Graph
31.
Avoided
Oil
Cost
from
RES
Deployment........................................55

Graph
32.
Avoided
Fuel
Costs
from
RES
Deployment...................................56

Graph
33.
Oil
Dependence
Increase......................................................................58

Graph
34.
EU
Gas
Imports,
2006............................................................................59

Graph
35.
EU
Gas
Imports,
2020............................................................................60

Graph
36.
CO2
Emissions
Growth
from
Fossil
Fuels.....................................61

Graph
37.
Emissions
Growth
from
Fossil
Fuels
by
Technology...............62

Graph
38.
CO2
Emissions
Growth
from
Transport........................................62

Graph
39.
Fall
in
Life
Expectancy..........................................................................64

Graph
40.
Rising
Mediterranean
Sea
Level.......................................................65

Graph
41.
Contribution
of
Renewables
to
Transport...................................68

7

List of figures
Figure 1. European Wind Turbines...............................11
Figure 2. Solar PV Panels............................................12
Figure 3. Geothermal Heat Hump Systems.................13
Figure 4. Hydroelectric Plants......................................15
Figure 5. EU Future Overview by Country...................29

8

1.Introduction

Today, every country has its economy of energies. Types of energy are many but
mostly known of the traditional sources are oil, coal, nuclear, gas. However,
since recent decades, world population has been observing of environmental and
ecological damages that planet has sacrificed in order gain from conventional
energy sources. The world is now mainly using resources such as fossil fuels,
which cause carbon dioxide and other effect, which then cause high
environmental problems.
Nowadays, we see an opportunity to switch from traditional to alternative energy
sources such as wind power, solar energy, geothermal, hydrothermal and
biomass. World experts see this type of powers as a solution to all environmental
issues and a key role in global economy. The development of renewable energy
sources has been rather rapidly progressing recent years as well as its utilization.
The price of fossil fuels, especially oil and natural gas, has increased sharply
over last few years. As a reflection, renewables energy sources that are
selectively used in electricity generation, house heating and transportation are
now garnering increasing attention. For instance, Iceland uses geothermal
energy to heat 95 % of houses, Cyprus customs solar water heat for almost 90%
of homes and half of amount of hotels.
Therefore, this thesis includes the question what would be the consequences of
this great change in economy terms from global, macro and micro point of views.
The question also studies the issue analyzing the reflections on every sector
such as transportation. The purpose of this document is to represent the reader
negative and positive sides of change and when is the best time for this
alteration.
The reason why the thesis is specifically based on this question is because the
Earth is now suffering from ecological crisis and environmental damages. Lots of
common resources such as water is becoming a scare resource and fuel which
one of the main driver of the world economy is facing its limit soon.
The thesis does not just study the topic in order to deliver information. Apart from
some knowledge of the subject, the foundation of the document is based on
analyzing the topic using practical approaches. Apart from showing the
advantage of alternative energy usage, the analytical part also detects the future
prospects of their utilization. Plus, it does not only study positive consequences,

9

but negative too. As a refection of that, the document gives an image that shows
what the users of neo power gain and what has to be sacrificed.
This thesis looks through the issue from all sides using various analysis and
practical approaches of both current and future situation of the problem. The
exploration of the issue is studied not by just giving figures and numbers, but
studying the consequences of neo powers implementation on important
segments such as transportation, electricity and heating & cooling which then
opens an opportunity to be used by both experts and non-experts (individuals) as
it touches household life too.
Consistent with all mentioned above, the document could be used as an
important tool for making forecasts the topic for upcoming decades. At present,
many organizations such as European Commission have already developed
reports that provides information about both current renewables situation and
certain scenarios that include particular assumptions for years 2020,2030 and
even 2050. Consequently, the document can be used as great tool for
comparison and assessment to those reports in order to identify average truth
and the most possible future situation for neo energies including figures.
Considering that topic is specialized in the subject of global economy, the
document is focused on answering the question specifically from economic point
of view meaning in such terms as savings, investments and economy overall.
However, the key point of the document is emphasis the results of change to
renewable energies on economical or in some parts political stage implementing
certainly created assumptions on European Union countries.
The reason why thesis studies selectively countries of European Union, is
because now world considers this alliance as second dominate empire in terms
of economy. Apart from their big influence in global stage, its leadership can play
an important role in this change and influence certain decisions made. By
promoting the use of neo powers, European Union can achieve independence
from foreign imports and then meet targets to fight global warming.
Finally, EU is a second global leader in application and improvement in
renewable energy sector. Since beginning of 2009 the EU has committed to bind
targets for an increase of renewable energies to 20% of total gross energy
consumption by year 2020.

10

2. Alternative Energy sources defined
Alternative Energy is a type energy based on usage of natural resources without
harm to environment such as solar, wind, tides, biomass, geothermal heat,
nuclear energy which can be renewable and can replace or substitute traditional
fossil fuel sources as coal and oil.
The word alternative assumes a set of unwanted energy technologies against
which alternative energies are contrasted. Modernly speaking, alternative energy
is what made without unfavorable consequences of the burning of fossil fuels.
The most common example of fossil fuel and the most provoking factor of global
warming is high carbon dioxide emissions.
The alternative-energy segment of the energy industry covers a wind range of
sources. These sources range from well-established technologies, such as
nuclear and hydroelectric power, through high-growth segments such as wind
and solar power. They additionally involve usage of less tried and tested
alternatives, such as hydrogen-powered, fuel-cell technology in order to use
them in both electricity generation and as a substitute to gasoline in the
automotive industry and manufacture1
.
These sources cover the gamut from commercially feasible and fully competitive
with fossil fuels to those that are at more experimental step of improvement,
awarding a greater risk for investors who want to take benefit of the increasing
attraction of this sector.
Renewable energy can also be defined as type of energy, which is changed by
natural process meaning naturally refilled, which uses non-existing resources.
The reason why it is also called renewable is because it is environmentally
friendly and can supplement non-renewable energy like oil/coal. Because of the
scarcity and price increase of oil and gas, the world shifts to alternative energy
sources.
The term can similarly be defined as non-conventional energy that is
continuously refilled by natural processes. Common ways of converting energy
are found in sunlight, wind, falling water, sea-waves geothermal heat or biomass.

1
Wells
Fargo,
“Identifying
the
Opportunities
in
the
Alternative
Energy”
special

report,
2010,

https://www.wellsfargo.com/downloads/pdf/about/csr/alt_energy.pdf

2
Wikimedia
Common,
2011,
http://en.wikipedia.org/wiki/Wind_turbines

11

3.Types of Alternative energy sources
3.1 Wind
Wind power id the conversion of wind energy into a useful form of energy like
wind turbines to generate electricity. This is one of the earliest types of energy,
which is based on harnessing of wind power to produce voltage. The kinetic
energy of the wind is converted into electricity by using special wind turbines.
European wind turbines are mainly divided up to two types: Horizontal Axis Wind
Turbines (HAWT) and Vertical Axis Wind Turbines (VAWT)2
. HAWTs have the
main rotor shaft and electrical originator at the top of a tower that must be
directed into the wind. In case of VAWT, the generator and other primary
components can be located near the ground, so tower doesn’t need to support it.
In addition, this method facilitates maintenance. The strongest point of these
turbines is that they do not need to be pointe into wind.
Figure 1: European Wind Turbines
Source: Wikimedia Commons
According to EU estimations, current average capital cost 3
of wind power is
$1725/kW and predicts to decrease to $1420/kW by 20304
. In addition, its
capacity increases yearly along with technological improvement. In EU countries
assumes a capacity of 60 GW by year 2015 and even 150 GW by year 2020.

2
Wikimedia
Common,
2011,
http://en.wikipedia.org/wiki/Wind_turbines

3
Average Capital Cost is the rate that a company is expected to pay on average
to all its security holders to finance its assets.

4
IEA
(International
Energy
Association,
“Renewable
energy
essentials:
Wind”

report,
2010,
http://www.iea.org/papers/2008/Wind_Brochure.pdf

12

3.2. Solar
Solar energy is a type of energy that is derived from the sun through the form of
solar radiation. Such Member States as Cyprus are now taking incentives to
apply the uptake of renewable energy so as part of their implementation. At
present, 50% of hotels and 90% homes in the country use solar water heat. For
instance, as was mentioned in this chapter, PV cells are applicable in household
and can be perfect substitute for utility grid. Today many companies are trying to
produce thinner and more effective materials for use in PV cells.
Today, EU mainly uses active method includes photovoltaic (PV) cells to harness
the energy. With 1 individual PV cell the energy generates 1.5 Watts, but with PV
panel (module) the energy can generate 3-100 Watts. The electricity from
photovoltaic cells is usable for range of applications, from power suppliers for
small consumer product to large power satiations feeding electricity into the gird.
Figure 2: Solar PV Panels
Source: European Commission
Photovoltaic capacity has exhibited an average annual growth rate of 40% over
late decade. The capacity almost increased by 50% between 2008 and 2009
from 15.7 GW to 22.9 GW. According to IEA records, by 2010 the capacity
increased from 32 to 38 GW. In addition m the capital costs fir utility scale PV
facilities- $4060/kW and predicts costs of PV drop by 50%-70% to between
$1220 and $1830 a kW5
. It is also predicted the capital cost to reduce of 40% by
2015 and 50% in 2020.

5
IEA,
“Renewable
energy
essentials:
Solar”
report,
2010,

http://www.iea.org/papers/2009/Solar_heating_cooling.pdf

13

3.3. Geothermal
Geothermal energy is a natural type of energy that is obtained by trapping the
heat of the earth itself. Because this energy derives from the heat in Earths core,
it refers to using the energy in the earth’s crust for heating and collecting
purposes. Apart from producing electricity and it can also be used for providing
direct heat for numerous applications like: space, water and direct heating,
aquaculture; horticulture; industrial processes.
Nowadays, European geothermal heat pump systems are mainly divided by
Closed and Open loop. In Closed Loop systems, commonly, layouts contains of
two pipes, one buried at six feet and the other at four feet, or 2 pipes positioned
side-by-side at five feet in the ground in a two-foot wide trench. In Open Loop,
the system practices surface body water as the heat exchange fluid circulating
directly through the GHP system. As soon as it has circulated through the
system, next, the water returns to the ground (through the well or surface
discharge).
Figure 3: Geothermal Heat Hump Systems
Source: Geothermal Energy Association
From statistics of year 2010, the geo energy capacity was 10.7 GW, which
represents 20% increase, compared to 2005. According to IEA forecasts, it is
projected to grow to 18.5 GW by 2015. Additionally, geo power electricity
generation costs for flash plant developments can run from $0.05/kWh to
$0.12/kWh for higher temperature and for lower temperature from $0.07/kWh to $
0.20/ kWh6
. According to capital costs of direct use of geothermal system for
direct space heating, cost is estimated in range between $1700/KW and
3950/KW.

6
IEA,
“Renewable
Energy
Essentials:
Geothermal”
report,
2010,

http://www.iea.org/papers/2010/Geothermal_Essentials.pdf

14

3.4 Biomass
Biomass is derived from various sources, which help in generating sufficient
energy for use meaning living and dead organs such as: plants like polar, willow,
hemp that capture energy through photosynthesis; wood that can be taken from
trees same as from the waste of industrial processes; solid waste is provided by
municipality or industrial waste.
In EU countries, biomass energy derived using 3 main methods: co-firing (large-
scale coal power), gasification (biomass conversion into biogas can be either
from fast thermo-chemical processes (pyrolysis), or from slow anaerobic
fermentation) and anaerobic digestion (In the absence of air, organic matter such
as animal manures, organic wastes and green energy crops can be converted by
bacteria-induced fermentation into biogas).
Table 1: Biomass costs by technology7

Costs

Technology

Capital,

$/KW

Electricity,

$/KWh

Co-‐firing
1200
0.05

Gasification
3500
0.11

Landfill
gas
4500
0.10

Source: Author based on IEA
The Table 1 represents biomass costs by methodology. Out of 3 most common
technologies landfill gas has the highest capital cost-$4500/KW and second
highest electricity cost. Then, the second highest cost that counts $3500/KW is
from gasification and the top electricity cost-$0.11/KWh. The lowest by both
capital cost-$1200/KW and electricity-$0.05 is co-firing.

7
IEA,
“Energy
Technology
Essentials:
Biomass
for
Power
Generation”
report,
2007,

http://www.iea.org/techno/essentials3.pdf

15

3.5 Hydropower
Hydropower refers to power gained from the process of water flowing. The
potential energy of falling water, captured and converted to mechanical energy
by waterwheels, powered the start of the industrial revolution. It is a largest and
earliest source of renewable energy.
Hydro power plants in EU Member States can be classified by both size and
capacity. Large Conventional Hydropower plant have capacity of more than 10
GW and are generally considered as large hydroelectric facilities. Today, there
are only three facilities over 10 GW. Small Conventional Hydropower Plants
The capacity of these plants varies up to 10 MW. However, this may be
prolonged up to 15 MW like in Germany.
Figure 4: Hydroelectric Plant
Source: European Studies
Finally, Micro Conventional Hydropower Plants are capable to generate up to
100 KW and are well applicable for at isolated homes or small communities.
Nowadays, installation of these plants is becoming famous in many parts of the
world.
According to IEA, electricity costs captured from hydropower are mostly in range
of $5-$10KW/h annually8
. The cost of operating hydroelectricity power plants is
far lower then the fuel prices. The entire capital cost is estimated by around
$2100/KW medium to large hydro plants. However, the technology can survive
up to 10 to 15 years without any maintenance, if not needed.

8
IEA,
“Renewable
Energy
Essentials:
Hydropower”
report,
2010,

http://www.iea.org/papers/2010/Hydropower_Essentials.pdf

16

3.5 Comparison
By knowing main details of each type of renewable energy that are electricity,
capital cost and capacity, analytically every power type can be compared by all
criteria’s mentioned.
The comparison by generation capacity, electricity and capital cost can identify
highest and lowest energy generator as well its expensiveness. As a result that,
the analysis can detect the best energy type in terms of investment, industry or
for household usage.
3.5.1 Electricity cost
As stated in previous subchapters, consumers have to pay differently for
electricity generated from each type of alternative energy. The graph below
shows cost the electricity collected from each renewable source.
Graph 1: Electricity Cost by Technology ($/KWh)
Source: Author based on IEA reports, 2010
The graph 1 shows electricity cost by type of energy. From estimates, it reflects
that solar has the highest average electricity cost (0.19 $/KWh) followed
Geothermal is considered as second highest (0.12 $/kw/h), followed by biomass
with almost same cost (0.11 $/KWh). Finally, Wind (0.06 $/KWh) and hydropower
(0.07 $/KWh) are estimated as cheapest ones. Economically speaking, these tow
powers are the safest in terms of cost.
Considering that average daily consumption of EU citizen for instance in
Germany counts 0.26 $/KWh. Therefore, it is worth mentioning that renewable
energies are economically safer then conventional ones.
0

0.05

0.1

0.15

0.2

17

3.5.2 Capital cost
Apart from electricity prices, average capital cost varies too depending on
renewable technology. According to data, solar power is the most expensive
energy by its average capital cost of $4060/KW. Furthermore, Sun energy is
followed by biomass with $3500/KW cost. Geothermal cost is estimated up to
$3000/KW similarly to solar’s one, while hydro’s is amounted significantly lower
up to $2100/KW. Finally, Wind energy which capital cost is considered as lowest
one ($1725/KW).
Graph 2: Average Capital Cost by Technology
Source: Author based IEA reports, 2010
However, future projections show cost reduction of renewable energy sources.
Wind energy, which is currently has lowest capital cost, is forecasted to low to
$1646/KW in 2015 and even to $1564/KW in 2020 while solar power which has
highest cost is expected to decrease down to $2436/KW in 2015 and to
$2030/KW in 2020.
Although geothermal power cost expects to fall slower then previous energies,
but still significantly. Consistent with the assumptions the capital cost will to
$2910/KW in 2015 and to $2825/KW in 2020 whereas biomass cost will drop
relatively more to $3325/KW in 2015 and $3100/KW in 2020. Finally, hydro’s cost
will decrease down to $1995/KW in 2015 and will become the cheapest
renewable energy with cost cut to $1895/KW in 2020.

$-‐

$500.00

$1,000.00

$1,500.00

$2,000.00

$2,500.00

$3,000.00

$3,500.00

$4,000.00

$4,500.00

$5,000.00

2010

2015

2020

18

3.5.3 Capacity
Finally, capability to generate maximum electricity is another way to clarify
renewable energies. From estimates, hydropower capacity (66.5 GW) is
estimated as the highest one, followed by solar (38GW) and Wind (37GW).
Geothermal (10.7GW) and Biomass (7 GW) are estimated as lowest energy
generators.
Graph 3: Capacity by Technology (GW)
Source: Author
Furthermore, according to forecasts, solar energy is expected to reach highest
capacity (95 GW) followed by hydro (68 GW) and wind (60 GW) in 2015 whereas
geothermal (18.25 GW) and biomass (11 GW) will keep lowest generation.
The forecasts for year 2020 show solar power (210 GW) and wind (150 GW) as
two dominant powers with top energy generation capacities. Hydro’s power
expects to reach 68 GW whereas biomass (11GW) and geothermal (18.25 GW)
will stay the lowest electricity generators comparing to other renewables.
0
50
100
150
200
250

Wind

Solar

Geothermal

Biomass

Hydro

2020

2015

2010

19

4. EU today
Nowadays, countries of European Union are presently second global leaders
(after US) in the development and application of renewable energy. The entire
promotion of the use of alternative energies is significant to the reduction of the
EU’s dependence on foreign energy imports and becoming an independent
trader.
This characterizes them as both current and future potential users of neo
energies, which then gives a prospect of creating assumptions and identify
upcoming opportunities. But before doing that, there has to be considered current
consumption of traditional and renewable energies in European Union today. The
interconnection of those two aspects can give us information which of those
powers yearly increase or decrease or whether renewables outperform
conventional sot the opposite.
In order to identify all mentioned above, following analyses provide data
representing the percentage of final energy consumption both by each type and
overall comparing with traditional ones. In addition, the analyses provide data of
important sectors such as electricity supply from renewable.
So as to compare to traditional powers, analysis also contain statistical data of
gross inland energy and final energy consumption of conventional energy
sources as well as percentage of imported and not imported primary energy use
production for the recent years. Plus, examinations consider investment rates in
energy sector, market share of the largest generator in the electricity and labour
productivity.
As result of considering all mentioned above, there opens a perspective to create
scenarios for future prospects of alternative energy sources.

20

4.1 The percentage of usage today
Considering that world has not completely moved to renewable energies, EU
countries still combines both conventional and alternative powers. Although fossil
fuels production is far higher then from modern sources, the percentages can
vary as Europe still has a chance to switch innovative bases. But before deciding
when is the best time for doing this, utilization proportions of old and new powers
can give clearer image about impending perspectives.
Graph 4: EU Energy Mix, 20089
Source: International Energy Association
The graph above illustrates the Union’s energy mix (energy combination the
Union uses in the economy so as to supply the Member States) of the year 2008.
According to the graph renewable energy resource occupy only 10% of the
energy mix. According to fossil fuels, share of oil that counts 42% occupies
almost half of the energy mix whereas gas share sums 29%. Third main energy
is coal, which captures 12% of the mix, followed by renewables. Finally, nuclear
has lowest share of 7%.
Overviewing the energy mix, it reflects that the major part is lead by conventional
energies while renewable energies are the minority. However, so as to
understand the energy mix more specifically, analyses have to go through both
part of conventional and alternative powers. Hence, the following subchapters
exemplify more technically shares of both traditional and modern energies.

9
IER,
“Renewable
Energies
in
Germany
and
in
Europe”
report,
2008,

http://www.bioenergyfarm.eu/media/default.aspx/emma/org/10727545/Renewa
bles-‐Germany%2bEurope_May_2011_IER_englishversion_total.pdf

7%

29%

42%

12%

10%
Nuclear

Gas

Mineral
oil

Coal

Renewable

21

4.1.1 Traditional
From various statistics, European Union’s use of traditional energy sources is
slightly decreasing while usage of alternative one is increasing. As European
Environment says, from 1900 to 2005 share of fossil fuels decreased from 83%
to 79% out of which oil, gas and solid fuels decreased by 2.4%, 3.2% and 2.8%
that reflects in growth of renewables share along with 57% growth in labor
productivity.
Table 2: EU Energy production, 200610
Own
production

Primary
energy
use
(46%)

Nuclear
29.30%

Coal

21.90%

Gas
19.40%

Renewable
14.60%

Oil
13.40%

Other
1.40%

Net
imports

Primary
energy
use
(54%)

Oil
&
petroleum
60.20%

Gas
26.40%

Other
13.40%

Source: Author
However, today more then half of EU’s energy supply depends foreign imports.
As the table says, 54% of primary energy use11
, out of which 60.2% for oil, 26.4%
for gas and 13.4% for other energies (coal), depends on imports.
Less then half of primary energy use is from own source. From statistics, only
46% of total EU energy production out of which 29.3% for nuclear, 21.9% for
coal, 19.4% gas, 14.6% renewables and 13.4% oil, are derived from local
sources.
Consistent with estimations above, it reflects that EU hangs on external fuels
imports by more then half of its production. Such high reliance on foreign energy,

10
European
Union,
energy,
2010,

http://en.wikipedia.org/wiki/European_Union#Energy

11
Primary
energy
is
a
type
of
energy
found
in
nature
that
has
not
been
subjected
to

any
conversion
or
transformation
process

22

results in higher energy dependence, which then leads to decrease in efficiency
in terms of trade12
.
Consistent with estimations above, oil and gas are two major resources of the
foreign imports. In order to estimate incoming fossil fuels by country, the graph
above illustrates oil and gas imports.
Graph 5: EU Oil and Gas imports, 200613
Source: ECIPE, 2008
As shown on the graph 5, such large as 42% of total imports of the mentioned
fuels are delivered from Russia. In addition, the imports from the Federation are
followed by second biggest importer, which is Norway (24%). Comparing to those
states, Algeria transports the lowest amount of oil and gas that counts only 18%.
Although it’s relatively low comparing to Norway and Russia, it’s still significant
as it counts almost one-fifth of the total imports.
The graph shows that Russia whose imports amount almost the half out totals
and Norway which imports one-forth, are dominant gas and oil exporters to
Europe comparing to the rest of the countries. The energy dependence on these
two states negatively influences the entire info structure of the country. As a
result of that, EU’s heating & cooling and transport sectors mainly depends on
Russia and Norway’s imports.

12
From
point
of
view
of
free
trade
(global
economy)
if
imports
are
higher
then

exports,
the
country
becomes
less
efficient

13
ECIPE,
“Europe’s
energy
dependency
and
Russia’s
commercial
assertiveness”

report,
2008,
http://www.ecipe.org/publications/ecipe-‐policy-‐briefs/europe2019s-‐
energy-‐dependency-‐and-‐russia2019s-‐commercial-‐assertiveness-‐what-‐should-‐the-‐
eu-‐do/PDF

Russia

42%

Norway

24%

Algeria

18%

Others

16%

23

4.1.2 Alternative
By technology
From International Economic Review 14
(IER), renewable energy consumption in
2008 was 10%. The graph below illustrates the consumption by each type of
energy.
Graph 6: EU Renewable Energy Consumption by Technology, 2008 15
Source: IER
According to the graph 6, more then 50% of the renewable energy consumption
is occupied by biomass and 24% by hydro energy. Such high share of bioenergy
can be beneficial for electricity. The electricity generation from biomass can help
earn emissions credits because by adding this power to renewable mix sulfur
dioxide and nitrogen oxides.
The main advantage of hydrothermal power is its capability to handle daily peak
loads. At peak times of electrical demand, this renewable can perfectly help to
help in electricity supply. Considering that its current share counts a quarter of
total renewable mix, this can significant for electricity sector.

14

International Economic Review is a worldwide
scientific
journal
that
focuses
in

many
areas
of
economics
including
econometrics,
macro
and
global
economics
and

applied
economics.

15
IER,
“Renewable
Energies
in
Germany
and
in
Europe”
report,
2008,

http://www.bioenergyfarm.eu/media/default.aspx/emma/org/10727545/Renewa
bles-‐Germany%2bEurope_May_2011_IER_englishversion_total.pdf

56%
24%

9%

9%

1%
1%

Biomass

Hydro

Biofuels

Wind
energy

Geothermal

Solar

24

Wind power dominates only 9% of the renewable mix. This type of power can be
a good energy generator both on individual property level and in generating large
amount of power to add it to electricity grid stream. Therefore, so as to partially
improve electricity supply, such small share wind will probably need to grow.
Likely to wind, the share of biofuels capture 9% of the renewable mix. Use
biofuels, such as biodiesel and bioethanol, can be perfect substitute for fuels
used transport and reducing emissions. However, in order to improve renewable
energy sector for transport, such small share also is recommended to expand.
Geothermal and Solar occupy the lowest part of renewables mix-1% each. Both
technologies are scalable in that can be used for domestic heating purposes.
Therefore, in order to improve renewable heating sector, the share definitely
needs to increase. Along with improvement of the sector, households living
conditions automatically develop too.
By sector
In order to identify how present 10% of renewable energy share is diversified, the
graph below illustrates the energy distribution by sector.
Graph 7: EU breakdown of Final energy Consumption, 200816
Source: Eurostat
As the graph 7 shows, alternative energy is spent on 3 main sectors: Heating,
Electricity ad Transport. Heating sector uses 5.5% of the share dominating the
major part. The other major pat is occupied by 4% for electricity sector. Transport
utilizes the minor of renewable mix-0.8% that is relatively low for such important
segment of the info structure

16
Eurostat,
“Environment
and
Energy”
report,
2010,

http://epp.eurostat.ec.europa.eu/cache/ITY_OFFPUB/KS-‐SF-‐10-‐056/EN/KS-‐SF-‐10-‐
056-‐EN.PDF

89.7%

5.5%

4%
0.8%

Conventional

Heating

Electricity

Transport

25

Consistent with the graph 8, electricity is the second renewable energy sector
counting 4% of the energy breakdown. Electricity from modern energies is
derived from 5 main alternative powers. The graph below shows renewable mix
for the sector.
Graph 8: EU Renewable Electricity, 200817
Source: Eurostat
The sector is dominated by hydropower that supplies 60% of electricity. The
advantage of such high share of this renewable is that it can be used in both
periods: at critical times of electrical demand and electrical demand is lower.
Therefore, the suppliers can feel safe for the electricity generated.
The second mostly used renewable is wind that shares 21% of the sector. This
can be significant in terms of cost saving as wind power needs no fuel
components. However, the main benefit is that it can generate electricity both in
local area and in large property level.
Also, biomass delivers 17% to the sector. Unlike, hydro and wind power, apart
from electricity, the bioenergy is also significant for transport as its biofuels
(mainly biodiesel and bioethanol) perfectly substitute for petrol and other fuels.
The lowermost share is for Geothermal and Photovoltaic-1% each. In difference
of other three renewables, these two renewable are mainly efficient in domestic
purposes such as provide light and heat in the house. Therefore, in order to
renewable energy sector for heating, such small share definitely has to grow at
least up to 10%.

17
Eurostat,
“Environment
and
Energy”
report,
2010,

60%
21%

17%

1%

1%

Hydropower

Wind

Biomass

Geothermal

Photovoltaic

26

Renewable Heating is the biggest sector capturing energy from alternatives that
occupies 5.5% of the renewable mix. Unlikely to electricity, the segment uses 3
main energies: biomass, solar and geothermal.
Graph 9: EU Renewable Heating, 200818
Source: Eurostat
According to the graph 9, 94% was derived from biomass, out which more then
70% from wood. After that, municipal waste that supplied 3% of the sector,
followed by solar supplying 2%. The minority of the segment was supported by
geothermal-1%.
As mentioned above, the renewable heating is most fully dominated by biomass.
However, instead of using bioenergy, that would be much more effective to
increase share of solar and geothermal energies. The scalability of the
technology is made the way that it can be used for domestics’ purposes or on a
larger scale for commercial electricity generation.
Geothermal energy, likely to solar, makes to use of a renewable natural resource
that is readily available in many parts of the world. Therefore, so as to increase
efficiency of the sector, the share of solar and geothermal energies has to
increase at least up to 10%-15%.

18
Eurostat,
“Environment
and
Energy”
report,
2010,

94%

2%
1%
3%

Biomass

Solar

Geothermal

Municipal

waste

27

Finally, renewable energy for transport is the third main sector capturing 0.8% of
final energy consumption. Unlikely to other sectors, this area of info structure
uses specific renewables derived from biomass energy.
Graph 10: EU Renewable Transport, 200819
Source: Eurostat
The graph 10 below illustrates the combination renewable energies for transport.
As estimated, the sector selectively uses two main alternatives: biodiesel and
bioethanol. Biodiesel captures almost there-forth of the sector supplying 67%
while bioethanol’s share, which is the second leading one, counts 32%.
From the projections, it is clearly identified that the sector is specifically using
biofuels, which is good for the transportation. Both biodiesel and bioethanol can
be blended with gasoline or traditional diesel to make them clear meaning
burning to reduce emissions or as a direct substitute. Similarly to modern
ethanol, biodiesel is the only fuel that does not require the purchase of a new or
especially adapted vehicle.

19
Eurostat,
“Environment
and
Energy”
report,
2010,

67%

32%

1%

Biodiesel

Bioethanol

Others

28

5. Scenario, 2020
Previous chapter described present share of the EU energy including both
traditional (production and imports) and alternative energies (renewable mixes by
segment and power). According to that, there can be created a scenario based
on assumptions for the renewable energy share (RES) by year 2020.
The scenario forecasts the upcoming share in the same three main sectors
(Electricity, Heating and Cooling and Transport) as in previous chapter in order to
illustrate the change not just overlooking on EU’s energy mix, but on each
segment of the info structure too. In addition, the scenario illustrates future
increase in RES by 5 leading Member States including each sector as well.
The objectives of the scenario:
• Give EU RES sector future overview explaining forthcoming energy mix
and show countries that can overachieve the planning target for 2020.
• Illustrate RES future consumption by sector and technology
• Clarify RES by Member State (Germany, France, Spain, UK and Italy) and
summarize them in order to make an analytical comparison.
The entire scenario is based on national RES Industry Roadmaps 20
that
compares assumptions developed between EU Member States 21
from National
Renewable Energy National Plans (NREAPs)22
. The source is developed in the
framework of the Renewable Energy Policy Action Paving the Way (REPAP)23
for
year 2020.
Finally, from projections done in the following assumptions of the scenario,
analysis can identify the consequences of switching to renewables and
consequences if EU doesn’t increase its energy share to alternatives by year
2020 and even 2030-2050 demonstrated in chapter 6.

20
The
EU
Roadmap
publication
is
drafted
in
the
framework
of
the
REPAP
2020

project
which
was
co
founded
by
the
International
Energy
Agency

21
“EREC
Roadmaps”
report,
2010,

http://www.eufores.org/fileadmin/eufores/Projects/REPAP_2020/EREC-‐roadmap-‐
V4.pdf

22
The
plans
provide
detailed
roadmaps
of
how
each
EU
Member
State
predicts
to

gain
its
legally
biding
target
by
year
2020(the
share
of
renewable
energy
in
energy

mix)

23
The
aim
of
the
policy
is
to
facilitate
the
implementation
of
the
RES-‐Directive
on

national
level

29

5.1 EU future overview
Nowadays, EU is a world leader in the use and deployment of technologies of
neo powers in order to achieve exploitation in renewable energy sector.
Figure 5: EU Future Overview by Country
Source: EU Roadmaps
The European Renewable Energy Council (EREC) 24
takes stock of the 2020
picture represented by the 27 NREAP’s submitted to the European Commission.
It is worth mentioning that 25 out of the 27 EU countries expect to obtain or
exceed their 2020 targets domestically.
As illustrated on figure 5, 16 EU members believe to overachieve their 2020
targets which means significant amount of 60% the EU Member States Those
countries are Austria, Bulgaria, Czech Republic, Denmark, France, Greece,
Hungary, Latvia, Malta, the Netherlands, Poland, Slovenia, Slovakia, Spain and
Sweden. Exceptionally, Italy and Luxembourg expect to resort cooperation
mechanisms in order to gain their required upcoming 2020 goals. However, as
previously mentioned, more then half of the Member States expect to have a
surplus regarding the target, which is significantly strong.

24
EREC
is
the
principal
organization
of
the
major
EU
renewable
energy
industry,

trade
and
research
association.

By
the
year
2010,
the
organization’s
industry

achieved
annual
turnover
of
€70
billion
and
more
then
half
million
employees.

30

5.2 Renewables 2020 by technology
In order to compare the increase or decrease from present to beginning of next
decade, the renewable energy share (RES) can be classified by technology by
year 2020.
Graph 11: RES by Technology, 202025
Source: “Re-thinking 2050” report
According to graph 11, RES still expects to be dominated by bioenergy as 10
years earlier. Its coming share sums 61% that again counts more then half of
RES. According to previous chapter, such high expects to be beneficial both for
electricity as it produces no emissions and for transport (biofuels) as a substitute
to traditional fuel.
Second biggest expects to be the Wind power. The consumption of wind energy
assumes to be 14,3%, which is a 5% of growth too similarly as in bioenergy case.
Consistent with what mentioned before, wind power is applicable for particular
and large amount of energy generated. Therefore, considering the future growth,
that amount expects to be added to electricity grid stream benefiting electricity
supply.
Hydro is forecasted to be third largest renewable energy. The upcoming share of
the power is reaching 11.51%. Although the present hydro consumption
calculates one-forth of the total RES whereas future expects to be just one-tenth

25
“Re-‐thinking
2050”
report,
2010

http://www.rethinking2050.eu/fileadmin/documents/ReThinking2050_full_versio
n_final.pdf

61%
14%

12%

6%

4%
3%

Bioenergy

Wnd

Hydro

PV

Solar
Thermal

Geothermal

31

of it, the share will still be significant. In addition, the strong point of the
hydrothermal is to produce electricity in peak times. Therefore, although there is
no consumption growth, that won’t be so significant.
Out of all energies, solar’s consumption expects the fastest growing one. From
just 1% in 2010, the consumption increases up to 9.6% (5.41%-PV cells and
4.19%-Solar thermal). Considering that solar energy is mainly used for domestic
reasons, the share growth will definitely be helpful for households.
Finally, geothermal is another fast growing energy in terms of consumption. The
forthcoming share expects to reach 3.38%, which is almost a quarter of the total
RES 2020 while presents consumption is just 1% out of the sum of all renewable
shares. Likely to solar, the geothermal share growth also expects to benefit for
individuals.

32

5.3 Consumption
Considering the fact that every type alternative powers gives different
opportunities in terms of energy supply, their usage can be classified by
segment. So as to understand what type of supply each power is specifically
good at, the analyses have identified RES consumption by sector and
technology. The main areas are electricity supply, heating & cooling and
transport.
Table 3: EU RES by Sector and Technology, 202026

Electricity
Heating
&
Cooling
Transport

Wind

Onshore

Offshore

Hydro

Small
Plant

Large
Plant

Solar

PV
cells

Solar
thermal

Solar
thermal

Geothermal

Conventional
Direct
Use

Hydrothermal

Ground
Heat

Pumps

EGS

Bioenergy

Biomass
Biomass
Bioethanol

Biogas
Biogas
Biodiesel

Source: Author based on EREC Roadmaps
As shown on the table 3, each sector uses different types of renewables. Out of
those three areas, electricity as dominant sector will be consumed from all 5
listed sources, followed by heating & cooling that will mainly derive energy from
solar power, geothermal energy and bioenergy (biomass and biogas). The third
sector will keep being efficient in bioenergy, but unlikely from previous area it will
mainly uses bioethanol and biodiesel production.
According to the figure, bioenergy is involved in all three areas, where solar and
geothermal are utilized in electricity and heating & cooling sector. Wind (onshore
and offshore) and hydro (small and hydro plants) are specifically practiced in
electricity consumption.

26
“`EREC
Roadmaps”
report,
2010

33

5.3.1 Electricity
From the assumptions, more then one third of electricity consumption will be
derived from renewables in 2020, that means the share of renewable energy is
forecasted to increase up to 34.3%. Furthermore, this is not a final limit.
According to the national RES industry, this number can be even up to 42.35% of
electricity consumption in 2020.
Graph 12: RES-Electricity, 202027
Source: EREC Roadmaps
Today and in future, wind turbines are not used in heating or in transport, but
specifically in electricity generation. According to the graph, wind is a dominant
renewable energy for electricity share. Its future consumption counts about 14%
of total electricity consumption that represents significant part in RES-E.
The second one that follows wind energy is hydropower. According to prediction,
the forthcoming hydrothermal share estimates 10.5%. The suggestively high
share is similar to hydro’s that can also importantly take part into upcoming RES-
E deployment.
Biomass is commonly used to produce power or heat. Biomass electricity
generating technologies include direct firing and co-firing of solid biomass, biogas
and liquid biofuels. As the scenario follows, its forthcoming share counts 6.5% of
total energy for electricity share. Another renewable electricity generating energy
is solar power. As stated by assumption, PV cells shares will 2.35% whereas
consternated solar power 0.5%. Finally, geothermal that mainly practices direct
use, consumes 0.3% of electricity utilization in 2020, followed by ocean energy
0.15%.

27
EREC
Roadmaps”
report,
2010

10.5%

6.5%

2.35%

0.5%

14%

0.3%

0.15%

65.7%

Hydro

Biomass

PV

CSP

Wind

Geothermal

Ocean

34

5.3.2 Heating & Cooling
Modern biomass, solar and geothermal energy expects to supply more hot water
and heat for millions of buildings over the Europe. From the forecasts, more than
one fifth of heating consumption will come from renewables sources in 2020 that
record 21.3%. Moreover, this figure can increase up to 23.5%.
Graph 13 RES- H, 202028
Biomass is the main energy that represents 17.2% of heating and cooling
consumption next decade. This will include heat derived from burning solid, liquid
and gaseous biomass for such purposes as cooking and water and space
heating. The EU biomass heating predicts to be mainly led by Sweden, Finland
and Denmark producing more then 70% of all biomass heat sold into district
networks among the Member States.
Bioenergy is followed by heat pumps from aero thermal and hydrothermal
energy. According to assumptions, their consumption for heating expects to be
1.6%. Consistent with previous chapters, high capacity of hydro energy is
capable of supplying both electricity and heating sector too. Also, the segment
expects to use such renewable technology as geothermal. Commonly, such
energy is used through direct used method. Their consumption predicts to be
1.3% of heating consumption.
Finally, solar energy machinery is the main upcoming renewable technology in
the sector. Solar water technologies for heating purposes expect to contribute
specifically to hot water production among the Member States. Consistent with
the scenario, solar thermal represents 1.2% of heating utilization.

28
EREC
Roadmaps”
report,
2010

1.3%
1.2%

17.2%

1.6%

78.70%

Geothremal

Solar
Thermal

Biomass

Heat
Pumps

(Hydro)

35

5.3.3 Transport
Electricity generated from renewables is used to power trains, subways and
electric cars. Analytically, along with increasing amount of electric vehicles, the
share of electricity from renewables rises too, which will then increase role of
alternatives in transport. However, renewable energies, specifically biomass, can
be perfect substitute for petrol.
Graph 14: RES-Transport, 202029
As shown on the graph 14, the share in transport sector specifically from
biodiesel and bioethanol is projected to reach 11.2% which is according to RES
industry road-maps, can be sum up to 12.2% by 2020. Although such share that
counts nearly one-sixth is relatively small to total energy for transport, it expects
to play significant role in RES-T sector.
Biodiesel is a leading contributor to the focuses for RES in transport in 2020,
followed by bioethanol. While almost no contribution of hydrogen is planned,
renewable electricity in transport will keep contributing in order to achieve the
target. According to assumptions, biodiesel counts 7.8% of RES-T sector.
Second leading contributor to the segment is bioethanol. As said by the scenario,
bioethanol consumption counts 3.5% of total share for transport. France and
Germany would remain largest ethanol manufacturers by 2020 with
approximately 2 billion litter productions each. The rest of transport energy is
consumed by RES-electricity contributing such neo technology as electric
vehicles. The coming share for electricity for non-road transport counts 0.7%
whereas for road transport 0.1%.

29
EREC
Roadmaps”
report,
2010

7.8%

3.5%
0.7%

0.1%

0.2%

87.7%

Biodiesel

Bioethanol

RES-‐
Electricity

(non
road

transport)

36

5.4 Overview by Member State
From political and economy points of view such countries as UK, Germany,
France, Spain and Italy are considered as leading Member States of European
Union. According to statistics of 2010, EU’s gross domestic product 30
(GDP)
records around 12,5 million euros out of which previously mentioned countries
are top 5 major investors.
Graph 15: EU GDP by State, 201031
Source: Author based on Eurostat
Apart from holding 3rd
world economy, Germany’s market value equals around
2,5 million that projects 20% of EU’s GDP. France is considered as second
largest market investor with 1.9 million euros estimating 15% of total the Union’s
GDP. Moreover, UK (1.7 million) and Italy (1,5 million) project 14% and 12% of
the Union’s market value. Out of 5 leading states, Spain has lowest but still
significant domestic product of 1.06 million that dominates 8.6% of the Alliance’s
total market value.
According previous statistics, those country can be classified as leading ones in
EU in terms of economy and political influence. Therefore, that would be rational
to identify their role most significant in overall Union’s renewable energy
deployment. The following subchapters show RES of each of the 5 Member
States by electricity, heating & cooling and transport sectors.

30
Defined
as
a
market
value
of
all
goods
and
services
produced
by
a
country
in
a

particular
time
(year).

31
Eurostat,
EU-‐27,
http://epp.eurostat.ec.europa.eu/cache/ITY_PUBLIC/2-‐
26042011-‐AP/EN/2-‐26042011-‐AP-‐EN.PDF

0%

5%

10%

15%

20%

25%

Germany
France
UK
Italy
Spain

37

5.4.1 Germany
The country of third world economy sets up a target from 12% to 18%
Renewable energy share including:
Graph 16: Germany RES Mix by Sector, 202032
According to government estimation, Germany also forecasts renewable energy
share to be 19.6% in 2020, but the official target stays 18% (required by RES
Directive). Sectors overall, the NREAP remains below the BEE estimations.
Specifically in electricity sector, BEE assumes 47% to be possible, for heating &
cooling 25% and for transport 19%.
According to the assumptions, Germany plans to spend 36.6% from alternative
powers that accounts more then one third of total renewable energy share. If
success, the expected number would signify high strength of electricity sector in
the country and increase the EU’s GDP. With the increase of the sector’s power,
the electricity supply will automatically increase too.
Electricity segment is followed by heating & cooling. As the graph says, 15% of
RES sector will be shared to heating that in order to develop living standards for
households could raise more. A good example for that would be France, which
RES-H & C counts 33%.
Next, there comes up the transportation sector. According to the graph. 13.2% of
renewable energy share expect to support transportation. The projection is
bigger comparing to the rest of countries: France (10.5%), UK (10.3%) and Italy
(10.1%). Hence, Germany competes with Spain, which RES-T accounts 13.6%

32
EREC
Roadmaps”
report,
2010

37%

15%
13%

35%

Electricity

Heating
&
Cooling

Transportation

Others

38

5.4.2 France
Out of all EU”s leading countries, France’s focus to modern power share is
estimated as the highest one. Its present RES estimates 12.5%, but the country’s
target for 2020 accounts almost quarter of total energy share that counts 23% of
renewable energy share including:
Graph 17: France RES Mix by Sector, 202033
Consistent with the graph 17, France expects to share 27% to electricity from
modern energy a source that is more then quarter from total renewable energy
share. The figure is almost the same as Italy’s assumptions (26.4%).
Although the amount is not that high like in Spain (40.2%), Germany (36.6%) and
UK (31%), the sector would still be rather developed from renewables as it
counts more one fourth out of total RES sector. Plus, that would be
recommended to increase the share at least up to 30% so as to raise county’s
electricity supply.
Renewable share for heating and cooling assumes to slightly more then for
previous sector. As the figure says, RES-H&C accounts 33% that is one third of
total RES sector. Apart from high living standards specifically for households,
France also projects the highest heating and cooling development from
renewables comparing to the rest 4 countries.
The energy share for transport expects to reach 10.5% similarly as in UK (10.3%)
and Italy (10.1%). However, the amount is still considered low for such important
segment. Hence, France will probably intent to increase RES-T share from at
least 3% so as to improve the transportation.

33
EREC
Roadmaps”
report,
2010

27%

33%

11%

29%

Electricity

Heating
&
Cooling

Transportation

Others

39

5.4.3 Spain
Today, Spain’s RES sector records 13% out of its total energy mix. However, the
Member State aims its target up to overall of 20% of renewable energy share out
which:
Graph 18: Spain RES Mix by Sector, 202034
Although the Spanish government forecasts achieve 22.7% renewable energy
share by 2020 in its high efficiency scenario, this figure is still significantly lower
than the 28.3% of renewables share in gross final energy consumption, which
APPA has calculated to be practicable in 2020 in its optimistic scenario.
According to forecasts, renewable energy expects to spend 40.2% that is almost
half of Spain’s RES. Such a big share reflects high sector development and
electricity supply, which then automatically improves other industries. Out of all 5
countries, Germany (36.6%) is the only one that can complete.
Heating & Cooling sector is next one followed by electricity. The share assumes
to be much less then in previously mentioned sector but expects to be rather high
comparing to the rest of the countries. From the graph, RES-H & C accounts
18.9% that is almost one fourth of total RES. Comparing to other countries, Spain
has highest upcoming heating share apart from France (33%).
Third sector coming up is transport. From estimates, Spain’s RES-T expects to
reach 13.6% that is highest upcoming share for transport out of all 5 countries.

34
EREC
Roadmaps”
report,
2010

40%

19%

14%

27%

Electricity

Heating
&
Cooling

Transportation

Others

40

5.4.4 United Kingdom
Out of the Member States listed in thus subchapter, Britain has lowest RES
share of just 4%. Overlooking, UK government set out its Renewable Energy
Strategy so as to gain 15% objective in 2020:
Graph 19: UK RES Mix by Sector, 202035
Electricity is the major sector shared from renewable energies. According to the
figure, future RES-E accounts 31%. By estimating, the sector is rather much
shared from renewables, which comparatively justifies high improvement of the
segment.
The second major sector of renewable energy would heating & cooling. As
assumptions say, RES- H&C predicts to be 12%. The projection is relatively
small. Therefore, that would be recommended to increase at least up to 15% so
as to develop conditions for the country’s households.
The third major sector would be transportations. According to predictions, RES-T
will 10.3% that is same little as France (10.5%) and Italy (10.1%).

35
EREC
Roadmaps”
report,
2010

31%

12%

10%

47%

Electricity

Heating
&
Cooling

Transportation

Others

41

5.4.5 Italy
Finally, Italy’s RES share is estimated by 8%, which is similarly low as UK.
However, The Italian NREAP targets the overall 17% of renewable energy share
out of which:
Graph 20: Italy RES Mix by Sector, 202036
As shown on the graph 20, electricity is a major sector of country’s info structure
utilizing renewable energy. As shown on the graph, almost 27% of alternative
energies share is target to electricity segment. Although it won’t be that shared
like in Germany or in Spain, electricity sector still would be rather industrialized
as it is shared by more then quarter from total renewable energy share.
The second major sector of renewables share would be heating & cooling. The
graph shows expected 17.1% share to the sector. The figure is close to Spain
(18.9%) but far lower comparing to France which heating segment from
renewable powers share expects to reach almost one third (33%).
However, it is competitively higher then in UK (12%) or in Germany (15%). By
supplying the sector from modern, Italy’s perspective would be to have more
developed living standards for households and individuals then in previously
mentioned countries.
Third major sector of alternative energy share would be one of the most
important one in countries info structure overall which is transportation.
According to graph, 10.1% of renewable energy share would be targeted to
transportation that is almost the same as France (10.2%) and UK (10.3%).
Transport carries a significant role for the country. In this case, so as to benefit its
info structure in terms transference, Italy would better increase RES-T at least up
to 15%.

36
EREC
Roadmaps”
report,
2010

26%

17%

10%

47%

Electricity

Heating
&
Cooling

Transportation

Others

42

5.4.6 Member States Comparison
So as to identify the most potential renewable energy user by year 2020, analysis
can compare current RES share with upcoming one.
Graph 21: RES by Member State, 2020
According to assumptions of the scenario, highest upcoming renewable energy
distribution belongs to France with 23% share. Such high distribution of
renewables is significant for both for the country’s economy and economy of the
EU overall because France is the second biggest Union’s domestic product
investor (15% of the EU’s GDP). Furthermore, France consumes the majority of
the Algerian fuels exports. Therefore, by achieving more then 20% of renewable
energy share, Europe energy dependence on North African imports decreases.
Second forthcoming country with highest RES would be Spain with 20% share.
As a result of that, the country’s unemployment along with the Union’s one
expects to decrease. Hence, by achieving such share, Spain sees an opportunity
to avoid growing social crisis.
In addition, Germany also expects to play a significant role by achieving 18%
renewable share. Apart from fact of being 3rd
world economy, Germany is the first
biggest domestic product investor with 20% of the EU’s GDP. Therefore, along
the renewable growth, the Union’s energy economy automatically becomes more
efficient.
Italy and UK have lowest but still significant renewables share with 17% and
15%. Considering that North suffers from unemployment, the increase in
alternative consumption can prevent the social crisis, which is likely in case of
Span. For the UK, the situation is similar in terms of resources. Considering that
the country doesn’t have much of own fossil fuels, by achieving modern energy
target, Britain avoids reliance on energy imports, likely France.
0%
5%
10%
15%
20%
25%

Germany

France

Spain

UK

Italy

2020

2010

43

By knowing upcoming increase of renewable energy by sector in each country,
analysis can make a comparison competing future results of each Member State
by segment.
Graph 22: Increase in RES by Sector and Member State
According to graph 22, RES-E sector expects to be mostly shared by Spain
(40.2%) and Germany (36.6%). Such high share that is more then one-third of
total RES, shows high future improvement of electricity industry in those
countries in terms of renewable energy. After that, there come up UK (31%) and
France (27%). France has lowest renewable share for electricity (26.4%).
Overall, all 5 states except of France, renewable electricity plans to be at least
one-third of the total electricity consumption, which expects to be very significant
fro the EU. With such great RES-E sector, the Union’s electricity supply can
radically increase. Hence, electricity grid stream will automatically become more
efficient.
Renewable energy shares for heating & cooling are slightly different. France has
most developed RES-H&C sector with 33% share. Next, Spain with 18.9% share
followed by Italy that has 17.1%. Economically speaking, the development of
heating and cooling sector improves living standards for individuals like in case of
France, Spain and Italy. However, for such countries as Germany and UK that
have lowest share for heating with 15% and 12%, so as to improve living
conditions for households, the shares have to grow by 5% more as minimum.
Overall, out of 5 most important Member States, renewable energy share for
transport is lowest apart from Spain’s that counts 27.3%. Second highest RES-T
is expected in Germany with share of 13.2%. France, UK and Italy have lowest
projection with share of 10.5%, 10.3% and 10.1%. However, the upcoming
shares are rather significant especially for Spain because as mentioned in
chapter 4, the use of biofuels perfectly substitutes for fuels and prevent
emissions growth
0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

Electricity

Heating
&
Cooling

Transport

44

6. Consequences
With the help of developed scenario, analysis can identify upcoming results of
renewable energy share expand on EU overall and on each sector from different
angles.
If the union follows completely the entire scenario, EU is expected to face more
optimistic consequences by increasing share in renewable energy sector but
more pessimistic, if the EU avoids the opportunity. By optimistic is meant what
the union gains from the switch such as decrease of environment pollution,
independence from foreign energy imports and money saving for householders
whereas pessimistic is what EU can loose in terms of such opportunities as
transport improvement and electricity sector development.
Identifying certain consequences can illustrate to Europe, what benefits can be
achieved from the energy change and what has to be scarified for that. The
penalties detection of the switch also shows what impacts and recommendations
that have to be considered in order to complete the target as successful as
possible with minimized amount of problems. By contemplating those impacts,
the process of renewable energy share expansion can be facilitated as they open
wider perspective for future development of alternatives.
Although the analyses are mainly practiced from economic point of view, some of
the examinations come from ecological (environmental safety) and political basis.
As a result of that, analysis can both keep its economic foundations and
represent the studies from other points of view too. The mixture of basis the
projections come from, explain the consequences from different points of view.

45

6.1 What if we change-2020
Switching to alternative energy sources, unlocks different opportunities among
EU Member States. Today, Europe’s demand for energy is rising of high and
unstable prices. The cost of oil imported to EU has been increasing for recent
years and expects to grow more in upcoming decade. In this case, renewable
energies can be outlined as key solver this issue as well to the problem
concerning greenhouse gas. Energy sectors that manufacture resources from
traditional sources such as nuclear are main drivers of emission growth in
atmosphere.
Also, global warming accompanied by an increasing dependency on foreign
energy imports are only minor problems facing the Union today. Carbon dioxide,
which is highest emission out of all greenhouse gases, is a main provoker of
Climate Change. Apart from the fact that renewable energies almost do not make
harm environment, their entire energy production causes no emissions, which
identifies alternative powers as main preventers of climate change.
So as to counteract to these tendencies and ensure a sustainable energy and
economic future, EU has to act the upcoming decade in order to bring
sustainable, safe and competitive energies. Although Europe can face some
challenges into changing to neo powers, which are illustrated in chapter 9.3 and
few pessimistic consequences, more then 80% of the implementation results will
certainly be in gain. The following sub chapters illustrate the consequences from
political, environmental, social and economical points of view.

46

6.1.1 Political
For EU Member States, the dependence on foreign imports of fossil fuels is
highly increasing. Main fossil fuels imported are oil and gas that are used for
such important sectors of info structure as transport and electricity. As was
mentioned in previous chapters, EU relies more then half on energy imports from
its energy consumption. Furthermore, fossil fuels account around 80% of EU’s
gross inland energy consumption. From political and economical points view,
such high reliance negatively affects the Union both in macro (analyzing the fall
in efficiency of the alliance as whole) and in micro terms (studying households
that over pay for electricity).
The problem of fossil fuel resources is their finiteness. Also, the supplies are
vulnerable to price fluctuations either logistical or political difficulties. Therefore, it
is significantly important to achieve EU’s independence on foreign energy
imports and to diversify its supply of energy. Implementation of alternative
energies can help the Union to succeed that target because using renewables
means using more “home grow” energy that means energy based on its own
natural resources. Hence, this facilitates to diversify the entire energy mix and
the sources of energy EU rely on.
Energy independence
The dependence of foreign energy imports is a present issue of EU Members. As
stated in chapter 4, European Union is more then 50% depended on imports of
its energy consumption and the number is expected to increase up to more then
65% in 15-20 years time.
Graph 23: EU Energy Dependence Decrease
Source: Author based on JIA37

37
Journal
of
International
Affairs,

“Re-‐thinking
Russia”
article,
2010,

http://jia.sipa.columbia.edu/russia-‐and-‐europe’s-‐mutual-‐energy-‐dependence

0%

20%

40%

60%

80%

100%

2010
2020
2030

47

However, the reliance on energy imports can decrease by implementing
renewable energies into the Union’s economy. From expectations, on behalf of
renewables the entire energy dependence can fall by almost 20% in next two
decades. According the graph above, the reliance on energy predicts to fall from
54% in 2010 to 45% in 2020. Furthermore, the independence will keep falling
from 45% in 2020 to 38% in 2030.
Gas imports independence
As stated in previous chapters, gas supply counts more then 25% of primary
energy use from imports. Such percentage shows big reliance on gas supply
especially concerning to heating & cooling sector. Alternative energy can unlock
such big dependence. According to assumptions if EU increases its renewable
energy share for heating & cooling up to 21.3%, the independence can rapidly
increase.
Graph 24: EU Gas Dependence Decrease38
Source: Author based on JIA
According to the graph 24, by increasing renewables share, gas dependence on
imports expects to significantly decrease. From 26.4% in 2010 to 15% in 2020
that shows more then 10% independence growth. Plus, gas supply freedom can
continuously increase to 10% in 2030. Totally estimating, by changing to
alternatives, EU’s can increase gas supply efficiency by almost 17% by year
2030. In reflection, heating & cooling sector expect to increase its efficiency too.

38
Journal
of
International
Affairs,

“Re-‐thinking
Russia”
article,
2010,

0%

20%

40%

60%

80%

100%

2010
2020
2030

48

Oil imports independence
Along with what was mentioned before, oil counts 60% of primary energy use
from imports in European Union, which is twice more then for gas. Such
dependence can also solved neo energy implementation. Consistent with
assumptions, if Member States increase its renewable share for transport up to
11-12%, foreign oil dependence will significantly decrease.
Graph 25: EU Oil Dependence Decrease
Source: Author based on JIA
According to the graph 25, from 60% in 2010 the dependence forecasts to
decrease to 40% in 2020. Hence, the reliance can fall by one third just in 10
years. Moreover, the dependence expects to decrease to 30% in 2030.
Analyzing overall, with help of renewables, oil reliance can fall by half for next
two decades. Consequently, apart from rescuing transport sector from external
influence, oil supply will increase its efficiency by more then 25% in 20 years.
0%

20%

40%

60%

80%

100%

2010
2020
2030

49

6.1.2 Environmental
Today, millions of manufactures are intending to decrease their contribution to
the emissions of greenhouse gases including carbon dioxide that is mainly
responsible for global warming. At the EU level, the Member States are putting
in place policies helping to low down CO2 emissions. The most effective strategy
so as to succeed the target would be switching to renewable energies. Changing
to neo powers would be the way of making EU energy supply more secure and
environmentally friendly.
The way that Europe produces energy lies at the heart of efforts to tackle climate
change. The major of energy supply is still dominated from fossil fuels, which five
off greenhouse gases when Europe manufacturers burn them for energy.
Because of the fact that alternative energies themselves cause no harm to
environment during energy production process, increasing renewable share in
the energy mix can help cut greenhouse gas emissions, decrease collective
“carbon footprint” and reduce air pollution.
CO2 reduction
At present, emissions of greenhouse gases (of which the biggest is CO2) are
responsible for global warming. This all leads to dramatic economic, social and
environmental. If the EU completes its of 20% share of renewable by 2020,
greenhouse gases will be reduced by 20% either by the same year.
Graph 26: CO2 Reduction (Mtoe)3940
Source: “RE-thinking 2050” report

39
“Re-‐thinking
2050”
report

40
Million
tones
of
oil
equivalent

0

500

1000

1500

2000

2500

3000

3500

2010
2015
2020
2030
2040
2050

50

Alternative energy has a very important role in influencing climate change.
Increase share of renewable powers in the EU will consequently lead in decrease
greenhouse gas emissions. In order to cause emission reduction, implementing
alternative sources can solve the entire issue. According to graph 27, the
arrangement of renewable by 2020 expects to reduce annual energy related CO2
emissions by about 30% and about 50% in year 2030.
Air quality improvement
Apart from CO2 emissions, the use fossil fuels also cases air pollution. As was
mentioned before in previous chapters, the nature of renewable energy sources
is to be environmentally friendly. Switching to alternative energies opens
opportunities to avoid air pollution and to develop air improvement.
The drop of power production from conventional energy sources and changing to
modern ones, automatically gives a chance to such emission reduction as
sulphur dioxide (chemical component that is produced in process of burning
fossil fuels), NOx (mixture of nitric oxide-NO and nitrogen dioxide- NO2), PM 2.5
(small subdivisions of solid matter suspended in a gas or liquid) and VOC
(volatile organic compounds produced by incomplete combustion of hydrocarbon
fuels).
Graph 27: Avoided Emissions 41
Source: EMEP42

41
“Cost-‐effective
Emission
Reductions
to
Improve
Air
Quality
in
Europe
in
2020”

report,
2011,

http://www.unece.org/fileadmin/DAM/env/documents/2011/eb/wg5/WGSR48/I
nformal%20docs/Info.doc.8_CIAM_report_on_Cost_effective_emission_reductions_to
_improve_air_quality_in_Europe_in_2010.pdf

42
EMEP
is
the
European
Monitoring
and
Evaluation
Program
built
for
international

co-‐operation
to
solve
trans
boundary
air
pollution
problems.

-‐100%

-‐80%

-‐60%

-‐40%

-‐20%

0%

20%

SO2
NOx
PM2.5
VOC

Scope

Baseline

51

The graph shows the possible reduction of each emission in case of RES sector
deployment in 2020 in the EU. Concerning SO2, the emission can be reduced by
35% that can even be achieved 5% higher if development uses the scope for
further technical measures. By preventing sulphure dioxide exposure, EU citizens
avoid health damage specifically on bronchial system.
The NOx emission can decrease by more then quarter-27% and even 5% more
in case of more intensive development. Apart from detrimental effect to the
bronchial system, nitrogen dioxide concentration exceeds air quality in Europe.
The PM2.5 emission can low down from 20% to 32%. The exposure the PM 2.5
matter certainly negatively effects transport sector, as its principal source is road
traffic emissions especially from diesel vehicles. VOC emanation can fell in the
range of 22%-31%. The major part of these emissions is toxic and carries high
danger on Europe citizen’s health.
Graph 28: Environmental Improvement 43
Source: EMEP
The energy change in 2020 can also result in significant improvement in the main
indicators of environmental effects. According to the graph, the years of life lost
that are caused by particulate matter (PM 2.5), can decrease 25%-35% (PM
health) that from demographical point of view will positively effect on population.
Also, the amount of premature deaths related to the exposure to ground-level
ozone expects to decrease by 27%-30% (O3 health) .The areas of ecosystem
that meet unsustainable conditions from air pollution would decrease by 35%-
50% for forest acidification44
, 30%-47% for water acidification45
and almost 30%
for eutrophication46
.

43
“Cost-‐effective
Emission
Reductions
to
Improve
Air
Quality
in
Europe
in
2020”

report,
2011,

44
A
process
by
which
soil
pH
reduces
its
quantity.

-‐100%

-‐80%

-‐60%

-‐40%

-‐20%

0%

20%

Scope

Improvement

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