Are Renewables Profitable in 2030? A Comparison between Wind and Solar across Europe

Abstract

The European Commission (EC) and the European Council have set ambitious energy targets for 2030 in order to secure clean and efficient energy in the European Union. In 2014, EU countries agreed that by 2030, the share of renewables should be 27% of total energy consumption in order to achieve the overall target of 40% GHG emission reduction. In 2018, this overall renewable target has been increased to 32% of total energy consumption. This target holds at the EU level, so all countries should work together either by reducing the energy demand or increasing generation from renewable energy sources (RES), to achieve the overall goals. Electricity generation is one of the sectors affected by the EU targets together with transport, agriculture and industry, as it is one of the major sectors responsible for total emissions. Following the track started with the 2020 targets on emission reductions, renewable electricity generation (RES-E) should increase to 49% of total electricity demand by 2030 in order to be consistent with the overall target on total energy demand, as noted by the in its own impact assessment analysis. The installed capacity in renewable energy has increased strongly during the last decade, when every EU country set up different incentives to promote the investment in renewable generation. There are several works that focus on the costs and the regulatory changes needed to promote the investments in renewable energy. All these works highlight that subsidies given to renewables are positively related with the investment in this type of generation in all EU countries. Despite the positive correlation between subsidies and investment in RES-E, it is widely recognised that the use of subsidies is suboptimal with respect to the first best solution of carbon-pricing, so a rigorous analysis is needed to assess under which conditions investments in renewable energy are economically profitable without subsidies. Looking at 2030, investment costs associated with renewables should decrease over time, making the investment in renewable energy more attractive to market operators. However, European countries are quite different in terms of natural resources and the availability of wind and solar irradiation, thus a careful analysis of the profitability of investments in renewable technologies is required to determine where it is optimal to invest in the future, as capital costs of renewables are often higher than for fossil fuels. Despite the importance of the subject, there are not many studies focusing on the profitability of renewable technologies in 2030 or beyond, in particular when it comes to comparing countries across Europe.