Europe faces power shortages in the next decade unless it balances its drive for low-carbon energy with investment in clean-coal and nuclear generation, according to the International Energy Agency.
Policy makers must boost incentives for coal-fired power that includes carbon-capture technology and spur investment in new atomic plants to replace aging reactors, Maria van der Hoeven, the executive director of the IEA, said in an interview. The investment in round-the-clock, or baseload, power is needed to cover intermittent wind and solar supply, she said.
“Not everything can come just from having more renewables,” van der Hoeven said in London on Nov. 12. “The system has to be stable so that the lights aren’t going to turn off the moment the renewables aren’t there.”
Europe needs 120 gigawatts of new baseload generation in the next decade, 1.6 times the U.K.’s existing total power capacity, according to IEA estimates. About 150 gigawatts of capacity will be retired in the period and lawmakers need to find ways to attract the $2 trillion of power-plant investments needed in Europe through 2050, the Paris-based agency said last week in its annual World Energy Outlook report.
Electricity costs in Europe have been about $20 a megawatt-hour too low in “recent years” for new conventional plants to recover their investment, the IEA said in its report. Weak energy demand caused by a sluggish economy plus a surge in renewables pressured prices, with German power for 2015, a European benchmark, slumping 26 percent in the past two years to the equivalent of $43.72 a megawatt-hour today.
British coal-fired plants totaling 13 gigawatts are at risk of closing by 2019, the Confederation of U.K. Coal Producers in Wakefield, England, said in March. That’s in addition to the 8.2 gigawatts shut in the previous 15 months. One gigawatt can supply about 2 million European homes.
The U.K. offered subsidies equivalent to about twice the current power price under a 35-year contract to France’s Electricite de France SA to build new atomic plants at Hinkley Point, England.
“If we use Hinkley Point C as a guide, 120 gigawatts worth of new nuclear would cost well over 600 billion pounds ($940 billion),” said Omar Abbosh, a senior managing director in Accenture Plc’s resources business. “This would clearly require new sources of capital and foreign investment, given the financial positions of most European utilities.”
Investment in low-carbon technologies has struggled as the recession cut industrial demand for pollution rights in the European Union’s emissions trading system, driving down prices and reducing the penalties for burning coal. The bloc is seeking to bolster the price in its cap-and-trade program with measures to curb a permit glut that’s grown to a year’s supply.