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EU 2020 renewable energy target unlikely to be met

Cost barriers may prevent the EU from reaching its 20 percent renewable energy targets by 2020, new report from Rabo warns.

EU renewable energy targets unlikely to be met by 2020
EU renewable energy targets unlikely to be met by 2020

The EU has published a report acknowledging for the first time that the 20 percent renewable energy target may not be reached by 2020. Rabobank analyst, Justin Sherrard explained, "A failure to meet the 2020 targets is a result of a number of barriers to renewable energy investment and development, which include the cost of capital, delayed infrastructure investments and disruptive policy adjustments". Realistic scenario development undertaken by Rabobank sheds light on the renewable energy outlook for Germany, the Netherlands and the UK. Incorporating the above barriers to renewables development suggests that Germany will meet the target, the Netherlands will fail and the UK will fall some place in between.

Germany has taken big steps with renewables in recent years – capacity has doubled in the last six years – setting it on track to meet the 2020 targets, according to the Rabobank analysis. Germany’s policy was skewed favourably towards solar PV and German solar expansion contributed significantly to lower global costs for the technology through scale and technology advances. Germany’s rapid growth of renewables could be slowed, either by some form of cap on renewable subsidies or by the practical reality of delivering offshore wind projects. Even so, Sherrard explains that the 2020 target appears to be achievable.

The UK has almost tripled its renewable electricity share between 2005 (4 percent) and 2012 (11.3 percent), largely driven by offshore wind expansion. This low installed base—meaning that subsidies are not hurting yet—and a separate CO2 system (with a floor price for carbon set well above current market prices) are positive for ongoing renewables development. The UK is likely to continue expanding offshore wind, even though utilities are cautious and will need to be encouraged to keep investing. For this to happen, Rabobank believes political support for renewables would need to increase from current levels.

The Netherlands has barely started on its transition to renewable electricity and is now the furthest behind on its 2020 electricity target of all EU nations. Rabobank analyst Clara van der Elst explains there are three main reasons for this. The design and execution of the renewable energy support schemes have skewed support towards biomass projects with unrealistic feedstock cost assumptions; many of these projects have been cancelled or are yet to be built. Furthermore, the Netherlands dropped its 5GW target for offshore wind almost immediately after launch. Finally, the high population density also creates delays in onshore wind development.

In contrast, in the US, the role shale gas production will play in the energy mix may dominate the agenda of the new administration, but there remains a clear commitment to renewable projects. China also looks set to expand its renewable energy base, with solar PV and wind both expected to continue growing strongly through to 2015 and beyond.