How renewables will stabilize energy prices

How renewables will stabilize energy prices

The European Green Deal aims to double the share of energy produced from renewables by 2030. This means that Europe’s citizens will no longer have to endure excessively high energy bills as a result of a reliance on gas.


For some years Europe has been at the forefront in the race against time to mitigate climate change, implementing innovative measures and ambitious initiatives. The latest of these was the European Commission’s presentation of the Green Deal in July of this year. This is an extensive plan that includes, among other things, the “Fit for 55” policy package, which aims to reduce climate-altering emissions by 55% by the year 2030.

The fundamental measures for achieving this goal include a substantial plan for boosting production from renewables within the EU: the goal is that within 10 years renewables will supply 40% of member states’ energy needs, from the current 20%.


Energy bills are increasing

The rebalancing of trade flows at global level has also led to an increase in oil and natural gas prices with consequences that will soon be all too visible for Europe’s citizens: price hikes in heating and electricity bills due to the substantial reliance on gas prices. The Vice-president of the European Commission, Frans Timmermans, foresaw this unpleasant trend when speaking at the official opening of the European Parliament’s plenary debate on the Green Deal on September 14.


Reliance on natural gas

“The one thing we cannot afford,” Timmermans observed, “is for the social aspects to be opposed to the climate aspects. I see this threat very clearly now that we have a discussion about the price hike in the energy sector. Only about one fifth of the price increase can be attributed to the greater costs caused by CO2 abatement. The other is simply a consequence of shortage [of gas] in the market. The irony is that, if we had introduced the Green Deal five years earlier, we would not be in this position now because we would be less dependent on fossil fuels and natural gas. We have all seen that even as fossil fuel prices have soared, those related to renewable generation have remained low and stable.”


Renewables and the free market

According to Carlo Tamburi, Italy Director of the Enel Group, “in recent years renewables have increased their share of total production from around 30 to 37% and this has reduced our reliance on gas. Therefore, the current increase in prices concerns a smaller quantity of energy. If we still had the same generation mix we had in 2009, today the wholesale price per megawatt hour would not be 98 euros but 111 euros.” Tamburi adds: “to limit the impact of higher energy prices, the solution is to develop renewables, which represent a factor that lowers prices. These natural resources are free and make Italy and Europe as a whole less reliant on imported supplies.”

Consumers have a chance to protect themselves by switching to the free market and choosing solutions that offer a fixed rate for electricity over a 24-month period.


The sun and the wind for energy autonomy

The case of Italy is emblematic of Europe’s excessively limited use of renewables. In Italy, in fact, the electricity system still depends on natural gas for 45% of production and 90% of this gas is imported. The situation is not so different throughout the European Union. According to the latest statistics from Eurostat, in 2019 the 27 member states consumed 4.2% more natural gas than in 2018, with the percentage of imports amounting to 89.5% compared with 83.8% in 2018.


Ever lower costs in the future

While Europe was becoming increasingly reliant on natural gas to produce electricity, at the same time it was becoming increasingly exposed to the high volatility of prices of this raw material. The alternative to this is to continue pursuing decarbonization and speed up the development of renewables, by working with the various institutions that can be involved in this important process. Carlo Tamburi has in fact suggested how we can collaborate to achieve the decarbonization goals for 2030, explaining that in Italy in particular, “it is necessary to make the renewable auctions work and reduce times for authorizations.”