There can be no denying that the situation in Ukraine has been a wake-up call for the European energy sector. This crisis is a stark reminder of its over-dependence on Russian gas, and the European Commission has acted swiftly in presenting an alternative strategy in the form of the REPowerEU plan.
The crisis has exposed the volatility of energy prices and the fragility of a system in which our energy security depends on other countries. War or geopolitical crises can quickly lead to a breakdown in the supply chain. This isn’t the first time this has happened: the oil crisis of the 1970s, for example, saw Saudi Arabia and other oil producers impose an embargo on various western nations in retaliation for their support for Israel in the Yom Kippur War. This led to a massive increase in oil prices, which was described as “the first oil shock.” The situation in Ukraine shows once more that an energy system based on fossil fuels is more susceptible to the effects of an international crisis. A system based on more local renewable energy sources, on the other hand, is more sustainable, more resilient and stabler. This is something that we at Enel have been working towards for many years, and not only in Europe.
By turning to renewable energy sources, Europe, and the world in general, can achieve a greater and more long-term goal, namely tackling the climate crisis. In spite of the bleak circumstances that gave rise to it, the REPowerEU plan is an exciting opportunity to accelerate an important process. And at Enel we have plenty of ideas for making it work effectively.
Investing in order to save
Even though Europe should have addressed the question of its energy system many years ago, the REPowerEU plan is a step in the right direction. It will require an additional investment of €210 billion between now and 2027. According to the Commission, dependence on Russian gas costs European taxpayers an annual €100 billion. It’s a case of “you do the math”: if our dependence ends by 2030 – and that is the purpose of the plan – then that amounts to a huge saving. As we never tire of saying at Enel, renewable energy is beneficial for the economy as well as for the environment.
The REPowerEU plan aims to improve the scenario by promoting energy efficiency, the diversification of energy supplies, and the replacement of fossil fuels with renewables in homes, industry and power generation. It sets more ambitious energy targets than those presented in the post-Covid Recovery and Resilience Facility and last year’s Fit for 55 package, which grew out of the European Green New Deal. Fit for 55 endeavored to reduce the EU’s greenhouse gas emissions by 55% (with respect to 1990 levels) by 2030. It also called for renewables to account for 40% of energy production by the same deadline. Under the REPowerEU plan, that figure has been raised to 45%.
In terms of domestic energy needs, the plan promotes the use of solar panels on rooftops and heat pumps indoors (the aim is to double their rate of deployment). It also provides a series of incentives for energy saving: these include reduced VAT rates on energy-efficient heating systems, building insulation, appliances and products. In terms of decarbonizing industry, there will be a focus on developing green hydrogen, another area where Enel is active.
Storing energy and modernizing the grid
A key issue for renewable energy, whose supply can be intermittent, is storage. Indeed, effective BESS (Battery Energy Storage System) is fundamental to the energy transition. In this respect, we are working on a number of exciting projects. Melilla, a Spanish city located on the Moroccan coast, is a great example. Melilla isn’t connected to the electricity grid on the Spanish mainland and therefore has its own power plant. In order to guarantee its stability, we have set up a storage system using “second life” Nissan Leaf electric car batteries. This type of system could help solve one of the biggest challenges facing the energy transition: how to dispose of the millions of car batteries that will be produced as the world shifts to electric vehicles. It is an example of the circular economy, an essential element in the energy transition. Enel is also doing a lot of work in another crucial area: the modernization and digitalization of grid infrastructure. We want to guarantee high-quality, accessible and reliable service via an efficient and digitalized grid, thus enabling a more sustainable lifestyle through the use of electricity. Last year we even set up a special company, Gridspertise, which will work on improving energy grids around the world.
Less paperwork, please!
Arguably the most important point in the REPowerEU plan is the rapid rollout of renewable energy sources, such as wind and solar power. Here we can share another lesson that we have learnt: the main barrier or bottleneck isn’t the technology, which is already in place, but bureaucracy. The average time required for the approval of a wind farm in Europe is between five and six years, whereas that for a solar power plant is between two and three years. This clearly has to change and the REPowerEU calls for an amendment to the Renewables Energy Directive (RED II). It states that countries should define renewable “go-to areas” inside which new projects should be permitted within one year. Speeding up the permit process will go a long way towards accelerating the transition to renewable energy sources.
Here comes the Sun
Once we have established a decarbonized energy sector, we need to extend its environmental benefits to other sectors. The EU Solar Strategy for doubling solar photovoltaic capacity by 2025 and installing 600 GW by 2030, and the Solar Rooftop Initiative with a phased-in legal obligation to install solar panels on new public and commercial buildings and new residential buildings are steps in the right direction.
And Enel Green Power will certainly be ready when the demand for photovoltaic panels increases. We recently signed an agreement with the European Commission to transform its 3Sun factory in Catania (in Sicily’s high-tech “Etna Valley”) into a Gigafactory, which will become fully operational by July 2024. Not only will production increase fifteen-fold, it will create an estimated thousand new jobs in the area. It’s an excellent example of what the future of the energy industry could look like: an environmentally healthy, economically prosperous and politically stable world. All this is possible, once we overcome our dependence on fossil fuels.