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Renewables and gas will drive Europe’s power sector growth: new research

23 November 2007 – According to new research by investment bank Société Générale (SG), Europe’s installed electricity generation capacity is set to grow by 2 per cent a year to 2010, reaching 845 GW, with renewable energy and gas fired power plants driving the growth.

Renewables will increase by 55 GW between 2005 and 2010, or 15.7 per cent annually, while gas fired power will grow by 6.6 per cent a year, representing a total of 54.6 GW between 2005 and 2010.

SG’s report, ‘Electricity in Europe – Evolution of supply balances by 2020’, also shows that investment in other energy sources will decrease to 2010, with oil down 1.5 per cent, nuclear power 0.9 per cent and coal 1 per cent.

Looking longer term, the report says that two scenarios were most likely for the period 2010-2020.

The first one features a slower demand growth, with natural gas and renewables still developing to the detriment of nuclear, coal and oil, but at a slower pace (2.6 per cent and 5.4 per cent per year, respectively).

The second scenario assumes stronger demand (especially in eastern Europe), which would be offset by larger investments in natural gas (a 6.6 per cent annual growth rate over the 2010-2020 period).

In both cases, the production trends for each energy source will depend heavily on carbon dioxide (CO2) emissions.

Higher electricity production will mean higher greenhouse gas emissions. According to the report, these will rise by 73 Mt between 2010 and 2020 for a demand growth that remains on trend (i.e. first scenario) and 170 Mt if demand is strong (i.e. second scenario),

The share of renewables in electricity production (excluding nuclear power) is set to reach between 20-22 per cent in 2020, depending on the scenario. While fossil fuels will continue to dominate Europe’s generation portfolio, representing 55-58 per cent of production in 2020.

Interestingly, SG’s research indicates that CO2 emissions will increase more slowly than electricity production.

If growth remained on trend, CO2 emissions would rise by only 5 per cent against a 9 per cent increase in electricity production between 2010 and 2020, or 11 per cent and 16 per cent, using SG’s strong growth scenario.

Because of the EU’s 20 per cent emission reduction target by 2020, the report describes a growing divergence between economic growth, energy demand and CO2 emissions, but it says that this will not be enough to reduce the electricity sector’s emissions