Electricity |

INTRODUCTION

Electricity is a form of energy that can be produced in several ways and that provides power to devices that create heat, light, etc.

Worldwide efforts to address climate change is leading to the rapid electrification of numerous end-users from transport to industry, driving a massive increase in power demand as well as the need to generate as much of it as possible from renewable sources. The result is a dramatic transformation of power systems globally. Electricity is the fastest-growing source of final energy demand. The rapid rollout of renewable sources such as wind and solar PV puts electricity at the forefront of clean-energy transitions. Such a radical transformation also calls for new approaches to how power systems are designed and operated. Sunshine and wind are not always available, requiring a range of backup generation options as well as smarter and better-connected grids.

Further policy action is essential to ensure that rapid electrification is matched by equally rapid rollouts of low-carbon sources and that it does not result in less secure energy systems.

The future of the electricity sector envisioned by policymakers is ultimately about the power mix (the size and composition of the power generation capacities) and the fuel mix (the volume and shares of different energy resources in power generation). The fuel mix determines the carbon intensity of the power sector, and different power generation technologies have a large influence over its operability, flexibility, and reliability. The ratio of conventional dispatchable technologies to intermittent/variable power generation capacities (VER) is a matter of critical importance. The reliance on different energy resources has serious consequences for import dependency and security of supply. Indigenous resources (coal/lignite and renewable resources) are considered to protect against import dependency. Even importing coal or nuclear fuel is widely regarded as more secure compared to natural gas because of diversified resources and political stability of suppliers.

Although the characteristics of the power mix have a profound impact on the electricity system, the virtues and shortcomings of the generation fleet do not determine its future. Import dependency can be alleviated by diversification of suppliers and transport routes. Flexibility and reliability can be supported by demand response, smart grids, well-built transmission networks (and market integration), energy storage and sector coupling. Smart regulation (motivating RES producers to locate generation capacities near the network, to adjust their production to market prices and to keep to schedule) and liquid spot markets can soften the system costs and ease the stress caused by variable energy resources put into electricity systems.

ELECTRICITY GENERATION MIX

Unabated fossil fuels currently account for over 60% of total global electricity generation, in which coal-fired electricity generation plays a crucial role, which role was unfortunately further strengthened by the energy security crisis of the Russian-Ukrainian war. To be consistent with the Net Zero Emissions by 2050 Scenario, that share needs to drop to 26% by 2030.

**World gross electricity production, by source, 2019 (IEA)**

Renewable electricity capacity is growing fast globally, especially in the EU, where nowadays more electricity comes from renewables than from fossil fuels. In 2020 at EU level, renewable energy sources accounted for 39 % of the electricity and overtook for the first time fossil fuels (36 %) as the main power source. In addition, 25 % of the electricity came from nuclear power plants. Among renewable sources, the highest share of electricity came from wind turbines (14 %), hydropower plants (13 %), biofuels (6 %) and solar power (5 %).

The electricity generation source is varying a lot in the Danube Region countries. Few countries (e.g. Germany, Austria) are forging ahead with aggressive expansion of renewable generation, network development and market integration, while most CEE countries (Czechia, Slovakia, Hungary, Romania, and Bulgaria) plan for nuclear power to anchor low carbon power generation.

Coal fired power generation is expected to undergo significant contraction in all EU member countries but remains an indispensable element of European power systems to 2030. Only 3 EUSDR countries plan to phase out coal in the next ten-year years (Austria, Hungary, Slovakia) with Germany and Czechia prolonging beyond 2030, and remaining significant in the non-EU countries.

**Electricity generation mix of the EUSDR countries 2017-2030 (%) Source: REKK**

New RES-E investments will increase the proportion of solar PV and wind in the EUSDR generation mixes over the next decade. The proportion of solar PV and wind energy increases across all EU DR countries to nearly 45% RES on average. The role of “other” RES-E generation (mainly biomass) moves up incrementally in Croatia, Slovenia, and Slovakia.

**Changes in RES-E generation mixes in the EUSDR countries 2018-2030 (%) source: REKK**

The growth in EUSDR installed capacities to 2030 will be driven primarily by solar PV and onshore wind. Decreasing technology costs, good natural potential and low environmental concerns make solar PV the most attractive RES-E technology over the next decade. Solar PV installed capacities are expected to grow by 79 GW in EU DR (52 GW from Germany) and at least by 490 MW3 in non-EU DR countries between 2018 and 2030. Onshore wind will also attract significant investment, with 40 GW new installed capacities in EU DR countries (31 GW of which in Germany, 13.6 GW being new offshore wind capacities) and 877 MW in non-EUDR countries.

Traditionally most DR countries use hydro power as the central piece of the electricity portfolios due to favorable natural conditions and positive effects for grid balancing. Hydro power will have a major role in achieving the 2030 climate and energy targets in most EU DR countries, but capacities will be maintained or even decreased due to saturation of suitable sites and environmental concerns. Overall hydro capacities are expected to fall marginally in the EU DR countries (by 155 MW) but will increase in the non-EU DR countries (by at least 347 MW).

Most DR countries plan to continue to develop solid biomass and biogas installations, in many cases by conversion of end-of-life coal or lignite units, although at a smaller scale than solar PV and wind energy. Solid biomass and biogas capacities will actually fall in Germany and Romania by 2030. Still electricity generation from solid biomass will play an important role in the renewable electricity mixes of the EU DR countries, with a share of above 20% in Czechia, Hungary and Slovakia in 2030.

Geothermal power plants currently operate in Austria, Germany, Croatia, Hungary, and Romania. In addition, Slovakia, Czechia, and Serbia plan to start operating geothermal power plants till 2030. Due to high exploration and drilling risks and high costs relative to the alternative renewable energy sources, the significance of geothermal electricity generation will remain marginal.

RENEWABLE ELECTRICITY SUPPORTING SCHEMES

RES deployment is mainly promoted through operating and investment support, but financial policies (e.g., exemptions from taxes and levies, preferential loans, etc.) and administrative policies are also in place (e. g. frameworks for self-consumption to enhance small scale investments). Tenders for ensuring a cost-competitive level of operating support are well established in Germany, Croatia, Hungary, and Slovenia, and are planned in some other EUSDR countries.

Amending legislation to make RES financially sustainable through competitive bidding and in line with State Aid Guidelines 2014-2020 is also a key issue for the countries of the non-EU DR countries. Montenegro has already held locational auctions for solar PV and onshore wind. Only two countries (HR and RO) have plans to create an attractive legal framework for RES private power purchase agreements (PPA), and two EU DR countries (AT and DE) have legislation in place related to energy communities.

MARKET CONNECTIVITY – ELECTRICITY GRIDS

An integrated EU energy market is the most cost-effective way to ensure secure and affordable energy supplies to EU citizens. Through common energy market rules and cross-border infrastructure, energy can be produced in one EU country and delivered to consumers in another. Given the degree of integration and changes in technology since 2009 and expected in years ahead, the EU electricity market has progressively been updated to match this reality. Cross-border projects promote market integration, increase competition (vital for small countries without liquid spot market), provide security of supply, and integrate renewable capacities into the electricity market (allowing intermittent renewable generation to spread across a larger area and get absorbed by a regional market).

In terms of electricity grids, several EUSDR countries need to strengthen internal transmission capacities and replace outdated 220 kV voltage level networks with 400 kV transmission lines. The reconstruction works raise the reliability of transmission systems, support the integration of renewable capacities (wind parks installed in distant areas of the country with insufficient grid infrastructure) and contribute to the development of priority transmission corridors. But even countries with well-built networks are planning to strengthen and expand internal lines.

The transmission grid in Central Europe is highly meshed, CEE countries are well connected, and many are already above the EU’s 2030 interconnectivity target of 15 % (defined as import capacity over installed generation capacity) and 30% (defined as import capacity over peak load). The non-EU countries share in common an aging network infrastructure, small, immature, and illiquid markets and insufficient market infrastructure, while the peripheral EU DR region is highly interested in improved price convergence and security of supply. Moldova and Ukraine face different challenges. Their top priority for transmission network development is electricity system integration into the EU energy market.

POLICY BACKGROUND

EU climate plan for 2030 and its revision

Paris Agreement (2015)

Energy Union Strategy (2015)

“Clean Energy for All Europeans” package (2016)

European Green Deal

Directive on common rules for the internal market for electricity (EU) 2019/944

Regulation on the internal market for electricity (EU) 2019/943

Regulation on risk-preparedness in the electricity sector (EU) 2019/941

Regulation on establishing a European Union Agency for the Cooperation of Energy Regulators (EU) 2019/942

LIBRARY

https://www.iea.org/reports/electricity-information-overview