EU energy subsidies: EUR 40 billion for renewables

The European Commission has released an interim report providing the first full data set on energy costs and subsidies for power generation technologies across the 28 European Union countries.

Examining energy subsidies in 2012, the Subsidies and Costs of EU Energy report shows that the EU spent between €120 and €140 billion on power sector support. The largest amount — €40 billion – went to renewables, reflecting EU efforts to expand the share of renewable energy in its overall energy consumption. Of that amount, €14.7 billion went to solar, €10.1 billion to onshore wind, €8.3 billion for biomass and €5.2 billion for hydropower.

Among conventional power generation technologies, coal received the largest amount of subsidies in 2012 with €10.1 billion, followed by nuclear (€7 billion) and natural gas (about € 5.2 billion).

The figures specify support across technologies but do not reflect the free allocation of emission certificates nor tax support for energy consumption. The inclusion of these factors would reduce the gap between support for renewables and other power generation technologies.

"Together with the Commission’s earlier report on drivers for energy prices, we now have a set of data on subsidies and costs in the field of energy that is more solid and comprehensive than anyone before,” said Vice-President Günther H. Oettinger, who currently oversees energy. “We are now better informed about the size of public subsidies in recent years and the costs for power generation across all technologies.”

Oettinger added that the task of subsidy data collection was not yet completed, however. “This can only be a first step and there are still gaps in our knowledge. We have to continue to work on filling these gaps. More research is needed, in particular on historical subsidies in the energy market in all EU member states and the EU overall."

The interim report also presents figures on the cost competitiveness of different power generation technologies. The estimated ranges reflect costs of non-subsidized new power generation (levelized costs). Costs for producing one megawatt hour (MWh) of electricity from coal range around €75. Electricity from onshore wind is generated at only somewhat higher costs. Costs for power from nuclear and natural gas are in comparable ranges around €100/MWh. Solar power costs have fallen considerably since 2008 to about €100-115/MWh depending on the size of installations.

The report also presents estimates on external costs across power generation technologies that are not reflected in market prices, such as costs of environmental and health impacts and the impact of climate change. The external costs of the EU’s energy mix in 2012 are estimated at between €150 and €310 billion.

“The methods for quantifying external costs come with a high degree of uncertainty, and the report only aims to identify orders of magnitude for external costs,” the European Commission added.

The Commission said that while the functioning of energy markets and the size and effect of government subsidies have been the subject of debate for years, there had been no consolidated dataset for government support for the EU power market to date.

Responding to the report, the European Photovoltaic Industry Association (EPIA) said it demonstrated “that the direct total cost of conventional energy technologies, such as coal and nuclear, is much higher than the direct cost for solar energy.”

“The study proves that solar energy is cost effective today, and is improving competitiveness at a rate that conventional technologies will never be able to achieve. This is a wakeup call for policymakers to prioritize the most cost effective energies — such as solar. Policymakers need to stop protecting the past and begin to shape the future, which is clearly based on renewable energies on the evidence of the report.”

EPIA Policy Director Frauke Thies added, “Despite decades of heavy subsidies, mature coal and nuclear energy technologies still rely on similar levels of public support as innovative solar energy is getting today. However, support to solar electricity is already coming down, in line with the rapid technology cost reduction, as opposed to coal and nuclear energy which remain locked into subsidies as they have been for the last 40 years.”

Thies stressed that with its increasing cost-effectiveness, “solar is set to overtake conventional technologies in the short term."