How to finance carbon neutrality by 2045?: Eurelectric’s answer

On 26 September, Eurelectric, the sector association which represents the common interests of the electricity industry at pan-European level, gathered more than 130 stakeholders to present, alongside experts in energy and climate issues, economists and projects promotors, its E-invest report. It took more than a year to finalise this report that aims to establish a diagnostic regarding the existing regulatory framework in order to evaluate the power sector’s ability to trigger the necessary investments to reach carbon neutrality by 2045.

In its Decarbonisation Pathways’ study published last year, Eurelectric established that €100 bn per year were necessary to reach carbon neutrality by 2050, a target UFE is committed to achieve as stated in its latest position paper. Therefore, it is mandatory to operate the right levers in order to allow investment in low-carbon energy generation as well as in storage solution, demand response or network infrastructures.

Operate a review of the existing framework

As underlined by Juan Jose Alba Rios (Endesa), Chair of the working group Wholesale Market Design & Investment Frameworks who was in charge – alongside the working group on RES & Storage – of the writing of the report, the European electricity industry underwent an investment decrease in 2018. To tackle this issue, electrification or a review of the fiscal policy in order to “stop penalising electricity with taxes and levies” should be favored. Moreover, another solution would be to have a market that would provide a long-term price signal to better guide the consumer.

How to trigger investments?

Numerous participants recalled that optimising the energy transition implies to allocate the risks to the market players that are in position to effectively manage them. Therefore, it is crucial to find a balance between the risk beared by the investors and those that are beared by the collectivity. As a matter of fact, using contract for difference could be a solution according to the panelists.
Regarding the necessity to have long-term signals, the stakeholders underlined the necessity to have a robust CO2 price, especially within the ETS as well as the key role that capacity mechanism will play in the future. Given the amount of investment needed (in RES, low-carbon generation or in flexibility solutions such as demand-side or storage and in networks), having a broader thought on the role of the European market design as a key enabler to reach carbon neutrality will be necessary as it will be a major topic in the years to come!