D. Jones, Ember: The Energy Transition Mainly Needs a Stable Framework Rather Than Subsidies

Date: October 27^th 2020

Topic: Renewables , Energy policy , Economy , En.vision

“We have been tracking electricity transition globally and there are some interesting findings, such as that for the first time in history, in the first six months of this year the world was getting one-tenth of its electricity from wind and solar, which is almost as much as it gets from nuclear. Furthermore, wind and solar are displacing coal,” said Dave Jones, an electricity analyst and the lead author of the Global Electricity Review, issued by Ember, an independent climate think-tank focused on accelerating the global electricity transition. Energetika.NET conducted a video interview with Jones in which all the possible aspects of renewables were tackled, including the negative power prices witnessed this year in Central Europe.

Solar is set to become “the new ‘king’ of the world’s electricity markets. Based on today’s policy settings, it is on track to set new records for deployment every year after 2022,” said Fatih Birol, the Executive Director of the International Energy Agency (IEA), recently when presenting the World Energy Outlook (WEO) 2020 (MORE). Meanwhile, the WEO’s new ambitious scenario shows that globally all inefficient coal power generation units need to be phased out by 2030, stressed Jones during an online conference organised the same week by Greenpeace (MORE), being quite positive about the EU as well as South East Europe (SEE) being on the right track towards more sustainable energy.

However, there are big discrepancies between countries, especially in SEE – some of which still rely heavily on coal – on how to overcome the current energy situation. When asked for his view on the transition from coal to gas in electricity production and if it always make sense or is it sometimes better to move directly to renewable energy, Jones replied giving the U.S. as an example, where coal generation has halved in the last decade, of which about a third has been replaced by wind and solar, and about two-thirds by gas. However, there has been very little improvement in climate terms due to the methane emissions coming from gas. Therefore, Jones is more enthusiastic about the future of wind and solar and less so about the future of gas.

Why investing in renewables is ‘safe’

Nevertheless, is it smart to invest in renewables today, also bearing in mind the negative power prices that we witnessed not that long ago? Responding to this question, Jones explained that most countries have established auction processes as a way to build wind and solar, which serves wind and solar industries really well, meaning that they are not exposed to the wholesale power prices. What is more, new renewable capacity has the effect of bringing down power prices for end-consumers.

“Wholesale power prices are expected to remain stable in Germany and Italy until 2023, trading in a range of 40-50 EUR/MWh and 45-55 EUR/MWh, respectively. While Germany seeks to achieve 65% renewable generation by 2030, Italy is targeting a coal phase out by 2025 and foresees a 70% increase in solar and wind generation over 2017-2025,” said Moody’s in mid-October. However, Jones argues that wholesale power prices only play a small part in the overall cost of the energy transition.

When talking about the energy transition, we asked Jones if sustainable energy contains nuclear in his ‘vocabulary’. “I am not against nuclear,” he answered, adding that the question of how nuclear fits in the whole energy mix is still not being answered.

However, investments in renewables are safer, precisely because of the auction price systems, recalled Jones. Furthermore, he also recognises the EU’s hype around hydrogen might be a bit too big, adding that we should use hydrogen usefully. The key is to build up the infrastructure in the right way and in those environments where it is most needed, and not, for instance, for residential heating, he stressed, while also considering the role of hydrogen in systems balancing due to the volatility of renewables. However, Jones is certain that in just a few years from now there will be several completely new energy solutions and technologies.

The energy transition includes also a changing role of end-consumers

In the interview, the question was tackled as posed by Stephen Littlechild (a founding father of western retail competition), in September’s Florence School of Regulation online debate on the future of energy utilities (MORE), on whether competition – especially in retail – is relevant at all or does it even make things worse? “It depends what we mean by competition,” Ahmad Faruqui, principal of the Brattle Group in San Francisco, replied to Littlechild, explaining that nowadays the ultimate competition comes from customers who have become another form of competition for energy utilities. We asked Jones what his response would be to both Littlechild and Faruqui about end-customers becoming a form of competition for energy utilities?

Consumers do need to play a role in the future, and therefore their role might seem more confusing than it was in the past. So, moving from the past to the future, how does Jones envision the energy future, especially considering the EUR 1.850 trillion package for Europe's recovery from the COVID-19 pandemic, which includes EUR 1.1 trillion for the long-term EU budget for 2021-2027 and an additional EUR 750 billion for the new recovery instrument, Next Generation EU (MORE)?

Responding to question of whether this is enough to propel us into the ‘so very wanted’ sustainable future or should we also be a bit reserved due to the fact that probably most of this money will be in the form of loans, which is not really a solution – as warned by the world-renowned economist and bestselling author Yanis Varoufakis – Jones said he believes that the EU’s focus on climate and the overall picture seems positive. Despite the concern that some of this money will be used for gas infrastructure, the EU has managed to challenge other countries, such as China and Japan, to announce their own net zero targets, he said. According to Jones, the point of the energy transition is not that it needs a lot of subsidies. In fact, it is quite the opposite, since the technologies are becoming increasingly cheaper; what they need is a stable framework, he stated. More on this in a video interview.

Check the interview with Dave Jones in its entirety HERE.

This article is available also in Slovene.