In 2012, 14 per cent of Europe’s electricity came from renewable sources, up from just over eight per cent in 2004 - and the Commission wants renewable energies to account for 27 per cent of gross final energy consumption across Europe by 2030.
But rising volumes of renewables pose a dilemma. Wind and sunshine are not always available when we want them, or where we need them. Since electricity is expensive to store, and power from wind and solar are variable, balancing supply and demand poses a problem. Tools to deal with minor variability exist, but as volumes of renewables rise above 15 per cent of supply, new ways need to be found to keep the system in balance.
At a Science|Business symposium on 18 March 2014, researchers, industry experts and policymakers debated the challenges to integrating a steadily rising volume of wind and solar power into the electricity grid, the technology solutions and policy recommendations. The symposium was the eighth in a series of high-level academic policy debates on energy research and innovation supported by BP.
Devising a unitary European energy system
A key message from the half-day debate: Europe urgently needs to focus on energy market integration and building greater flexibility into its energy system. As low-carbon power generation increases, combined with new demand technologies, Europe faces the threat of wide-scale degradation in asset utilisation at existing power plants. To evolve toward a balanced and cost-effective low-carbon energy system, policymakers need to implement radical changes in market design, shifting from the present member-state centric approach to a Europe-wide approach.
Flexibility - in the form of flexible energy generation, demand response, storage and new network technologies - may offer the EU a potential prize of €50 billion annually in energy cost savings in 2050. Currently, however, that prize remains out of reach, because the market is geared to rewarding utilities for total volume of energy produced and there are no incentives to invest in flexibility.
Participants agreed that the integration of large volumes of renewables - and the electrification of segments of the transportation and heat sectors - will require substantial investments in the electricity grid, as well as new technologies. While R&D investments will deliver some solutions, the obstacles to forging a low-carbon energy system are not only technological, the group concluded.
The legacy of Europe’s highly centralised 20th-century energy system has stymied the development of new business models adapted to renewables.
A number of technologies to resolve the renewables dilemma already exist, experts noted, but our understanding of the energy system as a whole remains inadequate. What’s needed is a better appreciation of how markets, policies and regulations influence the technologies and infrastructures necessary to integrate renewables successfully into European grids.
More R&D for better integration
Among the recommendations is a call for better, more objective and comprehensive research to inform policymaking, and more R&D on integration issues, including smart grid technologies. Europe also needs to create appropriate incentives for investment in flexible plant capacity. Since the value of electricity not only depends on when it is produced, but where, the EU must allow electricity prices to differ according to not just time but also location. Such locational marginal pricing will likely be critical to the successful functioning of a pan-European system incorporating renewables.
One European country in particular has become a key test bed for integrating renewables. Germany aims to generate 80 per cent of its electricity from renewable sources including wind, solar and biomass by 2050, and its Energiewende (or energy transition) is widely viewed as a possible blueprint for others looking to cut greenhouse gas emissions, enhance energy security, and boost energy efficiency.
Yet the Energiewende is in trouble - not least because of its ongoing failure to contain price increases to consumers. Germany has shouldered the cost of much of the global technology learning curve for photovoltaic solar power. With German consumers now paying the highest electricity prices in Europe, the Energiewende risks losing their once enthusiastic support.
Indeed, the German experience to date suggests that although people everywhere want secure, affordable and sustainable energy, rarely is it possible to deliver all three in any one location at a politically acceptable cost.
As the EU makes course corrections to its own energy road map in the coming years, it can benefit from the experience of pioneering countries and regions. The US, for example, has instituted locational energy pricing across multiple states and multiple ownership models. Denmark has developed an interconnected energy network incorporating both heat and power, a pioneering move, which enables the efficient management of a variable energy supply from renewable sources.
The long-term prize is a common European energy market. But that ambitious outcome will remain elusive until policymakers find ways of enrolling consumers in the development of a low-carbon energy system, participants said. They need to be convinced that the cost of renewables, which in the short term, as the German case demonstrates, can be quite high, is justified. Policymakers should shield the public from the more volatile aspects of market behavior, and speed the implementation of a more integrated EU energy market.
This report summarises the half-day of debate at the Berlin symposium, which included recommendations for European policymakers. It highlights the key generation, transmission and distribution challenges, and the need for a systems approach to creating a true market for trading flexible energy generation, the technology and pricing options, and market incentives to accelerate the transition.
The full report is available here. You can read more Science|Business stories on Europe's renewable power dilemma here, here and here.
The next Science|Business energy event will be held on 13-14 November 2014 in Brussels. More details: The EU Energy Challenge: Can innovation fill the gap?
Receive the Funding Newswire each Tuesday, our Policy Bulletin each Thursday, and news about bridging Europe’s east-west innovation gap twice a month in The Widening. 
Follow where the public and private R&I money is going and which collaborative opportunities you can pursue.
