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European Electricity
Figure3: EuropeanPowerFuelMix
electricity generating
technologies. New European
power capacity built in the
system in 2008 totalled 19.7
GWs. Of this, 8.5 GWs (43%)
was wind power and about
6.9GWs(35%)gas.Thatsaid,
the penetration of renewable
sources in the current
generationmixisintheorder
of17%,whichmeansthatthe
original target is likely to be
missed. We believe that the
most likely scenario is that
the share of renewable
Source: PIRA
sourceswithintheoverallfuel
mix could increase by some
supply disruptions. While these risks can still be avoided by 5% by 2020, while higher penetration is more likely to occur
building additional gas storage facilities or diversifying gas under stronger supporting policies or higher oil or EU ETS
supplies through pipelines and LNG terminals, a strong carbon prices.
dependencyonforeignsourcesstillimpliesthatEuropewillfind Wind turbines account for the bulk of renewable additions,
itself more exposed to competition for access to resources, with explainingwhynewbuildcostsforwindturbinesappeartobe
rising costs, due to enhanced competition for resources on a holdingrelativelyfirm,inspiteofcollapsingcommodityprices
globalscale. and the credit crunch restricting access
In addition, the prospects of gas-fired
... a strong dependency on
to financing. We expect a slowdown of
generation could weaken as a result of
foreign sources will continue
wind additions in the short-term, but
the current gas pricing regime, or with
gas prices broadly linked to volatile oil
to make the Continent more
according to a recently released report
by the transmission system operators
markets. In principle, weaker gas exposed to risks of short-term grouped under the umbrella of the
demand growth would provide some
supply disruptions
UCTE, 30 GWs of new wind capacity
pressure to move away from current gas should be added on the Continent
pricing mechanisms, but a number of issues are making this between now and 2013, with the bulk of additions located in
evolution rather difficult. Gas pipeline import flows are being the western part of the Continent.
tailored to demand needs, while the large European importers PIRA understands that offshore wind farms are quickly
are reluctant to move away from the oil indexation. gainingmomentum.Whileinstalledcapacityofoffshorewind
farmswas1.47GWsinJanuary2009,thiscapacitycouldreach
RenewableEnergySourcesGainMomentum 37.4 GWs in 2015 according to European Wind Association
Concerns of increasing dependency on foreign sources and statistics, with more than 50% of new capacity added in
linkage of European power markets to volatile oil markets Germany and the UK. Although these numbers also include
represent key drivers for the support of renewable energy early stage projectsthatmay notreach the construction phase
sources. We should remember that, prior to unveiling the due to supply chain, financing or grid constraints, planned
ambitious target for the penetration of renewable sources by capacity is substantial and will underpin the importance of
2020,theEUsetaboldtargetin2001,withtheelectricitysector wind generation as one of the key spot price drivers.
required to generate some 21% of total production from
renewable sources by 2010. Additions of renewable sources IncreasingPushTowardNuclear
have been particularly strong in recent years, especially wind. New nuclear power, and the extent to which it is seen as a
In 2008 about 43% of all new power capacity added in the EU safe and viable alternative to conventional thermal plants in
came from wind, far outstripping the contribution of other Europe, continues to be the wildcard. It is clear though that
22 worldPower2009
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