Power Sector Transformation and Emissions Pathways: US and Europe in 2018
With the changes in the United States Congress in 2019 and the intensifying presidential primary election campaign, we have seen, in stark contrast to Trump Administration views, considerable attention placed by the Democrats on climate change and the ambitious vision of the Green New Deal. In Europe, the European Union (EU) Parliament has approved more aggressive 2030 energy and climate targets, and most EU-28 countries submitted draft National Energy and Climate Plans at the end of 2018. In 2017, the United States and European Union combined accounted for about 25 percent of world energy-related CO2 emissions.
The new BP Statistical Review of World Energy 2019 estimates that this share remained constant in 2018. In light of the urgent need to decarbonize the power sector and, as the BP Review highlights, the persistent role of fossil fuels in the global electricity mix at around 65 percent, the key challenge is to determine where these major electricity producers now stand in terms of their emissions trajectories and transitions to cleaner fuels.
This short piece reviews and compares developments in the electric power sector in the United States and EU based on two major reports, the 2019 Sustainable Energy in America report from Bloomberg New Energy Finance (BNEF) and the Business Council for Sustainable Energy (BSCE), and The European Power Sector in 2018, a report from Sandbag and Agora Energiewende. Both studies describe changes in demand for electricity and the power sector fuel mix, and the implications for CO2 emissions, and each provides detail on what the United States and EU have done to meet those demands. Since they are not based on final numbers for the calendar year, this piece highlights, in some instances, the differences between their data and the complete 2018 data found in BP’s 2019 Statistical Review of World Energy.
The electricity sector is critical in both regions, accounting for about 28–30 percent of primary energy demand in 2017. With the strong economic growth in the United States, the BNEF/BCSE report estimates that electricity demand grew by 2.2 percent in 2018, to 4000 Terawatt hours (TWh), even as the sector became more efficient in its use of fuels. European electricity consumption growth was weaker with an estimated increase of 0.2 percent, to 3,249 TWh. Final year-end data, however, suggests that electricity growth in the United States was even stronger. The BP’s Statistical Review (also confirmed in the US Energy Information Administration’s “Monthly Energy Review May 2019” report) indicates US growth of about 3.7 percent in electricity consumption, with a simultaneous slight decrease of EU electricity consumption of 0.2 percent. One factor in the United States that stimulated growth was higher electricity consumption for both cooling and heating.
The transition to renewable energy sources progressed in both the United States and EU as prices continued to drop and efficiencies improved. Growth in non-hydropower renewables was 13 percent in the United States and 15 percent in Europe. Solar energy generation growth was strong in the United States, rising 27 percent (21 TWh), to almost 100 TWh, while wind continued to expand to 276 TWh and nearly equaled hydropower generation. Despite this growth, the share of renewables (including hydro) in the United States power mix remained level at 18 percent, due to increases in natural gas’ share in rising overall US electricity consumption. In Europe, the contribution of renewables expanded from 30 percent in 2017 to 32.3 percent. If nuclear is combined with renewables, the carbon-free electricity generation stood at 37 percent in the United States and 58 percent in Europe.
There is a significant difference in the natural gas sector as booming production, especially of associated gas from oil production, and continued low gas prices in the United States, spurred a 14 percent jump in gas generation, taking it to a record 35 percent of generation (the largest of any source). In Europe, relatively higher gas prices and favorable hydro conditions led to a 5 percent fall in gas generation to 18.9 percent of the total electricity output.
Coal was the big loser in both regions, with a continued downward slide in the United States from 31 percent in 2016 to 27 percent in 2018, due to natural gas and renewables substitution and record retirements of coal generation units, and 19 percent in Europe, due to renewable energy growth, especially in Germany and the United Kingdom (UK). In Europe, hard coal generation fell more than lignite (9 percent for hard coal as opposed to 3 percent for lignite). The UK is nearing a complete shut-down of coal facilities, and Germany and Spain have announced coal phase-out policies; however, progress in reducing lignite generation, especially in Eastern Europe and the Balkans, has been politically difficult and slow.
What is happening to CO2 emissions in this transition process? Despite declining coal use, emissions from the electricity sector rose in the United States by 0.6 percent in 2018, which was smaller than the overall projected emissions increase from energy of 2.5 percent. But in Europe, with strong growth in renewables and better hydro conditions, emissions fell 5 percent in 2018, while BP estimates that overall European CO2 emissions fell by 2 percent.
The future directions are difficult to forecast but it is clear that Europe has strengthened its overall targets for both renewable energy (30 percent by 2030) and energy efficiency (32.5 percent for energy efficiency). According to the Sandbag and Agora Energiewende study, these targets equate to around 57 percent renewables by 2030.
In the United States, policy action to address emissions is taking place in some states through renewable and clean energy portfolio standards and zero emission credits for nuclear power. The future of nuclear power, which accounts for 55 percent of carbon-free electricity in the United States and 44 percent in Europe, will be vitally important to the emissions equation, as nuclear units are closed (11 GW announced in the United States); phased out, as with Germany, Spain and Belgium; or phased down as in France (a new target of 50 percent nuclear by 2035).
In sum, both regions have a long way to go in their CO2 mitigation efforts, which are increasing in priority, as the evidence of the serious impacts of climate change mounts. Although US emissions are 10 percent below 2005 levels, they are only 40 percent of the way towards the now-abandoned Paris target of 26–28 percent below 2005 levels by 2025. The 2020 election will be critical in shaping the direction of US policy, while in Europe, the task of moving from 20 percent CO2 reductions of 40 percent by 2030 (which appears to be attainable) will require significant political determination.
Dr. Robert F. Ichord, Jr. is a senior fellow with the Atlantic Council Global Energy Center.