Investment

Europe’s energy future: the plan to reduce Russia’s fossil fuels and accelerate the green transition

Europe has promised to reduce its dependence on Russia’s fossil fuels by 2027 by boosting renewable energy. This transition from oil and gas was already a major goal before the war in Ukraine as the EU aims to be climate neutral by 2050. But how realistic and affordable are the latest plans?

Freedom of energy

Europe needs to reduce its reliance on Russia’s fossil fuels as well as tackle climate change.

The European Commission has developed its action plan – REPower EU – to end its dependency in 2027. This includes scaling and accelerating renewable energy.

It is estimated that it will cost 210 billion euros, which requires huge investment. This is where InvestEUthe EU’s flagship investment program is entering.

Working in partnership with European Investment Bank, it has a guarantee of 26 billion euros from the EU – which aims to provide reassurance to investors. It is expected to bring in more than 370 billion euros in public and private financing.

Its investments focus on four components: sustainable investment, innovation, social inclusion and job creation. And at least 30% of that should contribute to making Europe carbon neutral.

Solar power plan

Part of REPowerEU’s plan is to double Europe’s solar power capacity over the next two and a half years and Spain is a country where InvestEU funds solar plants.

Between Valladolid and Salamanca, there are solar panels as far as the eye can see. The area is home to seven solar parks, built since 2020, thanks to InvestEU.

Silvia Alonso Guijarro, from solar energy company Solaria, told Euronews: “Spain is a great place to build these solar panels, solar plants, because we are one of the countries with more hours of daylight per year. These seven solar photovoltaic plants have a capacity of 261 megawatts, which means (they) produce 477 gigawatts/hour of energy per year. “

That amount of energy is enough to provide electricity to more than 120,000 households. The project became possible thanks to a partnership between public and private investors, with the European Investment Bank (EIB) playing a key role in helping generate that finance.

The total cost of the project is 189 million euros. Of those, the EIB put 54 million euros on the table, either as a loan or guarantee mechanism, while also providing an additional 14 million euros as an intermediary.

This means that more than a third of the total project cost is already covered, providing ample assurance for private investors to fund the remaining 89 million.

The chief of the EIB’s bureau in Spain, Fernando Torija, said such guarantees were important.

“We are betting on the future of these companies. So that tell something to other investors, that are probably investing in the company, whether they are financiers, whether they are equity holder, and put the company on the map saying, okay, sort .of ‘I have a high quality stamp from the EIB’. ”

InvestEU’s original goal was to lead a green and digital recovery in the economy. But the war in Ukraine and sanctions against Moscow, mean the capital will be brought directly to help end Europe’s dependence on Russia’s gas and oil.

Solaria CEO, Darío López Clemente, said the company and EIB are working closely on plans to build more solar parks in Spain.

“Our intention is to continue developing projects. We are also working with the EIB for larger financing and larger packages of projects. The crisis in Ukraine. Well, I think, puts on the table the real needs of Europe.We are completely dependent on other energy sources that we do not have in Europe and we need to know, how important energy is to us.And the only way to solve this situation is with renewable energy, because, it is an emergency. It shouldn’t be in four or five years – that’s too late to develop all this power. In one, two years maximum. “

The European Commission recently launched the REPowerEU plan, also aimed at tackling non-financial hurdles, such as administrative permits and authorizations.

For more on the EU’s efforts to reduce its dependence on Russia’s oil and gas, Real Economy’s Naomi Lloyd spoke with the European Union’s Commissioner for Energy, Kadri Simpson.

Naomi Lloyd, Euronews:

“Is it realistic to think that you can end dependence on Russia’s fossil fuels by 2027?”

Kadri Simson, EU Commissioner for Energy:

“We’re doing our best to eliminate this dependency as quickly, as quickly as we can. And REPowerEU has the blueprint on how to replace Russia’s imports with alternatives. And we’ve reached some trusted partners in trade. But it’s not enough. We don’t want to replace fossil fuels with other fossil fuels 100 percent. And that means that where we can we will replace natural gas with renewables. We will prioritize electrification in the building sector, but also in transport. And on top of that, we will prioritize savings. “

Naomi Lloyd, Euronews:

“You’re talking about ending dependence on Russia’s fossil fuels, but you’re looking to import oil and gas from other countries. Won’t that confine us to new dependencies?”

Kadri Simson, EU Commissioner for Energy:

“We plan to replace only one-third of Russia’s imports with other fossil fuels. So yes, we will diversify our supply routes. But in line with that, we have also accelerated our own green transition. Where we can replace fossil fuels with renewables, we will. “

Naomi Lloyd, Euronews:

“Can you talk to us about plans for increasing renewable energy acceleration within REPowerEU?”

Kadri Simson, EU Commissioner for Energy:

“There are several ways we can promote renewables very quickly, for example, on rooftops. So according to our proposal, all newly constructed buildings should have rooftop panels. The largest bottle-neck is allowed. Right now, it could take as long as seven years to get a permit for an offshore wind park. But the European Commission has come up with a proposal, the right we call ‘overriding public interest.’ during the authorization period. “

Naomi Lloyd, Euronews:

“You have calculated that to end dependence on Russian fossil fuels is worth € 210 billion. Will Europe be able to afford it?”

Kadri Simson, EU Commissioner for Energy:

“If we keep in mind that in recent years, every year we pay about 100 billion euros to Russia for the import of oil, gas and coal. If so, it makes sense to replace that dependency. We know that the member states still have unused recovery funds., so there are loans … worth 225 billion available to member states for green projects.Financing is a key.InvestEU is a very -useful tool at our disposal, because during 2020 to 27 we will be able to mobilize approximately € 372 billion. “