Long-Term Scenarios: Understanding the Energy Future of Europe

Long-Term Scenarios: Understanding the Energy Future of Europe
Blog February 20, 2019

The global population is growing, which requires more energy to meet the demand of increased goods and services. At Genscape we understand this and are closely watching Europe’s own energy transition and the investments needed to improve the continent’s energy system.

Following our successful presentation at E-World 2019 in Essen, Germany, we would like to share a holistic, aggregated picture of the European energy market in 2040, analyzing relevant energy sources, sectors, and regions across four distinct scenarios.

Genscape Long-Term Scenarios
Figure 1: The main drivers behind Genscape’s four Long-Term Scenarios. Click to enlarge

These scenarios are constructed using Genscape’s proprietary software, EPSI, embracing a wide range of possible future outcomes. The platform builds on different global factors, trends, and developments we observe today, but there is considerable uncertainty about the future.

In the Idealist Europe scenario, Genscape builds on the recent decarbonization trends and we believe it will align with more economic growth. This scenario implies government subsidies led to a boom in renewables for power generation. The electricity systems will become fully decarbonized, decentralized, democratized, and digitalized. There will be more demand-response, smart grids, e-mobility, and electricity storage (batteries). Finally, Europeans will enjoy the highest degrees of security of sustainable supply.

In the Europe First scenario, Genscape’s stance is Europe will face high growth at the cost of the environment. The European sentiment is that since climate change is not seen as a collective responsibility, Europeans can look the other way. The price for a strong and united position is to accept a “wealth first, then the environment” policy. The coal and lignite phase-outs stop and investments in coal must resume.

In the European Nightmare scenario, the worst expectations are set to materialize with low economic growth and no decarbonization. Economic problems lead to a halt in energy R&D investments and, subsequently, lower renewable power generation investments. The single electricity market splits to pave the way for a come back of grey technologies. The slumping economy decreases electricity consumption and brings social unrest to Europe, which moves the countries towards isolationism.

Lastly, in the Europe’s Fear scenario, the pursuit of a carbon-free dream is hampered by an economic bust. The green ambition results in high taxes and more regulations, which directly hurts the European economy and energy industry. Despite meeting its own carbon emission reduction targets, the rest of the world did not follow, and global warming becomes irreversible. The economic downturn in Europe causes national social conflicts and less interconnection amongst countries.

The variables

Genscape's Long-Term Scenarios: Variables at Play
Figure 2: The variables at play in Genscape’s four long-term scenarios. Click to enlarge

Considering the context Genscape’s analysts and market intelligence team provided, our EPSI platform can be used to model the future. Our analysts do this by altering parameters, adding constraints, manipulating variables, and testing hypotheses. Figure 2 shows a simplified version of the roles the variables played in constructing Genscape’s Long-Term Scenarios.

The outcome

For each scenario, we calculated the system marginal prices for Germany, the dark spread and spark spread, the generation mix, and import/export from/to Germany.

Genscape's EPSI Platform
Figure 3: Generation Mix DE - Idealist Europe scenario, 2040. Click to enlarge
Genscape's EPSI Platform
Figure 4: Generation Mix DE – European Nightmare scenario, 2040. Click to enlarge

In Figure 3, you see the Generation mix in Germany for the Idealist Europe scenario. The electricity produced in Germany in 2040 is mainly coming from solar (PV) generation, along with on-shore/off-shore wind and biomass. While there is no more lignite or coal power generation, the Combined-Cycle Gas Turbine (CCGT) still provides a small portion of electricity in the mix.

The expected average power price in 2040 ranges between 65 and 70 EUR/MWhr.

At the other end of the spectrum, the generation mix in Germany for the European Nightmare scenario is shown in Figure 4, where thermal generation makes up half of the generation mix in 2040. The investments in renewable generation made during 2000-2020 are still present, but do not increase or continue. Around half of the generation still comes from lignite, coal, gas, or nukes.

The expected average price is cheaper, at 45-55 EUR/MWhr.

Please contact us directly for more information regarding the different outcomes discussed in this blog. Our analysts are available to provide you with a demo of the EPSI platform to show you how to create your own long-term scenarios. Please click here for more information about EPSI.