Energy

Context

Since the Industrial Revolution, the global economy has depended on unrestricted access to cheap energy resources, primarily from fossil fuels (see SOER 2015 briefing on resource efficiency). However, a number of factors look set to change this relationship in the coming decades:

• The OECD predicts rapid global economic expansion between now and 2050. This could intensify energy use and exacerbate global competition for energy resources, thereby increasing Europe's exposure to geopolitical risks and fossil-fuel price spikes.  
• The way we produce and consume energy has severe impacts on our climate (through greenhouse gas emissions from burning fossil fuels); on air quality (from fossil fuel and biomass combustion); on water quality and quantity (through dam construction for hydropower, water retention for energy crops, or water use for cooling of power plants); and on land resources, including natural habitats and ecosystems (through further deforestation in the tropics for the production of bioenergy, and through fragmentation of habitats due to resource extraction, pipelines and grids). If we do not change our habits, the consequences could be irreversible.
• Technological innovation could either alleviate or exacerbate some of these pressures. In the case of energy efficiency and renewable energy, it could alleviate pressures by decoupling energy consumption from economic growth and by prompting a shift towards less-polluting alternatives. But technological innovation could also weaken the momentum behind global climate-change mitigation efforts by boosting access to polluting fossil resources, and it could exacerbate the pressure on ecosystems through unsustainable demand for water and land use. And by making energy cheaper, innovation may encourage greater energy use, undoing many efficiency gains through the so-called 'rebound effect'.

These concerns suggest we need to fundamentally rethink our energy systems. In order to address these issues, the EU has committed to the '20-20-20' objectives. By 2020, it aims to cut greenhouse gas (GHG) emissions by 20% compared to 1990 levels, increase the share of renewable energy to 20% of energy consumed, and achieve a 20% cut in primary energy use compared with projected levels.^[1] A range of approaches to make energy-production and consumption patterns more sustainable have also been enshrined in other EU policies, and have been gradually tightened over the years. These policies include the Industrial Emissions Directive, the Clean Air Policy Package, environmental legislation on water and biodiversity (including Natura 2000), the Ecodesign Directive, the Energy Performance of Buildings Directive, and the Energy Labelling Directive.

Key trends

Decoupling and Europe's energy intensity

Between 1990 and 2012, there was a decoupling of economic growth from energy consumption in the EU-28^[2] (see definition section on energy intensity). This positive evolution occurred in the context of the economic recession; efficiency gains in the power sector; efficiency gains by end-consumers; the rapid penetration of renewable energy sources; and a shift from energy-intensive industries towards services with a higher value added.

Facilitated by European climate and energy policies, the EU's energy intensity decreased by 1.7% per year between 1990 and 2012 (Figure 1). In the same period, the renewables more than doubled their share of energy production (Figure 2); and there was a switch towards fuels that were less GHG-intensive (Figure 3).

Figure 1: Trends in energy intensity, gross domestic product and gross inland energy consumption

Renewables and nuclear

In 2012, the share of renewable energy consumed in Europe reached 11%, compared to 4.3% in 1990.^[3] Biomass energy and hydropower accounted for the largest share of renewables throughout the period, even though technologies such as solar photovoltaics (PV), solar thermal, and wind power had the highest average growth rates since 2005 (Figure 2).

The consumption of nuclear energy in the EU-28 peaked in absolute terms in 2004 (260 Mtoe). From 2005 to 2012, consumption of nuclear energy in Europe fell by 12% due to the shutdown of reactors that had reached the end of their planned lifetime, and the decision of Germany to begin to withdraw from nuclear power in the wake of the Fukushima disaster.^[4] Nevertheless, nuclear energy consumption in 2012 was still 11% higher than in 1990.

Figure 2: Contribution of renewable energy sources to gross inland energy consumption

Continued reliance on fossil fuels  

In absolute terms, fossil fuel consumption in the EU decreased by 9% from 1990 to 2012. The largest absolute reductions took place for coal (–35%) and oil (–10%), while natural gas consumption went up considerably over the period (+32%), offsetting partially the decline in the use of the other two fossil fuels (Figure 2). The coal-to-gas switching was driven by several factors, including tighter health and environmental regulations, consistently falling gas prices in the 1990s, and the attractiveness of combined-cycle gas plants.^[5]

For oil, the observed decline mainly took place after 2005, due to a combination of increased use of biofuels in transport, high oil prices, and the economic downturn. Despite the continued decline in the use of fossil fuels in recent decades, in 2012 fossil fuels still accounted for three quarters of all energy consumed in Europe. This gives rise to considerable health, environmental and geopolitical concerns.^[6]

Figure 3: Gross inland energy consumption by fuel

Prospects