The EU won’t meet climate targets until well into the 2060s, as focus shifts to energy security and economic stability, according to latest analysis from Wood Mackenzie.
Renewables and electrification uptake is due to progress steadily, but nascent technologies, such as hydrogen and carbon capture, need urgent action in the forms of investment, demand certainty, and policy commitment, highlighted “EU27: Energy Transition Outlook”.
The report is part of Wood Mackenzie’s ETO research series which maps three different routes through energy transition with increasing levels of ambition.
To meet global goals, the EU would need to reach net zero by 2048 in order to offset other regions that will still be emitting throughout the following decade, according to Wood Mackenzie’s 2050 scenario.
“The EU remains a leader in the energy transition with ambitious, legally binding targets, but a turbulent start to the decade has thrown up several obstacles, shifting focus to energy security and economic stability while pushing net zero targets lower on the agenda,” said Lindsey Entwistle, senior research analyst at Wood Mackenzie, and lead author of the report.
Entwistle added: “The good news is that these goals align for the EU in the longer-term and the wider industry is seeing the Union double down on efforts to streamline policy and strengthen cross-border infrastructure for power, carbon capture and low-carbon hydrogen.
“Targeted investment in these areas could accelerate the EU’s transition and achieve net zero by 2050.”
Electricity demand is forecasted to increase to 2.5 times from current levels, with 82% of domestic power supply forecasted to be renewable by 2050 in Wood Mackenzie’s base case.
Renewables capacity increases by an additional 70% in the net zero scenario, requiring an extra 10GW per year compared to Wood Mackenzie’s base case.
“Reducing bottlenecks is critical to deploying the extra 10GW of renewables capacity per year that is required to enable sufficient electrification of demand sectors. Policy makers are keenly aware of this, and half of the Projects of Common Interest identified in 2023 are related to international power, grids, and infrastructure.
“The TEN-E policy and the Grids Action Plan both aim to ease power infrastructure bottlenecks through targeted investment and collaboration across members,” said Entwistle.
In Wood Mackenzie’s base case, hydrogen is forecasted to grow to nearly 10% of industrial energy demand by 2050 in the EU, displacing the equivalent of 16% of today’s fossil fuel consumption in the sector and reducing more than 100 million tonnes (Mt) of CO2 emissions.
Hydrogen infrastructure projects account for 40% of Projects of Common Interest (PCIs) in 2023, helped by the launch of the Hydrogen Bank’s first auction round of €800 million.
Entwistle said: “Hydrogen Bank’s auction is a strong response to the US’ Inflation Reduction Act and the swift execution shows that the EU is serious about competing in the global hydrogen economy.
“But with 10Mtpa of imported low-carbon hydrogen required in our base case and 18Mtpa in our net zero scenario by 2050, the real export opportunity lies in EU expertise and low-carbon manufacturing of electrolysers, fuel cells and their components.
“Norway, Denmark, Finland, and Spain are well positioned to become key exporters for regional hydrogen trade within the EU, and are expected to reach more than 5.5 Mtpa net export capacity by 2050.”