FORRES 2020 Analysis of the renewable energy sources evolution up to 2020

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This report provides an overview of the progress made on the European market for renewable energy sources for the EU-25 member states1. The results and analysis describe the situation at the end of 2004. A separate volume contains more detailed country reports for each of these 25 countries as well as for the two EU candidate countries Bulgaria and Romania.




Final Report


FORRES 2020: Analysis of the renewable
energy sources' evolution up to 2020


Mario Ragwitz, Joachim Schleich, Fraunhofer ISI
Claus Huber, Gustav Resch, Thomas Faber, EEG
Monique Voogt, Rogier Coenraads, ECOFYS
Hans Cleijne, KEMA
Peter Bodo, REC



Karlsruhe (Germany)
April 2005

Supported by:

Under Tender No. TREN/D2/10-2002






Foreword
This report provides an overview of the progress made on the European market for re-
newable energy sources for the EU-25 member states
1
. The results and analysis describe
the situation at the end of 2004. A separate volume contains more detailed country reports
for each of these 25 countries as well as for the two EU candidate countries Bulgaria and
Romania.
This report was produced within the scope of the FORRES 2020 study, which was initi-
ated and financed by the European Commission, Directorate-General Energy and Trans-
port under tender no. TREN/D2/10-2002 with the aim to:

provide input for monitoring the progress of the targets set in the White Paper “Energy
for the future: Renewable sources of energy”, the Directive on the promotion of electric-
ity from renewable energy sources, and the Directive on biofuels; and

provide insight into future developments of a green energy market in the European
Union and Bulgaria and Romania until 2020
An international consortium of research and consultancy partners was involved in con-
ducting the study and compiling the report. The core project team contributing to this re-
port consisted of Mario Ragwitz, Joachim Schleich (Fraunhofer-ISI, Germany), Claus Hu-
ber, Gustav Resch, Thomas Faber (EEG, Vienna University of Technology, Austria), Mo-
nique Voogt, Rogier Coenraads (ECOFYS, Netherlands), Hans Cleijne (KEMA, Nether-
lands) and Peter Bodo (Regional Environmental Centre, Hungary).
Support from the European Commission, DG TREN, is gratefully acknowledged. The au-
thors would like to thank their colleagues for supporting the study and the report. The re-
sponsibility for the contents of the study and the views expressed remains with the core
project team and the main authors of this report. This view has not been adopted or in any
way approved by the European Commission and should not be relied upon as a statement
of the Commission's or DG Transport and Energy's view. The European Commission
does not guarantee the accuracy of the data included in this report, nor does it accept
responsibility for any use made thereof.



1
For reporting matters in some cases results are shown separately for the former EU-15
Member States (indicated as EU-15) and the ten Member States that joined in May 2004
(indicated as EU-10).


For further information, questions and comments, please contact the project manager at
the following address:

Dr. Mario Ragwitz
Fraunhofer-ISI
Breslauer Str. 48
D-76139 Karlsruhe
Germany
Tel: + 49 721 6809-157
E-mail: Mario.Ragwitz@isi.fhg.de

Analysis of the renewable energy sources' evolution up to 2020

V
Table of Contents
Page
Summary........................................................................................................XIII
1 Introduction.....................................................................................................1
1.1 Background - EU policy and targets for renewable energy
sources.............................................................................................1
1.2 Aim and scope of the report.............................................................3
1.3 Methodology and approach..............................................................4
2 Present status of renewable energy sources in EU-25 member
states................................................................................................................7
2.1 Current penetration, potentials and costs of renewable
energy sources.................................................................................7
2.1.1 Electricity..........................................................................................7
2.1.2 Heat................................................................................................15
2.1.3 Biofuels for transport......................................................................23
2.2 RES-E achievements in the period 1997-2002..............................25
3 Assessment and evaluation of policy instruments for the
promotion of renewable energy sources....................................................31
3.1 Main instruments in the sectors electricity, heat and
transport.........................................................................................31
3.1.1 Instruments to support RES electricity...........................................31
3.1.2 Instruments to support RES heat...................................................33
3.1.3 Instruments to support biofuels for transport..................................34
3.2 Combining several support schemes.............................................34
3.3 Success stories and key barriers....................................................47
3.4 Recent policy developments..........................................................48
Analysis of the renewable energy sources' evolution up to 2020

VI
4 The FORRES 2020 methodology and definition of scenarios...................51
4.1 The computer programme Green-X...............................................51
4.2 Econometric approach...................................................................53
4.3 Scenario assumptions: the business-as-usual and the policy
scenario..........................................................................................54
5 Results: perspectives of renewable energy sources to 2020....................57
5.1 Analysis of the dynamic evolution of RES in the sectors of
electricity, heat and transport.........................................................57
5.1.1 RES-E generation up to 2020........................................................57
5.1.2 RES-H generation up to 2020........................................................66
5.1.3 Biofuel production up to 2020.........................................................73
5.2 Progress towards meeting the 2010 targets...................................75
5.2.1 Electricity........................................................................................75
5.2.2 Primary energy production and consumption.................................77
5.2.3 Biofuels for transport......................................................................80
5.3 CO
2
-emission reductions and additional costs...............................82
6 Conclusions...................................................................................................87
7 References.....................................................................................................89


Analysis of the renewable energy sources' evolution up to 2020

VII
List of Figures
Page
Figure 1:

Historical development of electricity generation from RES in the
European Union from 1990 to 2002 – in the EU-15 (left-hand
side) and EU-10 countries (right-hand side)..............................................7

Figure 2:

Historical development of electricity generation from ‘new’ RES-E
in the European Union (EU-25) from 1990 to 2002....................................8

Figure 3:

Breakdown of electricity generation from ‘new’ RES-E for 2002
by country – EU-15 (left-hand side) and EU-10 countries (right-
hand side)..................................................................................................9

Figure 4:

Achieved (2001) and additional mid-term potential 2020 for
electricity from RES in the EU-15 – by country (left-hand side)
and by RES-E category (right-hand side)................................................10

Figure 5:

Achieved (2001) and additional mid-term potential 2020 for
electricity from RES in EU-10 countries & Bulgaria, Romania –
by country (left-hand side) and by RES-E category (for EU-10
alone) (right-hand side)............................................................................10

Figure 6:

RES-E as a share of the total achieved potential in 2001 for the
EU-15 – by country (left-hand side) as well as for total EU-15
(right-hand side).......................................................................................11

Figure 7:

RES-E as a share of the total achieved potential in 2001 for the
EU-10 & Bulgaria, Romania – by country (left-hand side) as well
as for total EU-10 & Bulgaria, Romania (right-hand side)........................11

Figure 8:

RES-E as a share of the total additional realisable potential in
2020 for the EU-15 – by country (left-hand side) as well as for
total EU-15 (right-hand side)....................................................................12

Figure 9:

RES-E as a share of the total additional realisable potential in
2020 for the EU-10 & Bulgaria, Romania – by country (left-hand
side) as well as for total EU-10 (right-hand side).....................................12

Figure 10:

Long-term marginal generation costs (for the year 2002) of
different RES-E technologies..................................................................13

Figure 11:

Development of the investment costs according to the business-
as-usual case (BAU)................................................................................15

Figure 12:

RES-H production development from 1990 to 2001 in EU-15 and
EU-10 [ktoe/year].....................................................................................16

Analysis of the renewable energy sources' evolution up to 2020

VIII
Figure 13:

RES-H breakdown (2001) from grid and non-grid connected
systems EU-15 and EU-10 & Bulgaria, Romania.....................................17

Figure 14:

Share of renewable energy sources in heat production - EU-15
2001.........................................................................................................17

Figure 15:

Achieved and additional mid-term potential 2020 for heat from
RES in EU-15 and EU-10 & Bulgaria, Romania.......................................18

Figure 16:

RES-H as a share of the total achieved potential in 2001 for EU-
15 member states....................................................................................19

Figure 17:

RES-H as a share of the total achieved potential in 2001 for EU-
10 member states & Bulgaria, Romania..................................................19

Figure 18:

Share of the total additional realisable potential of RES-H in 2020
for EU-15..................................................................................................20

Figure 19:

Share of the total additional realisable potential of RES-H in 2020
for EU-10 member states & Bulgaria, Romania.......................................21

Figure 20:

Achieved grid connected RES-H consumption as a share of total
steam consumption in 2001.....................................................................21

Figure 21:

Achieved non-grid-connected RES-H generation as a share of
total non-grid connected heat consumption in 2001................................22

Figure 22:

Pellets production for 2003 for selected EU-15 member states...............23

Figure 23:

Share of modern forms of biomass (pellets, wood chips) in non-
grid connected biomass...........................................................................23

Figure 24:

EU-15 biofuel production historical development 1993 – 2003................24

Figure 25:

EU-10 biofuel production historical development 1996 - 2003.................24

Figure 26:

Biofuel production in 2003 and production potential 2020 [Mtoe]............25

Figure 27:

Actual penetration of RES-E in 1997 and 2002 versus 2010
target (as set in the RES-E Directive) for EU-15 countries......................26

Figure 28:

Actual penetration of RES-E in 1997 and 2002 versus 2010
target (as set in the RES-E Directive) for EU-10 countries......................26

Figure 29:

RES-E target achievement for total EU-15: development of actual
and potential RES-E penetration in the period 1997 to 2002
versus 2010 target....................................................................................27

Figure 30:

RES-E target achievement for total EU-10: development of actual
and potential RES-E penetration in the period 1997 to 2002
versus 2010 target....................................................................................28

Analysis of the renewable energy sources' evolution up to 2020

IX
Figure 31:

RES-E target achievement at country level: comparison of actual
and potential additional RES-E penetration (2002 versus 1997).............28

Figure 32:

Changes in RES-E generation potential (2002 versus 1997) by
RES-E category at country level..............................................................29

Figure 33:

Overview of renewable electricity support systems in EU-15..................32

Figure 34:

Overview of renewable electricity support systems in EU-10 &
Bulgaria, Romania....................................................................................33

Figure 35:

Development of RES-E generation in EU-15 under the BAU
scenario until 2020...................................................................................58

Figure 36:

Development of RES-E generation in EU-15 under the policy
scenario until 2020...................................................................................59

Figure 37:

Development of RES-E generation in EU-10 under the BAU
scenario until 2020...................................................................................61

Figure 38:

Development of RES-E generation in EU-10 under the policy
scenario until 2020...................................................................................62

Figure 39:

Country-specific RES-E generation in EU-15 under the BAU
scenario until 2020...................................................................................63

Figure 40:

Country-specific RES-E generation in EU-15 under the policy
scenario until 2020...................................................................................64

Figure 41:

Country-specific RES-E generation in EU-10 and Bulgaria,
Romania under the BAU scenario until 2020...........................................65

Figure 42:

Country-specific RES-E generation in EU-10 and Bulgaria,
Romania under the PS until 2020............................................................65

Figure 43:

Development of RES-H generation in EU-15 under the BAU
scenario until 2020...................................................................................66

Figure 44:

Development of RES-H generation in EU-15 under the Policy
scenario until 2020...................................................................................67

Figure 45:

Development of RES-H generation in EU-10 under the BAU
scenario until 2020...................................................................................69

Figure 46:

Development of RES-H generation in EU-10 under the Policy
scenario until 2020...................................................................................70

Figure 47:

Country specific RES-Heat generation in EU-15 under the BAU
scenario until 2020...................................................................................71

Figure 48:

Country specific RES-Heat generation in EU-15 under the Policy
scenario until 2020...................................................................................71

Analysis of the renewable energy sources' evolution up to 2020

X
Figure 49:

Country specific RES-Heat generation in EU-10 and Bulgaria,
Romania under the BAU scenario until 2020...........................................72

Figure 50:

Country specific RES-Heat generation in EU-10 and Bulgaria,
Romania under the Policy scenario until 2020.........................................73

Figure 51:

Total biofuel production up to 2020 for EU-15.........................................74

Figure 52:

Total biofuel production up to 2020 for EU-10.........................................74

Figure 53:

Country specific target compliance until 2010, EU-15, RES-E
generation as ratio of target.....................................................................76

Figure 54:

Country specific target compliance until 2010, EU-10, RES-E
generation as ratio of target.....................................................................76

Figure 55:

Country specific RES primary energy share until 2010, EU-15...............78

Figure 56:

Country specific RES primary energy share until 2010, EU-10 and
Bulgaria, Romania....................................................................................79

Figure 57:

Country-specific target compliance until 2010, EU-15, biofuel
production as a ratio of the target............................................................81

Figure 58:

Country-specific target compliance until 2010, EU-10 and
Bulgaria, Romania. Biofuel production as a ratio of the target.................81


Analysis of the renewable energy sources' evolution up to 2020

XI
List of Tables
Page
Table A:

Projected RES electricity generation in 2020 in EU-25 under
BAU and policy scenario [TWh]...............................................................15

Table B:

Projected RES heat generation in 2020 in EU-25 under the BAU
and the policy scenario............................................................................17

Table C:

Projected biofuel production in 2020 in EU-25 under the BAU
and the policy scenario........................................................................XVII

Table D:

Projected RES primary energy production in EU-25 in 2020
under the BAU and the policy scenario....................................................18

Table 1:

Renewable electricity targets specified as share of renewable
electricity consumption in the EU-25 states considered.............................2

Table 2:

Overview of the main policies for renewable electricity in EU-15
at technology level...................................................................................35

Table 3:

Overview of the main policies for renewable electricity in EU-10
at technology level...................................................................................37

Table 4:

Overview of the main renewable heat policies in EU-15 at
technology level.......................................................................................39

Table 5:

Overview of the main renewable heat policies in EU-10 at
technology level.......................................................................................43

Table 6:

Overview of the main renewable heat policies in the candidate
member states at technology level...........................................................45

Table 7:

Overview of biofuel policies in EU-15 at technology level
(reduction rate in % of tax level for conventional fuels and/or
cent/litre)..................................................................................................46

Table 8:

Overview of biofuel policies in EU-10 at technology level
(reduction rate in % of tax level for conventional fuels and/or
cent/litre)..................................................................................................47

Table 9:

Summary of recent renewable energy policy developments in the
EU-25.......................................................................................................49

Table 10:

Model implementation of policy settings for RES-E & RES-H in
the Policy Scenario.................................................................................55

Table 11:

Development of RES-E generation in EU-15 under the BAU
scenario until 2020...................................................................................58

Analysis of the renewable energy sources' evolution up to 2020

XII
Table 12:

Development of RES-E generation in EU-15 under the policy
scenario until 2020...................................................................................60

Table 13:

Development of RES-E generation in EU-10 under the BAU
scenario until 2020...................................................................................61

Table 14:

Development of RES-E generation in EU-10 under the policy
scenario until 2020...................................................................................62

Table 15:

Development of RES-H generation in EU-15 under the BAU
scenario until 2020..................................................................................67

Table 16:

Development of RES-H generation in EU-15 under the policy
scenario until 2020...................................................................................68

Table 17:

Development of RES-H generation in EU-10 under the BAU
scenario until 2020...................................................................................69

Table 18:

Development of RES-H generation in EU-10 under the policy
scenario until 2020...................................................................................70

Table 19:

Comparison of White Paper targets at technology level and
realisations in the BAU and policy scenario for the EU-15 in the
year 2010.................................................................................................80

Table 20:

CO
2
-emission reductions compared to 2001 levels for Total RES
in the BAU-scenario.................................................................................83

Table 21:

Costs for Total RES in the BAU-scenario as a share of GDP..................85

Table 22:

Additional CO
2
-emission reductions costs for Total RES in the
policy scenario versus the BAU-scenario.................................................85

Table 23:

Additional costs for Total RES in the policy scenario versus the
BAU-scenario as a share of GDP............................................................86



Analysis of the renewable energy sources' evolution up to 2020

XIII
Summary
An important aspect of the EU policy to
increase the share of renewable energy
sources (RES) is the monitoring and eva-
luation of the progress made towards the
2010 targets and the assessment of real-
istic targets for the period up to 2020.
The monitoring process concentrates on
two main issues. Firstly, it examines the
national adoption of EU legislation and
its translation into legal and policy in-
struments in each of the 25 EU states.
Secondly, it provides a framework with
which to analyse the impacts of these
national policies and measures and the
extent to which each of the EU-25 states
is realising the targeted deployment of
renewable energy. Based on different
assumptions with regard to the imple-
mented policies, scenarios for the future
implementation of renewables until 2020
can be calculated.

Analysing current policies

The European renewable energy market
with its set of supporting measures is
very dynamic. Countries are continuously
monitoring their sets of policies and
measures, which often results in the fine-
tuning of instruments and sometimes the
introduction of a completely new set of
instruments. For electricity, the formula-
tion of the Renewable Electricity Direc-
tive has clearly had a strong influence on
the amount and level of supporting poli-
cies. For biofuels, changes in the fiscal
and agricultural policy can be observed
as a result of the Biofuels Directive. For
the heat sector, the recently formulated
Directive on the Energy Performance of
Buildings represents a starting point for
policy setting on the European level. Mo-
re significant policy changes are ex-
pected in the near future.

Calculation methodology

The calculations and projections con-
ducted in this study are based on two
different methods:
1. Forecasts of RES penetration with
the model Green-X.
2. Forecasts of RES penetration based
on econometric analyses.
The Green-X model allows for a com-
parative, quantitative analysis of interac-
tions between electricity from renewable
sources (RES-E), conventional electricity
and CHP generation, demand-side activi-
ties and GHG-reduction in the electricity
sector in all EU-27 countries. The model
calculates the impacts of various renew-
able energy promotion strategies, taking
into account boundary conditions on the
markets. Technologies are specified by
means of dynamic cost-resource curves.
The econometric analysis uses correla-
tions between historically observed pol-
Analysis of the renewable energy sources' evolution up to 2020

XIV
icy implementations and corresponding
RES penetration. The econometric
analysis is used to set a benchmark for
the results of the Green-X model.

Scenarios for developments until 2020
Model calculations and analyses are ba-
sed on two different scenarios; each with
a different mix of promotion schemes
and assumptions. The first scenario is
the business-as-usual scenario (BAU).
This scenario models the future devel-
opment based on present policies with
currently existing barriers and restric-
tions, e.g. administrative and regulative
barriers. Future policies, which have al-
ready been decided on, but have not yet
been implemented, will also be consid-
ered. The second scenario is the policy
scenario (PS). This scenario models the
future evolution based on the currently
available best practice strategies of indi-
vidual EU member states. Strategies that
have proven to be most effective in the
past for implementing a maximum share
of RES have been assumed for all coun-
tries. Furthermore, the policy scenario
assumes both a stable planning horizon
and that currently existing barriers will be
overcome. Both scenarios include the
effects of technology learning and eco-
nomies of scale, which have a higher
impact in the policy scenario.

Projections until 2020
Electricity
The major outcomes of the electricity
sector projections for the EU-25 until
2020 are shown in Table A. To calculate
the overall share, the BAU scenario is
related to the baseline demand scenario,
whereas the policy scenario is compared
to the efficiency demand scenario. As
can be observed, wind energy shows the
strongest increase in both scenarios. The
major difference between the two is that,
in the policy scenario, offshore wind ge-
neration is about 50% higher compared
to the BAU scenario. Electricity genera-
tion from biomass, biogas and biowaste
is expected to reach about four times the
current penetration under BAU assump-
tions and about nine times the present
levels in the policy scenario. Only minor
growth is projected for hydropower due
to the limited remaining potentials, espe-
cially for large hydropower. Photovoltaic
electricity is projected to grow moder-
ately in the BAU scenario due to the fact
that only few countries have imple-
mented sufficiently high support. Under
the assumptions of the policy scenario,
PV will show a significant increase until
2020 with average annual growth rates
of about 25%. Both solar thermal elec-
tricity as well as wave & tide energy will
Analysis of the renewable energy sources' evolution up to 2020

XV
experience significant growth in the next
two decades. Geothermal energy grows
only moderately in both scenarios be-
cause, at the current stage of the project,
only conventional geothermal electricity
generation potentials are considered,
e.g. not hot-dry-rock technologies.
Table A: Projected RES electricity generation in 2020 in EU-25 under BAU and
policy scenario [TWh]
2001
Electricity [TWh] EU-25 BAU Policy
Wind energy 34 385 461
Hydro power 326 337 354
large-scale 288 293 306
small-scale 38.0 44.3 48.4
Photovoltaic 0.2 8.8 17.9
Solar thermal electricity 0 12.7 21.7
Wave & tide 0 8.4 33.2
Biomass, biogas, biowaste 37 141 338
Geothermal 6.3 7.5 8.2
TOTAL RES-E 403 900 1234
TOTAL DEMAND* 2960 4009 3583
Share Demand [%] 13.6% 22.5% 34.4%
* European Energy and Transport Trends to 2030
2020


The projected share of renewable energy
sources in the electricity sector (RES-E)
for the EU-25 member states for the year
2020 is shown in Figure A. Projected
RES-E production figures under BAU
and policy scenario assumptions are
related to two different demand forecasts
from the EU energy outlook 2003 (base-
line and efficiency)
2
.
2
Demand forecasts are taken from the DG TREN Outlook 2030: European Energy and
Transport Trends to 2030. The baseline projection implies a demand growth for the EU-25 in
the electricity sector of 1.8% p.a. until 2010 and 1.5% p.a. thereafter, and in primary energy
terms of 0.8% p.a. until 2010 and 0.6% p.a. thereafter. The energy efficiency scenario cor-
responds to a demand growth of 1.1% p.a. until 2010 and of 1.0% p.a. thereafter in the e-
lectricity sector, and of 0.2% p.a. until 2010 and 0.1% p.a. thereafter in primary energy
terms. Of course, across countries, the level of changes of demand varies (country specific).
Analysis of the renewable energy sources' evolution up to 2020

XVI
Large differences exist between individ-
ual countries with regard to the achiev-
able generation due to differences in
current penetration and future potentials
for the different renewables. For some
countries like Ireland, Greece and Den-
mark, significant differences between the
BAU and the policy scenario indicate that
major improvements of the existing poli-
cies are feasible. For other countries,
such as Austria, higher priority should be
placed on controlling electricity demand
in order to increase the share of RES-E.
Generally Figure A indicates the need for
additional support in most EU-25 coun-
tries in order to utilise higher shares of
the existing RES-E potentials.
0
5
10
15
20
25
30
35
40
EU-15 EU-10+ EU-25
RES Electricity share [%]
BAU - Demand Baseline
BAU - Demand Efficiency
POLICY - Demand Baseline
POLICY - Demand Efficiency

Figure A: Share of RES electricity production in EU-15, EU-10 and EU-25 in 2020
Heat
Far fewer policy measures have been
implemented in the heat sector than in
the electricity sector in the EU-25 coun-
tries. This is particularly valid for bio-
energy, for which significantly more ef-
fective policy instruments are feasible
than are currently implemented in any
country. Since the policy scenario pre-
sented here (see Table B) is based on
the currently available best practice poli-
cies in an EU country, this implies that
stronger growth could be achieved by
applying new and more effective policy
measures. Furthermore, it has to be no-
ted that, in the absence of an efficiency
demand scenario from the EU energy
outlook (2003), the baseline demand had
to be used as a reference value for both
the BAU and the policy scenario. A fairly
large increase can be observed in the
policy scenario for geothermal heat gen-
eration as well as for active solar thermal
applications. This is mainly the result of
assumed supportive regulations for geo-
thermal heat pumps similar to the Swed-
ish case, and of assumed effective in-
Analysis of the renewable energy sources' evolution up to 2020

XVII
vestment support instruments for solar
thermal heat such as are currently being
applied in Austria and Germany. How-
ever, despite the success of these indi-
vidual examples, it is clear that there is a
major lack of effective policies, clear tar-
get setting, and/or a commonly adopted
approach on the European renewable
heat market.
Table B: Projected RES heat generation in 2020 in EU-25 under the BAU and the
policy scenario
2001
Heat [Mtoe] BAU Policy
Biomass 46 53 78
Geothermal 1.0 5 18
Solar Thermal 0.5 3 7
TOTAL RES-Heat 48 60 103
TOTAL Demand * ** 427 488 488
Share of Demand 11.2% 12.3% 21.1%
* European Energy and Transport Trends to 2030
** No efficiency scenario available
2020
Biofuels
The projected biofuel consumption for
the EU-25 in 2020 is shown in Table C
for both scenarios. Since a number of EU
countries have since implemented tax
exemptions for biofuels for transport, a
major share is already projected in the
BAU scenario. In the policy scenario, the
increase in biofuel production is signifi-
cantly stronger because all countries are
assumed to implement such tax exemp-
tions. The high share of biofuels in the
transport sector is due to the assumption
that a rapid take-off of biofuel production
and consumption can also be achieved
in the EU-10 countries and that the pro-
duction of biofuels from solid biomass
(lignocellulose) is technically and eco-
nomically feasible after 2010.
Table C: Projected biofuel production in 2020 in EU-25 under the BAU and
the policy scenario
2001
Transport [Mtoe] BAU Policy ***
TOTAL Biofuels 1 19 40
TOTAL Demand * 279 351 323
Share of Demand 0.41% 5.5% 12.4%
* European Energy and Transport Trends to 2030
*** Processes based on lignocellulosic biomass assumed technically
and economically feasible
2020


Analysis of the renewable energy sources' evolution up to 2020

XVIII
Total primary energy
Table D shows the projected RES pri-
mary energy production for the EU-25 in
2020 for both scenarios. Primary energy
production was calculated using the clas-
sical EUROSTAT method as well the
substitution principle
3
. In the policy sce-
nario, primary energy production from
RES is projected to more than triple
compared to 2001 levels and reaches
about 20% of the total energy demand,
whereas it less than doubles under the
BAU scenario.
4
The major difference
between the BAU and the policy scenario
corresponds to a more significant contri-
bution of bioenergy in the sectors of elec-
tricity, heat and transport.
Table D: Projected RES primary energy production in EU-25 in 2020 under the
BAU and the policy scenario
2001
Total primary energy [Mtoe] BAU Policy
TOTAL Renewables 101 212 351
(
151
)
(
302
)
(
457
)
TOTAL Demand *
1680 1900 1700
Share of Demand 6.0% 11.1% 20.6%
(8.7%) (15.2%) (25.3%)

according to classical EUROSTAT method
( ) according to substitution principle
* European Energy and Transport Trends to 2030
2020


The projected share of primary energy
production from RES in the total demand
for the EU-15 member states and for the
EU-10 member states is shown in Figure
B and Figure C, respectively for the year
2020. Projected RES production figures
under the BAU and the policy scenario
assumptions are again related to two
different demand forecasts from the EU
energy outlook 2003 (baseline and effi-
ciency). For most countries, the differ-
ences between the two scenarios in pri-
mary energy use from total RES are sub-
stantially larger than the differences in
the electricity sector. The reason for this
is, in part, the large difference between
biomass electricity generation in the BAU
and the policy scenario, which has a
3
The main difference between both methods is in their treatment of electricity generation from
hydro, wind, wave & tide and solar energy. Under the substitution method, the contribution of
these renewable energy sources counts for about 2½ times as many tonnes of oil equivalent
as under the classical method, because the conventional fuels substituted are taken into ac-
count.
4
BAU share: 11.1%/12.5% (baseline/efficiency demand)
Policy share: 18.5%/20.6% (baseline/efficiency demand)
Analysis of the renewable energy sources' evolution up to 2020

XIX
strong impact on the primary energy bal-
ance. This also suggests that, for many
countries, more effective policies are
required in the heat and transport sec-
tors. Figure B and Figure C list those
countries which could contribute most
significantly to closing the gap between
the two scenarios by implementing more
effective policies for the promotion of
RES and by controlling electricity de-
mand.
0
10
20
30
40
50
60
AT BE DK FI FR DE GR IE IT LU NL PT ES SE UK EU-15
RES primary energy share [%]
BAU - Demand Baseline
BAU - Demand Efficiency
POLICY - Demand Baseline
POLICY - Demand Efficiency

Figure B: Share of RES primary energy in EU-15 member states in 2020


0
10
20
30
40
50
60
70
80
CY CZ EE HU LA LT MT PL SK SI EU-10+ BG RO
RES primary energy share [%]
BAU - Demand Baseline
BAU - Demand Efficiency
POLICY - Demand Baseline
POLICY - Demand Efficiency

Figure C: Share of RES primary energy in EU-10 member states and Bulgaria and
Romania in 2020
Analysis of the renewable energy sources' evolution up to 2020

XX


Analysis of the renewable energy sources' evolution up to 2020

1
1 Introduction
1.1 Background - EU policy and targets for renewable energy
sources
Renewable energy has become more and more significant in the European energy market
and will, without a doubt, play a very important role in the longer term. It makes up a con-
siderable part of the solution to decreasing import dependency and diversifying sources of
production, and contributing to sustainable development in Europe. The European Com-
munity has been proactive in seizing opportunities to develop new renewable energy tech-
nologies and building-up leading industries. Moreover, renewables have provided an im-
portant impulse to realising social objectives such as increased employment opportunities
and supporting social cohesion in Europe.
Over the last decade, the European renewable energy market has altered considerably
and undergone many changes. Different policy papers have started to enhance the de-
ployment of RES:

The White Paper “Energy for the future”
5
, which has set a target of doubling the share
of renewable energy in primary energy consumption from 6% in 1997 to 12% in 2010.

The Green paper on the security of energy supply in Europe.
6

The currently existing Community legislation for stimulating the development of renew-
ables in the European market comprises:

The Directive on the promotion of renewable electricity (RES-E Directive) on the inter-
nal market, aiming at reaching a 21% share of renewable electricity by the year 2010
for the EU-25 and specifying indicative targets for all 25 member states.
7


The Directive on the energy performance of buildings
8
supporting, among others, the
application of renewable heating applications.


5
EC (1997). Energy for the Future: renewable sources of energy. White Paper for a Community
Strategy and Action Plan. COM(1997) 599 final (26/11/1997).
6
European Commission; 29 November 2000 (COM(2000) 769 final).
7
EC (2001a) Directive 2001/77/EC of The European Parliament and of the Council of 27 Sep-
tember 2001 on the promotion of electricity produced from renewable energy sources in the in-
ternal electricity market.
8
Directive proposal on the energy performance of buildings COM(2001) 226 final.
Analysis of the renewable energy sources' evolution up to 2020

2

The Directive on the promotion of biofuels
9
, aiming to increase the share of biofuels in
total transport fuels to 5.75% by the year 2010.

The Council Directive on restructuring the Community framework for the taxation of
energy products and electricity.
10

The policy framework has defined several indicative targets and other requirements to be
fulfilled in the mid-term. Table 1 specifies the indicative targets for the share of renewable
electricity for each of the EU-25 countries. Other targets have only been specified at EU
level.
Table 1: Renewable electricity targets for 2010 specified as share of renewable
electricity consumption in the EU-25 states considered
Country
RES-E target (%)

Country
RES-E target (%)
Austria (AT) 78.1 Cyprus (CY) 6
Belgium (BE) 6.0 Czech Republic (CZ) 8
Denmark (DK) 29.0 Estonia (EE) 5.1
Finland (FI) 31.5 Hungary (HU) 3.6
France (FR) 21.0 Latvia (LA) 49.3
Germany (DE) 12.5 Lithuania (LT) 7
Greece (GR) 20.1 Malta (MT) 5
Ireland (IE) 13.2 Poland (PL) 7.5
Italy (IT) 25.0 Slovak Republic (SK) 31
Luxembourg (LU) 5.7 Slovenia (SI) 33.6
Netherlands (NL) 9.0
Portugal (PT) 39.0
Total EU-15 22
Spain (ES) 29.4
Total EU-10 11
Sweden (SE) 60.0
Total EU-25 21
United Kingdom (UK) 10.0


9
Directive 2003/30/EC of the European Parliament and of the Council of 8 May 2003 on the
promotion of the use of biofuels and other renewable fuels for transport. The Directive aims to
increase the consumption of biofuels in the internal market from the current 0.6% to 2% of the
total consumption of transport fuels in 2005 and to 5.75% in 2010.
10
Directive 2003/96/EC of 27 October 2003 on restructuring the Community framework for the
taxation of energy products and electricity.
Analysis of the renewable energy sources' evolution up to 2020

3
An important aspect of the EU policy for increasing the share of renewables is the moni-
toring and evaluation of the progress towards the 2010 targets. This monitoring process
concentrates on two main issues. Firstly, it monitors the adoption of EU legislation into
national legislation and its translation into national action plans and policy instruments in
each of the 25 EU states. Secondly, it provides a framework to analyse the impacts of
these national policies and measures and the extent to which each of the EU-25 states is
realising the targeted deployment of renewable energy. The study report presented here
concentrates on this second aspect.
New market dimensions continuously affect the design of promotion policies. Since the
targets were set in the White Paper, and the Renewable Electricity Directive and the Di-
rective on biofuels took effect, many important issues have arisen. One concerns the
enlargement of the EU, which has opened up new opportunities for the exploitation of re-
newable energy resources, specifically bioenergy. Another important issue is the interac-
tion with other objectives and policies, such as environmental policies, the completion of
the internal EU energy market
11
, and the interaction with the Common Agricultural Policy
(CAP reform).
12
The establishment of a carbon market, supported by the introduction of a
greenhouse gas emissions trading system
13
, affects the economic valuation of investment
opportunities. Free consumer choice on the European electricity market has created en-
hanced competition and the possibility to distinguish green products from conventional
power supplies. This will be further enhanced by the required disclosure of fuel mix and
the environmental impact of power supplies. The CAP is a highly important element of a
consistent RES strategy.
1.2 Aim and scope of the report
The objective of this project was to carry out an independent analysis and assessment of
the implementation of renewable energy sources in the member states of the European
Union, Bulgaria and Romania, since the publication of the White Paper on renewable en-
ergy sources in 1997 and to propose a perspective for the period up to 2020. The results
of the project provide:


11
Directive 2003/54/EC of the European Parliament and of the Council of 26 June 2003 con-
cerning common rules for the internal market in electricity and repealing Directive 96/92/EC.
12
COM(2003) 698 final - Proposal for a Council Regulation amending Regulation (EC) No.
1782/2003 establishing common rules for direct support schemes under the common agricul-
tural policy and establishing certain support schemes for farmers.
13
Directive 2003/87/EC of the European Parliament and of the Council of 13 October 2003 es-
tablishing a scheme for greenhouse gas emission allowance trading within the Community and
amending Council Directive 96/61/EC.
Analysis of the renewable energy sources' evolution up to 2020

4

input for monitoring the progress of the targets set in the White Paper, the Directive on
the promotion of electricity from renewable energy sources, and the Directive on biofu-
els,

insight into the future development of a green energy market in the European Union,
Bulgaria and Romania.
The work included carrying out a comprehensive assessment of the evolution of re-
newable energy sources and their contribution to the electricity, heat and transport
sectors in the European Union, Bulgaria and Romania. The study gives a complete
overview of the RES objectives by country in primary energy terms based on a detailed
analysis of existing policies, promotion schemes and barriers in the different countries.
The project results in a set of transparent indicators

for monitoring the progress in the implementation of renewable energy sources up to
2010;

for providing insights into the possible future implementation of renewable energy
sources under different policy developments up to 2020.
The study also proposes a perspective and a strategy for the period up to 2020, with a
clear indication of the prospects for meeting the indicative EU and member state targets
for 2010. The work involves modelling using the techno-economic model Green-X. Two
types of scenarios are modelled, among them, a business-as-usual and a policy scenario.
1.3 Methodology and approach
The approach chosen in the FORRES 2020 project combines a detailed assessment of
the current policies to promote renewable energy sources in the European Union and Bul-
garia and Romania with a comprehensive modelling of the future evolution of the renew-
able energy markets based on an extensive database regarding RES penetration, poten-
tials and costs. In more detail, the work was structured into the following phases:
1. Data collection on policies, RES penetration, technological, potential and cost informa-
tion.
2. Policy impact assessment and derivation of indicators.
3. Stakeholder input consultation and risk assessment.
4. Software adaptation and modelling.
With regard to penetration data, we have relied on sources - insofar as available and pos-
sible - such as EUROSTAT, EuroObserv’ER, national statistics and statistical information
per renewable energy source from sector organisations and institutions such as EWEA
(European Wind Energy Association), ESTIF (European Solar Thermal Industry Federa-
Analysis of the renewable energy sources' evolution up to 2020

5
tion) and DEWI (German Wind-Energy Institute). This task was more difficult for the ten
new EU countries that joined in May 2004 as well as for Bulgaria and Romania. Here, we
contacted statistical offices, energy agencies and sector organisations in each of the re-
spective countries. For information on potentials, technologies and costs in the EU-15, we
mainly used and refined data collected in the projects ElGreen, Green-X and Pretir. For
the other countries, original data had to be derived on the basis of country-specific data
sources, e. g. based on country-specific wind atlases. In addition, a new database was
compiled with regard to biofuels in transport and some of the technologies in the heat sec-
tor. The data on policy instruments was obtained mainly by analysing government documents
on national targets and policy instruments, e. g. specific policy plans for renewable energy.
Furthermore, independent evaluations were used as important sources of information, e. g.
the IEA evaluations of energy policies, NGO evaluations, general literature on possible barri-
ers to the implementation of renewables and literature on the effectiveness of different types
of policy instruments.
Using validated concepts from techno-economic modelling and econometrics we derived
projections for the implementation of renewables in 2010 and 2020 under a business-as-
usual (BAU) scenario and a policy scenario (PS). Generally the prediction was made ac-
cording to two different methods:
1. Forecasts of RES penetration with the model Green-X.
2. Forecasts of RES penetration with the help of econometric analyses.
The second method has the advantage of a high degree of transparency, whereas the
calculations with the model Green-X allow boundary conditions to be adjusted and de-
fined (scenario variations) in a more accurate way.
Where forecasts were performed using econometric analyses, the policy scenario was
defined using correlations between historically observed best practice policy implementa-
tions and corresponding RES penetration. This method sets an important benchmark for
the results of the computer model Green-X.
Analysis of the renewable energy sources' evolution up to 2020

6

Analysis of the renewable energy sources' evolution up to 2020

7
2 Present status of renewable energy sources in EU-25
member states
2.1 Current penetration, potentials and costs of renewable en-
ergy sources
2.1.1 Electricity
Electricity produced by renewable energy sources (RES-E) in the EU-15 countries amoun-
ted to 363 TWh in 2002, corresponding to a share of 13.4% of gross electricity consump-
tion. The relevant figures for the EU-10 are 17.7 TWh and 5.6%, respectively.

0
50
100
150
200
250
300
350
400
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
Electricity generation [TWh/year] _
Large-scale hydro
Small-scale hydro
New' RES-E excl. hydro
EU-15 countries
EU-10 countries
0
2
4
6
8
10
12
14
16
18
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002

Figure 1: Historical development of electricity generation from RES in the European
Union from 1990 to 2002 – in the EU-15 (left-hand side) and EU-10 coun-
tries (right-hand side)

Analysis of the renewable energy sources' evolution up to 2020

8
The historical development of RES-E
14
is shown in Figure 1 for EU-15 and EU-10. As can
be seen, hydropower is the dominant source, but ‘new’ RES-E
15
such as biomass or wind
have started to play a role. The following figures provide some information about these
technologies: Figure 2 outlines their historical development in the European Union (EU-
25) and Figure 3 a breakdown of their production by country for 2001. Wind energy is the
RES-E source with the highest yearly growth rates of about 38% in electricity production
over the last ten years. Especially in EU-15 countries, wind energy is predominant in re-
cent portfolios of ‘new’ RES-E, whilst biomass is prominently represented in some of the
new member states.

0
10
20
30
40
50
60
70
80
90
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
Electricity generation [TWh/year] _
Wind off-shore
Wind on-shore
Photovoltaics
Geothermal electricity
Biowaste
Solid biomass
Biogas

Figure 2: Historical development of electricity generation from ‘new’ RES-E in the
European Union (EU-25) from 1990 to 2002


14
Based on EUROSTAT data, which are only up-to-date until 2001. For many RES, e. g. wind-
onshore and PV, more recent data from sector organisations and national statistics have been
used. Generally EUROSTAT data were modified where alternative data proved to be more ac-
curate.
15
In general, definitions of RES-E sources are made in accordance with the Directive for the
promotion of electricity produced from renewable energy sources in the internal electricity
market, 2001/77/EC. The technologies assessed include hydropower (large and small), photo-
voltaic, solar thermal electricity, wind energy (onshore, offshore), biogas, solid biomass, bio-
degradable fraction of municipal waste, geothermal electricity, tidal and wave energy.
Analysis of the renewable energy sources' evolution up to 2020

9
0
5
10
15
20
25
30
AT BE DK FI FR DE GR IE IT LU NL PT ES SE UK
Electricity generation [TWh/year] _
Gaseous biomass
Solid biomass
Biowaste
Geothermal electricity
Photovoltaics
Wind on-shore
Wind off-shore
Hydro small-scale
EU-15 countries
EU-10 countries
0,0
0,2
0,4
0,6
0,8
1,0
1,2
1,4
CY CZ EE HU LA LT MT PL SK SI

Figure 3: Breakdown of electricity generation from ‘new’ RES-E for 2002 by country
– EU-15 (left-hand side) and EU-10 countries (right-hand side)
As can be seen from the above figures (see, e.g. Figure 1
16
), RES-E such as hydropower
or wind energy represent energy sources characterised by a natural volatility. Therefore,
in order to provide accurate forecasts of the future development of RES-E, historical data
for RES-E had to be translated into electricity generation potentials – the achieved poten-
tial. In addition, future potentials were assessed taking into account the country-specific
situation as well as realisation constraints. Figure 4 depicts the achieved and additional
mid-term potential for RES-E in the EU-15 by country (left-hand side) as well as by RES-E
category (right-hand side). A similar picture is shown for the new member states (EU-10)
and selected candidate countries (i.e. Bulgaria and Romania)
17
in Figure 5. For EU-15
countries, the already achieved potential for RES-E equals 384 TWh
18
, whereas the addi-
tional realisable potential up to 2020 amounts to 1074 TWh (about 41% of current gross
electricity consumption). Corresponding figures for the EU-10 are 17.5 TWh for the achie-
ved potential and 118.5 TWh for the additional mid-term potential (about 39% of current
gross electricity consumption).


16
Compare, e.g. the decrease of electricity generation from hydropower in EU-15 countries from
2001 to 2002 as depicted in Figure 1: The 0.55 GW growth of cumulative installed hydro ca-
pacity is accompanied by a decrease in actual generation of roughly 66 TWh.
17
In the following, the categorisation EU-10+2 refers to this set of countries – i.e. the new mem-
ber states (as of 2004) plus the candidate countries Bulgaria and Romania.
18
The electricity generation potential represents the output potential of all plants installed up to
the end of each year. Of course, the figures for actual generation and generation potential dif-
fer in most cases – due to the fact that, in contrast to the actual data, the potential figures rep-
resent normal conditions, e.g. in case of hydropower, the normal hydrological conditions, and
furthermore, not all plants are installed at the beginning of each year.
Analysis of the renewable energy sources' evolution up to 2020

10
0
50
100
150
200
250
300
AT
BE
DK
FI
FR
DE
GR
IE
IT
LU
NL
PT
ES
SE
UK
RES-E - Electricity
generation potential [TWh/year] _
Additional potential 2020
Achieved potential 2001
0
50
100
150
200
250
300
Biogas
(Solid) Biomass
Biowaste
Geothermal electricity
Hydro large-scale
Hydro small-scale
Photovoltaics
Solar thermal electricity
Tide & Wave
Wind onshore
Wind offshore

Figure 4: Achieved (2001) and additional mid-term potential 2020 for electricity
from RES in the EU-15 – by country (left-hand side) and by RES-E cate-
gory (right-hand side)

0
10
20
30
40
50
60
CY
CZ
EE
HU
LA
LT
MT
PL
SK
SI
BG
RO
RES-E - Electricity
generation potential [TWh/year] _
Additional potential 2020
Achieved potential 2001
0
10
20
30
40
50
60
Biogas
(Solid) Biomass
Biowaste
Geothermal electricity
Hydro large-scale
Hydro small-scale
Photovoltaics
Solar thermal electricity
Tide & Wave
Wind onshore
Wind offshore

Figure 5: Achieved (2001) and additional mid-term potential 2020 for electricity
from RES in EU-10 countries & Bulgaria, Romania – by country (left-hand
side) and by RES-E category (for EU-10 alone) (right-hand side)
The country-specific situation with respect to the achieved as well as the future potential
shares of available RES-E options is depicted below in more detail. Figure 6 indicates the
share of the various RES-E in the achieved potential for each EU-15 country. As already
mentioned, (large-scale) hydropower dominates current RES-E generation in most EU-15
countries. However, for countries like Belgium, Denmark or the Netherlands – all charac-
terised by rather poor hydro resources – wind, biomass or biowaste are in a leading posi-
tion. Figure 7 illustrates the shares of specific RES-E in the total achieved potential for
Analysis of the renewable energy sources' evolution up to 2020

11
EU-10 countries & Bulgaria, Romania: here, hydropower accounts for 95% of the RES-E
production and, of the other RES-E options, only biomass, biogas and wind were of any
relevance. Only in the Czech Republic, Estonia and Lithuania does biomass electricity
have shares of 15%, 56% and 25%, respectively. In all other countries, biomass contrib-
utes less than 2% to the RES-E share. In Estonia and Poland, wind energy has attained
shares of 10% and 3% in RES-E production, respectively.

0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
AT BE DK FI FR DE GR IE IT LU NL PT ES SE UK
Share of total RES-E generation 2001 __
Biogas
(Solid) Biomass
Biowaste
Geothermal electricity
Hydro large-scale
Hydro small-scale
Photovoltaics
Solar thermal electricity
Tide & Wave
Wind onshore
Wind offshore
EU-15 total
RES-E breakdown 2001
1.6%
2%
2%
9.3%
8.7%
5.3%
71%

Figure 6: RES-E as a share of the total achieved potential in 2001 for the EU-15 –
by country (left-hand side) as well as for total EU-15 (right-hand side)

0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
CY CZ EE HU LA LT MT PL SK SI BG RO
Share of total RES-E generation 2001 __
Biogas
(Solid) Biomass
Biowaste
Geothermal electricity
Hydro large-scale
Hydro small-scale
Photovoltaics
Solar thermal electricity
Tide & Wave
Wind onshore
Wind offshore
EU-10+ total
RES-E breakdown 2001
81.0%
0.8%
3.6%
0.7%
13.8%

Figure 7: RES-E as a share of the total achieved potential in 2001 for the EU-10 &
Bulgaria, Romania – by country (left-hand side) as well as for total EU-10
& Bulgaria, Romania (right-hand side)
Analysis of the renewable energy sources' evolution up to 2020

12
Figure 8 shows the share of different energy sources in the additional RES-E mid-term
potential for the EU-15 for 2020. The largest potential is found in the sector of wind energy
(44%) followed by solid biomass (24%), biogas (9%) as well as promising future options
such as tidal & wave (11%) or solar thermal energy (3%).

0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
AT BE DK FI FR DE GR IE IT LU NL PT ES SE UK
Share of additional RES-E _
generation potential 2020 __
Biogas
(Solid) Biomass
Biowaste
Geothermal electricity
Hydro large-scale
Hydro small-scale
Photovoltaics
Solar thermal electricity
Tide & Wave
Wind onshore
Wind offshore
EU-15 total
Breakdown of
additonal RES-E
generation potential
up to 2020
9%
23%
24%
2%
2%
3%
3%
11%
2%
21%

Figure 8: RES-E as a share of the total additional realisable potential in 2020 for
the EU-15 – by country (left-hand side) as well as for total EU-15 (right-
hand side)


0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
CY CZ EE HU LA LT MT PL SK SI BG RO
Share of additioanl RES-E _
generation potential 2020 _ __
Biogas
(Solid) Biomass
Biowaste
Geothermal electricity
Hydro large-scale
Hydro small-scale
Photovoltaics
Solar thermal electricity
Tide & Wave
Wind onshore
Wind offshore
EU-10 total
Breakdown of
additional RES-E
generation potential
up to 2020
1%
2%
3%
6%
3%
53%
13%
3%
16%

Figure 9: RES-E as a share of the total additional realisable potential in 2020 for
the EU-10 & Bulgaria, Romania – by country (left-hand side) as well as
for total EU-10 (right-hand side)
Analysis of the renewable energy sources' evolution up to 2020

13
Figure 9 illustrates the share of different energy sources in the additional RES-E mid-term
potential of the EU-10 countries & Bulgaria, Romania for 2020. In contrast to the EU-15,
the largest potentials for these countries exist in the sectors of solid biomass (53%) and
wind energy (19%) followed by biogas (13%). Unlike the situation in the EU-15, the refur-
bishment and construction of large hydro plants holds significant potentials (6%).
In the model Green-X, the electricity generation costs for the various generation options
are calculated by a rather complex procedure – internalized within the overall set of mod-
elling procedures. In this way, plant-specific data (e.g. investment costs, efficiencies, full
load-hours, etc.) are linked to general model parameters such as interest rate and depre-
ciation time. The latter parameters are dependent on a set of user input data as policy
instrument settings, etc. Nevertheless, in order to give a better illustration of the current
economic conditions of the various RES-E options, exemplary marginal electricity genera-
tion costs are depicted in Figure 10.
Generation costs
19
refer to the starting year for model simulations, i.e. 2002 and, hence,
are expressed in €
2002
. The broad range of costs which results for several RES-E repre-
sents, on the one hand, resource-specific conditions such as are relevant, e.g. in the case
of photovoltaics or wind, and which vary between and also within countries. On the other
hand, costs also depend on the technological options available – compare, e.g. co-firing
and small-scale CHP plants for biomass.

0 25 50 75 100 125 150 175 200 225 250
Wind offshore
Wind onshore
Tide & Wave
Solar thermal electricity
Photovoltaics
Hydro small-scale
Hydro large-scale
Geothermal electricity
Biowaste
(Solid) Biomass
Biogas
Long-run marginal costs [€/MWh]
PV: 460...1740 €/MWh

Figure 10: Long-term marginal generation costs (for the year 2002) of different
RES-E technologies


19
For long-term marginal generation costs (as applied to new plants), a default capital recovery
factor is used based on the following settings: interest rate z = 6.5%; payback time PT = 15
years.
Analysis of the renewable energy sources' evolution up to 2020

14
Future cost development – technological learning
Forecasting technology development is a crucial activity, especially for a long time hori-
zon. Considerable efforts have been made recently to improve the modelling of technol-
ogy development in energy models. A rather ‘conventional’ approach relies exclusively on
exogenous forecasts based on expert judgements of technology development (e.g. effi-
ciency improvements) and economic performance (i.e. described by investment & O&M
costs). More recently within the scientific community this has often been replaced by tech-
nology-based cost dynamics which allow endogenous forecasts, at least to some extent,
of technological change in energy models. This approach of so-called technological learn-
ing or the experience/learning curves method takes into account the "learning by do-
ing / producing / installing" effect.
20

Within the model Green-X the approach chosen differs by technology. In principle, the
database is constructed to include two different approaches: standard cost forecasts or
endogenous technological learning. Default settings were applied as follows:

for most RES-E technologies, e.g. wind power or PV, it was decided to adopt the ap-
proach of technological learning. Learning rates were assumed separately for each de-
cade
21
at least.

For a few RES-E technologies where endogenous learning leads to non-accurate re-
sults – as e.g. in case of tidal & wave energy – it was decided to adopt well-accepted
expert judgements.
To obtain an impression of the induced cost reductions, Figure 11 depicts – as a summary
of the results presented later on – the expected progression of investment costs for vari-
ous RES-E technologies. The highest cost reductions can be expected for tidal & wave
energy as well as for solar electricity - both photovoltaics and solar thermal electricity pro-
duction – and wind power.
This figure refers to the business-as-usual development (BAU) – see Chapter 5 of this
report for details.


20
In principle the so-called ‘learning effect’ - which has been empirically observed in several
fields of technological development – states that for each doubling of producing / installing a
certain technology, a decline of the costs can be expected by a certain percentage, the so-
called ‘learning rate’. For a brief description of the learning / experience curve approach, see
e.g. Wene et al., 2000.
21
In many cases experience has shown that the rate of technological learning is often closely
linked to the development stage of a certain technology – i.e. high learning rates can be ex-
pected at an early stage of development if a technology is ‘brand new’, and later, as the tech-
nology matures, a slowdown occurs.
Analysis of the renewable energy sources' evolution up to 2020

15
55%
60%
65%
70%
75%
80%
85%
90%
95%
100%
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Cost reduction - share of initial investment costs
(as in the year 2002) [%]
Hydropower
Geothermal electricity
Gaseous biomass
CHP
Gaseous biomass
Solid biomass CHP
Solid biomass
Wind energy
Solar thermal
electricity
Photovoltaics
Tidal & wave

Figure 11: Development of the investment costs according to the business-as-usual
case (BAU)

2.1.2 Heat
Heat production from renewable energy sources (RES-H) in the EU-15 member states
amounted to 42.2 Mtoe in 2001, corresponding to a share of 11% of the total heat con-
sumption.
22
For the new member states (EU-10), the corresponding RES-H figure amoun-
ted to 5.6 Mtoe in 2001, which also corresponds to a share of 11% of the total heat con-
sumption. At EU-25 level, the share of heat production from renewable sources corre-
sponds once again to about 11% of the total heat consumption.
Figure 12 illustrates the historic development of RES-H for the EU-15 and the EU-10 from
1990 to 2001. As can be observed in the following figures, heat production from biomass
sources outweighs geothermal and solar thermal heat technologies in both EU-15 and
EU-10.


22
The total heat consumption (including cooling) amounted to about 378 Mtoe for the EU-15 and
to about 50 Mtoe for the EU-10 in 2001.
Analysis of the renewable energy sources' evolution up to 2020

16
EU-15 countries
0
5000
10000
15000
20000
25000
30000
35000
40000
45000
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
Heat Generation [ktoe/year]
Biomass
Geothermal Heat
Solar Thermal Heat
EU-10 countries
0
1000
2000
3000
4000
5000
6000
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001

Figure 12: RES-H production development from 1990 to 2001 in EU-15 and EU-10
[ktoe/year]
In order to provide a complete analysis of the current status and the future evolution of the
heat sector at EU level, it is important to distinguish between grid connected and non-grid
connected heat production. Both grid and non-grid RES-H are based on biomass, solar
thermal and geothermal resources, as illustrated in Figure 13. The biomass sector is the
most important one in terms of current penetration and the most complex one in terms of
feedstock sources and applications. Non-grid systems based on biomass sources com-
prise traditional wood heat production as well as innovative biomass such as pellets and
woodchips, whereas the grid connected systems include district heating and combined
heat and power (CHP) plants.
It is important to note that the historical data for the RES-H sector at EU-25 member state
level and in particular for the new member states are of limited reliability. This is especially
valid for non-grid connected wood-heating systems in households because of the decen-
tralised and often non-commercial nature of the activity. In contrast, the data on grid-
connected systems, as well as on woodchip and pellet systems, are more reliable be-
cause of the fact that the relevant fuels or the generated heat are traded as commercial
products. Historical data are based on official sources of member states as well as on
publications of the relevant sector organisations. All data have been cross-checked with
Eurostat for consistency. Additional up-to-date figures were obtained from EurObserv’ER,
Afbnet biomass and the pellets information centre.
Analysis of the renewable energy sources' evolution up to 2020

17
EU-15 countries
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
10000
AT
BE
DK
FI
FR
DE
GR
IE
IT
LU
NL
PT
ES
SE
UK
Heat generation - breakdown for 2001
[ktoe/year]
Biomass Heat Non Grid
Biomass Heat Grid
Solar Thermal Non-Grid
Geothermal Heat non-Grid
Geothermal Heat Grid
EU-10 countries
0
500
1000
1500
2000
2500
3000
CY
CZ
EE
HU
LA
LT
MT
PL
SK
SI
BG
RO

Figure 13: RES-H breakdown (2001) from grid and non-grid connected systems EU-
15 and EU-10 & Bulgaria, Romania
Heat production from non-grid connected biomass systems is predominant in almost all
EU-15 and EU-10 countries except for Sweden, Finland, UK, and Denmark, where heat
production from biomass in grid connected systems is primary. There is only a minor con-
tribution from solar thermal and geothermal heat production as shown in Figure 14. Only
1.2% of heat production stems from solar thermal sources and only 2.4% from geothermal
heat, while the overriding share of heat production (96.4%) comes from various biomass
sources.
1.8% Biogas
5.7% MSW
14.4% Biomass
Public CHP
4.3% Biomass
District Heating
11.4 % Biomass
Industry
56.8% Wood in
households
2.0 % Pellets
1.2% Heat Solar
Thermal (non-Grid)
2.4% Heat
Geothermal
(Grid & non-Grid)
96.4%
Heat Biomass
(Grid &non-Grid)

Figure 14: Share of renewable energy sources in heat production - EU-15 2001
An important basis for the scenario development for the RES-H sector is provided by com-
paring the additional heat generation potentials with the potentials already achieved. The
Analysis of the renewable energy sources' evolution up to 2020

18
additional realisable potential was estimated taking into account each member state’s
technical potential as well as development barriers and constraints. Figure 15 shows the
achieved potential in 2001 and the additional heat generation potentials for 2020 at mem-
ber state level (EU-15 and EU-10 & Bulgaria, Romania). The already achieved potential in
2001 amounts to 42.4 Mtoe for the EU-15 and 8.7 Mtoe for the EU-10 & Bulgaria, Roma-
nia; whereas the additional potential until 2020 totals 106 Mtoe for the EU-15 and 27 Mtoe
for the EU-10 & Bulgaria, Romania.
EU-15 countries
0
5000
10000
15000
20000
25000
30000
35000
AT
BE
DK
FI
FR
DE
GR
IE
IT
LU
NL
PT
ES
SE
UK
RES-H - Heat generation potential _
[ktoe/year] _
Achieved Potential 2001
Additional Potential 2020
EU-10 countries
0
2000
4000
6000
8000
10000
12000
14000
CY
CZ
EE
HU
LA
LT
MT
PL
SK
SI
BG
RO

Figure 15: Achieved and additional mid-term potential 2020 for heat from RES in
EU-15 and EU-10 & Bulgaria, Romania
The composition of the heat sector in each member state is illustrated in greater detail in
the figures below, showing the share of biomass, geothermal and solar thermal energy in
the achieved as well as the additional potential. Figure 16 displays the share of the differ-
ent RES-H technologies with reference to the total achieved potential for 2001 in the EU-
15 member states.
As already mentioned before, most of the EU-15 member states have a high share of heat
production from biomass sources. Moreover, heat production from solar thermal sources
is starting to play a role in countries like Greece, Germany, Austria and the Netherlands;
but its share remains low. There is a significant contribution from geothermal energy in
Sweden (mostly geothermal heat pumps) as well as in Italy and Portugal. Solar thermal
collectors provide two thirds of the hot water demands of Greek households, nearly 10%
of the demand in Austria and between 0-5% in the other countries.
Analysis of the renewable energy sources' evolution up to 2020

19
Figure 17 shows similar figures for the EU-10 countries & Bulgaria, Romania. Here, Cy-
prus is the exception to the biomass trend in heat production. Cyprus had a high solar
thermal heat production share of 92% in 2001. In addition, geothermal heat plays an im-
portant role in Slovakia (32%), Hungary (25%), Slovenia (10%) and Bulgaria (7%).

0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
AT
BE
DK
FI
FR
DE
GR
IE
IT
LU
NL
PT
ES
SE
UK
EU15
Share of total RES-H
generation 2001 [%] _
Solar Thermal
Geothermal Heat
Biomass Heat

Figure 16: RES-H as a share of the total achieved potential in 2001 for EU-15
member states

0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
CY
CZ
EE
HU
LA
LT
MT
PL
SK
SI
EU10
BU
RO
EU10+2
Share of total RES-H
generation 2001 [%] _
Solar Thermal
Geothermal Heat
Biomass Heat

Figure 17: RES-H as a share of the total achieved potential in 2001 for EU-10
member states & Bulgaria, Romania
Figure 18 and Figure 19 indicate the shares of different renewable sources with respect to
the additional realisable potential in 2020 for EU-15 and EU-10 & Bulgaria, Romania. In
the EU-15, there is a more equal distribution between the different sectors for 2020 poten-
Analysis of the renewable energy sources' evolution up to 2020

20
tials with almost 40% of heat production from biomass and 30% respectively for geother-
mal and solar thermal heat.
However, at the member state level, some countries exhibit a greater potential use of bio-
mass for heat, e.g. Finland, Sweden and Austria, with more than 50% share of biomass
heat. Whereas the additional potential in the biomass sector mainly depends on fuel sup-
ply potentials, the respective potentials of geothermal heat pumps and solar thermal in-
stallations are limited by the low temperature heat demand of households and by the
maximum growth rate that can be reached for a particular sector. In respect to geother-
mal sources, the relatively high potentials here are mainly due to geothermal heat
pumps. With regard to the determination of the mid-term potential for geothermal heat
pumps, the main assumption on the EU level is that a maximum annual growth rate of
25% per year will not be able to be surpassed until 2020. This figure corresponds to the
growth rate observed in Sweden during the last four years. Therefore the total mid-term
potential of geothermal heat pumps in the EU-15 equals 28.3 Mtoe, corresponding to
about 12% of household heat demand in 2020.
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
AT
BE
DK
FI
FR
DE
GR
IE
IT
LU
NL
PT
ES
SE
UK
EU15
Share of additional RES-H potential [%] _
Solar Thermal
Geothermal
Biomass

Figure 18: Share of the total additional realisable potential of RES-H in 2020 for EU-15
For the EU-10 & Bulgaria, Romania the overall picture is rather different, with an average
share of 60% for biomass, 19% for solar thermal and 17% for geothermal heat. At the
individual country level, however, solar thermal shares are dominant in Cyprus and Malta,
whereas biomass dominates the trend in the other new member states with shares well
above 60%.

Analysis of the renewable energy sources' evolution up to 2020

21
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
CY
CZ
EE
HU
LA
LT
MT
PL
SK
SI
EU-10
BG
RO
Share of additional RES-H potential [%] _
Solar Thermal
Geothermal
Biomass

Figure 19: Share of the total additional realisable potential of RES-H in 2020 for EU-
10 member states & Bulgaria, Romania
Figure 20 shows the current contribution of grid connected heat from RES in the total
steam consumption in 2001 (total steam consumption amounts to about 22% of total heat
consumption in the EU-25). There is a large heterogeneity among the member states, with
Finland, Portugal and Sweden clearly leading with regard to grid connected heat from
RES. Generally the current share of RES in total steam consumption is already remark-
able at EU level, but there are still significant future potentials, especially in countries like
Germany, the UK and the Netherlands. The demand data in Figure 20 and Figure 21 are
based on the EU Energy Outlook (2003).
0%
10%
20%
30%
40%
50%
60%
70%
80%
AT BE DK FI FR DE GR IE IT LU NL PT ES SE UK EU15
share of RES grid connected heat in total steam consumption

Figure 20: Achieved grid connected RES-H consumption as a share of total steam
consumption in 2001

Analysis of the renewable energy sources' evolution up to 2020

22
Figure 21 shows the current contribution of non-grid connected heat from RES in the total
non-grid connected heat consumption. A similar picture results as in Figure 20. The pro-
gress in the area of grid-connected heat production appears to be significantly greater
than for non-grid connected applications, but this impression is mainly triggered by two
countries, Finland and Sweden (for Portugal the relative figures appear to be high, but the
absolute values are rather small).
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
AT BE DK FI FR DE GR IE IT LU NL PT ES SE UK EU15
share of RES non-grid connected heat in non-grid consumption
2001

Figure 21
:
Achieved non-grid connected RES-H generation as a share of total non-
grid connected heat consumption in 2001

Looking at the historical development of the sector of wood heat production in house-
holds, one observes a declining trend in many of the EU-15 countries over the last seven
years. Especially the sector of traditional log wood shows this negative trend. In some
countries, especially in Austria, the decline in traditional log wood is partially compensated
by significant growth of new heating systems based on pellets and wood chips. This sec-
tor grew by about 40% per year on average between 1997 and 2002 in Austria and ex-
perienced a similar success in Denmark, Finland, Sweden and Germany.
Figure 22 and Figure 23 illustrate the current status in this sector showing the volumes of
pellet production in the relevant countries and the ratio of modern biomass heating sys-
tems, i.e. those based on pellets and wood chips, to the total number of non-grid biomass
heating systems. As far as pellet heating systems are concerned, it is important to point
out that Sweden – which has a higher share of pellet and wood chip-heating systems than
Austria (see Figure 23) – has a lower share of non-grid connected biomass heating. Also
worth mentioning is the fact that Portugal, which has the highest share of non-grid bio-
mass heating systems, has almost no pellet / woodchip heating systems.

Analysis of the renewable energy sources' evolution up to 2020

23
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
900,000
SE DK AT FI IT GE ES UK
Pellet Production [Ton / year]
2003

Figure 22: Pellet production for 2003 for selected EU-15 member states


0
1
2
3
4
5
6
7
AT DK FI DE SE
Share of Woodchips
in wood heating systems [%]

Figure 23: Share of modern forms of biomass (pellets, wood chips) in non-grid
connected biomass

2.1.3 Biofuels for transport
As can be observed in Figure 24, biodiesel has the largest share of biofuels production in
the EU-15, reaching more than 1.2 Mtoe in 2003. During the last decade, biodiesel pro-
duction increased by about a factor of ten. The growth in bioethanol production has been
more modest at about a factor of five compared to 1993 values. Especially Germany,
France, Austria, Italy, Sweden and Spain have set the pace for the biofuel sector in recent
years.
The development of the EU-10 biofuel sector since 1996 is shown in Figure 25. In gen-
eral, the development here has been less dynamic than in the EU-15. The significant in-
Analysis of the renewable energy sources' evolution up to 2020

24
crease of bioethanol production was mainly due to developments in Poland. The rapid
decline of the market in Slovakia caused by the abolishment of the tax reduction scheme
was responsible for the drop in the biodiesel market during the last 3 years.
0
200
400
600
800
1000
1200
1400
1600
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
Biofuel Production [ktoe]
Biodiesel [ktoe]
Bioethanol [ktoe]

Figure 24: EU-15 biofuel production historical development 1993 – 2003


0
20
40
60
80
100
120
140
160
180
1996 1997 1998 1999 2000 2001 2002 2003
Biofuel Production [ktoe]
Biodiesel [ktoe]
Bioethanol [ktoe]

Figure 25: EU-10 biofuel production historical development 1996 - 2003