pEUROPEAN COMMISSION Brussels, 15.12.2011 COM2011 885 final COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS Energy Roadmap 2050 {SEC2011 1565 final} {SEC2011 1566 final} {SEC2011 1569 final} nbsp;EN 2 nbsp; EN 1. INTRODUCTION People39;s well-being, industrial competitiveness and the overall functioning of society are dependent on safe, secure, sustainable and affordable energy. The energy infrastructure which will power citizens39; homes, industry and services in 2050, as well as the buildings which people will use, are being designed and built now. The pattern of energy production and use in 2050 is already being set. The EU is committed to reducing greenhouse gas emissions to 80-95 below 1990 levels by 2050 in the context of necessary reductions by developed countries as a group1. The Commission analysed the implications of this in its quot;Roadmap for moving to a competitive low-carbon economy in 2050quot;.2The quot;Roadmap to a Single European Transport Areaquot;3focussed on solutions for the transport sector and on creating a Single European Transport Area. In this Energy Roadmap 2050 the Commission explores the challenges posed by delivering the EU39;s decarbonisation objective while at the same time ensuring security of energy supply and competitiveness. It responds to a request from the European Council4. The EU policies and measures to achieve the Energy 2020 goals5and the Energy 2020 strategy are ambitious.6They will continue to deliver beyond 2020 helping to reduce emissions by about 40 by 2050. They will however still be insufficient to achieve the EU39;s 2050 decarbonisation objective as only less than half of the decarbonisation goal will be achieved in 2050. This gives an indication of the level of effort and change, both structural and social, which will be required to make the necessary emissions reduction, while keeping a competitive and secure energy sector. Today, there is inadequate direction as to what should follow the 2020 agenda. This creates uncertainty among investors, governments and citizens. Scenarios in the quot;Roadmap for moving to a competitive low-carbon economy in 2050quot; suggest that if investments are postponed, they will cost more from 2011 to 2050 and create greater disruption in the longer term. The task of developing post-2020 strategies is urgent. Energy investments take time to produce results. In this decade, a new investment cycle is taking place, as infrastructure built 30-40 years ago needs to be replaced. Acting now can avoid costly changes in later decades and reduces lock-in effects. The International Energy Agency IEA has shown the critical role of governments and underlined the need for urgent action;7with the scenarios of the Energy Roadmap 2050 different possible pathways for Europe are analysed more in depth. Forecasting the long-term future is not possible. The scenarios in this Energy Roadmap 2050 explore routes towards decarbonisation of the energy system. All imply major changes in, for example, carbon prices, technology and networks. A number of scenarios to achieve an 80 reduction in greenhouse gas emissions implying some 85 decline of energy-related 1European Council, October 2009. 2COM2011112, 8 March. 3COM2011144, 28 March. 4Extraordinary European Council, 4 February 2011 5European Council, 8/9 March 2007 By 2020, at least 20 reduction in greenhouse gas emissions compared to 1990 30 if international conditions are right, European Council, 10-11 December 2009; saving of 20 of EU energy consumption compared to projections for 2020; 20 share of renewable energies in EU energy consumption, 10 share in transport. 6See also quot;Energy 2020 - A strategy for competitive, sustainable and secure energyquot; COM2010 639, November 2010. 7IEA 2011, World Energy Outlook 2011. nbsp;EN 3 nbsp; EN CO2 emissions including from transport, have been examined.8The Commission has also analysed Member States39; and stakeholders39; scenarios and views.9Naturally, given the long time horizon, there is uncertainty associated to these results, not least because they rely on assumptions which themselves are not certain.10It is impossible to anticipate whether an oil peak will come, since new discoveries have occurred repeatedly; to what extent shale gas in Europe will prove viable, whether and when Carbon Capture amp; Storage CCS will become commercial, what role Member States will seek for nuclear power, how climate action across the globe will evolve. Social, technological and behavioural changes will also have significant impact on the energy system.11The scenario analysis undertaken is of an illustrative nature, examining the impacts, challenges and opportunities of possible ways of modernizing the energy system. They are not quot;either-orquot; options but focus on the common elements which are emerging and support longer-term approaches to investments. nbsp;Uncertainty is a major barrier to investment. The analysis of the projections conducted by the Commission, Member States and stakeholders show a number of clear trends, challenges, opportunities and structural changes to design the policy measures needed to provide the appropriate framework for investors. Based on this analysis, this Energy Roadmap identifies key conclusions on quot;no regretsquot; options in the European energy system. This makes it also important to achieve a European approach, where all Member States share common understanding of the key features for a transition to a low-carbon energy system, and which provides the certainty and stability which are needed. The Roadmap does not replace national, regional and local efforts to modernize energy supply, but seeks to develop a long-term European technology-neutral framework in which these policies will be more effective. It argues that a European approach to the energy challenge will increase security and solidarity and lower costs compared to parallel national schemes by providing a wider and flexible market for new products and services. For example, some stakeholders show potential cost savings of up to a quarter if there was a more European approach for efficient use of renewable energy. 2. A SECURE, COMPETITIVE AND DECARBONISED ENERGY SYSTEM IN 2050 IS POSSIBLE nbsp;The energy sector produces the lion39;s share of man-made greenhouse gas emissions. Therefore, reducing greenhouse gas emissions by 2050 by over 80 will put particular pressure on energy systems. If, as seems likely, global energy markets become more interdependent, the EU energy situation will be directly influenced by the situation of its neighbours and by global energy 8The model used for this purpose is the PRIMES energy system model. 9See annex quot;Selected Stakeholders39; Scenariosquot;, including scenarios of the International Energy Agency, Greenpeace/EREC, the European Climate Foundation and Eurelectric. Further studies and reports have been closely analysed, such as e.g. the independent report of the Ad hoc Advisory Group on the Energy Roadmap 2050. 10These uncertainties include among others the pace of economic growth, the extent of global efforts to mitigate climate change, geopolitical developments, the level of world energy prices, the dynamics of markets, the development of future technologies, the availability of natural resources, social changes and public perception. 11European societies might need to rethink the way energy is consumed, e.g. by changing urban planning and consumption patterns. See Roadmap to a Resource Efficient Europe COM2011 571. nbsp;EN 4 nbsp; EN trends. The results of the scenarios depend notably on finalising a global climate deal, which would also lead to lower global fossil fuel demand and prices. Overview of scenarios12Current trend scenarios Reference scenario. The Reference scenario includes current trends and long-term projections on economic development gross domestic product GDP growth 1.7 pa. The scenario includes policies adopted by March 2010, including the 2020 targets for RES share and GHG reductions as well as the Emissions Trading Scheme ETS Directive. For the analysis, several sensitivities with lower and higher GDP growth rates and lower and higher energy import prices were analysed. Current Policy Initiatives CPI. This scenario updates measures adopted, e.g. after the Fukushima events following the natural disasters in Japan, and being proposed as in the Energy 2020 strategy; the scenario also includes proposed actions concerning the quot;Energy Efficiency Planquot; and the new quot;Energy Taxation Directivequot;. Decarbonisation scenarios see graph 1 High Energy Efficiency. Political commitment to very high energy savings; it includes e.g. more stringent minimum requirements for appliances and new buildings; high renovation rates of existing buildings; establishment of energy savings obligations on energy utilities. This leads to a decrease in energy demand of 41 by 2050 as compared to the peaks in 2005-2006. nbsp; Diversified supply technologies. No technology is preferred; all energy sources can compete on a market basis with no specific support measures. Decarbonisation is driven by carbon pricing assuming public acceptance of both nuclear and Carbon Capture amp; Storage CCS. High Renewable energy sources RES. Strong support measures for RES leading to a very high share of RES in gross final energy consumption 75 in 2050 and a share of RES in electricity consumption reaching 97. Delayed CCS. Similar to Diversified supply technologies scenario but assuming that CCS is delayed, leading to higher shares for nuclear energy with decarbonisation driven by carbon prices rather than technology push. Low nuclear. Similar to Diversified supply technologies scenario but assuming that no new nuclear besides reactors currently under construction is being built resulting in a higher penetration of CCS around 32 in power generation. 12For details on the scenarios see Impact Assessment. nbsp;EN 5 nbsp; EN Graph 1 EU Decarbonisation scenarios - 2030 and 2050 range of fuel shares in primary energy consumption compared with 2005 outcome in 0255075RES Gas Nuclear Oil Solid fuels0255075RES Gas Nuclear Oil Solid fuels20052030 2050Ten structural changes for energy system transation In combination, the scenarios make it possible to extract some conclusions which can help shape decarbonisation strategies today which will deliver their full effects by 2020, 2030 and beyond. 1 Decarbonisation is possible – and can be less costly than current policies in the long-run The scenarios show that decarbonisation of the energy system is possible. Moreover, the costs of transing the energy system do not differ substantially from the Current Policy Initiatives CPI scenario. The total energy system cost including fuel, electricity and capital costs, investment in equipment, energy efficient products etc could represent slightly less than the 14.6 percent of European GDP in 2050 in the case of CPI compared to the level of 10,5 in 2005. This reflects a significant shift of the role energy plays in society. Exposure to fossil fuel price volatility would drop in decarbonisation scenarios as import dependency falls to 35-45 in 2050, compared to 58 under current policies. nbsp;2 Higher capital expenditure and lower fuel costs nbsp;All decarbonisation scenarios show a transition from today39;s system, with high fuel and operational costs, to an energy system based on higher capital expenditure and lower fuel costs. This is also due to the fact that large shares of current energy supply capacities come to an end of their useful life. In all decarbonisation scenarios, the EU bill for fossil fuel imports in 2050 would be substantially lower than today. The analysis also shows that cumulative grid investment costs alone could be 1.5 to 2.2 trillion Euros between 2011 and 2050, with the higher range reflecting greater investment in support of renewable energy. The average capital costs of the energy system will increase significantly - investments in power plants and grids, in industrial energy equipment, heating and cooling systems including district heating and cooling, smart meters, insulation material, more efficient and nbsp;EN 6 nbsp; EN low carbon vehicles, devices for exploiting local renewable energy sources solar heat and photovoltaic, durable energy consuming goods etc. This has a widespread impact on the economy and jobs in manufacturing, services, construction, transport and agricultural sectors. It would create major opportunities for European industry and service providers to satisfy this increasing demand and stresses the importance of research and innovation to develop more cost-competitive technologies. 3 Electricity plays an increasing role All scenarios show electricity will have to play a much greater role than now almost doubling its share in final energy demand to 36-39 in 2050 and will have to contribute to the decarbonisation of transport and heating/cooling see graph 2. Electricity could provide around 65 of energy demand by passenger cars and light duty vehicles, as shown in all decarbonisation scenarios. Final electricity demand increases even in the High energy efficiency scenario. To achieve this, the power generation system would have to undergo structural change and achieve a significant level of decarbonisation already in 2030 57-65 in 2030 and 96-99 in 2050. This highlights the importance of starting the transition now and providing the signals necessary to minimise investments in carbon intensive assets in the next two decades. nbsp;Graph 2 Share of electricity in current trend and decarbonisation scenariosin of final energy demand1520253035402005 2010 2015 2020 2025 2030 2035 2040 2045 2050Range for current trends scenariosRange regarding decarbonisation scenarios4 Electricity prices rise until 2030 and then decline Most scenarios suggest that electricity prices will rise to 2030, but fall thereafter. The largest share of these increases is already happening in the reference scenario, and is linked to the replacement in the next 20 years of old, already fully written-off generation capacity. In the High Renewables scenario, which implies a 97 share for renewable sources in electricity consumption, the modelled electricity prices continue to rise but at a decelerated rate - due to high capital costs and assumptions about high needs for balancing capacity, storage and grid investments in this quot;near 100 RES powerquot; scenario. For example, RES power generation nbsp;EN 7 nbsp; EN capacity in 2050 would be more than twice as high as today39;s total power generation capacity from all sources. However, substantial RES penetration does not necessarily mean high electricity prices. The High Energy Efficiency scenario and also the Diversified Supply Technology scenario have the lowest electricity prices and provide 60-65 of electricity consum/p