Investing in renewable energy projects in Europe - Dentons' Guide 2021 - Data partner
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
Investing in renewable energy projects in Europe Dentons’ Guide 2021 Data partner
Welcome
Dentons Europe is delighted to and other countries in our region,
present the 2021 edition of our which are no less ambitious in
Guide to investing in renewable their implementation of plans
energy projects in Europe. Our and measures. We are also
publication grows in stature every fortunate to be joined by leaders
year, just as renewables become like BloombergNEF, Wind Europe,
ever more central to Europe’s SolarPower Europe, and
energy mix, contributing to the Cummins Inc., who have all
modernization and strengthening added so much to this Guide.
of the economies in our region.
Welcome to the 2021 edition of our
With the global drive to a green Guide to investing in renewable
recovery, renewables have gained energy projects in Europe. Let it
even greater prominence be a small contribution to your
as Europe’s leading example plans, whether you are deciding
of balanced, yet sustainable on a new project or renewables
development, in a world where investment, or are simply looking
what matters is not only how to better understand where we
prosperous and rich we are, but also are heading across Europe, toward
how we can positively contribute a better, greener and economically
to the wellbeing of present and viable future.
future generations.
Colleagues from more than
Arkadiusz Krasnodębski
20 jurisdictions have prepared
Head of Europe Energy group,
a concise overview of renewables
Dentons
developments at various policy
levels – the EU, member states
dentons.com • 3Foreword
There is no doubt that 2020 was Union, the UK, Japan and South
a testing year. The COVID-19 Korea are targeting to reach net
pandemic has set off an zero emissions by 2050.
unprecedented global health, In perhaps the single most
economic and social crisis. important development in climate
The record time in which the policy since the Paris Agreement,
pharmaceutical industry developed 2020 also saw China commit to
several vaccines is one of many peak emissions by 2030, and net
highlights of human ingenuity on zero by 2060. The election of Joe
display in this crisis, but it is clear Biden should bring the US back
that the pandemic will affect our into the Paris Agreement, and the
livelihoods throughout 2021 and Democrats’ majority position in both
beyond. Yet, 2020 also brought Senate and Congress means that
a string of good news, especially the country may be able to prepare
for the world’s transition to a its own net zero pledge in time for
low-carbon economy. Despite the COP26 in Glasgow at the end of
delay of COP26, which will take this year. India, one of the largest
place later this year, 2020 may and most active clean energy
well go down as a watershed year markets globally, will certainly look
for climate progress. to follow, bolstering Boris Johnson’s
goal to make COP26 the “net zero
Just a year ago, who would have
COP.” What are the trends that
thought that the vast majority
emboldened governments to make
of people walking our planet
these pledges? Of course, there
today may well live to see a
are many, but here are a few that
carbon-neutral world economy
stand out.
and the impact of human activity
on climate reverse? That is the Clean technologies have continued
promise made by governments their march forward, delivering
across countries accounting for further cost declines, increasing
nearly half of the world economy their performance, and entering
as of the end of 2020. The European more markets. It looks like 2020
4 • dentons.comwill deliver yet another record for green bond compared to its
new wind and solar installations, standard issuance. The transition to
which BloombergNEF expects a carbon-neutral economy is capital
to reach 200 GW globally, far intensive, and the global investor
surpassing any competing community is showing that it wants
technologies. Lithium-ion battery to play its part.
prices have gone down almost
Investors’ and shareholders’
90 percent over the last 10 years,
expectations typically translate
helping decrease the cost of
into change in the strategies
flexibility services in power grids,
of the businesses they invest
and of electric vehicles. We expect
in. Corporate decarbonization
EV sales to grow 28 percent over
commitments have accelerated
2020, on the back of record growth
throughout 2020. Purchase of clean
in Europe, despite the crash of
power set a new record at around
the wider auto market during
18 GW of new capacity in 2020.
the pandemic.
537 organizations pledged to join
This progress on the technology the Task Force on Climate-related
front is now increasingly being Financial Disclosures, and 55 made
recognized by, and matched with, commitments to science-based
commitments in the financial emissions reduction commitments
community. Sustainable debt (as of December 2020). These
issuance hit a new record in commitments are unprecedented,
2020, reaching US$732 billion and the months leading up to
across bond and loan varieties Glasgow will bring even more.
targeting environmental and social
So, where do we go from here?
investments. Investors are now
If 2020 was the year the world came
often ready to put a premium on
together to agree that the interest
sustainable products over others,
of the planet, businesses, investors
which was best highlighted by
and civil society align, and that
the lower interest rate offered to
the technological challenges of
Germany on its first-ever sovereign
dentons.com • 5reaching net zero can be overcome, Deployment at this scale requires
then 2021 must be the year where smooth infrastructure roll-out and
we start focusing on execution, social acceptance. Yet, experience
especially here in Europe. Without in recent years shows that such
a step change in the deployment a consensus is often still missing
of sustainable technologies and in key European markets, creating
phasing-out of fossil fuel assets, increasingly slow and difficult
the EU will miss its new development conditions for
climate target of 55 percent projects on the ground. Delivering
emissions reduction the systemic transformation that
by 2030 against 1990 levels. Europe’s climate ambition calls
This level of ambition means for can bring unprecedented
that the transition needs to opportunity and accelerate the
accelerate and spread to every recovery from the COVID-19 crisis.
country and carbon-emitting But to be realized, the political
industry in the region. promises must be matched
with concrete action to ensure
BNEF estimates that Europe needs
sustainable investments
to install between 566 GW and
flow unhindered to the sectors
651 GW of renewables over the
and communities where they
next decade to reach its climate
are needed the most.
goals, depending on the role
taken by electrification. This is Dario Traum
about three times more than what Head of Energy Transitions,
was installed in the last decade. BloombergNEF
6 • dentons.comRenewable energy investment, including asset finance and small
distributed capacity investment
Source: BloombergNEF
US$ billion
Azerbaijan Belgium Czech Republic France Georgia Germany Hungary
Ireland Italy Kazakhstan Luxembourg Netherlands Poland Romania
Russian Federation Slovakia Spain Turkey Ukraine United Kingdom Uzbekistan
dentons.com • 7Wind industry can power
Europe’s green recovery
2020 was anything but safety protocols. With reduced
business as usual. Europe took electricity demand and less thermal
unprecedented measures to generation, wind covered 17 percent
counter the COVID-19 health of Europe’s electricity demand in the
crisis that affected all areas of first half of 2020 (it met 24 percent
the economy. of demand in February 2020, before
COVID-19 kicked in).
In the first half of the year, the wind
industry supply chain experienced For project financing, the economic
major disruptions, particularly fallout resulting from COVID-19
on the manufacturing side. New increased costs of debt in the short
obstacles to the free movement term and triggered strains in debt
of people and goods impacted liquidity in the lower-rated states
operation and maintenance in Eastern and Southern Europe.
services and the construction Despite this, the first semester of
of onshore and offshore wind in 2020 saw a record €14.3 billion
Europe. And electricity demand in raised for the financing of new wind
most European countries dropped farms. This is a clear signal: Wind is
by as much as 25 percent during the right bet to build back better.
the worst period (mid-March Corporate renewable electricity
to mid-May), resulting in lower sourcing in Europe also showed
electricity prices. continuous growth in 2020, with
cumulative contracted volume
But the European wind energy
of corporate renewable power
sector proved resilient: Turbines
purchase agreements (PPAs)
produced a record amount of
growing by almost 50 percent.
electricity, governments held
auctions, and the industry With its Green Deal, the EU aims to
continued to build new wind become climate neutral by 2050.
farms applying strict health and It wants wind to account for half of
8 • dentons.comEurope’s electricity by 2050, which The Commission’s guidance
entails a huge expansion in onshore on RRPs identifies renewable
and offshore wind between now energy as a priority for the RRPs,
and then. Investing in wind energy including the building and sector
will not only help Europe reach its integration of 200 GW of renewable
climate goals, it will be central to its energy capacity by 2030 and the
economic recovery. installation of 6 GW of electrolyzer
capacity and the production and
Wind already employs 300,000
transportation of 1 million metric
people across Europe, contributes
tons of renewable hydrogen across
€37 billion to EU GDP and pays
the EU by 2025.
€5 billion in taxes each year,
supporting local populations We at WindEurope want to see
and community projects. Each funding for grids, ports for offshore
new turbine installed in Europe wind, renewable hydrogen
generates on average €10 million infrastructure and R&I. And,
of economic activity. This covers crucially, we need to see more
the manufacturing of turbines funding for revenue stabilization
and components in 248 factories mechanisms and the de-risking of
across Europe, as well as planning, projects by public investment banks
construction, logistics, operations like the European Investment Bank.
and maintenance, and R&D
If European governments fully
activities. Expanding wind energy
implement their National Energy
will also help Europe strengthen
and Climate Plans, improving their
its global leadership in wind:
current approach to permitting and
Five of the world’s top 10 turbine
making the most out of the EU’s
manufacturers are headquartered
recovery strategy, the EU will have
in the EU.
392 GW of wind capacity by 2030,
To access the €673 billion Recovery up from 192 GW today. That would
and Resilience Facility (RRF) increase jobs from 300,000 to
at the heart of the EU’s €750 billion 450,000. This is an opportunity
recovery plan (“NextGenerationEU”), we simply cannot miss.
each member state must draft
Giles Dickson
a recovery and resilience plan (RRP)
CEO, WindEurope
that specifies how their national
envelope will be spent. Each RRP
must allocate at least 37 percent of
funding to climate-related spending.
dentons.com • 9EU solar: a strong 2020,
but potential still untapped
Solar PV power in the EU has shown markets accounted for 74 percent
strong resilience in 2020 despite of new capacity – 5 percentage
COVID-19. EU member states points lower than in 2019, so that
installed 18.2 GW of solar power the contribution of the other
capacity in 2020, 11 percent more 22 EU member states, though still
than in the previous year. This was relatively small, is rising noticeably.
approximately 12 percent less than All this has contributed to the EU
we forecast in our previous EU increasing its cumulative installed
Market Outlook, but significantly solar power capacity by 15 percent
higher than we estimated in an to 137.2 GW by the end of 2020.
adjusted post-outbreak forecast in
Looking ahead, we anticipate that
late spring, when we thought solar
the surprisingly positive 2020 for
demand in the EU would shrink.
the EU solar sector will be followed
Instead, 2020 was the second-best
by four years of even stronger
year ever for solar in the EU (beaten
demand. Our medium-scenario now
only by 2011, when 21.4 GW was
forecasts additions of 22.4 GW in
installed).
2021, 5 percent higher than forecast
Our latest (December 2020) last year. For the following two
“EU Market Outlook for Solar Power” years, we are even more upbeat,
(EMO) shows Germany was once now projecting 27.4 GW in 2022 and
again the largest solar market in 30.8 GW in 2023, translating into
Europe, installing 4.8 GW. It was 15 percent and 18 percent higher
followed by the Netherlands deployment than in our EMO 2019.
(2.8 GW); last year’s market leader And in 2024, SolarPower Europe
Spain (2.6 GW); Poland, which sees demand cross the 35 GW level,
more than doubled annual solar bringing total installed solar PV
deployment (2.2 GW); and France capacity to 253 GW.
(0.9 GW). These top five solar
10 • dentons.comThere are many reasons for solar’s obstacles in the way of solar that
recent positive developments make investments much more
and optimistic outlook in the EU, difficult, and thus slow down
not least its unique versatility long-term growth. This is not the
and constantly improving cost way forward if we want to achieve
leadership, and policy support climate neutrality by 2050. As we
in Brussels and several other have shown for Paris Agreement-
member state capitals, which have compatible scenarios modeled
created the right market framework in our recent ”100% Renewable
conditions for solar’s many possible Europe” report, the volume of solar
applications. The crucial topics that the EU must install is at least
under discussion to speed up two and a half times higher than the
solar growth include ambitions expected NECPs totals by 2030.
for the Clean Energy Package 2.0,
A close look at the cumulative
tackling the gap on carbon pricing,
installed capacity reveals that
initiatives to tap Europe’s gigantic
COVID-19 impacts will delay market
rooftop solar potential, and power
growth by two years. As it stands
grid constraints. All these and
now, it will take until 2022 before
more are addressed in our
total installed solar power capacities
EMO 2020-2024.
will reach the level we forecast in
However, commitment to solar at our EMO 2019.
EU member state level must remain
To enable Europe’s citizens,
a high priority. While most member
corporates, and financing
states are increasingly seeing total
institutions to embrace the
solar capacities grow and have
lowest-cost and most versatile
acknowledged solar in their National
power generation technology even
Energy and Climate Plans (NECPs)
more enthusiastically, member
to meet 2030 EU targets, most of
states must provide optimal policy
these deployment levels are still
frameworks for solar to continue to
not ambitious enough. The average
surprise so positively in the future.
19.8 GW per year solar growth
projected in the NECPs for the next Walburga Hemetsberger
decade is close to the volume the CEO, SolarPower Europe
EU installed during its most severe
economic crisis. Moreover, we
are seeing market leaders, such
as Germany, putting regulatory
dentons.com • 11Hydrogen: an opportunity
for European renewables
The potential for hydrogen Arabia are taking strategic steps
produced by low-carbon electricity to encourage not only the use
to provide a source of clean of hydrogen but its large-scale
energy is massive. It extends from production from renewable
transport (trucks, buses and trains, electricity, with a view to export
and, in combination with other as well as domestic use.
elements, ships and planes) to
The opportunity for hydrogen
a range of manufacturing industries
in Europe is to capitalize on
(refineries, production of ammonia
the fact that all the ingredients
and other basic chemicals, steel,
for success are in place:
glass and cement manufacture),
a supportive policy environment
and from storing intermittent
and the availability of financial
low-carbon electricity to using
support from EU and national
hydrogen for heating in residential
governments; concentrations
and commercial settings. Experts
of potential industrial users with
disagree on which applications
strong incentives to decarbonize
of hydrogen are likely to be
their operations; the presence
most important (and the speed
of developers of hydrogen
at which the costs of the different
technology with the potential
technologies involved are likely
to be leaders in global markets,
to decline), but few deny that
including in hydrogen production
it will play a key role in the
(such as electrolyzers) and
energy transition.
utilization (such as fuel cells); and
The development of a hydrogen the availability of infrastructure
economy is already widely and related expertise that can be
supported, not just in the EU but deployed to connect supply and
globally. Governments from Chile demand for hydrogen, both within
to Canada and Australia to Saudi Europe (using pipelines) and over
12 • dentons.comlonger distances (using ships). step to be taken to scale up
production and use from the MW
The challenge for hydrogen in
to the GW level. In this context
Europe is threefold. First, we must
hydrogen “clusters” or “valleys,”
consider if hydrogen is the right
perhaps centered on areas where
solution. Hydrogen fuel cell-based
there is existing demand for
power options often come into
hydrogen (currently supplied from
their own with heavy weights,
high-carbon sources), and the
high power requirements, and
potential Hydrogen for Climate
long-range needs. Freight vehicles,
Action Important Projects of
for instance, place a premium
Common European Interest (Green
on carrying capacity and range,
Flamingo, Blue Danube, etc.) will
where fuel cells can deliver a power
play a crucial role. Third, Europe’s
density that batteries cannot.
hydrogen technology providers
Rail applications, too, are a very
and potential hydrogen producers
promising area, as hydrogen can
(including renewable electricity
decarbonize lines without requiring
generators) will have to hold their
expensive construction to electrify
own against stiff global competition.
them with overhead power lines.
For other applications, battery On some estimates, the European
electric or clean diesel may market for hydrogen will grow to
be the best solution. At more than seven times its current
Cummins Inc., we see these size by 2050. Putting the European
solutions as complementary. Hydrogen strategy into action
As a business working on would need investments of around
developing and manufacturing €180 billion to €470 billion and the
clean diesel, battery electric European Clean Hydrogen Alliance
and hydrogen technology, has been created specifically to
we understand that different identify and build up a clear pipeline
circumstances simply require of viable investment projects.
different solutions. Second, as with The stakes are high, and the size
renewable electricity, scale will of the potential prize is huge.
drive cost reductions. At present,
Denis Thomas
almost all of the potential uses of
Global Business Development
hydrogen have been successfully
Leader – Electrolyzers,
demonstrated, but there is a major
Cummins Inc.
dentons.com • 13EU regulatory overview
In 2020, the European Commission signs so far are encouraging,
started to flesh out the broad if momentum is maintained.
outlines of the European Green
Deal (EGD) that were first presented RES and climate targets
in December 2019. Against the
The European Commission’s latest
backdrop of the EU’s response to
analysis predicts that the EU will
the COVID-19 pandemic, the EGD
slightly exceed the 20 percent
has acquired additional importance.
RES by 2020 target set under the
The clean energy sector is clearly
2009 Renewables Directive (RED).
intended to be a major priority for
If all member states successfully
the EU’s 2021-2027 budget and to
implement their National Energy
benefit from some of the additional
and Climate Plans submitted under
financial firepower available to
the 2018 Governance Regulation,
EU institutions in the form of the
RES should slightly exceed the
€750 billion NextGenerationEU
32 percent RES by 2030 target set
fund and its Recovery and
in the 2018 Renewables Directive
Resilience Facility. The scale of
(RED II). However, the RED II target
the challenge remains huge:
does not yet reflect the deeper
to put the EU on track to reach
reductions in EU greenhouse gas
“climate neutrality” by 2050, and
emissions (GGE) by 2030 that
in the meantime to set credible
are now proposed as part of the
interim targets for 2030 and
EGD. If the Governance Regulation
regulatory frameworks that will
is amended to require a GGE
make them achievable. At the
reduction of 55 percent, rather than
level of EU policy development, in
the existing target of 40 percent
particular as regards energy from
by 2030, a 2030 RES target of
renewable energy sources (RES)
38-40 percent will be required, and
and key adjacent policy areas, the
the percentage annual RES shares
14 • dentons.comof electricity generation will need to RES electricity generating capacity
double, from their current level and associated infrastructure will in
(low 30s) to the mid-60s. itself provide employment and other
benefits, the fact that EU levels
It remains to be seen how far the
of private and public investment
EU will attempt to achieve these
in clean energy R&I activity are
increases by raising carbon prices
lower than those of other major
through the further expansion and
economies (including the US, Japan,
reform of the EU Emissions Trading
China and Korea) gives cause for
System, and how far by other
concern that Europe risks missing
means. The case for sharper carbon
out on the manufacturing sector
pricing (perhaps rising to at least
benefits of green growth.
double current EU allowance (EUA)
prices of €30 per metric ton) is One area that the European
reinforced by the fact that as the Commission has marked out for
COVID-19 pandemic took hold coordinated RES-specific regulatory
of Europe, the monthly share of action is offshore renewables
EU electricity generation from (including, but not limited to wind,
renewable energy sources (RES) wave and tidal energy). Not entirely
reached its highest level yet: coincidentally, this is an area in
42 percent in March 2020, against which the EU still has an edge in
31 percent from fossil fuel sources, manufacturing, with a much higher
as relatively high carbon prices proportion of equipment in offshore
(and falling demand) helped to projects than other categories of
counterbalance relatively low RES projects being made in the
fossil fuel costs. EU. In November 2020, the
European Commission published
Strategic considerations a strategy for increasing offshore
renewable capacity from 12 GW
The pandemic has, of course,
today to 61 GW in 2030 and
elevated the importance of the
340 GW in 2050. (Projected
EGD. A key element in the von der
increases in onshore wind and
Leyen Commission’s mission from
solar capacity over the same
the outset, its role in promoting
timescales are on a similar or
EU economic growth is now critical.
larger scale in absolute terms, but
Here, the European Commission’s
represent a much less dramatic
analysis is less reassuring. Whilst the
increase on the current levels of
deployment of vast amounts of new
deployment in proportional terms.)
dentons.com • 15Renewable energy investment, 2016-2020
Source: BloombergNEF
US$ billion
Biofuels Biomass and waste Geothermal Small hydro Solar Wind
16 • dentons.comInstalled capacity, 2019
Source: BloombergNEF
Biomass and waste Coal Gas Geothermal Hydro Hydro-Pumped Nuclear
Oil Other PV -Sma PV - Utility-scale Solar - Thermal Wind - Offshore Wind - Onshore
dentons.com • 17It will require systematic use of congestion income) and taking
of marine spatial planning account of the support needs of
frameworks, including offshore projects in the forthcoming
cross-border collaboration, to updating of the 2014 Guidelines
develop the sector in a way that on State aid for environmental
is both efficient and takes full protection and energy.
account of environmental
RES are also at the heart of one of
sensitivities and other uses of
the key EGD strategy documents,
the sea. At the same time, the
the Commission’s July 2020
European Commission has
Communication on an EU Strategy
proposed steps towards the
for Energy System Integration (ESI).
development of a “meshed”
Although the starting point of the
offshore grid (replacing the current
ESI Strategy is energy efficiency
“point to point” transmission
and the “circular” use of waste
infrastructure connecting individual
(including waste heat), it then goes
generators to national transmission
on to emphasize the importance
systems, which are then separately
of electrifying energy demand
connected by interconnectors).
that cannot be eliminated or met
This would begin with “hybrid”
in these ways, using renewable
projects that combine export cables
electricity, as well as the use
from offshore generators with
of “renewable gases and liquids
interconnection capacity. Revisions
produced from biomass,
to the Trans-European Energy
or renewable and low-carbon
Networks (TEN-E) Regulation;
hydrogen,” both as energy
creation of new “offshore bidding
storage vectors and as means of
zones” in the context of the
decarbonizing applications that
market-coupling regime; measures
cannot readily be electrified.
to facilitate anticipatory investment
by TSOs; and Commission guidance The ESI Strategy highlights
on sharing the costs and benefits a number of RES electricity-related
of hybrid projects, are all planned areas possibly to be addressed
to help to drive this agenda forward by the revision of RED II during
over the next few years. Also on 2021. These include: introducing
the agenda are clarifications and mandatory green public
amendments to avoid hybrid procurement criteria; tackling
projects being disadvantaged by remaining barriers to high levels of
the existing internal electricity RES electricity in power systems;
market rules (for example, on use and introducing more specific
18 • dentons.commeasures for the use of RES aid guidelines is also mentioned
electricity in transport and heat and in this context, as are possible
cooling in buildings and industry. reforms to the EU gas
These will come alongside possible regulatory framework.
revisions to the EU Alternative
Finally, alongside and
Fuels Infrastructure Directive and
complementing the ESI Strategy,
investment support for the roll-out
the European Commission has
of 1 million EV charging points in
issued its hydrogen strategy. This
the EU by 2030, and revisions of the
shows the EU’s determination to
EU Energy Efficiency Directive and
make exploiting the potential of
EU Industrial Emissions Directive.
low-carbon hydrogen a major
A Network Code on Demand-Side
plank of its future energy, climate,
Flexibility is also proposed to unlock
transport and industrial policies,
the potential of “active consumers”
which will inevitably have strong
of electricity and to support
links to future EU and national
a renewables-heavy grid.
renewables policies. We consider
Various regulatory initiatives to the hydrogen strategy and the
support “green” gases and other future EU hydrogen economy
forms of renewable fuel are also further in the section below.
contemplated in the ESI Strategy.
These include the revision of the
EU Energy Taxation Directive to
align the taxation of energy better
with the EU environment and
climate policies, ensure harmonized
taxation of storage and hydrogen
production (avoiding double
taxation), and work “towards the
phasing-out of direct fossil fuel
subsidies.” The update of the state
dentons.com • 19Hydrogen in the EU:
policy overview
Low-carbon hydrogen has a key part extra operational optimization options
to play in the EU’s net zero future. In and lower curtailment risk.
2020 it started to be fully integrated
A key challenge is to scale up
into policy-making. Creating an
production of low-carbon hydrogen
entire new industry in a relatively
and reduce the costs of producing
short timescale is a major challenge
it, whether by electrolysis of water
but also a massive opportunity,
(green hydrogen), or (for those
particularly for the European
content to produce low-carbon
RES electricity sector.
hydrogen using fossil fuels) by
reforming natural gas with carbon
A silver bullet?
capture, usage and storage of
Hydrogen is increasingly seen as an the waste CO2 (blue hydrogen).
essential component of the toolkit Although low-carbon hydrogen
that will be required to achieve a net has much to offer both the RES
zero economy in 2050. If produced and oil and gas sectors in terms
by low-carbon means, it offers of value extension, for at least the
the convenience of hydrocarbons next decade, and probably longer,
without their greenhouse gas its production will require some
emissions. Producing it from form of regulated financial support
electricity allows energy to be stored in order to be economically viable.
on a scale and over time periods Some industrial users will also need
that battery technologies struggle support for converting their plants to
to accommodate at present. It could use hydrogen.
help decarbonize large parts of the
economy, including heavy transport, EU and national strategies
aviation, space heating and carbon-
In pursuit of its targets of 6 GW
intensive industrial processes. It could
of electrolyzer capacity by 2024
give a renewables-heavy power grid
and 40 GW by 2030, the EU’s
20 • dentons.comhydrogen strategy identifies several sees the potential to convert its
key areas for action at EU level: strength in natural gas production
channeling investment in both R&I into a role as a major source of
and commercialization projects blue hydrogen.
(including through the European
Clean Hydrogen Alliance); boosting Projects
demand for low-carbon hydrogen
There are significant policy issues
(including by developing common
to be resolved in developing
standards for its production, and
these strategies, but government
setting up a pilot scheme for carbon
and regulatory activity around
Contracts for Difference to support
low-carbon hydrogen has been
its use in industrial context); adapting
matched by practical plans on the
natural gas infrastructure and the
part of a range of industries to scope
existing gas regulatory framework for
out hydrogen projects – even if
hydrogen purposes; and exploring
some are still relatively small scale
international cooperation with
and many are predicated on the
potential sources of green hydrogen
availability of regulated support.
outside the EU (up to another
Examples include well-developed
40 GW of capacity outside the EU
plans for clusters around ports on the
is envisaged as potentially supplying
Dutch and British sides of the North
EU users by 2030).
Sea incorporating blue and green
The multi-GW ambitions and broad hydrogen elements; gas network
scope of the EU strategy are matched operators proposing a “European
by those of a number of member hydrogen backbone;” and numerous
states. The German government has plans for individual industrial sites,
allocated €9 billion of a €130 billion often using offshore wind power to
economic stimulus package to the produce hydrogen.
hydrogen sector and its strategy sets
out 38 measures to be taken forward
in the next three years alone. France,
Spain and others have also published
substantial strategies. Beyond the EU,
the UK aims for 5 GW of production
capacity and a “hydrogen town” by
2030 and is working on regulated
support frameworks for blue and
green hydrogen, while Russia clearly
dentons.com • 21Azerbaijan
Azerbaijan’s economy has long been dominated by the oil and
gas sector, a trend that will certainly continue in the near term.
However, new laws and model agreements have now been
prepared which, for the first time, will provide a clear framework
for RES in Azerbaijan. Significant new wind and solar projects are
in advanced stages of negotiation with foreign companies, and
there are ambitions to expand the development of RES as part
of a broader program of infrastructure renewal.
Share of renewable energy in electricity generation capacity
in 2020 – 17 percent* (estimate)
Azerbaijan national target by 2021 – 22 percent*
Share of electricity generated from renewable sources in the total
production of electricity in 2019 – 1.7 percent*
Drivers guaranteed tariffs, rebates on buyers’
obligations, foreign investment and
The long-awaited draft Law of
other support mechanisms, such
Azerbaijan “On the Use of Renewable
as scientific research. In addition
Energy Sources in the Production
to a guarantee on protection of the
of Electricity,” is under final review
investment and certain tax incentives
by the presidential administration.
for seven years under existing
It will address taxes and duties,
legislation, incentives proposed for
* Figures from Azerbaijan’s Ministry of Energy and State Statistical Committee
22 • dentons.cominvestors in RES projects in Azerbaijan As part of a broader infrastructure
include guaranteed offtake (under development effort in the
a take or pay contractual regime), aftermath of the recent hostilities
guaranteed connection, priority in in Nagorno-Karabakh, it has been
dispatching, long-term land leases reported that eight areas with high
and the possibility to index payments solar energy potential are being
to foreign currency. Draft model evaluated in the Kalbajar, Lachin,
contracts, including forms of a power Gubadli, Zangilan, Jabrayil, Fuzuli
purchase agreement, connection regions, together with potential wind
agreement and state guarantee, have energy resources in the Kelbajar
also been prepared and are under and Lachin regions.
consideration. In the near future
The Ministry of Energy of Azerbaijan
rules for holding renewable energy
currently estimates a potential RES
auctions and on a net metering and
capacity of 3,000 MW for wind,
calculation scheme will be published.
23,040 MW for solar, 380 MW for
The government has also started biomass and 520 MW for small
preparing a “Road map on the hydropower. It is a strategic priority of
development of the use of the Azerbaijan to significantly increase its
offshore wind industry in Azerbaijan.” wind and solar energy capabilities in
The World Bank has already estimated the coming years.
that the country has the potential for
tens of GW of offshore wind power Constraints and risk factors
(in particular, floating units).
The protracted time schedule for the
A number of projects have moved preparation and implementation of
forward, including a 240 MW onshore draft laws and model agreements
wind project involving ACWA Power relating to RES in Azerbaijan has
(for which a PPA, TCA and investment delayed the development of
agreement were signed on December significant projects and has hindered
30, 2020), a 200 MW solar project the overall development of the
involving Masdar, and a pilot sector. Once the necessary legal
project to install solar panels on and regulatory framework is in place,
Lake Boyukshor. A number of other particular challenges include the
international energy companies have competitiveness of tariffs, issues with
signed memoranda of understanding technology transfer and a lack of
(and similar) with the Ministry of available financing, particularly in the
Energy of Azerbaijan on a range of current low oil price environment.
renewable energy issues.
dentons.com • 23Belgium
Energy policy in Belgium is set both at the federal and regional
level. While all policy levels acknowledge and remain committed
to the stated RES objectives, Belgium has not been able to meet
its 2020 goals and it is currently unclear how it intends to meet its
objectives after 2025.
Share of renewable energy in gross final energy consumption
in 2019 – 9.9 percent
Belgium national target by 2020 – 13 percent, with a long-term
goal of 17.5 percent by 2030
Drivers systems of tradable renewable
energy certificates in all three regions
The largest component of RES
(Brussels, Flanders and Wallonia).
in Belgian energy generation is
The federal government’s
hydropower (nearly 50 percent),
competence covers matters related
followed by thermal energy
to energy supply, nuclear plants,
(biomass), wind, solar and others.
offshore wind farms and large energy
The first offshore wind zones were
infrastructure projects.
commissioned in 2020 (three new
offshore wind farms: Mermaid, One notable and encouraging
Seastar, Northwestern II), bumping trend of 2020 has been a number
Belgium’s wind capacity up to of substantial new corporate
almost 2.3 GW. PPAs involving offshore wind
farms and offtakers in the Belgian
The regulatory framework remains
chemicals industry.
largely unchanged, including the
24 • dentons.comConstraints and risk factors Following the completion of an initial
feasibility study, steps are now being
Belgium failed to meet its 2020
taken to allow for the construction of
objective of 13 percent, ending up
the plant, which will use electrolysis
at 11.7 percent instead, with the
to convert surplus renewable energy
Flemish region generating the largest
into green hydrogen. The project
shortfall. Belgium had previously set
will be rolled out by 2022 and the
its combined renewable energy target
plant is currently scheduled to go
at 17.5 percent by 2030. Following the
operational by 2025. The parties
determination that Belgium would
financing the project will include the
fall short of its 2020 target, it was
Flemish regional investment agency,
concluded that this was mainly due to
a major Belgian dredging company
structural underinvestment by private
and one or more private investors,
parties in the RES sector.
who are currently being selected by
In order to achieve its long-term the consortium.
objectives, recent studies point out
that Belgium requires at least an Response to the
additional 2.3 GW in onshore wind COVID-19 crisis
capacity and 2.4 GW additional solar
While contingency plans have been
capacity between 2019 and 2023,
implemented in Belgium to guarantee
as well as the construction of four
the availability of production,
or five new gas-fired power plants
the period has witnessed an
(providing in sum 3.85 GW) if its
exceptional drop in wholesale prices.
remaining operational nuclear power
Given commitments to renewables,
plants close, as currently intended,
the COVID-19 crisis is not expected
by 2025. The closure of the nuclear
to cause a downturn in RES
power plants is subject to ongoing
investments in Belgium.
political debate and is expected
to remain on the political agenda
in 2021.
Hydrogen trends
In early 2020, seven major Belgian
industrial entities and public
stakeholders formed a consortium
to construct and operate a green
hydrogen plant in Ostend harbor.
dentons.com • 25Czech Republic
In the first half of 2020, solar PV capacity increased by 23 MW
in the Czech Republic, with at least 2,000 MW more to be built
before 2030, according to the recent National Energy and
Climate Plan. The proposed Modernization Fund could be one
of the key drivers of public funding of RES in the next few years.
Share of renewable energy in gross final energy consumption
in 2019 – 16.2 percent
Czech Republic national target by 2020 – 13 percent, with a long-term
goal of 22 percent by 2030
While the Czech Republic has been Drivers
ahead of its 2020 RES share target,
The Environment Ministry of the
approximately CZK 650 billion
Czech Republic prepared a new
(€24.48 billion) of investment is
Program Document under the EU
needed to attain the overall goals
Modernization Fund aiming to use
in power generation between
resources from the sale of emission
2021-2030, including at least
allowances to subsidize projects
CZK 33 billion (€1.26 billion) of
through nine programs, which
RES public subsidies for small
will focus in the first wave on
local installations (biomass, solar,
the development of new
heat and wind). Dominating
non-fueled RES, modernization
RES are biogas (27.7 percent),
of heat supply networks, improved
solar (24.9 percent) and
energy efficiency and reduction
biomass (22.5 percent).
of industrial greenhouse gases in
26 • dentons.comthe EU ETS installations. consumption. So far, it does not
The goal is to support the include support for hydrogen
development of RES projects projects.
in brownfield and industrially
The amendment also deals with the
polluted sites.
issue of overcompensation, especially
The Environment Ministry has already for RES projects commissioned
launched a preliminary registration before 2016. The appropriateness
of projects and hopes to get final of subsidies will be evaluated by
government approval of the Program reference to the internal rate of return
Document by mid-2021. If approved, of investment in RES (6.3 percent for
up to CZK 150 billion (€5.72 billion) solar, 9.5 percent for biomass,
will be made available to public and 10.6 percent for biogas and
private investors, with at least 7.0 percent for hydro, wind and
CZK 59 billion (€2.25 billion) geothermal). To determine the
allocated to RES. However, the internal rate of return, the Ministry
final amount of available funds of Industry and Trade of the Czech
will depend on multiple factors, Republic will review performance
including the fluctuation of emission at sectoral and, in some cases,
allowance prices. individual project level, potentially
resulting in adjustment of subsidy
Constraints and risk factors levels or in some cases an obligation
to reimburse the subsidy received.
Following consultations, the
government redrafted its proposed Parliament is expected to approve the
amendment to the Act no. 165/2012 amendment in the first half of 2021.
Coll., the Promoted Energy Sources
Act, as amended, which introduces
new types of incentives for RES
such as (i) a subsidy for the use of
biomethane in transport, (ii) auctions
for annual or hourly bonuses, and
(iii) green bonuses based on own
dentons.com • 27France
France is seeing steady growth in renewables. In 2020, RES
installed capacity reached 55.3 GW, of which 46.5 percent is
hydro. 2.4 GW of RES installations were connected to the grid
in 2020 (+4.5 percent), with a significant slowdown due to the
COVID-19 outbreak.
Share of renewable energy in gross final energy consumption
in 2019 – 17.2 percent
France national target by 2020 – 23 percent, with a long-term
goal of 33 percent by 2030
Drivers and support the production of
decarbonized hydrogen.
In 2020, the government of France
announced a national strategy for The final version of the Multiannual
the development of decarbonized Energy Program (MEP) was issued
hydrogen. Calls for projects are in 2020, setting objectives for the
currently ongoing in relation to growth of renewables on a 10-year
the hydrogen supply chain and scale. On this basis, competitive
hydrogen use in transport. The procedures launched by the French
selected projects will be entitled to state to grant feed-in tariffs or
public support. The government Contracts for Difference keep going.
is also drafting an ordinance to The average tariff is €59.7/MWh
regulate the hydrogen sector, setting for onshore wind energy, and
up a mechanism to guarantee €57.4/MWh for ground and
traceability or origin of hydrogen, roof-based photovoltaic solar power.
28 • dentons.comAs of today, the rate of attainment is obliged to sell up to 100 TWh of
of the MEP 2023 targets is more than “historic” nuclear electricity per year
99 percent for hydro, 71 percent to other suppliers. However, since
for onshore wind and 50 percent demand exceeds this ceiling every
for solar. year, EDF could be obliged to sell the
entirety of this electricity in the future.
Subsidy-free projects are developing.
Finally, decisions are expected on the
France has not yet reached
possible construction of new nuclear
a corporate PPAs “golden age,” but
plants, and extending the operational
at least a dozen big corporate PPAs
life of some “historic” generators.
were signed in 2019-2020. The railway
company SNCF has notably secured
Response to the
a 260 GWh annual supply of solar
COVID-19 crisis
electricity through corporate PPAs.
The first three quarters of 2020
Constraints and risk factors were marked by a sharp slowdown
in the number of grid connections.
The litigation risk against RES projects
Nineteen percent fewer onshore wind
is still high in France, but several
farms were connected to the grid
measures have been enacted to
than during the same period in 2019.
speed up the processes. Notably,
However, lots of projects are currently
administrative courts of appeal
under appraisal.
are now the first resort jurisdiction in
litigation relating to onshore Lockdown led to an average drop
wind farms. in daily electricity consumption of
up to 15-20 percent. In this context,
In 2021, major reforms are underway
alternative electricity suppliers had
with respect to the nuclear sector
no interest purchasing nuclear
and in a context where nuclear
electricity from EDF, and argued the
electricity is still predominant, they
pandemic was a force majeure event
will surely have an impact on RES
enabling them to suspend the ARENH
too. First, the energy group EDF will
contract. Disputes arose, with the
be reorganized in order to separate
courts agreeing the pandemic was
its monopolistic activities—mainly
a force majeure event. In retaliation,
production from nuclear—from
EDF terminated the contracts.
its competitive ones. Second, the
purchase conditions of nuclear
electricity will be amended. Under the
current scheme (called “ARENH”), EDF
dentons.com • 29Georgia
Georgia’s electricity market reforms are following the timeline
envisaged in its Energy Community Accession Protocol. The
energy market will undergo significant changes from July 2021,
improving the environment for potential investors to capitalize on
the untapped potential from hydro, wind, solar, geothermal and
biomass sources.
Georgia aims to increase the share of renewable energy in total energy
consumption from 29.5 percent (2019 data) to 35 percent by 2030.
The share of wind and solar power plants for 2030 is targeted to
hit 18 percent.
Drivers of RES projects. In April 2020,
the government approved the
Among renewables, the Georgian
“Concept Design of the Electricity
government’s focus and priorities
Market” as the guidelines for future
have moved from hydropower
liberalization. It outlines measures
plants (HPPs), the most established
such as free choice of supply
technology, toward wind and solar,
for consumers and competitive
partly in order to reduce reliance on
price formation, and places public
imported electricity during periods
service obligations on some market
when HPPs generate less power.
participants that are intended to
The ongoing reforms to the benefit RES projects.
regulation of the electricity sector
In July-August 2020, the electricity
should facilitate the development
regulator adopted new rules for
30 • dentons.comday-ahead and intraday markets, resilience of the network to deal with
balancing and ancillary services, new generation capacity and address
and unbundling of distribution the geographical mismatch between
system operators. The day-ahead the country’s renewable generation
market will start operating and an resources and areas of greatest
imbalance settlement mechanism electricity consumption. EBRD is
will be introduced in July 2021. The also making a €217 million loan to
full launch of the intraday market and refinance the GOGC (Georgian Oil
ancillary services market is scheduled and Gas Corporation) corporate
for 2022. Eurobond following the COVID-19
crisis, as part of which EBRD will
In July 2020, the government
assess the costs of generating
adopted a new support mechanism
hydrogen from Georgia’s abundant
for HPPs with capacity of more
hydro resources and transporting
than 5 MW. During the first 10 years
it through the nation’s existing gas
of operation, for each
pipe network.
September-April period, the
Electricity Market Operator (ESCO)
Constraints and risk factors
will assist HPP operators with market
risk insurance. If the market price The biggest challenge to generation
for any hour falls below US 5.5 from wind and solar sources is
cents per kWh, ESCO will cover the integration into the national grid.
difference between By 2025, considering certain
the market price and this minimum assumptions, restrictions and
price, up to a maximum of requirements, it will be possible to
US 1.5 cents per kWh. integrate approximately 665 MW of
wind and 260 MW of solar-generated
The RES sector in Georgia continues
power (50 percent of the potential).
to receive steady support from
The conductivity of high-voltage
international organizations. In
power transmission lines to enable
July 2020, the European Bank for
the export of excess capacity and
Reconstruction and Development
imports to cover deficits remains
agreed to lend €90 million for
a challenge.
a project to strengthen and improve
Georgia’s electricity transmission
system (co-funded by Germany’s
KfW). A combination of new lines
and reinforcement of existing
infrastructure should enhance the
dentons.com • 31Germany The share of renewables in the German power mix continued to increase in 2020, reaching approximately 50 percent. To cut its greenhouse gases, Germany decided to initiate a fundamental reshaping of its overall industrial sector. In June 2020, the National Hydrogen Strategy (Nationale Wasserstoffstrategie) was passed, providing for a ramp-up of the hydrogen industry with a particular focus on green hydrogen. Detailed legislation is expected. The Coal Phase-Out Act passed in July 2020 aims at future-oriented sustainable conversion of efficient coal-fired plants, and the ramp-down of less efficient older ones. Parts of the Renewables Energies Act (EEG) were reformed. Share of renewable energy in gross final energy consumption in 2019 – 17.4 percent Germany national target by 2020 – 18 percent, with a long-term goal of 30 percent by 2030 RES capacity expanded by around 6.07 Ct/kWh for onshore wind and 6.5 GW in 2020, mainly driven by 5.01 Ct/kWh for solar PV. Large-scale 5 GW of solar PV, very low 0.2 GW subsidy-free (merchant) solar of offshore wind and 1.2 GW of PV projects are now appearing. onshore wind. Average remuneration PPA structures are still at a very following RES auctions in 2020 was early stage. 32 • dentons.com
Drivers Constraints and risk factors
Germany’s energy transition is built • Slow implementation of
around the phase-out of nuclear by grid expansion to safeguard
2020 and of coal-fired power by 2038 grid stability.
at the latest, alongside continued
• Lengthy permitting process.
promotion of RES electricity, and
energy efficiency. • Lack of charging infrastructure
is a fundamental obstacle to the
This is now supplemented by the
expansion of e-mobility.
National Hydrogen Strategy, which
aims to create 5 GW of electrolyzer
Response to the
capacity by 2030 and an additional
COVID-19 crisis
5 GW later on. The strategy’s action
plan sets out 38 measures for the As part of the COVID-19 emergency
first phase from 2020 to 2023. This measures, parliament amended
will lead to increased demand for the EEG in May and June 2020.
energy produced from RES, with New provisions remove the cap for
a strong emphasis on offshore wind. solar PV subsidies, which would
The framework conditions have been have ended subsidies for smaller
improved: the target for the build- scale solar PV installations once the
out of offshore wind by 2030 was national installed capacity exceeded
raised from 15 to 20 GW; by 2040 52 GW. By removing the cap, solar
a total of 40 GW is to be installed. PV systems up to 750 kWp continue
For onshore wind, the distance rule to benefit from the subsidies under
(1,000 meters to the next urban area) the EEG. Further, to mitigate a steady
does not bindingly apply throughout increase of the EEG surcharge
Germany but is subject to federal (by which the compensation for RES
state legislation that may provide for generation operators is levied on top
shorter distances; preferred building of the power price), the surcharge will
areas will increase. be partly covered by funds from the
CO2 pricing regime, which will come
With the federal government aiming
into effect in 2021.
for 65 percent of electricity to be
supplied from RES in 2030, and the
RES support auction system for
new projects now well established,
Germany should continue to be
an attractive market for investments
in renewables.
dentons.com • 33Hungary
In 2020, Hungary adopted key legislation, strategies and
action plans to achieve its climate objectives. Numerous calls
for innovative pilot projects are currently in place to support
investments in clean, efficient energy solutions. Solar PV
generation continues to be the most popular RES technology
in Hungary. The ongoing nuclear power plant development of
2,000 MW capacity at the existing Paks site plays a significant
role in Hungary’s clean energy policy.
Share of renewable energy in gross final energy consumption
in 2019 – 12.6 percent
Hungary national target by 2020 – 13 percent, with a long-term
goal of 21 percent by 2030
Drivers The RES scheme, called METÁR, is
primarily based on a price premium
The Action Plan for the National
type of subsidy (Contract for
Energy and Climate Plan, adopted in
Difference) that may be awarded
February 2020, envisages a six-fold
following auctions. After the
increase in installed solar capacity
successful first METÁR auction,
in the next 10 years (up to around
which was more than two and a half
6,500 MW by 2030). In June 2020,
times oversubscribed, the second
parliament passed the Climate
METÁR auction took place between
Protection Act, committing to net
September 15 and October
zero emissions by 2050.
15, 2020. The support to be
34 • dentons.comdistributed was capped at aim to help DSOs and TSO to improve
HUF 800 million (€2.2 million) and the stability and resilience of the
390 GWh, each per year. Projects up public grid through innovation.
to a maximum of 49.99 MW built-in
capacity were admitted. A preliminary Constraints and risk factors
announcement on the list of
While feed-in tariff (FIT) support is
applicants confirmed the impressive
closed to new applicants, several
interest, as the second METÁR
renewable projects were previously
auction was almost five and a half
awarded FIT support, which will
times oversubscribed, and the
expire in the period 2040-2045.
lowest bid price was far below
As of April 2020, these projects
expectations (HUF 16.18/kWh,
are exposed to balancing costs
approximately €44.94/MWh).
due to the introduction of the
The official auction results are
notion of balancing responsibility.
expected in late January 2021.
However, until the end of 2025,
In the period 2020-2026, the these FIT projects are entitled to
Hungarian Energy Office is authorized a temporary and gradually decreasing
to distribute renewable Contract for compensation in order to mitigate
Difference subsidies through auctions their significant financial burdens.
up to a yearly cap of HUF 2.5 billion
(€6.9 million) and the government Response to the
plans to announce a new auction COVID-19 crisis
every six months until August 2022.
In response to the COVID-19
Hungary is working on its National crisis, the deadline for the start of
Hydrogen Strategy, with the commercial operation of FIT projects
establishment of the National and those METÁR projects that were
Hydrogen Technology Platform. awarded CfDs without an auction
Pilot projects to convert excess and which were or are due to start
carbon-free power to gas (hydrogen, commercial operations between
biomethane) with innovative March 11, 2020, and June 30, 2021,
technology will be supported was extended until June 30, 2022,
with a budget of HUF 8 billion and the deadline of those that are
(€22.1 million). Additional calls due to start commercial operations
for pilot projects are in place, between July 1, 2021, and December
including projects focusing on the 30, 2021, was extended until
establishment and operation of December 31, 2022.
energy communities. These will
dentons.com • 35You can also read
