In line with the open questions raised by the review of our case NECPs, we discuss below how increasing the share of renewables in electricity generation would affect the larger economy, emphasizing the effect of system costs on projected results. We then discuss the challenge of choosing locations and types of renewable energy sources to scale up in terms of life-cycle accounting and carbon payback times. Finally, we discuss issues of public acceptance or resistance to such possible policies.
Efficiency: including integration costs in economic analysis
Greece
While wind generation would be competitive by 2030 for most of Europe under a large-expansion scenario, the high WACC for Greece, combined with the inclusion of system costs, would lead to wind being non-competitive (relative to the current average electricity production costs). The current electricity mix’ LCOE is estimated to be just over 0.08€/kWh, while the cost of wind power in a 2030 scenario including additional grid related costs would be over 0.09€/kWh, as additional grid investment is attributed to the renewable part of the electricity system.
With grid-related portion of system costs included, the costs for electricity in 2030 would rise by 1 cent, to 0.09€/kWh. In addition, the “utilization effect” drives up overall system costs (the use of more renewables means that conventional plants would be used less efficiently, leading them to increase their prices to recoup investments). However, a low-WACC scenario (representing a potential de-risking of investment [43,44,45]) could result in generation costs falling to competitive levels, even when including integration costs.
The results change for the solar PV expansion scenario, which is much larger in terms of final share of the total electricity supply. In a high WACC scenario including system costs (grid related), electricity from PV would still be over 0.015€/kWh cheaper than the current electricity mix’ average cost. It should be noted that scenario assumptions are more indicative of large-scale installations, and costs may increase if a more rooftop-solar-oriented build-up of PV is undertaken.
Factor market effects within the model are represented as prices of labor and capital. With renewables expansion, the demand for capital increases, raising its price (i.e. capital rents), while the labor price (wage) decreases due to less demand (see Fig. 1. While higher capital rents and lower wages are seen in all EU regions, the strongest effects emerge in Greece, with up to + 9% capital rent increases and reductions in wages for unskilled labor of − 7%. The inclusion of integration costs into the analysis has sharply negative effects on wages for skilled and unskilled labor – particularly for a scenario with large-scale PV production – and lower forecasted GDP and welfare (w.r.t benchmark). The impacts on a wind scenario are less extensive than PV, but still emphasize that analysis without incorporating integration costs may be misconstruing possible economic impacts in the future.
The relatively strong effects in Greece are due to a higher capital cost share (due to high WACC) and due to ambitious scenario renewable technology penetration targets. When comparing across technologies, we see that PV triggers stronger effects since it is even more capital intensive than wind. For PV, capital rents increase by up to + 9% and wages decline by up to − 7%.%; For wind, the maximum increase in capital rent is + 3% and the strongest decline in wages is − 3%. When system integration costs are included, the effects on factor prices are slightly stronger, since the utilization effect additionally drives up capital prices.
While results from [10] presume that economy-wide effects (in terms of GDP) would be positive for Greece in both scenarios, welfare would only see a positive change in the PV scenario, with inclusion of integration costs resulting in a negative welfare effects in the wind scenario. The difference between GDP and welfare effects can be explained by price effects, which are included in GDP, but not in Welfare (e.g. higher relative prices would be reflected also as a higher GDP, but not in a higher Welfare level, which measures consumption quantities). However, if Greece could lower its WACC, this would result in an eventual positive welfare effect for both scenarios.
Austria
Similar to the Greek case, the inclusion of system integration costs (grid related) related to wind power expansion would result in a cost (LCOE) increase of almost 0.0080075€/kWh compared to the current electricity mix. This would result in an increase in the market price for electricity in Austria, due to the low current LCOE (as a result of the high share of hydropower) for its electricity mix in absolute terms (0.06€/kWh). However, sufficiently lowering WACC due to de-risking of investments would lead to wind LCOE being lower than the conventional mix, but only if system integration costs are not considered.
In comparison to wind power, the solar PV expansion scenario would result in competitive PV in the country, with an LCOE of about one tenth of a cent lower than the current electricity mix, but in terms of economy-wide effects and the market price of electricity, the eventual price would still be higher in 2030 than the current benchmark estimate by about 1%. This is again due to the current LCOE being relatively low, producing an unfavorable cost ratio between PV and conventional generation.
In terms of follow-on effects, sectors are affected by a decrease in the production of electricity (sector activity falls 7%) and corresponding increase in price (rising 2.2%), due to the results of higher electricity costs. The outlook is similar for PV expansion: electricity sector activity falls (by 6.8%) and the price of electricity rises (by 2.5%).
While both the wind power and solar PV scenarios would increase capital rents (by 0.75 and 2.2% respectively) and reduce wages (0.5 and 1.25% respectively), the effects on GDP are positive for the country. However, with a scenario of high WACC and system integration costs, overall welfare is projected to be below the benchmark level, albeit minimally (~ 0.1%) in both scenarios, as neither technology can compete with the conventional mix. Even lowering WACC via de-risking would not produce positive welfare effects.
Compared to the Greek case, the inclusion of integration costs does not change results as drastically, although (as seen in Fig. 1) it does lead to further reductions in wages for both skilled and unskilled labor compared to the benchmark scenario (in line with Greece), higher costs of capital, and lower GDP and welfare, again with more prominent effects under a PV scale-up scenario.
Netherlands
While the Greek and Austrian cases demonstrate the impact of integration costs on static macroeconomic analyses, the work of Mayer et al. [39] show how such costs affect outcomes in a dynamic framework. As can be expected by switching from a baseline scenario with mainly offshore wind to a scenario with 33% PV (requiring substantial investment in batteries to address intermittency issues), average electricity generation costs rise between 2 and 4% over a period of 10–16 years, depending on cost and learning rate (e.g. how much costs decline per doubling in production capacity) assumptions, compared to the benchmark. However, due to the required investments for battery storage consumption is being reduced and therefore also demand for electricity. Thus, its retail price drops below the baseline scenario price by 10 years into the simulation.
In terms of macroeconomic effects, Mayer et al. [39] initially show a substantial drop in GDP over the first 10 years of the scenario, being lower by as much as 0.5% compared to the baseline,%, before the lower generation costs for electricity results in rising GDP, with an overall net positive effect on GDP as compared to the baseline. The same trend holds true for welfare, although to a different degree, being lower in the first 10 years by 1% (compared to the baseline),%, but being higher 5 years later by around 0.5% above baseline and maintaining that level until the scenario concludes.
Estimating the potential for missed GHG reductions via carbon payback times
Greece
As concerns wind power, estimates of country-specific CPTs for Greece are supplied by Abeliotis and Pactiti [42], with an estimate payback time of seven months. This falls well within the range of estimates for wind turbines in Northwest Europe of 2.2 to 8.8 months [4]. As Greece has relatively high solar insolation, PV capacity factors are higher than elsewhere in Europe. This leads to relatively short payback times: 1.62 years for Greece, compared to, e.g., Germany (3.54) and progressively higher CPTs as latitude increases [4]. However, there are some caveats. First, it pertains mainly to larger installations, with a reference plant of 570 kW, employing over 4000 square meters of panels [4]. Second, it has been shown that high PV module temperatures in warmer climates limit their efficiency somewhat, with a comparative study between Germany and Cyprus showing a performance decrease of 4% in the southern country [47]. Thus, any estimate of CPT for smaller-scale PV generation in Greece (e.g., rooftop solar) may rather be a lower bound or first-order estimate.
Given the short payback times for wind in Greece, the vast majority of new capacity (as shown in Fig. 2) will be net carbon-neutral by 2030; assuming new production comes online evenly throughout the year, only 0.62 TWh of wind power would be ‘younger’ than its CPT. The slightly longer CPT for PV lead to 1.134 TWh of production not being carbon neutral, although again this should be viewed as an optimistic case, and in reality, given smaller e.g. rooftop plant sizes and loss of efficiency due to higher ambient temperatures, the CPT may be longer. In total, a first estimate of RES production contributing to GHG reduction goals in the NECP, but not being net neutral in actuality, is 1.756 TWh.
Austria
In terms of the CPT of wind in Austria, a comparison of its wind climatology versus the study area in Loriaux et al. indicates less favourable wind conditions for most of the country than northern European regions, which consistently see mean wind speeds of 6 m/s and above (especially offshore wind, with averages of mainly 9 m per second (m/s) or higher) [4], while Austria averages wind speeds of 6 m/s and below, and a power density (depicted as watts per square meter, W/m2) of 200 W/m2 or less in the majority of the country [48]. Thus, while no concrete estimates can be derived as to the actual CPT for the country, wind turbines in Austria can be assumed to have substantially higher CPTs than those found for the region of North-western Europe.
For Austria a CPT for solar PV was estimated to be 9.64 years [4]. Austria’s very high hydropower capacity results in its electricity grid’s carbon footprint being relatively low (0.21 kg CO2/kWh), which raises the country-specific CPT. Due to the low carbon intensity of Austria’s energy market (large hydro-power share), more time is needed in Austria for Solar PV’s emission reduction to be large enough to outweigh the technology’s life-cycle emissions. This long CPT results in approximately 8.59 TWh of production contributing to GHG in the Austrian NECP, while in reality not being carbon neutral. The lack of CPT for wind installations makes equivalent calculations unreasonable, but it is safe to assume lower payback times implying at least the final year or two of installations would not have reached carbon neutrality.
The Netherlands
The Netherlands was the only case country to differentiate between on- and off-shore wind production in their NECP, with the bulk of new RES buildup to come from offshore installations. Loriaux et al. [4] estimate the CPTs for wind plants in northwest Europe, specifically offshore and coastal areas, but does not provide separate estimates for CPTs for the two. Instead, a range of estimates are provided, with CPT varying between 2.2 and 8.8 months, with an average of 4 months. We assume offshore wind to have a CPT at the lower bound, and onshore the upper. The country-specific CPT for solar PV installations as is 4.41 years [4].
These CPTs result in only 0.92 of 49.1 TWh of new wind installations not being carbon neutral. New wind installations are planned mainly earlier in the decade, and the extremely short CPT implies they quickly become net neutral. PV is another matter, however as the majority of PV scaleup is projected to take place early in the decade (see Fig. 2), only a relatively small amount of total PV will be installed in the last 4.4 years of the decade, with 5.42 TWh of production not having reached its CPT, resulting in a country total of 6.33 TWh being counted towards GHG reduction goals, while in reality not being net-neutral.
Potential feasibility barriers
Greece
As Fig. 2 illustrates, both wind and PV are expected to grow almost linearly over the next decade, with wind having an initially higher capacity buildup for the first two years (1.4 TWh per year from 2020 to 2022, as compared to 0.75 per year of PV), and subsequently adding only slightly more production than PV per year. Wind rises from 7.3 to 17.2 TWh, while PV increases from 4.5 to 11.8;
A survey of literature dealing with social acceptance and public opinion of wind power in the country finds a general preference for PV over wind power, which could present issues with the planned early scaleup of wind. Previous work has found that while 78% of the population perceives wind energy as beneficial and almost two-thirds of the population supports existing infrastructure [49], a huge gap appears in terms of support of future wind development, with only 35% of the population in favor, and 21% finding them aesthetically displeasing. Further work highlights that residents in areas with wind turbines generally supported expansion of capacity, but not in their own region [50], possibly due to fears of negative impacts on tourism [14] or a Not-In-My-Backyard (NIMBY) response. Comparatively, public opinion for expansion of solar PV installation is seen as more positive [51], with surveys by [52] showing that 94% of respondents were in favor of PV parks. Over half of respondents indicated that there were no visual impacts from such installations, and 22% stating that they were an annoyance.
Austria
Like Greece, Austria plans relatively linear development of both its wind and PV resources, forecasting for both technologies a rise of 0.833 TWh per year. While Austria does not extensively outline measures to ensure public agreement with its RES buildup, by-and-large, the country has not experienced much difficulty in terms of social acceptance in the past, having an extremely high portion of electricity from hydropower, however, further expansion of hydropower has started to target ecologically sensitive areas, with increasing public resistance [53]. Walter & Gutscher [54] highlight frequent and early public interaction as a key factor in dealing with and solving public opposition to renewables development. This, in addition to political support at all levels of government, is viewed as the reason for Austria’s success in diffusion of renewable energy resources.
A counter example to the successful development of renewable energy sources is Austria’s lack of success at introducing demand-side measures to reduce emissions, namely in the building sector. While renewable energy sources enjoy broad support across all political levels, the structure and division of responsibilities of Austria’s national and state-level authorities (building policies are decentralized, with responsibilities mostly falling to regional governments) led to provinces failing to meet EU requirements on building energy performance [55].
The Netherlands
As a juxtaposition to the other cases, the Netherlands NECP proposes larger increases in RES, heavily reliant on wind power. The plan placed emphasis on involvement of local and national stakeholders in participatory processes, and a focus on local / municipal level planning, to improve public acceptance, and set a target of 50% local ownership in RES installations by the end of the decade.
The plan’s objectives in terms of social acceptance are backed up by observations in the literature, particularly in regard to emphasis on local ownership, rather than relying on new RES for jobs as economic incentive. In general, expansion of the solar energy sector leads to increases in employment, but these gains may be fleeting. Koning, Smit & Dril [56] and Ligtvoet, Pickles & Barneveld [57] conclude that most jobs in the solar PV sector in the Netherlands are generated during the construction phase for both rooftop and large-scale projects, with short term and flexible terms of appointment. Jobs for operation and maintenance of ground-mounted solar parks are more long-term, but their number is relatively small. According to Koning et al. [56], around 9165 work years of employment will be generated in the period of 2014–2020 for 985 MW of solar panels, with a resulting ratio of full-time equivalent work per megawatt of 9.3.
At the same time, job losses in the traditional energy production sector due to the growth of the renewable sector is expected, and these workers will not necessarily be redirected to the renewable sector, but will more likely be employed in other sectors, thus a one to one replacement of jobs lost in fossil fuel-based energy by jobs gained in renewable energy activities is unlikely [58].
According to stakeholder interviews, an important step towards increasing public acceptance is to involve local people and cooperatives in all stages of project development. As an example, stakeholders referenced a solar park planned in the north of the Netherlands, developed without consulting the local population during project development, resulting in local resistance. This insights has been backed by research projects on the Dutch energy transition indicating that early engagement of stakeholders and even co-ownership increases the likelihood of public acceptance of projects under the low-emission energy transition [59,60,61,62,63]. In principle it would be easier to mount solar panels in the countryside, as developers only need to agree with the landowner, and it is easier to ‘hide’ and fit the park in the existing landscape, leading to lower public resistance risks. However, this may contradict regional regulations, for instance in the province of Fryslân, which prefers installing solar parks near cities and towns [64]. As a result, there is an ongoing political discussion on how to deal with land-use issues and different point of views between and lack of overarching visions on spatial planning of solar parks at the national, provincial and (local) government levels.
Along with local ownership, the Dutch NECP highlights a municipal focus also echoes findings from the literature which emphasize varying local motivations for support of RES. In some cases, the local population is able to invest in and benefit from nearby solar parks via crowd funding, purchase of certificates or obligations for a park, or postal code ‘rose’ regulation, through which citizens are able to invest in a nearby solar park and receive tax benefits on their electricity [65]. However, it is unclear whether citizens mainly take part in such projects for financial reasons, or because of the environmental benefits. It could be a motivating factor for people to be part of a decision-making process and feel that they contribute to societal and environmental improvements. This feeling may increase the more people become familiar with climate change impacts and needed solutions. In addition, people’s feedback might improve the project design (aesthetics, location, etc.), likely increasing overall acceptance [39].
With respect to acceptance of rooftop PV, the idea of rooftop panels as status symbol, showing that the owner of the panels invested money (cost signalling) and cares about the environment, may increase acceptance. Another aspect is that of communication of all benefits of renewable energy technologies to households, i.e. environmental and social in addition to financial benefits. Financial incentives generally provide only a short-term solution, and should this incentive be taken away, interest in renewables may decline as households are insufficiently familiar with other environmental motivations [39].