The schemes to remunerate investments in renewables should be accompanied by dedicated policy instruments, which are able to protect vulnerable consumers from additional net energy costs caused by the transition to a renewable energy system.

 

Energy prices for final consumers in Europe are likely to increase in the future due to a number of reasons. In part this is because investments in the electricity infrastructure of many countries have been at a low level since the liberalisation of electricity markets. In the next two decades, a significant share of the existing power plants has to be replaced and considerable investment in the grid infrastructure is needed, regardless of the need for a transition to a renewable energy system. In order to reach ambitious renewable energy targets, higher investments in renewable generation capacities will be needed than would be necessary in a “business as usual” scenario. On the other hand, over the longer term the operating costs of most renewable plants will be significantly lower than those expected for fossil plants. An energy system with high shares of renewables will also differ in terms of the geographical distribution of power generation, and will thus require modifications to the electricity grid. Additional investments will be needed for new flexibility options (such as energy storage and Demand Side Management) in order to manage the variability of an energy system with high shares of wind and solar generation. Most of these investments will have to be borne by energy consumers. Thus, the net costs of the transition to an energy system with high shares of renewable sources is likely to incur higher energy prices in a first phase compared to a “business as usual” scenario, while the lower operating costs of renewable energy will reduce energy prices in the longer run.

A considerable part of the expected net increase of energy prices can be compensated by higher efforts in energy efficiency. Thus while energy prices may rise, reduced demand will mean that bills may not go up or go up very little. Most consumers will be able to bear a moderate increase in their energy bills, but for some vulnerable consumers groups, this might not be possible. Thus the transition to a renewable energy system should be accompanied by dedicated policy instruments, which support these vulnerable consumers.

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