欧盟电气化目标恐难实现，分析师称缺乏支持

This is Kamla Shelling and you're listening to Switched on the Bloomberg NEF podcast. The European Union is planning to get to net zero by 2050. Legally speaking, that target is binding, but achieving it is more easily said than done. Not only will the block need to switch over to clean sources of electricity, but it'll need people to use that electricity to power their cars, heat their homes, and run their factories.

And the electricity needs to be affordable. To this end, the EU has released a new policy package in two parts. an electrification action plan and a proposal to future proof electricity bills. They're looking at a 46% electrification rate blockwide by 2040. So, what will it take to reach that target and is it even doable? Today, I'm joined by Victoria Bloomberg NF's head of policy to discuss her analyst reaction EU electrification goal unreachable without more support.

BNF clients can find this and other relevant research by heading to BNF policy go on the Bloomberg terminal or at bnf.com. If you'd like to learn more about how BNF connects the dots of the energy transition, visit us at about.bnf.com. And if you'd like to speak with a member of our team about becoming a client, [music] email us at sales.bnf. But for now, let's hear from Vicki. [music] Welcome back to Switched On, Vicki.

It's so great to have you here.

Thank you for having me. We are going to get into all the details of this new EU target in a moment. Um, but before we get there, I want to start by asking what exactly does electrification mean in a conversation like this? So, electrification here means switching from largely fossil fuels to electricity for enduse sectors. So, transport, building, heat, industry. And this is going to be a key pathway to reducing greenhouse gas emissions. um it's kind of the the two sides of the same coin with renewables.

So, we need to kind of switch to um a largely clean power system, but we also need to switch everybody else from fossil fuels to electricity. And so, why does the EU care about electrification right now at this point in time?

So, it's it's made a fair amount of progress the EU although it varies by member states in terms of kind of promoting a clean power system. Now it wants to get on track to actually pushing for electrification because there have been various sectors and countries that are kind of lagged behind in that and kind of overarching all of this is the EU's net zero target for 2050. Um so which is a legislated target and the EU has kind of positioned itself as this global climate leader.

So it it really would kind of to maintain its branding in that respect. it nearly needs to kind of get a move on in terms of boosting electrification.

All right, so the EU is trying to be a global leader in the energy transition. They've published this big target. What exactly does the target say?

So the package that was released on 17th of July in terms of electrification, the main components were um electrification action plan and a proposal to what was called future proof electricity bills. So if you give me a second just to be a policy geek for a second. So an action plan is a document that's published by the European Commission. It has no legislative weight in itself. It's somewhat of a a calendar of what the commission plans to do and could include some future legislation.

The actual future proofing electricity bills proposal is an actual proposal that will now go to the council of the European Union which is the member states and then the European Parliament to be actually adopted in practice. So you said initially that the 2050 target is a quote legislated target whereas this new one is simply an action plan. So what is the difference between those two things?

That is a great question. So in kind of legislative terms for one of a better word the 2050 net zero target is actually kind of legally binding. There's always a bit of a question mark with the EU when it has these legally binding targets on itself. What happens if it doesn't achieve those targets? But in the case of this um electrification target that's in this action plan, this is what the European Commission has termed an indicative target, this is the commission essentially saying this is what we would be planning on proposing and then we interpret it as the commission testing the waters to see what the reaction is before it then does an impact assessment at the end of the year where it's a kind of an in-depth study of the commission looks to see what would actually be the effects of implementing such a target and achieving it in theory and then they would go to the formal proposal which would then need to be adopted.

So we are a long way away before um the EU actually has a binding electrification target.

Okay. So this remains very embionic then. So this is a plan for a proposal that would then turn into an actual plan.

Exactly. And in terms of what the actual this so so-called indicative target is, it's for 46% electrification by 2040. So that means by 2040 um 46% of final energy consumption needs to come from electricity.

Do you think that's feasible?

No, not based on um not based on current policy and current trends. As listeners may know, Bloomberg NEF does a annual new energy outlook in which we have two long-term scenarios for energy system. Our kind of economics driven based case is called the economic transition scenario and that estimates that the EU, Norway, and Switzerland reach about 28% by 2040. So that's a long way away from this 46%.

What about our net zero scenario? How far does that get us?

So our net zero scenarios are kind of credible but maximum effort. Note that maximum effort and pathway to net zero and in that the EU, Norway and Switzerland reach only 39%. So still far away from this 46% indicative target. Wow. So maximum effort gets us we think 39% electrification of final energy consumption and the EU is now targeting 46. That's closer than the economic transition scenario. But the other thing about the net zero scenario of course is that it's really really expensive.

So if I recall correctly, um I think the NZS, the net zero scenario requires about $1.2 trillion each year of energy transition investment between today and 2050 to be on track for that. And last year the EU, Switzerland, and Norway put about 477 billion. So that's less than half 1.2 trillion toward the energy transition. So whether or not it's technically feasible, is it financially feasible?

No, not based on current policy support and trends. So the issue that we have is that this action plan and also other policy support that's been implemented by member states and by the EU does not put it on track to anywhere near the scale up of electrification that the commission is anticipating. uh in terms of the action plan itself that was published uh last month, it's largely relies on these kind of voluntary measures implemented by the EU but also by member states kind of future legislative reviews and very modest regulatory changes.

It introduces very little meaningful concrete support. So by that we mean things like here's some actual money to do stuff or here are some rules you need to follow that actually promote electrification. So based on this action plan and current policy support, the other thing is to flag is that if the EU is planning to put all of this kind of onus on the member states, member states in recent years plus the EU have also rolled back a fair amount of support for electric vehicles and heat pumps which will be key to promoting their deployment to actually achieve this electrification target.

So we're really not in a position to achieve this target at all. So because you're talking about policy support and financial support for consumers as well as industries, something you've been talking about really since the start of the Iran war is policy makers in the EU and elsewhere are now being pushed very hard