Renewable energy accounts for the highest share (41%) in primary energy production in the EU, with most of it coming from biomass (57%). However, petroleum products have the largest share in the EU energy mix since more than half of the EU’s energy needs are met by imports, most of which come from fossil fuels (70%).
As a result, the share of renewables in final energy consumption in the EU was at 22% in 2021 compared to the planned target of 42.5% by 2030.
Electricity generation is the “greenest” sector in the EU (38% renewable share). However, the continent needs to further increase its renewable electricity capacity to cut its greenhouse gas (GHG) emissions down and electrify the economy.
Long–term, this will lead to a corresponding increase in guarantees of origin (GO) issuance, ultimately bringing the GO prices down, as per our Long-Term Forecast Model.
In order to better orientate yourself in this article, it helps to reference the energy flow diagram below, that visualises the energy balance of the EU. It displays the contribution and flow of various energy commodities (fuels, heat, and electricity) into the different sectors of the economy (e.g., supply, transformation, and consumption) in energy units. The width of each stream represents the amount of energy in the flow. In this article, we mainly look at the right and left sides of the diagram, zeroing in on energy imports, energy production, and energy consumption in the EU.
Energy mix is the total energy available: i.e., domestically produced energy plus energy imported from other countries (ref. red box in the diagram above). Therefore, to get an accurate overview of European energy needs, one needs to put energy production in context with energy imports.
In 2021, the EU energy mix mostly consisted of fossil fuels (70%) with petroleum products having the largest share, followed by renewables (17%) and nuclear energy (13%) (see graph below). Based on this metric alone it is clear that renewables are insufficient to cover the EU’s energy needs. However, the picture is set to change in future. Greening the European economy will require increased renewable capacities to go hand in hand with greater electrification of the economy.
Primary energy production is defined as any extraction of energy from natural sources (i.e., coal from coal mines, oil from oil fields) (ref. green box in the energy flow diagram). It does not include transforming energy from one form into another, such as electricity generation in thermal power plants. The latest data available reveals that in 2021, the largest contributing source in primary energy production was renewable energy, constituting 41% (see graph).
A split by energy source reveals that more than half came from biomass (57%), followed by wind (13.6%) and hydro (12.3%), with solar coming in last place (7.5%). This has been the case since 2016 when renewables surpassed nuclear energy for the first time.
However, when considering Europe’s overall energy consumption, it is important to point out that over half of this energy is imported (56% in 2021).
In 2021, 95% of the EU’s imported energy came from fossil fuels. Thus, the EU produces less than half of what it uses: the bloc and its Member States are all net energy importers, especially of fossil fuels. This is reflected in the statistics of gross final energy consumption, where fossil fuels occupy a relatively high share, whereas the production of fossil fuels in the EU constitutes a small share.
Although there is no EU target for the share of renewables in energy production (the target is only for renewable energy consumption), European lawmakers rolled out measures to increase the uptake of renewables, such as by accelerating permitting procedures.
Final energy consumption covers the total energy consumed by end users, such as households, industry, transport, agriculture, etc. (ref. blue box in the energy flow diagram). It excludes energy used by the energy sector itself to produce energy (including fuel transformed in the electrical power stations, and coke transformed into blast-furnace gas).
Gross final energy consumption is an accounting metric used in the Renewable Energy Directive (RED) to measure the EU’s progress toward achieving its renewable energy targets. In contrast to the final energy consumption metric, the RED’s definition also encompasses electricity and heat consumption by the energy sector for the production of electricity and heat, as well as electricity and heat distribution and transmission losses.
There is a discrepancy between the share of renewables in gross final consumption (22%) and primary energy production (40.8%), which is, as explained above, because Europe covers most of its energy needs with fossil fuel imports.
It is also worth pointing out that primary energy production does not take into account the energy lost in the conversion of fossil fuels and renewable energy to usable energy, as well as transmission losses. The difference is such that out of the total energy available in the EU, around two-thirds is consumed by end users.
Thus, by definition, we need more energy than we think as an input to produce the energy we consume. This is the reason why the EU chose gross final energy consumption as the default accounting metric to assess the progress of renewable energy in the EU. Therefore, when doing so, it is more useful to consider renewables share in the gross final energy consumption rather than primary energy production.
The Directive also sets sub-sectoral targets in the transport, heating and cooling, and electricity sectors, which also have their accounting methods for calculating the share of renewable energy.
Under the revised RED, the share of renewables in these sectors is as follows: 29% in transport, y% in heating and cooling, and z% in electricity sector by 2030 (see table).
In turn, RED defines gross final electricity consumption as “the quantity of electricity produced in a Member State from renewable sources, including the production of electricity from renewables self-consumers and renewable energy communities, and excluding the production of electricity in pumped storage units from water that has previously been uphill”. Thus, the metric can be confusing as gross final electricity consumption actually means production.
Out of all sectors, electricity is the “greenest” sector in the EU with renewables leading the way. More than a third (38%) of electricity generated in Europe in 2021 came from renewables, where hydropower production is on par with wind, followed by biomass and solar (see graph below).
Note that a considerable portion of electricity generation comes from biomass (15%), which was recently upheld as renewable under the revised RED, with more stringent criteria for biomass sourcing applicable. Next came electricity from fossil fuels (37%) and low-carbon electricity from nuclear (26%).
The data indicates that more renewables capacity would need to be installed over this decade to meet the 2030 renewable energy targets. This will increase the supply of GOs, as with greater renewable energy penetration would come greater issuance of green power GOs.
Veyt specialises in data, analysis, and insights for all significant low-carbon markets and renewable energy.
