Competitiveness of the heating and cooling industry and services Part 1 of the Study on the competitiveness of the renewable energy sector Final Report ENER/C2/2016-501 28 June 2019 Study on the competitiveness of the renewable energy sector EUROPE DIRECT is a service to help you find answers to your questions about the European Union Freephone number (*): 00 800 6 7 8 9 10 11 (*) The information given is free, as are most calls (though some operators, phone boxes or hotels may charge you) LEGAL NOTICE This document has been prepared for the European Commission however it reflects the views only of the authors, and the Commission cannot be held responsible for any use which may be made of the information contained therein. More information on the European Union is available on the Internet (http://www.europa.eu). Luxembourg: Publications Office of the European Union, 2019 ISBN: 978-92-76-09233-9 Doi: 10.2833/569159 Catalogue: MJ-03-19-513-EN-N © European Union, 2019 Reproduction is authorised provided the source is acknowledged. EUROPEAN COMMISSION DIRECTORATE C Renewables, Research and Innovation, Energy Efficiency European Commission B-1049 Brussels Main Authors: Malene S Jespersen, Ivo Georgiev, Sára D. Jaganjacová (COWI) April 2019 2 Study on the competitiveness of the renewable energy sector Table of Contents Abstract ............................................................................................................... 5 Executive summary ............................................................................................... 6 1. Introduction ............................................................................................... 10 1.1 Background ................................................................................................ 11 2. Competitiveness of renewables in the European heating and cooling industry .... 15 2.1 Assessment of the biomass technology segment ............................................. 17 2.1.1 Current state of play .............................................................................. 17 2.1.2 Competitiveness of the biomass industry .................................................. 17 2.1.3 Case study ............................................................................................ 18 2.2 Assessment of the biogas technology segment ................................................ 19 2.2.1 Current state-of-play.............................................................................. 19 2.2.2 Competitiveness of the biogas industry .................................................... 19 2.2.3 Case study ............................................................................................ 20 2.3 Assessment of the heat pumps technology segment ........................................ 21 2.3.1 Current state of play .............................................................................. 21 2.3.2 Competitiveness of the heat pumps industry ............................................. 22 2.3.3 Case study ............................................................................................ 22 2.4 Assessment of the solar-thermal technology segment ...................................... 23 2.4.1 Current state-of-play.............................................................................. 23 2.4.2 Competitiveness of the solar-thermal industry ........................................... 25 2.4.3 Case study ............................................................................................ 25 3. Impacts on the EU economy ........................................................................ 26 3.1 Employment and turnover in the biomass technology segment ..................... 29 3.2 Employment and turnover in the biogas technology segment ........................ 30 3.3 Employment and turnover in the heat pumps technology segment ................ 31 3.4 Employment and turnover in the solar-thermal technology segment .............. 32 4 Conclusions and the way forward ..................................................................... 33 Annex A: Case studies on heating and cooling ......................................................... 37 Annex B: Member State plans for heating and cooling by 2030 ................................. 37 April 2019 3 Study on the competitiveness of the renewable energy sector List of abbreviations AEBIOM European Biomass Association Bioenergy Europe Formerly AEBIOM CAPEX Investment costs CEO Chief Executive Officer CHP Combined Heat and Power DG ENER Directorate-General for Energy EBA European Biogas Association EC European Commission EGEC European Geothermal Energy Council EHPA European Heat Pump Association ELENA European Local Energy Assistance Solar Heat Europe/ESTIF European Solar Thermal Industry Federation FTE Full Time Equivalents ISDE Sustainable energy investment subsidy scheme LCOE Levelized Cost of Energy MS Member State MW Megawatts MWh Megawatt Hour NECPs Draft National Energy and Climate Plans NREAP National Renewable Energy Action Plans OPEX Operating Expenditure O&M Operations and Maintenance R&D&I Research & Development and Innovation Directive 2009/28/EC of the European Parliament and of the Council on the promotion of RES Directive the use of energy from renewable sources Directive (EU) 2018/2001 of the European Parliament and of the Council on the promotion RED II of the use of energy from renewable sources (recast) RES Renewable Energy Source RES H&C Renewable Heating & Cooling TSE Turun Seudun Energiantuotanto Oy April 2019 4 Study on the competitiveness of the renewable energy sector Abstract This report constitutes the first part of a larger Study on the “Competitiveness of the Renewable Energy Sector”, conducted by COWI and CEPS for the Directorate-General for Energy (DG ENER) of the European Commission (EC). It analyses the competitiveness of renewable energy technologies within the heating and cooling industry. The study has focused on four segments constituting 93% of the European renewable heating and cooling industry: biogas, biomass, heat pumps and solar-thermal. The current stay of play within each technological segment is presented, including their impacts on the EU economy in terms of job creation and turnover based on the latest available data. The competitiveness is assessed through the application of Porter's Five Competitive Forces model based on data analysis and structured interviews. Four case studies have been conducted to examine the impact of local conditions in different European Union (EU) Member States (MS). Finally, the report includes an overview of the 2030 plans of the EU Member States including their heating and cooling targets and supporting policies, based on the draft National Energy and Climate Plans (NECPs). April 2019 5 Study on the competitiveness of the renewable energy sector Executive summary This report summarises the key findings from a study on the competitiveness of renewables in the heating and cooling industry. Heating and cooling represent around half of the final energy consumption of the Union and is a key sector in accelerating the decarbonisation of the energy system. The study was launched by the European Commission and conducted in the period November 2017 to June 2019. The study was implemented by COWI together with CEPS and has been conducted in parallel with another study on private companies' sourcing of renewable energy. Both studies have been implemented under the same contract, but results are reported in two separate publications. The main objective of this study is to answer the questions: 1) How do renewable H&C technologies compete in the H&C sector? and 2) What is the impact of the heating and cooling sector to the EU economy? This study focuses on four specific renewable energy sources (RES) technologies in the heating and cooling industry: biomass, biogas, heat-pumps and solar-thermal. From a methodological standpoint, the study was developed along two strands: a desk study part, particularly statistical data to provide the contextual background against which to understand the competitiveness issues of renewable energy in heating and cooling, and a part focusing on in-depth consultations with key stakeholders. The consultations include a questionnaire and is underpinned by the Porter’s Five Competitive Forces model. Moreover, they are complemented by four case studies (one on each heating and cooling technology) and in the form of interviews with four pan-European heating and cooling technology associations. Furthermore, milestone meetings were held with an Advisory Board consisting of these associations and chaired by DG ENER. These meetings have provided an important tool for validation and discussion of key observations with the joint participation of all concerned associations1. The renewable energy sector has a significant contribution to the EU economy. The EU’s RE sector employed around 1.4 million Full Time Equivalents (FTEs) considering direct and indirect employment2 with a turnover of approximately EUR 154.7 billion, in 2017. A rough estimate indicates that nearly half of those jobs (45%, 650 800 FTEs) are within the heating and cooling industry (considering biomass, biogas, heat pumps and solar-thermal segments). The combined turnover of those four technologies is EUR 67.2 billion and EUR 82.3 billion when biofuels and geothermal sectors are included. Increasing the share of renewable energy sources used in heating and cooling could have a positive impact on the EU economy