INTERVIEW: Growth in European renewables needs to double to 2030: Wärtsilä

Annual additions of renewables need to double to 2030 to hit the European Commission's REPowerEU goals, Håkan Agnevall, president and CEO of Wärtsilä Corp., told S&P Global Commodity Insights March 16.

A radical shift in permitting and market design was needed to help deliver an efficient transition away from fossil fuels, he said.

"Change begets change, as Dickens wrote. The democratic world is coming together in a way we've not seen in a long time," Agnevall said.

While there was a clear short-term political need to switch the supply of fossil fuels away from Russia, European politicians all recognized this was not a sustainable solution.

"The major way to stabilize the price of energy is to increase independence, and the way to do that sustainably is to increase renewables," Agnevall said.

This was step one in Wärtsilä's "five step ladder" to decarbonization, implying a 30 GW/year growth in Europe's wind and solar additions to 2030 to hit the new, hugely ambitious targets -- double the recent rate.

"We're trending around 15 GW on average -- that has to accelerate. Step two is to add thermal balancing and energy storage," he said.

Step three, up to around 2030, would be to phase out inflexible plants, mainly coal but also some big CCGTs, followed by step four -- converting thermal balancing plants to run on green fuels: hydrogen, ammonia, biomethane.

The final step would be a full phaseout of fossil fuels, achievable in many countries a decade ahead of a 2050 deadline, Agnevall said.

"It's a gradual journey -- for now you can run our engines on up to 25% hydrogen," he said.

Capex model

In parallel, power market design needed to evolve from an opex to a capex model, placing more emphasis on the value of balancing power and backup capacity, he said.

The thinking is that continually sinking operational expenditure into fueling and maintaining coal, oil and gas plants is now untenable. In its place, a new capex model is rising, where upfront capex is invested in predictable, low maintenance, renewables.

"However, I would say an even bigger impact will come from simplified permitting. Many countries in Europe have huge numbers of projects in the pipeline, many of which are struggling with permitting. I'd like to see a move beyond the not-in-my-back-yard mentality for the greater good," he said.

In 2021, Wärtsilä set itself two decarbonization targets: to have a product portfolio ready for zero carbon fuels by 2030, and to be carbon-neutral in its own operations by 2030.

"A part of this is how we procure our own energy," Agnevall said, noting the development of power purchase agreements would be crucial for corporates in supporting the transition and accessing cheaper, more stable pricing.

A similar engagement across sectors would be needed to advance the hydrogen economy, he said.

"Chemical and steel industries are likely to be pioneers in creating demand for hydrogen unless regulatory forces apply real pressure more generally for early conversion to alternative fuels," he said.