Twelve years. According to the latest report of the Intergovernmental Panel on Climate Change (IPCC), that’s how long we have left to make sure global warming doesn’t increase beyond 1.5C. Waiting any longer or allowing temperatures to rise above this limit risks “irreversible impacts.”
This report is a stark and necessary reminder of why meeting goals outlined in the Paris Agreement, to keep temperature rise well below 2 degrees and pursue efforts to limit the increase of warming to 1.5 degrees, is so important. United Nations Secretary-General António Guterres put it plainly when he noted that “if we do not change course in the next two years, we risk runaway climate change.”
While there has been progress towards EU’s own targets of cutting greenhouse gas emissions by at least 40 percent and increasing the share of renewable energy in the grid by at least 32 percent, it is clear that we must raise our ambitions and accelerate investment in innovation.
In Europe, today’s adoption of the Renewable Energy Directive (RED II) by the European Parliament demonstrates a clear momentum for making progress on the agreed targets. RED II establishes an overall policy for the production and promotion of energy from renewable sources, and encourages greater corporate participation in Europe’s energy transition. We hope EU Member States will recognize the latter when transposing the Directive into their national laws by July 2021.
While the implementation of the RED II is ongoing, other steps can be taken. EU Member States are currently working on their national climate and energy plans, which are due by the end of the year. These will guide the policy and investment decisions needed to accelerate progress.
It is estimated that, to meet the Paris targets alone, the EU needs around €180 billion in extra investment every year until 2030, including in the area of renewable energy. The scale of this challenge makes it vital to attract private capital for scaling climate innovations in Europe.
If EU Member States can foster an environment which encourages greater corporate involvement in the production, distribution and consumption of renewable energy, this would go some way to bridging the current investment gap. One step would be for Member States to expand access to Guarantees of Origins (GOs), as part of their transposition of RED II. GOs prove the origin of electricity generated from renewable energy sources, enabling companies to track and report their investment. Auctioning or limiting access to GOs can seriously prohibit the growth of corporate Power Purchase Agreements. By contrast, we support Member States shifting from feed-in tariffs to an auction-based system for the financing for renewable energy projects, since this will increase competition and help reduce energy costs for consumers and companies.
This is an area that Microsoft has already been investing in, with wind energy deals in Ireland and the Netherlands allowing us to power our data centers using renewable energy sourced directly in the countries where we operate to reach our targets. Further action would make the EU market more attractive for corporations looking to procure more renewable energy.
But greening electricity generation, which accounts for 25 percent of all annual greenhouse gas emissions, is just one part of the puzzle. To make a dent in global carbon emissions, we need to be enabling a full transformation of the energy sector, which means developing new solutions for energy storage (so wind and solar power can deliver energy even on calm or cloudy days) and streamlining the distribution of electricity across the power grid to make sure renewable energy gets to where it needs to, when it needs to.
Looking beyond RED II, the Electricity Market Design Directive, currently under discussion by the European Commission, Parliament and Council, also provides significant opportunities for maximizing the positive impact of renewables on the climate. Since this legislation will aim to specify how renewables are integrated into energy markets, expanding its scope to encompass new technologies – such as the battery-based storage we are piloting on our Irish wind farm – can help ensure a more predictable supply of power from usually intermittent renewable energy sources. This will support efforts to increase the share of renewables without jeopardizing security of supply.
Transforming generation and distribution also requires the transformation of utilities and how they manage the grid to accommodate renewables and leverage consumer-side assets, all while maintaining a reliable supply of electricity. This is vital if we are to achieve a supply of predominantly renewable energy. To enable flexibility, Europe’s energy markets must be open to a wider range of players at a grid infrastructure level. Grid connections spanning large geographies or linked with neighboring power systems already exist in Northern and Western Europe, demonstrating best practices in action. Grid flexibility also requires investment in demand-response technologies, like our pilot project with Agder Energi, a smart grid solution helping to prepare the grid for greater renewable integration. Such investment could be facilitated in part through the Horizon Europe program, which is partially focused on the development of innovative zero-carbon solutions.
Microsoft has already invested in innovative renewable energy projects, both directly and by supporting our customers, such as Energie Koplopers’ smart grid project. We would like to do even more, in as many markets as possible. But for this, we – and other industry players – need the right regulatory frameworks and incentives.
With the ink barely dry on the Renewable Energy Directive and discussions on the Electricity Market Design Directive well underway, policymakers are already looking ahead to COP24 and the EU’s 2050 climate plan. While it’s important to set Europe on an ambition long-term climate path, it’s vital that we do not underestimate the importance of our short-term actions. The policy and investment decisions taken today will determine where we stand a decade from now. It’s up to Europe’s policymakers to set us on the right course. The two year window is closing fast.