State of the Industry
Europe’s Energy Odyssey - 19-02-2025
In the theater of Europe’s clean energy transition, 2024 has offered both a standing ovation for renewables and a few scenes worthy of a facepalm. Solar has broken installation records (again), wind has climbed the ranks to become Europe’s second-largest source of electricity behind nuclear, and fossil fuels are leaving center stage. In 2024, Europe’s energy landscape reached a historic milestone: solar power surpassed coal for the first time, while wind edged ahead of gas. This shift helped drive down coal and gas output for the fifth consecutive year, halving energy-sector emissions compared to their 2007 peak. Simultaneously, imports of traditional fuels were sharply curtailed. Renewable energy now accounts for roughly 47% of Europe’s power generation—an impressive figure that nonetheless underscores the challenges that lie ahead. Beneath the bright lights of these gigawatt achievements lies an array of challenges—grid bottlenecks, permitting mazes and investment slowdowns. Energy security and affordability remain paramount for the industry going forward, highlighting the need for continued innovation, policy support, and infrastructure development to solidify Europe’s progress on the path to a more sustainable and independent future.
Solar shines brightly…but slows down
Europe (EU) installed 65.5 GW of solar PV in 2024, a fresh record that would have sent champagne corks flying across the continent. Yet the fizz is somewhat flat, thanks to a drastic slowdown in growth to just 4%—a stark contrast to the 41–53% annual increases from 2021 to 2023. How did solar go from sprinting to jogging? The culprit appears to be a 13% drop in capital investments. Despite solar’s cost-competitiveness hitting record lows, market uncertainty and grid constraints have tempered investor enthusiasm. Residential rooftop installations took a nosedive, largely because governments dialed back incentives, shifting the market’s center of gravity toward utility-scale solar. In the midst of this slowdown, Europe faces a second, bigger conundrum: grid challenges. With a lack of flexibility, limited storage, and minimal demand-side response, solar generation sometimes gets curtailed, or worse, triggers negative electricity prices. The result? Large-scale solar expansion is stuck in second gear. Meanwhile, the broader EU electrification rate has stalled at 23%, leaving many potential renewable energy consumers still wedded to fossil fuels.
Looking ahead to 2025–2028, analysts see moderate solar growth of 3–7% each year. Under a “medium scenario,” the EU’s solar capacity could reach 816 GW by 2030—a respectable figure. A more ominous scenario, however, may loom on the horizon if Europe fails to solve its policy, flexibility, and grid bottleneck issues. Total solar capacity might only hit 644 GW, well short of the EU’s 750 GW target. To prevent the EU’s solar momentum from sputtering, energy experts have offered a menu of policy prescriptions. Regulatory stability tops the list: investors like predictability, and frequent policy u-turns scare them off faster than you can say “subsidy cuts”. Expanding flexibility and storage is next—battery deployments, smart grids, and robust interconnections are vital to manage solar’s variability. There’s also talk of reshoring solar manufacturing—a move that aims to reduce the EU’s reliance on Chinese supply chains for modules and inverters. Add to that tax reforms to make electricity more competitive against fossil fuels, and streamlined permitting to speed up project approvals. In short, the policy blueprint is there.
The wind rises…but may lie down
While solar has stolen many headlines, wind energy is quietly making waves of its own. In the first half of 2024, Europe installed 6.4 GW of new wind capacity, 83% of which was onshore. Europe’s total wind capacity now stands at 278 GW—243 GW onshore and 35 GW offshore—marking another milestone in the region’s energy transition. Wind has surpassed gas to become Europe’s second-largest electricity source. Investors still seem bullish on wind: €15.4 billion in new wind projects was financed in the first half of 2024, set to add 9.1 GW of future capacity. Turbine orders are also up by 11%, hitting 9.5 GW. Government auctions for wind have been on a tear, awarding 19.7 GW of new capacity (6.5 GW onshore, 13.2 GW offshore)—already 72% of last year’s total awards. Yet all is not breezy. Offshore wind is grappling with grid bottlenecks, limited port capacity, and a shortage of specialized vessels. And as with solar, electricity grid limitations remain the biggest bottleneck, delaying new connections and risking curtailment.
Looking to 2030, Europe is expected to add 207 GW of new wind capacity, reaching a total of 453 GW (363 GW onshore, 90 GW offshore). But the EU’s internal target—350 GW by 2030—still falls short of the 425 GW that many experts say is needed to meet climate goals. To close the gap, annual installations must jump to 33 GW—a big leap from the 22 GW currently forecast. Once again, grid constraints top the list of woes. Offshore expansion, in particular, suffers from slow grid development and supply chain bottlenecks. Throw in the usual permitting labyrinths, and you have a recipe for under-delivery.
Achievements amid adversity
Despite these hurdles, Europe’s energy transition is still something of a trailblazer. The EU has adopted key legislation under the Fit-for-55 package, while the REPowerEU plan aims to rapidly phase out fossil fuel dependencies. Since 1990, Europe’s greenhouse gas emissions have fallen by 32.5%, even as the economy grew by 67%, decoupling economic growth from emissions. The EU ETS (Emissions Trading System) has been expanded to maritime transport, and emissions covered by the ETS are down 15.5% compared to 2022 levels—as mentioned, a testament to Europe’s determination to decouple growth from carbon. Meanwhile, Europe has decreased its imports of fossil fuels thanks to an 18% cut in overall gas demand. On the technology front, the Net-Zero Industry Act and Critical Raw Materials Act came into force in 2024, aiming to strengthen supply chain resilience. And let’s not forget the new wave of green hydrogen projects, supported by the European Hydrogen Bank, which awarded €720 million to seven renewable hydrogen ventures.
The road ahead, a balancing act
At COP 28, the EU announced a global pledge to triple renewable capacity and double energy efficiency rates by 2030, drawing endorsements from 132 countries. It also committed to phase out inefficient fossil fuel subsidies and triple nuclear capacity by 2050, alongside 25 other countries. So where does that leave Europe’s energy transition? In short: at a crossroads. On the one hand, solar and wind keep shattering records and driving down emissions. On the other hand, persistent grid constraints, permitting red tape, and inconsistent policy signals threaten the region’s ambitious 2030 goals. Meeting climate neutrality by 2050—and the intermediate 55% net GHG reduction by 2030—will demand a full-throttle approach: robust policy, well-targeted investment, and a collective sense of urgency.
European policymakers have the blueprint: regulatory stability, flexibility and storage expansions, manufacturing reshoring, tax reforms, and permitting overhauls. Europe’s energy story in 2024 is one of contrasts. We have record solar installations but sluggish growth, ballooning wind capacity but daunting offshore bottlenecks, and robust policy frameworks that occasionally run headlong into bureaucratic walls. Yet the overall direction remains unmistakable: fossil fuels are in retreat, renewables are on the rise, and the EU continues to set its pace in the clean energy transition. It will however require a push on grid infrastructure, storage technologies, and a healthy dose of political will and deregulation. In other words, the EU’s energy odyssey is far from over.
The information contained herein is obtained from sources that are publicly available including WindEurope, SolarPower Europe, Ember Energy, and various EU publications such as the State of the Energy Union report.