European power and renewables: navigating the perfect storm

Europe’s transforming energy landscape has rarely been under greater scrutiny than it is in 2022. At our recent Power & Renewables Conference we explored the forces of change, from highly volatile prices to Russia’s war with Ukraine and the ever-heightening focus on net zero.

Across a wide-ranging, two-day agenda our global analysts and consultants were joined by leading industry experts to discuss the path ahead. Amid such unprecedented uncertainty and change, how can the region successfully transition towards price stability, resilience and increased investment returns?

Missed it? You needn’t miss out. On-demand tickets are now available. Read on for some reflections from just a few of our speakers.

Tim Welton, Head of Power and Renewables Research, EMEARC, Wood Mackenzie

Change was a key theme at this year’s conference. That in itself is nothing new, but the events of the last year or so have really seen the pace pick up. The aftermath of the pandemic, Russia's invasion of Ukraine, the supply chain crisis and inflationary pressures are all contributing to the acceleration.

There is now a real push to both decarbonise rapidly but also ensure that security of supply remains at the top of the agenda. We're seeing a real transformation of Europe's power markets as a result, and a huge amount of investment will be required.

Tim Welton took part in a day two roundup discussion that asked: what changes should we make to accelerate Europe’s road to energy transition?

David Papp, Head of Sustainable Finance Policy Division, Central Bank of Hungary

We had a very interesting session about the European Union's sustainable taxonomy and the role it plays in decarbonising the energy sector – how it can help investment in financing the sphere.

We are at the very beginning of this. This policy tool is being implemented at the moment, but we see that this is going to – through its transparency tools – make green investment and green financing easier. It will enhance information exchange and hopefully give a boost to the sector.

David Papp took part in our discussion on the EU’s sustainable taxonomy debate and lack of flex: is taxonomy labelling the solution to ensure security of supply?

Simon Flowers, Chief Analyst, Wood Mackenzie

Russia’s war with Ukraine is affecting energy policy, geopolitics and power markets. A significant part of our discussion centred around gas markets, because gas is important in setting power prices. We concluded that gas prices are going to stay elevated for quite some years and that means power prices will be high too.

The war is leading to big changes in energy policies. The global economy is still reliant on fossil fuels and that won’t change quickly. Governments want energy security and, in the short term, access to oil and gas supply is the answer. Low carbon energy has a big role as the longer-term solution for energy security and governments are doubling down on plans to decarbonise and build out a low carbon energy mix, including renewables, hydrogen and carbon capture and storage.

Erik Mielke, Global Head of Corporate Research, Wood Mackenzie

Volatility in commodity prices is a key topic across the region right now. Prices are elevated, and companies are generating a lot more cash flow than they previously anticipated. The question is, how do they deploy the additional capital?

A lot of the focus is on accelerating growth in renewables, but we’re seeing additional investment across the entire energy complex, and of course, higher distributions to shareholders.

Erik Mielke and Simon Flowers held a fireside chat entitled ‘War in Ukraine: reflections on the impact on European energy markets.

Steven Knell, Vice President, Head of Power Renewables Consulting, Wood Mackenzie

One of the big takeaways for me was that, despite the noise around short-term fundamentals, there is opportunity amid the current crisis in Europe. Security of supply considerations, and changed appetites in relation to Russian imports, are actually going to accelerate the energy transition.

Another important takeaway was just how resilient the business models of different investors are. Profound changes are taking place in the economics of projects, almost on a daily basis, but the investment community that stands behind the renewables opportunity is thinking on its feet. And that's encouraging because with the policy targets being put forward, they're going to be asked to do more than they ever have before.

Europe's demand trajectory and the investment climate that supported it has been a bit muted over the course of the last decade. But that is all going to change. It’s creating a real era of optimism – and indeed bigger opportunities than were ever previously contemplated.

Steven Knell hosted a panel discussion: How to attract investors and lenders, the multi-trillion-dollar question.

Get a clear view of Europe’s power and renewables landscape

Wood Mackenzie’s Power & Renewables Conference: Europe was a two-day event, with a diverse agenda and a host of expert speakers and panellists. Find out more about on-demand access to all recorded sessions.