The European energy sector is undergoing one of the most comprehensive transformations in its history in line with sustainability and energy security goals. Fluctuations in global energy markets, rising energy costs, and the need to combat climate change have driven Europe towards renewable energy technologies and smart energy solutions. Fundamental transformations in energy production and consumption are leading to increased use of Photovoltaic Systems, Heat Pumps, EV Chargers, and Battery Storage Systems. Supported by innovative policies and economic incentives, this transformation is reshaping Europe's energy future and serving as a model for sustainable energy solutions on a global scale.
Reasons for the Transformation
The European Union's commitments to combating climate change are among the most significant reasons for the energy transformation. To achieve the targets set in the Paris Agreement, EU countries are making intensive efforts to reduce carbon emissions and transition to renewable energy sources. In this context, photovoltaic systems, battery storage systems, heat pumps, and EV chargers play a critical role in reducing carbon emissions and ensuring environmental sustainability.
Moreover, the Russia-Ukraine war has further highlighted the need to ensure Europe's energy security. Uncertainties in natural gas supply have led EU countries to turn to local and renewable energy sources. In this regard, heat pumps and battery storage systems enhance energy supply security, reduce dependency on external sources, provide assurance against power outage, and increase grid flexibility.
Another reason for the transformation is the rising costs of traditional energy production methods. Technologies such as photovoltaic systems and heat pumps reduce energy costs and increase energy efficiency.
Given all these reasons, economic incentives and subsidies are being offered for renewable energy technologies in Europe, leading to the rapid growth of renewable energy projects. The European energy sector is undergoing a significant transformation towards sustainability and energy security goals, supported by public policies and international financial institutions (IFIs). Germany, a country that has developed significant incentive and enforcement policies in this area, leads the energy sector with its zero VAT incentive for the installation, supply, and grid sale of photovoltaic systems, making it the country with the highest photovoltaic capacity. Additionally, low-interest loans and grants provided by both banks and the public support residential and commercial photovoltaic installations, making Germany a prominent country in the solar energy sector.
Transformation on the Production Side
Distributed energy resources offer cheaper and more reliable energy to consumers. Along with this, the cost of installing photovoltaic systems has decreased by 80% over the past decade. Demand for cheaper and more reliable energy is increasing every day, leading to more installations of photovoltaic systems. EU member states installed 42 GW of new photovoltaic capacity in 2022 and 54 GW in 2023. Germany, the EU's renewable energy leader with the largest share of these new installations, has seen rapid growth in photovoltaic installations, adding 7.9 GW in 2022 and 14 GW in 2023. Following Germany in the increase in new installation capacity in 2023 are
- Spain with 8 GW,
- the Netherlands with 4.5 GW,
- and Poland with 4 GW.
In addition to the increasing installation of photovoltaic systems, heat pumps also represent a significant transformation on the production side. In 2023, 2.64 million new heat pumps were installed in Europe, with Germany accounting for 380,000 of these installations. According to the REPowerEU Plan, the goal is to install 60 million new heat pumps by 2030.
In light of these transformations, it can be said that distributed energy resources, which promote on-site consumption and relieve pressure on the grid, are being adopted instead of traditional large production facilities. This transition not only enhances energy supply security but also accelerates the shift to sustainable and efficient energy solutions.
Transformation on the Consumption Side
With the acceleration of sustainable energy production, distributed generation has increased the load on the grid. Therefore, governments are taking new measures on the consumption side to encourage local consumption. Policies aimed at promoting the consumption of energy at its production site have made the use of electric energy technologies on the consumption side a sensible choice, especially for small-scale production facilities (residential). This trend towards electrification, starting with Germany, has led to the widespread use of sustainable energy solutions such as heat pumps and EV chargers. The widespread adoption of electric vehicles and chargers is changing energy consumption habits. The widespread of electric vehicles reduces dependence on fossil fuels and increases electricity demand. In 2023, the public charging stations in Europe increased by 40%, providing electric vehicle users with more charging opportunities across a wider geography.
Another change on the consumption side, which increases electrification, is the use of heat pumps. Heat pumps, which replace fossil fuel heating systems, increase energy efficiency and reduce energy costs. In 2022, heat pump sales in Europe increased by 39% compared to the previous year. When integrated with photovoltaic systems, heat pumps provide flexibility in energy consumption. Additionally, when used with smart grid-compatible systems, these devices optimize energy consumption and facilitate demand management.
Battery storage systems, which store energy generated from renewable energy sources for use according to demand, represent another renewable energy technology driving the transformation on the consumption side. Battery storage also increases energy supply security and reduces the load on the grid. In 2022, the installed battery storage capacity in Europe reached 5.4 GW, with this capacity expected to grow annually by 24% until 2026. Again, Germany leads Europe in battery storage systems, recording a 124% annual increase in battery storage installations in 2023.
Considering all these developments, it is clear that the transformation on the consumption side will continue to increase in the future, and electric energy consumption will be one of the most important trends shaping the world of the future.
Public Actions (Governments and IFIs)
Europe has set zero carbon emission targets for a sustainable future with the renewable energy technologies it has adopted in line with its sustainability and energy security goals. For example, Germany and Sweden aim to reach this goal by 2045, while the United Kingdom, France, and Denmark plan to achieve it by 2050. Additionally, countries such as Germany, Ireland, and Netherlands have started applying zero VAT on the supply and installation of photovoltaic systems to encourage their adoption.
Moreover, the European Union and member states offer various incentives to support the widespread of electric vehicles (EVs) and charging stations. The EU's Alternative Fuels Infrastructure requires public fast charging stations to be installed every 60 km along main transport routes. This plan aims to facilitate access to charging stations for electric vehicles and increase the use of electric vehicles. Besides incentives for electric charging stations, incentives for photovoltaic systems, heat pumps, battery storage systems, and other energy-efficient technologies also play a significant role in the energy sector. The European Commission invests billions of euros through the Horizon Europe Program to support renewable energy systems and energy efficiency projects. These supports aim to accelerate the adoption of energy-efficient technologies and transform energy consumption habits.
Another incentive is provided by International Financial Institutions (IFIs) that support the transformation in energy consumption by financing energy efficiency projects. Institutions such as The European Bank for Reconstruction and Development (EBRD) and The European Investment Bank (EIB), operating within the scope of IFIs, invest in energy efficiency and renewable energy projects and facilitate the increase of these projects. For example, the European Bank for Reconstruction and Development provided €1.5 billion in financing for energy efficiency projects in Europe in 2022.
SolarVis
As solarVis, we aim to offer innovative solutions by being at the centre of this transformation. By integrating heat pumps, EV chargers, and battery storage systems into our Sales Engine along with photovoltaic systems, we provide companies with sustainable energy project simulations. Our platform, designed as a CRM and ERP solution for sustainable energy, enables companies to conduct comprehensive analyses in their quotation and project planning processes. Thus, the time to prepare sustainable energy project proposals is reduced, and dependency on engineers in the sales processes is decreased. This way, any sales representative with internet access can prepare a sustainable energy project. With this solution, we, as solarVis, play a leading role in the energy transformation and continue to shape the energy solutions of the future.
