3. Not enough dispatchable power Over the next several years, a gap will develop between peak electricity loads and the dispatchable power capacity that can be switched on to meet it. This shortage is expected to worsen as natural gas, nuclear, and hydro production continue to decline while peak loads increase. By 2035, Europe’s gap will be equivalent to 19 percent of dispatchable capacity, or 116 GW (Exhibit 4). This, however, is a worst-case scenario and assumes no new capacity is built. Efforts are under way to close this gap with clean sources of dispatchable capacity. Over the past decade, considerable investments have been made in utility-scale battery systems, biomass, and hydrogen. Our model suggests that by 2035, more than 100 GW of battery capacity, five to ten GW of biomass, and 20 to 30 gigawatts of hydrogen electrolyzer capacity will be needed to meet peak
loads. Yet these technologies have to be further scaled, with build-outs remaining highly uncertain due to a reliance on supportive regulations, the availability of government incentives, and the need for raw materials that are in short supply, such as lithium ion. 14 4. New and evolving rules Long-term redesigns of Europe’s power market are considered critical to avoiding future price volatility, balancing the needs of consumers and producers, and bolstering investment in new generation capacity. In addition to immediate and temporary measures aimed at lowering prices for energy consumers, European policy makers and regulators are considering several longer- term options to fundamentally reform how the EU energy market operates. Each of these will need to balance the three dimensions of security, affordability, and sustainability:
Exhibit 4 Assuming no new capacity is built, Europe could face a gap in dispatchable power by 2035.
Dispatchable installed capacity in Europe 1 without new build, gigawatts
Peak load demand
Gap of 116 gigawatts of dispatchable capacity by 2035 (19%)
603 719
683
650
645
637
Gas Coal Others
559
530
Nuclear
Renewables 2
2021
2025
2030
2035
1 Austria, Belgium, Bulgaria, Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Italy, Netherlands, Norway, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, Switzerland, and United Kingdom. 2 Comprises hydro and biomass. Source: McKinsey Power Solutions EU Power Model, November 2022; Platts PowerVision; McKinsey analysis
McKinsey & Company
14 McKinsey Power Solutions EU Power Model, November 2022.
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