Seeing RED: how the EU Renewable Energy Directive impacts EVs
Photo by Karsten Würth on Unsplash
The European Union (EU) has been at the forefront of global efforts to combat climate change and promote sustainable energy practices. One of the most significant policy frameworks driving this agenda is the Renewable Energy Directive (RED). I recently attended a webinar from ChargeUp Europe that discussed their implementation guide for national public authorities on the credit mechanism in RED III. This blog will delve into the Renewable Energy Directive, with a particular focus on how it incentivizes the adoption of electric vehicles (EVs) and contributes to the decarbonization of the transport sector.
In brief:
The Renewable Energy Directive aims to reduce greenhouse gas emissions and one of the main focus areas is transportation - the credit program helps drive innovation and investment in EV infrastructure while reducing emissions.
A flourishing marketplace for sustainable energy credits can help CPOs address OpEx and encourages the use of renewable energy sources.
EU member states have flexibility in how they develop their programs allowing them to tailor them to unique needs and energy mixes but care needs to be taken to ensure the creation of a large market.
The Evolution of the Renewable Energy Directive
The Renewable Energy Directive (RED) was first introduced in 2009 as part of the EU's broader strategy to address climate change and reduce greenhouse gas (GHG) emissions. The directive set binding targets for the share of renewable energy in the EU's overall energy mix, aiming to reach 20% by 2020. This initial phase focused on promoting renewable energy sources such as wind, solar, and biomass.
Recognizing the need for more ambitious action, the EU revised the directive two more times with the most recent version being RED III from 2023. The latest version sets a binding renewable energy target of at least 42.5% by 2030 up from the previous target of 32%.
The Role of Electric Vehicles in the Renewable Energy Directive
Electric vehicles (EVs) play a crucial role in the EU's strategy to reduce GHG emissions and transition to a low-carbon economy. The transport sector is one of the largest contributors to GHG emissions in the EU, accounting for approximately 25% of total emissions. To address this challenge, the Renewable Energy Directive includes several provisions aimed at promoting the adoption of EVs and other low-emission vehicles.
Image from ChargeUp Europe - used with permission
Electric vehicles are very efficient at energy usage (roughly 4x more than an ICE vehicle) which makes them a great candidate to reduce emissions in the transport sector. EVs efficiency comes from both lower losses and the ability to re-capture energy via regenerative braking. Even if an EV is charged with non-renewable energy, their efficiency is still better for transport emissions. However, if an EV is recharged with renewable energy, emissions in transport are eliminated and that means we are that much closer to carbon neutrality.
Incentives for Electric Vehicles
One of the key mechanisms through which the RED incentivizes the adoption of EVs is the system of renewable energy credits. These credits are awarded to producers and consumers of renewable energy, including electricity used in EVs. The directive allows for the trading of these credits, creating a market-based approach to encourage the use of renewable energy in transport.
Image from ChargeUp Europe - used with permission
Electricity used to charge EVs is considered renewable if it is sourced from renewable energy sources such as wind, solar, or hydroelectric power. By using renewable electricity for charging, renewable energy credits are generated, which can then be sold or traded in the market. This system provides a financial incentive for switching to EVs and using renewable energy for charging.
ChargeUp Europe’s webinar dove into the credit market and shared their recommendations to national public authorities on how to implement the credit mechanism to help drive EV adoption in each member country. The full implementation guide is available at: https://www.chargeupeurope.eu/positions/red-iii.
How the credit mechanism can support the rollout of charging infrastructure
The last few years have seen substantial investments in public and private charging networks. Member states have implemented various measures to support the deployment of charging stations, including grants, subsidies, and regulatory incentives.
However, in many member states the subsidies and grants that helped address the capital expenditures associated with the creation of charging networks are diminishing or ending. One of the speakers, Dr. Arthur Marronnier - Head of Energy at Electra, believes that the credit mechanism can make up for the reduction in subsidies for CapEx by helping charge point operators (CPOs) address operating expenses. Helping CPOs lower OpEx can ensure that charging infrastructure companies can provide EV drivers with cost effective charging while operating as a profitable business.
Image from ChargeUp Europe - used with permission
One of the other key recommendations in the webinar was to also look for ways to include private and semi-public charging. As Dr. Moritz Bohland - Head of Business Operations @ reev explained, these use cases can greatly increase the supply in the market making it a more attractive proposition for companies. However without the involvement of a CPO focused on private or semi-public charging, this charging would most likely not make it into the marketplace. A smaller marketplace can mean lower prices which doesn’t incentivize the use of renewable energy in any form.
Grid Infrastructure and Renewable Energy Supply
One of the primary challenges now is ensuring that the electricity grid can accommodate the increased demand from EV charging while maintaining a high share of renewable energy. The integration of renewable energy sources such as wind and solar requires a flexible and resilient grid infrastructure capable of balancing supply and demand.
To address this challenge, the EU is investing in grid modernization and the development of smart grids. These efforts aim to enhance grid flexibility, improve energy storage capabilities, and enable better integration of renewable energy sources. Additionally, continued investment in renewable energy capacity will be essential to meet the growing demand for renewable electricity in transport.
For CPOs to help contribute to grid stability and the use of renewable energy sources, further investments in equipment and technologies like battery energy storage systems or demand side response systems are needed. The credits generated under RED III will help CPOs cover these investments while also helping meet GHG targets for transport.
Conclusion
The Renewable Energy Directive has been a cornerstone of the EU's efforts to combat climate change and promote sustainable energy practices. By incentivizing the adoption of electric vehicles and driving the decarbonization of the transport sector, the directive will make significant contributions to reducing greenhouse gas emissions and advancing the EU's climate goals.
The growth of the EV market, the expansion of charging infrastructure, and the integration of renewable energy into transport are testaments to the directive's impact. However, achieving the EU's ambitious climate targets will require continued efforts to address challenges related to grid infrastructure, CPO costs, and consumer adoption.
