- McKinsey & Company lists improving adoption of rooftop solar, heat-pumps, and ramping up building insulation as the 3 levers that can help the EU meet its decarbonization targets
- For rooftop solar, there is potential to install 484 GW of new capacity in the bloc between 2023 and 2030 if bold ambition is adopted
- It could mean 50 GW of new production capacity to meet the forecasted new demand for rooftop solar
- Main challenge, however, is to deal with a structurally old and poorly-insulated building stock
Faster rollout of rooftop solar installations, encouraging heat-pump adoption, and ramping up home and commercial building insulation are the 3 levers that can accelerate energy efficiency of European Union’s (EU) buildings which is critical to the bloc meeting its decarbonization targets, says new research of McKinsey & Company.
EU’s built environment is responsible for 35% of the bloc’s energy related emissions and 32% of natural gas consumption which means it needs to be transformed.
According to the research, “Annual deployment of rooftop solar will need to reach one-and-half times the recent 2022 record rate of 22 GW (versus the four-year average of 10 GW a year) to reach the EU’s FF55 and RePowerEU targets.”
Their calculations show that under business as usual (BAU) scenario, EU will have 88 GW total rooftop solar installed between 2023 and 2030, which can increase to 242 GW under Fit for 55 (FF55) scenario, but under a bold ambition (BA) scenario, it can grow to 484 GW.
Achieving the FF55 or BA scenarios will need up to 103 million unique installations across the bloc between 2023 and 2030 which the analysts believe can offer opportunities to create new industries and lead to local supply chains. These will be available as component production and assembly, distribution and installation services and financing energy efficiency solution providers. These efforts can generate 429,000 new jobs.
At present, the bloc remains dependent on China to meet its solar module needs, but this is where it has an opportunity to develop domestic production by creating demand from the building sector.
Analysts count, “Fifty GW of new production capacity could be added to the EU market at an investment cost of €5 billion to €25 billion (equivalent to a maximum of 36 million panels per year) to meet the forecasted new demand for rooftop solar.”
McKinsey also believes that EU solar manufacturing could be within €0.3/MWh levelized cost of electricity (LCOE) which will be relatively cost competitive with other global suppliers provided it can produce at economies of scale, reaching ‘at least 5 to 7 GW per year of integrated sites solar-production capacity—and ensuring wider ecosystem changes’.
Payback time of solar—with a faster rollout and reduced production and installation costs—can come down from 8 years to 12 years in 2022, to 5 years to 9 years in 2030.
However, the main challenge is to deal with a structurally old and poorly-insulated building stock, read 222 million residential and 12 million commercial structures as of 2018. While changing it all translates into significant investments by owners, the current ecosystem does not have the capacity to deliver the volume of installations required—read insufficient materials, not enough manufacturing facilities along with trained and requisite workforce.
For rooftop solar, by 2030 up to 3.2 million buildings/year will need to have rooftop solar systems installed requiring around 280,000 workers, up from current workforce of 76,000.
While listing these challenges, McKinsey argues, “Yet even though the path to a low-carbon buildings sector in the EU is complex, its successful overhaul offers major opportunities for the continent that could reduce household energy costs, create jobs, and increase the resilience of the EU energy systems.”