European Central Bank publishes research calling for a European Energy Union and estimating renewable output gains of up to 42% for solar and 110% for wind

The European Central Bank has published an Occasional Paper, with a disclaimer that the views are those of the authors, arguing that the European Union’s reliance on imported fossil fuels and fragmented energy market leave firms exposed to high and volatile energy costs that weaken growth, competitiveness and energy security. The paper concludes that a genuine European Energy Union, coordinating market integration, infrastructure, funding, taxation and industrial policy at EU level, would better support decarbonisation and reduce vulnerability to external shocks as electricity and renewables take a larger role in production. The paper highlights that EU energy import dependency reached 67.2% in 2023, including 98.6% for oil and 89% for gas, while industrial energy prices remain higher and more uneven than in key competing jurisdictions. Its scenario analysis finds that a more coordinated EU approach to locating new renewable capacity could materially raise output, with solar generation up to around 42% higher and wind output up to around 110% higher in high-efficiency deployment scenarios than in low-efficiency ones. It identifies five policy priorities to capture those gains, namely stronger cross-border grids and interconnectors, more green financing including deeper capital markets, investment in storage, digitalisation and flexibility tools, more efficient and harmonised energy taxation, and a coherent EU industrial policy for clean technology.