Europe's installed electricity generation capacity is set to grow by 2% a
year to 2010, reaching 844.8 GW (2006: 763.5 GW), with renewables (+55 GW
between 2005 and 2010 or +15.7%/yr) and gas-fired power plants (+54.6 GW or
+6.6%/yr) driving the growth, according to new research by investment bank
Societe Generale published Thursday.

SG's report, 'Electricity in Europe--Evolution of supply balances by
2020', said investments in the other energy sources will decrease to 2010,
with oil down -1.5%, nuclear power -0.9% and coal -1%.

Two scenarios were most likely for the period 2010-2020, SG said. The
first one featured slower demand growth, with natural gas and renewables still
developing to the detriment of nuclear, coal and oil but at a slower pace
(respectively, 2.6% and 5.4% per year).

The second scenario assumed stronger demand (especially in eastern
Europe), which would be offset by larger investments in natural gas (+6.6%
annual growth rate over the 2010-2020 period). "In both cases, the production
trends for each energy source will depend heavily on CO2 emissions," the
report said.

HIGHER OUTPUT, HIGHER EMISSIONS

Higher electricity production will mean higher greenhouse gas emissions,
the report said. "These will rise by 73 Mt between 2010 and 2020 for a demand
growth that remains on trend (first scenario) and 170 Mt if demand is strong
(second scenario)," the report said.

The share of renewables in electricity production (excluding nuclear
power) is set to reach 20% to 22% in 2020 depending on scenarios, SG said.
Fossil fuels would continue to dominate Europe's generation portfolio, with
55% to 58% of production in 2020.

CO2 emissions would increase more slowly than electricity production. If
growth remained on trend, CO2 emissions would rise by only 5% against a 9%
increase in electricity production between 2010 and 2020, or 11% and 16%
respectively using SG's strong growth scenario. "Because of the EU's 20%
emission reduction target by 2020, we see growing divergence between economic
growth, energy demand and CO2 emissions, but this will not be enough to reduce
the electricity sector's emissions," the report said.