Europe’s purchasing power will not be reduced by renewable energies being much more expensive than fossil fuels

We estimate that the price of renewable energies will be 2.1 times higher in Europe than the price of fossil fuels, mainly due to the intermittent nature of renewable energy production. One might then worry that this will lead to a significant loss of real income and purchasing power for Europe. But this is not the case, on the contrary: Renewable energies are produced in Europe, whereas fossil fuels are imported. Transitioning to renewable energies therefore increases Europe’s value added and reduces its imports; While the solar cells installed in Europe are imported, its wind turbines are manufactured in Europe. This is an important point: if the equipment for renewable energies were imported, all the capital income in renewable energy producers’ value added would head to the rest of the world, and Europe would only be left with the labour income. So the transition to renewable energies will lead to an increase in real income, albeit with a serious income distribution problem .