A revolution in the use of energy by these three sectors is possible over the next 30 years, bringing about sharp reductions in CO2 emissions. Written in partnership with Eaton and Statkraft the report, Sector Coupling in Europe: Powering Decarbonization, outlines a plausible pathway of electrification, taking account of current levels of policy ambition in countries like the U.K. and Germany.
Victoria Cuming, head of global policy analysis for BNEF, commented: “Electrification, or ‘sector coupling’ as it’s known in some countries, could make a huge contribution to the achievement of governments’ emission-reduction targets by exploiting the low-carbon transition already underway in the power generation sector.”
Direct electrification and green hydrogen and fuels
Electrification could take place via a mix of ‘direct’ and ‘indirect’ changes. ‘Direct’ would involve the proliferation of electric vehicles in as much of the transport sector as possible, and the spread of electric heating systems like heat pumps in buildings and some parts of industry; and ‘indirect’ would involve a switch to ‘green hydrogen’ – produced by electrolysis using renewable electricity – as a fuel to provide heat for buildings and as many industrial processes as possible, that otherwise would rely on fossil fuels.
“However, action from policy makers will be needed if these changes are to happen,” Cuming said. “Governments should introduce incentives or requirements to cut emissions from building heat, support demonstration projects for electrification, and iron out barriers to the production of green hydrogen. They should also consider how to engage energy consumers and civil society as they have a crucial role to play in enabling electrification of these new sectors.”
75% more power generation capacity by 2050
Albert Cheung, head of analysis for BNEF, added: “Electrifying other areas of the economy will have significant repercussions for the power system. Policy makers will have to support the reinforcement and extension of the grid to handle higher power volumes and more renewables, and the deployment of batteries and other sources of flexibility to balance the system.”
The report estimates that the power system could need 75% more generation capacity by 2050 compared with what would be needed without the additional sector coupling, with low-cost wind and solar plants comprising most of that. The power system would also need to be more flexible due to the different energy consumption patterns of heating and transport. At the same time, the newly electrified sectors could create new sources of this ‘flexibility’ – by being able to alter their consumption patterns – provided the right policies and technologies are in place.
Agriculture and land use also have to be adressed
Such an electrification pathway would enable power (directly and indirectly) to account for up to 60% of final energy demand by these sectors, compared to just 10% now. That would still be far short of full decarbonization for those sectors. That is due to the various hard-to-abate activities within them – including aviation, shipping, long-haul road transport and high-temperature industrial processes such as cement and steel – as well as the long replacement cycles of some assets.
To further reduce emissions to net-zero, governments would need to introduce more ambitious policies accelerating the ‘sector coupling’ pathway, and bring other technologies to market such as carbon capture, use and storage (CCUS). They would also have to address agriculture and land use.
Renewables must be the solution
It will be important to meet the additional power demand with clean power as much as feasible to maximize the climate benefits of sector coupling. Cheung said: “It will be crucial that governments and regulators adopt an electricity market design that enables developers of wind and solar projects, and those planning battery storage plants or demand response services, to anticipate level of returns that justify their investment.”
Henrik Sætness, SVP corporate strategy and analysis at Statkraft said: “The report confirms what electrification means for the decarbonisation of society and the unparalleled role of renewable energy in the years to come. Going forward, renewables can’t be part of the solution. They must be the solution.”
More incentives for flexibility necessary
Cyrille Brisson, vice president, sales, service and marketing at Eaton EMEA commented: “This study demonstrates the need for big changes to policy and market design, in order to accelerate the energy transition and halt the accumulation of greenhouse gases in the atmosphere. While essential reform to grid regulation has started to progress across Europe, we have far to go if we are to replicate best practices and further encourage innovation. This is particularly apparent when it comes to market structures that incentivize the flexibility needed to address the challenge of renewable intermittency.”
In the report’s pathway, which assumes that the above mentioned challenges are met, total emissions across power, transport, buildings and industry fall by 68% from 2020 to 2050. This compares with a reduction of 60% if only considering transport, buildings and industry. (HCN)
