This article is part of our special report Energy supply and end-use integration (sector coupling).
When it comes to energy regulations, the EU tends to legislate in silos, writing directives on renewables, energy efficiency or electricity and gas markets. But with the upcoming sector coupling strategy, it needs to do exactly the opposite, says Morten Petersen.
Morten Petersen is a Danish lawmaker from the centrist Renew Europe group in the European Parliament. He is the vice-chair of the Parliament’s Committee on Industry, Research and Energy (ITRE). Petersen spoke to EURACTIV’s energy and environment editor, Frédéric Simon.
As part of the European Green Deal, the European Commission will publish a strategy on “smart sector integration” later this year. How should the Commission approach this? What are the basic principles it should follow?
What we did in the previous mandate to a large extent, was to regulate in silos, with directives on renewables, efficiency, buildings, the single market for electricity, etc.
So, I think it’s absolutely crucial that we try to get this sector coupling issue right. My big question is: how should we approach this in legislative terms? Because you can try to impose on people or businesses to have a more systemic or horizontal approach. But how to do this in reality is a different question. And I think it’s absolutely crucial that we get this right because sector coupling is absolutely key for Europe’s climate and energy ambitions.
The risk, I believe, is that we adopt a top-down approach. I do not have the answers myself, but I think it’s important that we get this right.
How would you describe sector coupling, in simple terms?
It’s about having a holistic approach to energy – looking at the benefits of bringing together other sectors of industry when it comes to energy production and consumption. And I think having this holistic approach is the key thing.
There are numerous examples of optimisation within silos. But how do policymakers and industry adopt such a holistic approach when bringing up the solutions – that is the big challenge.
The Council has already held a debate about smart sector integration in November. Have you had exchanges about this in the European Parliament’s industry committee?
We haven’t had in-depth discussions yet on that topic, no.
But the Parliament will have to take a stance when the Commission tables its proposal later this year. So how do you think Parliament should approach this discussion when it comes to actual legislation?
From an institutional point of view, a horizontal approach is required in order to fulfil the ambitions of the European Green Deal.
And when it comes to Parliament, we are perhaps the prime example of silo-thinking: we have the ENVI committee, the TRAN committee, and the ITRE committee dealing with separate policy areas.
So, we should first get our own house in order instead of having internal fights as to which committee should deal with what legislative act. When the Commission eventually comes out with its proposal, who’s going to respond on the Parliament side? This in itself will be a matter of big discussions. How will TRAN and ENVI committees feed into these discussions and make their views heard?
Parliament, in a way, is a prime example of how NOT to do it in terms of a holistic approach.
What are the basic principles you think legislators should follow in dealing with this? Is there one overarching objective that you will keep in mind?
The main objective has to be decarbonisation, whatever we do. We’re pushing hard in the Renew Europe group to introduce regulatory impact assessments on all legislation related to the Green Deal.
Every impact assessment there should reflect how to maximise the reduction of greenhouse gas emissions. And, and as a secondary objective, look into which kind of sectorial approach is needed to achieve them.
So I think we have a challenge on the institutional side to maximise a reduction in greenhouse gas emissions, rather than insisting on this being an energy domain, a transport domain or whatever – the overall ambition is obviously to reduce greenhouse gas emissions. And we need some serious impact assessments on the legislative proposals, to verify the extent to which they fit into the overall climate objective.
And once we have that basis, then we will have to discuss how to go about this in legislative terms, who’s doing what. This is why impact assessments will be so crucial. In Denmark, we do this on all legislative acts, and I hope we will adopt the same principles at European level.
The Commission has already suggested that the first objective of sector coupling will be to increase “direct electrification” – in sectors like buildings, industry and transport. This entails investments in new power lines and renewable energy generation capacity. How can the EU ensure these investments bring the most value for money?
Again, impact assessments will be key. Right now, in the European Parliament, we’re having a big discussion on the PCI list – the Projects of Common Interest for energy infrastructure.
One thing is to evaluate the cost-effectiveness of investments in energy infrastructure. And another is to determine the extent to which this infrastructure is compliant with the climate objectives of the Paris Agreement.
Whatever we invest from public funds has to comply with the overall objectives of greenhouse gas reduction.
The European Commission’s second stated objective is “indirect electrification,” using excess renewable electricity to produce low-carbon fuels like hydrogen. Again, that requires new investments in things like electrolysers. How can policymakers determine which are the most cost-effective projects, knowing these will come “in addition” to renewable electricity capacity?
Again, it has to be related to the effectiveness in terms of greenhouse gas reductions. And electrolysers are a great example because you have to take into consideration the benefits they can bring for example in the heating and cooling sector – the extent to which they can actually help reduce greenhouse gas emissions there.
Fossil fuels – mainly oil and gas – are still dominant in energy-using sectors like heating, transport, industry, buildings and agriculture. Is “smart sector integration” the solution here?
Sector coupling also implies taking energy storage issues into consideration. And heating is such a massive part of our energy demand that we have to ensure maximum efficiency there. Because using surplus renewables to heat up the water in your household or district heating systems is a fantastic case of sector coupling where you phase out fossils and increase renewables in heating.
Scandinavian countries like Denmark have championed district heating as a way to decarbonise. But they also require big investments in infrastructure, basically hot water pipelines. Does it make sense to adopt such a model everywhere in Europe?
I think it does to a very large extent. We have a challenge on the financial side, aggregating also smaller projects, thereby creating sufficient volumes for them to be handled by the big institutional investors. And we haven’t solved that yet.
Green finance is fantastic for large infrastructure projects. But we also have to look at smaller projects in areas like district heating, which is so important for decarbonising energy use. And finance aggregation – piling up smaller projects in some kind of syndication – is in my view a challenge that we have to tackle.
District heating networks are often praised for being low-carbon. But a lot of them actually run on coal and gas. How far has a country like Denmark gone into ridding district heating systems from fossil fuels?
I don’t know the exact numbers but Denmark has gone quite far in terms of integrating renewables in district heating.
But it’s a challenge, right? Decarbonisation there hasn’t happened fully yet…
Not fully perhaps, but we have great examples of constituencies which are more or less there. We have great examples of projects integrating geothermal or using surplus renewable electricity.
So there are some good projects demonstrating how this can be done in practice. And of course, we have to build on this.
I see great perspectives: a lot of European countries have district heating systems in place. Not all are state-of-the-art in terms of technology but you have a widespread infrastructure in a lot of countries that you would have to upgrade obviously, in order to ensure integration of renewables or to ensure further greenhouse gas reductions.
But yes, a lot of this would require investments. And we have to find a way of not only focusing investments on large-scale top-down projects but also smaller-scale projects and electricity infrastructure. For example, the current PCI list is, in my opinion, too much biased in favour of fossil projects rather than electricity.
We have to get that balance right. And at the same time, we also have to make extra efforts to aggregate smaller projects in areas like district heating, in order to ensure that we have a more-environmentally friendly heat generation.
[Edited by Zoran Radosavljevic]