As the European Union turns the page on a series of clean energy laws focused on electricity, attention is now turning to decarbonisation in the gas sector, with an upcoming gas package expected in 2020. And the power sector intends to play a central role there too.
Kristian Ruby is secretary general of Eurelectric, the EU power sector association. He Spoke to EURACTIV’s energy and environment editor, Frédéric Simon.
- Deep decarbonisation of the economy requires 50% electrification or more, up to 60% by 2050
- For transport and industry, decarbonised gases such as biogas, green hydrogen and “Power-to-X” will play a supporting role
- “Power-to-X” can be viable in the long-term provided hydrogen production is industrialised
- But its role will be limited to around 5% of total final energy consumption, at best
- That means a more focused gas system in the future, with lower volumes, and no fossil gas
- Meanwhile, synergies are being developed between the gas and electricity sectors to achieve deep decarbonisation by 2050
The European Commission’s long-term strategy for climate change sees decarbonised electricity – powered mainly by renewables and nuclear – as “the backbone” of the energy system by 2050, covering more than 50% of Europe’s energy needs. Do you believe all sectors of the economy can or should be electrified by 2050?
First, we think the Commission’s analytical work for the Long term Strategy is of a very high quality. They have tried to assess individual strategies for decarbonisation, sector by sector. And they have also looked at the pros and cons, as well as the most effective way of getting towards net-zero emissions by 2050.
The overall findings are consistent with our own modelling, and the study we did with McKinsey, which basically came to the same conclusions. We looked at the existing EU objective – which is to cut emissions 80% by 2050 – and explored deep decarbonisation pathways, towards 90% and 100% decarbonisation.
So the overall trend in findings is really similar. We think however that the Commission slightly underestimated electrification when it comes to the very deep decarbonisation scenarios. Especially, if you’re aiming towards net-zero emissions, we think 60% electrification would be needed.
The Commission’s long-term strategy said 53% electrification would be required for all energy end-uses, including transport. That means more than doubling the current share, which is massive…
Correct. And we agree on the ballpark figure. Deep decarbonisation requires 50% electrification or more. That is a very robust conclusion, even when you benchmark with pretty much every study that’s ever been made.
Now, should everything be electrified? Our stance is that we should be very ambitious when addressing the societal challenge of climate change. And electrification plays a key role in that.
Let’s take the high scenario and assume 60% of energy consumption is met with electricity by 2050. That means at least 40% of the economy won’t be electrified. What are the sectors that won’t make it your view – is it going to be steel, chemicals, plastics…?
You will probably need other energy carriers than electricity – in industry, in buildings and in transport. We have found that 63% of buildings and 63% of transport can meaningfully be decarbonised with electricity technologies we know today. And 50% of energy use in industry can also be electrified with known technologies. So that means there will be a mix of energy vectors in all sectors.
Now, there are some industrial processes – such as petrochemicals, cement and a number of other industries – where we are at the early stages of understanding how we can decarbonise them. Over the last decade, they have decarbonised mainly through efficiency gains. Now, they are coming to a stage where they need to think of other measures in order to achieve deep emission reductions.
What’s clear is that electricity continues to surprise by its ability and its agility, pushing the boundaries of what can be electrified. One example is the steel sector where we’re seeing very interesting developments in Sweden and in Central Europe. The old steel production process based on cokes, which requires very high temperatures, is being replaced with indirect electrification: you take zero-carbon electricity production from renewables or nuclear, you transform that into hydrogen and you use it in the process to basically create carbon-free steel.
In 10-15 years’ time, we believe this process will be highly competitive. You actually save energy in the process. And you start with a decarbonised energy source. So this is an example where electricity plays an indirect role, through “Power-to-X” technologies.
That looks like a blurring of boundaries between electricity and gas. Hydrogen these days is often mentioned by gas industry people as a decarbonisation avenue for the future. And you mention it as well because electrolysis is involved. Does that mean there is some kind of convergence happening between the gas and electricity sectors?
For many decades, society has been powered by a mix. And many companies in the energy sector have a mixed portfolio. Gas plays a role in electricity production today and will continue to do so in the future.
So is there a blurring of boundaries? I think we should be meticulous in establishing those boundaries. For example, hydrogen can be part of the solution provided that it’s carbon-free. That’s why we say green hydrogen stemming from carbon-free electricity is the way forward.
We are more sceptical when it comes to other types of hydrogen coming from natural gas. Blue hydrogen can under certain circumstances be carbon neutral, when the CO2 is stripped from the gas and deposed underground, using carbon capture and storage (CCS). But it’s complex and expensive. And often, the CO2 is actually pumped into the ground in order to extract more fossil energy from oil fields, which makes the whole thing very questionable from a climate perspective. With grey hydrogen, the CO2 is released which means it’s essentially not carbon-free.
So I wouldn’t say there is a blurring of boundaries. The electricity and gas sectors have worked together in various ways for a long time and they will continue to do so.
From the regulator’s point of view, what’s important is to be clear that the objective is to decarbonise. And that also applies for the gas industry. How can they envisage themselves in a carbon-free world – that’s the real question.
Electricity currently covers about 22% of Europe’s total energy consumption, but only a third of it comes from renewables. This means bringing the total share of low-carbon electricity above 50% will require massive investments. Where are the limits of electrification? Is there a point where, it doesn’t make sense to electrify?
Yes, that limit is what we found in our study – between 50% and 60% of electrification depending on the decarbonisation level. And that is because decarbonisation is the key objective that we’re trying to reach as a society. Given what we know about the technologies today, their costs, the political and regulatory constraints as well as people’s habits, we came up with a 60% potential for electrification.
Much as we want, we can’t put up all the wind turbines that we would like because citizens don’t want them. Much as we want, we can’t put up all the transmission lines that we want, because citizens don’t want them. So, there is a point where we say: this is how much we can electrify with our knowledge today. And that adds up to around 60% of total final energy consumption.
And that’s cost-effective? It won’t require massive amounts of public money?
That’s cost-effective, yes. In terms of investments, I think we need to look at this by industrial sectors rather than making a distinction between public and private money. The measures will be in part public and part private. And we need to be smart about this, we want to keep the costs down because people are sensitive to cost.
Take the example of Brussels and the electrification of the bus fleet. Doing it in one go can be quite costly, but you can also do it progressively, every time you need to replace old buses with new ones. That way it won’t come across as a massive investment. And regulatory signals do help – we’ve seen that with the automotive sector.
Again, there are parts of transport where we don’t really see how we’re going to decarbonise today – at least not with electricity: shipping, long-haul aviation, long-haul heavy-duty vehicles.
But electricity continues to surprise. Until recently, you needed to fill up a truck with batteries in order to get it from Sweden to Italy. Well, it turns out that these things are evolving much faster than foreseen. Just two years ago, there was a big fuss about range anxiety. But the new models coming to the market in the passenger car segment easily reach 500km, and some are pushing it to 600km. Imagine what will happen with the next generation of cars coming out – range anxiety is just not an issue anymore.
For long-haul transport which is harder to electrify, you need to look at a range of technologies. Probably biofuels will play a role in aviation. But we also see interesting trends with short-haul flights being electrified, which is something you wouldn’t have dreamed of just five years ago.
The other thing is, power fuels will play a role in this. Those are synthetic fuels produced with Power-to-X technology, where you basically take clean electricity and bring it to fluid form.
The EU’s long-term strategy indeed makes repeated reference to so-called “Power-to-X” as a way to transform electricity into synthetic gases – mainly hydrogen, or methane. How do you see this developing? Is it mainly in transport?
We see a role for Power-to-X technologies mainly in industrial sectors, in addition to transport. Our deepest decarbonisation scenario foresees a role of around 5% for Power-to-X technologies in total final energy consumption.
And it could also potentially play a role in the power sector. But it will only come in as a balancing vector and a source of energy provided there is a push from other sectors. Otherwise, you won’t get the volumes to get the costs down.
It won’t emerge by itself in the power sector because you have competing technologies there, such as batteries, thermal storage and other types of low-cost storage options which are just as likely to develop and be cost-effective.
So if that doesn’t come from the power sector, it will have to come from elsewhere….
If you want the hydrogen economy to take off at the scale needed to decisively bring costs down, we need to see the establishment of industrial consortia around specific value chains. This is how you can bring down costs in specific industrial sectors and create a positive spill-over in other areas.
In Austria for instance, they looked at electrification versus hydrogen for parts of the rail tracks. And it came out that it could be done cost-effectively using hydrogen. So you’ll see those examples emerge here and there.
But we shouldn’t lose sight of the big picture: electrification will play the main role in the future energy system because it’s more efficient. And Power-to-X technologies will play a supportive role to electricity.
Power-to-X is also very inefficient, it creates energy losses…
By definition, it’s a process where you have conversion losses. You start off with electricity, and you then transform it into liquid form, which means you lose energy along the way. And that’s especially the case when hydrogen is transformed back into electricity, because you have two conversions. That’s why we see very limited use of hydrogen in the power sector – it’s basically more expensive.
So looking at the Commission’s scenarios for 2050, when around 53-60% of total final energy consumption will be met with electricity, we see gas playing more of a supportive role.
And that means a more focused gas system in the future. Because, once you make the transition to a fully decarbonised gas system, you inevitably end up with lower gas volumes. Of course there will be a certain amount of hydrogen, but it’s expensive and there is only so much that can be produced. And with biogas it’s the same – you’re not going to be able to produce it in the same volumes than natural gas today.
And we have to be honest: if Europe wants deep decarbonisation, there is a very limited role for natural gas in this system.
Natural gas meaning fossil gas or the whole range of gases?
Meaning fossil gas. Another thing is that there are important “niches” that can be filled by the gas system – for example the gasification of waste. This is a good way of extracting energy from waste. And it’s better to extract the gas before burning the waste because that way you get more energy out of it.
Capturing gas can also be an interesting way of abating emissions from the agricultural sector. And this is a role that electricity cannot take.
Electricity cannot yet be stored on a large scale, which is one of its key limitations. And grid-connected batteries are still in their infancy. So can “Power-to-X” offer a viable long-term solution as a flexibility solution?
Yes, provided there is an industrialisation of hydrogen production. Then it can have a balancing role. But if that does not emerge because the investments are not made, then we see other technologies take over that role in the power system.
There is absolutely competition between a number of different storage technologies. The strength of gas as a balancing vector in the energy system right now is that it’s very big. It has a volume that the others don’t have today.
But we also have to be aware that the emergence of renewables with better capacity factors will lower the need for balancing power. Secondly, we’re seeing a drastic trend of cost reduction in batteries. The battery technologies we know – lithium-ion – is getting cheaper very fast, whether grid connected or not. Once electro-mobility takes off significantly, you’ll see the volumes of second hand batteries coming to the market. And that will also bring a balancing component to the system.
Today, storage is a scarce commodity. But it’s going to become a much more crowded space in the near future. And in 10-15 years’ time, we’re going to see much more competition there. So the range of flexibility options is widening. And gas will be one of them, competing against the likes of demand-response technologies. And again, regulators need to ensure that they choose the most cost-effective option.
There is a new buzzword in town, called sector coupling. What is your understanding of sector coupling, how would you define it?
It is indeed rather vaguely defined. Sector coupling or sectoral integration is an inherent consequence of the decarbonisation journey that we are on. Basically, it means all the energy producing and consuming sectors come closer to each other – whether heating, transport or energy.
Let’s take the heating sector. How do you decarbonise heating? There are some heating processes in residential areas which are really easy to decarbonise by switching to clean electricity. For example by shifting to an electric stove, installing a heat pump or installing a water heating system in your house running on clean electricity.
But what about big heating systems, like district heating for example? Those are probably powered by fossil fuels today, like coal. But they could be running on a very high efficiency combined heat and power systems instead. Piped hot water infrastructures like district heating systems are very interesting because they’re very efficient: it’s insulated, it’s already there and it’s connected to thousands of homes or maybe millions of homes in big cities. It would be a pity to not use that.
So how do you get a clean source of energy to power these systems? There, it can be interesting to use industrial heat pumps. Or heat the water in other carbon-neutral ways. That’s called sector coupling because you’re bringing in electricity as a source of heat in a hot water system.
Everything around indirect electrification – this is also sector coupling. For example, when you’re coupling the steel sector with a gas system powered by electricity. Or when you shift to an electric powertrain in a car, it becomes a balancing vector for the electricity system. So you’re coupling sectors in many different ways as part of the energy transition.
Now, if the European Commission decides to legislate on the matter, it needs to be very specific. I wouldn’t like to see a general law on sector coupling – that could be quite messy.
About a year ago, Eurelectric presented a joint initiative with Eurogas and DSOs, saying electricity and gas were complementary. How do you see electricity and gas working together? Is this sector coupling?
It depends. And I think the nature of this cooperation will change over time. We have some examples of dual providers. In Germany, there are companies that operate in the electricity infrastructure and in the gas infrastructure. The question for them is how to create synergies between them and where they focus the individual infrastructures.
I think we’re going to see a smaller gas infrastructure in the future, with less volume. This comes out clearly from the European Commission’s analysis in the 2050 long-term strategy. And that means that the gas system has to be more focused on what makes it really unique. For example, as a feedstock for industrial production, or as a balancing vector for the energy system when competitive. And also for hard to abate sectors, where gas can’t be replaced.
And that also means looking at the infrastructure, which parts you keep and which ones you discontinue. That will be a consequence of this journey towards decarbonisation. We cannot see the amounts of clean gas or decarbonised gases emerge to power the entire gas system as we know it today. So the question is: where do you get the most value as a society and also economically from using the gas.
Power-to-X, as you mentioned, involves energy conversion losses which is the main drawback. It also requires investments in new infrastructure to make the conversion happen. Have you or anyone evaluated how much investments would be needed for this? And whether it’s cost-effective?
What the European Commission and others have found is that you can go a long way with direct electrification. The first steps on the path towards deep decarbonisation are cheaper and more efficient using direct electrification.
And then there are other areas where you can’t decarbonise without looking at more complex options. And this is where indirect electrification comes into play. So this has been assessed. And one of the long-term reflections you need to have when you weigh the hydrogen and Power-to-X options is energy efficiency.
The efficiency first principle dictates that you should use energy in the most efficient way possible. If you go too far with hydrogen, you require a lot of electricity to be used for hydrogen. And you’re creating a longer and less efficient value chain. So there’s really a trade-off between efficiency and Power-to-X which is the reason why direct electrification is the preferred option in the Commission scenarios.
Turning to policy now, the European Commission has wrapped up the Clean Energy Package which was heavily focused on electricity. It is currently preparing a new gas package for 2020. How relevant is this going to be for the electricity sector? And what are the key do’s and don’ts from the electricity side of the debate?
Whatever legislation is put in place needs to look at the objective of deep decarbonisation, not just low-carbon technologies. We are looking at an energy transition of around 30 years. And when you’re making big infrastructure investments, you want to make sure they last for that long.
So the legal framework that will be put in place in the next 5 years needs to take account of where we want to be in 30 years. And also what the future electricity system will require from the gas sector.
The Commission official who drafted the electricity market design legislation, Florian Ermacora, was re-assigned recently to work on the gas package, which is expected in 2020. Do you believe the new gas legislation should “mirror” the EU’s recently adopted electricity market design? Is this a copy-paste exercise?
Florian, to my mind, is very capable public servant and a knowledgeable man. But I’m not a gas expert so I wouldn’t want to try setting out what should be done. To my understanding, the gas and electricity market rules are different because of the physical differences between the two as an energy carrier. So how exactly this is going to be mirrored, I would leave to others to explain.
What I would say is this: since the political objective of the clean energy package was “Clean Energy for All Europeans” – well that ambition should be mirrored in the upcoming gas legislation as well. How this happens depends on the specific characteristics of the gas system.