‘Sector coupling’: The EU energy buzzword no-one can actually pin down

An integrated approach is essential for a sustainable energy future, says the International Energy Agency. [IEA]

This article is part of our special report Energy supply and end-use integration (sector coupling).

For over a year, one expression – “sector coupling” – has been on everybody’s lips among EU energy policy observers in Brussels. The only problem is none of them share the same understanding of what it actually means.

For people in the power sector, sector coupling means electrifying transport, heating and just about every sector of the economy which hasn’t yet been electrified.

For the gas industry, it means the opposite: delivering low-carbon gases in sectors which cannot easily be electrified – and building connections between the two in the form of power-to-gas and storage facilities.

For people in transport, it means all of the above. And for those in the building sector, it means deploying district heat networks across cities, and bringing electric heat pumps, solar panels, batteries and smart control systems to every household.

And the list goes on, with other sectors like agriculture, water, waste and recycling joining the party.

“The buzzword sector coupling goes by many definitions,” admits Augustijn van Haasteren, an official at the European Commission’s energy department who supervises a special unit dealing with the matter. “One way of looking at it is energy system optimisation,” he said during a EURACTIV event last month.

All agree on one objective, though: sector coupling should result in lower energy consumption, reduce network investment costs, and allow greater amounts of renewables in the energy mix. All of which with one ultimate goal – cutting emissions of global warming gases down to net-zero.

According to Lisa Fischer from climate think-tank E3G, “the Commission has developed its own terminology where sector coupling is really about the interconnection between gas and electricity – meaning power-to-gas and gas-to-power. And sector integration is looking at energy, transport, and heating networks together.”

But even that definition wouldn’t be entirely accurate because it fails to bring energy-consuming sectors explicitly into the mix, critics say. For them, sector coupling can be boiled down to energy efficiency: in the building stock, but also in industrial processes and in the wider energy system.

“Sector coupling is an enabler of that” because it allows using by-products of industry, such as wasted heat, said Julie Kjestrup from Danish engineering firm Danfoss, which supported the EURACTIV event.

“If we manage this correctly – and I agree it’s difficult – then we can couple the energy-using sectors with the energy-consuming sectors” including buildings, heating and cooling, transport, water and industry, she told participants at the EURACTIV event. “And if we do that, we will manage to reduce the overall energy consumption. We will manage to store energy and we will create synergies that offer the flexibility to roll-out renewables faster.”

Supply-driven approach is “the enemy”

For the most radical among EU energy policy specialists, sector coupling actually means fundamentally rethinking energy supply and demand.

“The first priority is to definitely get away from the supply-driven” and centralised approach to generating energy, said Claire Roumet from Energy Cities, an association bringing together more than 1,000 towns and cities in the energy transition.

“It was fine to do it before. Today, if we continue to do it, we will basically destroy our ability to reach any kind of climate goal,” she warned. “So for me, this is really the enemy,” Roumet stressed. “We need to go into something which is much more decentralised, sector-coupling, and demand-oriented,” she said at the EURACTIV event.

This is summarised in a study for the European Parliament’s industry committee, which says sector coupling is about “the increased integration of energy end-use and supply sectors with one another”.

Few certainties

Despite the all-embracing nature of that definition, there are also a number of certainties. The first is that low-carbon electricity is expected to become the dominant energy carrier in Europe, covering 53% of the bloc’s energy needs by mid-century, according to Commission projections for 2050.

“We all know that by 2050 renewable energies will become very important, particularly in the electricity sector,” van Haasteren said, citing the Commission’s long-term strategy for 2050. “And we also know that this requires a flexible energy system,” he added in reference to the variable nature of solar and wind power.

There are obvious implications to this. First, as electricity gradually rises to dominate the energy landscape, gas will increasingly act as a back-up to electricity, with a growing number of power-to-gas facilities expected to store excess renewable electricity production in gaseous form.

In fact, gas storage operators are increasingly positioning themselves on new markets – first as back-up for variable wind and solar power and, in the long run, as established providers of “flexibility” services in a future energy system where electricity and gas will be more closely integrated.

The evolving role of gas storage in Europe

Departing from its usual supply security role, gas storage is vying for a central position in Europe’s vision of a hybrid energy system combining renewable electricity and low-carbon gases like hydrogen. But getting there won’t be a smooth run and regulators are watching closely.

Combining gas and electricity

This is where gas and electricity industry lobbyists see eye-to-eye.

“The coupling of the electricity and gas sectors can bring significant benefits,” says Eurelectric, the power industry association. “Direct electrification, using carbon neutral electricity, could be complemented by power-to-gas and non-emitting fuels and gases, in those ‘hard-to-abate sectors’ such as industrial processes,” it said in a statement.

Such a hybrid energy system mixing gas and electricity is actually at the centre of the European Commission’s 2050 scenarios.

“Combining the electricity and gas infrastructure – for us in the Commission it’s clear that it’s the way to go,” said Klaus-Dieter Borchardt, deputy director general at the Commission’s energy department. “A hybrid system based on two pillars, in our view, is more resilient and would really add to security of supply,” Borchardt said earlier this year, citing the cost savings this could bring to the wider energy system.

Speaking at the October EURACTIV event, van Haasteren further expanded on this vision. While the interconnection between electricity and gas is already well researched, he said sector coupling was also about finding sources of flexibility “from other energy carriers”.

“So, we can speak about gas there. But another important vector, I think, is heating,” van Haasteren pointed out.

And here, some fundamental questions arise, he said. For instance, “what is the interface between the different energy carriers? And is it actually possible to use the relative advantages of one energy carrier and infrastructure in the next one?”

Energy consumers at the centre

The Commission doesn’t start from nowhere in trying to answer these questions. Last year, it already laid the groundwork when it passed a reform of electricity market rules, which enshrined consumers’ rights to generate their own electricity, and sell it back to the grid.

And the same consumer-centric approach will apply when the Commission revises gas market rules in the coming years, the official suggested.

EU's electricity market revamp hailed as ‘game-changer’ for clean energy

A recent agreement to reform Europe’s electricity market has enshrined into EU law the unprecedented right of consumers to produce, sell and share their own electricity in newly-defined “citizen energy communities”.

“We’re moving to a phase where decarbonisation really affects households directly,” van Haasteren explained, suggesting smaller participants are better placed to make decisions on how and when to use energy.

“The decisions to make this happen are more of a decentralised nature,” van Haasteren pointed out. But “to make this all coherent is a daunting task,” he added, pointing to the experience gained with the recent reform of the EU electricity market, which put consumers at the centre.

“And that relates to price signals,” he said referring to the energy taxation directive that is due to be reviewed under the next European Commission led by Ursula von der Leyen.

Danish MEP Morten Petersen wouldn’t disagree that this is a daunting task. “As legislators we tend to focus on the very specific directive at hand,” without considering the broader picture, he said at the EURACTIV event.

“Having this horizontal approach is bloody difficult, so I’m open to all kind of good suggestions on how to improve this,” he said.

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