The COVID-19 outbreak has shown how fragile our economies can be, and how valuable it is that certain critical sectors can react swiftly to provide uninterrupted services. Power sector utilities have proved their reliability throughout this period, even when faced with protracted lockdowns.
What’s more, the decarbonisation process has continued. This year, renewables have covered over 40% of the EU electricity generation, while the share of especially coal has plummeted.
The electricity industry is committed to provide Europe with fully decarbonised electricity, well before 2050, and lead the transition to a climate neutral economy. How do we get there?
In 2018, Eurelectric published a major piece of research, which showed how Europe’s energy system can transition cost-effectively to carbon neutrality by mid-century. In all scenarios, renewables assume a key role in power generation – at least 80% of all electricity will come from renewables.
With increasing shares of renewables in electricity, increased uptake on the demand side will be critical.
In other words, electrification of end-use sectors, notably transport, buildings and industry will be mission critical in order to integrate higher shares of renewables.
As the power mix progressively decarbonises, direct electrification will be the most efficient way to reduce emissions in end-use sectors, since conversion into other energy carriers inevitably comes with losses. Thus, electrification is not only a decarbonisation strategy, but also an energy saving strategy.
Electric vehicles and heat pumps are more efficient than their fuel-based combustion counterparts, even when accounting for power transformation losses. For instance, battery electric vehicles have a conversion efficiency of 80-90% from tank to wheel, compared to 20-30% for internal combustion engine. Similarly, compared to green methane used in conventional boilers the efficiency factor of heat pumps is 7 or 8 times higher.
Nevertheless, emerging energy carriers, such as renewable and low carbon power- to-gas fuels, will play an important complementary role in decarbonising specific segments of the industrial activity, and heavy- duty transport, where no electric alternative to fossil fuels exists.
There is no doubt that a smart sector integration strategy, driven by electrification, is now needed to fully benefit from positive synergies among various sectors of the economy.
This strategy is critical for the establishment of predictable, stable and market-based framework which ensures investments in a clean and cost-efficient energy transition.
As policy makers mull over the “EU strategy for energy system integration” it is essential to seize this opportunity to tackle some
remaining barriers, such as the heavy taxation of electricity, the coordination between electricity and gas grid operators, and the carbon pricing.
Today, almost two thirds of the electricity bill consists of taxes, levies and network tariffs. Lowering the levels of taxes and levies, while introducing cost-reflective network tariffs will contribute to an affordable and inclusive energy transition for all customers.
The strategy for energy system integration should be an opportunity to address the energy taxation and ensure that taxes and levies provide efficient and stable decarbonisation signals, while being fairly set across carriers.
Similarly, it is time to ensure that all part of the energy system contribute and are exposed to clear carbon price signals. The maritime sector is currently not exposed to any carbon pricing, while parts of residential heating have no or an insufficient CO2 price. While there is no one size fits all approach for carbon pricing, it is important to find the most efficient tool that paves the way to climate neutrality.
Last but not least, there is a growing need to strengthen the electricity grids. In an integrated system with more renewables. The importance of distribution grids should be duly reflected in the sector integration strategy as well as European spending on energy infrastructure.
Plenty of things still need to be tackled, yet one thing is certain: for Europe’s decarbonisation there is no way around electrification.