February 11, 2020
Report highlights steps for policy makers to encourage ‘sector coupling’ – the spread of electricity-based technologies into key sectors – and facilitate the process for the power system
LONDON and BERLIN... Electrification of the transport, buildings and industrial sectors in Europe could slash greenhouse-gas emissions by 60% between 2020 and 2050, according to a new report published today by research company BloombergNEF (BNEF).
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.”
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.”
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.
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.
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.”
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.
Source: BloombergNEF. Note: * Figure assumes that all compatible boilers in buildings are fueled by green gas or hydrogen.
The full report and the executive summary are available for download on eaton.com/sectorcoupling.
BloombergNEF (BNEF) is a leading provider of primary research on clean energy, advanced transport, digital industry, innovative materials, and commodities. With a team of experts spread across six continents, BNEF leverages the world’s most sophisticated data sets to create clear perspectives and in-depth forecasts that frame the financial, economic and policy implications of industry-transforming trends and technologies. Available online, on mobile and on the Terminal, BNEF is powered by Bloomberg’s global network of 19,000 employees in 176 locations, reporting 5,000 news stories a day. Visit https://about.bnef.com/ or request more information.
Eaton is a power management company with 2018 sales of $21.6 billion. We provide energy-efficient solutions that help our customers effectively manage electrical, hydraulic and mechanical power more efficiently, safely and sustainably. Eaton is dedicated to improving the quality of life and the environment through the use of power management technologies and services. Eaton has approximately 101,000 employees and sells products to customers in more than 175 countries. For more information, visit Eaton.com.
Statkraft is a leading company in hydropower internationally and Europe’s largest generator of renewable energy. The Group produces hydropower, wind power, solar power, gas-fired power and supplies district heating. Statkraft is a global company in energy market operations. Statkraft has 3600 employees in 16 countries.