Increasing the amount of renewable energy and electrifying heating, transport and heavy industry will be the fastest and most cost-effective way to decarbonise Europe — yet the EU has “no overarching, strategic, legislative approach” for electrification, according to power industry body Eurelectric.
In its new two-part Electric Decade report, Eurelectric points out that many barriers will need to be removed to speed up the growth of renewables and electrification — including high taxes, planning bottlenecks, a lack of adequate infrastructure, inadequate carbon pricing and unsuitable regulatory frameworks.
The Brussels-based organisation has set out five “key policy pillars” that will need to be put in place if the EU is to meet its aim of reducing greenhouse gas (GHG) emissions by 55% (compared to 1990 levels) by 2030.
1) Electrify everything, directly or indirectly
The first is to prioritise direct electrification — such as electric vehicles and heat pumps — and then to “aim for indirect electrification where direct electrification is not possible”. This is largely a reference to green hydrogen derived from renewable energy, but also includes the use of waste heat and electric thermal storage solutions to produce heat for district heating systems.
But Kristian Ruby, secretary-general of Eurelectric, explains that this does not mean the European power industry is advocating against the fossil-fuel industry, or arguing against the use of low-carbon blue hydrogen derived from natural gas with carbon capture and storage.
“Electricity is going to decarbonise faster than anything else,” he tells Recharge. “[This] narrative is so convincing and so firmly accepted by all parties that we don’t need to be knocking over other people [such as the oil & gas industry].
“The main point here is that in order to electrify to the levels needed and accepted by all parties, we need to prioritise and we need to move at warp speed.”
The report says that the European electricity sector is “on track to be fully decarbonised by 2045” and that the electrification of non-power sectors is key to achieving carbon neutrality “and should be the go-to first choice when the preparing the [European Commission’s forthcoming] ‘Fit for 55’ package”.
“When it is not yet technically possible to efficiently use a solution that can be plugged into the power system, indirect electrification will play its decarbonisation role,” says the report. “Electrons can be transformed into molecules to decarbonise end uses and processes that are difficult to directly electrify.
“Indirect electrification should be identified… as the natural alternative to complement direct electrification.”
2) Enact policies to drive electrification
Eurelectric says the EU should set “ambitious yet realistic targets for CO2 emission reduction for cars and trucks and for the necessary infrastructure deployment to support e-mobility”.
It also calls for better incentives for electric heating solutions such as heat pumps, and to “gear up EU industrial strategy and research and innovation programs to ramp up the direct and indirect electrification of industry (incl[uding] a European electrolyser industry) and thus help decarbonise other sectors”.
“Indirect electrification via hydrogen and other carbon-neutral alternatives will also play a role, while large-scale electric heating solutions (heat pumps) and electric processes in industry will be key to facilitate industrial decarbonisation,” it adds.
3) Establish a level playing field for electricity
One of Eurelectric’s priorities is to reduce taxes and levies on electricity across Europe to create a level playing field with rival energy sectors such as oil and gas.
“There is a massive overtaxation on electricity compared to other energy carriers, and that's just totally indisputable,” Ruby tells Recharge.
“If you’ve accepted the need to decarbonise at record speed — and decarbonising means electrifying… then it doesn’t work if you are at the same time just taxing the hell out of electricity. That means it’s going to be more expensive, relatively speaking, for someone to adopt an electric car or to [install heat pumps].”
As the report explains: “In a majority of EU member states, the electricity bill is more expensive than other energy carriers. This is not due to the price of electricity per se, but to the taxes and levies that are added on top. As a result, the competitiveness of electricity is harmed and the potential for electrification is heavily affected.”
It’s about matching the overall philosophy and objectives with policies and instruments.
Ruby says it would be fairly straightforward to reduce electricity taxes and charges through the EU’s energy taxation directive.
In addition, carbon could be priced within taxation, with higher taxes for higher-carbon energy, he adds.
“It’s about matching the overall philosophy and objectives [of the EU’s decarbonisation plans] with the enabling policies and the instruments,” Ruby adds.
Eurelectric also calls for the European Commission to “explore carbon pricing systems” for sectors that are currently outside the EU’s Emissions Trading System, which includes non-aviation transport.
4) Power system optimisation
In this fourth “policy pillar”, Eurelectric identifies two areas that are holding back the rise of renewables: a lack of grid flexibility and slow project permitting.
With wind and solar power being variable, and increasing amounts of EVs, rooftop PV and behind-the-meter batteries coming onto grids, additional flexibility will be needed to help balance the system.
Eurelectric is therefore calling for a European regulatory framework to allow consumers and aggregators to participate in all electricity markets through demand-side response. This means allowing end users to start and stop using electricity, or sending power back to the grid, in response to price signals. So when power prices are high due to demand outstripping supply, consumers could make money by selling power from their electric-vehicle (EV) battery to the grid, or turning off appliances to save money. Similarly, when power prices are low due to high amounts of wind and solar power on the grid, consumers could use that cheap electricity to charge their cars or do the weekly laundry.
Demand response could play a major role in the future decarbonised energy system, says Wytse Kaastra, managing director for utilities and the European energy transition at consulting giant Accenture, which co-authored the part of the Electric Decade report concerning challenges and opportunities, but did not contribute to the policy recommendations.
“It can resolve problems for congestion. It can resolve problems on the wholesale flexibility markets. It can help to engage more proactively with your customers and creating their experience because everybody, at the end of the day, likes to participate in a system. And it drives out CO2,” Kaastra tells Recharge.
Slow project permitting is perhaps an even bigger problem.
“For the 2030 targets to be met, more renewables are needed: at least doubling the current installed capacity for solar and wind... The way the permitting procedures are applied nationally are becoming a concrete barrier to a timely build-up of this capacity,” the report points out.
Eurelectric is consequently asking for the introduction of accelerated permitting for “climate critical infrastructure (capacity and grid, incl. demand loads needed)”.
Ruby tells Recharge that Europe needs to install an additional 500GW of renewables projects by 2030. “If you’re going to let them all take six years [to get their project permits] because of all the procedures they go through, it’s just not possible to do it.
“You need to have processes that set a limit to how many times you can question a decision. You need to, of course, get the involvement of citizens and stakeholders, but at some point you need to draw a line if you want [the energy transition] to be successful.”
5) Infrastructure reinforcement
While no-one is questioning the need for long-distance high-voltage transmission lines to help move renewable energy to demand centres, the Eurelectric report focuses on the need to reinforce, modernise and digitalise the low- and medium-voltage distribution grids that deliver electricity to end users.
“Distribution grids are key enablers of the energy transition and will take a much more central role in the value chain, connecting distributed generation, electric cars and an increasing amount of grid-edge technologies,” the report says, adding that a recent Eurelectric study found that a third of Europe’s distribution grids are already more than 40 years old.
Eurelectric says that the TEN-E regulation, which the EU adopted in 2013 to increase interconnection between member states, should be enlarged to include distribution grids in order to “enable efficient investments”.
National regulators also need to adopt forward-looking regulatory frameworks that encourage distribution system operators to make adequate investments in their networks, it adds.
Eurelectric also seeks to ensure that EV infrastructure is in place that allows drivers to charge their cars at home or at work. Currently, only new residential buildings are required to install EV charging points.
The report points out that 80% of the building stock in Europe will still be in use in 2050, therefore “rules for charging points should be extended beyond new buildings only and cover existing homes and non-residential buildings as well”.
It also states that this EV charging infrastructure should be “smart” and “able to interact with the grid”. In other words, chargers should be able to react to price signals in the grid, either to stop and start charging when prices are high or low, respectively, or by sending electricity from car batteries to the grid when prices are high (ie, vehicle-to-grid).