EU Commission proposes strategy for energy system integration
Why is the strategy important?
At present the energy system has a rigid structure. It is built on parallel and vertical energy value chains. In other words, specific sources of energy are linked to specific end uses. The EU Commission has concluded that this system is too technically and economically inefficient to deliver a climate-neutral economy. The outcome is significant losses such as waste heat and low energy efficiency.
The EU Energy System Integration Strategy sets out a vision of how to accelerate the transition from inefficiently structured energy value chains to a system that can deliver low-carbon, reliable and resource-efficient services at lowest possible costs.
EU climate chief Frans Timmerman stated, as he presented the strategy, that today’s system is “way too wasteful and way too rigid to be fit for a sustainable future” and that “we need to complete an overhaul of the current energy system which is quickly becoming a relic of the past”.
It is crucial to address these shortcomings in order to reach climate neutrality by 2050. By planning and operating the EU’s energy system in a holistic way the strategy enables the combination of decarbonised and renewable energy supply with efficient demand-side technologies.
Timmerman stated that “we need to stop transferring the wrong energy carriers in the wrong way to end-users”. Through using the relative strengths of different energy carriers and by minimising waste the strategy aims to achieve deep decarbonisation at the “lowest possible costs” for society.
However, there are already trends that are driving energy system integration in Europe. These include falling costs of renewable energy technologies, innovations in storage systems, electric vehicles and digitalisation. The EU Commission has stated that the strategy will connect the missing links between these trends to create flexible and diverse connections between multiple renewable energy sources, carriers, infrastructures and consumption sectors. Thus, the strategy takes the next step in accelerating and facilitating the necessary integration.
How will the strategy achieve its purpose?
The strategy identifies three complementary and mutually reinforcing elements:
1. A more circular energy system, with energy efficiency at the core.
An increase in energy efficiency will decrease overall investment costs and energy production needs. EU member states will be given guidance on making the principle of energy-efficiency-first operational when implementing EU and national legislation. Another important improvement within this element is to increase the use of local energy sources. A significant unused potential has been identified in waste heat, from local industrial sites and data centres, for example.
The International Energy Agency (IEA) has found that globally about 44% of the required reductions in the energy sector’s greenhouse emissions can be achieved through energy efficiency measures, and an additional 36% can be achieved by switching to renewable energy1. Eurostat’s new statistics on energy consumption for 2018 found that the EU is set to miss the 2020 energy efficiency objective by a margin of up to 5%. Similarly, the EU is not on track to meet its targets for 20302.
The Renewable Energy Directive and Energy Efficiency Directive will be revised to reduce waste heat. Another untapped
source that will contribute to a more circular energy system is wastewater and biological waste for bioenergy production. This can be used on site, at farms for example, and
in combination with renewable energy sources such as solar electricity.
2. Increased direct electrification of end-use sectors
Future electricity demand is bound to increase to enable decarbonisation and climate neutrality. Renewable electricity is becoming cheaper and its use needs to be extended. Especially in highly fossil-dependent sectors such as industry, transport and buildings.
The electricity share of final energy consumption is projected to grow from 23% today to 30% in 2030, and 50% by 2050. This share has only increased by 5% over the last 30 years.
Management of the electricity system at regional and local level will need several policy and legislative developments according to the strategy. One measure that will address this is the development of Regional Coordination Centres in 2022, creating a more robust security analysis, clearer coordination and infrastructure planning, and enhancing the deployment of storage and flexibility options.
3. Use of renewable and low-carbon fuels, including hydrogen, for end-use applications where direct heating or electrification are not feasible
For end-use applications that are harder to decarbonise, such as industry and heavy transport, this is an important element of the strategy. Rapid action is needed in these sectors. For example at present only 0.05% of total jet fuel consumption originates from liquid biofuels3.
According to the strategy, renewable gases and liquids produced from biomass or renewable and low-carbon hydrogen can offer storage solutions for the energy produced from variable renewable sources. This would exploit synergies between the electricity sector, gas sector and end-use sectors accordingly. The Commission has launched a parallel communication – “A hydrogen strategy for a climate-neutral Europe” – to address and apply the full potential of hydrogen.
Comments on the strategy
The reactions to the strategy have been a mix of positive and alarmist. Jean-Bernard Levy, CEO of French electricity utility EDF: “On sector integration the Commission got it right: energy efficiency and electrification are the primary drivers to decarbonise the EU economy. Producing renewable and low-carbon hydrogen for maritime transport, aviation and industry is the next frontier.”
When it comes low-carbon fossil-based hydrogen the strategy has received negative critique. ECOS welcomes the way that the strategy mainly supports renewable-based hydrogen, as it currently has a minimal share of production. On the other hand, the continued support of low-carbon fossil-based hydrogen is not appropriate even during a transitional phase. Fossil-based hydrogen coupled with carbon capture and storage should not be promoted at the expense of renewable solutions.4
Ester Bollendorff, EU Gas Policy Coordinator at Climate Action Network (CAN) Europe express the same worry of low-carbon hydrogen keeping “the door open for the use of dirty fossil fuels and misses out on indicating a fossil gas phase-out date, which will not get us closer or faster to the Paris Agreement objective. We need to reduce our emissions by at least 65% by 2030 already” and adds that “A full decarbonisation of the economy will require the EU to look at energy and non-energy solutions. We should significantly reduce energy demand – it can be halved by 2050 - and multiply renewable energy supply to reach 100% by 2040 - a decade earlier than the current target - with existing and proven technologies. The measures proposed by the Energy System Integration Strategy are not sufficient to move in the needed direction to limit temperature rise to 1.5°C”5
In summary, turning the vision of an integrated and flexible energy system into a reality requires resolute action, now. Investments in energy infrastructure typically have an economic life of 20 to 60 years. The steps taken in the next five-to-ten years will be crucial for building an energy system that drives Europe towards climate neutrality in 2050.