In 2018 when Eurelectric released the flagship report Decarbonisation Pathways, the challenge of the time was clearly climate change. Today, things have changed. That is not to say that climate change has been solved – far from it – but from another direction, we face geopolitical tension not seen since the height of the Cold War. Russia’s invasion of Ukraine, China’s dominance of supply chains, and a breakdown in the global rule-based order have altered the decarbonisation scenarios of just a few years ago.
With Russian energy imports falling, renewables overtaking gas in electricity generation and REPowerEU calling for an additional 605 GW of renewable capacity by 2030, the question now is which trajectory will score net zero in the fastest, most efficient, and strategic way? Electrification remains the answer – both to climate change and the new balance of power.
In our Decarbonisation Speedways, we analyse 3 scenarios for Europe’s decarbonisation in the building, transport and industry sectors with key milestones in 2030, 2040 and 2050.
Already, the Fit for 55 package from 2021 set a target to reduce emissions by 55% below 1990 levels by 2030. Russia’s energy blackmail after its invasion of Ukraine prompted the REPowerEU plan which upped the ante on Fit for 55. Now, we are at a fork in the road between the pace of Fit for 55 decarbonisation targets and the REPowerEU ones, with new targets coming up for 2040.
The European Union is required under the European Climate Law to set targets for 2040. The industry is now called to share its positions as the Commission’s consultation comes to an end in June. Regardless of what the final target will be, the study provides insight into different decarbonisation ambitions for Europe’s economy and society. It acknowledges the current reality of our industry, and details an ambitious, yet realistic path to achieving carbon neutrality well before 2050 at the lowest cost.
Today 70% of the final energy demand in transport, buildings and industry relies on fossil fuels. This is the main target for decarbonisation. Electrification is the direct, efficient, and effective way to achieve society’s decarbonisation as it can reduce greenhouse gas (ghg) emissions in three ways:
To achieve the EU decarbonisation goals, all sectors must be largely electrified. Massive electrification rates will be made available by large shares of renewables and other decarbonised power generation.
Where direct electrification is not an option, renewable hydrogen and bio-based energy carriers will replace fossil fuels. This will mostly be the case for energy-intensive industries, heavy transports – such as heavy trucks carrying cargoes over long distances – and other hard-to-abate sectors.
When processes are electrified, more efficiency gains are realised compared to liquid, solid or gaseous energy sources. The development of heat pumps, storage and electric transportation technologies are crucial in the coming decades for increasing electronification.
*Calculations on EU27+UK Level 1. Gas consumption per year 10 MWh 2. Vehicle distance per year 15000 km
Heat pumps will drive electric heating of homes, replacing natural gas-fired boilers. Thanks to their superior energy efficiency, European households and businesses could reduce today their energy use by up to 73% per year by installing a heat pump in their home or office. This translates into a 66% reduction of greenhouse gas emissions per year.
In the transport sector, electric vehicles are set to take over and replace polluting internal combustion engines (ICE). Switching to an EV today would reduce up to 72% of CO2 emissions per year while consuming a third of the energy needed for a fossil-fuelled car.
Looking at 2050, transport will score the largest energy efficiency gains with at least a 53% reduction of final energy demand compared to 2015 levels.
Beyond efficiency gains and emission reductions, there are many benefits to grasp from clean and renewable electricity, such as better air quality and health savings, job creation, and increased European competitiveness in clean technologies.
Moreover, as climate change is set to become the main driver of biodiversity loss, higher renewable and low-carbon generation can also benefit the preservation of ecosystems and restoration of degraded areas by mitigating the disastrous effects of climate change. Switching to electric alternatives also empowers customers to play an active role in the energy transition whether at the regional, local, or city level.
Now, more than ever, decisive action is needed to power Europe’s decarbonisation journey in a changing balance of power. As Europe grapples with security of supply in energy while facing an ever likelier 1.5C and more of global warming and its consequences, decarbonisation has taken on a new meaning, with electrification remaining the speedway to both Europe’s net zero, energy independence and ultimately cheaper energy bills for consumers.
But let’s be clear, all of this hinges on several enablers to be implemented…
Renewable capacity should reach 83% in 2040 compared to 50% in 2020 to decarbonise the power sector and triple the electricity generation capacity by 2040.
From 527 GW in 2020, renewables should grow by 6 times to reach 3110 GW by 2050. Solar PV will dominate the capacity representing 55% of the renewable mix and 46% of the total capacity. Wind will make up 32% of the total capacity.
To ensure Europe’s security of supply in a system with a high share of renewables, firm and dispatchable technologies will be massively needed along with more flexible assets. In particular, Europe will need between 531 TWh and 782 TWh of flexible capacity to complement variable renewable generation by 2050.
To have an idea of how gigantic this leap forward needs to be, suffice it to say that in 2022, battery storage reached only 9 GWh. This represents 0,009% of the 108 TWh of flexible battery storage needed in 2040.
Within our scenarios, reservoir and pump storages will play the main role as flexibility providers followed by electric mobility with vehicle-to-grid technology. Squaring this ambitious goal, however, requires urgent incentives for storage technologies – such as hydro power reservoirs, pump storage, and batteries – and flexible sources while keeping a technology-neutral approach to unlock all sources of flexibility currently available.
Grids need a game-changer. A smarter and reinforced distribution grid is critical to increase system efficiency and ensure reliable electricity flows across thousands of kilometres of power lines throughout Europe. Reinforced, expanded electricity infrastructure would ease the saturation of interconnectors across Europe which are fundamental to safeguarding the internal energy market.
To enable the electrification and integration of new users in transport and other economic sectors, adequate and overdue grid investments, in particular at distribution level, are urgently needed.
Between 2020-2050 distribution grid investments will need to reach between 38-100 billion € per year based on additional generation demand.
Catalysing the necessary investment levels and innovation for the next wave of decarbonised power generation technologies requires an improved financial framework, as well as accelerated permitting and conducive land use policies to facilitate infrastructure build-out and new power generation.
The profound and accelerated transformation of the economy brings about uncertainties for investment security and the reliability of electricity supply. This calls for an electricity market reform fit for net zero and a complementary industrial policy.
Europe’s power market needs an evolution that builds on the existing structure which has been refined over more than two decades. The electricity market reform, currently under discussion, should seek to provide the right price signals to spur innovation and enable much-needed investments in clean and renewable energy, while shielding consumers from price volatility via better long-term hedging and contracting as well as de-risking instruments.
Achieving a solid investment framework entails risks and benefits that will need to be equitably shared between investors and consumers while taking into account the evolving role of the State. A cohesive industrial policy to defend EU competitiveness and leadership in clean technologies should also be developed in a way that does not delay industrial decarbonisation, nor sacrifices the resilience of the integrated energy market by sparking a disruptive intra – EU subsidy race.
If and only if properly implemented, such enablers can lead to lower energy bills for consumers, who will see their energy cost drop by 30% with yearly energy bills going from 3000 euros in 2018 to approximately 2100 euro by 2040 on average.
Source: for 2018, data from Eurostat; for 2040 and 2050, results of Eurelectric calculations