The EU has opportunity to accelerate shift to cleaner and more resilient energy future
The European Union is strengthening its efforts to make its energy systems cleaner and more resilient, reinforcing its global leadership in reducing greenhouse gas emissions, according to a new energy policy review by the International Energy Agency.
EU greenhouse gas emissions in 2019 were 23% lower than in 1990, meaning the bloc had already met its target of a 20% decline by 2020, according to the new IEA report. Cleaner electricity was the main driver behind the reduction, with the carbon intensity of European power generation now well below most other parts of the world. The EU is a leader in renewable energy technologies, notably offshore wind, and many of its Member States have policies in placed to phase out coal. However, greenhouse gas emissions in the EU transport sector are still rising, and the use of energy in buildings remains fossil-fuel intensive.
The new IEA report sets out recommendations to help the EU meet its 2030 targets for greenhouse gas emissions, renewables and energy efficiency as well as its longer-term decarbonisation goals. It finds that stronger policies than those currently in place will be needed to deliver on these ambitions and that the energy sector needs to be at the heart of those efforts, as it accounts for 75% of EU greenhouse gas emissions.
In December, the new European Commission led by President Ursula von der Leyen launched the European Green Deal in a bid to make the EU climate neutral by 2050. This plan quickly faced the added challenge of Covid-19, which has pushed the world into a sharp economic downturn. This crisis is a test of energy sector resilience and policy makers’ commitment to clean energy transitions. The EU energy sector has so far stood up well to the pressures it has been under, but the economic downturn continues to weigh on company and government balance sheets. Last month, the European Commission presented a massive recovery plan to counter the economic damage from Covid-19. The plan aims to achieve a resilient, inclusive and green recovery in Europe while laying the foundations for a low-carbon future.
“With its recovery plans, the EU has a real opportunity to boost economic activity, create jobs and support the long-term transformation of its energy sector,” said Dr Fatih Birol, IEA Executive Director, as he launched the new report with Kadri Simson, the European Commissioner for Energy. “The Sustainable Recovery Plan described in the IEA’s recent World Energy Outlook Special Report shows how to achieve these three objectives simultaneously. The IEA is working with the European Commission and EU Member States to design policies to repair the economic damage of the crisis while making their energy systems cleaner and more resilient.”
“The IEA’s review of EU energy policy comes at a crucial moment, as we debate the investment priorities for our economic recovery and the future EU budget,” said Commissioner Simson. “The review supports the Commission’s firm commitment to a green recovery, which is at the heart of our proposal for a €750 billion recovery plan. We will continue to work closely with the IEA as we design European policies to transform our energy sector and at the same time provide jobs, growth and better quality of life.”
As EU Member States have different energy policies and approaches to decarbonisation, the IEA report concludes that strong cooperation will be needed under the framework of the National Energy and Climate Plans. It also recommends that the EU build on the bloc’s integrated energy market and cross-border trade and develop stronger carbon price signals.
“The European Green Deal represents an opportunity to strengthen economies across the continent by pooling investments in energy technologies that are likely to play a crucial role in the future,” Dr Birol said. “Hydrogen electrolysers and lithium-ion batteries could potentially be game-changers both for the EU and globally. I welcome the efforts by the European Commission to accelerate innovation and commercialisation in these key areas. ”
The IEA report also underscores that maintaining EU energy security remains critical, as the energy sector is vital for the health of citizens and economies. In particular, EU electricity systems and markets will need to accommodate growing shares of variable renewable energy. At the same time, risks such as extreme weather and cybersecurity threats are intensifying the challenges for designing and operating electricity systems.
The EU is facing the retirement of half its nuclear power generation capacity over the next five years unless decisions are taken to extend the lifetimes of the plants, which currently provide a major part of the continent’s low-carbon electricity. To support the phase-out of coal, natural gas is becoming essential to ensure the flexibility of electricity systems in Europe, but the region’s supply of gas will be largely dependent on imports. In this context, the IEA report finds that the EU cannot afford to reduce its energy diversity and needs to invest in electricity sector resilience.
The IEA report also points out that as the EU accounts for a relatively small share of global greenhouse gas emissions (8%), global climate action and global partnerships will be essential to amplify its climate ambitions. The IEA stands ready to continue to support EU efforts to strengthen clean energy transitions worldwide by sharing lessons and insights from European experiences across the globe.
European Green Deal: EU agrees stronger rules to boost energy efficiency
The Commission welcomes the provisional agreement reached this morning with the European Parliament and the Council to reform and strengthen the EU Energy Efficiency Directive. This deal marks a further step in the completion of the ‘Fit for 55′ package to deliver the European Green Deal and the REPowerEU Plan. It shows once again the EU’s determination to become climate neutral by 2050.
Reaching higher targets with better instruments
For the first time, the energy efficiency first principle is given legal strength with a clear requirement for EU countries to take energy efficiency into consideration in policy, planning and major investment decisions in the energy sector and beyond.
The agreement establishes an EU energy efficiency target of 11.7% for 2030, exceeding the Commission’s original ‘Fit for 55′ proposal. It requires EU Member States to collectively ensure an additional reduction of final and primary energy consumption, compared with energy consumption forecasts made in 2020.
Under the provisional deal, the annual energy savings obligation nearly doubles to ensure continual progress. EU countries will be required to achieve new savings each year of 1.49% of final energy consumption on average, from 2024 to 2030, up from the current level of 0.8%. They will gradually have to reach 1.9% by the end of 2030. This is an important instrument to drive energy savings in end-use sectors such as buildings, industry and transport.
The revised rules also give a greater responsibility to the public sector to increase energy efficiency. Public bodies will need to systematically take into account energy efficiency requirements in their public procurement of products, services, buildings and works. A new annual energy consumption reduction target of 1.9% is introduced for the public sector. EU countries’ obligation to renovate each year at least 3% of the total floor area of buildings owned by the public administration now also covers the regional and local levels.
Companies will be encouraged to be more energy-efficient under the revised Directive. First, energy management systems will become a default obligation for large energy consumers. All enterprises, including SMEs that exceed 85TJ of annual energy consumption, will have to implement an energy management system. Otherwise, they will be subject to an energy audit (if their annual consumption exceeds 10TJ). For the first time, a reporting scheme for energy performance of large data centres is also introduced.
Under the agreed rules, EU countries will also have to promote local heating and cooling plans in large municipalities having populations above 45,000. Also, with the revised definition of efficient district heating and cooling, minimum requirements will be gradually changed to ensure a fully decarbonised district heating and cooling supply by 2050. Support to new high-efficiency cogeneration units using natural gas and connected to district heating in efficient district heating and cooling systems will only be possible until 2030, whereas any other fossil fuel use will be banned for new heat generation capacities in such systems.
The deal further strengthens provisions on energy efficiency financing to facilitate the mobilisation of investments. Under the new provisions, EU countries will be required to promote innovative financing scheme and green lending products for energy efficiency, by ensuring their wide and non-discriminatory offer by financial institutions. EU countries will have to report on the volume of energy efficiency investments.
Alleviating energy poverty and empowering consumers
The agreement includes the first ever EU definition of energy poverty. Member States will now have to implement energy efficiency improvement measures as a priority among people affected by energy poverty, vulnerable customers, low-income households, and where applicable, people living in social housing. The revised rules put a stronger focus on alleviating energy poverty and empowering consumers, including the creation of one-stop-shops for, technical and financial assistance and out-of-court mechanisms for the settlement of disputes.
Today’s provisional agreement now requires formal adoption by the European Parliament and the Council. Once this process is completed, the new legislation will be published in the Official Journal of the Union and enter into force.
The European Green Deal is the EU’s long-term growth strategy to make Europe climate-neutral by 2050. The revision of the Energy Efficiency Directive is one of the ‘Fit for 55′ proposals presented by the Commission in July 2021 to make the EU’s climate, energy, land use, transport and taxation policies fit for reducing net greenhouse gas emissions by at least 55% by 2030, compared to 1990 levels. Achieving these emission reductions in the next decade is crucial to Europe becoming the world’s first climate neutral continent by 2050 and making the European Green Deal a reality.
Energy efficiency is also a key pillar of the REPowerEU plan, which is the EU’s strategy to get rid of Russian fossil fuel imports as soon as possible. In May 2022, the Commission proposed as part of the REPowerEU Plan to enhance long-term energy efficiency measures, including an increase of the binding Energy Efficiency Target under the ‘Fit for 55′ package of European Green Deal legislation.
Ships harness wind for voyage to a cleaner future
By Gareth Willmer
There is no mistaking Cristina Aleixendri’s enthusiasm – and competence – when it comes to talking about how wind-assisted shipping is on the verge of making a planet-changing comeback.
Aleixendri founded a company called bound4blue with two fellow Spaniards in 2014 to develop sail technology inspired by their training in aeronautical engineering.
Dream come true
‘When we started, we were seen as crazy engineers for wanting to bring sails back to ships,’ she said. ‘But when we speak to shipowners today, they tell us we’ll go back to wind and it will never be abandoned.’
It’s easy to understand why. The shipping industry accounts for about 3% of global greenhouse-gas emissions and is trying to move away from heavy fuel oil, which is highly polluting.
‘Wind-propulsion technology will become a standard,’ said Aleixendri. ‘It started as a dream of mine. Now, I see it less as a dream and more of a reality.’
Not only has Barcelona-based bound4blue attracted growing interest from shipping firms in its wind-assisted propulsion system but Aleixendri has achieved significant personal recognition for her efforts.
In 2019, she made the Forbes 30 Under 30 list for manufacturing and industry in Europe. The following year, Aleixendri won the European Institute of Innovation and Technology Woman Award recognising inspiring female entrepreneurs.
Wind in the sails
Now, bound4blue is coordinating an EU-funded sails project that borrows the company’s name and runs for two years through February 2024. There’s big room for growth in wind-assisted shipping.
As of September 2022, only 21 large commercial ships globally were equipped with the ability to harness wind energy, according to the International Windship Association. Though predicted to more than double to as many as 50 vessels this year, that’s still a drop in the ocean compared with the global fleet.
Wind energy is viable for a variety of vessels, including cargo carriers, tankers, ferries and cruise ships, according to Aleixendri.
‘It’s a massive market because there are more than 60 000 ships sailing worldwide that could benefit from such solutions,’ she said. ‘This is very nascent.’
As 2023 dawned, the entry into force of new regulations by the International Maritime Organization on energy efficiency and carbon emissions is also expected to spur growth.
‘I think it’s the right moment to invest in wind propulsion – it’s a very sweet spot for us,’ said Aleixendri, who is her company’s chief operating officer and earned a Master of Sciences degree in aerospace engineering from the Polytechnic University of Catalonia.
Bound4blue has developed what’s called an autonomous suction-based sail, which looks nothing like a traditional one. It has the appearance of a cylinder-shaped tower that rises from the ship’s deck.
Traditional sails work by ‘‘catching the wind’’. The wind creates a higher-pressure area behind the sail compared to its other side. This difference in pressure generates a force that propels the ship forward, known as “lift”.
By contrast, bound4blue’s ‘‘eSAIL’’ contains a suction fan to draw air inside the tower as wind flows around it, creating stronger lift to power the boat.
This results in six or seven times the lift of a conventional rigid sail and could reduce fuel consumption by up to 40% if combined with better vessel design and adjustments in routes to take advantage of prevailing winds, according to Aleixendri. The eSAIL is best suited for the types of windy conditions found in the North Atlantic and North Pacific, she said – though its use is by no means exclusive to those routes.
Emission savings will vary, depending on the general wind conditions on different routes. For example, bound4blue estimates that a merchant ship sailing the 25 000 kilometres from southern Brazil to north-eastern China could save 26% on fuel and emissions.
While it’s still early days, some first movers have already reported savings of 15%. Bound4blue has also signed a range of deals with shipping firms including Japan’s Marubeni and French-owned Louis Dreyfus Armateurs.
‘We have more demand than we can supply today, so we’re very happy about how it’s going,’ said Aleixendri.
While new technology has previously been seen as risky to install on ships, wind-assisted options like bound4blue’s are starting to make economic sense and can pay for themselves in fuel savings within five years, she said.
‘In the end, wind propulsion is providing free, renewable energy that you don’t have to store or invest in infrastructure to supply,’ said Aleixendri.
Amid the promise of wind-based options, a challenge arises: ensuring they are properly implemented to achieve their full performance potential or preventing negative knock-on effects on how a ship runs.
So another EU-funded project, OPTIWISE, is investigating how the overall design of vessels can be adjusted to optimise wind-assisted propulsion.
Better attuning ships to the technology can help improve sailing efficiency and emission savings, according to Rogier Eggers, who leads the three-year project running through May 2025.
Design modifications could also help overcome some of the potential negative consequences of installing sails on ships. Doing so may, for instance, create an obstacle for passing under objects like cranes in ports or even affect ships in such a way that they struggle to stay on course.
‘That’s simply not acceptable, so it’s required to look at the shape of the hull and appendages such as rudders to make sure that you get the ship in balance,’ said Eggers, a senior project manager at Dutch maritime research institute MARIN.
Over the next couple of years, OPTIWISE plans to use scale models of ships several metres in length to test wind systems and the effects of technological improvements in various sea conditions. The project also intends to employ computer-based voyage simulations and machine learning.
Innovations could deliver savings of well over 30% in carbon emissions, maybe even reaching as much as 50%, if effectively delivered, according to Eggers.
Blast from the past
If wind technologies can be successfully integrated, methods like suction sails, wing sails and cylindrical spinning rotor sails being produced by partners in OPTIWISE could gain real traction, he said.
Adoption of such rotor sails would resurrect a wind-based technology invented a century ago by Anton Flettner, a German engineer. It failed to become widely adopted as a result of the growing popularity of diesel fuel at the time.
‘Several suppliers have been pretty active with wind technology and have been getting increased interest from the shipping market for installations,’ said Eggers. ‘Before, there was a big reluctance to put such things on ships, but devices like Flettner rotors, suction sails and wing sails are now gradually being trusted by the industry.’
This transition promises to set the maritime sector on a course towards slashing emissions.
‘We are at the start with shipping in moving towards a zero-emission future,’ said Eggers. ‘The number of ships equipped now with wind propulsion is still tiny compared to the world fleet, but the hope is that we will soon be seeing hundreds of ships being equipped per year.’
Natural gas markets remain tight as uncertainty persists around Chinese LNG demand
Natural gas markets worldwide continued to tighten last year despite global consumption declining by an estimated 1.6% in 2022. Demand is forecast to remain flat in 2023, but the outlook is subject to a high level of uncertainty, particularly in terms of Russia’s future actions and the economic impacts of fluctuating energy prices.
Unprecedented price rises led to a 13% reduction in Europe’s gas demand as governments responded swiftly with emergency policies, industry scaled back production, and consumers dialled down thermostats. Milder winter weather conditions also helped reduce space heating needs. Gas demand in Asia dropped by 2% as a result of high liquefied natural gas (LNG) prices, Covid-related disruptions in China and consistently mild weather in Northeast Asia.
LNG was a particularly dynamic area in 2022 as the value of global trade hit an all-time-high, doubling to USD 450 billion. Traded volumes increased by 6%, slightly slower than 2021, once again highlighting the distortive impacts that sharp rises in energy prices have had on global economic activity. Europe was the primary driver behind the increase in LNG demand as it pivoted away from Russian pipeline. LNG cargoes delivered to Europe increased by 63% last year.
Natural gas prices, although still high by historical standards, have fallen in recent months. However, that could change in 2023 as demand for LNG picks up in Asia, particularly in China. As the world’s largest importer of natural gas, the country recently lifted its Covid restrictions, which stifled domestic demand throughout last year. China’s domestic LNG demand could increase by 10% in 2023, but current forecasts are highly uncertain. In a bullish scenario, China’s renewed demand growth may be as high as 35% if prices continue to fall and general economic activity recovers swiftly. This would spark fierce competition in international markets and could see prices return to the unsustainable levels seen last summer, representing a concern for European buyers in particular.
“Last year was extraordinary for global gas markets. Prices are returning to manageable levels, particularly in Europe, where a mild winter and demand destruction have helped to cool markets,” said Keisuke Sadamori, the IEA’s Director of Energy Markets and Security. “China is the great unknown in 2023. If global LNG demand returns to pre-crisis levels, that will only intensify competition on global markets and inevitably push prices up again.”
Despite the growth in global LNG demand in 2022, the 5.5% increase in supply was relatively modest. Maintenance at large liquefaction ports and a longer-than-expected outage at Freeport in the United States, one of the largest LNG terminals in the world, contributed to this. Moreover, high market prices were not enough to stimulate significant investment in new terminals.
Investment activity was slow due to rising construction costs and ongoing contract renegotiations throughout the year. This was compounded by a continued reluctance among potential buyers, with the exception of China, to commit to new LNG contracts in the face of long-term demand uncertainty, elevated pricing and decarbonisation objectives. However, many pre-investment projects – including several developments in North America as well as Qatar’s North Field South expansion – made significant progress towards a final decision, leaving the door open to a strong year in 2023.
European natural gas prices and Asian spot LNG prices spiked to record highs late last year. In Europe, this was due to offsetting the sharp falls in Russian gas supplies through LNG imports. China’s gas consumption decreased by 1% in 2022 as a result of lower growth in economic and especially industrial activity, Covid-related restrictions and high prices. Japan was once again the world’s largest LNG importer, despite a modest 3% drop in LNG inflows in 2022. Preliminary data indicates a 4.4% rise in natural gas consumption in North America last year. This increase is primarily attributed to substantial consumption growth in the US power generation sector, as well as the expansion in Canadian consumption reported by both power generators and industrial consumers. For other regions, the current crisis casts longer-term uncertainty on the prospects for natural gas, especially in developing markets where consumption was expected to rise with the aims of helping to support industrial development and of displacing in part the use of more polluting fuels.
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