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An EU Strategy for Energy System Integration: Explainer

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What is energy system integration?

Energy system integration refers to the planning and operating of the energy system “as a whole”, across multiple energy carriers, infrastructures, and consumption sectors. It creates stronger links between them with the objective of delivering low-carbon, reliable and resource-efficient energy services, at the least possible cost for society. Energy system integration is the pathway towards an effective, affordable and deep decarbonisation of the European economy.

The current energy system is still built on parallel and vertical energy value chains, which rigidly link specific energy resources with specific end-use sectors. This model of separate silos cannot deliver a climate neutral economy. It is technically and economically inefficient, and leads to substantial losses in the form of waste heat and low energy efficiency.

The Energy System Integration Strategy sets out a vision on how to accelerate the transition towards a more integrated energy system, in support of clean energy and a climate neutral economy while strengthening energy security, protecting health and the environment, and promoting growth and global industrial leadership.

The Strategy sets out 38 actions to implement the necessary reforms. These include the revision of existing energy legislation, financial support or research and deployment of new technologies and digital tools, guidance to Member States on fiscal measures and phasing out of fossil fuel subsidies, market governance reform and holistic infrastructure planning, and improved information to consumers.

What are the main elements of the strategy?

The strategy is built on three complementary and mutually reinforcing elements:

  • First, a more circular energy system, where no energy is wasted and where energy efficiency is the first consideration. An example is to facilitate the reuse of waste heat from industrial sites and data centres.
  • Secondly, the use of cleaner electricity produced from renewable sources. As renewables become cheaper, electricity will become cleaner. We need to extend the use of that clean electricity into more areas such as buildings, industry, and transport, which traditionally relied on fossil fuels.
  • Thirdly, the promotion of renewable and low-carbon fuels, including hydrogen, for sectors that are hard to decarbonise, such as heavy transport and industry. This will be done by: unlocking the potential of sustainable biomass and biofuels, renewable hydrogen, and synthetic fuels; enabling carbon capture, storage and use; clarifying the definition of different renewable and low-carbon fuels and supporting their development; and promoting innovative projects.

Finally, the strategy will be pro-consumer, providing clear and easily accessible information on the cleanest solutions and climate-friendly choices in the market, enabling and encouraging smarter and more sustainable energy use. It will rely on an increased use of digitalisation to connect consumers, producers and energy system operators with each other. This will also contribute to the fight against energy poverty.

The strategy lays down concrete policy proposals that the Commission will present over the coming months and years to deliver on these objectives.

Does this strategy help to reach the goals of the European Green Deal?

Yes. Energy production and consumption account for 75% of our greenhouse gas emissions. The energy system is therefore crucial to delivering on the European Green Deal’s objective of reaching climate neutrality by 2050. The energy system also underpins our economy and our daily lives. It provides jobs and livelihoods and strengthens European competitiveness and innovation.

Energy sector integration enables to combine decarbonised and renewable energy supply with efficient demand side technologies such as electric motors, heat pumps and fuel cells. Deep greenhouse gas emission reductions can only be reached through a combination of energy efficiency and very high shares of renewable energy. And both energy efficiency and renewables penetration can be facilitated by a more integrated energy system.

A new inter-connected system will be more efficient and “circular”, capturing and re-using waste energy. It will be cleaner, with increased use of heat and electricity produced from renewable sources applied in efficient demand side applications in industry, transport and heating. And for those sectors where electrification is difficult, the strategy proposes steps to promote cleaner fuels, including sustainable biofuels and biogas, and renewable hydrogen.

All this will contribute to combatting climate change and reach the goals of the European Green Deal while keeping the costs of the energy transition under control, thus contributing to a fair and just transition.

Will the strategy help Europe’s economic recovery from the Covid-19 crisis?

Yes. The strategy will be another building block of the economic recovery in the aftermath of the COVID-19 crisis. The transition to a more integrated energy system is of crucial importance for Europe, now more than ever. The Commission’s Next Generation EU recovery plan presented on 27 May 2020 highlights the need to better integrate the energy system, as part of its efforts to unlock investment in key clean technologies and value chains. By relying on greater use of clean and innovative processes and tools, the path towards system integration will also trigger new investments, jobs and growth, and strengthen EU industrial leadership at a global level, contributing to the economic recovery.

Does the strategy continue to support fossil fuels such as gas and coal?

On the contrary, the strategy is a roadmap to accelerate the phasing out of fossil fuels through 3 levels:

  • Energy efficiency and circularity, and the use of local renewable resources;
  • Electrification wherever possible, to replace the uses of gas, coal and oil by the direct use of electricity produced from renewables;
  • Renewables and new fuels based on renewables to replace fossil fuels in processes that cannot be converted to electricity;

As regards to gas, the strategy proposes a pathway to replace natural gas with sustainable renewable gas and new synthetic gases based on renewable sources such as hydrogen and synthetic methane.

Does the strategy contribute to the goal of a just transition?

The objective of the strategy is to reach our climate objectives at the lowest possible cost for consumers and public budgets. The strategy also proposes to reinforce the role of consumers in driving the transition to a decarbonised, decentralised energy system. Providing clear and easily accessible information will enable citizens to make climate-friendly choices, change energy consumption patterns and be informed about the best technology options available to them.

The strategy also takes advantage of the rapidly decreasing costs of renewable energy across the EU, which results in lower prices for the consumers, increased energy security, and a more inclusive energy system. In addition, this strategy aims at strengthening the competitiveness of the European economy by promoting growth and technological innovation across the whole EU.

Does the strategy respect the ‘energy-efficiency-first’ principle?

Yes. The energy-efficiency-first principle is at the core of energy system integration. Energy efficiency reduces the overall investment needs and costs associated with energy production, infrastructure and use. It also reduces the related land and materials use, and the associated pollution and biodiversity losses.

Energy system integration can help the EU achieve greater energy efficiency through a more circular use of available resources and by switching to more efficient energy technologies. For example, electric vehicles are much more energy efficient than combustion engines. Applying this energy-efficiency-first principle consistently across the whole energy system will be done by giving priority to demand-side solutions whenever they are more cost effective than investments in energy supply infrastructure in meeting policy objectives.

Other measures will ensure that customers’ decisions to save, switch or share energy properly reflect the life cycle energy use and footprint of the different energy carriers, including extraction, production and reuse or recycling of raw materials, conversion, transformation, transportation and storage of energy, and the growing share of renewables in electricity supply.

How does the strategy support EU leadership in clean energy technology?

The strategy aims to ensure that the EU fully exploits its head-start and expertise in renewable and smart energy technologies. Specific sectors and value chains that are expected to have a central importance and where the EU is well positioned for global leadership include:

  • district heating
  • smart grids and appliances
  • digital tools to support the integration of electric vehicles
  • hydrogen supply and demand side equipment.

How does the strategy affect the EU’s security of energy supply?

The EU is currently importing 58% of its energy needs, mostly in the form of oil and gas. With the clean energy transition, the EU will decrease its dependence on fossil fuels and fossil fuel imports. The Energy system integration strategy will facilitate this process. The EU will consume less energy overall, increasingly rely on domestic renewable resources and gradually diversify its energy imports towards cleaner energy carriers, such as renewable hydrogen. These energy savings, diversification and domestic production will help to build a more resilient European economy.

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Achieving Net Zero Electricity Sectors in G7 Members

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G7 members are well placed to fully decarbonise their electricity supply by 2035, which would accelerate the technological advances and infrastructure rollouts needed to lead global energy markets towards net zero emissions by 2050, according to a new report from the International Energy Agency. The report was requested by the United Kingdom, which holds the G7 Presidency this year.

The pathway laid out in the report – Achieving Net Zero Electricity Sectors in G7 Members – underscores how the G7 can serve as first movers, jump-starting innovation and lowering the cost of technologies for other countries while maintaining electricity security and placing people at the centre of energy transitions.

The new report builds on the IEA’s landmark Roadmap to Net Zero by 2050 to identify key milestones, challenges and opportunities for G7 members. Following on from June’s G7 Summit, it is designed to inform discussions at the COP26 Climate Change Conference in Glasgow, for which the UK also holds the Presidency. 

At the G7 Summit, the leaders of Canada Germany, France, Italy, Japan, the United Kingdom and the United States – plus the European Union – committed to reach “an overwhelmingly decarbonised” power system in the 2030s and net zero emissions across their economies no later than 2050.

The G7 now accounts for nearly 40% of the global economy, 36% of global power generation capacity, 30% of global energy demand and 25% of global energy-related carbon dioxide (CO2) emissions. Its clean energy transition is already underway, with coal making way for cleaner options. The electricity sector now accounts for one-third of the G7’s energy-related emissions, down from a peak of nearly two-fifths in 2007. In 2020, natural gas and renewables were the primary sources of electricity in the G7, each providing about 30% of the total, with nuclear power and coal close to 20% each.

Reaching net zero emissions from electricity would require completing the phase-out of unabated coal while simultaneously expanding low emissions sources of electricity, including renewables, nuclear, hydrogen and ammonia. According to the IEA’s pathway to net zero by 2050, renewables need to provide 60% of the G7’s electricity supply by 2030, whereas under current policies they are on track to reach 48%.

The G7 has an opportunity to demonstrate that electricity systems with 100% renewables during specific periods of the year and in certain locations can be secure and affordable. At the same time, increased reliance on renewables does require the G7 to lead the way in finding solutions to maintain electricity security, including seasonal storage and more flexible and robust grids.

In the IEA’s pathway to net zero by 2050, innovation delivers 30% of G7 electricity sector emissions reductions to 2050, which will require international collaboration while also creating technology leadership opportunities for G7 countries. Mature technologies like hydropower and light-water nuclear reactors contribute only about 15% of the reductions in the IEA pathway. About 55% come from deploying technologies that either still have huge scope to grow further, such as onshore wind and solar PV, or in early adoption phase, such as heat pumps and battery storage. Technologies still in development, such as floating offshore wind, carbon capture and hydrogen, would deliver another 30%.

The new report underscores that people must be placed at the centre of all clean electricity transitions. Decarbonising electricity could create as many as 2.6 million jobs in the G7 over the next decade, but as many as 300,000 jobs could be lost at fossil fuel power plants, with profound local impacts that demand strong and sustained policy attention to minimise the negative impacts on individuals and communities. Household spending on energy should decline by 2050, as rising spending on electricity is more than offset by lower expenses for coal, natural gas and oil products. Governments must foster efficiency gains and structure energy tariffs for consumers and businesses so that all households can benefit from these cost savings.

“G7 members have the financial and technological means to bring their electricity sector emissions to net zero in the 2030s, and doing so will create numerous spill-over benefits for other countries’ clean energy transitions and add momentum to global efforts to reach net zero emissions by 2050,” said Fatih Birol, the IEA Executive Director. “G7 leadership in this crucial endeavour would demonstrate that getting to electricity sectors with net zero emissions is both doable and advantageous, and would also drive new innovations that can benefit businesses and consumers.

We have decided to take the path towards climate neutrality. This can only be achieved together – with joint and decisive action,”said Peter Altmaier, Germany’s Federal Minister for Economic Affairs and Energy. “Our way towards climate neutrality is ambitious, but necessary. We need to act together with clear, joint and decisive action. The energy sector plays clearly a key role on our way to climate neutrality. Solutions are at hand, such as the exit from coal-fired power generation in Germany and other countries. The IEA report shows how the G7 can live up to its pioneering role in this regard a matter that will continue to be topical during the German G7 presidency in 2022.

In this critical year of climate action ahead of COP26, I welcome this report, which sets out a roadmap for the G7 to meet the commitment, made earlier this year, to accelerate the transition from coal to clean power,” said COP26 President-Designate Alok Sharma. “The report also highlights the huge jobs and growth opportunities that this decade could bring, from scaling-up renewables and improving energy efficiency to driving digital solutions and deploying critical technologies.

We welcome the IEA’s report on achieving net zero electricity sectors in the G7. These countries should provide leadership in the energy transition,said UN High Level Climate Action Champions Gonzalo Munoz and Nigel Topping. “Decarbonising electricity is essential to keep 1.5 degrees alive, as well as to provide the power for electrification of other sectors. Key G7 milestones in the report include phase out of unabated coal and reaching 60% renewable share of electricity by 2030 and overall net zero electricity emissions by 2035. The private sector stands ready to support this effort.

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Sustainable transport key to green energy shift

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With global transport at a crossroads, government leaders, industry experts, and civil society groups are meeting in Beijing, China, for a UN conference to chart the way forward to a more sustainable future for the sector, and greater climate action overall. 

The three-day UN Sustainable Transport Conference, which opened on Thursday, will examine how transportation can contribute to climate response, economic growth and sustainable development. 

It is taking place just weeks before the COP26 UN climate change conference in Glasgow, Scotland. 

In remarks to the opening, UN Secretary-General António Guterres underlined what is at stake. 

“The next nine years must see a global shift towards renewable energy. Sustainable transport is central to that transformation,” he said.  

The move to sustainable transport could deliver savings of $70 trillion by 2050, according to the World Bank.   

Better access to roads could help Africa to become self-sufficient in food, and create a regional food market worth $1 trillion by the end of the decade. 

Net-zero goal 

The COVID-19 pandemic has revealed how transport is “far more than a means of getting people and goods from A to B”, the UN chief said.

Rather, transport is fundamental to implementing the 2030 Agenda for Sustainable Development and the Paris Agreement on climate change, both of which were “badly off-track” even before the crisis. 

The Paris Agreement aims to limit global temperature rise to 1.5 degrees Celsius, but the door for action is closing, he warned. 

“Transport, which accounts for more than one quarter of global greenhouse gases, is key to getting on track. We must decarbonize all means of transport, in order to get to net-zero emissions by 2050 globally.” 

A role for everyone 

Decarbonizing transportation requires countries to address emissions from shipping and aviation because current commitments are not aligned with the Paris Agreement. 

Priorities here include phasing out the production of internal combustion engine vehicles by 2040, while zero emission vessels “must be the default choice” for the shipping sector. 

“All stakeholders have a role to play, from individuals changing their travel habits, to businesses transforming their carbon footprint,” the Secretary-General said. 

He urged governments to incentivize clean transport, for example through regulatory standards and taxation, and to impose stricter regulation of infrastructure and procurement. 

Safer transport for all 

The issues of safety and access must also be addressed, the Secretary-General continued. 

“This means helping more than one billion people to access paved roads, with designated space for pedestrians and bicycles, and providing convenient public transit options,” he said. 

“It means providing safe conditions for all on public transport by ending harassment and violence against women and girls, and reducing deaths and injuries from road traffic accidents.” 

Making transport resilient 

Post-pandemic recovery must also lead to resilient transport systems, with investments going towards sustainable transport, and generating decent jobs and opportunities for isolated communities. 

“Public transport should be the foundation for urban mobility,” he said. “Per dollar invested, it creates three times more jobs than building new highways.” 

With much existing transport infrastructure, such as ports, vulnerable to extreme climate events, better risk analysis and planning are needed, along with increased financing for climate adaptation, particularly in developing countries. 

Mr. Guterres stressed the need for effective partnerships, including with the private sector, so that countries can work together more coherently. 

“The transformative potential of sustainable transport can only be unleashed if improvements translate into poverty eradication, decent jobs better health and education, and increased opportunities for women and girls. Countries have much to learn from each other,” he said. 

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Decisive action by governments is critical to unlock growth for low-carbon hydrogen

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Governments need to move faster and more decisively on a wide range of policy measures to enable low-carbon hydrogen to fulfil its potential to help the world reach net zero emissions while supporting energy security, the International Energy Agency says in a new report released today.

Currently, global production of low-carbon hydrogen is minimal, its cost is not yet competitive, and its use in promising sectors such as industry and transport remains limited – but there are encouraging signs that it is on the cusp of significant cost declines and widespread global growth, according the IEA’s Global Hydrogen Review 2021.

When the IEA released its special report on The Future of Hydrogen for the G20 in 2019, only France, Japan and Korea had strategies for the use of hydrogen. Today, 17 governments have released hydrogen strategies, more than 20 others have publicly announced they are working to develop strategies, and numerous companies are seeking to tap into hydrogen business opportunities. Pilot projects are underway to produce steel and chemicals with low-carbon hydrogen, with other industrial uses under development. The cost of fuel cells that run on hydrogen continue to fall, and sales of fuel-cell vehicles are growing.

“It is important to support the development of low-carbon hydrogen if governments are going to meet their climate and energy ambitions,” said Fatih Birol, the IEA Executive Director, who is launching the report today at the Hydrogen Energy Ministerial Meeting hosted by Japan. “We have experienced false starts before with hydrogen, so we can’t take success for granted. But this time, we are seeing exciting progress in making hydrogen cleaner, more affordable and more available for use across different sectors of the economy. Governments need to take rapid actions to lower the barriers that are holding low-carbon hydrogen back from faster growth, which will be important if the world is to have a chance of reaching net zero emissions by 2050.”

Hydrogen is light, storable and energy-dense, and its use as a fuel produces no direct emissions of pollutants or greenhouse gases. The main obstacle to the extensive use of low-carbon hydrogen is the cost of producing it. This requires either large amounts of electricity to produce it from water, or the use of carbon capture technologies if the hydrogen is produced from fossil fuels. Almost all hydrogen produced today comes from fossil fuels without carbon capture, resulting in close to 900 million tonnes of CO2 emissions, equivalent to the combined CO2 emissions of the United Kingdom and Indonesia.

Investments and focused policies are needed to close the price gap between low-carbon hydrogen and emissions-intensive hydrogen produced from fossil fuels. Depending on the prices of natural gas and renewable electricity, producing hydrogen from renewables can cost between 2 and 7 times as much as producing it from natural gas without carbon capture. But with technological advances and economies of scale, the cost of making hydrogen with solar PV electricity can become competitive with hydrogen made with natural gas, as set out in the IEA’s Roadmap to Net Zero by 2050.

Global capacity of electrolysers, which produce hydrogen from water using electricity, doubled over the last five years, with about 350 projects currently under development and another 40 projects in early stages of development. Should all these projects be realised, global hydrogen supply from electrolysers – which creates zero emissions provided the electricity used is clean – would reach 8 million tonnes by 2030. This is a huge increase from today’s level of less than 50 000 tonnes – but remains well below the 80 million tonnes required in 2030 in the IEA pathway to net zero emissions by 2050.

Practically all hydrogen use in 2020 was for refining and industrial applications. Hydrogen can be used in many more applications than those common today, the report highlights. Hydrogen has important potential uses in sectors where emissions are particularly challenging to reduce, such as chemicals, steel, long-haul trucking, shipping and aviation.

The broader issue is that policy action so far focuses on the production of low-carbon hydrogen while the necessary corresponding steps that are required to build demand in new applications is limited. Enabling greater use of hydrogen in industry and transport will require much stronger policy measures to foster the construction of the necessary storage, transmission and charging facilities.

Countries with hydrogen strategies have committed at least USD 37 billion to the development and deployment of hydrogen technologies, and the private sector has announced additional investment of USD 300 billion. But putting the hydrogen sector on path consistent with global net zero emissions by 2050 requires USD 1 200 billion of investment between now and 2030, the IEA estimates.

The Global Hydrogen Review lays out a series of recommendations for near term-action beyond just mobilising investment in research, production and infrastructure. It highlights that governments could stimulate demand and reduce price differences through carbon pricing, mandates, quotas and hydrogen requirements in public procurement. In addition, international cooperation is needed to establish standards and regulations, and to create global hydrogen markets that could spur demand in countries with limited potential to produce low-carbon hydrogen and create export opportunities for countries with large renewable energy supplies or large CO2 storage potential. 

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