SECTOR COUPLING The Next Stage of the Energiewende - 05/2021 Thomas Bruckner, Hendrik Kondziella
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D I S K U R S 05 / 2021 Thomas Bruckner, Hendrik Kondziella SECTOR COUPLING The Next Stage of the Energiewende
WISO DISKURS 05/ 2021 Friedrich-Ebert-Stiftung The Friedrich-Ebert-Stiftung (FES) is the oldest political foundation in Germany with a rich tradition dating back to its foundation in 1925. Today, it remains loyal to the legacy of its namesake and campaigns for the core ideas and values of social democracy: freedom, justice and solidarity. It has a close connection to social democracy and free trade unions. FES promotes the advancement of social democracy, in particular by: – political educational work to strengthen civil society; – think tanks; – international cooperation with our international network of offices in more than 100 countries; – support for talented young people; – maintaining the collective memory of social democracy with archives, libraries and more. Division for Economic and Social Policy The Division for Economic and Social Policy of the Friedrich-Ebert-Stiftung advises and informs politics and society in Germany about important current issues and policy making concerning social, economic and environmental developments. WISO Diskurs WISO Diskurs are detailed analyses examining political issues and questions, containing sound policy recommendations and contributing to scientifically based policy consultation. The authors Prof. Dr. Thomas Bruckner is Professor of Energy Management and Sustainability and Director of the Institute for Infrastructure and Resources Management (IIRM) at Leipzig University, where he also heads the Research Centre for Municipal Energy Economics. Dr. Hendrik Kondziella is Managing Director of InfraRes GmbH in Leipzig, and a researcher at the Institute for Infrastructure and Resources Management (IIRM) at Leipzig University. Person responsible in the FES for this publication Dr. Philipp Fink heads the fields of Climate, Environment, Energy and Structural Policy in the Division for Economic and Social Policy.
05/ 2021 WISO DISKURS Thomas Bruckner, Hendrik Kondziella SECTOR COUPLING The Next Stage of the Energiewende 3 PREFACE 4 1 SUMMARY 5 2 INTRODUCTION 6 3 THE ENERGY AND CLIMATE CONTEXT 6 3.1. The global climate context 6 3.2. The national energy context 8 3.3. Decarbonisation of the heating and transport sectors using renewable electricity 12 4 THE TECHNICAL PRINCIPLES OF SECTOR COUPLING 12 4.1. Sector coupling technologies 12 4.2. Sector coupling and power-to-X 13 4.3. Technical efficiency of sector coupling options 15 4.4. Technically feasible – economically viable 17 5 INTEGRATED ASSESSMENT OF SECTOR COUPLING APPROACHES 17 5.1. Sector coupling to compensate temporal variability of renewable energies 18 5.2. Power-to-gas to safeguard security of supply during dark and windless periods 20 5.3. Sector coupling to balance the spatial variability of renewable energy 20 5.4. Sector coupling to decarbonise the heating and transport sectors 24 5.5. Sector coupling from the industrial policy perspective 24 5.6. Comparative assessment of sector coupling approaches 26 6 POLICY RECOMMENDATIONS 27 6.1 CO2 -Bepreisung als zentrales Klimaschutzinstrument 28 6.2 Reform der Energiesteuern und -abgaben 28 6.3 Technologieförderung 28 6.4 Forschungsförderung 28 6.5 Volkswirtschaftliche Kosteneffizienz und Technologieoffenheit 29 6.6 Sektorenkopplung ist kein Selbstzweck 29 6.7 Kurzfristige Maßnahmen 30 Index of figures and tables 31 Abbreviations 31 References
FRIEDRICH-EBERT-STIFTUNG – Economic and Social Policy 2
SECTOR COUPLING WISO DISKURS 3 PREFACE With its recommendation to phase out coal-fired power gen- closer to the goal of a decarbonised economy, also in terms eration in Germany by 2038, the Commission on Growth, of economic costs. The crucial factor, however, will be estab- Structural Change and Employment has cleared the way for lishing the right price incentives, for example through a CO 2 the next stage of the Energiewende (the “energy transition”). price. By the same token, underlying conditions must be The termination of coal-fired power plants also heralds the shaped politically in such a way that a sufficient demand for advent of the post-fossil age, which visualises the abandon- these technologies is generated and investment is chan- ment of fossil fuels by 2080. This step also makes an impor- nelled into these technologies and their application. The au- tant contribution to achieving the Paris climate goals. For the thors therefore conclude with recommendations for political energy transition, this decision means not only that the ex- action that can help on the one hand to break down existing pansion of renewable energy generation capacities must move barriers to a stronger coupling of sectors and, on the other, forward, but also that other sectors need to make a contri- to promote sector coupling processes in a targeted manner - bution of their own to CO 2 reduction and that there have to to make sure that the next stage of the Energiewende is a be sufficient opportunities to use green electricity. success. In this context, the concept of sector coupling is increas- ingly attracting political and public interest. Particularly in view of the long-term climate protection goals, both globally DR. PHILIPP FINK and nationally, technological approaches in which the elec- Division for Economic and Social Policy tricity, heating and transport sectors can be linked up in a Friedrich-Ebert-Stiftung particular efficient manner are currently under discussion. The hope is to be able to achieve the climate goals more quickly and more effectively through synergy effects. Sector cou- pling is also linked to the goal of storing electricity from renew- able sources in the form of hydrogen or methane in order to then use it as a source of energy and heat. But sector cou- pling can do even more. PtX processes can be used to pro- duce synthetic fuels, lubricants, composites and carbons that can be used in industrial and chemical production as well as in the mobility and construction sectors. No wonder, then, that many experts see sector coupling as a key technology, not only to realise the transition to a largely CO 2 -neutral en- ergy supply in the long term, but also as an opportunity for industrial production and employment in the post-fossil age. But what is the best way to shape this next stage of the energy transition? In this publication, Thomas Bruckner and Hendrik Kondziella from the University of Leipzig summarise the current state of the art and knowledge on sector cou- pling in a generally understandable way while providing a comprehensive explanation of the various terms. In addition, the authors discuss current technological constraints on sec- tor coupling and explore the economic costs. Nevertheless, in their view, sector coupling has the potential to move us
FRIEDRICH-EBERT-STIFTUNG – Economic and Social Policy 4 1 SUMMARY The parties to the Paris Climate Agreement agreed to pursue Public opposition to the expansion of transmission networks the objective of limiting the increase in global mean tempera- represents a threat to further expansion of renewable energy. ture to 1.5°C. In the context of Germany’s Energiewende targets Power-to-gas (PtG) can offer an alternative, offering signifi- (Bundesregierung 2010), this means working to reduce green- cant network-serving potential once renewables reach 80 house gas emissions by at least 95 percent by 2050. Given the percent of electricity demand. PtG can bridge delays in trans- levels of unavoidable emissions in other sectors, this implies mission network expansion by using existing gas infrastruc- an electricity supply based entirely on renewables. ture (pipelines and storage facilities). Coupling the electricity Sector coupling represents a key technology for realising and gas networks and operating the infrastructures in par- such an energy supply, and thus for successful realisation of allel also enhances the resilience of the power supply. the Energiewende as a whole. A comprehensive evaluation If ambitious and cost-effective climate action is to be pur- of sector coupling at the infrastructure level must take cumu- sued, the incremental introduction of power-to-X technologies lative CO2 emissions into account, because an earlier shift must begin today, aiming to allow for a market penetration from fossil fuels to renewable energy sources in all sectors is in the medium term, because achieving the macro-economic good for the CO2 budget. In the medium term, fossil natural dimensions required by 2050 will involve significant lead times. gas can serve as a bridge, which would then be successively The central elements of macro-economically appropriate substituted in the longer term by green gases (biogas, or promotion of sector coupling technologies include: hydrogen/methane generated using renewable electricity). The use of renewable electricity for an ambitious decar- (1) CO2 pricing covering all sectors, at a steadily increasing bonisation of all sectors and emission types will demand level consistent with ambitious climate targets; extensive coupling of multiple infrastructures through the (2) Creation of a level playing field concerning state sur- application of so-called power-to-X technologies: power- charges on electricity use; to-heat (use of renewable energy for heating, short-term), (3) Promotion of research; power-to-mobility (electromobility, medium-term), power-to- (4) Technology-specific promotion of market entry of innova- gas (green gases, medium-term) and power-to-liquid (syn- tive sector coupling technologies; thetic fuels, long-term). This will enable the use of renewable (5) Avoidance of unnecessary restrictions on technological electricity in the heating sector and (via electromobility) in openness (for example in connection with the discussion the transport sector. of all-electric approaches or the utility of multiple infra- It will be impossible to achieve an entirely renewable en- structures in the electricity, gas and heating sectors). ergy supply in all sectors as long as energy storage systems required to bridge unpredictable “dark and windless” events (weather situations with little wind or sunshine) are lacking. Power-to-gas offers one practicable route to secure the re- quired long-term storage, using the existing gas distribution infrastructure with its storage facilities and pipeline networks in connection with an appropriate reserve of gas-fired power stations. As such the gas distribution infrastructure can guar- antee security of the electricity and heat supply throughout dark and windless periods, even in a situation where the En- ergiewende reduces the guaranteed capacity of nuclear and coal-fired power stations and/or shortages occur in the Euro- pean electricity market.
SECTOR COUPLING WISO DISKURS 5 2 INTRODUCTION In the longer term, implementation of the German govern- with the long-term climate targets. The idea is that closer ment’s Energy Concept (Bundesregierung 2010) will mean linkage of the electricity, heating and transport sectors can transitioning to a largely CO 2 -neutral power supply. The core generate synergy effects in the overall economic implemen- long-term goals laid out in the document therefore include tation of the Energiewende. The benefits achievable through reducing CO 2 emissions by 80 to 95 percent, through meas- closer coupling of sectors include: (1) the use of renewable ures including increasing the share of renewables in electrici- electricity as a contribution to accelerated decarbonisation in ty production to 80 percent and reducing primary energy the heating and transport sectors; (2) integration of fluctuat- consumption by 50 percent (all to be achieved by 2050). ing surplus electricity from wind and photovoltaic that would Nuclear power is to be phased out by 2022. Important con- otherwise be subject to curtailment (i.e. wasted); (3) storage tributions to achieving these targets are expected from in- of renewable green gas to safeguard security of supply in an creasing energy efficiency, and associated reductions in elec- energy supply system that includes ever fewer fossil power tricity demand and primary energy consumption. stations as a result of the Energiewende; (4) in terms of indus- The Paris Climate Agreement proposes: “Holding the in- trial policy, to become an international technological leader crease in the global average temperature to well below 2°C in this innovative field. above pre-industrial levels and pursuing efforts to limit the From a systemic perspective, sector coupling opens up temperature increase to 1.5°C above pre-industrial levels.” new opportunities to improve the cost-effectiveness of climate Whereas an 80 percent reduction in German greenhouse gas action. The extent to which coupling is desirable and the ex- emissions by 2050 is fairly compatible with the long-standing tent to which it will be necessary to provide targeted sup- 2 degree target, the new 1.5 degree target demands signifi- port (for example for innovative processes such as generating cantly more ambitious action – with accelerated decarboni- synthetic methane) or modify the legal framework has yet sation largely completed by 2050. Since the Paris Climate Con- to be fully clarified. However, a consensus is emerging that it ference the focus of the climate debate in Germany has will not be possible to achieve the long-term target of reduc- therefore shifted to a reduction in national greenhouse gas ing CO 2 emissions by 95 percent without sector coupling emissions orientated on the upper end of the Energiewende (for example through increasing electrification of transport targets for 2050 (i.e. 95 percent). and the application of renewable electricity for heating and As the German government’s monitoring reports on im- generating synthetic gases). plementation of the Energiewende show, the targets for the The present study seeks to lay out the state of the art in share of renewable energy in the electricity supply will be the field of sector coupling in an accessible manner. Chapter 3 met or even exceeded in the medium term. But deficits exist begins by describing the context, while Chapter 4 defines in relation to emissions targets. Greenhouse gas emissions the key terms (such as sector coupling, power-to-heat, power- have to date only been reduced by 27 percent in relation to to-gas, power-to-liquid, power-to-X) and outlines the associ- the reference year 1990. Despite a multitude of additional ated concepts and technological possibilities. Chapter 5 sum- measures – as laid out in Aktionsprogramm Klimaschutz marises and contextualises the findings of existing publica- 2020 – it must therefore be assumed that the target of a 40 tions concerning economic and policy aspects and identifies percent reduction by 2020 will be missed. This applies espe- the significance of sector coupling for successful implemen- cially to the transport and heating sectors: The original targets tation of the Energiewende. Chapter 6 concludes with a for emissions reduction and renovation of existing buildings discussion of policy recommendations that could help to re- will not be met. move barriers to the growth of sector coupling, as well as Supplementing the request for adjusting the regulatory situations where it would appear sensible to subsidise sector framework , there is increasing discussion of technologi- coupling developments. cal sector coupling approaches, especially in connection
FRIEDRICH-EBERT-STIFTUNG – Economic and Social Policy 6 3 THE ENERGY AND CLIMATE CONTEXT Growing public and political interest in sector coupling is emissions without risking the security of energy services: (1) fuelled by the urgency of global and national energy and reducing final energy demand through efficiency measures climate targets. This technological approach has already (for example in buildings, industry and transport); (2) provi- chalked up successes, but existing deficits must also be not- sion of low-CO2 energy supply (for example renewable ener- ed. In the following we present a global overview and out- gy); and (3) removing CO2 from the atmosphere (so-called line the national situation, as the context for the different negative emissions). The latter can be realised for example methods of sector coupling. by combining the use of bioenergy with CCS (carbon capture and sequestration) to remove the CO2 released when bio- mass is burned. Which of these options is realised on what 3.1. THE GLOBAL CLIMATE CONTEXT scale will depend – alongside technological practicability – crucially on economic and acceptance aspects that often dif- The signatories to the Paris Climate Agreement (COP 21) fer between countries (Bruckner et al. 2014). have agreed to pursue the objective of: “Holding the in- crease in the global average temperature to well below 2°C above pre-industrial levels and pursuing efforts to limit the 3.2. NATIONAL ENERGY CONTEXT temperature increase to 1.5°C above pre-industrial levels.” As climate modelling demonstrates, this target can only be The German government’s Energiewende decisions of 2010 achieved if the CO2 concentration in the earth’s atmosphere set a series of quantitative targets for Germany’s contribu- can be stabilised and future cumulative emissions of the tion to containing global climate change and protecting finite greenhouse gas CO2 restricted to a budget compatible with resources (BMWi 2016c, see Table 1) in the context of Euro- the temperature targets (IPCC 2014, 10). By 2011 the “residu- pean energy and climate policy (BMWi 2016a; BMWi 2016b, al budget” of global CO2 emissions had shrunk to about BMUB 2017).) 1,000 GtCO2 (for 2 degrees) and 400 GtCO2 (for 1.5 degrees). Most of the aforementioned targets of the Energiewende Current global emissions are close to 40 GtCO2 per annum were already laid out in the German government’s Energy (IPCC 2014a). In other words, more than half the remaining Concept published in 2010 (Bundesregierung 2010). Con- budget for the 1.5 degree target has already been used up. crete implementation is occurring in an ongoing legislative It is thus very clear that postponing climate action until after process involving the reform of a multitude of energy-related 2030 will make it harder to transition to a decarbonisation laws and instruments (BMWi 2016d). The German Federal path and significantly narrow the range of available options. Ministry of Economics (BMWi) publishes regular progress At the same time the following are all increasing: (1) the reports (BMWi 2016c). Since the Energy Concept was original- costs of climate protection, (2) the necessity to actively re- ly published in 2010 there has been a substantial change in move CO2 from the atmosphere, and (3) the risk that it will the political objectives: Following the nuclear disaster at Fuk- no longer be possible to achieve the Paris climate targets ushima the German government reversed its decision to ex- (IPCC 2014a). According to calculations using integrated as- tend the working lives of the country’s nuclear reactors. The sessment models (IPCC 2014b; IPCC 2018), a climate protec- fundamental political objectives of the Energiewende now tion target of 2 degrees can be achieved if global CO2 emis- include phasing out nuclear power by 2022, alongside cli- sions are reduced to zero in the course of the second half of mate protection, safeguarding competitiveness and uphold- the century; the 1.5 degree target, by contrast, requires net ing security of supply (BMWi 2016d; BMWi 2015: 8). emissions to reach zero by around year 2050 (see Figure 1). As Figure 1 shows, the upper target for reducing green- From a technological perspective there are essentially house gas emissions (GHGs) in the German government’s three possibilities for achieving the desired reduction in Energy Concept (95 percent in 2050 vis-à-vis 1990) would
SECTOR COUPLING WISO DISKURS 7 Figure 1 Paths for anthropogenic CO2 emissions Current climate action protection technologies 60 Traditional climate Annual CO2 emissions (Gt/year) 30 2° path emissions Negative 0 CO2 1,5° path Year 2025 2050 2075 2100 Source: MCC 2016. See also IPCC 2018. Table 1 Quantitative targets of the Energiewende Year 2020 2030 2050 GHG EMISSIONS Greenhouse gas emissions (reduction compared to 1990* 40 % 55 % 80 – 95 % RENEWABLE ENERGY Share of gross final energy consumption 18 % 30 % 60 % Share of gross electricity consumption 35 % 50 % 80 % EFFICIENCY AND CONSUMPTION Primary energy consumption (reduction compared to 2008) 20 % 50 % Gross electricity consumption (reduction compared to 2008) 10 % 25 % Primary energy demand, buildings (reduction compared to 2008) 80 % Heat demand, buildings (reduction compared to 2008) 20 % Final energy consumption, mobility (reduction compared to 2005) 10 % 40 % * In the cases highlighted in red, the targets are not currently expected to be met. Source: Targets: BMWi 2016c: 4; expectation of achievement of targets after Expertenkommission 2017. represent an appropriate German contribution to meeting According to the German government’s Climate Action the global 1.5 degree target (see Figure 2). The lower target Plan 2050 (Klimaschutzplan 2050, BMUB 2016a; BMUB of an 80 percent reduction in GHG emissions corresponds – 2016b): “ Germany’s long-term goal is to become extensively as Figure 1 shows – more closely to the objective of meeting greenhouse gas–neutral by 2050.”. Assuming adherence the 2 degree target. At this juncture it is already worth em- 'to the Paris Climate Agreement – as Figure 1 shows – this phasising that the difference between the two targets ad- means that Germany cannot simply stop at 80 or 95 percent dressed here (80 percent and 95 percent) plays an outstand- reduction in GHG emissions after 2050. It is obvious that in ing role in the subsequent assessment of the sector coupling particular the figure of 80 percent by 2050 (and even a value techniques considered in this study. of 95 percent) can only be understood as a transitional step
FRIEDRICH-EBERT-STIFTUNG – Economic and Social Policy 8 Figure 2 Global climate targets and national reduction targets für greenhouse gas emissions (GHGs) International climate Climate protection protection regime (Paris) Max. change in global 2 °C 1,5 °C mean temperature National GHG reduction ~ 80 % ~ 95 % target (2050) Source: Authors. on a climate protection path leading to a complete decar- heating sectors, and in the long term also mobility. Given the bonisation of the economy in the course of the second half phasing out of nuclear power and the caution observed to of the century. In the present study the twin climate targets date in the public opinion in relation to CCS, a 95 percent (95 percent/1.5 degrees) thus imply an attempt (or in fact a GHG reduction target will require almost 100 percent of the necessity) to permanently avoid greenhouse gas emissions electricity supply to be renewable. wherever this is technologically possible. Progress to date in implementing the Energiewende can The German government’s climate protection targets iden- be summarised as follows (see Figure 4) (Agora Energie- tify a target corridor for greenhouse gas reductions by 2050. wende 2018, UBA 2018): As described in Chapter 3.1. for the global context, the inter- national community has a residual budget of CO2 emissions – The proportion of electricity demand supplied by renew- that is compatible with meeting the respective temperature ables rose in 2017 to more than 36 percent. The Energie- targets. At the same time, integrated assessment modelling wende objective for 2020 (35 percent) has thus already makes it clear that a rapid reduction in emissions is required been met. But the share of renewable energy is stagnating if the emissions reduction path is to be economically viable in heating and falling in the mobility sector (UBA 2018). (IPCC 2014a; UNFCCC 2015). – Primary energy consumption in 2017 was 5.9 percent Assuming a linear reduction path from 2015 to the respec- lower than in the reference year (2008). The trend is thus tive targets in 2050, Germany will emit approx. 20.85 GtCO2eq far from meeting the target (20 percent by 2020) (Ex- in the 80 percent scenario. If the 95 percent scenario is pertenkommission 2017). chosen today, the cumulative CO 2 emissions will be less, at – Greenhouse gas emissions in 2017 were 27.6 percent approx. 17.5 GtCO 2eq. This would save the global GHG lower than in the reference year 1990. Again, the trend is budget approx. 3.4 GtCO2eq (Figure 3). thus far from meeting the target (40 percent by 2020) As well as repercussions for expected emissions in 2050 (Expertenkommission 2017). (max. 250 Mt for 80 percent path compared to 67 Mt for 95 percent path), the choice of GHG emissions target (80 per- cent versus 95 percent) also affects the cumulative budget: 3.3. DECARBONISATION OF THE HEATING the less ambitious path leads to roughly 20 percent higher AND TRANSPORT SECTORS USING RENEW- consumption over the period as a whole. Alongside the ex- ABLE ELECTRICITY pansion of wind and solar, a faster cross-sectoral fuel switch from coal and oil to gas (in the short term to natural gas and Consideration of the energy and climate goals and the pro- in the medium to long term to renewable power-to-gas or gress made to date leads to the following interim conclusion: biogas) can thus contribute to preserving the remaining CO2 While the targets of the Energiewende that relate to phasing budget. out nuclear power and expanding the use of renewable en- If we are seeking cost-effective climate protection, analysts ergy in the electricity sector will in all likelihood be achieved, at the global level (IPCC 2014a) and in the national sphere considerable deficits remain in relation to efficiency targets. (Frontier Economics 2017) show that the available emissions But the biggest challenge is in relation to the uppermost budget is not evenly distributed among all sectors. Because objective of the Energiewende, that of reducing greenhouse there are practically unavoidable emissions in industry and gas emissions (Expertenkommission 2017). agriculture, an overall GHG reduction target of 95 percent im- In view of those findings, it would be tempting to com- plies almost complete decarbonisation of the electricity and pensate the deficits in improving overall energy efficiency
SECTOR COUPLING WISO DISKURS 9 Figure 3 GHG emissions in Germany (2015) 1,500 1,200 GHG emissions (Mt CO2 eq) 900 GHG budget gap of 3.4 Gt between 2015 and 2050! 600 300 Emissions 2015–2050 17.5 Gt 0 1990 2000 2010 2020 2030 2040 2050 Target 95% Target 80% Source: Authors, data from BMUB 2016b. and increasing the use of renewable energy in the heating and transport sectors by using renewable electricity not only in the electricity sector itself, but increasingly also to drive decarbonisation in other sectors. This approach – known as sector coupling – can potentially harness the very impressive development of renewable energy in the electricity sector to benefit other sectors. Many actors see sector coupling as a central approach that can make a significant contribution to the necessary future reductions in national greenhouse gas emissions. To what extent and under what preconditions sector coupling can fulfil those desires is discussed in greater detail in the following. First of all the technological principles are examined, followed by an analysis of the economic efficien- cy. The contribution concludes with recommendations for energy and climate policy.
FRIEDRICH-EBERT-STIFTUNG – Economic and Social Policy 10 Figure 4 Achievement of concrete Energiewende targets 40.0 35.0 30.0 25.0 Renewable share 20.0 of gross electricity consumption (%) 15.0 Renewable share of primary energy 10.0 consumption (%) 5.0 0.0 1990 2000 2005 2010 2011 2012 2013 2014 2015 2016 2017* 16,000 14,000 12,000 10,000 8,000 Primary energy consumption (PJoule) 6,000 4,000 2,000 0 1990 2000 2005 2010 2011 2012 2013 2014 2015 2016 2017* 1,400 1,200 1,000 800 GHG emissions 600 (Mt CO2 eq) 400 200 0 1990 2001 2003 2005 2007 2009 2011 2013 2015 2017* * Figures for 2017 are provisional. Source: AGEB 2018, Agora 2018.
SECTOR COUPLING WISO DISKURS 11 Table 2 Likelihood of achieving Energiewende 2020 targets DIMENSION INDICATOR LIKELIHOOD OF MEETING TARGET Main aims of energiewende Reduction in greenhouse gas emissions unlikely Phasing out of nuclear power likely Renewable energy Increase share of renewable energy in gross likely final energy consumption Increase share of renewable energy in gross likely electricity consumption Efficiency and consumption Reduction in primary energy consumption unlikely Source: Authors, based on statements of Expertenkommission zur Bewertung der Energiewende (Expertenkommission 2017).
FRIEDRICH-EBERT-STIFTUNG – Economic and Social Policy 12 4 THE ENERGY AND CLIMATE CONTEXT Sector coupling methods offer the potential to move towards electrolysis is combined with carbon in subsequent the target of a decarbonised energy sector in a manner that chemical processes to produce synthetic hydrocarbons is also economically optimal. The question of economic effi- (methanol, dimethylester, kerosene, etc.). The term ciency is addressed in Chapter 5. First, the different techno- “power-to-fuel” comprises both power-to-liquid and logical paths are presented here and their energy efficiency power-to-gas, where the gases generated (H 2 and CH 4) compared. are used in mobility applications . – Power-to-chemicals: Use of electricity to produce chemi- cals. In a broader sense this also includes the products 4.1. SECTOR COUPLING TECHNIQUES produced by power-to-gas and power-to-liquid. In a nar- rower sense it is understood as meaning the use of elec- The brief outline of the technologies relevant to sector cou- tricity to produce feedstock for the chemicals industry pling is based on the definitions in DVGW/VDE (2016). More (for example in the context of “green” chemicals). detailed technological descriptions are found in Sterner/ – Power-to-mobility: Covers all (direct and indirect) uses of Stadler (2017). In all cases a contribution to comprehensive electricity in the transport sector. As well as battery-pow- decarbonisation only arises if the electricity used is increas- ered road vehicles, this also includes electric trains, trolley- ingly supplied from renewable sources. This can be (but is buses and (in the future potentially) trolley-trucks. Alter- not necessarily) surplus renewable electricity that would oth- natively the hydrogen or methane from power-to-gas erwise be subject to curtailment. The most important sector processes can be used in vehicles powered by fuel cells, coupling techniques are: CNG or LNG. The latter would also contribute to decar- bonisation in the mobility sector. – Power-to-heat (PtH, P2H): Use of electricity for heating, – Power-to-battery: Use of electricity to charge electric ve- for example by fitting simple heating elements (electric hicle batteries. In theory the mobile battery in the car can boiler) in district heating systems or use of electrically also be used to store electricity, feeding electrical energy powered heat pumps. back into the grid as needed (vehicle-to-grid approach). – Power-to-power: (Intermediate) storage of electricity in – Power-to-gas (PtG, P2G): Generation of combustible batteries or other systems (for example pump storage or gas (for example hydrogen or methane) by electrolysis of compressed air storage). water – splitting water molecules into hydrogen (H2) and – Power-to-X (PtX, P2X): Umbrella term for all possibilities oxygen. In a subsequent step (known as methanation, to use (renewable) electricity outside the conventional see Figure 6) the hydrogen can be converted into synthetic electricity sector via power-to-heat, power-to-gas, pow- methane (CH 4) by combining it with carbon. The stand- er-to-liquid, power-to-chemicals, power-to-battery (or ard source of carbon would be CO 2 for example (1) power-to-mobility). sourced from biogas processing, (2) captured from the emissions of fossil-fired power stations (analogous to CCS) or (3) captured directly from the air (direct air cap- 4.2. SECTOR COUPLING AND POWER-TO-X ture). If renewable electricity is used, we speak of renew- able natural gas, as natural gas is largely composed of The historically observed expansion of renewable energy has CH 4 . The term “green gases” comprises renewable natu- led to a marked fall in costs. The prices offered in bidding ral gas and biogas. processes for new photovoltaic and wind power installations – Power-to-liquid (PtL, P2L): Processes generating synthetic at good locations have in the meantime fallen below 6 ct/ liquid fuels using electricity. Hydrogen generated through kWh in Germany, with the globally price at approx. 3 ct/kWh
SECTOR COUPLING WISO DISKURS 13 Figure 5 Power-to-gas (power-to-methane) Electricity grid Gas network Wind – for heat – for mobility Gas-fired power Solar station Other renewable O2 H2O Power-to-gas plant Gas storage Electrolysis, H2 H2 tank CH4 Absorption Air Methanation Adsorption CO2 tank CO2 H2O Coal-fired power station with CCS Air LZA* O2 Biogas Biogas plant treatment CH4 / CO2 * LZA: Luftzerlegungsanlage Source: Sterner/Stadler 2017. (Thomaßen/Deutsch 2017; REN21 2017). Today wind and so- able electricity in different sectors of the economy. As de- lar electricity under favourable conditions are already com- scribed in Chapter 3, the expansion of renewables in the petitive in terms of full costs against conventionally generat- electricity sector has proceeded faster than expected. At the ed electricity from fossil and nuclear sources. If wind and same time the heating and transport sectors exhibit major solar electricity are to be used in other sectors as their price deficits in relation to the goals of the Energiewende. It is falls, it will be necessary to convert and store the energy in therefore unsurprising that sector coupling is often treated other forms. as a cure-all in the energy debate (Energate 2016). The technologies of power-to-heat, power-to-gas, pow- Yet just because a method is technologically possible does er-to-liquid, power-to-chemicals and power-to-mobility (re- not mean that it is macro-economically sensible. The contri- ferred to collectively in the following as power-to-X) make it bution that power-to-X technologies can actually make to cost- possible to couple the electricity grids with heating, gas and effective realisation of the Energiewende depends in particu- mobility infrastructure so that (1) the renewable electricity lar on (1) the technical efficiency with which they convert can contribute to decarbonisation of other sectors (see Fig- electricity into heat and movement, and (2) the investment ure 7) and (2) further cross-sectoral synergy effects can be and operating costs associated with their application. Be- tapped (DVGW/VDE, 2016). cause the latter are highly dependent on energy and climate The concept of energy sector coupling is also understood policy and can be influenced by subsidy programmes, we to encompass integration of the electricity, heating and gas first turn our attention to the technical efficiency of the con- distribution networks and the mobility sector (see Figure 7). version technologies. This expands the options available for cost-effective imple- When electrical energy is stored in pump storage systems mentation of the Energiewende. or batteries, losses occur in particular in association with charging and discharging. Despite these losses, batteries and pump storage systems achieve technical efficiencies exceeding 4.3. TECHNICAL EFFICIENCY OF SECTOR 80 percent (Sterner/Stadler 2017). When electricity is convert- COUPLING OPTIONS ed into heat (power-to-heat) in an electrode boiler, technical efficiency of almost 100 percent is achieved (Böttger et al. From a purely technological perspective, the paths described 2015). In the case of heat pumps, which draw heat from their above open up multiple, diverse possibilities to utilise renew- surroundings, technical efficiency averaged over the year (in
FRIEDRICH-EBERT-STIFTUNG – Economic and Social Policy 14 Figure 6 Sector coupling with power-to-X and energy storage Electricity Electricity storage sector 1 6 2 3 7 8 Heat sector Gas Transport Material Fuel storage storage sector storage Heat storage 10 Gas Chemicals 4 sector sector 9 5 Power-to-heat, heat pump, Power-to-gas as Power-to-liquid as Power-to-chemicals as 1 4 7 10 flexible CHP heat storage e-fuel fuel storage Storage technology Power-to-gas as Storage technology 2 5 8 power-to-gas e-fuel power-to-chemicals Power-to-gas as Power-to-gas as 3 6 Electromobility 9 electricity storage material storage Quelle: Sterner/Stadler 2017. the case of heat pumps this is referred to as the annual per- the very efficient variant of combined-cycle power plant). If formance factor) can exceed 100 percent of the electrical en- ordinary gas turbines are used for power generation the over- ergy consumed (annual performance factor exceeding 1). all efficiency falls below 25 percent.1 The efficiency of heat pumps depends strongly on the tem- In other words, if one attempts to “save” 1 kWh of surplus perature of heat to be supplied and in particular on the type electricity from curtailment through power-to-gas using or- of heat supply. Typical annual coefficients of performance dinary gas turbines, only one quarter of the energy is actual- (COP) factors for air source heat pumps in combination with ly fed back into the system; 75 percent is lost. Nevertheless, radiators for heating buildings are around 2; ground-source in a comprehensive systemic approach to challenges associ- heat pumps with underfloor heating can achieve annual per- ated with the Energiewende, at high levels of decarbonisa- formance factors exceeding 4 (Fraunhofer IWES/IBP 2017). tion there are good reasons to use power-to-gas despite its The technical efficiency of power-to-gas-on the other hand relatively low technical efficiency. These are laid out in detail is significantly lower than 100 percent: the figure for hydro- in Chapter 5. gen production using electrolysis is today in the region of 75 If we consider the efficiency of different heating technolo- percent (see Figure 8), with further losses for methanation. gies (see Figure 9a) (BMWi 2017), it is apparent that heat The technical efficiency of converting hydrogen to methane pumps enjoy a clear advantage over direct electrical heating is generally given as 80 percent (see Figure 8). The technical efficiency of the combined-cycle power plant used to con- 1 Although the technical efficiency of conversion to hydrogen is com- vert gas (back) into electricity is about 60 percent, while the parable to that of batteries (80 percent), methanation of hydrogen is only technical efficiency of ordinary gas turbines is significantly one step in the power-to-gas process. The process as a whole is: electri- cal energy –> hydrogen (75 percent) –> hydrogen to methane (80 per- less. In the case of power-to-gas the overall technical effi- cent) –> methane used to generate –> electrical energy (60 percent). The ciency is only 36 percent if the entire chain through to power efficiency calculation is 0.75 x 0.8 x 0.6 = 0.36 (36 percent); that is well generation is taken into consideration (even assuming of below the technical efficiency of 80 percent achieved by battery storage.
SECTOR COUPLING WISO DISKURS 15 Figure 7 Figure 8: Technical efficiency of power-to-gas conversion steps Waste heat Combined cycle power plant CHP heat Methane Electrical energy 60 % Reconversion (electricity generation) 36 % Power-to-gas 60 % 100 % 100 % 75 % 80 % Methanisierung Renewable energy Methane Electrolysis Hydrogen Electrical energy Heat Waste heat Source: Sterner 2009. with electric boilers, and even more so over the use of synthetic 4.4. TECHNICALLY FEASIBLE – gas produced using electricity (PtG). This is easy to understand ECONOMICALLY VIABLE if we remember that heat pumps draw heat from their sur- roundings, in addition to the electrical energy employed. Electric From a purely technological perspective the paths presented boilers in turn provide better outcomes than heating using gas here create a multitude of possibilities for sector coupling. produced using electrical energy, because they avoid the conver- But a comprehensive evaluation of their usefulness must not sion losses involved in electrolysis (and methanation). be restricted to the technological perspective. Apart from The findings are similar to those which are obtained for technical efficiency the breadth of technologically possible different vehicle propulsion concepts (Figure 9b). If the elec- applications plays a crucial role, even more so the question tricity is used directly to charge batteries (or still better via of cost-effectiveness. Thus, despite the obvious efficiency overhead wires), this is significantly more efficient than the advantages of electricity-based sector coupling methods (for loss-incurring production of hydrogen to use (for example) in example electric heat pumps and electric vehicles) over tech- fuel cell vehicles, which has a technical efficiency of about niques using PtG or PtL (see Figure 9a and 9b), it would be 60 percent (Ausfelder et al. 2017). The balance is even worse premature to conclude that all heating and mobility applica- if methane or liquid fuel – produced with losses via PtG/PtL – tions should be exclusively electric (the so-called all-electric are used in vehicles with combustion engines. Here the rela- approach). A comprehensive and systemic perspective on tively poor technical efficiency of the conventional combustion the challenges associated with the Energiewende shows that engine compounds the losses incurred in the electricity- despite its relatively low technical efficiency, there are good based production of the fuels (BMWi 2017). Whereas the grounds to use power-to-gas in clearly defined areas of ap- technical efficiency of electric motors is over 90 percent, plication. It is that question to which we now turn in the fol- the technical efficiency of combustion engines is generally lowing. less than 50 percent (Ausfelder et al. 2017).
FRIEDRICH-EBERT-STIFTUNG – Economic and Social Policy 16 Figure 8a Efficiency of sector coupling technologies for decarbonising the heating sector Efficiency of alternative Heat pump heating concept Electric boiler Power-to-gas in gas heating Electricity required to substitute one unit of fossil fuel Source: Authors, on basis of BMWi 2017: 17, Abbildung 2a. Figure 8b Efficiency of sector coupling technologies for decarbonising the mobility sector Battery-powered Efficiency of alternative electric vehicle drive concept Hydrogen-powered vehicle Internal combustion engine with PtG/PtL Electricity required to substitute one unit of fossil fuel Source: Authors, on basis of BMWi 2017: 17, Abbildung 2b. The significance of sector coupling is often downplayed in the energy debate. For example, it is often discussed solely in relation to the use of surplus electricity that would otherwise be subject to curtailment. As will be shown in the following, an integrated techno-economic and systemic perspective re- veals multiple important aspects that speak for greater cou- pling of sectors using power-to-X technologies.
SECTOR COUPLING WISO DISKURS 17 5 INTEGRATED ASSESSMENT OF SECTOR COUPLING APPROACHES 5.1. SECTOR COUPLING TO COMPENSATE from (conventional and renewable) generating plant and TEMPORAL VARIABILITY OF RENEWABLE storage always corresponds to demand (including electricity ENERGIES being fed into storage). When this is the case, the amount of electricity entering the grid is the same as the amount leaving The proportion of renewable energy in the electricity supply it. The grid is in equilibrium, as indicated by a stable network has risen to more than 35 percent (see Figure 4). Most re- frequency (in Europe 50 Hz) across the system. newable electricity production (measured in kWh) is generat- Fluctuations in the electricity supply can be balanced us- ed by wind and solar power, both of which fluctuate with ing the following technologies, or flexibility options: the weather. As Figure 10 shows, the installed generating capacity for renewable electricity in 2017 was almost 120 a) Balancing through central, conventional (back-up) power GW. That is 50 percent more than maximum electricity demand stations (for example gas turbines); (80 GW). The challenges this creates are discussed in the b) Decentralised balancing through flexible back-up tech- following. nologies (“virtual power plants”); Given the objective restrictions on expansion of electrici- c) Balancing via the national or European network; ty production using hydro-power, bioenergy and geothermal, d) Curtailment of renewable electricity supply (generation it should be assumed that electricity production in 2050 management); will remain largely dependent on fluctuating wind power e) Demand-response measures (load management); and photovoltaic. In light of the German government’s target f) Use of energy storage systems (pump storage, com- of increasing the proportion of renewable electricity to more pressed air, battery storage); than 80 percent by 2050 (which inevitably means a corre- g) Power-to-X (PtH, PtG, PtL, etc.). sponding expansion of installed capacity), the number of hours where possible infeed from the renewable sector ex- As the diversity of options suggests, temporally variable in- ceeds demand at that time can be expected to increase. feed from the renewable sector alone does not create a Today residual load (defined as momentary demand minus systemic necessity to employ energy storage systems or possible infeed from the renewable sector) is generally posi- power-to-X technologies. Surplus electricity can be avoided tive. In other words, renewable energy sources are unable to through generation management (e. g. curtailment of renew- satisfy 100 percent of demand and the deficit must be made able energy). In periods where renewable infeed is insuffi- up using conventional capacity. cient to cover load, the shortfall can be made up in the me- In future the frequency of negative residual load periods dium term, for example by existing conventional power can be expected to increase, because the installed capacity stations or in future by new-build gas-fired power stations of fluctuating wind power and photovoltaic will greatly ex- (ETG 2012). Where this involves fossil fuel–fired plant, their ceed the maximum demand. Surplus renewable electricity compatibility with tightening climate targets must verisfied during such phases will then have to be curtailed, stored or (see Chapter 5.2). directed to flexible additional loads (for example in the form A comprehensive evaluation of the usefulness (or even of power-to-X installations). As electricity production from necessity) of energy storage systems and power-to-X tech- renewable sources approaches 100 percent of load, the two nologies must not be restricted purely to the question of annual averages converge. When plotted on an hourly basis technical feasibility (as unfortunately occurs too often in the (see Figure 11) the residual load fluctuates around the zero line public discourse). The very different levels of technical effi- (ETG 2012). ciency must also be taken into account, along with the resul- Guaranteeing a stable electricity supply with a high pro- ting operating costs and the sometimes considerable invest- portion of renewable energy means ensuring that infeed ment costs.
FRIEDRICH-EBERT-STIFTUNG – Economic and Social Policy 18 Figure 9 Historical expansion of renewables in the electricity supply 120 111.9 Installed renewable generating capacity in Germany 110 103.6 96.9 100 89.4 90 82.8 77.4 80 70 66.7 60 55.8 50 46.5 37.8 40 34.8 31.6 27.9 30 24.4 21.2 18.2 20 14.6 11.7 10 4.2 0 1990 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017* Hydro-power Wind onshore Wind offshore Biomass* Photovoltaic Deep geothermal *Including solid and liquid biomass, biogas (including biomethane, landfill gas, sewage gas, without biogenic share of waste ). BMWi on basis of Arbeitsgruppe Erneuerbare Energie-Statistik (AGEE-Stat). As of February 2018, figures provisional. Source: BMWi 2018. As laid out in Chapter 4.3, long-term storage of electricity energy via power-to-X methods must be weighed against using power-to-gas and the reconversion in gas turbines is the costs (for example for investment in plant). Consequently, associated with especially large losses. If 1 kWh of surplus the use of these technologies is not always sensible in over- electricity is “saved” from curtailment using power-to-gas all economic terms. Given the especially high investment costs and reconverted in ordinary gas turbines, only about one of power-to-gas and power-to-liquid installations, it does not quarter of the original energy can actually be fed back into make sense to regard these exclusively as an option for us- the system, while 75 percent is lost. A more energy-efficient ing surplus renewable electricity (Agora Verkehrswende/Ag- alternative in periods of renewable energy surplus (i.e. nega- ora Energiewende 2018). As the current economic difficulties tive residual loads) is to generate heat, as long as it can be of many pump storage schemes demonstrate (Schill et al. used in bivalent heating systems (BMWi 2017; Böttger et al. 2015), there is no automatic connection between the expan- 2014; Böttger/Bruckner 2017; Fraunhofer IWES/IBP 2017). sion of fluctuating renewable energy and the need for stor- Bivalent systems enable the use of electricity during periods age. Cost aspects must be included in the evaluation and the where this is economically attractive (for example when systemic cross-sectoral interactions must be considered in there is a surplus of renewable electricity), and switch to oth- the context of given climate protection targets. er sources of heat when that is not the case. They include district heating systems with power-to-heat and CHP as well as gas-fired peak-load boilers and bivalent heat pumps for 5.2. POWER-TO-GAS TO SAFEGUARD SECU- individual buildings . RITY OF SUPPLY DURING DARK AND WIND- As their investment costs fall (Agora Energiewende 2017a) LESS PERIODS battery storage could also play a role in balancing short-term fluctuations in the supply of renewable energy (Schill et al. Unless excluded by the underlying climate protection targets, 2015). The same applies to pump storage, and to batteries all flexibility options applied in the case of positive residual in electric vehicles – if the latter are operated in so-called ve- load (i.e. undersupply of renewable energy) must be meas- hicle-to-grid mode, where electricity from the battery can be ured against the benchmark of flexible use of the conventio- fed back into the grid (Hanemann et al. 2017). nal power stations still in the system. In the longer term, in- Interim conclusion: Power-to-X can make a contribution to creasing use will need to be made of fossil-fired low carbon balancing the fluctuations in renewable electricity production. alternatives to safeguard security of supply “when the sun In economic terms, the possibility of temporarily storing sur- doesn’t shine and the wind doesn’t blow”. As its costs con- plus renewable energy or converting it into other forms of tinue to fall (Agora Energiewende 2017a), battery storage
SECTOR COUPLING WISO DISKURS 19 Figure 10 Market-serving potential for power-to-X in relation to climate target 100 100 Storage, load management, Flexible conventional generation low-CO2 generation 50 50 Residual load (GW) (e.g. using green gases) Residuallast (GW) 0 0 – 50 – 50 Generation management Storage and/or power-to-X (curtailment) (heat, gas, liquids) – 100 – 100 – 150 – 150 0 2.000 4.000 6.000 8.000 0 2.000 4.000 6.000 8.000 Hour of year Hour of year 80 percent emissions reduction target (2050) 100 percent emissions reduction target (2050) Source: Authors’ compilation on basis of acatech et al. 2015: 15, Abbildung 2; ETG 2012. The extent to which short-term storage will play a prominent role with GHG reduction less than 80 percent will depend on the extent to which storage costs fall. will increasingly be employed to cover the frequent short- can integrate approx. 5.4 TWh of additional renewable elec- term fluctuations in wind power and photovoltaic (for exam- tricity in the market; in the 100 percent scenario the figure ple the day/night rhythm of solar). But, like pump storage, is 38 GW with 4,000 full load hours. Here the demand for batteries are not economically viable in the case of rare but long-term PtG storage is 48 TWh of electricity, which re- longer-lasting dark and windless periods, which do not occur quires 70 TWh of green gas (Hüttenrauch et al. 2017). Thus a often enough to recoup their high investment costs. Assum- relatively small expansion of power-to-gas capacity is indi- ing one wishes to avoid relying on imported electricity from cated for a share of 80 percent renewable electricity supply, other European countries to cover dark and windless periods, but PtG demand increases significantly if 100 percent renew- the current state of technology offers only gas-fired power able electricity is the objective. The reason for this is the ne- stations to fill the gap (alongside bioenergy and geothermal). cessity in the latter scenario to provide (renewable) electricity (Fossil) natural gas is a fuel option in the medium term, but even when the wind does not blow and the sun does not once the GHG emissions reduction target exceeds 80 percent – shine in dark and windless periods. Such periods do not occur and in particular where a 100 percent renewable energy every year, and when they do, they do not normally last supply is sought – the only alternatives for fueling them are more than two or three weeks. During these rare events it biogas and synthetic gas generated in PtG installations. can make sense (despite the poor overall technical efficiency) Under conditions of negative residual load (i.e. renewable to generate electricity using gas turbines or fuel cells fired electricity surpluses) the costs of curtailment (also known as with hydrogen or synthetic gas produced using surplus renew- generation management) define the economic benchmark. able electricity in PtG installations. The findings of studies for the electricity sector that take into In an electricity system that seeks to cover 100 percent of account the necessity for comprehensive techno-economic demand from renewables, 60–70 GW of guaranteed capacity and systemic analysis (acatech et al. 2015, ETG 2012), are sum- remain necessary, for example through PtG with gas-fired marised below (see Figure 11). power stations (Sterner et al. 2015). In the event of a dark For a share of variable renewable energy of up to 80 per- and windless period lasting two weeks – as observed for ex- cent of electricity demand and an emissions reduction target ample from 23 January to 6 February 2006 with 72.8 GW of 80 percent (both in relation to 2050), generation manage- average residual load (Energy Brainpool 2017) – 23 TWh of ment and flexible fossil fuel–fired power stations (for exam- secured capacity would be needed. Given that dark and ple operating with natural gas) define the economic bench- windless periods can last longer than two weeks, the result- mark case. As the share of variable renewable energy approa- ing residual load cannot be covered by short- or medium- ches or exceeds 100 percent of electricity demand, the use term flexibility options (such as batteries and/or load manage- of storage and power-to-X technologies increasingly becomes ment measures). a systemic necessity. These technologies also become attrac- The meteorological outliers that create the typical multi- tive in macro-economic terms where the share lies between week dark and windless event can be expected to occur 80 and 100 percent, if network congestion is left out of the roughly every two years in similar dimensions. While Europe- equation (so-called market-serving potential of PtX). an balancing via the interconnectors reduces the need for The BMWi project on convergence of energy networks flexibility options in normal operation, it can make only a small reaches similar findings: in the 80 percent GHG reduction contribution to dealing with dark and windless events which scenario, 5 GW of PtG capacity with 1,650 full load hours – as in 2006 – can affect the whole of continental Europe.
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