Sector integration, energy efficiency first and heat pumps - an outlook for a sustainable energy system

 

Contributing to the blog this week is Thomas Nowak, EHPA’s Secretary General in Brussels, EUSEW 2020 Digital Ambassador.

Europe aims to become the first carbon neutral continent in the world in order to limit global warming to less than 1.5°C. This means reducing 4 481 Mt of CO2 emissions in 2017 to net zero in 2050.

Studies by IRENA, LUT/energy watchgroup or Standford suggest this target as both technically feasible and affordable, but the current set of political measures in place and proposed to be is insufficient. Additional ambitious action is needed, in particular on the Member State level. The European Green Deal aimed at giving Europe a new direction by combining more challenging energy and climate targets with a solid growth strategy to the benefit of all Europeans. It seemed to be well on track with e.g. the climate law already presented, the impact assessment for a higher CO2 emission reduction target underway and the “smart sector integration strategy” expected within the next 2 months.

The COVID-19 pandemic has ‘slightly’ derailed this process. Some voices even request to “forget about the Green Deal” or “to stop the ETS” following a belief that relief and recovery action are too costly to be executed in parallel with a push towards a decarbonised Europe.

Fortunately, most policy makers, backed by strong industry support, disagree! Instead of putting the European Green Deal to a halt, they request it to be strengthened and connected to the recovery action in order to re-start the economy with a tailwind towards decarbonisation.

This follows the example of the US New Deal which provided relief action, recovery support and reforms after the great depression. And this is what Europe needs. With the devastating impact on economic development, the parallel between Roosevelt’s New Deal and von der Leyen’s European Green Deal has become more striking. Europe’s citizens need short term relief, and its economies require recovery packages but most importantly, Europe needs an ambitious and reinforced Green Deal that includes a reform of the energy price mechanism.

It is often the price of goods and services that influences supply and demand. Today this price, at least in heating, ignores the external effects of fossil energy used. And since energy prices are mainly shaped by political decisions on levies, taxation and subsidies, it is a task for policy makers to change this status quo.

Establishing a price mechanism that is transparent about the full cost of energy by internalising its external effects will automatically honour cleaner energy sources and technologies/products/services that use energy more efficiently. It will accelerate the build-up of a renewables based, efficient and more affordable economy.

Reforming the energy price is thus essential for the much-needed sustainable energy system based to 100% on renewable energy and largely powered by green electricity.

Energy efficiency must be the guiding principle on the product, and on the systems level.

As a future high-RES electricity grid will be managed from the supply side, storage facilities and demand side flexibility solutions need to be introduced at scale to balance differences in supply and demand resulting in a stable electric grid.

 

Decarbonising heating and cooling

Energy policy has neglected heating and cooling have far too long. Instead this sector needs focus to reduce both energy demand and CO2 (see table 1 for data for 2015).

Table 1: Final energy demand and related CO2-Emissions (Europe, 2015).

  Energy demand 2015 CO2 emissions
Total final energy demand 12 676 TWh 4 470 Mt
Total amount used for heating and cooling (50%) 6 350 TWh  
Final energy demand for residential heating (41%) 2 625 TWh 494 Mt

 

As EUROSTAT data shows, the electricity sector has decarbonised rather quickly. In 2018, 32% of all electricity consumed in Europe was generated from renewable energy sources. Heating and cooling (19,7%) and transport (8%) were lagging. In absolute terms, heating and cooling provided slightly more renewable energy (1 169 TWh) than electricity (1 027 TWh) and transport (215 TWh).

As a result of the impressive cost reduction in electricity generation, stakeholders mean renewable electricity when talking about renewable energy. For 2030 a share of 45% of renewable electricity is expected by Eurelectric, while the RES II Directive has set a sectoral target of 32% for renewable heating and cooling.

The options to decarbonise heating and cooling are limited: biomass (both solid, fuel and gas), heat pumps (ambient energy) and hybrid heat pumps, solar thermal and direct geothermal sources. The 2018 renewable energy directive adds the direct (heat exchangers) and indirect (heat pumps) use of waste heat to this list (acknowledging a similar effect as the use of renewables).

Heat pumps provide heating/cooling to residential and commercial buildings, industrial processes and district energy grids. And they do so with benefits to Europe’s energy system and society. Efficiently using renewable or waste heat, their deployment reduces CO2 emissions as well as air pollution at the point of operation resulting in cleaner air and a cleaner atmosphere.

As European manufacturers are technology leaders in many subsegments of this industry and EU universities provide a well-developed research environment, a growing local heat pump market is not only providing employment and taxes but creates significant export opportunities. Not least, heat pumps are built via a pan-European value chain and connect the competence centres of the continent.

From an energy efficiency perspective, heat pumps are the most powerful technology available. If subject to labelling, the majority of heat pumps comply with the labels top 2 categories. In final energy terms, heat pump generate between 3.5 and 6 units of heat from one unit of electricity (up to 10, if the provided cooling is used in parallel).

In 2019, 1.5 million heat pumps and hybrid systems were sold, many in renovation projects. This translates into a 15% growth over 2018. Growth rates have to increase further to achieve national and European energy and climate targets. Connecting EU-recovery and EU Green Deal is a perfect accelerator to leapfrog to modern, 2050 ready solutions

The efficiency comparison of different electrification trajectories made by Agora Energiewende clearly shows the advantage of direct electrification.

Thus, for heating and cooling “energy efficiency first” means electrify first.

Figure 1: Individual and overall efficiencies for different heating systems starting from renewable electricity (Source: Agora Energiewende: The future cost of electricity based synthetic fuels.)

Figure 1: Individual and overall efficiencies for different heating systems starting from renewable electricity (Source: Agora Energiewende: The future cost of electricity based synthetic fuels.)

The reality looks different. In 2015 the fuel mix was dominated by gas (43%) followed by biomass (19%), oil (16%), District heating (10%) electric heating (9%) and coal (4%). It is often argued, that this should not be changed, as “we cannot electrify everything”, we should continue to use the existing gas pipelines since they are already been paid for or that the use of heat pumps would require the renovation of buildings, which would simply be unaffordable.

Table 2 compares the energy demand of different decarbonisation alternatives for heating. It reveals that exchanging a fossil boiler with a hydrogen one or running it on eMethane instead of choosing a heat pump does not reduce demand. Thus, the energy demand of a largely unrenovated building stock will remain at today’s level. Generating enough green fuels to fulfil this demand would require even more green electricity. If we cannot electrify everything, we should certainly not choose a pathway that leads to the need to electrify even more.

  Heat pumps (eff. of 3,3) Fuel cell H2 boiler e-Methan boiler Electricity -> H2 -> re-electrified in CHP -> HP
Energy demand replaced 1654 TWh 1654 TWh 1654 TWh 1654 TWh 1654 TWh
Requirement for additional electricity 501 TWh 3675 TWh 2487 TWh 3308 TWh 1262 TWh

 

Table 2: Comparison of electricity needs for different decarbonisation pathways. Source: own.

From an efficiency perspective, the role of hydrogen in heating is not in its direct use, but in storing energy and re-electrifying it to provide a stable electricity supply when needed.

A decarbonised electricity grid will require more demand side flexibility for resilience and robustness. Sector integration can provide some of the most cost efficient solutions, among them the storage of surplus electricity as heat. Small and large thermal storage in combination with direct electric heating and heat pumps are all capable of using more electricity in times of surplus and to switch off demand in times of shortage. Heat pump systems – smartly integrated into the grid – use algorithms to load and unload water storage tanks, heat distribution system, structures in the built environment or whole districts, thus providing flexibility to the grid while maintaining end-user comfort or an expected service level in industry. If flexibility is given economic value, opportunities for new business models occur. The current European heat pump stock of 13,5 million installed units has a technical load shifting potential of between 1 and 3 Terawatt-hours per year.

Where demand side flexibility finds its limitations and can be completed by green molecules. Their storage, transport and use is the missing piece in the puzzle. Green fuels are gap fillers for those sectors and applications that cannot easily be electrified. They are not alternatives to direct electrification but are complementary to it since most green molecules are generated from green electrons (indirect electrification).

While a renewables based, efficient and resilient energy system is possible the transition will take a huge effort on the EU level as well as from the Member States.

The current discussion on the recovery package that aims at reviving our economy must focus on a Green Recovery with strings attached. The trillions of support funding that are ready to be delivered to individuals and industries whose economic activities have slowed down from the COVID-19 Pandemic should be translated into innovation, growth and employment in sectors and for products that are 2050 ready.

The following action items could help trigger demand for heating/cooling

  • Frontload already agreed upon renovation programmes for public buildings (administration, hospitals, schools etc.) and social housing
  • Provide grant schemes for the replacement of fossil boilers. Subsidizing a share of the full renovation cost will help increase renovation rate including technology replacement. In order to avoid like-for-like replacements, Ecodesign and the energy label are useful tools. Project support could be granted only if the requirements of the A+ class are met.
  • Establish one-stop-shop solutions for building renovation including expert advice, planning and financing to simplify the decision in favour of an improved building. Establish similar services for industry and district heating.
  • Showcase best practices across Europe to illustrate that energy efficiency in buildings, processes and cities are not an illusion, but feasible with existing technology. A pan European information and knowledge sharing campaign could engage end-users in the process.

 

In the longer term, the fundamental market dynamic of the energy system needs to be reformed including

  • a CO2 price to internalise the external effects of fossil energy use.
  • a review of taxes and levies applied to different energy sources. Most Member States’ taxation regimes result in a disadvantage for electricity. This should be remedied, and a fair treatment based on CO2 emission levels should be applied.
  • a fixed phase-out schedule for fossil fuel subsidies.

 

It will be impossible to finance the energy transition in heating/cooling from government budgets alone. Thus, market framework must be reformed to active end-user investment.

Solutions exist and sometimes it needs a small nudge to start action. EUSEW serves as a great showcase for market ready technologies, successful policies and future innovation. And it is great for networking. Discussing with like-minded, dedicated people, seeing what is possible, hearing what is planned, is highly inspirational. It encourages many of us to start doing what is necessary.

While we cannot have a coffee together this year, don’t forget that ideas are electrons. I am convinced that the first online EUSEW will deliver results and wish all attendants a successful event.

 

Bio:

Thomas is a long term (renewable) energy aficionado. Apart from closely following the energy transition both in the electricity and heating sectors, he is the owner of a heat pump, a PV power plant and a building in which both peacefully cooperate.

In his professional live, Thomas represents the European Heat Pump Association (EHPA) as Secretary General in Brussels. His main responsibilities are the representation of the industry at the European institutions, networking with other stakeholders in the field of heating and cooling as well as the management of the association and its future development.

Thomas has published several articles on heat pump technology and the integration of heat pumps in the energy system and has spoken on this topic in European and international conferences.

He has also been contributing to scientific publications including the IEA energy technology perspectives and the REN21 Renewables Global Status Report.

Before working for the EHPA, he has worked in several projects on the economic and social benefits of renewable energy.

Thomas holds a university degree in business administration and economics.

 

Disclaimer: This article is a contribution from a Digital Ambassador. All rights reserved.

Neither the European Commission nor any person acting on behalf of the Commission is responsible for the use that might be made of the information in the article. The opinions expressed are those of the author(s) only and should not be considered as representative of the European Commission’s official position.