sign in sign up
<<
Home , Electrification, Renewable energy, Renewable heat

ELECTRIFICATION WITH RENEWABLES Driving the transformation of services WITH RENEWABLES Driving the transformation of energy services

© IRENA 2019

IRENA HEADQUARTERS P.O. Box 236, Abu Dhabi United Arab Emirates www.irena.org PREVIEW FOR POLICY MAKERS POLICY FOR PREVIEW ELECTRIFICATION WITH RENEWABLES

Copyright © IRENA 2019

Unless otherwise stated, material in this publication may be freely used, shared, copied, reproduced, printed and/or stored, provided that appropriate acknowledgement is given of IRENA as the source and copyright holder. Material in this publication that is attributed to third parties may be subject to separate terms of use and restrictions, and appropriate permissions from these third parties may need to be secured before any use of such material.

ISBN: 978-92-9260-108-9

Disclaimer

This publication and the material herein are provided “as is”. All reasonable precautions have been taken by IRENA to verify the reliability of the material in this publication. However, neither IRENA nor any of its officials, agents, data or other third-party content providers provides a warranty of any kind, either expressed or implied, and they accept no responsibility or liability for any consequence of use of the publication or material herein.

The information contained herein does not necessarily represent the views of the Members of IRENA. The mention of specific companies or certain projects or products does not imply that they are endorsed or recommended by IRENA in preference to others of a similar that are not mentioned. The designations employed and the presentation of material herein do not imply the expression of any opinion on the part of IRENA concerning the legal status of any region, country, territory, or area or of its authorities, or concerning the delimitation of frontiers or boundaries.

PHOTOGRAPHS ARE FROM SHUTTERSTOCK UNLESS OTHERWISE INDICATED.

ABOUT THE REPORT

The forthcoming scoping study “Electrification with Renewables: Driving the transformation of energy services” presents recent trends and long-term pathways for electrification with renewables, described as “RE-electrification”. Itidentifies key areas for further to better understand the implications and economic impacts of those pathways.

The study is a first-of-a-kind analysis between the International Agency (IRENA) and the world’s largest utility, the State Grid Corporation of . Benefitting from the perspective of a major grid operator, it synthesises recent IRENA work on technology and innovation, including findings from IRENA’s forthcoming report, “Innovation landscape for a renewables-powered future: Solutions to integrate variable renewables”.

This preview of the study for policy makers has been prepared for the ninth session of the IRENA Assembly, of which China will be the President.

The Chinese characters on the front cover signify the concept of "RE-Electrification".

For further information or to provide feedback: [email protected] and [email protected]

2 DRIVING THE TRANSFORMATION OF ENERGY SERVICES ELECTRIFICATION WITH RENEWABLES: DRIVING THE TRANSFORMATION OF ENERGY SERVICES

ver the course of human history, the world 1. RE-ELECTRIFICATION: Ohas made the transition from one major form of energy to another several times – from animal A VITAL PATHWAY and to burning , and then to New technological innovations – along with policy the increasing use of oil and gas. The world is imperatives around and already in the midst of another historic shift away the need to combat change – are driving from these . an urgent in this century. This But to meet and climate goals, the transition is toward clean as a principal pace of change must accelerate. We need a vast , combined with “smart” digital technologies expansion of renewables, a smarter and much that make it possible to take full advantage more flexible electricity grid, and huge increases of the growing amounts of cheap renewable in the numbers of vehicles and other products power. This vision, coined as RE-electrification and processes that run on electricity. This report in this report, unlocks the potential synergies outlines the key role that those three elements between major increases in the use of electricity – combined together to form the strategy of and renewable power generation by coordinating RE-electrification – can play along the path toward their deployment and use across demand sectors a new transformation. – power, , industry and buildings. In a highly digitalised future with strong global climate policies, electrification of energy services will be pervasive. Electric or vehicles would largely replace fossil-fuelled cars and trucks, and and electric would substitute for oil and gas in buildings and industry. Electricity from renewables could also be used to make or synthetic gas for applications where direct electrification is difficult.

Combining widespread electrification and digital technologies on one hand and renewable power on the other can become a central pillar of energy and climate policy, given their numerous benefits. RE-electrification can make power systems more flexible and resilient, while making the wider energy system more secure and less reliant on

3 ELECTRIFICATION WITH RENEWABLES

fossil fuels. At the same time, it offers significant power utilisation, and to avoid the need for massive efficiency gains in use. It reduces investment in building new grid infrastructure. , leading to improved health. The modern Smart electrification with renewables thus creates and control systems that are an a virtuous cycle, where electrification drives new integral part of RE-electrification can also boost uses and markets for renewables, which then economic productivity and improve the quality of accelerates the to electricity for end uses, living conditions. creating more flexibility and thus driving further Unlocking synergies between electrification renewables growth and technological innovation. and renewables Growth and innovation also reduce costs and create additional investment and business opportunities. In today’s traditional electricity systems, demand is viewed as variable but relatively inflexible and Challenges ahead predictable. Small variations can be covered Such a major transformation is not trivial, by operational reserves at or hydro however. Energy systems are both complex and generators. Most flexibility to meet variable highly integrated, making them difficult to change. demand comes from the supply side, where On the policy side, they are highly dependent on dispatchable power plants can be ramped up and entrenched regulations, taxes and subsidies, which down. require considerable political will to adjust. Even RE-electrification creates a very different system. where there is political will, transforming markets Overall demand for electricity will rise significantly and supply chains – e.g. the global car industry in transport, buildings and industry, which creates to EVs, or home heating to heat pumps – may new markets. Solar and will be key suppliers still take many years. People replace heating to these new markets. At the same time, the equipment and cars every 10-15 years, and in electricity they generate can vary depending on some parts of the world the building stock is being prevailing weather conditions, and having a high renovated at a rate of less than 1% per year. Any share of such variable renewable energy (VRE) transition also creates winners and losers, and in a power system poses increased operational those who do not benefit may resist change. The challenges. distribution of cost and benefits needs to be fair and just in order to achieve broad acceptance. RE-electrification strategies meet emerging operational challenges by looking beyond On the technical side, a transition to the the generation side of the power system and widespread use of renewable electricity also has tapping all available sources of flexibility. This considerable challenges. It requires integrating is particularly the case for flexibility of demand large amounts of VRE into the grid, which involves over a wide range of time scales. To take just one matching supply and demand in the face of example, the charging of electric vehicles (EVs) varying generation and peak production that may can be ramped up or down within milliseconds or not match . It requires improved shifted by several hours. coordination between sectors of the economy, both in planning and operation. In addition, new To deliver this new system in a cost-effective infrastructure must be built or expanded for, inter manner, simply switching to electricity in end alia, the , EV charging networks and uses and building new renewable generation hydrogen or synthetic gas production facilities. alone is not sufficient, however. RE-electrification strategies also require smart devices and other The basic technologies needed for the transition information technologies that offer much more already exist. Still, innovation remains critical. flexibility and control over demand and the Innovation in technologies needs to go in hand- delivery and use of renewable electricity. The in-hand with improvements in new hardware, integration of smart approaches in combination software and services. Together, all these with digitalisation is key to reduce the risk of rising innovations can accelerate the energy transition peak loads, to expand opportunities for renewable and lower its overall cost.

4 DRIVING THE TRANSFORMATION OF ENERGY SERVICES

2. A PROFOUND technology trends, these figures are likely to be even higher. Meanwhile, the renewable share in TRANSFORMATION power generation would climb from 26% today to IN ENERGY USE 85% in 2050, with up to 60% coming from variable sources such as solar and wind. Electrification The RE-electrification transformation could be increases the demand for power, but it reduces profound. With dramatic cost reductions making the total energy demand, as electric heat and wind and solar cheaper than fossil-fuelled electricity transport systems can be significantly more generation in many regions, the prospect for low- efficient at delivering energy services than those cost renewable electricity to economically replace using fossil fuels. the direct use of fossil fuels is now in sight. In a future with strong RE-electrification, one Global perspective billion EVs could be in use worldwide in 2050, around half of the total fleet and about the same According to IRENA analysis underpinning the number of all types of vehicles that are on the road recent Global : A Roadmap today. The number of heat pumps used to provide to 2050 (GET2050) report, the global share of heating for buildings could jump ten-fold, to more electricity in total final use of energy could rise than 250 million. Many industrial processes could from 20% today to nearly 45% by 2050, with switch to electric furnaces and heat pumps, while some regions relying on electricity for up to 60% others (along with some transport applications of their energy use by that time (IRENA, 2018a).1 such as long-haul trucking) could use hydrogen or In ongoing updates to this analysis being carried synthetic gas produced with . out by IRENA, based on more recent data and

1 If fuels like hydrogen produced from electricity were to be included as part of electricity’s share of total energy use, these figures would be even higher.

5 ELECTRIFICATION WITH RENEWABLES

The shift to renewable energy could reduce Chinese perspective emissions of from the power This report also features a groundbreaking sector by 64% compared to the reference case assessment of future energy pathways for China, used in the IRENA GET2050 analysis, while conducted by the State Grid Energy Research deep electrification of the end-use sectors could Institute (SGERI), which suggests that the share reduce the emissions from buildings, transport of electricity in the country’s total final use and industry by 25%, 54%, and 16% respectively. of energy could grow from the current level As a result, as seen in Figure 1, the overall impact of of 21% up to 47% by 2050. In China, total final RE-electrification would reduce total energy sector energy demand is expected to peak around emissions by 44% compared to the reference case. 2030-2040 before declining, which is similar to the Adding direct use of renewable energy (such as anticipated global trend. Between 2015 and 2050 solar thermal for heating or for transport) in the analysis, the total amount of energy used and efficiency measures to RE-electrification would increase by around 30%, while electricity would achieve an emissions reduction of more consumption would grow by 140%. There would than 70%, which is compatible with the well-below be a structural shift away from coal towards 2°C goal established in the . more renewables, which would provide 66% of IRENA’s assessment agrees with other global generation by 2050, with solar photovoltaic (PV) scenarios compatible with the well-below and wind generating 41%. 2°C target, which find that buildings have the The potential for RE-electrification is particularly highest potential for electrification (range of high in buildings, with an anticipated increase in study outcomes between 50-80% electrification electricity’s share of from rate by 2050), followed by the industrial sector 29% today to 63% by 2050. The share would reach (34- 52%), and then the transport sector (10-52%). 49% and 25% for industry and the transport sector, A scenario, for example, anticipates respectively (Figure 2). high electrification rates for both industry and the transport sector (at 44% and 52%, respectively) This RE-electrification would cut annual carbon (Teske, Sawyer and Schafer, 2015). Another emissions nearly in half by 2050 compared to the interesting example can be seen in the 85 global anticipated peak, which is reached after 2025. scenarios underpinning the Intergovernmental More than half of the reduction would come from Panel on special report on limiting the industrial sector, due to reduced demand and planetary warming to 1.5°C. Most of the scenarios increased electrification. The power sector, despite feature electrification as an essential element of an increase in total generation, would actually be the overall strategy for deep decarbonisation, with responsible for more than one-third of the total the rate of electrification achieved by 2050 largely emission reductions due to the switch from coal to in the range of 35% to 55%, although several reach renewables. up to 70% (IPCC, 2018).

6 DRIVING THE TRANSFORMATION OF ENERGY SERVICES

Figure 1 Contribution of renewable electrification to global decarbonisation needs

40 000

35 000 )

2 2 167

30 000 6 818 Renewables in the power sector: 23%

15118 Mt Electrification of heat, transport: 21% 25 000

Direct use of

emissions (MtCO emissions 10 215 2 20 000 renewables: 7%; 2 167 Energy 15 000 eciency 3 139 5 745 and other 9846 Mt measures: 21% 10 000 4 730 1 435

Energy related CO related Energy 12 120 2 607 5 000 2 361 2 715 4 339 614 2 124 0 IRENA GET2050 IRENA GET2050 IRENA GET2050 reference case reference case + REmap case renewable electrification

Power Buildings Transport Industry District heat

Notes: CO2 = carbon dioxide; MtCO2 = million tonnes of carbon dioxide. Source: IRENA's own analysis based on IRENA (2018a)

Figure 2 Electrification rate of various sectors in 2050 in the SGERI China RE-Electrification Scenario

70%

60%

50%

40%

30%

20%

10% Percentage of electricity in energy consumption in energy of electricity Percentage 0% 2015 2020 2035 2050

Buildings Transport Industry

Source: SGERI's own analysis

7 ELECTRIFICATION WITH RENEWABLES

3. RE-ELECTRIFICATION Here are summaries of the technologies and strategies needed: APPROACHES, PROSPECTS AND PRIORITIES Buildings, transport and industry 1. Buildings RE-electrification is a particularly powerful Buildings now use about 120 exajoules (EJ) of strategy because it takes advantage of globally per year, about 30% of global synergies between electrification and renewable final consumption (IEA, 2018). More than half of energy, and between sectors of the economy. that energy is supplied by , oil, coal, or At the same time, however, it a very complex biomass. Homes and other residences consume undertaking, since steps taken in one sector can about 70% of buildings energy, while commercial have major impacts on other sectors and their and government buildings use the rest. infrastructure requirements. The impacts will be seen not only on the power grid, but also on the Currently, electricity supplies about 24% of the gas and thermal network infrastructure, as well as energy used in residential buildings and 51% of that on building stocks, recharging stations for EVs and for commercial and public buildings. Those shares other end-user infrastructure. can be increased using the following technology pathways: Each of the three major areas of the economy would play a significant role in achieving the • Switch to heat pumps for space heating RE-electrification transition, both through major and hot water. Heat pumps are three to four growth in their use of electricity as a fuel, and in times more efficient than other forms of offering opportunities for significantly increasing space heating. However, they typically have the flexibility of that use. higher capital costs and require major building

8 DRIVING THE TRANSFORMATION OF ENERGY SERVICES

retrofits when applied to old properties. In account for peak demand or more closely match some Nordic countries heat pumps already supply from renewable generation, increasing account for more than 90% of the sales of the potential for integrating VRE. One German space heating equipment (European Heat case study found that using smart devices on Association, 2017). heat pumps to shut off the pumps or reduce consumption during periods of peak demand, • Use electricity directly for resistance heating when homes were sufficiently heated, could cut in boilers and furnaces, typically to heat water peak loads and reduce costs by 25% (Romero that is circulated to provide heating, and for Rodriguez et al., 2018). space heaters. As there is no efficiency gain in this option, for economic reasons it is better A third solution is increasing the use of district suited to well-insulated buildings or mild heating systems, which can take advantage . Switch to electric and ovens for of waste heat, heat from sewage or water, or where applicable. as sources for heat pumps. The heat can also come from biomass and geothermal In addition to the direct electrification of building sources, combined with to produce energy needs, using synthetic fuels produced with heat and power, and storage systems. The Heat clean electricity may present another pathway to Roadmap Europe project found that using such reduce fossil fuel use and emissions in buildings: systems to supply half of Europe’s total demand • Use electricity to produce fuels such as for heat (using excess industrial heat, large-scale hydrogen or synthetic that can be heat pumps and cogeneration) could cut carbon supplied to homes and commercial buildings emissions by 89% in 2050 compared to 2015 through existing or new natural gas distribution (Paardekooper et al., 2018). pipelines. systems can also be combined with thermal storage systems. Countries with colder winters face a particular challenge in electrifying buildings while meeting In addition to existing solutions, demonstration high demand for heat. In , for example, projects are exploring even more innovative the current typical peak demand for electricity approaches. In , for example, E.ON’s and gas combined is four times higher in the Ectogrid technology enables a number of winter than in the summer (Sauvage, 2018). A UK buildings to be connected to a thermal grid, using study showed serious electricity supply shortfalls heat pumps to supply the necessary heat. Heat during the winter in scenarios with high numbers or cooling flows as needed among the buildings, of heat pumps, even when using battery storage, controlled by a cloud-based management system. demand-side management and other tools to The approach reduces heating bills by 20% manage the demand (Fawcett, Layberry and Eyre, (Ectogrid, 2018). In northern England, a project 2014). Solving this peak demand problem requires called HyDeploy is launching a four-year trial to additional approaches and investment. inject hydrogen produced via into a number of existing gas grids, to reduce cooking Key first steps include weatherising existing and heating emissions without the need for new buildings to make them more energy efficient end-use appliances (HyDeploy, 2018). and strengthening building codes to improve the efficiency of new buildings. This reduces Achieving greater electrification of energy use electricity demand and the need to build new with renewable power in buildings requires a generation capacity. Efficiency gains from heat careful combination of multiple approaches, which pumps can also help to reduce the peak load. balance the needs of different infrastructure requirements. Particular attention must be paid Another important step is harnessing intelligent to avoiding excessive new investment in power grid technologies and storage. These help to distribution grids to meet the winter peak demand.

9 ELECTRIFICATION WITH RENEWABLES

2. Transport • Use renewable electricity to make synthetic gas or oil (hydrogen derivatives) to replace Currently, only about 1% of total energy use in fossil-based transport fuels. Studies show that transport – which includes passenger and cargo even in the long run, the economic prospects for transport by road, rail, maritime shipping and such fuel use in ICE vehicles may not be positive aviation – is supplied by electricity. More than in comparison to EV or FCV options. However, two-thirds of that is used for globally, such fuels can be used for applications where and much of the rest is used by tram and subways. no alternatives exist, such as heavy-duty marine The electricity consumption of the estimated four and aviation applications. million EVs now on the road (as of June 2018) is negligible. Strong policies are therefore required The extent to which the use of hydrogen and its to accelerate the profound transformation of the derivatives penetrate may largely transport sector called for by decarbonisation depend on the future performance and cost of targets and concerns over local air quality. batteries. With sufficiently low battery costs, electricity can increasingly be used for rail travel The technology paths for achieving a major and freight, and perhaps in aviation. For example, transformation include: Avinor, the public operator of Norway’s airports, • Increase the share of EVs on the road. Such has a goal of using for all flights vehicles offer a number of advantages, of up to 1.5 hours long by 2040 (Avinor, 2018). including improved air quality and reduced Ships are being electrified and batteries have maintenance and operating costs. Adoption been introduced on ferries in Norway, for example, rates will depend heavily on both public policies while hydrogen is being considered for Rhine River and continuing declines in the cost of batteries. freight shipping. The future role of hydrogen for Bloomberg New Energy Finance estimates transport applications requires further debate. that battery costs will drop quickly enough to The electrification of transport is in many ways make EVs cost-competitive without subsidies an ideal use of renewable power, given the by 2024 (Bloomberg NEF, 2018). Especially in variable output of sources such as solar and urban environments, the benefits wind. Road vehicles are parked about 90% of of EVs can make a decisive difference. As a the time, allowing their charging schedules to be result, an increasing number of have put optimised using smart power management tools in place regulations that favour electric driving. to accommodate (or even take advantage of) Anticipated changes in transport, such as those variations in power generation. German autonomous vehicles and more shared rides, research finds that adjusting charging rates up which are expected to increase the usage rates or down to match the changes in wind and solar of vehicles, could reinforce the deployment of generation, in combination with price-sensitive EVs. smart charging systems, can more than double the • Use renewable electricity to make hydrogen share of renewable energy used by EVs (Kasten to power fuel cell vehicles (FCVs) and trains et al., 2016; Schuller, Flath and Gottwalt, 2015). for use over long-distances, for example, EVs also offer the potential of so-called vehicle-to- where battery capacities limit the range of grid (V2G) services. When parked and connected EVs, or in cases where the cost of building to the grid, their batteries can help regulate voltage new overhead electric lines is high. Though and frequency, or supply electricity to meet spikes currently expensive to buy, studies show that in in demand. The vehicle capacities are significant: the long run FCVs may offer well-to-tank costs car battery capacity already far exceeds the comparable to the internal combustion engine capacity of all other electricity storage. However, (ICE) equivalent, subject to future changes in this V2G potential has not yet been widely taken oil prices and tax schemes. advantage of, outside of certain pilot projects.

10 DRIVING THE TRANSFORMATION OF ENERGY SERVICES

Flexibility can also come from using electrolysis to Given the intricate interrelationships between produce hydrogen, which then can be used in FCVs. generating power and using it for transport, and Not only can the electrolysis process be quickly between market forces and public policy, the ramped up or down to match supply variations, electrification of transport with renewable energy but the resulting hydrogen also functions as a is a daunting and complex task. Making the means to store temporary surpluses of energy. transition requires careful planning.

Realising these potential synergies requires For example, the necessary transport infrastructure intelligent grids and smart power management – especially for road transport, whether it is EV strategies. This is especially important to avoid charging stations or hydrogen distribution networks the massive investment in upgrading distribution and fuelling stations – must be rolled out at a scale networks that would be required if EV charging to ensure that consumers can have confidence were uncontrolled. in choosing new types of vehicle or transport. Furthermore, the implications of transport Pilot projects and experiments are already electrification for clean power demand, and for the demonstrating the benefits of smart electrification potential need for capacity, strategies in transport. In the Netherlands, grid need to be better understood. Some studies operators and Renault have built 1 000 public indicate that the full electrification of the transport solar-powered smart charging stations with sector would require renewable generation battery storage, decreasing peak load by 27-67% capacity several factors larger than what is currently (van der Kam and van Sark, 2015). In , envisaged. Expansion of electrification without the Pacific Gas & Electric (PG&E) and BMW have paid corresponding expansion of renewable energy will car owners for the right to draw power from their result in higher emissions from the power sector, plugged-in cars, cost-effectively helping to meet even though emissions from the transport sector peak loads (PG&E, n.d.). significantly reduce. Photograph: State Grid Jiangsu Electric Power Co., Ltd

11 ELECTRIFICATION WITH RENEWABLES

National goals, such as banning sales of fossil- supply and demand on the grid as renewable fuelled vehicles entirely (as France, Norway, the power generation varies. High- and others plan to do) or setting EV electric furnaces for commercial applications targets (as in China, , the Republic of Korea, are not yet available. and others), must therefore be complemented with • Replace natural gas fuel and feedstocks with clear plans for implementation of measures such hydrogen or its derivatives produced with as charging infrastructure and the use of smart renewable power. Direct use of hydrogen as charging. For example, to ensure that the five feedstock, for example in , million zero-emission vehicles mandated to be on has good economic prospects among all the the road in California by 2030 can be supplied with hydrogen applications. electricity, the state has earmarked USD 2.5 billion over eight years to install 250 000 charging stations • Relocate industrial facilities to regions with (California Air Resources Board, 2018). low-cost renewable electricity. Aluminium smelters have in some cases moved to 3. Industry because of inexpensive . Industry is the most challenging of the three Switching to electricity in industry is easier and major sectors to decarbonise because of its cheaper for new plants, given the high cost unique dependencies on fossil fuels for both fuel of retrofitting existing plants. In many cases and feedstocks, and because of the lack of cost- electrification of industrial processes could be effective substitution (in contrast to transport, made cost-effective with a price on carbon. where ICE vehicles can be replaced by already However, areas with good renewable sources, or available EVs). For high-temperature industrial industries where processes can be made flexible processes, there is no significant efficiency gain to better match the variable generation from these from a shift to electricity. sources, could already have potential to maximise Today, electricity supplies only about 27% of the the benefit of cheap and clean power generated energy used in industry, powering everything from by renewables. For example, the output of an pumps and motors to heating and cooling units. aluminium production process developed by Germany’s Trimet Aluminium SE and New Zealand’s Technologies and strategies for RE-electrification Energia Potior Ltd can rise or fall by 25%, creating include: a virtual storage capacity of about 1 120 megawatt • Increase the use of efficient heat pumps for hours (MWh) – similar in size to a medium-sized low-temperature heat. IRENA estimates that pumped-storage plant (IEA, 2017). the number of such heat pumps could rise from Electrification permits quick and substantial one million today to 80 million in 2050, which reductions in industry’s carbon emissions. The would supply about 7% of the global demand for reason is that the bulk of energy use is in just a few industrial heat. Combined with waste recovery, energy-intensive industries, such as metals and heat pumps offer significant cost reductions, as chemicals. Kraft Foods in the found when it captured waste heat from systems Using smart public policy to target the production to heat water. The company saved more than of the few energy-intensive commodities can 14 million gallons of water and USD 260 000 have a major impact. The Swedish Energy Agency annually (Emerson, 2017). is co-financing a pilot initiative called HYBRIT that will use hydrogen from hydro and • Adopt electric boilers or hybrid boilers that to make steel, for example. The goal is to make can switch instantly between electricity and the production of steel fossil-free by 2035, at natural gas. The hybrid boilers allow companies a cost that is competitive with traditional steel to not only take advantage of fluctuating production. That initiative alone has the potential electricity prices, but also to help balance to cut Sweden’s total carbon dioxide emissions by 10% (HYBRIT, 2018).

12 DRIVING THE TRANSFORMATION OF ENERGY SERVICES

Implications for network investment 1. Smart RE-electrification reduces To deliver electrification at scale, investment peak-load grid costs will clearly be needed to build or upgrade key The most significant negative impacts of infrastructure. This includes the production electrification could be unprecedented increases of electricity (and hydrogen), the energy in peak demand relative to average demand. transmission and distribution networks (such as For example, EV charging may raise daily peaks the electricity grid and gas and thermal pipelines), substantially, while heat pumps could increase and end-user infrastructure (such as information the seasonal peak (such as winter in European and communications technology [ICT] devices, countries). The problem with this disproportionate retrofits and distribution stations). increase in peak demand is that much of the grid RE-electrification strategies could bring infrastructure required to meet the peaks would significant cost reductions, by reducing investment be used only for short time periods. This lower needs in peak-load infrastructure, achieving higher utilisation of grid infrastructure would make the utilisation rates of power generated by VRE, and investment economically unviable. reducing the need for investment in additional This problem can be solved through smart flexibility measures, such as storage. management of demand. For example, a number of Multiple RE-electrification technology pathways simulation studies have shown that controlling the exist for a given sector. Often the best strategy timing of EV charging would minimise the increase is a combination of technology pathways that in peak demand. In addition, drawing power from balances the need for different infrastructure plugged-in vehicles (V2G) could even reduce peak requirements across sectors, with a particular demand. In simulations in five US states, in a case focus on avoiding excessive new investment where EVs make up 23% of the vehicle fleet, the in power distribution. There is no global study increase in peak demand was 3-11% without smart that comprehensively assesses the infrastructure implications of alternative combinations of RE- electrification pathways, but various pilot projects, Electrifying production case studies and energy system modelling studies of a few energy-intensive do offer some insights. These are used here to illustrate four important implications of RE- commodities can have electrification for network investment: a major impact

13 ELECTRIFICATION WITH RENEWABLES charging. With an optimised charging strategy, on the electricity distribution network. The smart that dropped to 0.5-1.3% (Fitzgerald, Nelder and grid allows optimal control over small loads and Newcomb, 2016). In addition, a recent pilot project generation assets, and can bring significant cost in the United Kingdom with more than 200 Nissan benefits. For example, investing USD 100 million Leaf EVs showed that such a smart charging in technologies at substations in the strategy could save up to USD 3 billion in avoided United Kingdom would bring savings of USD 640 investment costs in the power grid until 2050 (My million within 13 years, Northern Powergrid, a Electric Avenue, n.d.). UK distribution company, estimates (Northern Powergrid, n.d.). Smart management of demand is less effective at reducing peak loads from the use of heat pumps in Digital technologies and sophisticated software buildings, given the wide differences between the also make it possible to combine distributed peak loads in summer and winter. That’s because energy resources, including small-scale solar and demand management strategies can typically shift storage, into what is known as a virtual power loads by at most a week or two, not months. As a plant (VPP). VPPs can bring additional sources result, to achieve the electrification of heat demand of flexibility to the system and avoid the cost in buildings, a balanced mix of gas networks of building new generation and transmission (using hydrogen gas produced by electricity) infrastructure. For example, in New a and thermal networks (with heat pumps that use VPP is being used to provide 20-25 megawatts waste heat and renewable energy) may offer the of flexibility, mitigating the need for expensive best approach to cover peak demand and avoid new power generation resources. The US Energy excessive investment in the power grid. Information Administration also estimates that flexibility can be sourced from VPPs at the cost 2. Smart grid investment pays off beyond of USD 70-100 per kilowatt (kW) (Enbala, 2018), a peak-load savings small fraction of the USD 700-2 100 per kW cost of Investment in smart grid infrastructure can constructing a new gas-fired power plant. deliver significant economic benefits in addition 3. Transmission investment needs depend to addressing problems related to peak load. on resource location For example, EVs could put additional strain on the distribution network because the intensity of New transmission lines may need to be built charging may exceed what the network is designed to supply the additional renewable electricity, to handle. The extent of this problem depends not depending on the location of the renewable only on the charging strategies, but also on the sources. Building wind generation offshore on choice of charging devices and the geographical the north coast of Germany, for example, would concentration of the charging stations. Studies require transmission investment to bring that show that ICT infrastructure to control and power to cities in the southern part of the country. monitor the load would be a significantly cheaper And in countries such as China, renewable energy solution than investing in additional wires and sources are typically far away from the cities that to solve this problem. use most of the electricity, requiring new long- distance transmission lines. China has approached With electrical devices increasingly being used in this issue in part with improved transmission daily life, and more and more generation assets technologies, such as ultra high-voltage direct- (notably rooftop solar PV) being owned by private current transmission lines. customers, the intensity of power use increases and power increasingly flows in more than just Electricity storage could reduce the need for one direction. As a result, the combination of new transmission. This is particularly the case in electrification with increased penetration of areas with congested transmission lines and a high will have major impacts concentration of VRE.

14 DRIVING THE TRANSFORMATION OF ENERGY SERVICES

4. Economic case for hydrogen production Building hydrogen distribution networks does not infrastructure still needs to be established seem cost prohibitive. The production and uses of electrified fuels However, there seems to be a general consensus through hydrogen and its derivatives are already that, for hydrogen derivatives, additional financial technically feasible. A rapid scale-up could lower incentives or a CO2 price would be needed to improve costs and demonstrate which applications are their economic case. One possible enabling strategy economically possible. would be building hydrogen production facilities near low-cost renewable electricity facilities that operate In the long run, producing hydrogen via with high load factors, such as solar plants in the electrolysis is cost-competitive, particularly in Middle East or North Africa, or offshore wind in the areas with good renewable energy resources and North Sea. very low-cost renewable electricity. The Chilean government, for instance, plans to support production of hydrogen from , which it Smart grids keep expects to become cost-competitive with other fuels peak load under by 2023 as solar prices continue to decline. The first applications will be in industry and in transport control and deliver fleets, but as production increases and costs drop, economic benefits hydrogen could be exported to countries such as as well (IRENA, 2018b).

15 ELECTRIFICATION WITH RENEWABLES

4. KEY ITEMS ON • Develop detailed roadmaps to fulfil that vision THE FUTURE AGENDA »» Plan for building or expanding RE- electrification infrastructure, including This scoping report and other recent studies transmission and distribution grids, suggest that the RE-electrification transition offers charging networks, facilities and pipelines a path to a future with greater , for hydrogen production and distribution, improved health and quality of life, and reduced and district heating and cooling systems. risk of potentially catastrophic climate change. »» Engage citizens and tailor solutions to meet The pathway is difficult and complex, and so the specific needs of local communities and will required careful planning, political will, and consumers. detailed national energy strategies and roadmaps. But the preliminary analysis shows that it is both • Adapt regulations effective and achievable. »» Use price signals, such as time-of-use The advantages of widespread electrification are tariffs. clear and compelling. How they are implemented, »» Remove barriers to innovative technologies however, is crucial. Failing to coordinate all the or ownership models. complex and interrelated elements of the pathways would pose major issues, raise costs and potentially »» Provide incentives or funds for widespread have unintended negative consequences. This adoption and use of heat pumps, electric scoping exercise has allowed the identification of boilers, and smart meters and appliances. the following areas where recommendations can »» Strengthen building codes to require already be made, and areas that require further greater efficiency in buildings and support investigation and debate. weatherisation of existing buildings.

Priorities for policy makers • Implementation To avoid potential problems, this report identifies »» Support pilot projects of digital grid important areas where countries can begin by technologies and solutions to manage new taking the following concrete actions: patterns of load, to optimise utilisation of • Develop a long-term vision of the role of VRE, and to explore V2G technologies that electricity in the country’s energy system offer synergies between sectors.

16 DRIVING THE TRANSFORMATION OF ENERGY SERVICES

»» Take advantage of opportunities for large- particular national or local contexts – rather scale centralised solutions such as district than relying on generic figures – could become heating and cooling. increasingly relevant.

»» Scale up smart charging infrastructure, While there is a need to conduct more detailed and assess and plan electric infrastructure and more comprehensive techno-economic needs, particularly at the distribution level, studies of RE-electrification, there is also a need to avoid bottlenecks. to address outstanding policy-related questions. These include: »» Explore relocating energy-intensive industries to sites with low-cost renewable • What are the most effective system-wide policy power. frameworks to achieve the potential synergies between the deployment of renewable • Support key research areas generation and electrification in buildings, »» Continue research and development on transport and industry? electric storage and on electrified fuel • How can policies integrate the economics options in shipping and in aviation. of electrification as a whole, balancing costs »» Support research, development and and benefits to all sectors rather than specific demonstrations of direct and indirect use options individually? of electricity in industry. • Where and how can price signals be used Gaps to bridge to encourage electrification and renewable deployment? There is clearly growing knowledge of the benefits that RE-electrification can provide. However, future Two important factors are often ignored – the research is also needed to better understand behavioural and spatial dimensions in system- uncertainties around the technical, economic and wide RE-electrification. There is still a limited policy-related aspects of the transition. understanding of how end-users will – or would like to – interact with the future energy system, At a high level, the key technical and economic and current operating models do not always questions that remain are related to the effects reflect the needs of citizens or the potential role of electrification on energy system costs, and the of active consumers. Spatial considerations in new extent of the scope for cost-effective electrification investment can materially change the cost-benefit in various contexts. This requires the following: analysis of new energy supplies (e.g. location- • The actual costs and benefits of these wider dependant solar and wind), demand centres electrification aspects need to be more (e.g. remote industrial sites, or district heating comprehensively analysed, for example new extensions), and the required scale of network investment vs new options in end-use flexibility, infrastructure that will connect them (e.g. smart efficiency, or operation. grid assets, or EV charging stations/networks). In further exploring the optimal technical, economic • Even wider analysis needs to be conducted that and policy evolution of electrification with takes into account the costs and benefits of renewables, these dimensions need to be taken electrification in other networks such as gas or fully into account. thermal pipelines, or transport Lessons from failures, as well as from successes, More studies, including comprehensive – truly should be widely shared. This applies whether such system-wide – analysis of RE-electrification lessons relate to new technical demonstrations, pathways, with better data on supply- and pilot projects, or enabling-framework designs. demand-side options, will help to answer more complex questions. Case studies examining

17 ELECTRIFICATION WITH RENEWABLES REFERENCES

Avinor (2018), “Electric aviation”, www.avinor.no/ Fawcett, T., R. Layberry and N. Eyre (2014), en/corporate/community-and-environment/ “Electrification of heating: the role of electric-aviation/electric-aviation heat pumps”, presentation at the BIEE (accessed 19 December 2018). Conference, Oxford, www.researchgate.net/ publication/281029887_Electrification_of_ Bloomberg NEF (2018), “ outlook heating_the_role_of_heat_pumps 2018”, Bloomberg New Energy Finance, https:// (accessed 19 December 2018). about.bnef.com/electric-vehicle-outlook (accessed 19 December 2018). Fitzgerald, G., C. Nelder and J. Newcomb (2016), “Electric vehicles as distributed energy California Air Resources Board (2018), “Zero resources”, Rocky Mountain Institute (RMI), Emission Vehicle (ZEV) Program”, www.arb. Colorado. www.rmi.org/pdf_evs_as_DERs ca.gov/msprog/zevprog/zevprog.htm (accessed 19 December 2018). (accessed 19 December 2018). HYBRIT (2018), “HYBRIT – Towards fossil-free Ectogrid (2018), “E.ON is building the world’s first steel”, www.hybritdevelopment.com ectogridTM at Medicon Village”, www.ectogrid. (accessed 18 December 2018). com (accessed 12 November 2018). HyDeploy (2018), “About HyDeploy”, www. Emerson (2012), “Kraft Foods relies on industrial hydeploy.co.uk/ (accessed 18 December 2018). for sustainable operations”, www. climate.emerson.com/documents/kraft-foods- IEA (International Energy Agency) (2018), World relies-on-heat-pump-en-us-3222734.pdf Energy Balances 2018, OECD/IEA, Paris, https:// (accessed 19 December 2018). webstore.iea.org/world-energy-balances-2018 (accessed 19 December 2018). Enbala (2018), “Creating a 21st Century Utility Grid with DERMS and VPPs”, Knowledge, IEA (2017), “Renewable energy for industry from https://sun-connect-news.org/fileadmin/ green energy to green materials and fuels”, DATEIEN/Dateien/New/MGK_Report_Utility_ OECD/IEA, Paris, www.iea.org/publications/ Grid_with_DERMS_and_VPPs.pdf (accessed 19 insights/insightpublications/Renewable_ December 2018). Energy_for_Industry.pdf (accessed 18 December 2018). European Heat Pump Association (2017), European Heat Pump Market and Statistics Report 2017, IPCC (2018), “IAMC 1.5°C Scenario Explorer”, European Heat Pump Association, Brussels. hosted by IIASA, Intergovernmental Panel on www.ehpa.org/about/news/article/european- Climate Change, https:// data.ene.iiasa.ac.at/ heat-pump-market-and-statistics-report-2017- iamc-1.5c-explorer/ is-available-now/ (accessed 19 December 2018). (accessed 18 December 2018).

18 DRIVING THE TRANSFORMATION OF ENERGY SERVICES

IRENA (2018a), Global Energy Transformation: PG&E (n.d.), “PG&E and BMW partner to extract A Roadmap to 2050, International Renewable grid benefits from electric vehicles”, www.pge. Energy Agency, Abu Dhabi, www.irena. com/en/about/newsroom/newsdetails/index. org/publications/2018/Apr/Global-Energy- page?title=20150105_pge_and_bmw_partner_ Transition-A-Roadmap-to-2050 to_extract_grid_benefits_from_electric_ (accessed 19 December 2018). vehicles (accessed 19 December 2018).

IRENA (2018b), Hydrogen from Renewable Romero Rodriguez, L. et al. (2018), “Contributions Power: Technology Outlook for the Energy of heat pumps to : A case Transition, IRENA, Abu Dhabi, www.irena. study of a plus-energy dwelling”, Applied org/publications/2018/Sep/Hydrogen-from- Energy, Vol. 214, pp. 191–204, https://doi. renewable-power org/10.1016/j.apenergy.2018.01.086. (accessed 18 December 2018). Sauvage, E. (2018), “Natural and renewable Kasten, P. et al. (2016), “Electric mobility in gas: Key enablers of decarbonisation and Europe – Future impact on the emissions and digitalisation of the EU energy system”, the energy systems”, Öko-Institut e.V., Berlin, www.european-utility-week.com/summit- https://www.oeko.de/fileadmin/oekodoc/ programme/natural-and-renewable-gas-key- Assessing-the-status-of-electrification-of- enablers-of-decarbonisation-and-digitisation- the-road-transport-passenger-vehicles.pdf of-eu-energy-system#/ (accessed 19 December 2018). (accessed 19 December 2018).

My Electric Avenue (n.d.), “My Electric Avenue”, Schuller, A., C. Flath and S. Gottwalt (2015), www.myelectricavenue.info “Quantifying load flexibility of electric vehicles (accessed 19 December 2018). for renewable energy integration” Applied Energy, Vol. 151, pp. 335–344, https://doi. Northern Powergrid (n.d.), “£83 million smart grid org/10.1016/j.apenergy.2015.04.004 programme will pave way for North to become low-carbon leader”, www.northernpowergrid. Teske, S., S. Sawyer and O. Schafer (2015), “Energy com/news/-83-million-smart-grid-programme- [r]evolution – A sustainable world energy will-pave-way-for-north-to-become-low- outlook 2015”, Greenpeace International, Global carbon-leader (accessed 26 November 2018). Wind Energy Council, Solar Power Europe, Amsterdam and Brussels, www.greenpeace. Paardekooper, S. et al. (2018), “Heat Roadmap org/international/Global/international/ Europe 4: Quantifying the impact of low- publications/climate/2015/Energy-Revolution- carbon heating and cooling roadmaps”, in 2050 2015-Full.pdf (accessed 18 December 2018). Heat Roadmap Europe: A Low-Carbon Heating and Cooling Strategy, Aalborg University, van der Kam, M. and W. van Sark (2015), “Smart Aalborg, http://vbn.aau.dk/files/288075507/ charging of electric vehicles with photovoltaic Heat_Roadmap_Europe_4_Quantifying_ power and vehicle-to-grid technology in a the_Impact_of_Low_Carbon_Heating_and_ microgrid: a case study”, Applied Energy, Cooling_Roadmaps..pdf Vol. 152, pp. 20–30,. https://doi.org/10.1016/j. (accessed 19 December 2018). apenergy.2015.04.092.

Note: Complete references are to be listed in the forthcoming report.

19 ELECTRIFICATION WITH RENEWABLES ELECTRIFICATION Driving the transformation of energy services WITH RENEWABLES Driving the transformation of energy services

© IRENA 2019

IRENA HEADQUARTERS P.O. Box 236, Abu Dhabi United Arab Emirates www.irena.org PREVIEW FOR POLICY MAKERS POLICY FOR PREVIEW