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Energy transition – Net-zero energy system in Germany is possible

November 19, 2024 ryansheehanrts

According to the Jülich researchers, electricity from wind power and photovoltaics will account for the largest share of electricity supply in the future, at over 90 percent. To minimize the costs of the necessary expansion of renewable energies, it must be adapted to regional conditions. “In this way, the potential of each region can be optimally utilized while at the same time ensuring security of supply,” emphasizes Detlef Stolen, head of Jülich system analysis.

Electrolysers first in the coastal regions

Northern Germany has large wind resources. As a result, electricity generation from renewable energies will increase disproportionately there and new energy centers will emerge. However, in order to take advantage of this location, it must be possible to use the electricity flexibly, emphasizes the study “Ways to a Net-Zero Energy System: A Regional Look at Infrastructure, the Economy, and Society.” It makes sense, for example, to initially push ahead with the construction of electrolysis plants for hydrogen production in the coastal regions.

Also see: Increase the rate of expansion for renewables in Europe by a factor 5

The development of hydrogen production in the southern and eastern federal states would follow in a later phase of the transformation in order to be able to meet the increasing demand for hydrogen. According to the study, around 10 percent of Germany’s electrolysis capacity will be located in these regions in the future. This regional distribution would enable a low level of curtailment of renewable energies.

Conversion of the natural gas infrastructure for hydrogen

To ensure that all regions of Germany can benefit, the power grid will need to be expanded – this is particularly important for supplying the energy-intensive industrial centers in North Rhine-Westphalia and in the Rhine-Neckar and Rhine-Main areas. If the grid expansion is delayed, less offshore electricity could be purchased. This would then have to be compensated for by the increased expansion of the hydrogen infrastructure, onshore renewable energies, electricity storage and reconversion power plants. Additional investments of around 8 percent would then be necessary in these areas.

Another key aspect is the expansion of the hydrogen network in order to optimally link domestic production, imports, consumers and storage facilities. According to the study, around 18,000 kilometers of pipelines will be needed for this by 2045. However, these would not have to be newly constructed. The demand for natural gas will decline, so that the existing pipeline infrastructure can be converted to hydrogen.

Electricity, biomass, and heat storage for green district heating

According to the simulation by the Jülich systems researchers, the decarbonization of district heating will be achieved primarily through electricity and biomass in combination with heat storage. Biomass and biogas will be used in more rural areas, while electricity will be used in urban centers. Heat pumps and heat storage will align PV generation with heating demand.

According to the study, security of supply in times of dark, cloudy periods and lower electricity production from wind and sun can be ensured by flexible power plants – based on hydrogen, biogas and biomass.

Also see: Double investments in power distribution or lose race to net-zero

A large proportion of hydrogen power plant capacities will be built in Lower Saxony and North Rhine-Westphalia, in close proximity to hydrogen storage facilities in salt caverns. In 2030, they will account for just over half of all capacities, and in 2045, for two-thirds. The electricity generated from hydrogen can be transported to the south via the power grid. According to Institute Director Stolten, comprehensive hydrogen storage, including the conversion of existing cavern storage facilities and the construction of new salt caverns, is necessary to ensure the necessary flexibility and security in the system.

Positive economic effects outweigh

According to the study, the transformation to greenhouse gas neutrality entails both opportunities and risks for economic development. Overall, however, the positive effects outweigh the negative ones, according to the study. Overall, employment growth is expected in all regions of Germany compared to today, as demand in the various sectors increases. The study sees a higher risk of job losses in the transformation in the automotive and metal industries, and a low risk in the electrical industry and in education and healthcare.

Also interesting: Record annual growth of renewable jobs in 2023

The researchers estimate that the costs of converting the energy system to net zero by 2045 would be around 1.2 percent of Germany’s gross domestic product. However, it is clear that the consequential costs of damage and negative impacts, as well as the costs of climate adaptation measures, would be significantly higher if investments in climate protection were not made, Stolten emphasized at the presentation of the study last Friday (November 15) in Berlin. It is based on a study by Forschungszentrum Jülich on the European energy transition presented at the end of October.

Broad acceptance of PV and wind power

The Jülich systems researchers see a high level of social acceptance for the energy transition and have evaluated various representative surveys on the subject. Both the expansion of wind energy and photovoltaics are widely accepted in all regions, with photovoltaics leading the way. The expansion of hydrogen production using electrolysers is also supported by the population, though higher acceptance in Germany than in the neighborhood. (hcn)

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New McKinsey report – Rising energy demand affecting the pace of the energy transition

September 18, 2024 ryansheehanrts

The report of McKinsey reveals that the global energy transition is entering a new phase, marked by rising costs, complexity and increased technology challenges. Growing energy demand and resulting emissions could affect the pace of the energy transition, which will require a rethink of both low-carbon and fossil fuel strategies to meet the goals outlined in the Paris Agreement.

Key insights

Key insights include:

– Global energy demand is projected to grow by up to 18% through 2050, mainly driven by growth in energy consumption in emerging economies (especially ASEAN countries, India and the Middle East). – –

– Renewables are projected to grow to 65-80% of the global power generation mix by 2050 depending on the scenario.

– Notably, hydrogen demand is projected to be up to 25% lower than previously anticipated due to cost increases of 20-40% and regulatory uncertainty.

– Fossil fuels are projected to account for 40-60% of total energy demand to 2050, with fossil fuel demand projected to plateau between around 2025-2035 and begin declining thereafter.

– Key drivers of oil demand decline include EV uptake, continued plastic recycling and increased demand for sustainable fuels.

– By 2050, BEVs are projected to account for 99% of global passenger vehicle sales in the Continued Momentum scenario, up from 13% today and 71% in 2030.

– A consequential impact on emissions, which have not yet peaked and are projected to begin their decline between 2025 and 2035. Annual capital spending on physical assets is projected to grow by up to 80% by 2040.

Clean energy solutions must scale up

The analysis demonstrates that the build out of clean energy technologies has not been fast enough to meet growing global energy demand. To date, the buildout of renewable energy sources has largely benefitted from the most promising use cases or “low-hanging fruit” where policy and funding have been most plentiful.

Also see: Double investments in power distribution or lose race to net-zero

Diego Hernandez Diaz, Partner at McKinsey reflected on the findings: “To navigate this critical phase of the energy transition while keeping it affordable, reliable, and green, we need urgent action and a faster pace of change. Even with the surge in global net-zero targets, the technologies needed to reach them aren’t progressing quickly enough. Low-carbon solutions must scale up, but they’re facing an uphill battle as rising interest rates and supply chain challenges limit access to capital.”

Global price too low

Critically, the report also shows that the current pace of the energy transition could necessitate new oil production to meet energy demand, across all bottom-up scenarios. The previously anticipated fossil fuel peak at the end of this decade is now better characterized as a plateau. Simultaneously, the projections show the global carbon price is currently too low to drive the decarbonization required for the conditions of faster scenarios to be met, particularly the at-scale uptake of carbon, capture, utilization and storage (CCUS), which will be vital to mitigate more carbon intensive fuel sources.

Humayun Tai, Senior Partner at McKinsey, added: “In order to accelerate the energy transition, continued investment into CCUS and energy efficiency is essential to mitigate fossil fuel dependence. Ensuring a viable business case through the right combination of policy, financial frameworks, and incentives will be critical in driving stakeholder adoption and buildout of low-carbon technologies.”

The new report notes that accelerating the pace of the transition will require overcoming several bottlenecks impacting the uptake of low-carbon technologies, including electricity generation and sustainable fuels. This layered with T&D investments needing to grow nearly three-fold by 2050 to recover from under investment and accommodate for intermittent RES, demonstrates the scale of the challenge ahead. (hcn)

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Energy transition not on track – more PV needed

August 28, 2024 ryansheehanrts

Global consulting firm McKinsey & Company launched a new research revealing the energy sector has a widening “reality gap” between decarbonization technology project commitments and realization. The analysis focuses on Europe and the United States, given both have set explicit targets and have readily available data. It highlights that the disparity between project target volumes, expected volumes and those reaching final investment decision (FID) is significant – threatening the pace of the energy transition.

The article “The energy transition: Where are we, really?” suggests corporate, public and private investors are hesitating about deploying capital due to softening business cases, technology cost-competitiveness, and project enabling and market forming policy support. This is underscored by a significant proportion of announced projects not yet reaching FID, amplifying the risk of project cancellation. For projects with longer lead times in specific technologies, such as offshore wind, the industry is quickly reaching the stage at which FID status projects will only come online after 2030 – impacting countries’ abilities to reach 2030 Paris Agreement commitments.

Several hurdles to be overcome

This divide is being driven by several factors. First, the challenging macroeconomic environment and fluctuating investment climates post-COVID are impacting the financing and prioritization of projects. This is then compounded by long permitting procedures, grid reform challenges and carbon pricing fluctuations which delay the approval and deployment of new projects. Once projects do reach FID, a lack of skilled workers in green technologies is again slowing down the installation and maintenance of systems across the supply chain.

With decarbonization technology projects experiencing significantly high fall-through rates, McKinsey’s analysis shows that Europe and the United States are falling short of announced targets – and therefore, swift action is required. In renewable power generation in the US, for example, more than 1,000 green or blue hydrogen projects have been announced since 2015, but fewer than 15% have reached FID. In more established technologies such as solar, PV capacity additions are projected to stagnate after 2028 at 220GW because of a lack of firm commitments – and of the announced capacity expected to come online before 2030, ~60% is still pending FID.

International supply chain tensions and trade disruptions

In Europe, the solar pipeline is not currently on track to meet 2030 capacity targets of 600GW, with less than 390GW of capacity planned to be online by the end of the decade. Of the ~114GW of additional capacity expected to come online by 2029, less than 20% has reached FID. There is of course the recognition that in some technologies, like PV, there is still an ability to accelerate deployment ahead of 2030 goals. Offshore wind has a gap of only 18GW remaining to meet its overall 2030 target of 176 GW. But, again, of the announced 124GW of offshore wind capacity in Europe, ~65% is still pending FID.

Also interesting: Denmark – More PV for district heating

Humayun Tai, Senior Partner at McKinsey reflects on the findings: “Transforming the energy system hinges on the coordinated deployment of interlinked and interdependent technologies. A slowdown in deployment in one area of the energy system can cause cascading delays and hamper the growth of other technologies. This data confirms the reality gap that we believe the industry is experiencing, especially through inflation and system shocks alongside geopolitical uncertainty, which is seeing international supply chain tensions and trade disruptions. It further underscores the need for companies to reassess the current strategies to further drive the transition.”

Revisit decarbonization plans to pioneer the next wave of progress

The analysis highlights decarbonization technologies such as carbon capture utilization and storage (CCUS) and hydrogen are also facing bottlenecks, such as the need to build out entire value chains for technology deployment. CCUS project pipelines are full and ambitious with 60x and 9x the current CCUS capacity to be available in Europe and the US respectively by 2030. There is a pipeline of 148mpta in Europe and 170mpta in US, but 44mpta and 132mpta of projects respectively are still lacking FID, underscoring a high risk of this not materializing.

Thomas Hundertmark, Senior Partner at McKinsey comments: “While the gap is widening, there is still a window of opportunity for governments and companies to deliver the growth needed while meeting their net zero ambitions. Doing so will require revaluation of existing strategies and regulatory regimes, many of which were devised to assume a different economic and policy landscape than exists today.

Also see: Less energy is more

With a clear view of the reality gap emerging, now is the time for stakeholders across the energy value chain to revisit decarbonization plans to pioneer the next wave of progress. Our forthcoming Global Energy Perspective will demonstrate how far the gap needs to close as we look at different levels of technology deployment, policy, and incentives across the energy system.” (hcn)

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Double investments in power distribution or lose race to net-zero

August 7, 2024 ryansheehanrts

Eurelectric’s Grids for Speed study shows that distribution grid investments should increase from an average €33 billion to €67 billion per year from 2025 to 2050, roughly 20% of what the EU spent on fossil fuel imports in 2023. Getting the grid up to speed will significantly reduce fossil fuel imports, create more than 2 million jobs, bring greater energy savings and deliver more reliable power supply while accelerating the decarbonisation of Europe’s economy.

Societal shifts are changing Europe’s energy system at a disruptive speed. By 2050, electricity will make up 60% of final energy use compared to 23% today, renewable capacity will have increased six-fold from 2020 with 70% of renewable generation and storage connecting at distribution level. Connection requests are increasing faster than grid modernisation and will continue to grow as electrification of end-use sectors progresses. These developments put a strain on the grid.

Massive grid investments and grid-friendly flexibility

To relieve the strain, annual investments into new and modernised infrastructure, including digitalisation, should reach €67 billion from 2025 to 2050, around 0.4% of EU GDP., the new Grids for Speed study shows. Forward-looking grid strategies such as anticipatory investments, optimal asset management and grid-friendly flexibility could lower this to €55 billion per year if properly implemented. Failure to invest would jeopardise 74% of prospective connections in key decarbonisation technologies such as electric vehicles (EVs), heat pumps and renewables. Investing, on the contrary, will accelerate electrification and help the EU save €309 billion every year on fossil fuel imports from 2040 to 2050.

“For a successful energy transition the EU needs massive amounts of additional grid capacity. Investment volumes for distribution system operators needs to double. Whilst this will require a significant ramp up, the cost of not investing is even higher. To succeed we need attractive returns for investors to be able to finance it, technology and fast electrification to manage the distribution fees. ”– says Eurelectric’s President and E.ON CEO Leonhard Birnbaum.

Also the supply chain has to scale up

Scaling grid investments requires a dual effort. National authorities should implement the agreed legislation – such as anticipatory investments – while adapting the regulatory regime to support the investment surge. This means eliminating investments caps, fast-tracking grid permitting and procurement procedures and de-risking investments to spur private funding while opening up of public financing through EU budget.

Also interesting: Joint initiative for a competitive decarbonized European industry

Futureproofing the grid also depends on the supply chain’s capability to scale. Even if the necessary investments are met, current shortages of copper, a talent deficit, extended manufacturing lead times and transformers’ costs can hamper infrastructure development. Such bottlenecks must be addressed through strategic planning, enhanced collaboration between policymakers and industries and new training initiatives to ensure a skilled workforce.

Eurelectric calls on policymakers both at national and regional level to secure grid investments, strengthen supply chains and unleash the societal benefits of Grids for Speed. (hcn)

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