April 4, 2018
BRUSSELS INSIDER #1 by Sonja van Renssen
EU gas and power transmission grid operators team up to map out energy future
April 4, 2018
For the first time ever, the gas and electricity transmission system operators in the EU have joined forces to develop a series of joint scenarios for the European energy system out to 2040. In a sign that the electricity and gas sectors increasingly depend on one another as much as they fight for dominance, the exercise throws up interesting insights into how they expect the European energy system to evolve. High carbon prices, no shale gas, hardly any CCS, less gas in heating/more gas in transport, less nuclear and more biomethane and power-to-gas are some of the highlights. The scenarios matter because they will ultimately help decide which energy infrastructure projects get EU support.
The European bodies representing network operators for gas and electricity – ENTSO-G and ENTSO-E – have teamed up for the first time to develop a series of joint scenarios for the future of the European energy system out to 2040. These scenarios will form the basis for their respective Ten Year Network Development Plans (TYNDPs) due out this autumn. Those plans will in turn support the European Commission’s next selection of Projects of Common European Interest (PCIs) in 2019. Those projects get put on a regulatory fast-track and can apply for EU funds. All this to say that this latest bout of modelling in the EU capital is not without consequence.
In their press release on the joint scenarios on 30 March, the ENTSOs recommend them to “any party wishing to perform their own analysis of future policies, market designs or technologies”. They plan to “take initiatives to increase their usability” and talk about how “transparent” their scenarios are. In their TYNDP 2018 Scenario Report, they explain an elaborate stakeholder consultation process and cite input from industry, NGOs, National Regulatory Authorities (NRAs) and Member States. It appear that here, finally, is an alternative to the much criticised – also for its lack of transparency – PRIMES modelling that has been the basis for EU energy policy to date.
The ENTSOs have actually included one of the Commission’s PRIMES scenarios alongside their own three scenarios for the future. More on that in a moment. First, all the scenarios make a few basic assumptions. They all assume, for example, that European greenhouse gas emissions will need to be cut by 80-95% by 2050. That’s current EU policy, even if Green MEP Claude Turmes is trying to introduce a net zero emissions goal by mid-century via a new governance regulation in the Clean Energy Package. Realistically, the goal is likely to be revisited next year, when EU leaders have asked the European Commission to come up with a new 2050 climate strategy.
A second foundation for all the scenarios is that they are “broadly technically feasible; for instance making it possible to maintain the energy balance at all times in each country”, the report says.
To the scenarios themselves then. The ENTSOs have come up with three, which they develop for 2020, 2025, 2030 and 2040:
- Sustainable Transition, or let’s call it the GAS scenario. It’s the most conservative scenario, with a big role for gas. It’s the preferred decarbonisation option even for passenger cars. This scenario foresees defining roles for national regulation, emissions trading and subsidies, and maximum use of existing infrastructure. The EU is only just on track to its climate goals in 2030 and will need to up the pace after 2040. Economic growth is moderate.
- Distributed Generation, or the PROSUMERS scenario. This one’s all about small-scale generation and batteries. Consumers are engaged and empowered. This scenario has the highest penetration of electric vehicles and the highest electricity demand. There is substantial demand side flexiblity. There is also a strong EU Emission Trading Scheme (ETS). Both electricity and gas are important in the transport sector; hybrid heat pumps are the preferred option for heating.
- Global Climate Action, or in our view, the LARGE-SCALE ELECTRIFICATION scenario. This imagines a world on-track to rapid decarbonisation, with large-scale renewables development in both the electricity and gas sectors. There is a big role for a strong CO2 price and a steady decline of demand for gas in heating thanks to electrification. Gas retains a role in transport however. This is the secenario with the strongest development of power-to-gas.
Finally, the Commission’s PRIMES scenario that is included alongside is “EUCO 30”. It models the minimum that the EU has committed to deliver by 2030: 27% renewables (still backed by many Member States; the Parliament wants 35%), 30% energy efficiency (the Parliament also wants 35%) and a 40% greenhouse gas emission cut (the Parliament’s preceding demands would automatically bump this up to 47.5%). In practice, the parameters for this scenario resembled those for scenario 3 above so EUCO 30 will replace it for the TYNDP.
The ENTSOs welcome their “new collaboration” with the Commission.
Below is our take on interesting points in the new modelling exercise, beyond what’s already been noted above:
- Member States and NRAs are much more conservative/worried about the future than other stakeholders.
In a vote on which of five draft scenarios to develop further, Member States and NRAs were keen on a “Behind the Targets” scenario – where Europe clearly falls behind its climate and energy targets. They rated it third in a priority list, after Sustainable Transition and Distributed Generation. Other stakeholders put it last, with just 8% support. Conversely, the most important scenario for other stakeholders, Global Climate Action, was least important for Member States and NRAs.
The ENTSOs decided to exclude Behind the Targets due to the overall number of votes received in the stakeholder consultation and because it would likely be a “very conservative estimate of the future which may mean the challenges posed by the scenario do not reflect what future infrastructure needs to be assessed against”.
- All the scenarios except the Commission’s EUCO 30 assume (unrealistically?) high EU ETS prices.
In a table towards the back of the report on p46, the ENTSOs list their fuel and CO2 price assumptions. These are derived from the International Energy Agency’s (IEA) World Energy Outlook 2016 report – with some lifts to the carbon price “to set the merit order to gas before coal”. “By 2030, the storylines dictate that gas is before coal in the merit order, driven by prices and the need to reduce emissions.”
This results in a carbon price of €84 a tonne in 2030 for the Sustainable Transition scenario and €50 a tonne for the Distributed Generation scenario. The Commission’s EUCO 30 scenario, which has replaced Global Climate Action here, has a much more modest (and realistic?) €27 a tonne.
The EU ETS price has broken the single-digit threshold for the first time in seven years in the last month (rising to just over €13 on 2 April), but most experts do not expect it to rise enough to trigger fuel switching for at least another decade.
- There is no shale gas, hardly any carbon capture and storage (CCS) and a reduction in gas demand for heating across all the scenarios. Nuclear and coal face downhill trajectories. In contast, electric vehicles show exponential growth across the board.
None of the scenarios foresee any investment in shale gas in Europe, albeit for different reasons. In the Global Climate Action scenario, it’s “due to the focus on environmental issues”. In Sustainable Transition, it’s because societal support for climate action depends it being “managed in a cost-effective way”. In Distributed Generation, it’s because there is a substantial development of biomethane instead.
CCS is hardly present either, with at best an expectation of “low growth” in industry (for process emissions) in two of the three ENTSO scenarios; it “not insigificant” in all three in the power sector.
There is also a reduction in gas demand in all three scenarios for heating and cooling in the residential and commercial sectors. The big – if uncertain how big – opportunity for gas is in transport, with substantial growth in gas vehicles expected. Despite this, transport still makes up a small proportion of overall gas demand even in 2040 however. Gas demand in industry stays stable or declines. Flexible gas plants play a “vital role” however, to back up variable renewables even in the scenarios with lots of storage or demand side response.
The ENTSOs assume a reduction in nuclear power – and no nuclear plants built after 2030 – in both the Sustainable Transition and Distributed Generation scenarios. It is only in Global Climate Action that the future of nuclear “depends on national policies”. The Commission’s EUCO 30 scenario foresees nuclear stabilising at 2020 levels.
Interestingly the greatest share of coal is retained in the prosumer-led Distributed Generation scenario.
- Methane leakage is not a problem.
Somewhat surprisingly, the report has a special section on methane emissions, to make the point that: “Regardless of the timeframe considered, gas generates far fewer GHG emissions than coal.” The total amount of methane leaked worldwide is estimated to be just 0.1% of the total manmade greenhouse gas emissions of the EU-28, the ENTSOs argue. And even this miniscule amount, the oil and gas industry can feasibly reduce by 75% with existing technologies and practices, they add, citing the IEA.
This section presumably comes in response to increasing questions over the scale and impact of methane leakage, with some suggesting that if this is taken into account, gas could be worse for the climate than coal.
- “Green gas” – biogas and power-to-gas (P2G) – is attracting increasing attention but the overall potential is still highly uncertain.
Stakeholders felt that the levels of green/renewable gases were “under represented” in the scenarios, the ENTSOs explain. In response, the biomethane data has been revised upwards for all three and a special section on biogas – authored by the European Biogas Association – has been introduced. The power-to-gas data has not been changed. Hydrogen “is not widely covered in the scenarios”, the ENTSOs acknowledge with only a limited penetration of hydrogen vehicles foreseen.
Biomethane is now projected to supply a maximum of just under 10% of total gas demand in 2030 (under the Distributed Generation scenario). Power-to-gas doesn’t show up in the figures until 2030 and only breaks the 1% mark by 2040. An optimistic “Gas for Climate” study that we reported on two weeks ago expects “green gas” to make up a quarter of gas demand by mid-century.
Of course these are Europe-wide scenarios and just because there is a reduction in nuclear power expected across the continent for example, doesn’t mean that individual countries won’t build new reactors. As we said at the start, these scenarios are highly relevant nonetheless because the forthcoming TYNDPs for European gas and electricity infrastructure will build on them. The draft TYNDPs are due out this autumn, with a final version for electricity due by the end of the year and a final version for gas in spring 2019. Both of them will be ready in time to support the next PCI selection process thereafter when abstract theory gets turned into investment decisions.
BRUSSELS INSIDER #2 by Sonja van Renssen
Wastewater can produce instead of consume energy
April 4, 2018
Municipal wastewater contains the equivalent of 12 power plants’ worth of energy. But Europe’s wastewater plants consume instead of produce energy. The EU “PowerStep” project shows this can be changed.
Municipal wastewater in Europe today contains the equivalent of 87,500 GWh of energy per year in its organic matter. That’s 12 power plants’ worth of energy. Instead of producing this however, sewage treatment currently consumes more than two power plants’ worth of energy each year. It’s often the single biggest electricity expense for municipalities, accounting for more than a fifth of their power bills.
“PowerStep” is a three-year, €5-million project funded by the EU’s flagship Horizon 2020 research programme that aims to transform wastewater treatment plants from net power consumers into net power producers. It has tested – at industrial scale – innovations that decrease the energy consumption and increase the energy production of these plants.This is possible at a cost similar to conventional sewage treatment whilst maintaining or even improving the quality of the treated water, the consortium behind the project says in a short report for EU policymakers issued on 23 March.
The consortium is made up of 15 partners from seven European countries. Led by the KompetenzZentrum Wasser Berlin (KWB – Berlin Centre of Competence for Water), an international centre for applied water research, its backers also include the German Environment Ministry, French company Veolia and the Technical University of Vienna.
Sewage to biogas to fuel
In essence, the PowerStep concept is based on the extraction of more organic matter from wastewater to turn into biogas. It does this through more efficient “primary treatment”. That biogas can either be used to power the plant itself or upgraded and fed into the grid as biomethane for use in heating or cooling, or transport (see Figure below). PowerStep is applicable to large or very large plants (>100,000 population equivalent), both existing and new.
The project’s promoters argue that their plants can contribute to each of the Energy Union’s five pillars – energy security, a fully integrated internal energy market, energy efficiency, climate action, and research, innovation and competitiveness in clean energy technologies. They want renewable energy from sewage to be explicitly incentivised by the EU’s climate and energy framework for 2030.
Energy neutrality can and should be the benchmark for large wastewater treatment plants, the PowerStep team says. Several existing plants show that this is possible. Yet these plants often rely on external fuels (e.g. sludge from other plants) or on-site renewables production (e.g. wind or solar PV) to accomplish this. PowerStep showcases “state-of-the-art+” plants that can either power themselves or feed surplus (upgraded) biogas into the gas grid.
Biogas from sewage has some particular advantages. Unlike other forms of bioenergy, it does not compete for land. Unlike solar and wind, it is dispatchable. There is also plenty of it. Sewage sludge accounted for just under a tenth (9%) of the 15 mtoe of biogas produced from waste in Europe in 2014. Only a tenth of biogas too is currently upgraded into biomethane for direct use in transport or injection into the gas grid. With an ever stronger push for green gas however, expect this to grow (until now, nearly two-thirds of biogas has gone into power production).
From project to product
PowerStep’s final conference is scheduled for 16-17 May at the IFAT Trade Fair in Munich, Germany, which is billed as the world’s leading trade fair for environmental technologies. With the project coming to a close, the consortium has drawn up a list of asks to policymakers, to help implement their innovation across Europe:
- The EU should recognise that biogas from sewage has a lower environmental footprint than other forms of biogas and biofuels. This should be reflected in national renewables support schemes and energy taxes i.e. biogas from sewage should get “the highest possible levels of public support and financing”.
- Green public procurement (GPP) criteria for wastewater treatment plants should be extended to promote energy neutral or energy positive plants (today they only promote energy efficiency). That said, wastewater treatment plants should always first be made as efficient as possible, and only then upgraded to become energy producers. The consortium recommends that access to EU regional development funds is made continent on energy efficiency investments, including in wastewater treatment plants.
- PowerStep needs power-to-gas (P2G) to be defined as a form of energy storage. Wastewater treatment plants do P2G when they use power from the grid to upgrade biogas to biomethane. Like other forms of P2G, this is a way of storing energy that can support the further deployment of variable renewables like wind and sun power. The European Commission opens the door to P2G in its power market redesign proposals in the Clean Energy Package, but this still needs to be approved by MEPs and Member States.
Separately, in a waste-to-energy paper in January 2017, the Commission identified the upgrade of biogas to biomethane as the best way of increasing the energy efficiency of anaerobic digestion.
The biggest challenge of all however, says the PowerStep consortium, is attracting the interest of EU energy policymakers in the first place. Wastewater treatment plants are not part of a country’s energy infrastructure. They have to date been a more natural fit with the circular economy – another major EU initiative – as recovery points for nutrients alongside clean water. But with the circular and low-carbon economy agendas increasingly aligned, wastewater treatment plants are in a sweet spot that could tick a lot of boxes for EU policymakers.