Electricity’s strategic role in leading Europe’s decarbonization
2. Electrification roadmap
What steps are needed to deploy electrification across the energy system?
With the current policies, the 2050 climate goals rely on a hypothetical acceleration of the effort post 2030, making it necessary to pursue a more ambitious target in 2030 to ensure reaching EU carbon neutrality by 2050. In this regard, the study “Sustainable Paths for EU Increased Climate and Energy Ambition”3 performed an impact assessment of a more ambitious scenario aiming at increased GHG emissions reduction in 2030 and carbon neutrality in 2050, aligned with the current European Commission climate and energy targets.
To pursue the carbon neutrality ambition, structural changes are required throughout the entire EU energy value chain from now to 2050, with the electrification of end-uses accelerated by decarbonization of power generation and supported by the digitalization of electricity networks. Increasing penetration of electrification in final uses urges for clean and decarbonized technologies in power generation, notably new wind and solar capacity, hand in hand with the development of digitalized smart grids. In an electrified system, infrastructures will play a fundamental role as an enabling factor both for the supply and demand-side so as to deliver the multiple benefits of electrification to system users.
Through electrification, electricity will quickly become the leading energy carrier in a rapidly decarbonizing EU, with the share of final energy consumption rising from today’s 23% to 31% in 2030 and 60% in 2050. The contribution of all sectors (transport, industry, and building) is necessary to achieve carbon neutrality in 2050 and can be realized through the electrification of end-uses. Consistent electrification trajectories show that the electricity share increases in all sectors, with electricity demand totaling ca. 2,700-3,000 TWh in 2030 and ca. 3,500-3,800 TWh in 2050.
In order to maximize its multiple benefits, electrification of final uses will have to rely on increasingly decarbonized power generation with the RES share of the mix rising to 60% by 2030 and 84% by 2050. According to the study “Sustainable Paths for EU Increased Climate and Energy Ambition,”4 new wind and solar capacity additions (including both large utility-scale facilities and distributed generation for self-consumption and energy sharing) will take the lead in the power sector with 450 GW of new installed capacity by 2030, reflected in a total share in electricity production of 13% from solar and 30% from wind, while in the 2030-2050 period the increased RES installed capacity will totalize 1,270 GW. The total installed RES capacity will reach 2,210 GW by 2050. Of the latter, 960 GW will be solar and 1,090 GW will be wind, leading to a total share in electricity production of 21% from solar and 47% from wind. These findings are consistent with the European Commission’s increased ambition for the climate target plan for 2030 and are mainly due to recent technological progress and scale effects leading to unexpectedly accelerated significant cost reductions for both solar PV and wind (85% for PV and 30% for onshore wind in the 2010-2020 period).
What investments are needed to implement electrification?
Investments in power generation
Additional investments will be needed to fully decarbonize the power sector, increasing from the roughly 30 billion euros (€) currently invested in power plants annually to about €60 billion in the 2021-2030 period and about €100 billion in the 2031-2050 period. According to the study “Sustainable Paths for EU Increased Climate and Energy Ambition,” average annual investments of €63 billion are needed in the 2021-2030 period to decarbonize the power sector to the level foreseen by the increased EU climate ambition for 2030. During 2031-2050, average annual investments will have to reach €100 billion to fully decarbonize the EU power sector. Nevertheless, such costs may well turn out to be lower thanks to the ever-decreasing costs of renewable and flexibility technology as well as the digitalization of power generation. The assessment by the European Commission in the Impact Assessment accompanying the communication “Stepping up Europe’s 2030 climate ambition” provides in fact similar but lower estimates: average annual investments in power plants of ca. €55 billion in 2021-2030 and ca. €90 billion in 2031-2050, which should be compared to an average €31 billion invested annually over the 2011-2020 period.
Investments in infrastructure
Investments in power distribution networks in the range of €375-425 billion over the 2020-2030 period will have to be deployed to support the deep electrification of energy system.6 Electrification (and its related benefits) will require key investments focused on:
a) €180-210 billion for supply-side and demand-side management: new power lines, additional transformer capacity, integration of increasing RES, and electrification of end-uses (building, industry, transport).
b) €145-170 billion for smartening of grids: reinforcements and upgrading/renewal of existing assets, digitalization of station/substations and advanced protection systems, smart meters to enable customers’ monitoring and observability of grid.
c) €30-35 billion for resilience: management and control of the grid and load curve, predictive maintenance and control.