How 'electrifying' the energy sector can decarbonize the world  

Never before has the energy system offered so many possibilities as it does today. But energy systems are changing and how we handle energy must be rethought. Electricity will become the most important form of energy in the future and the use of electrical energy in many other sectors will be crucial for the sustainable decarbonization of our daily lives.

Two years after the historic COP21 climate agreement was signed, French president Emmanuel Macron invited representatives of governments, business and the financial sector to return to Paris in a quest to support concrete measures for greater climate protection and to make sustainable technologies more attractive to investment. The signing of the original climate agreement by more than 190 countries was not only symbolic but will also have a lasting impact. Many followed Macron’s recent invitation too and with the US represented by delegates from numerous cities and companies. This response proves that global warming is not only being taken seriously by politicians but that climate protection is a focus of interest for business.

From my talks with customers, politicians and business associations, it’s becoming clear that the idea of sustainability is gaining momentum and is now just as important as the economic efficiency and reliability of energy systems. I maintain that we have never previously had as many possibilities for securing reliable, economical and, above all, sustainable power supplies for the world as we do today. Innovations in conventional power generation, as well as the striking drop in costs for renewable energy technologies, now make it possible to better meet the rising demand for electricity than ever before.

Forecasts that look ahead to the middle of the century suggest demand for electricity will grow substantially, making it the most important source of energy in the 21st century. That’s why experts are already talking about “electricity transitions” in many energy transitions – the transitions from a fossil-dominated power sector to a more sustainable system, dominated by renewables energies – since electricity represents a value that has maximum flexibility. Moreover, electricity from fluctuating renewable sources is carbon-free and often available in greater quantities than can actually be consumed. In the future, this surplus will be the true value of the energy transition, since it will enable other sectors to be electrified and thus decarbonized.

The systemic changes taking place in electricity transitions support electrification in other sectors. As decentralization increases so does the number of players connected to Smart Grids, which can better balance surplus and demand. This fully networked world will also increase the security of the energy supply and the stability of the system.

The most significant opportunity offered by this development is to intelligently connect the growing number of decentralized players and thereby integrate the advantages of each player into the overall system. This way, producers and consumers are not limited to the traditional electricity sector but can participate in a substantially expanded playing field involving sectors such as heat, gas or mobility.

Many countries will only be able to reach their declared climate targets by successfully joining together various sectors. This will make it easier to coordinate variable power generation with consumption and, as a result, will reduce the use of fossil fuels and make the system more sustainable. Although technologies have made impressive advances in recent years, their widespread use in many regions still requires public attitudes, market roles, business models and regulatory frameworks to change further.

To ensure broader acceptance, partners in industry, politics and society are needed to promote these new ideas, try out new technologies and also fix faults in the energy system. For example, the first phase of Germany’s energy transition has proven that a surprisingly large number of power generation fleets can be shifted to renewables in an unexpectedly short time. The second phase is now dealing with the task of technically integrating fluctuating renewable generation as effectively as possible so that, in the end, the system’s economic efficiency is also improved.

Since electricity is used in various sectors in crossovers, interfaces are needed to organize and drive the coming together. This task can be handled by established players who are already responsible for securing basic power supplies, such as municipal utilities, or by new providers with a successful business model. In any case, there won’t be a single solution, but rather various solutions tailored to specific regions and conditions of which there are some early successes:

Power-to-heat/cold is about efficiently providing a supply of thermal energy – that is, heat or cold – using surplus renewable energies. Worldwide, heat accounts for nearly 50% of final energy consumption, so it’s obvious that the thermal sector plays a crucial role in reaching national climate targets. Specifically, power-to-heat involves generating heat from electric heaters, electrode boilers or heat pumps for use in a district heating system or in private households. The same principle also applies to power-to-cold systems used for district cooling, particularly in warm climates.

One interesting business model is offered by New Brunswick Power in the eastern Canada province of New Brunswick to its customers. The utility operates power plants and transmission and distribution grids, and supplies around 400,000 customers with electricity. The region is characterized by long, cold winters and mild summers. This leads to massive differences between the utility’s peak loads in summer and winter. Heating and hot water in buildings are largely produced with electricity, and heating accounts for roughly 75% of a typical household’s electricity consumption.

NBP’s new business model now intelligently networks household boilers and uses them to store up to six hours of heat. With the help of an intelligent load management system, simultaneous heating in the households can be avoided and peak loads lowered. The utility hopes this new system will make around 25% of its load more flexible. In the medium term, this will enable the utility to reduce its investment in new distribution systems.

Power-to-mobility involves the coupling of the electrical and transportation sectors. Various forms of coupling are used for electrified rail systems, long-distance trains, buses, trucks, cars, light motorcycles and, increasingly, ships. Along with the well-known use for mass transport, individual electric mobility is increasingly being considered as a way to increase flexibility in energy systems.

According to the International Energy Agency, more than two million electric vehicles were in use worldwide in 2016; by 2025, this number is expected to rise to 70 million. These vehicles don’t just charge surplus electricity, but reliably store it and feed it back into the grid when needed. The batteries of one million electric vehicles, for example, would have greater storage capacity of all pumped storage power plants in Germany. Digitized charging systems are a must for being able to exploit all of these advantages – such as for controlling charging time, strains on batteries, electricity prices and grid loads, as well as preventing simultaneity and grid bottlenecks.

Power and gas utilities have long been involved in converting gas into electricity, usually in gas-fired power plants. The reverse process of converting electricity into gas has rarely been used so far by utilities, except in a few cases of hydrogen electrolysis. I believe the possibility of producing hydrogen or even methane offers the most flexible – and potentially the most important – form of sector coupling.

Compared to electricity, gas is easier to store. Moreover, many countries have a well-developed gas infrastructure that can provide storage capacity. Electrolyzers can easily and flexibly convert large amounts of surplus electricity into hydrogen or methane gas. Power-to-gas methane is chemically identical to natural gas and can be fed into existing gas networks without a problem. Moreover, hydrogen is a basic material used in the processing industry and can also be used for vehicles powered by fuel cells. Although power-to-gas plants are profitable only in rare niche applications today, we are seeing rapidly increasing profitability in this area. There are already more than 20 plants of this type operating in Germany at present. Siemens is working with partners to operate the world’s biggest electrolyser plant for producing hydrogen in the Energiepark Mainz. The PEM pressure electrolyser has a power input of up to six megawatts and is ready for operation within just seconds. Hydrogen produced with renewable energy is mixed in with natural gas in the gas network and is also available for industrial users and hydrogen stations for fuel-cell vehicles.

The ability to shift surplus electricity into other sectors will probably be the most important basis for decarbonizing the energy sector and other sectors in the future. Power-to-heat and power-to-mobility are increasingly widespread today. Electrolysis and the production of hydrogen or methane, however, offer the most flexible solution for utilizing surplus electricity. The energy sector, which accounts for roughly 30% of the world’s greenhouse emissions today, can be decarbonized by shifting to a “power-to-X” model and at the same time be made more economical and reliable. In the future, sector coupling will increasingly connect diverse sectors with one another and be a solution for decarbonizing the world.