Over the last decade, renewable electricity has seen remarkable growth. Between 2006 and 2016, renewables grew by an average of 5.3 percent a year in the EU, or by 66.6 percent over 10 years. By 2016, almost 90 percent of the new power generation capacity came from renewable sources, mostly wind and solar. In contrast, oil, coal and gas still dominate the transport, heating and cooling sectors; efforts to expand renewables for these purposes have had limited success. For the EU to reach its target – at least a 40 percent reduction in greenhouse gases by 2030 compared to 1990 levels – much more progress is needed.
Although renewable generation capacity has increased significantly, the capacity of conventional power stations remains virtually unchanged. Such power plants function as baseload units and still dominate the power mix in most member states. This poses a challenge as Europe moves towards a renewables-based system. Most conventional power plants lack flexibility: they are not designed to be turned off and on quickly. Solar and wind, on the other hand, produce a constantly fluctuating amount of power: they are subject to the whims of the weather, and solar panels are useless at night. As a result of the growing share of power from such sources, flexibility in the rest of the energy system has become increasingly important. It must be able to react quickly to fluctuations in both supply and demand so as to maintain a stable network.
The power sector has to be linked with transport, heating and cooling
“Sector coupling” addresses these challenges by linking the power sector with transport, heating and cooling. Interconnections would make possible the use of surplus electricity to heat homes, store heat in district-heating networks, cool industrial processes, and charge the batteries of electric cars, thus helping to replace coal and gas, and drive down emissions. By connecting the heat, transport and electricity sectors we can achieve a fully renewable system with existing available technology. Increasing the share of electric vehicles to 80 percent in 2050 would cut emissions by another 255 Mt. Such moves would also limit the cost of maintaining ageing conventional power units or building new ones.
To make sector coupling commercially viable, electricity prices for end-users need to reflect the actual supply and demand. Prices should be lower when excess power is generated, and higher at times of shortage. But this is not the case. Today, households pay the same price for electricity even when demand drops at night or during holidays, when industrial production is curbed. At such times, electricity prices on the wholesale market fall close to zero or may even be negative, meaning power plant operators actually have to pay to feed electricity into the grid. The sensible thing would be to switch off some power stations, but big conventional coal and nuclear power plants are not designed to ramp up and shut down quickly.
Sector Coupling is crucial for decarbonization
So far, strategies to reduce emissions have been implemented independently in the heating, electricity and transport sectors. The potential of sector coupling – increased energy efficiency, reduced CO2 emissions, and cost reductions – remains untapped. But recent years have seen a growing interest in a more integrated approach. The first is in transport, where excess power could be stored in the batteries of electric vehicles, reducing the need for liquid fuel.
Coupling heating and cooling with the electricity sector will happen in two ways: through electrification and through technological innovation. In most places around the world, individual residential buildings are heated using coal, gas or low-quality fuels. In many cases, electrification may be the only alternative when there is no access to a gas network and when it is not cost-effective to build a network that supplies heat directly.New technologies such as power-to-heat could also be useful. This is a hybrid system where electricity is used to supplement traditional heating methods such as burning wood or gas. On sunny, windy days, electricity generation from renewables is particularly high. Using such power to heat homes is a new approach that is spreading quickly in countries with a lot of solar and wind potential.
Sector coupling is indispensable for the transition to renewable energy. It will attract the use of innovative technologies such as heat pumps, electric cars, power-to-heat solutions and demand-side management. Bringing these technologies into the market requires a more systematic, integrated approach, driven by a wide policy mix. Sector coupling will increase the system’s flexibility and strengthen energy security. At the same time, it will reduce the need to build new generating units and permit the phase-out of the oldest, dirtiest power plants throughout the European Union, leading to a reduction in CO2 emissions and lower long term costs.