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#Energy & Climate

Gas and the electrification of heating & transport: scenarios for 2050

  • 25 May 2018
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This CERRE Energy & Climate report identifies the possible impact of increased electrification of road transportation and domestic heating and cooking on the energy system (electricity and gas), as well as on CO2 emissions and on GDP. It is based on a set of scenarios for 2050 on the implications of a possible gradual electrification in five European countries: Austria (AT), Belgium (BE), France (FR), Germany (DE) and the Netherlands (NL).

Three scenarios are being considered:  the first where electrification remains limited, the second where the residential and road transport sectors are virtually fully electrified by 2050, and a third intermediate path.

As is the case with all scenario studies, this one is based on a number of assumptions and includes limitations, such as:

  • the limited geographical scope of the study, based on case studies of 5, Western European, EU member states;
  • the increased carbon price within the EU ETS, as a result of increased gas fuel power production, has not been taken into account;
  • the gradual introduction of renewable gases has not been fully taken into account.

Finally, it is worthwhile reminding readers that scenarios are neither forecasts, nor recommendations for specific policy options. They shed light on challenges and choices, in this case those to be respectively addressed and made by policymakers and the energy sector to manage in the most efficient way the impact of possible electrification paths.

With its Energy Union Strategy, the European Commission set forth a plan for making the EU’s energy supply more secure, affordable and sustainable. Diversification of energy sources is one of the essential dimensions of the strategy along with decarbonisation. With these energy policy goals comes the transformation of the European power market and an expected increase in electricity demand.

This study derives the consequences that electrification of heating and transport can have for the electricity and gas sectors, the CO2 emissions associated with the residential, transport and electricity sectors and the overall social costs. The policy commitments, if any, of the corresponding governments regarding the deployment of renewable generation of electricity (biomass, wind and solar) and the phasing-out of fossil fuel and nuclear sources of power production are taken into account.

Main conclusions of the report

  • Increasing electrification in the transport and heating sectors reduces the consumption of fossil fuels in these sectors but because the demand for power increases significantly, the use of gas as energy resource of last resort gains weight in the generation mix. Specifically, the demand for gas from the residential sector decreases as electrification progresses but, because of the planned phasing-out of coal and nuclear generation and limited increase of renewables, gas demand rises in the power market. The net effect depends on the countries’ specific policies and current energy mix, with demand for gas increasing in BE, FR and DE, remaining constant in AT and slightly decreasing in NL.
  • As more renewable sources of generation (biomass, wind, solar) are progressively deployed in the market, the electricity supply becomes more weather dependent and thus more volatile so that a substantial amount of gas-fired power plant capacity will be necessary for reliability of supply. In BE, FR, DE and NL this capacity should be around 3 to 4 times the current capacity by 2050, while in AT a small increase would be sufficient.
  • The current plans of the countries’ governments regarding the expansion of renewable generation capacity, coupled with a full electrification scenario, result in very small amounts of renewable electricity being available to use for power-to-gas. From now to 2050, only under expectional weather conditions will an oversupply of electricity occur.
  • As both electricity and gas provision rely heavily on the use of transmission and distribution networks, an increase in power generation and/or gas consumption requires a possibly costly resizing of the networks. In 2050, in a full electrification scenario, the electricity grid capacity would have to increase in BE by 70%, in NL by 50%, in AT by 34%, in FR by 35% and in DE by 37%. Except for NL and possibly BE, the capacity of the gas networks will have to be extended.
  • Electrification of the residential and road transport sectors will shift CO2 emissions from these sectors to the power sector, with an increased price on carbon as a result. The net effect depends on the technology mix for power generation and is therefore country specific. In 2050, with a full electrification scenario, CO2 emissions from the residential, road transport and electricity sectors together in BE would decrease only by 11% relative to the corresponding 1990 levels, in AT by 62%, in DE by 70%, in FR by 48%, and in NL by 40%.
  • The model results show that the social costs of a full electrification path towards 2050 vary significantly, ranging from 0.5% of GDP in FR to close to 7% of GDP in NL, with intermediate rates for AT (2%), DE (4%) and BE (4.5%). The cost per ton of CO2 reduction would be €250 for NL, €146 for BE, €142 for DE, €78 for FR and €54 for AT.
Document(s)
Gas and electrification of heating and transport: senarios for 2050 | Introduction, Summary & Conclusions
Gas and electrification of heating and transport: senarios for 2050 | Methodology & Netherlands Case Study
Gas and electrification of heating and transport: senarios for 2050 | Austria Case Study
Gas and electrification of heating and transport: senarios for 2050 | Belgium Case Study
Gas and electrification of heating and transport: senarios for 2050 | France Case Study
Gas and electrification of heating and transport: senarios for 2050 | Germany Case Study
Author(s)
Chloé Le Coq
Chloé Le Coq
CERRE Research Fellow
University of Paris II & Stockholm School of Economics

Chloé Le Coq is a CERRE Research Fellow and Professor of Economics at the University Paris 2 Panthéon-Assas and at the Stockholm School of Economics (SITE).

Her research interests include industrial organisation and behavioural economics, especially topics related to energy markets, anti-trust policy and social innovation.

She has held visiting positions at the University of Purdue, at the University of California Berkeley Energy Institute and at the National Singapore University.

Jose Luis Moraga
Jose Luis Moraga
Professor of Microeconomics
Vrije Universiteit Amsterdam

Professor José Luis Moraga joined CERRE as Research Fellow in December 2014.

He is a Professor of Microeconomics at VU University Amsterdam. He holds a PhD in Economics from the Universidad Carlos III de Madrid.

José Luis is an ICREA Research Professor (on leave) and worked at the Department of Economics at IESE in Barcelona from 2009 to 2011.

In addition to the study of the market imperfections generated by transaction costs, his research interests include energy economics, two-sided markets, advertising and research and development networks.

His work has been published in leading economic journals, including the Journal of Political Economy, the Review of Economic Studies and the Rand Journal of Economics.

José Luis’ research in energy economics is mainly focused on transparency in forward markets, access pricing for and investment in interconnectors, and the role of open seasons.

Machiel Mulder
Machiel Mulder
Professor of Regulation of Energy Markets
University of Groningen

Machiel Mulder is Professor of Regulation of Energy Markets at the University of Groningen, in Netherlands. He teaches several courses on energy economics.

He is also Director of the Energy programme of the University of Groningen Business School and Director of the Centre for Energy Economics Research (CEER) at the Faculty of Economics and Business (FEB) of the University of Groningen.

Earlier he was the Deputy Chief Economist at the Netherlands Competition Authority (NMa) and head of the energy department of the Netherlands Bureau for Economic Policy Analysis.

Sebastien Schwenen
Sébastian Schwenen
Professor
Technical University of Munich

Dr Sébastian Schwenen is a Research Fellow at the German Institute for Economic Research (DIW) Berlin, and Chair for Economics of Energy Markets at the Technical University of Munich.

His research interests include Energy Economics, Industrial Economics and Applied Microeconomics. Sebastian previously served as a Post-Doctoral Researcher at the Climate Policy Department of DIW Berlin and at the Robert Schuman Centre for Advanced Studies of the Florence School of Regulation.

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