This could be achieved by increasing the uptake of electric heating systems, such as heat pumps, and electric vehicles (EVs), as well as using green hydrogen to provide heat for buildings and in industrial processes, researchers at BloombergNEF (BNEF) explained.
As a result, electricity’s share of these sectors’ final energy demand could increase from 10% to 60% by mid-century.
BNEF added some activities, such as aviation and shipping, will remain difficult to electrify, and their emissions difficult to lower.
This electrification of transport, buildings, and industry could create a need for 75% more generation capacity in a typical country in northern Europe by 2050, compared with the additions needed without sector coupling.
The researchers added that clean power sources — especially wind power and solar PV — should meet as much of this additional power demand as is feasible to maximise the climate benefits of sector coupling.
Change in the electricity mix by 2050 of a typical Northern European country (source: BNEF)
BNEF suggested meeting the extra demand created by electrification would require a 400% increase in total capacity from today (above), rather than the analysts’ projected 180% increase in a scenario without sector coupling.
While power sector emissions may increase because more fossil-fuel plants will be needed to provide flexibility, electrification would result in economy-wide emissions reductions as the alternative would be for transport, buildings, and industry to continue to use fossil fuels, BNEF explained.
Governments should introduce incentives or requirements to cut emissions from building heat, support demonstration projects for electrification, and remove barriers to the production of green hydrogen, BNEF’s head of global policy analysis Victoria Cuming said.
They will also need to appease public opposition to wind and solar as higher volumes of capacity will be needed, and incentivise communities and companies willing to be early starters for sector coupling, BNEF added.
The European power system would also need to be more flexible due to the different energy demand patterns of heating and transport.
However, they suggested these newly electrified sectors could create new sources of flexibility by altering their consumption patterns as long as the right policies and technologies are in place.
Meanwhile, the higher power volumes and greater renewables penetration accompanying this sector coupling mean grids will need to be reinforced and extended.
This will also create a need for more flexible resources such as battery storage and gas peaker plants.
BNEF did not suggest the total cost of the new technologies required to electrify transport, buildings, and industry.
However, its head of analysis Albert Cheung suggested that electricity market design should enable developers of wind, solar PV and battery storage projects, as well as those providing demand response services, to expect returns that justify their investment.
To avoid sector coupling resulting in increased fossil-fuel build, policymakers could open capacity markets to wind and solar plants, BNEF suggested.
This would enable operators of such projects to receive payments for providing reliable generation, creating another revenue stream and therefore boosting the investment case for wind and solar projects.