Embracing electrification as a catalyst for decarbonization - with special guest from Eurelectric

In this first of two episodes for our Energy Transition Talks series, Eurelectric’s Head of Energy Policy, Climate and Sustainability Paul Wilczek joins Peter Warren to examine the intrinsic link between decarbonization and electrification, plus the consequent opportunities shaping the energy landscape. They discuss the need for grid investment and modernization, how transparent information helps bridge gaps between governments and public opinion, upfront costs versus long-term benefits of electrification and how reforming energy taxation and billing can shape the future of electrified communities.

Decarbonization and electrification: A pivotal shift

By 2040, Europe aims to have a largely decarbonized power sector, paving the way for the widespread adoption of electrification across various sectors. According to Paul, this transition not only promotes energy efficiency but also offers significant environmental benefits. As he shares, electrified systems, such as heat pumps for residential heating, can use “just two-thirds of the primary energy” required by traditional gas-based heating systems, resulting in substantial energy savings. Peter indicates that a shift is happening in North America as well, citing the current U.S. government’s incentives for heat pumps.

Despite the increasing adoption of electric vehicles (EVs), heat pumps and other electrified technologies, the overall electrification rate in Europe remains stagnant at around 22-23%. This is surprising, Paul point says, as the growing number of electrified processes and users would indicate the rate would rise.

The primary focus has been on decarbonizing the power sector, with efforts to transition to renewable and clean energy sources. However, Paul reveals, the remaining 78% of energy consumption across other sectors has been largely overlooked. Electrification presents an effective solution for further decarbonization, as the electricity grid becomes increasingly green and decarbonized.

According to projections from the European Commission, electrification is expected to account for 35% of final energy demand by 2030, rising to 50% by 2040, and potentially reaching 60-70% by 2050.

The transformation of transportation

The transport sector is undergoing a profound transformation, with the phase-out of combustion engine vehicles playing a pivotal role. This transition is driven by policy initiatives, technological advancements, and a collective commitment to reducing carbon emissions and embracing sustainable energy solutions.

Within the next 20 years, Paul estimates that very few combustion engine cars will remain on the roads. This shift is driven by the European Union's ban on combustion engines in cars, paving the way for electric and hybrid vehicles to dominate the personal transportation market. While some heavy-duty vehicles may still rely on hybrid technologies, the family vehicle of the future is expected to be predominantly electric.

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Transcript

Pete (00:06.132)
Hello everyone, I'm Peter Warren and welcome to another installment of our continuing conversations about energy, energy transition, what's going on around the world. And today I have the privilege of having Paul Wilczek from Euroelectric on today's. Paul, do you want to introduce yourself?

Paul Wilczek (00:23.054)
Yes, hi Peter, pleasure to be here. I'm Paul Wilczak from Euroelectric. I'm head of energy policy here at Euroelectric. We are the association of the power utilities based in Brussels.

Pete (00:35.636)
It's a great organization and you're making a lot of changes and moving forward. And some of these things are all about the electrification, what targets are coming in 2024, why is this important? And I think that we see this happening around the world where things are changing at a really fast pace. What are your thoughts on that?

Paul Wilczek (00:56.814)
Yes, indeed. Electrification is changing so much. Electrification, production of electricity, how we use electricity, for what we use electricity. So not only for our light bulbs, but also for our heating, our transport. So many things get electrified, right? Think of all the electric cars driving around right now, but also your neighbor that has now a new heat pump, for example, and you wonder what that thing is. It's all used by...

It's all using electricity after all. And this is quite an interesting thing because in Europe at least we have an electrification rate inside the energy sector, if you will.

that's actually quite stagnant. So we looked at the statistics and we saw that the electrification rates overall is stagnating around 22, 23 percent, which is a bit strange because you would imagine it would go up because many, many processes, users get more and more electrified. But it's about 22 percent, 23 percent. Of course, this is changing. It will be more in the future because we have more electric vehicles on the roads.

But the point here is that we are really busy trying to decarbonize the power sector, trying to decarbonize power production. And we are not looking at the other 78%, if you will, from energy and how this is decarbonized. So we see a very effective way of decarbonizing further is electrifying, because electricity will be greener and greener by...

Sometime by 2040 we will have really a decarbonized power sector hopefully in Europe and and and let's use this green electricity this decarbonized electricity in the future also for other uses so this can be achieved by by having more electricity being used across other sectors be it transport be it you know heating industrial processes

Paul Wilczek (03:00.078)
This is the point that, yeah, that shook us quite a bit that the electrification rates are stagnating. So we are advocating for more electrification because it's efficient, obviously, also, because this is another point. After all, it's energy efficient to use more electricity because you're not converting. You're producing electricity, you're directly using it as opposed to a heating system where you have to burn gas and this gas is...

boiling water, then this boiling water goes into your radiator. The heat pump uses basically, to give an example there on residential heating, only two thirds of this primary energy that you would use to heat your home. So it's really energy efficient to electrify your residential heating, to give you that example. It saves energy.

Pete (03:51.444)
I think that's an interesting example and I just talked about here in North America in the US study I watched recently, it was talking about this, the current government in the US is putting a lot of incentives for heat pumps and things here on this side of the Atlantic as well. Looking actually to Europe and learning from it, I think there was this doom and gloom, all these electric vehicles are going to crash the grid and everything else, but new technologies even putting new advanced transmission wires on are allowing them to carry more power more efficiently.

And the overall demand actually, even though all the EVs are coming on, has actually gone down a bit in North America, at least according to that last study that I read. And I think this sort of ability to both electrify at pace and scale and decarbonize is kind of the interesting thing. And I think you see both of those in Europe at the same time, don't you?

Paul Wilczek (04:39.47)
Absolutely. You see, you know, decarbonization and electrification goes hand in hand. All the prognostics that we saw also at policy level, what the European Commission has published recently in the so -called 2040 target communication tells you it's going to be about 35 % of electrification by 2030 as part of the final energy demand up to 50 in 2040 and somewhere between, you know,

even up to 60, 70 and in 2050. So the electrification rates will really go up. If you look at it, just take transport as another sector.

you know, we will have very few combustion engine cars on the roads in 20 years. We have a ban actually in Europe, you know, on the combustion engine in cars, as you know. So there will be some cars on hybrid functions, mainly some heavy duty vehicles on that, but on a normal vehicle, you know, the family vehicle will be mostly electric in the future.

Pete (05:45.908)
Yeah, I think that's an interesting thing there. And we see a lot of uses in the vehicle industry. We talked to them. So biofuels, and we're not going to get into that too much today, but biofuels and other things. So I think some of the manufacturers are saying that we still might have something that has an ice engine, but what it burns might be different or cleaner than it has been in the fact in the past. We see that with production for fuels for, let's say harbors and things like that. But all of that requires a lot of electrification as well.

So as we move forward with the electrification and moving things into being a more cleaner environment, what do you see as the barriers? What are you still seeing as stumbling points for people?

Paul Wilczek (06:24.974)
Yeah, electrification has some general barriers. So a very general barrier and an important one is infrastructure. So, you know, we are lagging behind on our grid infrastructure. We are basically running the energy transition on a pretty outdated infrastructure. You know, infrastructure is always a bit of a problem. It's a very, say, you know, part of the system that is regulated. There's a lot of inertia in it. There's a regulator.

Pete (06:32.5)
Hmm.

Paul Wilczek (06:53.454)
on your back that tells you you have to do everything in a cost saving way. Don't spend too much. You cannot anticipate a lot, you know, make it as cheap as possible. So we found out in a study two years ago, basically that 40 % of our distribution grids. So where most of the electrified users, e -mobility, the charging, residential heating in form of heat pumps is over 40 years old. So it's really old. It's, it's,

you know, it's an investment cycle that is due right now anyway. So let's use this in fact to have our grid infrastructure as modernized as possible so we can connect all these new users as quickly as possible.

Because if you want to connect, you have to be connected. That's your right. It's a public infrastructure. If you want to use the road, you can drive on the road. So this is the same for the electricity grid. And we have longer and longer waiting times. So if somebody wants to electrify the factory, wants to electrify its industrial processes, they're asking, how long will it take to get this bigger grid connection that we need?

And for this we need to give a good answer. It cannot take, you know, over five years, cannot take 10 years as it doesn't sometimes.

Pete (08:12.212)
There's definitely a disconnect sometimes between let's say what a state level government and like a national government, a more regional government and then municipal government for policies and things. So one group says yes, one group says yes, and then the other group says, well, I don't know what the standards are for that type of thing in my neighborhood. So, and NIMBYism, I don't know whether that translates, but not in my backyard syndrome. You know, I want...

Paul Wilczek (08:36.654)
Yeah.

Pete (08:37.908)
I want green energy, but I don't want to see the wind turbines. I don't want to see the transmission lines. So there is that sort of cultural thing that's going on. How do you see your members in your organization really tackling that?

Paul Wilczek (08:49.774)
Yeah, there's a lot of issues with regards to basically available information. So we do intersect or whatever we can to tell people, you know, or to tell governments as well, you have to put in place comparison tools, adequate information tools, adequate.

Pete (08:55.22)
Mmm.

Paul Wilczek (09:08.43)
platforms for industry players, for residential consumers, to be able to compare basically your gas boiler solution to an electrified solution, what sort of grants are available. All this information is just look at your own constituency. Do you have it? Do you know where to go to compare? You see some commercial solutions for that, but is there a really transparent comparable platform? So we think that the public sector needs to do quite a bit there to...

to facilitate this a little bit, provide this information, be transparent, but also be transparent what we are actually paying when we pay our electricity bill, because we are...

looking at electricity bills that are vehicles for all sorts of other things that have nothing to do with electricity. Taxes, levies, you know, you'd be surprised what you're paying on your electricity bill that has nothing to do with your power consumption, but on other energy sectors, you know. So let's make sure we know what we're actually paying for electricity versus our say gas use, right? Or other things, because then,

the equation makes more sense and then you know, ah, this is actually more cost effective for me. This is more cost effective for the factory. They know what they are paying for. So there is also something to do, something to reform about energy taxation in general and how we inform and talk about it in general.

Pete (10:41.204)
I think it's a great point. I know that there's been some great projects. I have been following stuff. I used to be a builder of homes in one of my previous jobs. Every time I see interesting things in new building constructions and stuff, and I've seen some builders, particularly in the Netherlands, that one project comes to mind, where the entire community was built to be electrified. The car park is solar powered. It charges the EVs right there.

And this is a competitive advantage to move in that neighborhood. The people who move there want to be part of that and want to be a part of the electrified community. So I think your idea about education, not as in this change isn't necessarily a bad thing. This is all an opportunity for people to move forward. And I think your membership, whenever I've sat with them, they all see this as an opportunity. Would you agree it's more of an opportunity than a hindrance or what's your thoughts on that?

Paul Wilczek (11:33.71)
It's absolutely so.

The tricky part is, of course, there's a lot of upfront costs that need to be invested in it. And the advantages, the monetary advantages are not so imminent as you might think. It's more of a mid to long term cost benefit that you will see. This is a bit, of course, again, to do with information, with transparency and having all the stakeholders know what the cost is versus the benefits is that they're getting.

Pete (11:40.532)
Correct.

Paul Wilczek (12:05.664)
So for this is not only about the grants that you and the sort of state support that is available out there for you, but it is also to help people decide, you know, electricity, which is after all homegrown because we are producing the electricity always somewhere close to us is more advantages in terms of more secure, cheaper as an option value than importing.

gas or other things, biofuels, whatever, from far away, that can just be very volatile in its price and for which you might even have a supply disruption. So you have seen this price volatility in gas massively and because the gas price is almost dictating

the power price right now, as it seems in Europe, we had this huge volatility also on electricity prices. Whereas, if you didn't have that, if it's a much more domestic source, you are all shielded from this volatility. So it's complex. It's not a straightforward answer and it's long -term. So therefore, this information, this transparency and communication effort is just huge.

But the arguments are there. The arguments are really in our favor because you really want to avoid this price volatility. You want a secure thing for which you need to invest upfront, but it will pay off. It will pay off if you have a heat pump in 15 years. You have paid less in those 15 years every day than you have had with a gas boiler in your house paying, you know, gosh knows what prices going up and down in the future.

Pete (13:55.764)
I think that's a great segue as we sort of wrap up today's session. I think that's a great way to finish it off because in the next section, we're going to pick up on renewable energy, looking at these things in energy solventry, I think that's the right word, nationalized security with energy. That's a key component, making it more local, having it be here, being in the control of it is a key part of it. So with that, Paul, thank you very much for this, for our first installment.

and I'll meet you in a couple of minutes on the next session. Thanks.

Paul Wilczek (14:29.358)
Thanks a lot, Peter.