FORESIGHT Climate & Energy Spring/Summer 2022 by FORESIGHT Media Group

Climate & Energy

Efficiency first

TECHNOLOGY

POLICY

FINANCE

INTERVIEW

An efficient transition through electrification

Old directives, new directions

More bang for your buck

IEA on the importance of the next decade

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A NEW RELATIONSHIP WITH ENERGY

Net-zero is made easier by the efficient use of energy

FORESIGHT Climate & Energy SPRING / SUMMER 2022

PUBLISHER FORESIGHT Media Group

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EDITOR David Weston david@foresightdk.com

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The energy transition is about more than switching power carriers. Replacing fossil fuels with renewable forms of energy generation is perhaps the most significant change the world will make in its attempts to avoid the catastrophic effects of climate change. Still, it is not as simple as a straight swap. It requires a complete overhaul of how we live and interact with our world. This is where energy efficiency and the efficient use of energy comes in. For a successful transition, we need to make sure the energy we use is applied in a smarter, greener way. The current energy crisis which has seen household bills skyrocket makes the need for energy efficiency even more relevant. As we find in these pages, electrification alone will somewhat reduce energy demand. But bringing demand and consumption down further, and using electricity in more efficient ways, makes the goal of the energy transition more attainable. What was not predicted when we first started work on this issue was a second crisis: Russia’s invasion of Ukraine and the ensuing geopolitical fallout. Europe’s lawmakers have turbocharged efforts to cut the region’s dependence on Russian oil and gas, which is putting greater focus on clean energy and energy efficiency in buildings. But there are other ways more efficient use of energy can help, beyond the triple glazing and roof insulation. New transport business models can ensure we maximise the use of electric vehicles; different technologies or materials can see industry reduce its heavy emissions load; while more efficient electrolysers may help with green hydrogen’s inherent problems. The combination of today’s crises—energy prices, the war in Ukraine and energy security, plus climate change—all off the back of two years of a global pandemic, means the energy efficiency, particularly in buildings, is experiencing a renaissance in the collective consciousness. The story that emerges in our 14th print issue of FORESIGHT Climate & Energy is that energy efficiency must go hand in hand with a switch to renewables for the energy transition to succeed. The point is made repeatedly in these pages but Stephen Richardson from the World Green Building Council sums it up best: “This is probably the most high-profile that building energy consumption’s ever been on the political spectrum, going back to the oil shocks of the 1970s,” he says. “If energy efficiency is not addressed as part of the response, it’s a real missed opportunity.” Energy efficiency can no longer be the forgotten fuel of the energy transition it once was.

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David Weston EDITOR

CONTENT

POLICY

FINANCE

TRANSPORT

TECHNOLOGY

A MATTER OF PRINCIPLE: THE EU’S FORGOTTEN MANTRA

THE EFFICIENCY PARADOX

TRANSPORT’S NEW DIRECTION

AN EFFICIENT TRANSITION

Change attitudes over building renovation with the right combination of incentives

Increasing the use of electric vehicles may require new ways of working

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Electrification will automatically bring down consumption, but it also requires a new relationship with energy

Energy Efficiency First never enjoyed its heyday but there are new plans to bring it front and centre PAGE 8

EU PRESSES AHEAD WITH POLICY RENOVATION

Updating two directives to strengthen energy efficiency as the world battles back from the pandemic PAGE 20

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HOW TO MAXIMISE ENERGY EFFICIENCY INVESTMENTS

Getting bang for your buck in building upgrades to make sure every penny counts PAGE 40

INTERVIEW

RENEWABLES DOUBLE UP ON LAND USE TO MAXIMISE RESOURCES

New model sees renewables generation and crops exist side-by-side PAGE 50

ENERGY EFFICIENCY IS HERE TO STAY

The IEA’s Brian Motherway speaks to FORESIGHT on why efficiency is an essential part of the energy transition

HEAVY INDUSTRY PLANS TO TREAD LIGHTLY

Major emitters tackle inefficiencies through new technologies and redesigned processes PAGE 54

HYDROGEN SECTOR TARGETS PRODUCTION BOOST

More efficient electrolysers strengthen the business case of green hydrogen PAGE 62

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FORESIGHT

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SDGs

The Big Picture It is not all about renovation. For new buildings, using the local resources helps to keep the emissions down. Sometimes old methods are still the best. This two-story school in rural Bangladesh was built by local workers using local, sustainable materials with support from Germany-based architects Anna Heringer and Eike Roswag, and German-Bangladeshi development partnership programme Shanti. As well as providing services to local children, the construction of the school also afforded training for local tradespeople PHOTO Kurt Hoerbst

POLICY The European Union’s “Energy Efficiency First Principle” was designed to maximise the potential of energy sources and increase investor appetite but it has struggled to jump from principle to practice. But new rules and a shift in geopolitics look set to propel the efficiency maxim to top billing

he saying: “The best energy is the energy we don’t use”—or some variation—often makes an appearance when the EU’s top energy and climate officials give speeches explaining how the bloc intends to slash emissions to a net-zero level by 2050. Energy efficiency measures and making sure that every electron, molecule and drop of combustible fluid is used shrewdly is part of a wider policy jigsaw that also includes decarbonising power systems with renewable energy. This is why the EU institutions wrote the Energy Efficiency First Principle into law in 2018—as part of the rules governing the energy union—marking the first attempt to give energy savings measures their time in the spotlight. Its ultimate goal is the removal of any market or regulatory barriers that prevent demand-side resources from competing with supply- side equivalents on an equal footing. Building renovations should share the same stage with wind energy, for instance. However, the all-important Energy Efficiency Directive (EED) (page 20), which sets energy consumption reduction targets and savings benchmarks for end8

use energy, did not include any obligation for governments to take the principle into account. This lack of binding legal pressure has undermined other mentions of the principle in other policy packages such as the EU’s Strategy for Energy System Integration and the Renovation Wave strategy. It has remained aspirational rather than obligational. Project developers have therefore only taken it into account in a limited way and, although successful examples exist, they are more the exception than the rule.

WASTED OPPORTUNITIES Energy experts are mostly in agreement that the EU has taken a step forward in prioritising energy efficiency measures but that there is still substantial untapped potential waiting to be unlocked by more ambitious policies. Arianna Vitali, from the Coalition for Energy Savings, says it is positive that energy effi ciency is now being acknowledged and considered in lawmaking, compared to not that long ago when it was not even on the agenda. However, she warns that although the energy effiFORESIGHT

Brought to the fore Energy efficiency policies are becoming more widely adopted as a weapon against climate change

TEXT Sam Morgan ILLUSTRATION Hvass&Hannibal and Liana Mihailova PHOTO Sasha Plescho

A matter of principle: the EU’s forgotten mantra

FORESIGHT

POLICY

ciency first principle has created a certain buzz and has put it on the map, EU policies are still not on track and much more needs to be done to elevate demand-side measures to the same ranking as supply-side. According to the latest energy stock-take by the European Commission, the 27 EU member states are well below the existing 32.5% target for 2030. The situation becomes more pressing when you consider that the target will be revised upwards in 2022. “Models tend to be blind to the benefits and value of energy savings, so in that sense, the energy efficiency first principle always comes second. The mindset is still to talk about supply not demand. That has to change,” Vitali says. Lower heating bills are just the tip of the iceberg, she adds. “Putting the principle first makes your energy system more flexible and clean. You first reduce your wasteful and inflexible demand—leaky buildings, inefficient industries—this makes the overall system smaller, more dynamic and better equipped to integrate renewables,” says Vitali. Overall costs linked to energy production and distribution fall as a result, which benefits the consumer. “That’s why you have to look at this from a system perspective and why this principle is so important,” she adds. Vlasios Oikonomou and Jean Sebastien Broc of the Institute for European Energy and Climate Policy both agree that energy efficiency has not been consistently taken into account when proposing solutions to combat energy-related challenges. Those challenges include the current spike in energy prices and fresh attempts to curb dependence on Russian energy imports. They also warn that lawmakers often “lack indepth understanding of the quantified benefits of energy efficiency” and rely too heavily on energy supply measures, only citing energy saving policies as an afterthought. Instead, Oikonomou and Broc propose that default lawmaking should impose the burden of proof on supply-side measures rather than the other way around. Any scenarios that prioritise extra energy supply over efficiency would have to show the potential benefits to society. Oikonomou and Broc add that quantitative assessments are needed to make the case for the multiple benefits of energy saving policies and to back up the credibility of the principle. Tools are being developed that allow local and regional authorities to crunch their own numbers and produce assessments that analyse the costs and benefits. This might not obligate lawmakers to choose efficiency policies but it does provide essential data. Monica Frassoni, of the European Alliance to Save Energy, insists that the principle has to be reflected 10

in all climate and energy rules, not just the efficiency directive, in order for EU policies to be “coherent”. For its part, the Commission acknowledged that the energy efficiency first principle is underestimated in existing planning and investment programmes. This has prompted a major rethink as part of an ongoing update of the EED.

REGULATORY POLISH The EED renovation is primarily meant to help the EU hit its target of slashing greenhouse gas emissions by 2030 via a proposed beefed up overall target of a 36% reduction and annual energy savings of 1.5%. Incorporated within that update is also an obligation to deploy energy efficiency first in energy system and non-energy sector planning, policy and investment decisions.

“The energy efficiency first principle always comes second. The mindset is still to talk about supply not demand”

As part of this new regime, governments will have to develop and apply cost-benefit tests so that the full range of benefits that come with energy savings measures are taken into account. Those assessments will have to be underpinned by a common methodology so that EU countries make their fair contribution to bloc-wide targets and there is a fair playing-field for green investments. But these standards cannot be completely harmonised because of the differences between countries— building stocks, weather patterns and energy mixes— and the Commission is expected to write guidelines that at least keep everyone on the same page. To keep tabs on whether governments are sticking to the principle, they will be expected to compile and submit regular reports to the European Commission. They will also have to set up dedicated agencies tasked with monitoring its application and its impact on planning and investments. The European Parliament still needs to have its say on the EED review and all the indications point towards MEPs strengthening the principle’s legal basis. “We don’t give this principle enough importance. It’s something that’s often mentioned in speeches but when you look at whether we can reach our targets for energy efficiency today, we are not on track,” says FORESIGHT

POLICY

FORESIGHT

POLICY

Niels Fuglsang, MEP and leading the European Parliament’s review of the EED. If Fuglsang gets his way in the final agreement due to be published later in 2022, governments will have to make an even bigger effort and work towards a target close to 45%.“We need to give it more teeth and that is something the new proposal intends to do,” Fuglsang says, adding that he intends to tighten up the Commission’s plan by expanding the scope of the principle’s obligations.

“The energy efficiency first principle is more relevant than ever and should be applied across all sectors and policies”

“The Commission says that for major investments in new energy production facilities, an analysis has to be done to see if it can actually be achieved using energy savings instead. I propose it be done for every new energy project.” Under the draft plan, a legal obligation would only be applied to investments of more than €50 million. For transport infrastructure projects in particular, the threshold would be €75 million. Fuglsang is not alone in seeking to cut “major” from the wording of the legislation. Compatriot Morten Helveg Petersen and Slovakian MEP Martin Hojsík also want to remove it because it would create legal uncertainty as the term is “vague”. They highlight in their amendments that member states could choose to game the system and that it could hurt “harmonisation and predictability”, limiting the scope of energy efficiency measures just to largescale projects. Conservative elements of the Parliament are seeking to push back on this alteration and insist that it could create extra administrative and financial burdens for small- and medium-enterprises. Meanwhile, Energy experts Oikonomou and Broc point out that large-scale projects worth €50 million or more are already subject to in-depth scrutiny under the EU’s environmental impact assessment legislation. Fuglsang’s report states that monitoring how the principle is applied should go into much more detail than the Commission suggests. For instance, reports must look at national, regional and local-level planning and energy systems, as well as list instances of where regulatory and non-regulatory barriers have 12

been removed. The draft report also says that a common methodology for cost-benefit assessments need to be put in place by June 2024.

GUIDING LIGHT Writing a new EED into law will give the EU legal power to make energy savings a top priority but the nitty-gritty detail of putting efficiency first and helping governments make the most of the opportunity is still an open question. The Commission already made some headway on that particular issue in September 2021, when the EU executive followed up its “Fit-for-55” package of climate laws—designed to reach the bloc’s target of reducing net greenhouse gas emissions by at least 55% by 2030—with a detailed set of guidelines. Under FORESIGHT

Energy security Russia's invasion of Ukraine has increased efforts within the EU to tackle an overreliance on imports

POLICY

those non-binding recommendations, governments are urged to consider energy efficiency first “as an overarching principle to be applied in a wider policy context, rather than an ultimate goal to reduce energy consumption.” The playbook also says that resources should be funnelled towards local-level projects in particular, a system approach should be taken and that assessments must take into account the future impacts of climate change on energy networks. Although aimed primarily at lawmakers and regulators, the sixty pages of guidelines are also applicable to regional and local-level authorities, market players and investors involved. German Greens MEP Jutta Paulus insists in her amendments to the EED update that member states should use the guidance note as an energy efficiency playbook. It is hoped that the two can be married together during the legislative process.

RUSSIAN INFLUENCE Vladimir Putin’s invasion of Ukraine has moved the needle in favour of policies that help reduce Russian oil and gas imports significantly. Accelerated renewable energy rollout and more in-depth energy savings measures are set to be the main beneficiaries. The EU aims to reduce oil and gas imports by two-thirds by the end of 2022 and phase them out completely by 2027, under revised energy plans that have been sanctioned by the European Council. How to replace the 155 billion cubic metres of gas imported every year falls under the remit of the European Commission. Its new RePowerEU strategy includes plans to increase supply agreements with other oil and gas exporters, more renewables generation and an additional focus on energy efficiency. The plan stops short of proposing new targets but encourages governments to frontload their policies this decade instead of delaying them. “The energy efficiency first principle is more relevant than ever and should be applied across all sectors and policies, with demand response measures complementing those on the supply side,” the text states. While Fuglsang agrees that the geopolitical situation has given energy saving advocates extra political momentum, he insists that from his perspective the goal is still the same because his report was written prior to the Russian invasion. Greens MEP Ciarán Cuffe is helming the European Parliament’s review of the Energy Performance of Buildings Directive (EPBD) and says that while there has been progress on energy saving measures, opportunities have still been missed. FORESIGHT

“I feel like the REPowerEU communication could have gone into further detail on how energy efficiency can reduce demand and our dependence on Russian imports,” the Irishman says about the strategy, which did not mention renovations in any great detail. “The Commission is not applying its own principle,” adds Frassoni, who insists that the EU's plan is focusing too much on LNG shipments, gas diversification and nuclear power. Vitali, meanwhile, says, “We need to see something that pays more than just lip service to energy efficiency first. If we’re serious about cutting imports and boosting dependence, there needs to be a priority on saving energy.” She adds that although urging people to turn down their thermostats and wear jumpers is certainly part of modern energy policies, “We need something more structural, clear measures that have long-term effects.” Oikonomou and Broc of the Institute for European Energy and Climate Policy are hopeful that the Commission and EU leaders can learn from lessons of the past, suggesting that the current crisis would have been mitigated if different policy choices had been made.

“We don’t give this principle enough importance”

“If the priority had really been set on energy efficiency since the early 2000s, EU dependency on Russian gas would likely have been a minor issue by now and the EU would be much more advanced on the path to carbon neutrality,” they say. Whether the Commission will be able to crunch all the numbers and include them in that mid-May action plan is an open question, given the heavy workload created by energy policies and the far-reaching consequences of Russia’s war. The conflict has also put governments in a mood to back short-term fixes to issues rather than focus on the long-term structural fixes that energy experts are calling for. To what extent this will affect the efficiency principle’s fortunes remains to be seen. It is clear that there is growing political will for energy saving measures and targets but whether they are given priority over extra energy capacity in particular will be decided over the next important few months of backroom deals. • 13

TECHNOLOGY The energy transition is not simply a matter of replacing fossil fuels with zero-carbon alternatives. It will also be marked by a radical change in our relationship with energy and the spread of technologies like heat pumps and electric vehicles that can yield significant efficiency gains even before traditional energy savings measures come into play. Electrification will reduce energy demand globally

uring the industrial revolution in 18th century Britain, and elsewhere in Europe and the United States the following century, coal was combusted to turn steam engines providing power to factories. As the 19th century ended, internal combustion engine automobiles fuelled by petrol began to take the place of horsepowered carriages. Now another revolution is at hand. Emissions from fossil fuels need to be slashed to practically zero to meet international commitments laid down in the Paris Agreement to limit the rise in global temperatures to “well below” 20C and avert the worst effects of climate change. This means not only that fossil fuels will need to be replaced by renewable energy but also entails a change in how energy is converted and used. Nick Eyre of the University of Oxford says the transformation underway can be seen as a move from the energy system introduced with the industrial revolution in which heat from fossil fuels provides work into one in which work from renewable energy, in the form of electricity, also provides heat. In this new world, steam and gas turbines will 14

become increasingly rare and be replaced with technologies like heat pumps and electric vehicles (EVs). With the energy transition, “You don’t just change the input fuels,” says Eyre. “The whole set of technologies changes.” The combustion of fuels to produce power is acc ompanied by significant heat losses. The conversion of power to heat is more efficient and the advent of an energy system relying heavily on electricity, and particularly the electrification of heating and transport, also brings with it sizeable energy savings. EVs typically require less than one-third the energy of internal combustion engine vehicles and heat pumps less than one-third of boilers. Eyre calculates that final energy demand could be reduced up to 40% by switching to renewable energy sources like wind, solar photovoltaics and hydro electric power where it is feasible and using green hydrogen when direct electrification is not an option. Demand reduction in buildings and transport can exceed 50%, Eyre estimates. “Not only is energy efficiency helpful for the [energy] transition, but the transition is also helpful for energy efficiency,” says Eyre. FORESIGHT

Efficient process Electrification means energy will be used more efficiently, reducing demand as a result

TEXT Heather O'Brian ILLUSTRATION Hvass&Hannibal and Liana Mihailova

An efficient transition

FORESIGHT

TECHNOLOGY

Key assumptions behind Eyre’s analysis are that heat pumps provide most low-temperature heat, EVs predominate in light vehicle fleets and hydrogen is used mainly in fuel cells in heavy vehicles. “In the energy efficiency community, there’s still a big focus on the marginal, incremental savings that can be made from energy efficiency measures, but you need to step back and look at this huge opportunity offered by electrification,” says Jan Rosenow of advisory body the Regulatory Assistance Project (RAP).

USING RESOURCES EFFICIENTLY While many electric applications are efficient in terms of final energy use, Thomas Boermans of German energy group E.ON believes the focus in the energy transition should be targetting a “sustainable and convenient [energy] system” rather than on electrification per se. While electricity often fits the bill for being sustainable and convenient, he notes that there are also inefficient ways to use electricity such as onefor-one direct heating. Opting for the most efficient energy resources will help limit the renewable energy resources needed to meet decarbonisation goals, which will be immense even with efficiency gains. “By reducing the total amount of energy we need by taking advantage of these efficiencies [from electrification], we will need a lot less renewables to decarbonise,” notes Rosenow. Under most decarbonisation scenarios, the role of electricity is seen growing strongly. The International Energy Agency’s (IEA) net-zero pathway shows electricity consumption growing to represent nearly 50% of all energy consumption in 2050, up from about 20% currently. Eyre has calculated that about 77% of energy could potentially come from direct electrification and the remainder from green hydrogen. Michelangelo Aveta of power trade association Eurelectric says its clear efficiency advantage means that direct electrification should be favoured for the majority but certainly not all end uses. “If you need to decarbonise an aeroplane, you can’t do that with direct electrification or you would need a hell of a battery,” says Aveta, noting that using renewable electricity to create a synthetic fuel would make more sense in this case. “It’s a matter of making the best use of the resources you have at hand and using those resources that might be scarce where they are most valuable,” he says. The use of green hydrogen—hydrogen produced from the electrolysis of water powered by renewable electricity—as a fuel source is far less efficient than direct electrification. Rosenow notes that a hydrogen fuel cell vehicle requires about three times more electricity than an EV and hydrogen used in heating 16

would use about five times more electricity than a heat pump. One mitigating factor is that fuel cells enabling the conversion of hydrogen chemical energy directly to work are significantly more efficient than fossil fuels at the point of final energy conversion. Geert Decock of Transport & Environment (T&E), a clean transport NGO, stresses the importance of considering the different renewable energy requirements for transport and other end uses when choosing an energy source. Less efficient solutions will require more green energy, which in turn means also more land will be needed to house wind and solar farms. “You can’t just say you’re going to put hydrogen fuel cells on trucks; you also have to say where you are going to get that extra renewable energy,” Decock says. A 2020 study by consultancy Ricardo Energy & Environment, commissioned by T&E, places the renewable electricity needs for the decarbonisation of transport in the European Union at 2414 terawatt-hours (TWh) in 2050 in a base case scenario assuming 100% electrification for all road transport. Green energy requirements jump to 2797 TWh in a “higher hydrogen” scenario in which 50% of buses and heavy-duty trucks would run on hydrogen but 90% of all cars and other road vehicles would still be electric.

“It’s a matter of making the best use of the resources you have at hand and using those resources that might be scarce where they are most valuable”

A “higher synthetic hydrocarbon” scenario—using only man-made hydrocarbons produced from green hydrogen in shipping and aviation and a small share in road transport—would require a total of 3598 TWh of electricity or 40% more than the base case scenario. Given the inefficiency of using hydrogen and synthetic hydrocarbons, they should be targeted for uses where there is a lack of alternatives, primarily aviation and shipping, believes Decock. Indeed, the Riccardo Energy & Environment study shows the renewable electricity needed in the EU for aviation and shipping in the base case scenario will see a 24-fold increase from 2030 to 2050, rising from FORESIGHT

TECHNOLOGY

Global final energy use by sector and fuel Electrification will reduce energy demand across all major sectors

EJ/year 180 160 140 120 100 80 60 40

SOURCE: NICK EYRE

20 0 Industry

Buildings

Transport

CURRENT Fuels

Industry

Buildings

Transport

POST-TRANSITION Electricity

just 43 TWh to 1274 TWh as decarbonisation efforts in the two sectors get underway in earnest. Aside from shipping and aviation, green hydrogen is widely expected to be an essential element in the decarbonisation of hard-to-abate industries like steel and cement manufacturing (page 62) and as a replacement for fossil fuels that are used as feedstocks. There may also be a supporting role for using green hydrogen in power plants to replace flexible, gas-powered plants, despite the inefficiency of using electricity to produce hydrogen that is once again transformed into electricity.

EMISSIONS GAINS Although decarbonisation will require a move towards 100% renewable electricity, one of the implications of the efficiency gains of electrification is that emissions can often be reduced even when the share of fossil fuels on the grid remains relatively high. A bonus of electrification is that it ceases burning FORESIGHT

fuels at the point of use, getting rid of tailpipe emissions from cars that contribute to urban pollution and improving air quality in buildings. T&E found that, on average, electric cars in Europe generate almost three times less CO2 than the equivalent petrol or diesel car over their lifecycle, including the embedded emissions from the energy-intensive production of batteries. Even in a worst-case scenario—an electric car with a battery produced in China and driven in Poland— CO2 emissions are still 22% less than for a diesel car and 28% less than petrol. On the other hand, an electric car with a battery produced in Sweden and driven in that country can emit 80% less CO2 than diesel and 81% less than petrol. Meanwhile, in a 2020 analysis, the Rocky Mountain Institute (RMI) concluded that replacing gas boilers with air source heat pumps would result in a reduction in CO2 emissions over the 15-year lifetime of the heat pump in 46 out of the 48 US contiguous states, 17

TECHNOLOGY

Power switch Switching to electricpowered vehicles will reduce total energy demand

or about 99% of US households. The exceptions were Wyoming and Utah, where electricity grids are still highly reliant on coal. The carbon intensity of power grids on both sides of the Atlantic Ocean has been falling and is set to decline further as solar PV and wind power continue to expand their share of the electricity mix. Germany, the UK, the US, and Canada are among the many countries that have committed to emissions-free electricity by 2035.

EVS RACE AHEAD As battery prices come down sharply and the range of EVs improves, the electrification of cars is already 18

moving full speed ahead. Sales of electric cars reached 6.6 million in 2021, representing 9% of the global car market and more than doubling from the year earlier, data from the IEA shows. The well-to-wheel efficiency of electric cars now stands at about 77%, according to data from T&E, compared to about 33% for hydrogen fuel cell cars. On the other hand, figures from the US Department of Energy (DOE) indicate that only 12-30% of the petrol put into a car moves it down the road, depending on the drive cycle. Car manufacturers are investing heavily in EVs, as lawmakers increasingly promote their use. The European Commission has proposed that all news cars be FORESIGHT

TECHNOLOGY

emission-free by 2035, in what is seen as an effective ban on traditional internal combustion engine (ICE) vehicles. California is also planning to ban the sale of new gasoline-powered cars by 2035. Electrification is also increasingly seen as the best option for other forms of road transport. “Technical and economic developments in battery and fast-charging technologies could soon make fuel cell electric vehicles, which run on hydrogen, superfluous in road transport,” Patrick Plötz of Fraunhofer Institute for Systems and Innovation Research wrote in an article published in Nature Electronics in January 2022. “If truck manufacturers do not start the mass production of fuel cell trucks soon to reduce costs, such vehicles will never succeed in low-carbon road transport.”

move that is expected to further encourage the purchase of heat pumps. Heat pump sales in the country already rose by 25% in 2021, driven in part by the introduction of a carbon tax on heating fuels. As it seeks to wean itself off Russian gas, France said it would provide financial support for heat pumps and cease subsidies for fossil fuel heating. In Poland, regulations phasing out the use of coal in single-family houses helped to drive a 60% jump in heat pump sales in 2021. Eurelectric’s Aveta notes that heat pumps work best in buildings that are energy efficient themselves, making insulation and other measures to renovate the building stock a priority in policies to support the uptake of heat pumps. He also points to the need to train skilled workers to instal heat pumps and the need to, “Eliminate the incentives some countries still have for fossil fuel-based heating solutions.”

FAVOURING EFFICIENCY

“Not only is energy efficiency helpful for the [energy] transition, but the transition is also helpful for energy efficiency”

EFFICIENT HEATING Another key technology that improves the efficient use of energy via electrification is heat pumps, where one unit of energy input generally yields about three units. The multiplier can rise to as much as six for large heat pumps used in district heating systems. In its pathway to net-zero by 2050, the IEA sees 1.8 billion heat pumps installed in buildings in 2050, providing 55% of global energy demand, up from about 7% today. Partially due to higher upfront costs, the market is not yet on track to reach the 2050 target and growth in the heat pump market has been uneven. There are signs the market is accelerating, however. Heat pump sales rose by 21% in the US in 2021 and the European Heat Pump Association (EPHA) estimates that sales in Europe increased by over 25% in 2021 to over two million units. High gas prices have improved the economic case for operating heat pumps and an increasing number of governments are putting into place policies and incentives to encourage their use. In its coalition agreement, the new German government stipulated that all new heating systems must run on a minimum of 65% renewable energy as of 2025, a FORESIGHT

Despite the efficiency gains that can be garnered with electrification and the need to move towards renewable energy sources, RAP’s Rosenow notes that many energy efficiency programmes have and continue to be focused on increasing the energy efficiency of fossil fuels. “This perpetuates the deployment of these technologies,” he says. A study published by Cool Products, an NGO that promotes ecodesign and energy labelling, found that 16 out of 27 European Union member states were still financing gas boilers and eight member states still backed oil boilers. At the time, only seven member states provided no support for fossil fuel heating. As the energy transition progresses, the focus will increasingly shift to not simply adopting more EVs and heat pumps but also making these technologies as efficient as possible. Energy efficiency labelling already exists for heat pumps. Continuing to raise the bar for standards and labels to keep up with technological progress in key heating markets could help drive sales towards higher-end products, says the IEA. “For cars, we’re still in the moment that as long as you are electric, you are green,” but at a certain point it will also be important to set energy efficiency standards for EVs, says Aveta. One possible model could be the fuel mileage standards now in place for new cars in the US. “There will be more or less efficient EVs and heat pumps” and applying standards like those now in force for technologies running on fossil fuels is a sensible approach, adds Eyre. “We need to be more aggressive in speeding up the energy transition and in ensuring the most efficient options are taken up,” he says. • 19

POLICY Two of the European Union’s (EU) main energy laws are in the process of being updated. Despite the fundamental role they play in decarbonisation efforts, the rules have so far failed to live up to climate expectations. This is set to change

he EU’s topline climate targets of a 55% cut in greenhouse gas emissions by 2030 and net-zero by 2050 rely heavily on accelerated renewable energy deployment, significant— if not total—fossil fuel cuts and a substantially more efficient energy system. Talks aimed at ratcheting up sector-specific targets, rewriting emission standards and funnelling more money towards green projects are ongoing, all against a backdrop of unpredictable geopolitical events that are moving markets and changing the game. In 2021, the European Commission (EC) published its plan— known as the “Fit-for-55” package—to drag Europe’s economy onto a trajectory that is consistent with its set-in-stone climate neutrality goal. Under the EC’s existing regime, renewable sources have to reach 32% of the total energy mix by 2030. This was increased to 40% by the Fit for 55 plan. Its energy efficiency directive (EED) counterpart aims for arguably even more ambitious improvements. The current overall benchmark of a 32.5% reduction in final energy consumption is ramped up to 36%, 20

while annual energy savings requirements were nearly doubled from 0.8% to 1.5%. According to the updated Energy Performance of Buildings Directive (EPBD)—designed to support the energy efficiency of Europe’s buildings stock— governments will identify which commercial, public and residential structures are among the least efficient 15% of the building stock. These will then be classified as ‘G’ class on a rating scale that goes all the way up to ‘A’—which will be reserved solely for buildings that emit no emissions whatsoever during their operation phase. Minimum Energy Performance Standards (MEPS) will then be applied to that 15%. G-class commercial and public buildings would have to be renovated up to F-class by 2027 and E-class by 2030, if the Commission’s plan is adopted as it stands. Residential buildings would have longer— by 2030 and 2033, respectively—for the two lowest classes. The revised EPBD will be the main lever for the EU’s ongoing Renovation Wave policy, which aims to FORESIGHT

Building works Updated EU directives are aiming to increase the efficiency of Europe's building stock

TEXT Sam Morgan PHOTO Simone Hutsch & Sasha Plescho

EU presses ahead with policy renovation

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boost refurbishment rates above their current annual 1% and upgrade 35 million buildings by 2030.

EFFICIENCY FIGHT Niels Fuglsang, a Danish socialist member of the European Parliament, is tasked with crafting the institution’s proposal for the EED review. He is not pulling any punches when it comes to ambition. His report says the overall target should be 43% rather than 36%, while his vision for annual savings is 2% rather than 1.5%. Fuglsang also insists that those requirements be legally binding on national governments. “We need to do more to live up to the EU’s Climate Law; it is cost-efficient, according to the cost analysis that I have built this on and we need to become independent of Russian gas and oil,” the MEP explains. He is likely to find plenty of support in Parliament for his bumped-up targets, as lawmakers 22

from across the political spectrum have already publicly backed energy-saving policies as a weapon against Russian fossil fuel dependence. Arianna Vitali of the Coalition for Energy Savings, an NGO, says discussing higher targets is no longer taboo. “There's more consciousness now about how important energy savings are and why it should be prioritised,” she says. According to member state diplomats from some of the EU’s biggest players, their governments are unlikely to push back too hard on the target increases but will argue that their national contributions to the binding EU-wide goal remain indicative only. The Parliament too might struggle to agree on a negotiating position that includes legally binding benchmarks, despite Fuglsang’s efforts, as the large centre-right European Peoples’ Party (EPP) has submitted amendments that insist countries must be granted flexibility. FORESIGHT

Main culprits The updated EPBD will identify which commercial, public and residential buildings are among the EU's least efficient

POLICY

“Renovating existing buildings can lead to significant energy savings and could reduce the EU’s total energy consumption by 26%”

In changes suggested by Danish MEP Pernille Weiss, governments should set milestones to keep them on track and be able to use their own energy policy datasets to calculate their contributions. The Commission says member states should use a formula that it has designed. A third way may yet emerge when negotiators sit down for talks in 2022. The European Policy Centre (EPC), a think tank, suggests that member states should be given free rein and only hit with obligatory measures if they come up short. “If the 2022 evaluation of a National Energy and Climate Plan shows that a member state is not on track or not taking the appropriate measures to meet its energy efficiency goals, the Commission should be able to propose new, binding targets and plans to said member state. This would ensure that monitoring also leads to concrete results,” the EPC writes in a briefing.

BUILDINGS BOOST The buildings performance directive is one legislative step behind the EED, as the proposal was only published at the end of 2021 as part of the second wave of climate legislation promised by the Commission. Ciarán Cuffe, an Irish greens MEP, is Fuglsang’s counterpart on the EPBD and will lead the Parliament’s negotiating team. He too is adamant that the rules review can make a huge difference to the EU’s climate accounts. “Renovating existing buildings can lead to significant energy savings and could reduce the EU’s total energy consumption by 26%,” Cuffe says, adding that he will seek to accelerate the Commission’s proposed timeline. “We also have to look at other areas like encouraging the uptake of on-site renewable energy systems and creating frameworks to improve the energy performance of buildings through MEPS,” he adds. Performance standards risk being a key point of contention between EU countries that already have strict rules in place, such as the Netherlands, and FORESIGHT

other member states that have building stocks that are in a much worse condition and require bigger injections of capital. As a result, the Commission has attempted to forge a middle way with the EPBD, setting EU-wide class requirements but allowing governments to design their own rating systems and designate their own trigger points for when renovations must be carried out. Caroline Simpson of campaign group Renovate Europe says, “Fast-tracking key measures in the revision of the EPBD, such as MEPS, is crucial to aligning the EU’s Green Deal with the new geopolitical reality,” following Russia’s invasion of Ukraine. Both Cuffe and Simpson regret the fact that the Commission failed to include building renovations in its initial plan to curb Russian energy imports. Indeed, an entire section on refurbishments in the first draft of the REPowerEU plan was withdrawn from the final text. Fuglsang will be working closely with Cuffe as the two MEPs attempt to marshall two different but closely linked directives through the EU’s legislative process. However, success for one does not necessarily guarantee success for the other. “An ambitious EED might actually be used as an excuse to lower the ambition of the EPBD. The interplay between the various pieces of legislation is tricky and must be managed carefully,” Simpson warns. One important factor that will make or break the ambitions of the legislation is financing. Hundreds of billions of euros will be needed to bring the building stock up to code but in that regard, the EPBD can count on a powerful ally. An €800 billion pandemic recovery fund is already doling out grants and loans to the 27 member states and renovations feature prominently in many of the plans that governments have submitted to the Commission, which is the gatekeeper of the money. “There’s a lot of money under the recovery fund that can be used for energy efficiency, including building renovations,” Vitali insists. Meanwhile, Cuffe 23

POLICY

warns that some member states have missed an opportunity not to spend more on buildings.

EXPERTISE MATTERS As is the case for so many EU rules and regulations— not just in the climate and energy sector—there is often a gap between what is decided in Brussels and what is implemented on the ground. In order to help national, regional and local authorities actually stick to targets, the EU offers technical assistance funding, so governments can obtain the services of experts that, for instance, know how to run mass renovation projects. Under the InvestEU programme—worth nearly €400 billion in total—governments can apply for funding and seek help from the scheme’s advisory hub, which links project promoters with advisors to work together and help projects reach the financing stage. It is a little-known instrument that many senior Commission officials complain is almost completely underappreciated by the member states. “Governments have to get better at using money which has already been allocated to green investments, like the recovery funds, and the EU has to get better at helping them,” insists Brook Riley at multinational insulation firm Rockwool. “It’s pretty clear that every euro in renovation brings big socio-economic benefits, but you’ve got to actually get the money into the economy. Cue technical assistance,” he adds. More governments may shortly realise what they have been missing after the Commission set up a special branch of its technical assistance services to help 17 EU countries curb their reliance on fossil fuels. The revised EED and EPBD rules both tout technical assistance as an essential step that governments must consider when allocating funding to efficiency and renovation projects. Small- and medium-sized enterprises in particular should be given special attention as they represent significant energy-saving potential. The directive insists that national authorities must provide technical assistance and targeted information under an appropriate framework. Plans to deploy minimum energy performance standards for buildings will also hinge on technical assistance, according to the Commission’s EPBD proposal, which makes an explicit link between targets and results. One-stop shops are the main tool the Commission wants to see governments embrace and roll out en masse. “We need to have a lot of money going into skills and training at the moment. This will make sure that our workforce is adequately equipped for the increased demand for renovations,” says MEP Cuffe. 24

This is where the institutional arm of technical assistance can come into play. Not only can the EU offer expertise there, but other international organisations such as the World Bank also have the resources needed to help craft policy options for countries that seek assistance. “Discussions with financial institutions show that there is a desire to up investments in renovations but to do this we must create a legislative framework that can strengthen and secure investments in energy-efficient and affordable homes,” Cuffe explains.

“Governments have to get better at using money which has already been allocated to green investments”

AVAILABLE FINANCE Cuffe is not the only MEP that wants financial institutions to play a larger role in the EU’s green transition, as compatriot and centre-right lawmaker Seán Kelly has urged the European Central Bank to do more to help households renovate their properties. “A big barrier faced by homeowners is the high costs of procuring bank loans for renovations. Banks themselves face high fixed costs,” Kelly says, adding that the European Central Bank (ECB) should step in and link energy efficiency criteria with low-interest loans. Governments are limited in how much of their budgets they can pump into renovation schemes but the banking sector theoretically has more flexibility. The ECB in particular has billions of euros at its disposal with its targeted longer-term refinancing operations. Kelly suggests the European Parliament should be discussing how to unleash that funding for renovation programmes and make other changes, such as disclosing energy performance standards on bank mortgage portfolios. He insists that the ongoing work on the EPBD and existing recommendations by the European Banking Authority will “greatly facilitate the ECB’s efforts in this direction.” Under the presidency of Christine Lagarde, the Frankfurt-based institution seems to be in an environmentally-inclined mood after publishing a comprehensive climate strategy for monetary policy in summer 2021. Kelly’s suggestions could therefore fall on fertile ground. • FORESIGHT

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FINANCE Reducing the amount of energy we use is a key part of cutting emissions by 2050, but asking people to be more frugal could be challenging in a society that prizes consumption. Getting incentives right can shift attitudes

s of 2022, thermostats have become instruments of war. After Russian president Vladimir Putin ordered tanks into Ukraine, Josep Borrell, head of foreign policy at the European Union (EU) said European citizens should turn down their heating to cut Europe’s dependence on Russian gas. In the war on climate change, using less energy is also key. The International Energy Agency (IEA) says energy efficiency represents “a critical contribution” to its Net Zero by 2050 road map to meet the Paris Agreement to limit global warming to well below 2ºC. Unless demand is reduced through electrification, behavioural changes and efficiency, global energy consumption could be 83 petawatt-hours a year higher in 2050 than in 2020, or 90% above the amount needed to cut net emissions to zero, the IEA says. EU lawmakers recognise the importance of effi ciency and last year tabled a revision of the bloc’s energy directive, aiming to bring in a legally binding 36% cut in final consumption by 2030. This target 26

could be revised further following Russia’s invasion of Ukraine. On the surface, encouraging energy efficiency should not be hard. Businesses and consumers alike benefit from using less energy because they pay lower bills. Lower energy costs are not the only plus. More than 220 million buildings, representing around 85% of Europe’s building stock, were built before 2001 and most will still be standing by 2050. “[These buildings are] unprepared for the ongoing and future changes in our climate, such as increasing temperatures and extreme weather events,” says the EU. Buildings account for around 36% of the region's energy-related greenhouse gas emissions, so improving their efficiency would deliver a triple benefit of lower costs, greater climate resilience and counteract global warming. People should hardly need encouragement to improve the energy efficiency of their homes and workplaces. In practice, however, things are not so easy. FORESIGHT

Get your house in order Businesses and households need to improve the efficiency of the exisiting building stock

TEXT Jason Deign ILLUSTRATION Hvass&Hannibal and Liana Mihailova PHOTO Frederico Beccari & Tomas Marek

The efficiency paradox

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FINANCE

POOR RESPONSE One renovation firm discovered these difficulties when it offered to improve the energy efficiency of UK homes but only got three responses. Meanwhile, a 2020 EU “renovation wave” plan to improve building efficiency could miss its target of 35 million renovations by 2030 because progress on the ground has been slower than is required, says Peter Sweatman, of Climate Strategy, an advisory firm. Observers from Australia to the United States bemoan the fact that energy is needlessly wasted every year from poorly insulated buildings, but few public or private sector initiatives seem to be able to stem the loss. There are multiple reasons for this. For a start, our brains are not wired for efficiency. Our species evolved largely without the means to store things, so reducing consumption did not make much sense. You took as much as you could of a given resource when it was available and then moved on. Today, we see this in the Jevons paradox, which says that if you improve the efficiency and reduce the cost of something then people just use more of it. The paradox means attempts to improve efficiency can be stymied from the start. John Grant of Sheffield Hallam University in England calls it the rebound effect. “You end up using more stuff, not less, because it drops in cost. Efficiency in itself is actually a false god,” he says. Further evidence of our indifference to efficiency stems from the fact that most of the world’s economy is built on capitalism, which is based on, and rewards, conspicuous consumption. In Europe, this economic system leads to a clear conflict of interest for businesses linked to building efficiency. FINANCIAL INCENTIVES Energy utilities and construction companies stand to lose financially from the creation of sturdy, well- insulated buildings that have low energy and renovation needs, yet these companies are often tasked with implementing efficiency schemes. A further challenge is that most energy efficiency programmes assume people will welcome the savings that come from having more efficient homes, but the cost is a minor concern for many consumers. “Evidence tends to show that just relying on prices isn’t very effective, for a couple of reasons,” explains Samuel Thomas of the Regulatory Assistance Project (RAP), a non-governmental organisation focused on the energy transition. “At the lower end of the income spectrum, you can’t really afford to cut back on your energy consumption except in ways that negatively affect your welfare.” For rich people, energy costs tend to be such a small portion of overall expenditure that there is practical28

ly no incentive to cut back on consumption. At best, says Thomas, price incentives “will have some effect in the middle ground”. All this may help explain why many energy efficiency schemes, historically based on grants, subsidised loans and fiscal benefits, have struggled to deliver results despite the availability of finance. “In many [EU] member states, low renovation rates relate more to an absence of promoting, supportive policies and a mature renovation industry than to an absence of funding,” says Sweatman.

Fruitful programmes Italy's Superbonus programme saw €21 billion in energy efficiency improvements

SUCCESSFUL SCHEMES As European lawmakers look to improve the efficiency of buildings in the future, it will be important to learn from initiatives that have worked despite these challenges. One such scheme is the Superbonus programme in Italy, where the government provides a tax rebate covering more than the entire cost of energy efficiency work such as installing thermal insulation. The scheme has not been without its problems, with Italy’s tax agency in late 2021 uncovering €950 million in fraudulent claims tied to the Superbonus and other building improvement tax rebates. But the programme has led to 122,000 renovations across the country, delivering €21 billion in improvements.

“Serious energy efficiency is going to involve all sorts of hassle”

Another acclaimed approach is the white certificates trading programme in France. The programme forces energy suppliers to help their customers reduce consumption, through information campaigns or incentive schemes. Suppliers that exceed government targets for consumer efficiency can trade excess white certificates with other providers, while those that do not face a per-kilowatt penalty. The French white certificates programme has been in operation since 2006. Between 2011 and 2019, it led to the installation of 116,000 heat pumps, 45 million square metres of insulation and 3 million double- or triple-glazed windows. “What I like about it is the French government uses it as an overarching instrument to meet energy efficiency goals,” says Thomas at RAP. “They’ve ramped up the targets over time and helped keep the lid on bills by allowing other subsidies.” FORESIGHT

FINANCE

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FINANCE

Elsewhere, Europe’s Energy Efficient Mortgages Initiative, established in 2015, aims to encourage the installation of energy efficiency measures by cutting mortgage rates for efficient buildings. The programme includes 70 European lending institutions, which benefit from the correlation between energy- efficient homes and low mortgage default rates, even considering other factors.

FUTURE OPTIONS Building on the initiative, the European Commission introduced mortgage portfolio standards in its proposed recast of the Energy Performance of Buildings Directive (page 20), in December 2021. Sweatman at Climate Strategy believes the standards could play an important role in fostering energy efficiency. “These are internal tools to help attach energy performance indicators to existing mortgages and 30

then establish a median for the entire portfolio to move down a Paris-aligned pathway,” he says. “We think these should be extended to the over 50 million existing mortgages in Europe, to engage lenders in offering fully funded deep renovation solutions to the lowest-hanging fruit in their portfolios.” Sweatman's Climate Strategy is developing an EUbacked instrument, called the EU Renovation Loan, for homeowners who cannot take out a mortgage. More generally, Europe is gearing up to tackle energy efficiency like never before, as part of moves to get the economy back on track after Covid-19. Sweatman notes that 37% of the recovery and resilience funds offered by the EU to member states must be spent on climate neutrality goals and a recent review of plans suggests this proportion could be closer to 40%. The European Commission has singled out energy efficiency in its guidance to member states. FORESIGHT

Brutal upgrades The low level of efficiency upgrades seen to-date will require a significant up-tick in the coming decade

FINANCE

“We need to fundamentally own the fact that we built loads of shit houses and a large proportion of them are going to have to come down”

“In principle, recovery funding provided designated funds and guidelines to upscale climate-aligned buildings renovation,” says Sweatman.

HASSLE COSTS European funding may improve financial incentives, but it is clear these only have a limited impact on the uptake of energy efficiency. On the other hand, the extra money will have little effect on another factor that is increasingly recognised as being of fundamental importance in the success of energy efficiency schemes: convenience. “Serious energy efficiency is going to involve all sorts of hassle,” says RAP’s Thomas. “It might involve moving out or whatever. Those are basic barriers. Hassle costs are real costs.” Plus, this inconvenience often buys no more than a meagre amount of efficiency. According to the EU, renovations are currently only reducing building energy consumption by 1% a year. Deep renovations, of the kind needed to cut energy consumption by 60% or more, are only carried out in 0.2% of the building stock per year—and barely a fifth of these see significant improvements in efficiency. To achieve the emissions reductions envisaged in studies such as the Zero Carbon Britain report published by the Centre for Alternative Technology in the UK will require “a brutal level” of energy efficiency upgrades, says Grant of Sheffield Hallam.

UK HOUSING The best way to achieve this is by retrofitting today’s building stock (page 40) to a standard called EnerPHit, which makes existing buildings almost as efficient as new-build passive houses with ultra-low energy requirements. However, EnerPHit “is crushingly expensive,” Grant says. “I think we need to fundamentally own the fact that we built loads of shit houses and a large proportion of them, unfortunately, are going to have to come down,” he adds. In the UK, Grant says, roughly 10% of buildings— FORESIGHT

around 3 million homes, mostly dating back as far as the 1970s—could potentially be retrofitted to passive house standards. The experience gained from carrying out these renovations might serve to tackle a further 10% or so of more challenging buildings, Grant speculates. Up to a further 10% might be demolished anyway in the next three decades, he adds. “That leaves 70% of your houses,” says Grant. “I think somewhere between 10% and 50% of those houses cannot be retrofitted to any standard that is comfortable. There is a hard question to be asked about those houses.” The houses he is referring to include heritage buildings such as those in the UK’s classic Victorian terraces, which were designed to be lived in at 9ºC in the winter—not the 20ºC that is deemed comfortable today. Asking residents in these buildings to live the way their homes were designed for might be a tall order.

STARK REALITY Even assuming most Victorian terrace residents agree to live at 9ºC in winter, the energy consumption of up to about 40% of the UK housing stock from other periods would still be too high for what is needed to meet net-zero emission targets. “[This stock] needs to be recycled, because at the cost it would take to retrofit that last 40%, you’d be able to build two houses for every one you retrofitted,” says Grant. His proposal is for the replacement buildings to be designed to passive house standards, with a minimum lifespan of 500 years. On paper, this would solve the buildings efficiency problem and put the UK on the path to net-zero emissions. In the real world, however, it is hard to see the UK government—or indeed any western administration—asking citizens to take such draconian action on climate, particularly when it concerns their most prized possessions— their homes. This is the conundrum facing energy efficiency lawmakers: what seems simple in theory might be difficult—or even impossible—in practice. • 31

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TRANSPORT Cutting emissions from road transportation is a major part of the energy transition. Electrification promises to transform the way we move people and things around

Transport’s new direction

Yet, while Norway could be lauded for its early exit from fossil-fuel car sales, there is a long road left to go everywhere else. The global transportation sector produced around 7.3 billion tonnes of carbon dioxide in 2020, according to German market and consumer data company Statista. Passenger cars accounted for 41% of the total. Medium and heavy trucks were another 22%, way ahead of shipping (11%) or aviation (8%). Wiping out road transportation’s colossal carbon footprint is not easy. Like other industries born out of an abundance of fossil fuels, road transportation is not set up for efficiency.

OFF TRACK The average fuel consumption of cars and vans has been falling over the last two decades, but it dropped by less than 1% between 2017 and 2019. The latest tracking report on the sector from the International Energy Agency (IEA), published in November 2021, says it is not on track to meet emissions targets. It is unclear to what extent the high petrol and diesel prices seen in recent months in Europe will have an impact on this. People drive because they want or need to; having to pay more for fuel may annoy them but is unlikely to stop them. FORESIGHT

Rapid descent Sales of internal combustion engine vehicles are falling rapidly in Norway, ahead of the Government's planned phase-out date

TEXT Jason Deign PHOTO Daniel Schwarz & Volvo

y the time you read these words, it is likely that climate change will have critically endangered a once-common inhabitant of Norway’s rural and urban landscapes. Unlike global warming victims such as the golden toad or Brable Cay melomys, however, few naturalists will mourn the passing of the internal combustion engine (ICE) car in Norway, even though its demise came sooner than expected. Norway had set a date of 2025 to phase out new fossil-fuel car sales, but as of March 2022, ICE and non-rechargeable hybrid vehicles had dropped to just 8% of new vehicle sales. Spurred by generous tax breaks, growing demand for electric vehicles in N orway has led analysts to predict ICE car sales would effectively fall to zero in the first half of 2022, more than two years ahead of schedule. The Norwegian milestone is a world first. It is important because other than having supportive policies the country is not an obvious candidate for full vehicle electrification. A trip into the Arctic Circle on Norway’s 3088-kilometre E6 highway is hardly for those that suffer from electric vehicle range anxiety. Furthermore, as the world’s thirteenth-largest oil producer, Norway has no great need to go electric just yet.

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TRANSPORT

Nevertheless, there are encouraging signs of change. The first is that electric vehicle sales are taking off and not just in Norway. The IEA’s 2021 Global EV Outlook says there were 10 million electric cars on roads worldwide at the end of 2020. Electric vehicle registrations surged 41% in the 12 months beforehand, even as new car sales dropped 16% overall because of the coronavirus pandemic. Meanwhile, governments spent $14 billion to support electric vehicle sales, a 25% increase on 2019 figures. Europe overtook China as the world’s largest electric vehicle market, according to the IEA. Rising sales volumes should help bring economies of scale to the electric vehicle sector, although that effect may be blunted in 2022 by the impact of rising commodity prices on battery costs. For now, the upfront cost of electric vehicles is high36

er than ICE models, although government incentives bring down the costs in many markets. Furthermore, with European drivers seeing sky-high petrol pump prices there is a growing incentive to go electric as a way of avoiding fuel costs.

CHANGING MOODS Rising electric vehicle ownership is prompting companies and local authorities to roll out charging infrastructure. In April 2022, the forecourt giant BP and German automotive producer Volkswagen Group pledged to install up to 8000 new charge points across Germany, the UK and other European countries by 2024. Alongside these positive indicators for passenger car electrification there is another trend that could help cut road transport emissions in the coming FORESIGHT

Heavy problem Electrification of heavy-duty vehicles is falling behind passenger transport but appetite is growing

TRANSPORT

“It’s much too expensive to have an asset just standing there and not being used 95% of the time”

years: future car owners are becoming less interested in driving. With growing levels of urbanisation, many young people live in city environments where owning a car is expensive and difficult—and there are plenty of cheaper, easier transport options, from buses and trains to electric scooters and taxi services such as Uber. “In the future, people will not own a car,” predicts Tore Harritshøj of Spirii, a Danish charging infrastructure services provider. “It’s much too expensive to have an asset just standing there and not being used 95% of the time. Transportation will be on consumption in the future—you will just call for it when you need it. That will limit the number of cars.” The jury is still out on whether such transportas-a-service models will in fact reduce traffic levels. Research on ride-hailing services such as Uber and Lyft in the United States suggests that they may sometimes increase traffic by luring people away from alternatives such as public transport, walking and cycling.

POSITIVE SIGNS Similarly, models of how self-driving cars might behave in city centres predict that, between pick-ups, the vehicles could avoid paying for parking by driving around slowly in circles—hardly an efficient use of resources. However, these kinds of challenges could potentially be addressed through smart city planning and regulation. Furthermore, if ride-hailing and self-driving car services rely on electric rather than ICE vehicles then there could still be a greenhouse gas reduction benefit. All this bodes well for the decarbonisation of road transportation—as far as passenger cars are concerned, at least. Bus and coach services, too, are starting to make progress on electrification, with the IEA reporting 600,000 electric buses in service globally at the end of 2020. For non-passenger road transportation, however, the outlook is still unclear. Heavy goods vehicles need to spend hours on the road, travelling hundreds of FORESIGHT

kilometres. This is beyond the reach of electric trucks today, but new models are on the horizon. Tesla’s Semi truck is expected to come in two variants, with a 300-mile (483-kilometre) range machine starting from $150,000 and a 500-mile (805-kilometre) model costing $180,000.

PRICING PROBLEMS Pricewise, the Tesla vehicle is not far off fossil-fuel peers such as the $140,000 Volvo VNR 300. What is uncertain is when the Tesla Semi will be available. Production should start in 2023, the company announced, but deliveries were originally slated to begin in 2019. Until Tesla gets its Semi onto the road, the price differential between electric trucks and their ICE counterparts will make it hard for goods transportation fleet operators to abandon fossil fuels on a purely financial basis. Daimler’s eM2 electric Freightliner, which has a top range of 230 miles (370 kilometres), was said to cost four times as much as a diesel version when it launched in 2018. Even now, Daimler is cagey about the cost. “New technologies are always more expensive in the beginning,” says the company on its website. “Currently the high-voltage batteries are the largest single cost driver for the eM2 and its purchase price will be higher than Freightliner products with a conventional powertrain.” Despite the unfavourable economics, a growing number of European fleets are going electric anyway, for environmental reasons. “There’s a surprisingly high willingness for the adoption of e-mobility,” says Joakim Bansholm Nilsson of Volvo Trucks Danmark. Range restrictions mean electric trucks can address up to around 30% of the European freight market today, he says. Even if sales were solely electric, given a standard vehicle lifespan of up to ten years it could take a decade before this segment, mostly dedicated to city delivery services, is fully electrified, Nilsson says. Nevertheless, “I have customers already saying, ‘I have bought my last diesel truck’,” he adds. 37

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“It’s not only about creating the best product, [but] also about the business model ”

INHERENT INEFFICIENCIES The debate over how to power the remainder of roadbased freight cleanly—either through batteries or alternatives such as hydrogen or synthetic fuels—is ongoing. Hydrogen fuel cell trucks will not likely enter the market until around 2027 or 2028, says Nilsson. In the meantime, fleet owners may be able to reduce emissions by introducing carbon-neutral fuels, but at a significant cost as a lack of supply is driving up prices. Fleet owners may also be able to save money and reduce emissions by re-evaluating use cases and business models. “You will probably find that in certain use cases there are a lot of inefficiencies today,” says Martin Cardell of EY, the global professional services organisation. “Around a construction site, it could be that a large proportion of trucks today go full in one direction but empty in the other. There are built-in inefficiencies in the logistics system.” To Cardell, this implies there is an opportunity for business model innovation with companies moving to by-journey or by-tonne pricing models. This would serve as an incentive to improve road transportation efficiency by up to 50% for specific cases, according to Cardell. Businesses exploiting this new area of opportunity will likely need to look at end-to-end processes and rely on complex data analysis to discover optimum routing and delivery strategies, Cardell believes. Companies are already moving in this direction, with a few interesting pilots, he says. “It’s not only about creating the best product, [but] also about the business model. Innovating around that will become more and more important,” Cardell adds. This kind of innovation could see Uber-style service delivery coming to freight transport. A US company called Zeem has already started down this road, with a fleet of electric trucks—and its own charging infrastructure—for hire to companies that cannot afford the upfront cost of going electric themselves. The beauty of this model is that corporate custom38

ers might not just look at cost and convenience as the main levers for adoption. Instead, it is easy to envisage corporate freight contracts that factor in environmental and social performance by stipulating a given level of emissions reduction or rules against loading and unloading at unsociable hours. MONEY TALKS Ultimately, however, many purchase decisions in both the private vehicle and fleet markets will come down to economics. Current high petrol and diesel prices could push faster adoption of electric vehicles and promote more efficient routing and scheduling, but more is likely to come courtesy of a technology that is currently in its infancy. Vehicle-to-grid technology aims to let car batteries also feed current back to the electricity network. This makes sense when you consider that the average electric vehicle battery holds enough energy to power a home overnight and most vehicles—bar the very busiest of freight carriers—are parked most of the time. If only a small part of the charge available in the thousands or millions of electric vehicle batteries were made available to the grid, it could play an important role in balancing supply and demand and keeping the electricity network stable. The vehicle-to-grid concept has been around for a long time but the technology to enable it is only just getting ready for prime time after years of pilots. It could be a key enabler for electric vehicle adoption, says Harritshøj of Spirii, because it will allow the vehicles to earn money from grid operators. “Battery owners can make money on servicing the grid when it’s needed. This will make it even easier to meet optimisation goals,” he says. If batteries soak up electricity when it is plentiful and cheap, then return it to the grid when it is scarce and expensive, the net result could be that the owner will make money on their vehicle instead of spending it. • FORESIGHT

FINANCE Sudden spikes in the cost of energy have pushed energy efficiency higher up the public and political agenda. Building renovations can be costly, but there could be ways of making energy efficiency itself more efficient

How to maximise energy efficiency investments

sense to have it,” says Jan Rosenow at the Regulatory Assistance Project (RAP), an advisory body. Other measures that are often overlooked include draught-proofing. “Someone showed me a triple glazed window that had a gap between the window and the brickwork surrounding it. Of course, that’s completely pointless. Draught proofing is not something that’s particularly sexy but it’s really cost- effective and you get your money back very quickly,” Rosenow says.

COMFORTABLE LIVING Many heat systems are not optimised to run at the correct temperature. Lowering this temperature improves the efficiency of the system by 5-10%, BPIE calculated. It is a low-tech intervention that can deliver quite a sizeable energy saving at no cost, Rosenow adds. It does depend on the size of the radiators in the home, since small ones may not warm up sufficiently but many people have oversized radiators for their property, he says. Cavity wall insulation is also effective, though many countries do not have buildings with this type of construction, so would need to look at solid wall FORESIGHT

TEXT Catherine Early PHOTO Laura Stamer

nvironmental and fuel poverty campaigners have long pushed for a big push on energy efficiency to reduce emissions and guard against high costs. However, rates for upgrades of the existing housing stock remain stubbornly low. The cost of some measures for hardto-treat homes can be a key barrier. This begs the question of whether money could be better spent on technological solutions, or if energy efficiency itself could be made more efficient? Which energy efficiency measures give the most “bang for the buck” varies according to the type of property and the climate of its location. However, certain measures are always cited as a sensible investments, such as loft insulation. Deep insulation (20 centimetres) installed in attics of homes across EU member states could save 254 terawatt-hours (TWh) of heat consumption a year, equivalent to 14% of the demand for home heating in the bloc in 2020, according to the Buildings Performance Institute Europe (BPIE). “Loft insulation pays back quickly, in most cases, it’s fairly easy to install— it’s one of those measures that there shouldn’t be any buildings without any, because it always makes

Old-school Retrofit Upgrading and repurposing exisiting buildings is a challenge across Europe ageing building stock Architects: Erik Brandt Dam

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Impact of effective roof insulation Europe's buildings could save 254 TWh a year with sufficient roof insulation

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insulation, either externally or internally. “This expensive, there’s no other way of putting it and it’s not going to pay back quickly,” Rosenow says. However, he believes it still makes sense to increase the installation of solid wall insulation as a long-term investment. With this type of measure, there is a clear case for policy intervention to overcome the fact that the building owner who has to pay for it may not see their investment paid back unless they remain in the house for the longer term, he believes.

SMART SYSTEMS Instead of physical solutions, developments from the digital world may offer cheaper alternatives to save money. Denis Richard at the UK’s Energy Systems Catapult, believes smart systems can lead to energy efficiency by enabling people to really control thetemperature of a room, hour by hour. Results can vary according to the person since some will want to use the controls to be more comfortable, while others will be motivated to save money. 42

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“Someone showed me a tripleglazed window that had a gap between the window and the brickwork surrounding it. Of course, that’s completely pointless”

“Typically, people will try to use energy only where and when they need it—with a good smart system, you can immediately get what you want, where you want,” he says. However, though digital tools can optimise energy use, they cannot change the basic physics of how heat will perform in a leaky building, says Stephen Richardson of the World Green Building Council. Though the cost efficiency of energy efficiency measures varies between buildings, a general principle of “fabric first” should be followed. “The fabric first approach FORESIGHT

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Keep the heat in Average potential energy savings through attic and roof insulation by construction period in Europe (kWh/m2 of roof)

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is really the right one to apply because otherwise, you’re throwing good money after bad,” he says. Rosenow points out that it is hard to find the optimal balance between installing insulation and decarbonising the heat supply, a subject he is currently researching. “It’s not just an economic question. A more insulated building is also much more comfortable to live in and less noisy. These other benefits are much more subjective, so are hard to value, but I would go as far to say that using the cost metric only is the right approach,” he says.

DIMINISHING RETURNS However, Tom Lipinski, an energy technology entre preneur, believes that there is a point at which improvements to building fabric become stop being worthwhile financially. Once you are installing external wall insulation and upgrading all the windows to be triple glazed, a retrofit project can hit the law of diminishing returns very quickly, he says. FORESIGHT

Single-family houses

“When it comes to getting the most efficiency gains for the money spent, if you look at the curve of diminishing returns, you probably want to walk away when you hit 45 degrees and well before you start going flat,” he says. The carbon payback should also be considered, he believes. “If your financial payback is 40 years and if your CO2 payback is in excess of ten years, which means it’s on the wrong side of 2030, or even 2035, there’s definitely a case to consider whether that measure is useful at all because we need to make that saving now rather than the other side of 2035,” he says. “There’s very little data available of the carbon intensity of various retrofit measures. We seem to be rushing into things without understanding the shortterm CO2 impact. If a local authority has a target to be carbon neutral by 2028 and yet the retrofit action they’re taking now will still be paying back in carbon terms till 2035, that means they can’t possibly meet those targets,” he adds. 43

FINANCE

COST CUTS Market observers agree there are opportunities to cut the cost of energy efficiency measures. Richardson believes the current piecemeal approach increases costs by creating a “boom and bust” in the sector. Recent examples include the UK’s Green Homes Grant scheme and Italy’s Ecobonus initiative. Installers and suppliers operating in such schemes have increased costs as demand for materials and skilled tradespeople has outstripped supply, under the pressure of deadlines, he says. “We don’t build the long-term capacity that we need, so it tends to drive prices up without scaling things, and that’s a real problem. Rather than looking to technology or trying to find other ways that might cut corners, we have to deal with these systemic problems,” he says. Renovations needed to be done at an industrial scale to achieve economies, for instance, working through city authorities on social housing to scale up the sector’s capacity consistently.

ONE AT A TIME Lipinksi however believes that whole-home retrofits often do not make economic sense and fail to take account of how homeowners behave in terms of home upgrades. In the UK, an approach of whole home retrofits has replaced the concept of consequential improvements, under which energy efficiency measures would be installed at the same time as other work that was causing disruption in a particular part of the house, such as floor insulation when building an extension. “This dogmatic approach is actually harming the marketplace because it’s pushing people into a very onerous and very disruptive whole-house project. Most people don’t want to go around the house and rip everything out at the same time,” he says. Lipinski sees the answer in using technology to reduce the cost of energy efficiency. “We’re still going around and lumping rockwool onto buildings and rendering over it by hand—that process has not changed in almost 40 years,” he adds. There are a few companies innovating in technology solutions to modernise such processes, but though they can obtain government funding for early-stage development, they struggle to get any to get to commercial scale.

MARKET ENTRANTS A company called Mauer developed a technique to manufacture solid wall insulation offsite, but it folded due to lack of funding after a few trials with Nottingham City Homes and utility company Engie. This is “insane” when there are public authorities struggling to find suppliers of solid wall insulation, 44

Lipinski says. There are currently only two suppliers of insulation made offsite in the UK, leading to a lack of competition, he adds. One of Lipinksi’s own companies, Q-Bot, uses robots to apply insulation underneath timber floors through one or two openings rather than ripping out all the carpets and flooring, resulting in significant savings in time and disruption and costing around a fifth of the traditional process. The company has now delivered over 2500 installations of floor insulation. However, the time, effort and money to get to this stage were significant, he says. More than half of the ten years since it launched was spent developing the technology, with four spent on commercialisation. “It took about £10 million of investment and government funding—roughly split 50:50—to get to this point,” Lipinski says.

“If your financial payback is 40 years, and if your CO2 payback is in excess of ten years… there’s definitely a case to consider whether that measure is useful at all”

Another of Lipinski’s companies Ventive is building the UK’s first heat pump factory in Worcestershire, using cell-based micro-factory design and volume production to cut costs. However, the company is struggling to attract the necessary funding to complete the factory, he says. “It is dispiriting, as the UK could be leading this race if it took a more active approach,” he said. “The transition is no longer a climate change issue, it’s an energy security issue. And yet, when it comes to somehow stimulating UK companies to deliver those in the UK, nobody cares,” he says.

LONG TERM SOLUTIONS Market analysts agree that finding a way to make energy efficiency more cost-effective is not going to happen overnight, even as politicians seek rapid responses to reduce reliance on Russian fossil fuels. “We’re being asked to provide a short-term response to a long-term structural problem with measures that we should have installed many years ago,” RAP’s Rosenow says. Fabric upgrades to the energy efficiency of homes cannot be ramped up quickly, because there is a lack of skills and a constrained supply chain. “You can’t FORESIGHT

FINANCE

Lagging behind Fabric upgrades to buildings cannot be ramped up because of a lack of skills and a constrained supply chain

really just turn on a tap and make 50,000 homes energy efficiency right now to reduce Russian gas imports this year. That is a lost opportunity that must not happen. We should really be thinking very hard about what we do in the next ten years to avoid that happening again. “When fossil fuels were cheap and plentiful, nobody really wanted to talk about energy efficiency. Now, fossil fuels aren’t cheap, and certainly not plentiful, but it’s a bit too late,” he adds. However, both the EU’s RePowerEU and the UK’s energy security strategy—policy packages designed to reduce gas dependency issued in response to Russia’s invasion of Ukraine in February 2022—have been criticised for not placing a strong emphasis on energy efficiency. “It is really high time that we put this much, much higher on the political agenda,” says Oliver Rapf from BPIE. “It is not new to think of energy efficiency as bringing a security dividend for Europe, we discussed this back in 2013 when the Russian gas supply was shut down when it annexed Crimea. In any European country, we’re wasting energy from buildings everywhere. And the question is not, how much does it FORESIGHT

cost me today to put insulation on a building or to change the windows and how long would it take me to gain that investment back through saving energy? Any energy efficiency investment today is an insurance policy against future energy price spikes,” Rapf adds. “If we ensure that our buildings are efficient, it’s not only a strategy to mitigate against climate change, there will be fewer geopolitical tensions about energy because we’re simply more energy independent. Therefore we should make sure that our buildings need to be energy efficient and they need to be smart,” he says. Richardson also believes the current energy crisis—which has seen household bills skyrocket—is changing commonly-held assumptions about costs and payback periods of energy efficiency. “It is rapidly increasing people’s awareness of their vulnerability to price fluctuations. This is probably the most high-profile that building energy consumption has ever been on the political spectrum, going back to the oil shocks of the 1970s—if energy efficiency is not addressed as part of the response, it’s a real missed opportunity.” • 45

INTERVIEW This decade is the most important one for energy efficiency in the energy transition. FORESIGHT spoke to Brian Motherway, head of energy efficiency at the International Energy Agency (IEA), to discuss why this is and how it can be better implemented

peaking ahead of the IEA’s 7th Annual Global Conference on Energy Efficiency in Sønderborg, Denmark ( June 7th-9th), Brian Motherway describes how global collaboration on energy efficiency measures is vital for its success. While there are different contexts for each region, the issues surrounding energy efficiency are similar everywhere, he says. The past two years, dominated by a pandemic and more recently war, have catapulted energy efficiency to the top of the political agenda, but Motherway believes the threat of global warming was already changing mindsets. While it is a complex puzzle to solve, energy efficiency is uniquely placed to combat the trio of current crises: energy security, climate change and unprecedented price hikes. FORESIGHT Climate & Energy (FCE): Why is energy efficiency a big part of the IEA’s work on the energy transition?

Brian Motherway (BM): We’ve always called energy efficiency the “first fuel” and we realised that whether you’re thinking about energy security, energy access, affordability for citizens and, most of all, 46

climate and net-zero pathways, none of this is possible without a lead from energy efficiency. If you look at the IEA’s net-zero pathway, it’s absolutely clear that it would be impossible to achieve without a lead from energy efficiency. The more efficiently you are using energy, the less investment you will ultimately need in wind turbines, the grid and everything else. Energy efficiency underpins everything. There are a lot of energy efficiency technologies that are ready, fully mature and economical. This has been amplified by Russia’s invasion of Ukraine. Many governments are thinking about the short-term issues, which is absolutely right, but also have a real focus on energy security and affordability. Energy efficiency speaks to all of these things. More than ever, there has been this realisation and that’s why it has been growing in recent years.

way. We must start with what’s possible and what’s economic already to make other things more achievable and more affordable. We need to capture the emissions reduction that energy efficiency provides. We need to remove emissions everywhere we can now while we wait for other technologies to mature and become more economic. We’re not on track— globally, emissions are actually going up, so we need to really focus on everything that can be done right now. It is also the decade of energy efficiency because of the here and now. We are in the midst of the biggest global energy crisis any of us can remember. The era of price volatility or concerns about supply security is going to be with for some time.

FCE: How important is the next decade in terms of making gains in energy efficiency?

BM: Energy policy discussions have a tendency to think about the supply side—that is just the nature of the beast. Sometimes it is more tangible, I can physically see a wind turbine or a solar panel. Energy efficiency is more abstract when you are

BM: This decade is the most crucial for energy efficiency because it is such an essential component of the net-zero pathFORESIGHT

FCE: Has the “efficiency first” principle been forgotten? Why has much of the focus been on adding more clean generation instead?

TEXT David Weston ILLUSTRATION Sine Jensen

Energy efficiency is here to stay

ing, “What can I personally do to reduce my bills?” It’s on people’s minds more than ever. Certainly, the 2022 crisis has expedited that, but I think we were heading in that direction anyway. In the context of climate change, both citizens and governments were realising with all these countries setting net-zero targets and accelerating their climate ambition, there was a rapid awakening that energy efficiency is central to it. FCE: There is a paradox that suggests the more energy efficiency that is added, the more energy consumers tend to use. How do we overcome that?

BRIAN MOTHERWAY

“Some of the schemes that have maybe failed in energy efficiency, assume that it is simply a question of paybacks”

engaging with politicians or investors. It’s hard to show them the energy that wasn’t used. What creates more of a challenge is people understanding how to unlock that potential. There are times when energy efficiency has oversold its potential impact; that all you have to do is X and you’ll save Y. Whereas many lawmakers have had experiences with underperforming programmes, or there is a degree of “healthy scepticism” as to how to deliver energy efficiency because it is complex. Energy efficiency is much more cross-governmental,

in terms of policy, governance and implementation. It’s harder to do by definition. FCE: How can consumers and end-users be encouraged to take up energy solutions at a greater scale? BM: Now is the perfect moment. People up until now haven’t known what their energy bills are or how efficient that boiler is or [considered] their car. But that’s very different in 2022 where people are really suffering from high prices and feel more [price increases] are coming. They’re askFORESIGHT

BM: If I insulate my home today, and therefore it is costing less to heat, I am going to cash that gain in two ways: I am either going to spend less on energy or I am going to have a warmer, more comfortable home. If I’m living in energy poverty or living in a part of the world where these measures haven’t been affordable until now, I’m likely to take the majority of that cash gain as comfort gain. That’s a valid thing to do and is making somebody’s life better. But in either case, I never end up using more energy. It’s a question of how much less energy do I use? Sometimes people describe this as a failing of energy efficiency but if you look at the literally billions of people in the developing and emerging world who just can’t meet all their energy needs— because they can’t afford it or the energy isn’t available—it’s a tremendous victory for energy efficiency if their lives are becoming more comfortable, if their industries are becoming more competitive or if their societies are becoming more mobile. So, energy efficiency isn’t always just about energy savings. It’s always about just making people’s lives better through a mixture of savings and other gains. FCE: How do we help poor communities and households in energy poverty to maximise the benefits of energy efficiency? BM: This is a very important issue. There are lots of things people can do today in terms of just adjusting their lifestyles, 47

INTERVIEW

“There are local circumstances but, more often than not, energy efficiency issues are similar everywhere”

but those measures are less available to people who are already unable to afford to keep the thermostat where they’d like. If those people had more efficient homes and more efficient appliances, that is where energy efficiency can bring benefits. But they can’t necessarily afford to upgrade the home or buy new appliances. This is where government money is very well spent. With many countries in Europe, they might give somebody like me a partial grant to upgrade my home because I can afford to pay my share. Whereas somebody who can’t afford to pay their share can, and should, have it entirely paid for. This reduces their bills and makes a home more comfortable for decades. It reduces emissions and reduces health costs. There are so many societal benefits that it seems to be a very wise investment by a government to do that. And I do think governments should recognise that money spent on energy efficiency in many different ways is money well spent, whether it’s improving people’s lives, reducing our dependence on Russian oil or just a relatively cost-effective way of reducing emissions compared to some of the supply-side investments. FCE: How will the European Union's Fitfor-55 package help with energy efficiency? BM: It is an important step forward because it recognises the importance of energy efficiency and cements it in place. It gives it a priority and recognises its impor48

tance. It also signals to member states, investors, businesses and to individuals that energy efficiency is here to stay. It gives that positive signal that these things are going to be economic and conditions are going to remain the same. It can unlock finance or provide incentives but also it’s really important to remove barriers. A strong, forward-looking coherent solid policy package is really important. FCE: While the cost-saving potential is obvious, many energy efficiency measures still require high upfront costs. This is prohibitive to building owners and landlords that might not benefit from the return in energy savings. How do we help people living in high rise buildings, multiple-family dwellings and those that rent accommodation to improve their energy efficiency? BM: Your point is a real practical challenge to energy efficiency. There is a difference between theory and practice. An energy efficiency campaigner might show you a spreadsheet and say that if you upgrade a building, it’ll pay for itself and nine years using the energy savings and that makes perfect sense economically. But then you have all the barriers you’re pointing to. Maybe, as the building owner, I don’t have the cash available to me now or I don’t value savings in nine years’ time. That again is where policy comes in because you can see solutions to all the problems in many countries. Solutions like investment schemes where the utility will pay the upfront cost of investing and FORESIGHT

expect the money back over a number of years through the savings. Landlords can be incentivised, or they can share the savings or the costs with renters. All of these things can be done, but it’s important to recognise that it is complex. I think some of the schemes that have maybe failed in energy efficiency, assume that it is simply a question of paybacks. But it needs a lot of interventions and maybe that makes some lawmakers uncomfortable. If you put the seeds in place, if you design and implement them well, you will capture those savings that otherwise won’t happen by themselves. FCE: Is there scope for more international collaboration on energy efficiency, or is it down to the national governments to do it within their own countries? BM: There are many opportunities for collaboration, and that is something we really focus on at the IEA. First and foremost, by learning from each other. India has some really excellent policies on energy efficiency in industry; the US has some really interesting policies in transport; Japan has great policies in appliances; Europe has really excellent policies in buildings and many others. All of these countries can learn from each other and they can swap positive and negative experiences. Learning from each other is really hugely important in energy efficiency, particularly as we focus on the “how”. But also there are many opportunities for trade for exchange of technology for cross border investment. We see countries who have increased their ability to export appliances because they have raised energy efficiency standards, which means their products are now more attractive in other markets. The ability for trading and collaboration and that space is important as well. There are local circumstances but, more often than not, energy efficiency issues are similar everywhere. People, of course, use different technologies and [there are] different cultural contexts, but really, a lot of the challenges people are facing are global. •

Energy efficiency is not an if, it’s a must. It is a simple and impactful solution to mitigate climate change. It’s the low-hanging fruit we need to bridge our path to a future where all energy is clean energy. The Energy Efficiency Movement brings together all stakeholders to innovate and act for a more energy efficient, regenerative, adaptive world. Together, we can make a real difference if that’s how we decide to use our power. Join us and prepare for a more sustainable future together.

join.energyefficiencymovement.com

RENEWABLES For years, farmers had to decide to stick with their traditional produce or twist and turnover their land for renewables projects. Until recently, it has not been a financially viable option for agriculture and solar panels to live side by side. But new techniques are providing a chance to use increasingly scarce land more efficiently

ne of Technical University of Denmark’s (DTU) test facilities at Research Center Risø, north of Roskilde, is dominated by shadow. The fixed solar photovoltaic (PV) panels, in lines running east-west, face south meaning the ground behind the panels is shaded for most of the time. Meanwhile, the ground of the neighbouring test facility, still covered in solar panels, is flooded with sunlight. These rows of solar panels run north-south, providng more access for the sun. Also, there is more room between the rows—up to 15 metres compared with five metres at the first site. This frees up space for crops to grow or livestock to roam more freely. The site is Denmark’s first Agri-PV facility and the researchers are obtaining promising results. With the right combination of technology, hours of daylight and produce, a new pathway to a more efficient use of land emerges. To make this set up feasible, single-axled PV trackers are used, which follow the sun from its rise in the east until it sets in the west. These trackers used to be prohibitively expensive but, just like other renewables technologies, the price has dropped significant-

ly in recent years. The price difference between the fixed and moving panels is €0.05 per kilowatt hour. Agri-PV is already taking off in Spain, Italy, Belgium and Germany, and its introduction in Denmark would be most welcome as the country tries to overcome a lack of space. “It’s a bid to solve the conflict around the [use of ] open land, which we would all like to use for different purposes,” says Uffe Jørgensen from the University of Aarhus and one of the associated researchers at the test facility. He points to two arguments the use of Agri-PV techniques aim to solve. The first is a traditional criticism of solar power facilities: They take up space which could be used as important farm land to grow crops, especially during a time where food security is an issue due to the war in Ukraine. The second argument was seen during the debate around the first generation of bioenergy. At that time, replacing agricultural land with bioenergy production—or solar panels, now—actually leads to more emissions. The lost agricultural production needs to be replaced elsewhere, leading to a loss of established wildlife habitats. Scientists call this indirect land-use change. FORESIGHT

Between the lines Agri-PV sites might help balance the need for farm land and for greater renewables capacity

TEXT Rasmus Thirup Beck PHOTO European Energy VISUALISATION KirtThomsen for European Energy

Double up on land use to maximise resources

FORESIGHT

RENEWABLES

“You should look at solar power replacing agricultural land in the same way,” says Jørgensen. “If there was a way to do both things at the same time it would be good. This is what we’re looking into. I’m all about win-win solutions when it comes to the green transition and I think we’re looking at one such solution here,” he adds.

SMOOTH OUTPUT Using the tracking solar panels have the added benefit of providing a more even energy output throughout the day because they follow the sun. Production from the standard fixed and south-turned panels peaks in the middle of the day when the energy need is the lowest. The smoother production of tracking panels profile reduces the load on the transmission infrastructure. Electricity demand is higher in the morning and the afternoon, which makes the solar power more valuable. This partly makes up for the fact that you need around 20% more space to produce the same amount of electricity as a standard south-facing facility. The rest is made up for by the income from the agricultural production. Danish renewables developer European Energy, which is part of the team conducting the research at Risø, has previously implemented animal husbandry alongside fixed south-facing solar panels. This is the simplest form of Agri-PV with the added advantage that the livestock keeps the vegetation low, stopping any shade from covering the panels. 52

The company has had a keen focus on so-called co-location—the dual use of a plot of land. Just like its compatriot Better Energy, it has often thought about combining nature and biodiversity with solar power facilities. European Energy planted 245,000 trees around its facilities in 2021 alone.

“It’s a bid to solve the conflict around the [use of ] open land, which we would all like to use for different purposes”

In late November 2020, the developer turned on its first commercial solar facility with moving axles in Skive, Jutland. This initial project only comprised a single row of panels and was further limited due to local regulations that only allowed a maximum height of three meters. To reach a level of commerciability, along with efficiently farmable land, the panels need to be higher, reaching around five meters when the panels are vertical. “When we get to that height, the distance between the rows can be ten meters making it possible for modern agricultural equipment to drive through. That’s what we’re working on and we have quite a few project applications out but they require local regulations to be changed,” says Mads Lykke from European Energy. FORESIGHT

RENEWABLES

Future vision Taller solar panels means a greater distance can be left between rows, allowing agriculture vehicles to pass by

“An advantage is that looking at it you’ll see more field and fewer solar panels due to the ten meters between the rows,” Lykke adds. The three metre height restriction limits the energy yield, Lykke explains. “As it is, energy production is a lot more profitable than agricultural production. We have to sell the electri city on the European market which makes it hard to be competitive with a lower energy output per hectare. With the taller facilities we can make the ends meet,” he says.

SHADE OR WIND One of those introducing Agri-PV to Denmark is Jørn Rosager from Spanish solar company Powertis, a subsidiary of Soltec Power. Before entering the PV industry, Rosager worked in the agriculture sector. This means he understands why many farmers are reluctant to give up actual farming for energy production. He also has a farmer’s knowledge about the need for sun and the number of sunny days the crops require for a healthy yield. Agri-PV solutions may look different in other parts of the world. In Southern Europe and other areas close to the equator, the sun's intensity means farmers need the shade north European farmers try to avoid. This need has traditionally been solved by planting trees, leading to the term Agroforestry. But trees can end up stealing water from the soil. Solar panels, meanwhile, would not use up valuable moisture. “I call it high-tech agroforestry”, says Jørgensen. Elsewhere, in places like southern India and California the sun is so intense that the water in rivers and irrigation channels evaporate. Here local authorities have successfully installed solar panels on top of the waterways and reservoirs. Back in northern Europe, and like many areas around the world, farmers combat another force of nature: gale force winds. For centuries farmers have planted windbreaks between their fields. Jørgensen and the team at Aarhus University are convinced that these, like the shade giving trees, can be swapped out with vertical rows of solar panels. In spring 2022, a test windbreak was installed in cooperation with a blueberry grower in Skælskør, east Denmark. At what point Agri-PV unleashes its true potential depends on both developers and the political flexibility at the national and local level. As with much of the renewables sector, red tape needs to be removed and height regulations need to be loosened. But there are signs that the national politicians are moving fast in light of the war in Ukraine, which has led to both higher prices for energy and food: the municipality of Randers in west Denmark signaled that it would demand Agri-PV for a large amount of new applications for solar energy parks. • FORESIGHT

A shortcut to agricultural robots?

he robots are coming or so the experts have been saying for years. Across many sectors—from the car industry to your vacuum cleaner—autonomous machinery is growing. But the agricultural world is still dominated by manned tractors. With the expansion of Agri-PV this might change. The challenge to date has been the fact that for a robot tractor to work a field—either by ploughing, removing stones, spraying for weeds or harvesting crops—you need a barrier around your field, much like a robot lawn mower. “If you don’t, they have an annoying tendency to drive away from the field” says Jørn Rosager from Powertis. With Agri-PV this problem is potentially solved because most solar power facilities are fenced in anyway. This is especially true for the tracking solar panels, since they have moving parts that could be purposefully damaged. With fences in place, robots have a clearly defined work area. “We find that very exciting and we would love to help facilitate the development of this. In five years, I’m not sure farmers will drive tractors anymore,” says Jørn Rosager from Spanish solar company Powertis. Mads Lykke from European Energy agrees. “The missing fences are what have kept development of this technology down. This is definitely on our agenda.”

Heavy industry plans to tread lightly The heavy industry sector has made significant progress in increasing energy efficiency in recent years and further gains are possible with greater electrification, digitalisation and changes in production processes. Meanwhile, material efficiency measures reducing demand for products like steel and cement offer major potential for energy savings for customers

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TEXT Heather Xx PHOTO O'Brian Xx PHOTO Louis-Michel Desert, Bernhard Lux & Miha Rauch

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anadian steelmakers Algoma and ArcelorMittal Dofasco (AMD) expect to shave nearly 1% off Canada’s CO2 emissions when investments earmarked for increasing the sustainability of their Ontario steel plants are completed at the end of this decade. Emissions from Canada contribute 1.52% to total global emissions. Both companies are developing more efficient, cleaner electric arc furnaces (EAFs) and phasing out coke ovens and blast furnaces, allowing them to reduce annual CO2 emissions by about three million tonnes each. In conventional steel production, a coke-powered blast furnace processes iron ore, producing molten iron by removing oxygen. The molten iron is then fed into a basic oxygen furnace, frequently mixed with some scrap, where the desired carbon level is reached with the addition of powdered carbon and the mixture is alloyed with other metals.

Relying instead on scrap material, EAFs avoid the initial refining step in primary steel production of removing oxygen from iron ore, as a result requiring 80-90% less energy than blast furnaces. In a place like Ontario, where over 90% of power capacity comes from nuclear power, hydroelectric, wind and other renewable generation CO2 emissions cuts from EAFs compared to traditional processes can be impressive. Steel is the largest industrial contributor globally to CO2 emissions, followed by cement and chemicals. Together these three heavy industries account for nearly 60% of energy consumption in industry and about 70% of its CO2 emissions. Increasing energy efficiency is widely seen as a key measure in a toolbox to get heavy industry to net-zero emissions by 2050. Given the likelihood that green, but energy inefficient hydrogen (page 62) will be needed in hard-to-abate industrial sectors, containing energy requirements becomes even more important. “Energy efficiency increases productivity and saves costs, both at a company and a societal level,” says Fleming Voetmann of Danish engineering company FLSmidth. “If I need to produce 10,000 tonnes of copper a day, I should first look at how little energy I can use to do that.” 56

From 2011 to 2018, industrial energy efficiency globally improved at a rate of about 2.5% a year while studies by the United States Department of Energy and International Energy Agency (IEA) indicate further efficiency gains of roughly the same order could be possible in the next few decades, notes Jeffrey Rissman of think tank Energy Innovation. Industrial energy efficiency can be achieved at different levels, Rissman suggests. First, there is the efficiency of individual equipment like boilers and motors; then facility-scale efficiency measures such as insulating pipes for heated and cooled fuels, optimising material flows, waste heat recovery and automation processes then can save both materials and energy. “The third scale is efficiency beyond the factory, involving things like the business supply chain and designing a product so it uses fewer process steps or lower energy process steps,” he says.

GREATER ELECTRIFICATION Going electric is one way to increase efficiency and lower the emissions of steel production. It has been a major factor behind the decarbonisation of the steel industry in the US, where about two-thirds of steel production is already traced to EAFs, a technology that is over a century old. Instead, globally about 70% of steel production involves blast furnaces while EAFs account for about 28%.

In its Net Zero by 2050 roadmap, the IEA envisages that an increase in steel scrap collection to enable more scrap-based steel manufacturing combined with further efficiency measures can deliver most of the needed CO2 emissions reduction in the sector in the near term. The IEA sees the global market share of EAFs rising to 37% by 2030, with the share of scrap in steel manufacturing increasing to 40% from a current level of 30%. With the recycling rate for steel already estimated at about 80%, the industry is also looking to improve the efficiency and reduce the carbon footprint of primary steel production. The availability of recycled steel cannot keep up with demand, particularly in rapidly growing economies like China and India, in FORESIGHT

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part due to the fact that some recycled steel may not be suitable for high-grade applications. For primary steel production, the alternative to blast furnaces involves Direct Reduced Iron (DRI) furnaces combined with EAFs. DRI furnaces require lower temperatures and less energy than blast furnaces and reduce iron ore to a solid state so that it can then be melted in an EAF, where the addition of scrap steel is possible. DRI furnaces commonly use natural gas but this provides an opening for the use of green hydrogen. Some companies are already going down this route. Hybrit, a Swedish joint venture between steelmaker SSAB, mining company LKAB and utility Vattenfall, hopes to demonstrate its technology that removes oxygen from iron ore using fossil-free hydrogen on an industrial scale as early as 2026. The Hybrit pilot plant in Luleå delivered the world’s first hydrogen-reduced sponge iron to Swedish automaker Volvo in August 2021.

“Energy efficiency increases productivity and saves costs, both at a company and a societal level”

In cement, efficiency efforts have largely been focused on fine-tuning the recipe for its production. Since the most energy-intensive component in cement manufacturing is clinker, a binding agent, reducing clinker content while continuing to guarantee safety is central to plans to boost efficiency. To get to net zero, the IEA sees the clinker-to-cement ratio declining from about 0.71 today to 0.61 in 2030 and 0.56 in 2050. Changing the feedstock for cement from limestone to clay, which has no embedded CO2, brings benefits in terms of emissions, lower temperatures and reduced energy requirements for calcination, notes FLSmidth's Voetmann. Just as is the case with steel, using recycled cement in production can also yield energy savings, he adds.

ROOM FOR IMPROVEMENT “In chemicals, you buy methane both for energy and the feedstock and what we generally see is that when energy prices go up, the energy productivity can go FORESIGHT

up quite quickly, which seems to indicate that there might be further room for efficiency in the sector,” says Rebecca Dell of the ClimateWorks Foundation. Chemical companies that have faced higher energy prices tend to be more productive, she notes.

Dell points to opportunities for radical improvement in energy efficiency through “process intensification measures”. One example involves the separation of chemicals. “You need a lot of energy to do a chemical reaction and often more energy to separate the chemicals you want from those you don’t want,” Dell explains. Chemicals are now separated through thermal distillation but researchers and companies are looking into how to switch to membrane-based separation powered by electricity. Meanwhile, two consortiums—one composed of BASF, Linde and SABIC and a second of Borealis, BP, TotalEnergies, Versalis and Repsol—are working on developing electrically heated steam crackers, that break large hydrocarbons into smaller molecules at a temperature of about 850C. While large-scale investments may usher in more efficient technologies, Voetmann believes “relatively cheap and simple” digital solutions could lead to a reduction in energy consumption in many heavy industries ranging from a few percentage points to as much as about 10%. “Adaption has been painfully slow,” he says. “Even though it’s likely the cheapest equipment you can deploy it requires a different way of thinking.”

Beyond the single facility, energy efficiency can have benefits at a broader level, for instance, if waste heat from industry is recovered to be used in district heating systems. Efficiency gains may be maximised in industrial clusters like that of Kalundborg, Denmark, where energy and other resources are shared in a circular economy approach. 57

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Growing demand The need for materials like steel, concrete and plastics will continue to grow, so developing low-carbon production techniques is essential

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MATERIAL EFFICIENCY Demand for steel, cement and plastics has roughly doubled globally in the last two decades and efficiency gains have slowed but not stopped emissions growth. Material efficiency, where the same set of products are produced with fewer materials has come to the forefront, particularly for cement and steel, says Chris Bataille of the Institute for Sustainable Development and International Relations (IDDRI), a think tank.

Cement is cheap and quantities that far exceed engineering standards are routinely used in construction projects. “With just a little bit of effort, we can cut cement needed for any given building by about 25%,” says Bataille. Steel beams used in construction also tend to be all the same size, whether they are placed at the top or the bottom of a building. “If you have multiple sizes of beams, you could use less steel,” he adds. Steel demand could potentially be reduced by up to 40% with material efficiency measures such as designing for less steel use, lengthening the lifetime of buildings and reusing steel, calculates the Intergovernmental Panel on Climate Change. Building regulations and policies can encourage material efficiency. Sweden has begun to require that applications for permits to construct new buildings contain a study on embodied carbon in the project. “This is the first step to putting new requirements in place,” says Dell. Meanwhile, those responsible for construction projects should also simply start asking if less structural material can be used, Dell suggests. The design brief for one building constructed for the 2012 London Olympics—the Velodrome—stipulated that one of the criteria for judging the design was material efficiency. “Just by asking, they ended up getting 40% less structural material,” she says.

PLASTIC PROBLEM Growing demand for plastics represents an obstacle to efforts to reduce emissions in the chemicals industry. The Organisation for Economic Co-operation and Development (OECD) found that plastic waste has doubled over the last two decades amid a “relentless” increase in demand driven by rising populations and incomes. FORESIGHT

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Industry contributes to a large share of global energy use Nearly 40% of energy demand comes from industrial processes

Industry % of total

200

50%

160

40% Other industry

120

30%

20%

10%

Pulp and paper Chemicals and petrochemicals Aluminium Cement Iron and steel

0% 1990

1995

2000

2005

Most of this waste is ending up in landfills, incinerated or leaked into the environment and only 9% is successfully recycled, the OECD said. Raising the recycling rate for plastics is essential to improving efficiency, given that virgin plastic energy requirements tower over those for recycled plastics, the IEA believes.

THE ROLE OF CHINA China is the world’s largest producer of both steel and cement, manufacturing over half of the total for both materials. “It is hard to overestimate the importance of energy efficiency and decarbonising industry in China,” says Energy Innovation’s Rissman. With most of its cement kilns built in the last 1015 years, the efficiency of China’s cement sector is 60

2010

2015

2018

already relatively high. The Chinese government has supported energy efficiency in cement, setting standards requirements and providing grants for waste heat recovery, says Dell. In steel, on the other hand, a lot of small, inefficient blast furnaces were built in the late 1990s and early 2000s so are still within their operational lifetimes. The government has repeatedly emphasised the need to replace these furnaces with higher quality ones. “Retiring inefficient facilities is good but what this has meant is that China has continued to build a significant number of [more efficient] blast furnaces,” says Dell. “How we square this with both global and domestic climate goals in China is a real challenge.” Given the generally long lifecycle of equipment in heavy industry, another challenge will be to ensure the investment window for rolling out new technologies to boost efficiency and meet decarbonisation targets is not missed, says FLSmidth’s Voetmann. “If we don’t get these new technologies out and accelerate their deployment, we can never deliver on the Paris Agreement,” he says. • FORESIGHT

Industry % of total SOURCE: IEA 2020

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TECHNOLOGY Energy losses in the production process contribute to making hydrogen produced with renewable energy expensive. Companies and researchers are working to improve the efficiency of electrolyser technology and scale it up, bringing down the green hydrogen price tag at the same time

Hydrogen sector targets production boost

Most of the cost of producing green hydrogen comes from the renewable electricity needed to power the process, with the electrolyser accounting for the majority of the remainder. The more efficient the electrolyser, the less electricity is wasted and the lower the cost of green hydrogen. Electrolysers used to split water into hydrogen and oxygen now run at 65% efficiency according to the International Renewable Energy Agency (IRENA), while analysts at the consultancy Wood MacKenzie put the end-to-end efficiency of green hydrogen production at 30%.

EFFICIENT ELECTROLYSERS Hysata, a spin-off from the University of Wollongong in Australia, aims to commercialise breakthrough hydrogen electrolyser technology. It revealed in an article published in the March 2022 issue of Nature Communications that its capillary-fed electrolysis cell technology can produce green hydrogen from water at 95% cell energy efficiency, well above IRENA’s 2050 target of 76% and what is currently achieved by FORESIGHT

TEXT Catherine Early PHOTO Chris Leipelt

s the Intergovernmental Panel on Climate Change (IPCC) states in its latest report: “As a general rule, and across all sectors, it is more efficient to use electricity directly and avoid the progressively larger conversion losses from producing hydrogen and ammonia.” But advocates of hydrogen produced from renewable energy—known as green hydrogen—promote its role in reaching net-zero targets particularly in hardto-abate sectors such as steel and chemical production, heavy transport and aviation. Demand for green hydrogen will grow to 500-800 million tonnes a year by 2050 to meet the needs of these sectors, creating a new multi-trillion-dollar industry, expects the Energy Transitions Commission, a coalition of energy companies, financial institutions and NGOs. However, building up a green hydrogen industry of these dimensions will not be easy. One major obstacle to growth lies in the inefficiency of green hydrogen production. Narrowing the efficiency gap compared with direct electrification is essential for green hydrogen to be competitive.

Plane green Hard-to-abate sectors like aviation offer a genuine route to market for green hydrogen

existing electrolyser technologies. This adds up to a hydrogen production cost well below A$2 per kilogram, Hysata claims. Efficiency gains have been achieved by reducing the electrical resistance within the electrolysis cell. This resistance wastes energy and requires additional energy for cooling. Hysata’s team develop a thin sponge-like membrane to suck the water up between two electrodes. Unlike typical electrolysers, this technique does not create gas bubbles during the operation of the electrolysers, removing the need for equipment to circulate the liquid. The technique also self-cools, eliminating the need for water-cooled chillers. The technology will save hydrogen producers billions of dollars in electricity costs and enable green hydrogen to outcompete fossil fuel-derived hydrogen, claims Paul Barrett of Hysata. The overall system has been designed for ease of manufacturing, scaling and installation, which also cuts the capital costs of producing green hydrogen. Barrett says Hysata is on track to commercialise its electrolyser and reach gigawatt-scale hydrogen production capacity by 2025. FORESIGHT

The company plans to build a pilot electrolyser manufacturing plant in 2022. In the United States, researchers from the Georgia Institute of Technology are developing high-performance catalysts to make electrolysers more energy efficient and are using artificial intelligence in this process, explains Seung Woo Lee of the institute’s George W Woodruff School of Mechanical Engineering.

“Costs will come down with innovation and scaling”

“Before jumping into the synthesis of any new materials, we wanted to down-select candidate materials to figure out what would be the most promising one that exhibits high performance in the water splitting. We use machine learning as a tool for this pro63

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cess based on a database of materials investigated by other researchers, as well as our team, an approach we believe holds great potential to accelerate our research,” Lee says. Elsewhere, Siemens Energy has several research and development projects on electrolysers. The company uses Proton Exchange Membrane (PEM) electrolysis technology—a type of fuel cell, which is dominating hydrogen projects at the moment—and is developing systems with the capacity to produce several tonnes of green hydrogen per hour. Siemens has signed a partnership with French company Air Liquide to combine their expertise in PEM technology to develop industrial-scale hydrogen projects, laying the groundwork for mass manufacturing of electrolysers in Europe, especially in Germany and France, and research and development activities to co-develop next-generation electrolyser technologies. The two companies will jointly apply for large project funding under the EU’s Green Deal and Important Project of Common European Interest (IPCEI) scheme for hydrogen, funded by the French and German governments. They are already working on the Air Liquide-H2V Normandy electrolyser project in France, which has a capacity of 200 megawatts (MW) and is scheduled for commissioning in 2025.

UPSCALE DEPLOYMENT Research and innovation in electrolysers are key to increasing the viability of green hydrogen, according to Alexander Esser of Aurora Energy Research. “Scaling up the global deployment of electrolysers is paramount as we currently have just a few of them installed and these are still often in a prototype phase. We believe that costs will come down with innovation and scaling, very similar to what we observed with wind turbines or solar panels,” says Esser. The EU has a 40 gigawatt (GW) target for electrolysers in operation by 2030. If recent commitments contained in the hydrogen strategies of member states are respected, this target will be met on time. “This is great news as this deployment will accelerate innovation and bring the costs down,” says Esser. “Prices will have to fall significantly if green hydrogen is to be economically feasible at some point,” says Steve Scrimshaw of Siemens Energy. To reduce electrolyser costs and meet rapidly growing demand, industrial-scale, automated production is essential, he adds. This would further improve efficiency. Electrolysers are generally produced using a lot of manual labour, allowing for the production of small quantities. Siemens will instead use digitalisation, robots and serial production techniques in a new electrolysis factory in Berlin, set to be operational in 64

2023. “The aim is to realise electrolysers in large dimensions and with high performance. The efficiency of electrolyser production will be enhanced significantly,” says Scrimshaw. Siemens is targeting electrolysis efficiency of 75.5%. David Burns of Linde agrees that scaling is part of the answer. The multinational industrial gas company can produce green hydrogen at an efficiency of 53 kilowatt-hours (kWh) per kilogram, he says. The company is currently building a 24 MW electrolyser in Germany, which will be the biggest PEM electrolyser in the world, he adds.

“To get the scale you need for green hydrogen, projects need to be in the gigawatt range”

Linde is also working with UK-based oil firm Shell on a 100 MW electrolyser in Wessling, Germany, while another partnership with German energy company RWE will see two 100 MW electrolysers installed in Lingen, as part of RWE’s roadmap to install a 300 MW of electrolyser capacity by 2026. “But to get the scale you need for green hydrogen, projects need to be in the gigawatt range. It’s a gradual ramp up, we’re getting into 100 MW projects now,” Burns says. In the future, solid oxide electrolysers could provide an opportunity for more efficient production of green hydrogen. Operating at higher temperatures, they could be an option in particular applications such as steel manufacturing, where there is potential for heat integration with high-temperature sources. However, the technology is still some years away from maturity, according to Burns. In the meantime, Linde is developing high-efficiency PEM electrolysis projects. To boost efficiency, Linde is considering all aspects of its design: the size of the membranes and the gap between them, voltage drop and technologies that can tolerate higher current densities without degrading, Burns explains. “There’s a number of different trade-offs, but there’s a lot of attention going into PEM today so that seems to offer the most potential, mid- to long-term and then technology like solid oxide will probably come on later,” he adds. Linde is also evaluating water treatment, power sources, supporting infrastructure and distribution, including the pressure being put into the pipeline and FORESIGHT

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Economies of scale Cost of green hydrogen production as a function of electrolyser deployment at different electricity price levels

Hydrogen cost ($/kg H2) 6.0 Electrolyser cost in 2020: $1000/kW

Electrolyser cost in 2020: $650/kW

Electricity price $65/MWh

5.0 Electricity price $20/MWh

4.0

Electrolyser cost in 2020: $1000/kW

SOURCE: IRENA Analysis

Electrolyser cost in 2020: $650/kW

Electrolyser cost in 2050: $307/kW @ 1TW installed capacity

3.0

fossil fuel range

2.0

Electrolyser cost in 2050: $130/kW @ 5TW installed capacity Electrolyser cost in 2050: $307/kW @ 1TW installed capacity

1.0

Electrolyser cost in 2050: $130/kW @ 5TW installed capacity

2020

2025

2030

2035

how much heat is being distributed as a liquid. “You have to look at the whole system when you look at it from an efficiency point of view,” Burns says.

LEARNING FROM EXPERIENCE As well as developing scalable technology platforms, Scrimshaw from Siemens believes that learning by experience from different projects will be key. “We really need these feedback loops to improve the processes; funding of projects and the right regulatory framework are key here, such as quotas or CO2 taxation regarding e-fuels. We also need to prepare the supply chains to scale and we must enable a reliable service structure to keep the plants running,” he says. As the green hydrogen energy industry scales up, the efficiencies of producing hydrogen from renewaFORESIGHT

2040

2045

2050

ble energy are expected to improve and costs fall. Esser estimates that the Capex of PEM electrolysers will decrease by around 40% by 2030, while efficiency will increase to 69%. Alkaline electrolysers will follow a similar trend, he says. French energy group EDF expects that for some time green hydrogen will be mostly used for activities that cannot be decarbonised otherwise, such as plastics, fertilisers or petroleum refining for heavy transport. It argues that the inefficiency of the production process means that using green hydrogen to replace gas in power plants or as storage for renewable energy, both for which alternatives are technically possible, will not make economic sense before 2040 or 2050 by which time, alternatives may have matured. • 65

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