Electrification of heating and transport consequences for gas consumption, emissions and costs MACHIEL MULDER Centre for Energy Economics Research Faculty of Economics and Business, University of Groningen Joint research with Jose Moraga (VU Amsterdam), Chloé le Coq (Stockholm) en Sebastian Schwenen (München) on request of CERRE (Centre on Regulation in Europe, Brussel) Energy Days: climate policy and energy markets TU Eindhoven, 28 March 2019

Outine Method Scenarios Results electricity consumption & generation gas consumption & supply costs CO2 emissions Conclusions

Policy objectives wrt electrification in period to 2050 Number of houses and cars by type, energy use and electrification in 2016 Annual change in number of houses and cars Investments in electrification in residential buildings and road transport Electrification scenarios Annual electrification in residential buildings and road transport Annual consumption of fossil fuels in residential buildings and road transport Annual emissions of CO2 Extra annual electricity consumption because of electrification Investments in electricity network Impact of electrification on annual natural-gas consumption total system costs emissions of CO2 Autonomous annual change in remaining electricity consumption Annual electricity consumption Annual natural gas consumption Investments in natural-gas network Actual level of electricity consumption in 2016 Annual and seasonal generation by gas-fired power plants Investments in gas-fired power plants Annual supply of methane through electrolysis Actual composition of electricity generation in 2016 Annual electricity generation by conventional plants (except gas plants) Annual electricity generation by renewable techniques (wind and solar) Annual net imports Seasonal demand and supply of power from Power-to-Gas Investments in Power-to-Gas equipment Policy objectives wrt electricity generation in period to 2050

Scenarios

Data and assumptions on residential houses Statistical data for 2016 Assumptions on energy use for period to 2050 Variable Value Number of houses (x million) 7,6 Number of houses electrified (x million) 0,02 Average size of houses in m2 119 Average gas consumption per house (m3)* 1400 share of gas used for cooking** 5% share of gas used for hot water** 15% Share of houses connected to district heating system 5.5% CO2 emissions by households in 1990 (Mton) 21 Variable Value Annual increase in number of houses 0,5% Annual number of new houses (x 1000) 50 Energy use for heating a new house (in m3 gas) 1000 Annual increase in efficiency houses 1% Coefficient of performance (COP) of heat pumps Space heating 3 Warm water 1 Annual increase in efficiency of heat pumps   Sources: CBS, RVO

Electrification of residential houses, 2016-2050, 2 scenarios

Consumption of electricity in houses, for heating, cooking and hot water, in 2050

Data and assumptions on road transport Assumptions on energy use for period to 2050 Statistical data for 2016 Variable Value Passenger cars Annual number of new cars (x 1000) 400 Performance electric (kWh/100km) 20 Vans Annual number of new vans (x 1000) 60 35 Trucks Annual number of new trucks (x 1000) 10 70 Buses Annual number of new buses (x 1000) 0,75 100 Motorbikes and scooters Annual number of new M&S (x 1000) 75 5 Bicycles Annual number of new bicycles (x 1000) 1000 1 All vehicles Annual increase in number 1% Annual increase in efficiency Annual increase in average distance per vehicle 0% Battery charging units Annual improvement in charging efficiency 0,5% Variable Value Number of (x million) passenger cars 8,9 vans 0,84 trucks 0,15 buses 0,01 motorbikes and scooters 1,15 bicycles 22,7 Of which electric (x 1000) 60 0,1 1500 Average distance per year (km) 13022 18896 59228 61461 2000 1000

Electrification of road transport, in 2050 (per scenario) % of full electric cars

Consumption of electricity by road transport, in 2050, per scenario

Autonomous growth in electricity consumption: 0.6% per year since 2000 Assumption for period up to 2050: 0.5% growth per year

Consumption of electricity, total Netherlands, autonomous + effect electrification in 2050, per scenario

Supply of electricity: assumptions Capacity factor: wind: 40%, solar: 25% (more than in publication)

Supply of electricity, 2016-2050 (aggregated numbers per year)

…but what to do with fluctuations in generation and load? distribution of joint weather circumstances over past 6 years hardly wind hardly sunshine cold (= high demand for heat) working days (high demand for power) a lot of wind a lot of sunshine normal temperature (low demand for heating or cooling) weekends (low demand for power)

Supply of electricity on extreme days Hardly wind and sunshine, high heating demand, working day A lot of wind and sunshine, no heating demand, weekend Solar, wind and biomassa generate more than needed: storage of power as hydrogen (Power-to-Gas) Supply of electricity from storage, wind, solar, biomass and import not sufficient to satisfy demand: gas fired power plants are required

Storage of power as storage for seasonal flexibility (PtG) Assumptions on efficiency PtG

Gas-generation capacity needed on worse day

Consumption of gas in houses and electricity sector Full electrification scenario All scenarios in 2050 Assumption: gas-fired power plants realise 1% efficiency improvement per year

Total consumption of gas in the Nederlands Assumptions on industry: 1% efficiency improvement per year – no hydrogen or elektrification

Supply of gas to the Dutch market, 2016-2050 Statistical data Assumptions

Supply of gas to the Dutch market, 2016-2050

Reduction CO2 emissions compared to 1990 Statistical data Assumptions

Emissions of CO2 by road transport, residential buildings and electricity sector

Emissions of CO2 per sector per scenario

Reduction CO2 emissions compared to 1990 T+R (2050) T=Transport R=Residential sector E=Electricity sector

Assumptions for calculating costs Variable Value Weighted Average Costs of Capital (WACC) 5% Discount rate (for NPV calculations) 3% Depreciation periods (years) - grid 20 - power plants - houses 40 - cars 10 Investments costs: - gas-fired power plants (mln euro/MW) 0,75 - electrolyser (mln euro/MW) 0,5 - storage (caverne) 30 Asset value electricity grid (billion euro) 28 Investment costs residential buildings - heat pump (euro / house) 6000 - renovating house (euro/m2/house) 105 Investments costs road transport - quick charging stations (per unit) 35000 - ratio charging stations / cars 0,08 - extra costs of electric cars (euro/car) 7500 Gas price (Euro/MWh) annual change in gas price 0% Price motor fuels (Euro/lt, excl taxes) annual change in price motor fuels shadow price of CO2 (euro/ton) 50 CO2 price in ETS (euro/ton) Assumptions for calculating costs

Costs of electrification, per type of costs

Costs: present value of all costs during period to 2050

Sensitivity analysis Legenda: 'higher efficiency': annual improvement in the energy efficiency of houses, vehicles and electricity generation is 2 times baseline 'more renewables': annual increase in wind turbines and solar panels is 2 times baseline 'stable demand': no increase in number of houses and cars and autonomous electricity demand remains constant 'all 3': all the above 3 variants combined

Conclusions electrification results in much higher demand for electricity increasing supply of renewables is not sufficient to meet this demand even on windy and sunny days, there will hardly be oversupply renewable energy should increase much stronger before we can realise a green hydrogen economy hybrid systems are less expensive than full electrification

References CERRE, Gas and elektrification of heating & transport, scenarios for 2050 (including studies for Netherlands, Germany, Austria, Belgium and France) Study on the Netherlands (extract of CERRE report): Moraga en Mulder, Electrification of heating and transport: a scenario analysis of the Netherlands up to 2050, CEER policy papers, 2, May 2018.