Energy agenda issue 1 by bmf business services

energyagenda magazine

issue 1

March 2021

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contents

Energy markets are broken, can they be fixed, Malcolm Keay asks.

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Energy markets are broken, can they be fixed, Malcolm Keay asks.

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Energy priorities of the European Commission Kadri Simson, EU Commissioner for Energy outlines the role of member states and the energy system in achieving the EU’s raised ambitions on tackling climate change. 4

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The 2019 European Green Deal recognised the need to fundamentally transform the EU’s energy system, states Simson, highlighting that 75 per cent of all the EU’s greenhouse gas emissions come from the energy sector and that this is a priority area if Europe is to be carbon neutral by 2050. In September, the European Commission stepped up its ambitions by proposing the new 2030 Climate Target Plan which saw an increase in ambition for the greenhouse gas reduction to 2030 of at least 55 per cent, which Simson believes has added “further urgency to the green energy transition”.

Setting out the significance of the ambitious shift, Simson explains: “It also means that by 2030 electrification needs to reach 40 per cent and the rate of building renovation has to double. Additionally, 24 per cent of transport will have to be powered by renewable fuels. Oil consumption must be reduced by almost one third and natural gas consumption must be reduced by one quarter. “We know reaching a 55 per cent reduction is doable but it will require massive changes and actions in all sectors. We will not only need to change but we will need to change fast,” states the Commissioner. Highlighting that, to date, the power sector has led the way in decarbonisation, making it the most decarbonised system in the world, Simson says that the level of ambition will require action on other fronts as well. In June, the European Commission presented the strategies for energy system integration and hydrogen, the first of which sets out the main characteristics of the energy system of the future and the other which looks at the role of renewable hydrogen in that system. Simson highlights that these strategies also provide solutions to how other sectors can follow the lead of the energy generation sector. On 14 October 2020, the Commission published its Renovation Wave Strategy, which aims to double renovation rates over the next decade, making sure that renovations lead to higher energy and resources efficiency. It is estimated that by 2030, 35 million buildings could be renovated in Europe, with an additional 160,000 green jobs created in the construction sector.

In November 2020, the EU launched its strategy on Offshore Renewable Energy, aimed at giving a strategic direction for the ambitious development and integration of this type of energy by 2030 and 2050. The Commissioner recently presented the strategy to the annual conference of the Irish Wind Energy Association (IWEA), where she described Ireland as one of the “global champions” of wind energy. The Commissioner outlines that the strategy will not just cover offshore wind farms but tidal and wave energy also. Tying these various channels together, the Commissioner explains that it is the Commission’s intention to propose an updated framework for Europe’s energy infrastructure policy before the end of 2020, which she says, “will help us to make our future investments climate proof”.

Finance Simson highlights that as well as establishing long-term plans for the future, the Commission must also react to the challenges of the present. To this end she says that while political buy-in and momentum exists, financial investment and public support are crucial. In July 2020, EU leaders supported the Commission’s proposal to create a €750 billion recovery plan for Europe, named Next Generation EU. Speaking on the unprecedented levels of finance being made available, Simson says: “We will need to be smart when deciding where to invest this money. Our analysis shows that investment in clean energy technologies generates more value added than investment in fossil fuel sectors, both in relation to profit and in terms of job creation.

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“This means that we need to seize the moment and make sure we are accelerating our investments in the clean energy transition. This brings duel benefits of supporting recovery and increasing job creation in the short-term and in the long-term, helping us achieve our climate goals.” Explaining the significance of shifting Europe away from being one of the world’s largest natural gas and oil importers, she adds: “The energy transition is also an investment in our resilience and independence because going climate neutral reduces our import dependency and our spending on fossil fuel imports. “To ensure we achieve the expected transformation we must rethink and renew our energy system. We can no longer act in silos and we must look at the energy system as a whole, creating synergies and looking for cost-effective solutions for our households and business.” Simson explains that the recently adopted EU-wide assessment on the national energy climate plans brings together the efforts of member states in stepping up their ambitions. “Each member state now has a forward-looking blue print for clean energy targets in terms of transformation and investment. Combining the 27 plans, predictions are that we will surpass our 2030 target for greenhouse gas reduction of 40 per cent.” The Commissioner highlights that the picture is especially encouraging when looking at renewable energy, where Europe is a global technology leader and has recognised a steady fall in prices. The National Energy and Climate Plans (NECP) Assessment outlines that Europe is on track to produce more than 33 per cent of its energy from renewables, an overachievement on its original target of 32 per cent. However, recognising that the national plans were prepared with the current 2030 targets in mind, Simson says that more must be done to reach the 55 per cent reduction of greenhouse gases goal by 2050.

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“The impact assessment foresees the need for a 38-40 per cent share of renewables in our energy mix by 2030 and 36-39 per cent improvement in our energy efficiency. With the Climate Target Plan, we commit to reviewing the Renewable Energy and the Energy Efficiency Directives, including those targets, and we will make a proposal in June 2021.” Simson states that a change of this magnitude will require “serious investment”. The Commission estimates the need for €350 billion per year. Explaining the significance of the EU’s announced recovery package, the Commissioner says: “The Green New Deal was always meant to be a growth strategy and even the health crisis has shown that this is not simply a slogan. “In July [2020] the EU leaders agreed on the unprecedented recovery package of €1.8 trillion, which sets sustainability at its core. The package brings together a reinforced EU budget for the next seven years, complimented by €750 billion from a stimulus plan. This is the Next Generation EU and the package gives us a unique opportunity to reboot the economy and accelerate the clean energy transition, which was already underway, and build a more sustainable and competitive economic future. “I believe that the economic recovery and sustainability need to go hand in hand and respond to the needs of our people and our businesses and we need to invest in tomorrow’s technologies, not yesterday’s. “Change is necessary but managing this change will be for the benefit of all.”

Heat and the city Janette Webb, Co-Director of UK Energy Research Centre and Professor of Sociology of Organisations, Edinburgh University discusses the lack of progress on the decarbonisation of heat in Great Britain and its impact on net

The UK Government has set a net zero carbon target for 2050 and more ambitiously, the Scottish Government aims to reach the same goal by 2045. However, as Webb explains “minimal progress” on the decarbonisation of heat raises serious questions around how realistic these ambitions are with major social and political questions yet to be answered. Webb, whose research has informed both the UK and Scottish Government policy on heat, highlights that Ireland’s position as a laggard on heat in relation to other EU countries is not unique when compared to its neighbouring countries of England, Scotland and Wales. “Many around these parts are doing much the

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In Britain, people are very wedded to their gas heating systems so there has to be in place very clear quality assurance advisory, public standards, security/safety and open access evaluation of some of those bigger demonstrators that are beginning to come around in order to get the societal momentum that we need behind it.

same and performing rather poorly on that conversion of high carbon heat into lower carbon or renewable heating systems,” she states. “We know this is something that is essential to meeting greenhouse gas targets but it is an area where we are making very little progress and where there aren’t straightforward answers.” In its 2019 report the UK Committee on Climate Change commented that: “Over 10 years after the Climate Change Act was passed, there is still no serious plan for decarbonising UK heating systems and no large-scale trials have begun for either heat pumps or hydrogen.” The scale of the challenge has been acknowledged by the UK Government. The Department for Business, Energy and Industrial Strategy (BEIS) stated in 2018 in relation to the decarbonisation of heat: “Change of this scale and breadth will require a level of coordination beyond most public policy change programmes.” However, Webb believes that even this might be an understatement. In 2017, the European Union had a 19.5 per cent of renewable heat share in gross final energy consumption compared to 7.4 per cent for the UK and 5.9 per cent for Scotland. Webb outlines a “cluttered landscape” in respect to heat policy across Britain including ambitious declarations by local authorities and city regional authorities, although these bodies have few powers and resources at their command to enable them to act “in a

concerted and systematic fashion on the climate emergency”. Part of Webb’s work of late has been trying to establish the role of local and regional governments in the decarbonisation of heat, recognising that a number of authorities have ambitious plans to be carbon neutral or carbon negative, yet continue to be heavily dependent on burning fossil fuel for heat. Webb has drawn comparisons between England/UK Government policy and Scottish policy in terms of progressing decarbonisation of heat. Heat policy is devolved in Scotland, but in practice the devolution arrangement is complicated, with some levers such as building regulations being fully devolved, and others such as fuel standards and specifications, and energy market regulation, being fully reserved. Webb outlines that current policies mainly overlap more than they diverge. However, in recent years the Scottish Government, while advocating for greater devolution of powers, has been active in developing not just heat policy but system-wide policies, including around local energy planning and zoning for different heat solutions. However, the elephant in the room in relation to policy for decarbonising heat is the current gas infrastructure. Most of the heat in buildings and for industrial use across Britain comes from the highly developed gas grid that was built under public ownership and then privatised in the 1990s. “Over a lot of the cluttered policy picture lies that question about

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to investors for a more decentralised system, where you could have different decisions about clean heat solutions in different places. The Hubs however work across very large areas and have very limited resources.”

what is the future of the gas grid and that is a question that really only can be answered by the UK Government because it is a reserved matter. Of course, underlying a lot of this is to what extent are we going to decarbonise the current gas grid?” Addressing costs and how those costs will be shared is not one that ministers are keen to face up to, says Webb. Turning back to policy comparison, Webb says that in England, the UK Government’s Clean Growth Strategy has tried to use liberalised market competition and market instruments to meet carbon reduction, and climate protection, targets. This includes feed in tariffs and subsidy schemes of various forms, often with limited life spans. The Renewable Heat Incentive (RHI), which ends next year and for which no equivalent replacement has been identified, is really the only scheme now supporting the market in renewable heat. “The idea there was that the solutions would be led by the market. That the Government and the public would allow the market to discover the most cost effective solutions, but really there is still no clarity on the extent to which localised or regionalised market led solutions are emerging and emerging at the pace needed. “What we have on the English side is a number of initiatives that are running without an obvious future route to a comprehensive solution or framework. So, we have initiatives such as the five local energy hubs which aim to develop project pipelines attractive

Webb points to a possible exception to market-led thinking in the 2016 announcement by Treasury to invest £320 million in heat network development. This was renamed the Green Heat Networks Fund in the spring 2020 budget. The scheme remains the largest capital sum ever to be considered for heat network investments by the UK Government and applies only to England and Wales. “Of all of those policies around market-led solutions for the future of heat, there is that one exception where there is recognition that there is scope to address a significant part of the problem through the development of new heat network infrastructure. However, it’s very hard to do that when you have a highly dominant and costeffective gas industry meeting the majority of heating and hot water demand.” In Scotland, however, the direction of travel has been towards a more managed market and a more partnership-thinking approach. In Scottish policy, terms such as planning, community and social inclusion are frequently used alongside the likes of market and competition. “Some of the major issues on the Scottish side, apart from questions around social justice, concern the future of the oil and gas sector, which remains a massive contributor to the economy and employment, and what might take its place in a just transition. Also though, is the question around how to use less energy, because part of the thinking always has been that these solutions around heat, and I think this is true across the UK, is not to have any waste.”

In Scotland, a push towards a zero waste heat solution saw

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Trend of renewable heat share on gross final energy consumption 2009-2017

5.9%

Scotland

1% 7.4%

2.3% 19.2%

European Union

15.2% 0%

10% 2017

15%

20%

25%

2009 Source: Eurostat, BEIS

government identify buildings as a national infrastructure priority. In 2015, the Scottish Government opted to plan in various ways, primarily through cross sector partnerships, to retrofit the entire building stock to a much higher energy performance standard by 2040. The Energy Efficient Scotland programme saw a series of pilot projects led by local authorities and gave prominence to planning at local and regional scale for a future net zero carbon building stock. The first phase of the scheme called for area-based initiatives to retrofit buildings, while the second phase did this again, but focusing on home owners and on detailed local heat and energy efficiency strategies (LHEES), which have become one of the key policy instruments in Scotland for decarbonising heat and improving the energy performance of building stock. “It’s been really interesting evaluating those projects to see how difficult it is to organise the societal co-ordination, collaboration and consent around this kind of programme and I don’t think we’ve got very far yet,” says Webb. “However, in that Energy Efficient Scotland programme, which is core to the net zero carbon heat target, is a national policy framework which envisages a more planned solution. This would mean local governments managing area-based advice and delivery services with business and third sector partners, supported by a

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national system to coordinate specialist legal, technical and procurement services, and funding, and to review progress.” Webb explains that this localised approach is also being utilised to address the Scottish framework’s goal of resolving fuel poverty and ensuring that any transition does not exacerbate existing vulnerability problems. A localised heat and energy efficiency solution aims to do this through costed and comprehensive area-based plans for decarbonising heating, including through the likes of zoning areas where district heat would be cost effective and identifying other areas where stand-alone heat pumps might be best. The ambition is for such schemes, in part, to be self-funded, however, as Webb explains, a viable route from what exists currently to full decarbonisation of heat is not clear. Outlining a to-do list for the UK and Scottish governments, Webb states: “I think it’s fair to say that right across Britain, a net zero carbon future for heating systems is just about on the policy horizon. There is a mix of ideas and debate on the extent to which markets can solve this without very significant public intervention and planning. “I believe there are four interconnected themes from a social science perspective on how to solve that question. The first is the need for a working consensus on ‘what and how’. We’ve seen in our research the difficulties of getting the necessary cross-sector

HEAT and

THE CITY

“I think it’s fair to say that right across Britain, a net zero carbon future for heating systems is just about on the policy horizon.”

have good subsidy schemes in place at present. We have loan schemes, but there is no requirement on most property owners to make use of those loans schemes and we’ve seen a big reduction in public finance for energy efficiency retrofit in England.

collaboration and co-ordination when regulation does not mandate it. Steps have been taken in England, Scotland and Wales to develop a cross-sector collaborative system on a voluntary basis, but where is that working? It’s not working anywhere terribly well, I would suggest. “Secondly, there is a need for clarity over who owns what problems and of course, the big question of who will pay. To what extent should infrastructure costs be socialised, given differential rates and forms of benefit in different places? “Thirdly, some of the key starting points are around building stock renovation and retrofit based on clear policy targets all over Britain, but there has been rather slow progress. There has been progress towards better energy efficiency standards but we don’t

“Fourthly, we need to build public trust. To do this, we need some large-scale whole system demonstrators. We need to be able to view projects in a public setting, with open access evaluation. Additionally, we need to see how well hydrogen conversion of the gas grid can work and how the costs and benefits would be distributed between different groups. “In Britain, people are very wedded to their gas heating systems so there has to be in place very clear quality assurance advisory, public standards, security/safety and open access evaluation of some of those bigger demonstrators that are beginning to come around in order to get the societal momentum that we need behind it.”

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Copenhagen: 100 per cent renewable gas by 2025 12

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The city of Copenhagen has set an ambitious target to be carbon neutral by 2025. Executive Director of Denmark’s State of Green, Finn Mortensen, outlines the role of renewable gas in reaching this target. In order to fully understand the progress which is set to see the level of biogas in Copenhagen’s gas system reach 60 per cent by 2020, Mortensen says that it is important to first understand the scale of the transition in Denmark as a whole. Mortensen is the Executive Director of State of Green, a public-private partnership, established in 2008 in preparation for Denmark hosting the UN Climate Conference, which combines industry and government and provides an overall narrative for Denmark’s switch from a country totally dependent on fossil fuels in the 1970s to a global examplar of decarbonisation, with a vision to be totally independent of fossil fuels by 2050. In 2012, Denmark’s renewable share of total energy consumption was 23 per cent and by 2018 this had risen to 33 per cent. Mortensen explains that the goal is to reach 55 per cent over the next decade to 2030.

Of renewable generation, like Ireland, wind is a dominant source in Denmark, with around 45 per cent of all electricity generation coming from wind annually. Denmark has recorded several days where production of electricity has been 100 per cent from wind. Denmark’s ambitious targets have been driven by public demand. In June 2019 a newly

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“The new government has not yet decided which way to go but most are expecting that there will be finance available for biogas in future because people can see the potential of attracting international interest from companies to Denmark.” elected minority government recognised that on average 70 per cent of Danes prioritised climate change as their major concern pre-election. The result was the Government very quickly setting an ambitious target of a 70 per cent reduction in CO2 emissions by 2030. Mortensen explains that these ambitions were backed up by the establishment of 13 climate partnerships, made up of business, industry and government. These partnerships are led by top CEOs in their sectors, such as transport and energy, and tasked with delivering solutions for a 70 per cent CO2 reduction within their sectors and to deliver ideas to be used in other sectors. The partnerships have since developed an extensive set of recommendations aiming to bring down emissions dramatically during the next decade, while also maintaining commercial competitiveness. These recommendations are set to form the basis of a green recovery themed climate action plan expected to be published before the end of 2020. As Mortensen explains, many, including the Government, recognise that while the first 65 per cent is “relatively easy” there are few solid solutions to achieving the final 5 per cent reduction required. Denmark still relies heavily on fossil fuels, in 2018 over 60 per cent of the country’s energy consumption was from fossil fuels. Of the 32.8 per cent renewable contribution, 55 per cent was from biomass, which Mortensen describes as “contentious” and something which the country is actively trying to reduce. Currently biogas is not a major player in renewable generation, however, Mortensen outlines an understanding of the much bigger role it has to play in future. Key drivers of production and usage of biogas, Mortensen outlines, are government subsidies, taxes on fossil fuel consumption, fees on waste treatment and the banning of organic waste in landfills, among others.

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connected to town gas, as well as Denmark’s national hospital. Even though bioenergy makes up only 4 per cent of Denmark’s total energy consumption, the potential and economic contribution is recognised. Currently the sector employs around 14,000 full time workers and an estimated 1,400 companies work in the sector. Annual turnover is in the region of €5.2 billion, with the sector contributing €1.5 billion to exports. This figure is expected to grow as the Danish Government plans to introduce national subsidies for bioenergy, including biogas.

Turning specifically to Copenhagen’s ambition to be carbon neutral by 2025, a transition that is already well underway, Mortensen points to a 42 per cent reduction in CO2 emissions since 2005. Over the same time period, Copenhagen’s economy has grown by around 25 per cent. “Copenhagen is a city with a population of some 600,000 and CO2 emissions of approximately 1.5 million tonnes in 2018. The biggest carbon emitters, like many places, are energy and heat production. In this context, the city administration set out a plan to focus on wind, sun, bioenergy and geothermal as pathways to an 80 per cent reduction goal by 2025,” explains Mortensen. “However, even existing initiatives will leave a gap of 200,000 tonnes and while the city is optimistic about reaching the target, there is a requirement for support from national government.”

At the time of WWI, Denmark had close to 120 different gasworks. As these have phased out, today greater Copenhagen, with around 1.2 million residents, is serviced by one utility in the form of HOFOR. HOFOR provides environmentally friendly district heating, district cooling, water supply and town gas to approximatley 300,000 residents in the city of Copenhagen. HOFOR also owns another utility, BIOFOS, which is Denmark’s biggest wastewater treatment plant, converting waste water sludge to biogas for town gas supply. Mortensen estimates that currently above 45 per cent of Copenhagen’s town gas supply is carbon neutral and HOFOR has outlined expectations for this to increase to 60 per cent by the end of 2020 and be totally green by, if not before, 2025. The Executive Director highlights a focus on attracting corporate customers, with most of Copenhagen’s restaurants

“The new government has not yet decided which way to go but most are expecting that there will be finance available for biogas in future because people can see the potential of attracting international interest from companies to Denmark,” explains Mortensen. Highlighting a concrete example of this. Mortensen, in conclusion, points to Apple’s decision to locate a large data centre near the city of Viborg, with district heating for the city coming only from renewable energy, including the excess heat from the data centre. Separately, Apple has invested €3 million to expand Aarhus University’s biogas test and demonstration plant in Foulum, which will provide backup power to Apple’s data centre. Denmark is a popular choice for big technology companies to establish data centres. Mortensen says that there are huge economic benefits from being able to supply these large energy users with renewable energy that doesn’t compromise Denmark’s energy supply of increase their CO2 emissions.

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Energy storage and the grid Innovative energy storage solutions will play an important role in ensuring the integration of renewable energy sources into the grid in the EU at the lowest cost, according to a new study published by the European Commission. “An appropriate deployment of energy storage technologies is of primary importance for the transition towards an energy system that heavily relies on variable RES technologies to be a success,” states the independent study funded by the Commission. Published in March 2020, the study on energy storage estimates that 97GW will be necessary for Europe for 2030, including large development of stationary batteries. The report found that pumped hydro storage is currently the main energy storage in Europe but that new battery projects are rising as prices “plummet”. Of electrochemical storage projects, Lithium-ion is in the majority but the report cautions that theoretical specifications submitted to grids may be relatively optimistic compared with their use at nominal conditions. Germany leads on the number of operational electrochemical facilities but the study notes a number of important projects in Ireland.

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The study was based on a need to understand which of the technologies are most likely to have an important role in the future and to detect the potential barriers to their development. Additionally, it proposes an updated regulatory framework and policy actions to allow the relevant flexibility solutions to successfully penetrate the market. Running a range of scenarios, the study forecast that based on policies already agreed across member states, electrolysers do not appear to be competitive solutions to provide flexibility to the power system. However, it does qualify that if deployment was to materialise in 2030, driven by indirect electrification of end-uses in the industry or heating sectors, then they could provide flexibility.

In separate scenarios out to 2050, where the deep decarbonisation of different sectors including industry, transport and heating, around 550GW of electrolysers would be required to satisfy the demand of green hydrogen. “Combined with the flexibility offered by the end-users’ of hydrogen and e-fuels, or with direct use of hydrogen or gas storage facilities, electrolysers will be able to provide important levels of flexibility to the power system,” the study finds. It also outlines that the deployment of EVs using smart charging strategies, combined with short-term thermal storage, will also enable the demand-side to provide daily flexibility to the power system. Interestingly the report finds that in a deep decarbonisation scenario out to 2050, the requirement for pumped hydro storage and batteries will be lower in 2050 than in 2030 due to competition between various flexibility sources. The report included a range of policy recommendations for energy storage including the addressing of barriers, examples of which are given as public guidance and support, electricity market design and grid aspects. “The most important barrier is the lack of a viable business case for many energy storage projects,” it states, adding “the cost and technical performance of storage technologies gradually improve their viability, which in the long-term will significantly improve the business case, and already has for several technologies.” However, for the shorter term it says that various policy barriers still hamper the development for energy storage in the EU, leading to uncertainty concerning the revenues streams to cover project costs and risks.

“An appropriate deployment of energy storage technologies is of primary importance for the transition towards an energy system that heavily relies on variable RES technologies to be a success.” To that end, it suggests that the main responsibility of policymakers is to provide an enabling environment and level playing field “in order to enable storage to participate in energy and ancillary services markets as well as in eventual capacity mechanisms, and to be remunerated in a transparent, nondiscriminatory way”.

“Adequate energy price signals should also guide the investment and operational decisions of private actors,” it adds. The European Commission, ACER and other EU authorities should prioritise policy measures that address barriers to storage identified in the majority of all member states and that hinder the deployment of several storage technologies and applications, the report

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Member states should develop a policy strategy for storage based on an assessment of the system flexibility, adequacy and stability needs, and of gaps in national regulatory frameworks. “An appropriate identification of the flexibility needs per country and per timescale is key to assess the possible contribution of storage technologies in the future,” the report states. The report specifies that specific EU action is to be considered to encourage/develop harmonised standards for device communication and system operation. “Currently, the digital layer of battery management systems, notably application programming interfaces, is often based on proprietary solutions, and a move to open interfaces would be desirable,” it states, recommending that EU organisations and member states should guarantee the interoperability of flexibility resources and access to data.

recommends. Importantly, however, barriers specific to only a few member states should be addressed at the national level, it adds. “At the EU level, upcoming revisions of EU instruments relevant for energy storage provide an opportunity to address barriers where EU action would be adequate. Actions under the European Green Deal should also consider storage, where appropriate.”

Clean Energy Package for all Europeans (CEP) A definition of storage is provided in the new Electricity Directive, however, at present most EU member states do not yet have a coherent definition of storage nor have transposed the Directive, and definitions in secondary legislation often are not aligned with the rest of the legal framework. To this end the report recommends that “member states should ensure that storage is coherently defined across the national legal framework”.

Finally, the report highlights that the EU’s Clean Energy Package did not address the issue of energy taxation. “EU institutions and member states should increase the energy and greenhouse gas reflectiveness of taxation, and eliminate the double taxation of stored energy. “The upcoming revision of the Energy Taxation Directive (ETD) is pivotal, not only for the development of energy storage, but also to foster low-carbon energy technologies in general. The increasing system integration will also require the elimination of diverging taxation levels across energy sectors and carriers, in order to avoid cross-sectoral distortions regarding taxation or the internalisation of carbon costs, and to seize the synergies between the electricity, heat and gas sectors. “Only storage losses should be subject to taxes in order to stimulate highly energy-efficient processes,” the report concludes.

The report also recommends the elimination of double charging in the form of grid tariffs during storage charge and discharge, describing them as detrimental.

“EU institutions and member states should increase the energy and greenhouse gas reflectiveness of taxation, and eliminate the double taxation of stored energy.” 18

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The IPCC Special Report on Global Warming of 1.5°C Co-Chair of the IPCC working group III, Jim Skea, discusses the report on limiting global warming to 1.5oC and the pathways required.

The 2015 Paris Agreement invited the Intergovernmental Panel on Climate Change (IPCC) to provide a special report in 2018 on the impacts of global warming of 1.5oC above pre-industrial levels and the related global greenhouse gas emissions pathways. Skea suggests a simplification of the reports purpose to that of addressing two key questions: What were the impacts of global warming of 1.5oC? And what were the related greenhouse emission pathways? The IPCC looked at how the level of global warming impacted and/or the risks associated with the reasons for concern and selected natural, managed and human systems.

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Figure 1: Global total net CO2 emissions

The IPCC report outlined that emissions from other climate forcers, outside of carbon dioxide, also need to fall, but not to zero. “Emissions of non-CO2 forcers are also reduced or limited in pathways limiting global warming to 1.5oC with no or limited overshoot, but they do not reach zero globally,” says Skea, highlighting substantial fall in methane emissions and black carbon emissions, as well as a lowering of nitrous oxide emissions, although not to the same extent.

Source: IPCC Special report on global warming of 1.5oC

Skea explains that the major finding was that a difference of 1.5oC to 2oC was significant. Highlighting an example, Skea points to that of tropical corals, where current levels of warming have already seen huge risks. “Even at 1.5oC we could lose most of these corals, but at 2oC they will be virtually all gone,” he states. Another example is that of the arctic region: “If we were to warm by 1.5oC we would have an ice free arctic about once every century. If we warm by 2oC it will be once every decade. Areas of

particular sensitivity in these scenarios are coastal flooding and low latitude fisheries but further knock-ons would occur in crop yields, for example. Skea’s working group III paid particular attention to the emission pathways question and the transitions consistent with 1.5oC warming. The IPCC does not have a research function and so its reports are based on existing research. Skea explains that within the existing research the IPCC found a range of scenarios that were consistent

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with global warming of 1.5oC, all of which fell within the trend line of global emissions of carbon dioxide shown in Figure 1. Skea points to two strong messages coming from the research of: •

•

CO2 emissions need to fall by ~ 45 per cent by 2030 on the path to limiting global warming by 1.5oC; CO2 emissions need to fall to “net zero” by midcentury to limit global warming to 1.5oC

The Co-Chair explains that a key point made by the IPCC within the report was that more than one way to limit global warming to 1.5oC. The report identified four illustrative pathways for carbon dioxide emissions, showing the kind of choices that might be faced if limiting warming to that level. Skea highlights an awareness from many countries that efforts to limit warming should happen in the context of sustainable development and efforts to eradicate poverty. Emphasising the absence of a quick fix, Skea points to the reports findings that limiting global warming to 1.5oC “would require rapid, farreaching and unprecedented changes in all systems”. “There is almost nothing which can be left off the table

“There is almost nothing which can be left off the of you want to limit global warming to 1.5oC. An incremental approach won’t do. It needs to be a big effort,” he says. Unprecedented change, identified in the report include: •

a range of technologies and behavioural changes;

•

scale up in annual investment in low carbon energy and energy efficiency by factor of five by 2050;

•

renewables supply 70-85 per cent of electricity in 2050;

•

coal declines steeply, ~zero in electricity by 2050;

•

oil and especially gas persist longer – gas use rises by 2050 in some pathways;

•

deep emissions cuts in transport and buildings;

•

changes in land use and urban planning.

Carbon dioxide removal Another important element identified in all pathways that limit global warming to 1.5°C with limited or no overshoot is that they involve the re-use of removal of carbon dioxide (CDR) from the atmosphere. CDR can be used to compensate for residual emissions in difficult sectors such as aviation, heavy industry and freight transport, but also to achieve ‘net negative emissions’. Skea explains that the report confirms the general understanding that the larger and longer the overshoot, the greater the reliance on CDR will be later in the century. He also highlights that bioenergy with carbon capture and storage feature in most scenarios and are only avoided in a few. This he explains would have implications for land, food and water security, ecoystems and biodiversity.

table of you want to limit global warming to 1.5oC. An incremental approach won’t do.

Sustainable development The IPCC took a number of mitigation options, alongside 17 sustainable development goals and look at measures that applied to either energy supply, energy demand or land use and how the exercise of these options would impact on other sustainable development goals. “The clear message was that it was the energy demand measures which had the most positive outcome,” states Skea. “There are most synergies with the sustainable development goals. It is a bit more of a mixed picture on the land side but some of the biggest difficulties actually come on the energy supply side, with some of the technologies that would be exercised. “There is a clear message that the demand side really matters if we’re going to reconcile climate mitigation with sustainable development more broadly.”

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Biofuels:

The UK’s approach Senior Policy Advisor of Low Carbon Fuels at the UK’s Department for Transport (DfT), Charlotte Stead discusses the direction of travel for advanced biofuels for transport in the UK. Speaking in early 2020, Stead highlighted that in the UK less than 5 per cent of the 450,000 litres of fuel supplied to transport companies is biofuel, however, the Government has set a target to increase this level to 12.4 per cent by 2032. The desire to progress the use of advanced biofuels in the hard to decarbonise sectors, such as transport, lies in the understanding of the potential benefits of greenhouse gas emission savings and that

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advanced biofuels avoid displacement effects when used to produce transport fuel, explains Stead. Currently, the UK primarily uses waste feedstock for transport biofuel and has in recent years been moving away from the use of crops. This has been hastened by the introduction of a crop cap, aiming to reduce plant-based renewable fuels down to 2 per cent by 2032.

F4C shortlisted projects Project

Location

Feedstock

Technology

Product

Kew Technologies

West midlands

Waste wood

Gasification + thermal + cracking + fischer tropsch

HGV Diesal (jet in the future)

Rika Biogas

North lincolnshire

Straw

Straw pre-processing, AD, cryogenic upgrading

HGV Liquid biomethane) Liquid CO2 coproduct)

Lanzatec/Lanzajet

Port Talbot, Wales

Ethanol from steel mill waste gases

Ethanol dehydration+oligomerisation+hy Jet (ATJ-SPK) + some diesel drogenation+fractionation

Velocys

North east Lincolnshire

Post recycling MSW

Gasification+fischer tropsch

However, the majority of the UK’s wastefeed stock (47 per cent) comes from cooking oil, highlighting that advanced biofuels are not yet emerging at pace. Stead explains that this is largely due to two major challenges. The first is the cost associated with producing advanced low carbon fuels, which historically arises caution in investors. The second is a question of feedstock availability. As the harder to decarbonise sectors increase their use of advanced biofuels, it’s likely that they will find themselves in competition for feedstock with other sectors. Additionally, Stead explains, it’s not simply the UK where there is an increased demand for feedstock, but demand for advanced biofuels has increased worldwide. Explaining how the UK is addressing these challenges, Stead highlights that as of 2019, the UK has a target for development fuel, intended to stimulate the production of advanced renewable fuels and aimed at modes within the transport sector recognised as difficult to decarbonise including aviation and heavy goods vehicles. It is also recognised that growth of the domestic industry of development fuels will have an economic benefit, given estimates

Jet(SPK+naptha)

that the global market is set to be valued at around £15 billion by 2030. From 1 January 2019, the UK have made available Renewable Transport Fuel Certificates (dRTFCs) which allow for earnings to be made of up to £1.60/litre for development fuels and up to £0.30/litre for general fuels. “This is recognising that the development fuels are much more expensive and that’s why they have a higher value,” explains Stead. Another tool utilised by the UK Government is competitions. In 2014 the UK launched its Advanced Biofuels Demonstration Competition (ABDC) which made available £25 million (private sector matched capital funding) to companies to demonstrate waste to fuel technologies. “Specifically the competition sought to attract significant private sector investment, see first-of-a-kind biofuel plants built, support the development of the UK-based advanced biofuels industry and contribute to commercial waste based fuels that could offer significant carbon savings up to 95 per cent relative to fossil fuels,” Stead explains.

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“We are exploring the greenhouse gas benefits of using them to produce fuels instead of how they are currently disposed.” potential of recycled carbon fuels (RCF), which are transport fuels made from fossil derived wastes that are not suitable for reuse or recycling, or cannot be avoided. The UK does not currently support these under the RTFO but recognises that there is potential greenhouse gas savings. The competition is now in its final stages with a plant being built in Teeside where a company plans to create cellulosic ethanol from forestry residues and another in Swindon, where biomethane will be produced from municipal and wood waste. The UK also launched a second competition named the Future Fuels for Flight and Freight Competition (F4C) in April 2017. The competition provided £22 million to “help construct novel, advanced low carbon fuel plants” in the UK by 2021. Projects were required to produce fuels from waste and offer an end product with greater than 70 per cent greenhouse gas savings compared to conventional fuels. Stead explains that 28 projects entered for the first stage (2017-19) of the competition with seven projects sharing a £2 million grant pot to support preliminary project work. In 2019, four projects were shortlisted for the final stage with £20 million of funding made available. Two of the projects focus on aviation fuel while the other two focus on HGV fuels. Turning back to the question of feedstock availability, Stead outlines that the UK Government are currently investigating the

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“We are exploring the greenhouse gas benefits of using them to produce fuels instead of how they are currently disposed,” says Stead. The pathways for RCF are varied and include the likes of incineration, cement Kilns, landfill, combined heat and power and heat. “These are known as counterfactuals and each counterfactual will have a different level of greenhouse gas savings. One of the things we are exploring is which counterfactual should we be using RCF’s from,” she adds. Stead explains that the Department for Transport has commissioned two reports on sustainability risks of RCFs and hosted RCF workshops in 2018 and 2019. Additionally, the Department has engaged with numerous RCF producers/potential producers in order to understand their process and the feedstocks used, as well as working closely with other government departments, making sure that there is alignment so as not to displace waste being used elsewhere. Looking to the future Stead explains that the Department’s biofuel policy focusses on waste, which is demonstrated by current competitions, the crop cap, the introduction of development fuel

Offshore wind: An international perspective In setting out a target of 5GW of offshore development by 2030, Ireland has outlined an ambition to be a world leader in renewable energy and has the opportunity to learn lessons from the offshore pacesetters. Ireland’s onshore wind development has moved at pace and is central to progress of renewables on to the electricity system. Onshore wind will continue to be the major player in terms of renewable generation up to and beyond 2050 but if Ireland is to reach a target of net zero carbon by 2050, it is recognised that significant development of offshore wind and other emerging technologies will be required. The Programme for Government raised the ambition for offshore development from 3.5GW to 5GW for 2030 on Ireland’s eastern and southern coasts and set a vision for a potential 30GW on the western coast out to 2050.

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Industry leaders have stressed the importance of Ireland meeting the Climate Action Plan target of 1GW to be delivered by 2025 if the 2030 target is to be reached and pointed to the need to prioritise trigger projects in the planned offshore-dedicated RESS auction in 2021. The Irish Government has embraced a phased approach to offshore development, seeing the value in targeting nearshore and shallow water offshore deployment on the east coast for fast deployment. The south coast, where the water gets deeper quickly, will form a second phase, with a wider range of technology required, including fixed beds and floating. The greatest challenge will be Ireland’s west coast, where a range of limitations, not least grid absence, wave height and access limitations will require a reliance on technology innovation and emergence in the coming decades. While Ireland aims to be a global leader in renewable energy and harness the potential of renewable electricity exportation, it is not an early pacesetter in the deployment of offshore wind technology. The Government will seek to learn from the pathways taken by other countries, not least the UK, but must also recognise an increase in competition in the offshore global market, where skills, investment, vessels and turbine availability will become squeezed.

UK A global leader in offshore wind, the UK will serve as an exemplar to Ireland’s deployment. The UK currently has the largest installed capacity of offshore wind in the world, with over 10GW in operation off its coasts, however, it took some 15 years to get from initial deployment to get to its first 5GW. Generation from offshore wind made up around 10 per cent of UK electricity in 2020, equivalent to powering 4.5 million homes and now represents one of the lowest cost options for new power in the UK, with prices falling by 50 per cent since 2015. The UK Government has recently increased its own 2030 targets from 30GW to 40GW, with the ambition to produce enough electricity from offshore wind to power every home and to make offshore the country’s biggest energy source. The Build Back Greener initiative includes a new target to deliver 1GW of floating offshore wind by 2030.

China China has the fastest growing offshore wind sector, globally. A Global Wind Energy Council report estimates that China accounted for 40 per cent of the globally added offshore capacity in 2019 and now has around 23 per cent of the world’s offshore wind capacity. China intends to add a further 52GW of offshore wind capacity by 2030 to its existing 5.9GW generation. Currently China holds 94 per cent of Asia’s total offshore wind capacity. China has over 18,000km of coastline and current resources are concentrated on the south-east coast and China’s islands. Its economic activity is concentrated on its coasts. However, China’s electricity from renewable sources is still dominated by onshore wind, most of which is located in the north of the country and requires transportation. Land scarcity and grid connection challenges have driven the push towards offshore.

Germany The German Government, in line with enhanced European Commission aspirations, has outlined plans to reach 40GW of offshore wind power capacity by 2040. Currently, Germany generates around 7.5GW of electricity from offshore wind but has outlined a 20GW target for 2030 as a stepping stone to its 2040 ambitions. Germany constructed its first commercial offshore wind farm in 2009 in the Baltic Sea and currently boasts over 20 offshore wind farms between it and the North Sea. However, a slowdown in Germany’s offshore expansion has been recorded with 1,400 new offshore wind turbines added in 2020 compared to 1,800 in 2017. In response the German Bundestag passed an amendment to the Wind Energy at Sea Act (WindSeeG) in late 2020 to provide for an expansion of offshore in the coming years, not least a target of average annual generation and grid capacity increases of 2GW from 2030 to 2040. Interestingly, the increase in offshore wind generation capacity is envisaged through cooperation with other EU member states bordering the North and Baltic seas, including the potential of opening auctions for wind farms located in territorial waters.

Belgium Belgium now ranks fourth behind the UK, Germany and China in terms of installed offshore wind capacity. The completion of the 497MW SeaMade project, the largest windfarm in the Belgian North Sea, saw Belgium reach an installed capacity of 2.3GW. Despite a smaller population size than its counterparts of other leading offshore wind countries and relatively limited marine territory, Belgium’s current installed capacity represents around 10 per cent of total electricity consumption in the country. Having first began offshore development in 2009, a delay was recognised in 2015 and 2016 due to social acceptance challenges with a land-based connection but was later resolved. After over a year of government formation talks, a coalition government was formed in late 2020 and has set out an ambition to double the country’s offshore wind capacity to 4GW to 2030.

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Minister Eamon Ryan TD: Unlocking Ireland’s offshore wind potential Ireland’s Programme for Government (PfG), establishes the Irish Government’s ambition for 5GW of offshore wind energy by 2030 with the potential for “at least 30GW of offshore floating wind power” on the Atlantic Coast. Ciarán Galway speaks to Ireland’s Minister for the Environment, Climate and Communications Eamon Ryan TD about unlocking Ireland’s offshore potential. Determining a commitment to the “rapid decarbonisation of the energy sector”, the PfG indicates the Government’s intention to “take the necessary action” to deliver at least 70 per cent renewable electricity by 2030. This incorporates the development of offshore wind.

wind, is essential to meet the overall energy ambition of 70 per cent renewable electricity by 2030, doubling it from a current 35 per cent (alongside Ireland’s obligation to contribute to the EU-wide renewable energy target of 32 per cent by 2030).

Rationale

Likewise, to support the delivery of enhanced climate ambitions of an average 7 per cent reduction in emissions per annum from 2021 to 2030 and netzero emissions by 2050, the Government has also committed to “a

Until now, onshore wind has been Ireland’s most effective renewable generation technology. A diversification of technologies, including offshore

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Education Successfully unlocking Ireland’s offshore wind potential will rely on the development of educational opportunities to build a skilled workforce that can support the offshore industry. “We will have, in the end, some 30,000 people working on that high-skilled craft building work in which there is going to be a consistent steady of work for the next 30 years. “The MaREI Centre in Cork has real expertise in ocean energy research and in training people for some of the skills we will need in this area. I had a very good meeting with UCD the other day, which has a very strong tradition in power systems analysis and research and now is really extending that, working with other industry partners, colleges, and Science Foundation Ireland to develop this whole-of-systems approach which is the key to getting this right,” the Minister says. transformational programme of research and development”. Within the wider programme of innovation, this includes the development of floating offshore wind turbines.

Programme for Government commitments Under the Energy subheading of the Green New Deal mission, the Programme for Government outlines a commitment to produce a “longer-term plan setting out how we will take advantage as a country of the massive potential of offshore energy on the Atlantic Coast”. The plan, the PfG states, will establish how Ireland will achieve 5GW capacity in offshore wind by 2030 on the eastern and southern coasts. Simultaneously, the

plan will capitalise on the potential of “at least 30GW of offshore floating wind power in our deeper waters in the Atlantic”, enabling Ireland to become a “major contributor to a pan-European renewable energy generation and transmission system”. Working as part of a collaborative energy-secure north west European system, Ireland’s exporting capability could also be delivered using high voltage direct current (HVDC) cables, using a strong transmission system. “This is all in train; we’ve spent 10 years thinking about it and planning it. The technology has become ever more competitive. The political certainty around it is clear and every party agrees. Every European country is now in a race,” Minister Ryan outlines.

Job creation Utilising existing energy and maritime infrastructure, the Government intends to develop the skills base, supply chains, legislation and infrastructure to facilitate delivery of this plan, which it identifies as an opportunity to create new and skilled jobs. The Environment and Climate Minister emphasises the economic potential that offshore wind ambitions will have for ports around the country, including through the assembly and maintenance of infrastructure. Another benefit he identifies is the prospect of converting the power generated offshore through electrolysis and subsequently using hydrogen to power industry. This entails, he says: “Running digital infrastructure that is

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POtential

WIND essential to the economic progress of the country in a zero-carbon and completely sustainable way.” While Ireland has a pipeline of offshore wind projects (totalling 16GW) sufficient to meet the Government’s decarbonisation ambitions, delivery hinges on two fundamental factors.

Planning Firstly, the necessary planning framework must be implemented to ensure planning permission by the end of 2025, enabling the

timely completion of projects by the end of the decade. The Marine Planning and Development Management (MPDM) Bill is intended to establish in law a completely new regime for the maritime area, providing an offshore planning system. In this context, the coalition Government has prioritised the passage of “a balanced and Aarhus Convention compliant” MPDM Bill through the Oireachtas. A commitment to the drafting and enactment of the Bill “within nine months”

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suggests that it could be delivered by the end of Q1 2021. “We have to be sensitive to environmental and other concerns. We need to give certainty to investors what the planning arising is. This is a very long-term, big investment, so having planning certainty and a planning system is really key,” Minister Ryan remarks. “The Taoiseach has consistently said that the three top priority legislative measures for this government are: the Climate Action and

wind

potential

“We will start planning now for the rollout of the really big phase, which is the development of floating offshore wind in the west, north west and south west and at huge scale; Ireland’s sea area is 10 times greater than its land area.”

Low Carbon Development (Amendment) Bill, to have a stronger Climate Change Advisory Council and process; the Marine Planning and Development Management Bill; and the Land Development Agency Bill 2020,” the Environment and Climate Minister emphasises.

Transmission capacity Secondly, the transmission capacity of the national grid must be enhanced to integrate power from offshore farms. Current EirGrid’s estimates indicate that the electricity transmission grid on the east coast can accommodate 1.5GW of wind energy, far short of the 5GW ambition. To meet the 2030 target, infrastructure upgrades must begin imminently.

RESS Meanwhile, the PfG states and Minister Ryan has reiterated that an offshore wind RESS auction will take place in 2021. The Renewable Electricity Support Scheme (RESS), a competitive

auction scheme for renewable electricity projects, is intended to provide a platform for the “rapid deployment of onshore and offshore wind projects… at scale”. Suggesting that the offshore auction will be held in the second half of 2021, he says: “This auction system has been working in other European countries to bring down the price of electricity; people are bidding in because the scale is very large, so they can bid in very low. “We will start in the Irish Sea with about 2.5GW of offshore wind. That will be the first step, with construction in the middle of this decade all being well. “We will go further then, with further auctions in the Irish Sea and the Celtic Sea. We will start planning now for the rollout of the really big phase, which is the development of floating offshore wind in the west, north west and south west and at huge scale; Ireland’s sea area is 10 times greater than its land area,” he concludes.

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