CLIMATE & ENERGY
Gas in transition GREEN GAS THE NEXT BIG STEP
SCIENCE
BUSINESS
MARKETS
CITIES
Blockchain and the energy transformation
Companies under pressure on climate risk
Fog lifted from flexibility
Low carbon heating the Danish way
PAGE 36
PAGE 60
PAGE 24
PAGE 44
FORESIGHT Climate & Energy SPRING / SUMMER 2018
PUBLISHER First Purple Publishing A/S
CIRCULATION 15,000
CONTACT CEO Kasper Thejll-Karstensen First Purple Publishing A/S +45 3119 4000 kasper@foresightdk.com
PRINT Stibo Printing Solutions
CCO Kristian Lee Dahm Dickow kristian@foresightdk.com EDITOR-IN-CHIEF Philippa Nuttall Jones philippa@foresightdk.com EDITORIAL ADVISER Lyn Harrison PROJECT MANAGER Kasper Thejll-Karstensen ART DIRECTOR Trine Natskår PHOTOS Lars Just Aurland Photography Daici Ano Chris Barbalis Scott Webb COVER ILLUSTRATION Louise Rosenkrands ILLUSTRATIONS Anders Morgenthaler Louise Rosenkrands WRITERS Anna Hedegaard Katie Kouchakji Mark Nicholls Heather O'Brian Iva Pocock Clare Taylor Jesper Tornbjerg
FORESIGHT is made in Denmark ADVERTISING For advertising rates contact booking@foresightdk.com or +45 3119 4000 SUBSCRIPTIONS For our full range of subscription offers, including digital only or print and digital combined, visit foresightdk.com/subscribe or contact us at subscription@ foresightdk.com FORESIGHT Climate & Energy is the essential read from Denmark on the global transition to a decarbonised energy economy—objective reporting on what really matters by expert journalists and writers from around the world. Read more at foresightdk.com/about FORESIGHT is independent of outside economic and political interests and assumes no responsibility for advertising material. Content from the publication may not be reproduced, distributed or stored in any form without the publisher’s written permission. FORESIGHT is a trademark of First Purple Publishing A/S FORESIGHT Climate & Energy ISSN 2446-094X Noerrebrogade 45C DK-2200 Copenhagen
FORESIGHT ONLINE Website: www.foresightdk.com / Twitter: @foresightdk Instagram: @foresightdk / Facebook: /foresightdk Email: info@foresightdk.com
THINK OUTSIDE THE BLOC
Why leaders and laggards need to work together The Nordic countries—Denmark, Finland, Iceland, Norway and Sweden—have long been acknowledged as leaders in the energy transformation. They were early adopters of energy-efficient district heating networks and today they are collectively leading the switch to electric vehicles. Indeed, the region’s achievements are to be showcased in 2018 at the Clean Energy Ministerial (CEM) and Nordic Clean Energy Week. Yet, while the Nordic bloc moves forward, progress worldwide is still far too slow if the global temperature rise is to be kept to below 2ºC, or even 1.5ºC, as agreed in the international climate deal signed in Paris in 2015. As Fatih Birol, executive director of the International Energy Agency, said in March, “The significant growth in global energy-related carbon dioxide emissions in 2017 tells us that current efforts to combat climate change are far from sufficient.” To reduce this gap between action and reality, all countries and industries need to work together to find the best solutions to cut emissions in a timely and affordable manner. This means that countries lagging behind on the transition would do well to look to Scandinavia for inspiration, but the region would, in turn, be well advised to look beyond, as well as within, its borders. While Denmark has broken many wind records, poor policy choices have limited the uptake of electric vehicles compared to neighbouring Norway with its bullish incentives or the ambitions of the US state of California. And regions often seen as energy transition laggards are offering fresh inspiration with new market platforms, micro-grids and flexible solutions. Nordic countries should explore these initiatives and ensure leadership where it is lacking. An absence of common standards, such as for electric car plugs, is posing unnecessary challenges for industries at the forefront of the transition. The energy transformation is a monumental challenge, but when there’s a will there’s a way as delegates of the International Maritime Organisation, the UN shipping agency, proved in April when its members (173 countries) agreed to reduce emissions from the sector to no more than half of 2008 levels by 2050. As Thomas Edison is credited with saying, “There’s a way to do it better. Find it.”
ENVIRONMENTALLY AWARE MAGAZINE PRODUCTION Using paper from sustainably managed forests. Postal deliveries of single copies in a 100% biodegradable wrapper.
Philippa Nuttall Jones
BEL
NOR DI
N SWA ECO LA
C
EDITOR-IN-CHIEF
Printed matter 5041 0004
6
FORESIGHT
Content
MARKETS
CITIES
BUSINESS
THE MISSING MARKET
ELECTRIC AVENUE
COMPANIES UNDER PRESSURE
Taking into consideration the nonenergy benefits of energy efficiency are vital for the sector’s growth
How electric vehicles have taken over one street in Norway, but better charging solutions still needed
The risks to business from climate change is the responsibility of boards
Page 12
THE ROLE OF GAS
Decarbonisation is key if gas is to play a future role in the global energy mix, meaning more investment and research in green gas technologies Page 18
FOG LIFTED FROM FLEXIBILITY
Buzzwords can be dangerous if they mean different things to different people Page 24
THE TIDE IS TURNING
The shipping industry has finally agreed to reduce its emissions, but investors need to dig deeper into their pockets to support innovation in the sector Page 30
Page 60
Page 40
LOW CARBON HEATING THE DANISH WAY
SCIENCE
The practice of heating networks of homes and businesses from a central generator is growing in popularity across Europe as a low carbon solution Page 44
NEW KID ON THE BLOCK
Blockchain is constantly in the headlines, but can it support the energy transition?
POLICY GOVERNMENT IN NEUTRAL AS BUSINESS DRIVES SHIFT TO ELECTRIC CARS IN DENMARK
Jeppe Juul, senior transport policy officer at the Danish NGO the Ecological Council and president of the board of Transport & Environment (T&E), the Brussels-based organisation that helped break the dieselgate scandal, in conversation with FORESIGHT Page 64
Page 36
HERE COMES THE SUN
Bornholm, Denmark’s “sunshine island,” is a test bed for new energy technologies, including experiments with solar directed at achieving heating, cooling and electricity generation from a single source Page 48
IN BRIEF / Danish business leaders have their say on how to speed up the energy transition / Page 8 THE BIG PICTURE / Wood is becoming the low carbon material of choice / Page 10
FORESIGHT
PHOTO ESSAY / A walk through
the streets of Denmark's capital Copenhagen to see how the city’s space and light accommodate people and increasingly facilitate the generation and use of clean energy / Page 50
7
Ahead of the Clean Energy Ministerial (CEM9) and Nordic Clean Energy Week (NCEW), taking place in Copenhagen and Malmö in 2018, FORESIGHT spoke to Danish business leaders about ways to speed up the energy transition
Encouraging electrification
Plugging in
Ole Bigum is head of operations at K2 management, a Danish consultancy providing engineering services for developers of wind and solar power
Casper Kirketerp-Møller is CEO of Clever, a Danish company focused on making it easier to charge electric vehicles
Q: What should be at the top of the CEM9 agenda? A: Electrification and the storage technologies that enable electrification because, despite the commercial success of wind and solar power, electrification has not yet gained much traction. We haven’t been as successful in increasing the share of green power in total energy consumption as we have been in reducing the costs of producing that energy. If we allow that pattern to continue, it will inevitably slow down demand for new green power projects and so anyone who is serious about accelerating the green transition needs to focus on electrification.
Q: What do you expect from the CEM9? A: The transport sector accounts for almost 25% of carbon dioxide emissions in the EU. I would therefore like ministers to work out some common solutions to accelerate the electrification of transport. This means looking beyond large production and distribution entities and focusing on end consumers.
Q: What steps should ministers agree to increase electrification? A: They could definitely help by deciding on targets for electrification and investments in storage solutions. Although formally agreed targets would be preferable, voluntary targets including an agreement on measurement methods, would be a huge step forward, as it would allow countries to learn from the best in class. We need to be able to compare how countries are managing electrification based on the same data, such as the number of electric cars on the road, the share of electric cars in a country’s fleet or investments in storage technologies. And countries need to report on these targets on a regular basis. We know from experience that international targets can focus minds nationally and internationally and that this, in turn, helps attract investment. Even though energy consumption patterns will become more local, international attention could be a major driver for electrification.
8
Q: Which concrete outcomes would you like to see? A: The electrification of transport won’t happen unless potential new car owners are confident that they can travel from one destination to another, across countries, without worrying about whether they can charge their car. Transnational solutions are essential. Those of us trying to build a new green cross-border transport system often run up against the might of a 100-year-old gasoline infrastructure. It can be a hassle to get permission to develop an electric charging site and the best ones are often already occupied by players selling traditional fuel. A decision by leaders to allow electric charging site developers to have access to the right sites along the main highways would significantly speed up the creation of new effective transnational infrastructure. Q: Do we need the same infrastructure everywhere? A: No, but we do need to make it more user friendly, and ministers could help by calling, for instance, for a common plug-standard worldwide for electric cars. Q: Can electric vehicles conquer the world without full political backing? A: A: Electric cars are here to stay. Any political signal to show that governments are turning their backs on the fossil fuel industry and are fully behind the electrification of vehicles will boost investment and speed up the installation of infrastructure.
FORESIGHT
TEXT Anna Hedegaard - ILLUSTRATION Anders Morgenthaler
In Brief
Read the full versions of these and other interviews on foresightdk.com
Looking for inspiration Peder Andreasen is outgoing CEO of Danish transmission system operator (TSO) Energinet.dk Q: Why is CEM9 important? A: To increase the share of renewable energy in the grid from 50% to 100% is no mean feat. During CEM9 I will be looking for inspiration from countries and regions that are, at face value, lagging behind Denmark and other Nordic countries in terms of the energy transition. Q: Who do you think may provide this inspiration and why? A: I am particularly eager to speak to ministers and participants from Africa, India and the US. To ensure security of energy, these regions out of pure necessity have often implemented solutions that enable consumers to adjust their energy demand to the supply situation. We may be able to learn from them to allow Denmark and other countries to have 100% renewable energy in our grids. Q: Can Denmark really learn from these countries? A: Yes! They are interesting exactly because of their lack of infrastructure. In regions where consumers cannot or do not want to rely on grid services, new market platforms, micro-grids and flexible solutions are popping up. In Brooklyn, US, for example, citizens have started building their own micro-grid based on a blockchain platform that allows local owners of solar panels to sell excess power directly to their neighbours, peer-to-peer, without communicating with the central grid. The neighbourhood is also looking to add batteries and electric vehicles to the micro-grid, turning citizens into energy prosumers: consuming and producing power, and enabling the neighbourhood to keep the lights on in case of a hurricane. These solutions are smart and show how digitalisation has massive potential to change the way we consume energy, especially if we can find ways to scale them up to cover thousands of electric vehicles and heat pumps.
FORESIGHT
9
The Big Picture Energy use in buildings and for building construction represents more than one-third of final energy consumption and contributes to nearly one-quarter of greenhouse gas emissions worldwide. The use of timber is increasingly seen as a way to help cut the sector’s energy use, bills and emissions thanks, in part, to wood’s lightness and speed in construction. There is also growing evidence of the mental and physical health benefits of working or living in a green building. Inspired by Cidori, a traditional toy made from wooden sticks, the GC Prostho Museum and Research Centre in Aichi Prefecture, Japan is an eye-catching example of what can be achieved with timber. The museum was designed by the architectural firm Kengo Kuma & Associates PHOTO Daici Ano
10
FORESIGHT
TRANSITION
Gas has a part to play in the integration of renewable energy and the reduction of carbon dioxide emissions. But decarbonisation efforts must intensify if it is to retain a significant role in a future, sustainable energy mix
W
ith considerably lower carbon dioxide emissions (CO2) than coal and oil, natural gas is often seen as an instrument for weaning the world off its fossil fuel dependence, easing the way to a decarbonised future. Natural gas can also contribute to the smooth functioning of the power system through its long-term storage capabilities and flexibility, with modern gas plants able to quickly ramp up and down to respond to changes in output of variable renewable energy generation, facilitating their integration in the electricity mix. Natural gas is, however, far from being the only flexibility mechanism available for the power system. Moreover, like coal and oil it is also a fossil fuel and will have to be decarbonised or replaced by so-called green gases if international climate commitments— particularly the Paris agreement to keep the global temperature rise to below 2°C—are to be met. “Natural gas has an important role to play as part of a diversified portfolio,” believes David Littell of the Regulatory Assistance Project (RAP), a global group of former regulators offering energy policy advice. “But it’s important not to over invest. In the long term, all fossil fuels will have to decrease dramatically.”
SHORT BRIDGE Even the role of natural gas as a bridge to renewables is a short one unless natural gas use is coupled 18
with high levels of carbon capture and storage (CCS), the International Renewable Energy Agency (IRENA) says in its 2017 joint energy transition study with the International Energy Agency (IEA). The study warns of the risk of path dependency and future stranded assets, such as pipelines and liquefied natural gas terminals (LNG), if natural gas deployment expands significantly without long-term reduction emissions goals in mind, leaving infrastructure unused and investors out of pocket. CCS, in which carbon dioxide is captured and stored underground, has not advanced far to date. A lack of support from policymakers and investors, who have favoured technologies considered to be more secure like wind and solar, plus low carbon prices, has held back investments. Yet the European Academies Sciences Advisory Council (EASAC) suggests in a recent report that the world will miss its target to limit the temperature rise to 2°C without CCS. DNV GL, a Norwegian-German risk management company, agrees with this assumption. In January 2018 it launched a framework for certifying the geological storage of carbon dioxide and a recommended practice for the design and operation of CO2 pipelines in an attempt to improve dialogue and investor predictability around CCS. DNV GL’s 2017 Energy Transition Outlook lays out a single, “most likely” scenario rather than targeting FORESIGHT
TEXT Heather O’Brian ILLUSTRATION Louise Rosenkrands
THE ROLE OF GAS
Markets
a desired outcome. In the scenario, natural gas surpasses oil and coal to become the world’s largest primary energy source in about 2035. The scenario also sees gas peaking in 2035 at a level 14% greater than in 2017, before experiencing a moderate decline as renewables increasingly dominant the electricity market.
FUEL SWITCHING Meantime, switching to natural gas from other more polluting fuels may be an appropriate short and medium-term solution in some places and sectors. The shift to natural gas and away from coal in countries like the US and the UK has contributed to cutting carbon dioxide emissions. “It makes sense to start fighting emissions from coal before you start fighting emissions from gas, even though gas is still only a partial decarbonising solution,“ says Sverre Alvik, who heads DNV GL’s research on the energy transition. Yet even partial solutions are not always easy to achieve, with some countries still tempted to use coal. “Our perspective in north-west Europe is massively climate-centred, but this view isn’t shared by much of the world,” explains Jonathan Stern, distinguished research fellow and founder of the natural gas programme at the Oxford Energy Institute in the UK. “For most countries, the priorities are energy security, affordability and access to energy. In that context, gas still faces problems in much of the world because of affordability issues.” At the same time, Littell of RAP points to a “fervent debate” about the best strategy to pursue in some emerging markets and whether it might make more sense to push more for renewables when decommissioning polluting
“The existing European gas network can transport energy at a cost much lower than new electric infrastructure and its storage capabilities can manage the seasonality and variability of demand”
coal or diesel plants and a little bit less for gas. “There are big questions about the extent you should shift to natural gas. If you import LNG, you need import terminals and that is substantial infrastructure. There are also substantial energy losses if you have to liquefy and regassify so it’s less climate friendly,” he says. In the European Union, renewable energy acFORESIGHT
counted for over 30% of total power generation in 2017 while 50% is targeted for 2030 and the power sector is expected to be nearly completely decarbonised in 2050. As a power sector with 100% renewables is no longer seen as an unachievable task, attention is gradually shifting to heating and transport, where increasing the share of green energy is seen as more dif-
ficult. Electrification could help increase the weight of green energy in these sectors as well, but many observers also expect gas to play an important role. While there is a growing consensus that electric vehicles will dominate the future passenger car market, natural gas and other alternative fuels could carve out a stronger position in the trucking and maritime sectors. Natural gas vehicles (NGVs) open the way to renewable NGVs powered by compressed biomethane or liquefied biomethane and based on the development of local resources as part of a circular economy, according to Sylvie Cornot-Gandolphe, a research associate with French think-tank IFRI and author of a January 2018 report on the role of gas in the European energy transition. Gas will also retain a significant role in heating, which accounted for some 41% of European gas demand in 2016, she says. “The European gas network, already well developed and integrated, can transport energy at a cost much lower than new electric infrastructure and gas storage capabilities can manage the seasonality and the variability of demand.” As is the case for transport, natural gas could be replaced in heating by renewable versions.
BIOGAS POTENTIAL There are a number of potential paths to a cleaner gas future, including the development of biogas. Among renewable gas alternatives, biogas produced from the anaerobic digestion of biomass is the most advanced, 19
TRANSITION
FROM FLEXIBILITY Every generation has its buzzwords. Flexibility is the current in-word of the energy transition. Like many overused phrases, it means different things to different people, carrying the risk that ideas get lost in translation, not only slowing the race against time to reduce greenhouse gas emissions and climate change, but also threatening energy security and endangering the bottom line of companies working in the field
24
FORESIGHT
TEXT Philippa Nuttall Jones ILLUSTRATION Louise Rosenkrands
FOG LIFTED
Markets
T
he Oxford English dictionary gives three definitions of flexibility: first, the quality of bending easily without breaking; second, the ability to be easily modified; and third, a willingness to change or compromise. All three definitions are important when discussing flexibility in terms of the energy transition: the power system has to be reliable and able to bend easily to meet different demands without breaking; it has to be easy to modify and react quickly to changes to accommodate the challenges of decarbonised energy production and consumption; and it can only be truly cost-effective, correctly regulated and make use of the right technology in the right circumstances if policymakers, system operators and ultimately consumers are willing to change. “Nowadays everybody talks about flexibility in the context of the energy transition, but each person has something different in mind,” says Emanuele Taibi from the International Renewable Energy Agency (IRENA). Flexibility in energy is for many treated as a sleeping giant they fear to wake. “People give a negative connotation to the need for flexibility driven by solar and wind, however existing systems with large shares of inflexible generation such as nuclear were among the first to adopt flexibility on the demand side,” he states. US President Donald Trump is a prime example of a leader believing that the need for flexibility is connected with renewable energy. He applauds fossil fuels as strong and reliable and ridicules renewables as weak and unpredictable. Increasing reliance on renewables will put the country “at grave risks of brownouts and blackouts,” cause businesses to “come to a halt” and the American family to suffer “lost jobs and a very diminished quality of life,” he warned be-
“What is new is the need to access the potential for flexibility in real time on the demand side as well as the supply side”
fore announcing that the US would pull out of the international climate deal agreed in Paris in 2015. Australian Prime Minister Malcolm Turnbull and his government used a blackout following a cyclone in 2016 to argue against “aggressive” renewable energy targets and suggest that renewables were incapable of “keeping the lights on.” And a report by a group FORESIGHT
of members of parliament in the UK in the same year states that coal power station closures and a drive for renewable energy has left the country facing “intermittent blackouts for the foreseeable future.” Such claims have been discredited many times over. Experts agree that increasing power system flexibility is not only key to managing the decarbonisation of the world’s energy use, it is possible and affordable.
REAL TIME DEMANDS “The penetration of renewable sources of electricity such as wind and solar will increase dramatically over the coming years,” says John Lowry from Eirgrid, the Irish power transmission operator and director of EU-SysFlex, a project his company is leading with French energy behemoth EDF to ease the way for system operators challenged by the need for more flexibility. “While presenting much opportunity in terms of decarbonisation, the increase in wind and solar, coupled with the trend towards the electrification of heat and transport, advances in energy storage as well as consumer behaviour, brings many challenges and complexities from a system operation perspective,” he states. However great the challenge, system operators will have to adapt to this new world environment, insists Lowry. “Core to this is system flexibility.” To what extent more flexibility takes system operators into a new world is up for debate, says Michael Hogan, senior advisor at the Regulatory Assistance Project (RAP) in Brussels. He appears sanguine about the task ahead, emphasising that, on the supply side at least, the concept of flexibility is nothing new. “Demand varies more or less constantly over time and the power system has to follow this and so we already have a range of resources that are capable of operating flexibly.” What is new, he states, is the need to access the potential for flexibility in real time on the demand side as well as the supply side. The Brattle Group, a US consultancy, defines a resource as flexible, “When it can react to operational signals to ramp its power generation up and down to help meet the needs of the system over multiple hours and minute-to-minute.” Brattle’s Judy Chang also suggests that isolating wind and solar as troublemakers is not an efficient approach. “In the context of the energy transition, it may also be helpful to think about flexibility of the system as a whole, hence the entire portfolio of resources,” she says. “A customer who can turn off her air conditioning during a hot summer afternoon to respond to high prices and tight system conditions [is] a perfectly flexible resource.” Lowry says that the extent to which large-scale electricity grids can respond to changing circum25
TEXT Iva Pocock - PHOTO The Fjords / Aurland Photography
Markets
30
FORESIGHT
If the global marine transportation sector were a country, it would be ranked sixth in terms of CO2 emissions. A number of progressive leaders in the industry are starting to explore alternative ways to propel their ships, but more investment is needed
THE TIDE IS TURNING
S
hipping, the industry that is largely out of sight, out of mind and outside of the international Paris climate agreement, is finally coming under pressure to change its means of propulsion. The sector’s fuel of choice is heavy fuel oil (HFO), a cheap, highly toxic and viscous residual from crude oil refineries. When burned it emits high levels of black carbon, a substance that is 3200 times more powerful a climate warming forcer than carbon dioxide (CO2) per tonne and is linked to increased heart and lung disease among those who inhale it. When spilt it is disastrous to wildlife and livelihoods. Being generally high in sulphur, HFO (which in 2017 accounted for over 80% of marine fuel, according to the International Energy Agency) and the other main shipping fuel, distillate fuel, produce significant amounts of sulphur dioxide (SO2) and particulate emissions, which are responsible for acid rain and respiratory diseases. The dominance of these fuels, however, may be about to change. Within the bureaucratic machinery of the International Maritime Organisation (IMO), the United Nation’s shipping agency, there are four different but closely related initiatives that are set to influence shipping’s fuel options. First, a cap on the sulphur level of permitted fuels will come into effect in 2020. Second, technical discussions have started about abatement measures for emissions of black carbon. Third, an initial greenFORESIGHT
house gas reduction strategy that envisages for the first time a reduction in total greenhouse gas emissions from international shipping was adopted by the IMO in April. This would mean a reduction in carbon emissions from shipping to no more than half of 2008 levels by 2050. Last, at the same meeting, an IMO sub-committee was directed to develop a ban on heavy fuel oil use and carriage for use by ships in the Arctic.
ENVIRONMENTAL PROTECTION The initial proposal to reduce the risks posed to the Arctic by implementing a HFO shipping use ban was co-sponsored by Finland, Germany, Iceland, the Netherlands, New Zealand, Norway, Sweden and the US. At the April IMO meeting it was supported by 14 other countries, including Denmark, but not by Russia, Canada, China, the Bahamas and the Marshall Islands. Given these differing opinions, the ban is being developed “on the basis of an assessment of the impacts” and on an “appropriate” timescale. “The motivation is of course environmental protection. Oil spills in the Arctic Ocean would be a huge risk to the sensitive Arctic environment. The properties of HFO mean the environmental consequences could be particularly serious and long-term,” says Laura Sarlin of Finland’s Ministry of Transport and Communications. “A single HFO spill could have devastating and lasting effects on fragile Arctic marine and coastal environments. In addition, Arctic shipping is projected to 31
TRANSITION
The past few years have seen a growing awareness and buzz around cryptocurrencies and blockchain and how these technological tools will alter the way business is done. It is easy for customers to see the attraction of a decentralised data system for the energy sector, but it remains to be seen whether blockchain can deliver on its promises and support the energy transition
New kid on the block
36
ledger back in 2005, but security concerns surrounding the inherent all-user access to the data hindered uptake. Since then the advent of cryptocurrencies, virtual or digital currencies has been “proof of concept,” he says, with blockchain suddenly receiving a significant boost in popularity. The most often discussed cryptocurrency is Bitcoin, not to be confused with blockchain—not least when talking about energy. Bitcoin is a currency, while blockchain is an enabler of secure and multiple trades of a product across the internet. According to a note published by Morgan Stanley in January 2018, the creation of digital Bitcoin tokens—a process known as mining—could, this year, use more energy globally than the entire country of Argentina and use more energy than that required by electric vehicles by 2025. Blockchain, by association, receives similar negative press on its energy use. “There’s a bit of a myth that needs to be dispelled around the energy use of blockchain,” says Katherine Foster from the Blockchain Labs for Open Collaboration (BLOC) in Copenhagen and a blockchain specialist at the World Bank. How much energy blockchain FORESIGHT
Three Google searches are equivalent to a 60 watt bulb being switched on for a minute
TEXT Katie Kouchakji
T
he rise of renewables is changing the energy system and it is also bringing electricity to areas which previously had none. This shift to a growing number of smaller-scale generators embedded at the far reaches of the power system is driving a technological revolution in how electricity is brought to the market. One massive innovation is that of socalled blockchain-powered platforms that can link generators and consumers directly. These trading platforms have the potential to transform the electricity business, moving it away from the traditional model of vertically integrated utility firms serving a specific geographic area. Blockchain literally links, or chains together, blocks of data, such as information regarding a specific power generator and a specific consumer. All users have access to the blocks. “The biggest change is the elimination of third-party intermediaries,” says Michael Mainelli, London-based director of consultancy Z/Yen Group. He describes blockchain as, “Multi-organisational databases with a super clear auditing trail.” They are also referred to as smart or distributed ledgers, which are essentially shared data sets. Mainelli built his first distributed
Science
Joining the dots Blockchain could lead to decentralised energy transaction and supply systems
TRADITIONAL PROCESSES
Network and network operator
PROCESSES IN A BLOCKCHAIN-BASED SYSTEM
Energy company
Wind
Storage
Photovoltaics (RES in general)
Bank payment service provider
$ Conventional generation
Conventional generation
Meter operator
€
Residential user
Network and network operator
Traders
SOURCE PwC global power & utilities
TRADING PLATFORM Industrial user
Electricity Payment / fee Data / blockchain
Storage
Photovoltaics (RES in general)
does use, though, is difficult to determine as it depends on various details, not least how big the chain is and where the data is stored. Foster sees great potential for blockchain and the energy transition.
ENERGY TRADING In a 2016 report, consultancy PwC laid out the potential myriad applications of blockchain for the energy market, including the decentralised trading of FORESIGHT
Industrial user
Residential user
energy, proof of origin, emissions trading, renewable energy certification, and metering and billing. For the moment, however, experts are doubtful the technology is ready to manage energy trading, questioning its ability to keep up with the throughput. “We see millions of transactions per minute to run the energy system,” says Stu Innes, CEO of emhTrade in Auckland, New Zealand. “There are not many, if any, blockchain systems that can do that.” 37
SHARED WARMTH
District heating, where heat from a central generator is distributed underground to warm a network of homes or businesses, is commonplace in Nordic countries, but until now it has remained a rarity elsewhere in Europe
Europe heads for low carbon heating the Danish way
44
able electricity is expected to become a major input for district heating, accounting for as much as onethird of heat by 2050.
NORTH SOUTH DIVIDE While district heating is dominant in Denmark and other Nordic and Baltic countries, with the highest market penetration in Iceland (92%), Latvia (65%), Denmark (64.4%), Estonia (62%) and Lithuania (57%), across Europe as a whole only 12% of homes benefit from the system and barely 2% of countries in the Mediterranean are heated this way. But times are changing. Encouraged by climate policies aimed at reducing greenhouse gas emissions and the growing need to reduce air pollution, cities around Europe are turning to district heating. Paris already has the world’s eleventh biggest district heating network, supplying one-third of the city’s households using a combination of fuel switching and network expansion to help meet its target of powering 25% of its energy consumption by renewable or recovered sources by 2020. In 2016, Paris halved the use of coal in its heating network, with FORESIGHT
In 2015 the UK government allocated £320 million in funding to grow the UK heat networks sector to 2021
TEXT Clare Taylor
D
enmark has a long history of district heating. The country’s first combined heat and power (CHP) plant was built in 1903 and by the 1970s around 30% of homes were connected to a centralised heating network. The real push for change, however, was driven by the 1972 oil supply crisis and subsequent energy price spikes in the late 1970s. The crisis was a wake-up call for Denmark, says Birger Lauersen from the Danish District Heating Association. “At that stage we were one hundred per cent dependent on imported oil,” he adds. Danish policymakers decided to switch fuels and expand district heating networks. “There was a push to use the waste heat from oil-fired power generation in the bigger city networks, while the smaller networks switched to coal,” says Lauersen. Today, 98% of all buildings in Denmark’s capital city, Copenhagen, are connected to district heating. Across the country, renewable energy in district heating has grown significantly, reaching a share of 49.1% in 2014. The government’s aim is to totally eliminate fossil fuel use from heat production by 2035. Widespread deployment of heat pumps driven by renew-
Cities
Residental heating in Denmark, 1981-2016 District heating wins the race to warm Danish homes
Central heating refers to heat supplied by a centrally located source of heat generation in each separate building. When not oil or gas, this can be from other sources such as wood. District heating in Denmark is mainly from large biomass-fuelled combined heat and power plant, which can also supply electricity when required
3.000.000 2.500.000 2.000.000 1.500.000 1.000.000 500.000 0
SOURCE Statistics Denmark
1981
1986
1991
1996
2001
2006
2011
2016
Heat pumps
Central heating without oil or natural gas
Unknown
Central heating with natural gas
Stoves, other
Central heating with oil
Direct electricity
District heating
50% of it now powered by renewable and recovered energy sources. The new energy mix comprises 1% geothermal, 2% biofuel, 10% biomass, and 41% heat generated from waste incineration. In the Netherlands, 80% of buildings in Rotterdam are currently heated by domestic gas boilers, but the city hopes that its Heat Transition Programme will allow it to achieve a 40% district heating target by 2020 and 50% by 2035. That is a tall order. It requires changing the heating of 8000 buildings and replacing 40 kilometres of gas grid every year, starting now. “This is a huge and very complex challenge,” says Astrid Madsen, the city’s energy transition programme manager. “District heating is regarded as one of the alternatives to gas boilers, but the business case is difficult because gas is still very cheap.”
HOLISTIC THINKING Despite the challenges, Madsen insists that district heating is the most cost-efficient solution for areas with high population density. Lauersen agrees. The FORESIGHT
time is right for cities to put in new networks with a longer-term view to decarbonising heat supply, he says. “You cannot have a sustainable city without considering heating and cooling, this is 50% of energy consumption. In Denmark, it took us 20 years to get from 30% to 60% market penetration. For cities that want to speed up their energy transition, heat is an area where you can really effect change.” Most specifically, this is by using surplus heat. Indeed, studies show that there is more heat wasted during electricity production in Europe than is required to heat all buildings in the continent. As Lauersen puts it, “Surplus heat will finance the infrastructure of the future.” He is sees it as unlikely, if not impossible, for cities to otherwise simultaneously develop district heating networks and renewable heat sources without public subsidies. “In Denmark, we are now able to invest in deep renewables, such as solar and heat pumps, because we already have the networks in place and paid for,” he says. Lauersen believes that such change can be 45
PHOTO ESSAY
CITY OF PEOPLE AND LIGHT People have always come first with Jan Gehl, an 81-year-old Danish architect. Throughout his career his aim has been to improve the quality of life in cities by focusing on the needs and desires of pedestrians and cyclists. He wants cities to be liveable, easy to get around in, and with plenty of green space and light. They should stimulate rather than smother people’s senses. Today these goals have a double mission: to improve the well-being of citizens and to reduce polluting emissions. FORESIGHT has taken a walk through the streets of Copenhagen and looked at how the city's space and light accommodate people and increasingly facilitate the generation and use of clean energy. The building occupied by the Copenhagen International School, in the Nordhavn dock redevelopment complex, is an inspiring example of energy-efficient architecture that employs space and light in a harmonious design that promotes well-being and represents a blueprint for future sunlit projects
PHOTO Lars Just
Policy
GOVERNMENT IN NEUTRAL AS BUSINESS DRIVES SHIFT TO ELECTRIC CARS IN DENMARK While Denmark is leading many aspects of the energy transition, the move away from fossil fuels to electric vehicles is not one of them. Only 1.5% of new cars bought in Denmark in 2017 were electric or plugin hybrids compared to around 40% in Norway. The reason for this is simply politics, according to Jeppe Juul, senior transport policy officer at the Danish NGO the Ecological Council. Recently appointed president of the board of Transport & Environment (T&E), the Brussels-based organisation that helped break the dieselgate scandal, Juul is pushing for all EU countries to follow Norway’s example and decarbonise their cars and trucks. In conversation with FORESIGHT, he explains his hopes and frustrations Q: First, congratulations on your new appointment. Denmark is steaming ahead with the decarbonisation of its energy sector and so why are so few Danes buying electric cars? A: Six years ago, Denmark was a frontrunner on electric vehicles (EVs), but due to bad judgement and bad will in the government we are now lagging behind. In 2015, the Danish government decided to phase out tax breaks for EVs, making them more expensive and dissuading people from buying them. This was a purely political decision and totally out of line with what other countries are doing. The high market penetration of EVs in Norway shows that with the right policies people will buy electric cars, even if the choice of models remains limited. In Norway, 13,000 people pre-ordered the new Nissan Leaf. This is because Norwegians know that the writing is on the wall for fossil fuel cars. The country plans to outlaw them by 2025 and is on track to achieve this target in practice. The Danish government, though, is reluctant to follow its neighbour’s example and to encourage people to buy EVs by offering incentives such as free parking for them, allowing them to travel for free on ferries or be exempt from bridge tolls. Transport is a sensitive subject and national ministers in Denmark seem reluctant to tackle it, but this is short-sighted and hampering the efforts of local authorities in Copenhagen that want to do more. 64
Danish companies, however, remain world leaders in terms of technology. Danfoss, for instance, is leading the development of equipment for EVs, while Clever and E.ON are working together to create, over the next few years, a network of fast charging stations for EVs across Europe. Q: What now needs to happen to speed up transport behaviour change and the electrification of the transport fleet? A: We need car producers to divert their investments from diesel to electrification. In the EU, countries need to agree strong targets for zero emissions vehicles in 2025 and more money needs to be directed towards infrastructure projects that facilitate the change. We need an EU ambition level for EVs of at least 20% by 2025 to ensure that the transport sector’s climate targets are met. The European car industry has been lagging behind competitors in other countries for many years by keeping their focus on diesel. Governments now need to help the European car industry by setting firm targets for electrification and setting a clear direction for investments and the future.
“Cars last for a long time. Each new internal combustion engine car sold locks us into future CO2 emissions. A ban on sales of these cars has to be in effect by 2035 at the latest”
Cars have a relatively long lifespan and those sold today will still be on the roads in 2030, while some cars bought in 2030 will be running in 2050. We need this to be taken into consideration when agreeing policies that govern the cars sold in the EU in the coming years. We need regulations now that plan for the end of the internal combustion engine (ICE) in cars. Biofuels are not the answer and so electrification is the only way forward. By 2035, 100% of cars in the EU need to be zero emissions vehicles. Q: Do you think this will happen? A: Yes. I believe that this change will happen even sooner as the technology is already there and so FORESIGHT
TEXT Philippa Nuttall Jones
INTERVIEW: JEPPE JUUL
Policy
Cleaner roads Cumulative sales of electric vehicles in Europe
700,000
600,000
500,000
400,000
SOURCE Transport & Environment based on ACEA and EEA
300,000
200,000
100,000
0 2010
2011
2012
2013
2014
EFTA (Iceland, Liechtenstein, Norway, Switzerland)
things can move quite quickly. New electric cars have a range above 300 kilometre and soon it will be possible to charge around 80% of their battery within a few minutes. For most people there are therefore no practical issues stopping them having an electric car. In Denmark, for instance, 95% of all car journeys are less than 50 km. The judgement in Germany earlier this year [the Federal Administrative Court in Leipzig ruled that cities can impose diesel driving bans to combat air pollution] shows that we are reaching a tipping point. And lots of companies have already said they will stop producing cars that run on diesel—Fiat Chrysler was the latest company to announce at the end of February that it will end the production of diesel cars. FORESIGHT
2015
2016
Q1 & 2
2016
Q3 & 4
EU
Q: The shift to electric mobility risks bankrupting one of the biggest global industries and putting millions of people out of work. True or false? A: False. Electric cars are simpler to produce and have half the running costs of a fossil fuel powered car. For consumers, therefore, the EV industry is closing in on having the same overall cost as a traditional car. For industry, it means that you need fewer people to assemble a car and of course this causes fears about job losses. But studies show that shifting to EVs will create new jobs. Recent research by Cambridge Econometrics for the European Climate Foundation reveals that moving away from oil-powered vehicles to ones driven by renewable energy will create over 65
*This offer is on a first come, first served basis and limited to 200 new subscribers
On the energy transition great minds think alike With foresight they think even better. Improve a great mind with the gift of FORESIGHT. Take advantage of a 25% discount on a personal or institutional subscription to FORESIGHT Climate & Energy. Visit us at foresightdk.com/subscribe / Coupon code: greatmind-ss18 P.S. Pass it on and create another great mind
FORESIGHT / CLIMATE & ENERGY
Better knowledge for better decisions