From Overambitious to Realistic

by: Farah Abi Morshed

  • Shifting from polluting to less polluting sources of energy is easier said than done
  • To ensure a high reliability of electricity supply, we will remain dependent on gas and, at a later stage, hydrogen
  • An up-to-date electricity grid is a pre-requisite to ensure high renewable energy integration and cope with electrification  

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Ambitious targets

The Netherlands has set ambitious targets with regards to reducing carbon emissions and moving towards a large share of renewable energy. The aim is to achieve 16% of renewable energy share by 2023. This means more than doubling the current share of 7.4% (Figure 1). Moreover, as part of the overall climate policy in the form of the ‘klimaatakkoord’ (climate agreement),  the aim is to reduce carbon emissions by 49% by 2030 in comparison to 1990 levels and to phase out using coal for power generation by that same year.

The energy transition is not only high on the agenda of the Dutch government but increasing numbers of people are installing solar roof panels, considering electric vehicles and insulating their houses to achieve higher efficiency levels. Meanwhile, the government often discusses the energy transition from a political point of view, with little emphasis on the fundamentals that can enable or inhibit the energy transition. As we aim to meet the related targets, it is important to recognize that the energy transition is facing a multitude of challenges that are not initially very apparent. Here, we discuss a few of these challenges.

An up-to-date electricity grid is a pre-requisite

With our eyes on the horizon, aiming towards a 16% renewable energy share in 2023, it is often forgotten that electricity requires transportation from the generation source to the user in order to be consumed. Take, for example, the surplus of electricity from solar roof panels. This surplus must travel back through the electricity grid. The electricity grid is similar to the road network. It also faces congestion during peak hours. So if we all drive to work at 08:00 in the morning we will face traffic congestion, as does the electricity grid during such times. This occurs, for instance, if we all turn on our TVs in the evening to watch a football match or charge our electric vehicles at the same time.

The problem of congestion on the electricity grid not only occurs due to the increase of decentralized supply (i.e., solar roof panels) but also the increase in electricity demand due to electrification. Take, for example, the integration of data centres, electric vehicles, and heat pumps which are demanding more and more electricity. Subsidization schemes (like SDE+ subsidies) have also strongly supported the development of renewable energy farms and the rollout of electric heat pumps. But the electricity grid needs to be able to keep up with the energy transition. If it doesn’t, it might not be possible to continue to ensure a reliable, affordable and accessible supply for everyone.

First signs of insufficient grid capacity are already emerging

Grid operators are already forced to delay the connection of electric charging poles and data centres because the grid is unable to handle the electrical load. In 2019, FastNed (a company building/operating electric car charging stations) was unable to connect to the grid on time, and grid operators were fined as a result. Grid operators are warning that demand for electricity in Amsterdam will soon be six times higher during peak hours and the grid cannot handle such a load. Looking ahead, the situation will only get worse given the city’s ambitions to phase out gas by 2040 and allow only electric transport by 2030. Consequently, ensuring a reliable electricity grid is equally important, if not a pre-requisite, for further electrification and integration of renewable energy sources into the electricity system. For more details on possible solutions, please refer to our previous publication.

The reliability of electricity supply is at risk  

It is  highly desirable from an environmental perspective to aim for a 49% reduction in emissions by 2030. However, it is assumed that we can accomplish this by phasing out fossil fuels (referred to as molecules) and electrify all processes that are fossil fuel intensive. However in our view, at least in the coming years, this it is not technically viable without the use of natural gas, liquified natural gas or – at a later stage –  hydrogen.

The output of solar and wind farms is weather dependent, and therefore the availability of electricity is inherently uncertain. The reliability of the electricity supply in the Netherlands is currently 99.996% – which is one of the highest levels of reliability in the world – and the Dutch government has indicated in the climate agreement that it wants to maintain this level. Consequently, solely depending on renewable energy generation will most likely be insufficient to ensure and maintain such a high level of reliability. To ensure that high penetration of renewable energy generation is technically feasible while also ensuring high levels of reliability of electricity supply, the following two options are possible:

1 – Storing electricity in local batteries – feasible in the short term; not yet in the long term

If the output of solar and wind farms is higher than the demand for electricity, the surplus could be stored in batteries. During periods where the demand is higher than the supply, these batteries could serve as a buffer to maintain the electricity supply. However, this would only solve short-term imbalance problems at a local level. Over the longer term (weeks and months), the output of solar farms is roughly 10 times less in the winter than in summer (Figure 2). Storing enough electricity in batteries to overcome these seasonal troughs, while ensuring enough electricity, is simply infeasible. To put this in figures, if hypothetically half the country’s electricity is generated by solar power, we would need a storage capacity equivalent to more than half a billion electric vehicles to store the amount of electricity needed for the Netherlands alone.

2 – Gas and hydrogen will be needed

In combination with electric batteries, gas and hydrogen from fossil fuels (in the short term) and renewable energy (in the long term) will be key to ensure the balance between supply and demand. During periods of high renewable energy supply, excess of electricity can be used to split water molecules into hydrogen and oxygen (known as electrolysis). The hydrogen can then be stored in a compressed state (e.g., in abundant gas fields), transported through the gas network (in specific percentages/volumes) and used for the generation of electricity using fuel cells. Alternatively, the hydrogen can be enriched with carbon dioxide, which results in the creation of methane that could also be stored for later use. Methane, like hydrogen, can be used to generate electricity at a later stage or act as a feedstock for industry.

While the electrolysis technology promises high electricity storage capacity and is aimed at using the existing gas infrastructure, the technology still needs to mature with the support of regulation and efficient investments.  Meanwhile, until hydrogen reaches a tipping point in maturity and cost parity, natural gas and LNG will remain crucial to fill demand gaps during peak times (short term) and seasonal gaps (long term) (Figure 2).

Shifting from one source of energy to another is easier said than done

Currently, 49% of the Netherlands’ electricity generation still comes from gas and 26% from coal. It is a well-known fact that coal power plants are more polluting and less efficient than natural gas power plants. This alone should be a good argument in favour of shutting down these traditional sources of energy. The same argument applies when discussing a shift away from gas towards renewables. The strengthening of the  European Emission Trading System (ETS) can have a positive effect on the transition from coal to gas and to renewables (Figure 3). This system increasingly punishes high polluters (coal power plants versus gas power plants). Nevertheless, there are many other factors at play that affect the source of energy used to generate electricity.

Even in situations where the cost of gas is lower than the cost of coal, there are times when switching to gas and renewables is not an option. After all, ramping up and ramping down power plants takes time and money and there are situations when gas power plants are already running at peak capacity during peak times. In addition, as long as the grid is not up to date, disconnecting wind/solar farms is a necessity to protect the electricity grid. Furthermore, combined heat and power obligations that have already been negotiated could also make it impossible to change generation sources overnight.

From overambitious to realistic

In light of the ambitious renewable energy and decarbonization targets agreed in the climate accord, it is crucial to remain realistic and aware of the multitude of challenges confronting the energy transition. Those challenges vary from electricity transportation problems and supply & demand imbalances to a multitude of stable and intermittent sources of generation. To come close to the targets of the climate agreement, it is crucial to overcome these challenges and ensure pre-requisites are in place for such a fast-paced energy transition:

  • The electricity grid is about to become a game-changer in the energy transition. Grid operators have a critical role to play in ensuring that the electricity grid can cope with this transition. The growth of decentralized generation (i.e. solar roof panels), electric vehicles, data centres and electric heat pumps will likely increase congestion on the grid and eventually threaten the current high reliability of supply.
  • During periods when demand exceeds supply, batteries could serve as a local buffer and supply electricity. However, this would only solve the short-term imbalance problem. For seasonal imbalance problems, the current level of technology means that during periods of low renewable energy production we will still be dependent on gas and hydrogen to store the excess of renewables and allow high electricity storage and efficient transportation.
  • Shifting from one source of energy to another is easier said than done because there are many factors at play. Among other things, ramping up and ramping down a power plant takes time and money, pre-negotiated heat and power obligations do not easily allow a change in energy sources and sometimes curtailing renewable energy is necessary to protect the electricity grid.