Europe’s Power Backbone: Three Key Recommendations for an Integrated Energy System

The final warning: IPCC urges action

A few days ago, the Intergovernmental Panel on Climate Change (IPCC) published its latest Assessment Report on the current state of our climate. The result was sobering. Since 1990, the IPCC has regularly pointed out the unprecedented scale of the challenge of limiting global warming to 1.5 °C. There has been a lot of talk since then, but we have to admit: Despite 33 years of reporting, far too little is being done. The pace and scale of action to date remain insufficient to actively tackle climate change.

The plans to make Europe CO2-neutral by 2050 are also ambitious, but unfortunately far too unspecific. So, we should not be surprised that we are not making any progress – on the contrary: According to the IPCC, global greenhouse gas emissions will most likely exceed the 1.5 °C mark before 2025 if drastic measures are not taken now. Therefore, the IPCC report must be seen as a final warning to act now. Ideological debates about the “how” will get us nowhere. We need to drive decarbonization forward quickly and with an open approach to technology, including renewable, low-carbon electricity as well as hydrogen, because there is no one silver bullet. 

Strong focus: Europe’s power backbone

But what does an integrated energy system for Europe look like? Together with our partner Air Liquide , we looked into the question of what exactly is currently needed to enable the energy system in Europe to quickly and efficiently make the energy transition a success – from a technological, financial and macroeconomic perspective.

In doing so, we have focused on an aspect that far too often remains in the background of the debate: transmission. It forms the backbone of our energy supply and at the same time connects a wide variety of elements of power generation with their many applications. It is a backbone that will come under massive pressure if we consistently push ahead with the necessary expansion of renewables and thus drastically shift the previous parameters of power transmission. The question of whether we will really succeed in transitioning to an energy system dominated by renewables and low-carbon energy sources by 2030 will therefore also be decided here. We have published the result in a joint study, which you can access on our website. So, let me just touch upon the key findings here. 

Electricity and hydrogen transfer

Transport, industry and heating – these are the three central areas in which energy is consumed. They are the focus of the switch from fossil fuels to renewable or low-carbon energy sources. Whenever possible, we should focus on direct electrification, because it ensures the most efficient use of the available energy and avoids additional losses that occur during conversion processes. Nevertheless, not all applications can be directly electrified. This is where low-carbon energy sources such as hydrogen come into play.

Therefore, electricity and hydrogen transmission should not be considered as competing with each other, but rather as complementing each other, with both contributing to the success of the energy transition in their respective fields of application. Both technologies must be considered in order to achieve the overall goals for decarbonizing the European economy. Given the urgency of achieving Europe’s climate goals while ensuring energy security, we recommend a pragmatic approach based on the following recommendations:

1.    Make electrification the top priority for investment

Europe needs a sustainable energy system that can compete globally and reduce dependence on individual energy sources. To achieve this, we in Europe must now make massive efforts to actually reach our goal of being CO2 neutral by 2050. Specifically, we need to expand renewable energy production on our continent by 89% by 2030. But this will only work if we channel investment not only into power generation systems but also into the corresponding transmission systems and accelerate the electricity interconnections between European countries.

This is the only way to rapidly decarbonize heat and power generation, which is still heavily dominated by fossil fuels such as coal and natural gas, and to maximize the benefits of renewable energy production, which are still only available to a limited extent. In essence, this means a complete transformation of the entire European energy market, which is currently not prepared for these massive changes. This is another reason why strengthening and expanding the electrical infrastructure must be an absolute priority – at various voltage levels. Local and decentralized systems at the distribution levels must be supplemented by robust, centralized power transmission systems at both a national and international scale.

2.    Scale hydrogen with a focus on key industry clusters

Energy storage is key to energy security. Hydrogen is a form of energy storage that is independent of the time and place of demand. It will play a central role especially in areas that cannot be directly electrified, for example for the decarbonization of heavy-duty mobility and aviation, and for industrial processes in which it can be used directly in its chemical form. But to help hydrogen achieve a breakthrough, production capacities must be expanded, transport options created, and storage infrastructures developed.

The good news is that the cost of energy production and transmission can be reduced by a factor of two if the energy is consumed in the form of hydrogen (chemical energy). Therefore, investment in a European hydrogen backbone must be accelerated and existing gas infrastructure must be repurposed for hydrogen as soon as it is available. But here too, priorities must be set: Priority should first be given to investments and projects in key industrial clusters, because both existing demand and many future large-scale applications are in localized clusters such as these. And before new import dependencies for green hydrogen emerge, this prioritization also helps scale domestic production. In addition, all hydrogen production technologies should be considered based on their carbon footprint. Low-carbon hydrogen, produced primarily through carbon capture and storage, should be developed simultaneously with renewable hydrogen. This is the only way to scale the hydrogen market in Europe quickly and consistently.

3.    Integrated and holistic planning makes a difference

If demand is high enough to justify it, domestic hydrogen production can eventually be supplemented by imports. However, price should not be the sole determining factor. To ensure that imported hydrogen and hydrogen produced on site compete on a level playing field, it is also important to consider factors such as environmental impact over the entire life cycle. In this way, we can create regulated hydrogen backbones that also coexist with private, unregulated supply networks in industrial centers. Overall, it is now a matter of planning the infrastructures in the various energy sectors and industrial clusters in an integrated and holistic way. This is the foundation for building a sustainable and cost-efficient energy system in Europe. And this is what we as politicians, the business community and the financial world must now focus on.

Amid all this, we need more determination to act, and the courage to reduce complexity. The latest European legislative proposals still lack the courage to do this. But the industry itself can continue to lead the way. The partnership between Air Liquide and Siemens Energy is an excellent and important example of this. Together, we are working to create a European hydrogen sector. In this way, we are showing how we can quickly decarbonize not only industrial processes, but also the transportation sector. Others need to follow this example.