Enel CEO: ‘Clean electricity will power 99% of Europe’s transport and heating by 2050 — and this is how it will work’

There are several arguments that are often used to explain why the world cannot be fully powered by clean electricity:

1) Power grids will not be able to cope with the increased demand for heating and transport;

2) Wind and solar projects cannot be built fast enough to replace existing fossil-fuel power plants and meet the increased electricity demand;

3) Wind and solar is intermittent, so there won’t be enough electricity available when the wind isn’t blowing and the sun isn’t shining;

4) When there are a lot of wind and solar farms on a grid, supply will frequently exceed demand, leading to low or negative power prices, so renewables projects won’t be profitable and therefore won’t get built.

But Francesco Starace, chief executive of Italian power giant Enel — Europe’s largest electricity company by market capitalisation and Ebitda — believes that none of these arguments are valid, and tells Recharge how all these potential problems will be resolved.

“I think that by 2050, we can have a European system that would be fully electrified. Is it possible? For sure. Is it possible only with renewables and nuclear? Probably yes, to 98-99%. You will always have some kind of back-up thermal generation in standby here and there. You will always have probably some kind of district heating system that cannot be dismantled. So there will always be exceptions.

“In 2050, you will also have someone driving a car with an internal combustion engine in it, [in the same way] as today, you have people riding horses.

“But for the purpose of normal life and society at large, it is going to be electrified.” (see separate story here on why Starace believes electric vehicles and electric heating are better options than hydrogen)

1) Will power grids be able to cope with the increased demand for heating and transport?

It is often stated that for Europe to electrify its transport and heating, the continent will have to double the amount of electricity on its networks, and Starace — who has led Enel since 2014 — does not disagree.

Massive investments will be needed to upgrade the power grids to handle the greater demand for electricity in certain places, but this is not difficult to do, he says.

“Distribution and transmission are going to evolve in a big way in order to serve this trend,” the Italian explains. “This is not so much a technological challenge… this is not going to the Moon. It’s just a question of the regulators understanding that more money has to be invested in these networks and look at ways to direct investments where they should go.

“To upgrade the network means to build more [power] lines and build more substations and digitising the systems. It’s not about technologies we don’t have, it’s just the question of doing it… of putting in more cables or larger cables. It’s a question of just putting more money and people to work, but that’s totally possible and it will happen — no question, for sure.”

In January, trade body Eurelectric unveiled a study that showed that Europe’s distribution grids would need €375bn-425bn ($456bn-516bn) of investment to ensure that they can handle increasing volumes of variable renewable energy as well as the expected extra demand from heating and transport.

So will it be affordable to upgrade the networks?

“Yes. It’s cheaper than other solutions and… from an economic standpoint, electrifying Europe — rather than prolonging its dependence on fossil fuels — is a big, big [cost] saving for Europe,” Starace explains.

He admits that upgrading the grids will be “capex intensive”, but that the running costs will be a lot less than, say, an energy system reliant on natural gas, or blue hydrogen derived from the former.

“So you invest money up front [in grid upgrades] and then everything is basically almost free, and you just have to repay the capital. With fossil fuels, you pay something upfront, but then you keep paying a lot for these commodities going forward, plus all the damage that you create on the environment.”

He also argues that grid upgrades should not be seen as a cost that will have to be borne by taxpayers or consumers — they would be profitable investments that would increase grid operators’ incomes, as they would transmit/distribute more power to consumers. Such investments would “absolutely” be self-funding, Starace says.

And even if huge numbers of households installed their own solar panels and batteries, these “prosumers” would still sell their excess power to the grid, and the distribution system operator will get paid to distribute this energy.

2) Can we build renewables fast enough to meet future power demand?

Recharge asks Starace whether it would be possible to build renewables projects fast enough to both decarbonise the power sector and meet the increased demand from transport, heating and heavy industry.

According to the International Energy Agency, annual clean energy investment will need to more than triple by 2030 if the world is to reach net zero emissions by 2050.

Starace says there are no bottlenecks in terms of resources or potential sites for renewables projects, but that the biggest hurdle to overcome is slow permitting.

“The systems we have inherited from the past — the procedures and processes that govern the agreement around new installations — are not at par with this acceleration. So there is a bottleneck in the permitting,” he explains.

“Unless attention is driven to this point by the stakeholders, and governments look at it with real attention, then there will be frustration on the way.”

So what should the politicians do to speed up permitting processes?

“You need to basically set fixed times and define that a non-answer [within that time frame] is a ‘yes’,” he says.

Starace points out that processing more planning applications in a shorter space of time would require the permitting authorities to have higher staffing levels than today.

“So if you want to quadruple your installations, you also have to more or less quadruple the number of people you put in the office to process the applications, because otherwise this doesn’t work.”

3) Will enough clean electricity be available when the wind isn’t blowing and the sun isn’t shining?

One of the biggest questions surrounding the scale-up of renewable energy and the electrification of heat and transport is how clean electricity will power the continent when the wind isn’t blowing and the sun isn’t shining — particularly on cold, dark winter days.

The answer is a combination of energy storage — which may or may not include the use of green hydrogen — as well as demand response and vehicle-to-grid, Starace explains.

“You will need more batteries and batteries will be ubiquitous in the system. And you will need storage of electricity, which will take the form of pumped storage, gravity storage, and all kinds of potential storage systems,” he says.

“Hydrogen might also play a role. Let’s remember it’s a very valuable and difficult-to-handle commodity. So you can store energy in the form of hydrogen [but] it’s not easy to retrieve that energy… so it requires some attention.

“There could be places where seasonal storage will be needed. And again, seasonal storage is today available through pumped hydro, but it can be done also with gravity storage. There are a lot of solutions out there.

“Batteries today are only allowing four, five, six hours storage — batteries will evolve. You will have different batteries that today are just being studied, but I’m quite confident that in the timeframe we’re talking about, there will be storage in batteries that will allow longer storage times.”

At the same time, demand response will reward consumers for reducing their energy use at times of high electricity demand, while vehicle-to-grid applications will allow electric vehicles (EVs) to send power from their batteries to the network when required, and pay their owners accordingly.

The potential storage capacity of electric vehicles is enormous. A quick calculation based on an expected 130 million EVs on Europe’s roads by 2030, with an average battery size of 100kWh (up from today’s average of 60kWh) would mean that 13TWh of batteries would theoretically be able to provide power to the grid when required. To put that in perspective, that’s almost 11,000 times more storage capacity than the world’s largest battery, the 300MW/1,200MWh Moss Landing Energy Storage Facility in California.

Demand response and vehicle-to-grid “will be increasingly important because of the demand becoming more volatile from one side and also generation becoming more volatile on the other. I think flexibility and related services will be extremely important”, Starace says.

“I think vehicle-to-grid will evolve as a smart way of providing services to the network while the cars are not being driven and also a smart way for owners to have their cars earn them money, rather than what happens now.”

4) How can price cannibalisation be prevented?

The problem of price cannibalisation — that when there are a lot of wind and solar farms on the grid, supply will increasingly often be greater than demand at sunny and/or windy times, leading to low or negative power prices — is a very real one, which could deter future investment in renewables projects.

Two types of solution have been proposed — for long-term fixed-rate off-take agreements between developers and utilities, or for excess renewable energy to be diverted into energy storage or to electrolysers that would produce green hydrogen.

Yet storage capacity might well be limited and rapidly be filled up in times of excess supply, while the levelised cost of green hydrogen becomes cheaper the more hours an electrolyser is in operation, so H2 produced using only excess renewable energy will invariably be more expensive than that produced at dedicated green hydrogen plants.

And while using fuel cells at wind or solar projects to convert the hydrogen back into electricity when required would be possible, the round-trip efficiency would be around 35%, so that might not be the most cost-effective method of dealing with temporarily low power prices.

Starace, however, has a completely different idea as to how to resolve the problem of price cannibalization — by changing the way the power markets operate.

“I think the issue is why are we having a system marginal price [SMP] in our heads? Because we come from a fossil-fuel world in which this was a completely logical and functional and intelligent way of having prices set by the most expensive plants — and that leads everybody to be aggressively competitive on that basis,” he says.

“But once you get to a point where, say, thermal generation is just 20% or 30% of generation, can you politically sustain a system marginal price?”

Starace believes Europe will move to an energy system based around long-term contracted renewable energy at fixed prices, with the SMP remaining for the dispatching of residual thermal power plants perhaps for another 15 years or so, before the SMP would eventually be replaced by capacity payments.

He says that when Europe’s power system is comfortably being run on variable renewable energy and storage, electricity will be sold to the public in the same way as today’s mobile phone contracts — consumers will pay a flat monthly fee for their electricity.

“A long time ago we used to make short [phone] calls because the calls were paid by the minute, which was a nonsense — there was nothing in additional costs [for network operators] for these additional minutes. But then somebody said, look, it’s a flat fee and you can call anytime you want. Basically, this is going to happen also here [in the power sector].”

Read more: Using clean hydrogen for domestic heating and transport is ‘nonsensical’, says Enel CEO

This post appeared first on Recharge News.

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