• Wärtsilä Energy

Interview: Jan Andersson, Senior Market Development Analyst, Wärtsilä Energy Business

Sector coupling plays a key role in decarbonising the European energy system. Jan Andersson, Market Development Manager at Wärtsilä Energy, Europe, shared exciting insights to the World Climate Foundation of Wärtsilä Energy´s recent work on sector coupling and drew important conclusions for what needs to happen to achieve real change. Jan spoke on this topic at World Climate Forum Europe on 17 November as part of London Climate Action Week. Watch the full panel discussion here.

Jan Andersson, Senior Market Development Analyst, Wärtsilä Energy Business

How can we handle excess renewable energy generation in the best way?

We need to start optimising how we generate and consume energy throughout the whole society, that is the essence of sector coupling. Looking at the world today we have now reached the point when we have excess renewable energy available from time to time. This is a challenge for our inflexible power systems, which is leading to curtailment of renewable energy or pushing it across borders for heavy costs and this is not optimal. I believe we must change our mindset on how we see electricity. This means that society must to a higher degree be electrified, e.g. utilising more EVs and power-to-heat technologies. There are of course sectors which are not easily electrifiable, such as industry processes or heavy transport and these should be using renewable feedstocks and fuels such as hydrogen.

What are some of the potential impacts of sector coupling on the energy system as a whole?

For me, sector coupling is a big optimisation opportunity, or challenge. An optimisation of how we really generate and consume energy throughout society. Through sector coupling, i.e. by doing this optimisation, we avoid excessive oversizing of generation assets and we reduce the waste of energy throughout society. This holds true both in the generation phase and in the consumption phase, i.e. when we are using energy, we are using it with an as high efficiency as possible. I also believe that sector coupling will fundamentally change the patterns of electricity consumption. The way we consume electricity today does very seldom match the generation profiles of renewable energy sources, which means that we need some form of energy storage in between, such as batteries, pumped hydro, heat storage, hydrogen, etc.

We have done quite a lot of modelling in the past and we have also done modelling on sector coupling for Germany. Our modelling show that when connecting different sectors together, in this case the electricity and the heating sectors, we should build a versatile system that utilise the best features of different technologies. We should have wind and solar that generates most of the energy, storage that shifts electricity from time of generation to time of consumption, flexible thermal that can support when there is not enough renewable energy, heat pumps to decarbonise space heating and heat storages to enable more flexibility in the heating sector. This is a resilient, affordable and a secure system. I believe that is one of the cornerstones of sector coupling and it shows how to build a future system.

What actions need to be taken moving forward to facilitate sector coupling across Europe?

The first action that we need to take is the mindset change with regards to electricity. Today electricity as widely considered an end-product. This needs to change. We need to see electricity rather as a raw material for, e.g. heating, hydrogen or enabler of transportation. We are already going in that direction. There are a lot of heat pumps being installed and electrical vehicles are becoming more abundant on our roads. But we still need to take the mindset change even further in society and throughout the whole value chain.

Secondly, I believe, that the consumer will have a role to play in making sector coupling really work. As sector coupling is partly about optimising the use of energy, the change in consumption patterns will certainly ease this optimisation. However, for consumers to adapt, there must be an upside, i.e. you need to gain something in doing so. Therefore, we should really empower the consumer to contribute.

The third point is around regulation. Taxation and regulations for surcharges of electricity is centred around consumption. In part this hinders the investment into technologies that are needed. One example is battery energy storage, where in some places stored electricity is still double taxed. Therefore, I think that regulation in general should be adapted in such a way that it favours investments into solutions that facilitate sector coupling. On the consumer side this could be investment support for heat pumps, incentives to buy an electric car instead of gasoline or diesel and participating in demand response. On the generation side we need to see more support for flexible assets and storage.

How will the cost of sector coupling be addressed?

Cost is, of course, one of the main topics especially today when we are still living in a pandemic ridden world. There is a lot of support packages being discussed and support money going out to help the society overcome the pandemic and this will result in a big bill in the end. The high-level modelling that we have done for Germany, shows that a sector coupled system is cheaper than sub-optimising electricity and heating. It leads to a 10-15% saving on cost, when comparing a sector coupled model to a model that is sub-optimised for electricity and heating alone.

Furthermore, sector coupling does not make the question on technology irrelevant. Our results show that building a versatile system with all available technologies is 35-45% cheaper than focusing on renewable sources alone. That is a huge difference in cost that ultimately stems from the requirement of secure supply. To have security of supply in a system based on only intermittent renewables and storage you must over-size the system a lot just to manage the days with no wind and little sunshine. In a versatile system where you have also flexible thermal assets on the other hand these assets form the basis for supply security. These units will only run when needed, but it will significantly reduce the need for over-sizing. The fuel will in the future be made from excess renewable electricity, i.e. the fuel becomes a form of long-term energy storage.

Therefore, I believe sector coupling is an optimisation of both generation and consumption of energy. I also believe we already have all the knowhow and technology that we need to build the future and we can do it together.

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