Cheaper electricity ‘will break geopolitical barriers’ to better EU competitiveness

Conference hears energy sector actions to boost EU competitiveness are within touching distance

According to a new report, electrification and the ditching of fossil fuel alternatives could be economically viable for most industrial processes by 2030… but only if a number of realistic measures are enacted, writes Vic Wyman in Brussels.

In some sectors, electrification is already more economic than alternatives, according to the industrial competitiveness report by Accenture for the European electricity federation Eurelectric.

“Electrification is already a good option in many cases,” said Andrea Falciai, the European, Middle East and Africa utilities industry lead at Accenture, at the report’s launch in Brussels during Eurelectric’s annual Power Summit.

Read more about the report:
Electrification key for industrial competitiveness finds Eurelectric study

The challenge is to “make energy cheap again”, said Katherine Dixon, chief executive of the Regulatory Assistance Project, a clean energy transition NGO. But as gas would never be cheap or allow the EU to compete economically, “the real challenge is to make electricity cheaper”.

Dixon said that poor grid links would result in future under-usage of power plants that are being built today and that the markets failed to value energy storage, leading in part to the need for stronger forward markets.

She rejected any suggestion that the barriers to better EU competitiveness were technical: “They are geopolitical.”

Competitive alternatives

In the case of battery cell manufacturing, for example, the Accenture report claimed that there were already competitive electrical alternatives to fossil fuel-driven coating and drying processes and dry rooms, which account today for almost 25% of the total cost of energy, or 7% of the overall cost of production.

Dry coating electrode technology rather than conventional coating and drying machines, and heat pumps to run dry rooms more efficiently, could cut energy costs by 20-30% today, according to the report.

And in the case of the production of milk powder from liquid milk, which uses low-to-medium temperature steam and high-pressure superheated steam from fossil fuels, electrification could be competitive today, with electrification taking a clear lead by 2030, said Accenture.

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However, for high-temperature and energy-intensive sectors such as the chemical, cement, glass and iron and steel industries, electrification would only be competitive following large cuts in both the capital and the operating costs of electrification alternatives to fossil fuels.

Accenture estimated that, today, only 4% of Europe’s industrial process heat was generated by electricity, despite the availability of technologies such as heat pumps, electrical boilers and electric arc furnaces.

Such equipment could already deliver more than 60% of the 1861TWh of annual process heating energy used by industry, according to the report. And by 2035, 60-90% of industrial energy demand could be directly electrified, using technologies readily available today or under development

Although the situation varied across sectors and between countries, many energy users saw scope for more electrification. Philippe Kehren, chief executive of the chemicals firm Solvay, said that most electrification moves do not cost much. “We just need to act, and to act we just need to trust each other.”

Policies pave the way

The path to widespread electrification involved cutting the technology costs, especially for high-temperature uses, and closing the gap between electricity and fossil fuels costs, concluded Accenture.

It said that the former involved: increasing scale of production; improving manufacturing processes; improving technology to extend asset lifetime and efficiency; and improving industrial processes to lower the temperature needs to allow the use of already available equipment at lower cost.

To give electricity the edge over fossil fuels, Accenture called for: removal of bottlenecks; de-risking of long-term contracts; minimising system costs; and reducing taxes and levies.

Among the bottlenecks identified were long waits for grid connections, inadequate equipment production capacity (currently a wait of about 200 weeks for a large power transformer, for example) and a lack of workers.

And investments could be de-risked by adopting power-purchase agreements to provide predictability to energy producers and consumers. “PPAs are a good way of dealing with the problem,” said Markus Rauramo, Eurelectric president and chief executive of the state-owned Finnish energy company Fortum.

To minimise system costs, the increased flexility needed to support more variable renewable generation could come from nuclear as well as short- and long-term storage systems such as batteries and hydropower, said Accenture, along with more demand flexibility by industrial consumers, clean energy quotas and clean energy price premiums. And particularly carbon pricing.

Accenture also called for an end to discrimination in taxation. EU electricity taxes as a share of final bills were three times higher for household consumers than for natural gas and three and a half times higher for industrial consumers, it said.

Originally published on Enlit World.