In this report, the Federal Planning Bureau sets out to scrutinise the place hydrogen can occupy in the future Belgian energy system by 2050. In fact, this publication focuses on two divergent evolutions of energy (end) uses: on the one hand, a far-reaching electrification of the final energy consumption, on the other, a sustained and increased use of gas for transport, (industrial) heating and power generation. Different outcomes of the two future visions are reported such as the required investments in infrastructure (interconnections, electrolysers, storage).
In a period in which we try to come to grips with the sanitary and economic effects of the coronavirus pandemic, a lot of high-level announcements on recovery plans containing e.g. fiscal stimuli to avoid further economic catastrophes are being uttered. This happens on both national and supranational level. An often-heard remedy to climb out of the recession is to start building the hydrogen economy. To that purpose, the European Commission formulated a strategy eyeing 40 GW of renewable hydrogen electrolysers by 2030. Belgium already mentioned its hydrogen ambition in its Long-Term Strategy, handed over to the European Commission in February 2020.
In this report, the Federal Planning Bureau sets out to scrutinise the place hydrogen can occupy in the future Belgian energy system by 2050. In fact, this report focuses on two divergent evolutions of energy (end-) uses: on the one hand, a far-reaching electrification of the final energy consumption, on the other, a sustained and increased use of gas for transport, (industrial) heating and power generation. These different future pathways provide the basis for the definition of two distinct scenarios, called respectively ‘Deep Electrification’ and ‘Diversified Energy Supply’.
Both scenarios do respect and are compatible with the 1.5°C temperature increase limit as stated in the 2015 Paris Agreement: they both set sail towards a full decarbonisation (net zero greenhouse gas emissions) in 2050. To achieve this goal of full decarbonisation, both direct and indirect electrification are assumed to (take off and) increase dramatically. Direct electrification means that fossil fuels used for certain energy end-uses (like e.g. transport and heating) are replaced by electricity: this is actually what happens when buying an electric car or installing an electric heat pump. Indirect electrification means that electricity is being used in (an) industrial process(es), hence, is being converted into something else like hydrogen or ammonia. The latter two can then be used to satisfy the consumer’s energy demand, be it for transport, heating, industrial processes or power generation.
Although both scenarios integrate (in)direct electrification, the degree to which they do, diverges. The scenario ‘Deep Electrification’ is primarily based on direct electrification, whilst ‘Diversified Energy Supply’ integrates more indirect electrification.
The present analysis contains a selection of indicators (called KPIs or Key Performance Indicators) to investigate the impact of more (in)direct electrification on the future Belgian power system. In general, in both scenarios, total power demand in 2050 increases dramatically compared to today’s levels: it is up to three times higher than 2018 demand. On top of that, the partial flexibilization of power demand is proving to be an important aid in supporting the future energy system operation.
In 2050, supply of electricity originates in a combination of domestic production (88%) and net imports (12%). The former is based on a highly renewable energy system: the share of renewable energy sources in the electricity production mix lies between 67 and 68%. This, however, does not mean that gas units are singing their swan song anytime soon. Gas, which is composed of e-gas, biogas and some remaining fossil gas burnt in thermal units equipped with carbon capture and storage, occupies a third (32 to 33%) of the future power mix.
Belgium remains a net importer of electricity in 2050: it imports more power than it exports. Net imports reach, on average, 29 TWh. A cold winter, as simulated in one of the investigated climate years, decreases the domestic production of electricity (and hydrogen for that matter) and increases net imports. Nevertheless, Belgium does export (and transmit) power. Its major clients are France and the UK which both have nuclear energy in their capacity mix. Belgium primarily imports from the Netherlands, followed by Germany.
Curtailment is low in both scenarios and generation adequacy can be assured, even during rather harsh winter conditions (mimicking the winter of 2010), according to the current legal (double) criteria. System marginal costs, a proxy for wholesale power prices, are, on average, comparable between scenarios.
Where the two scenarios differ, is, first, in their need of flexibility and in their (use of) flexibility instruments. Flexibility in future power systems is crucial since the penetration of variable renewable energy sources (wind and solar) is high: they represent 58 to 60% of domestic generation. Since these renewables are weather dependent (they only produce electricity when wind is blowing and sun is shining), other generation, demand and storage units have to fill the gaps. Above that, the dynamics of demand (daily peaks, weekday-weekend, seasonal patterns) add to the flexibility needs. The need for flexibility is higher in ‘Diversified Energy Supply’ and electrolysers combined with gas-fired power plants are the main daily, weekly and annual flexibility providers. In ‘Deep Electrification’, electricity imports together with electric vehicles become more important daily and weekly flexibility suppliers: they compensate for the lower installed electrolyser capacity. The latter nevertheless contribute substantially to ease the flexibility needs, even in ‘Deep Electrification’, in which they provide half of the annual flexibility needs.
Both scenarios do make use of the (existing) gas infrastructure, but how much they use it and its main purpose differs: in ‘Diversified Energy Supply’, it is primarily used to satisfy energy end-uses, whilst in ‘Deep Electrification’, it provides an important means of flexibility for the power system.
Another interesting finding is that more trade takes place in ‘Deep Electrification’: more imports, but also more exports can be observed. This can be explained by two factors: 1) its somewhat higher Net Transfer Capacity, 2) the system possessing a higher degree of flexible electricity demand that can be traded off for interesting electricity import and export opportunities.
The aggregate demand for hydrogen (including pure hydrogen and hydrogen further processed into egas and e-liquids) in Belgium is substantial. If Belgium is interested in producing a (large) part of this hydrogen on its own territory, it should foresee ample renewable energy sources (including biogas). Domestic production of hydrogen via electrolysis can amount up to 99 (80) TWh in 'Diversified Energy Supply' ('Deep Electrification'). Importing hydrogen is another option: if there is little or no cheap electricity available and/or if the price of producing hydrogen elsewhere and transporting it to our country ('shipping the sunshine') is more attractive, imports will increase.
As regards the exploitation costs of the power system, ‘Deep Electrification’ seems to have somewhat lower costs compared to ‘Diversified Energy Supply’. The difference between the two scenarios, nonetheless, is rather small, certainly when it is being compared to the total energy system cost.
The exploitation costs, however, do not comprise the investment costs (or annuities) of the different systems, they only relate to the costs incurred by electricity system operations (production, curtailment and loss of load). The investment costs (not reported in this publication) will be considerable given that the energy system of the future is infrastructure (capex) heavy and a lot of investments (still) need to be (re)done or upgraded. In 2050, both scenarios count on an installed capacity of 39 GW of solar PV and 25 GW of wind. The capacity of electrolysers, interconnectors and gas-fired units, however, differs according to the scenario. The first amounts to 19.1 (10.6) GW in ‘Diversified Energy Supply’ (‘Deep electrification’),
the second reaches 14 (14.4) GW whilst the last amounts to 11.0 (15.8) GW.
In order to entice potential stakeholders to invest capital in the construction of a such system, it is of paramount importance to create a stable regulatory and policy environment. In this respect, in addition to the ambition already shown in the Green Deal, the latest European Commission proposal on the total greenhouse gas emission reduction target for 2030 and its imminent climate law are not voluntary announcements, but create a framework within which national future-proof policies should be embedded.
Finally, additional studies on investment costs, potential risks for market participants or necessary market design adaptations associated to both future systems would be valuable complements to this report. That, however, is food for other publications.