Sector coupling in the EU

Published 3.3.2020

The idea of sector coupling refers to electrification and integration of more energy consuming sectors in an economy. Sector coupling has recently become one of the hotly discussed topics among policymakers and indeed, many believe that energy supply and end-use integration is essential for successful decarbonization of the European economy.

Why sector coupling?

• Sector coupling: Means to cut emissions and address climate change
From all the energy we use, only a share is met by electricity. In 2018, electricity represented about 20% of the global final energy supply while fossil fuels accounted for 67%. This means that even if we achieve high levels of generation from renewable energy sources, our economies would stay far from green. In Europe, we are still driving diesel cars, heat our homes with gas or fly planes that use jet fuel. The idea of sector coupling is that we electrify and interconnect as many sectors as possible which would enable us to shift away from fossil fuels, achieve our climate targets and, in the end, tackle the issue of climate change. According to BNEF, by 2030, the coupled sectors together with electricity could cut emissions to 63% below 1990 levels.

• Sector coupling: More purposes for excess electricity

Sector coupling comes at a cost but presents itself with a lot of opportunities as well. With an increasing amount of renewable energy sources on the grid, it is progressively more challenging to balance supply with demand and avoid distortions such as negative electricity prices. This also creates system inefficiencies. With sector coupling, excess electricity could be easily used for many different purposes ranging from power-to-heat or power-to-gas. Such processes remain expensive with current system configuration. As gases are easily stored and infrastructure is already in place, they would easily find later use in transportation or heating.

Impacts on the energy industry

• Demand for fossil fuels decreasing / more electricity demand

Should electricity replace the role of fossil fuels in the European energy mix, fossil fuel energy suppliers should be among the first to be affected. With greater electrification of sectors such as gradual usage of EVs on European roads, or heating in buildings using electricity, the demand for oil and gas would crash. As electricity would come take the place of fossil fuels, European electricity demand would soar.

• Larger and more complex power systems

As sector coupling would translate itself into much higher electricity end-use, European power systems would need to be upgraded in order to cope with such a surge in demand. According to BNEF, the electricity demand in Europe would increase by 65% from 2018 to 2050, on stylized sector coupling pathway. The power grid needs to be gradually upgraded as sector coupling proceeds.

• Interconnections and flexibility

Not only interstate power networks need to be upgraded, more interconnections in between countries are also to be developed in order for the overall European power system to attain more flexibility and create a network of support. On the other hand, the new system can also offer new ways of using demand response for flexibility purposes. For example, EVs while plugged in, could be used as electricity storage for balancing the supply and demand.

Electrifying and integrating more energy consuming sectors will require large investments in order to adapt the current European energy system. Nevertheless, sector coupling offers major contribute to a cost-efficient decarbonization of European economies.

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