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Does COVID-19 change anything about our future energy mix?

January 21, 2021

In December 2020, the European Union reached an agreement on the European climate objectives for 2030. In this new agreement, the EU adjusts its ambitions, from a 40% reduction in greenhouse gas emissions compared to 1990 to 55%.

The Dutch government has set itself the target of having at least 27% of its energy consumption come from renewable sources by 2030. By 2050 the Netherlands must have made an almost complete switch to sustainable energy. This means that there will be major changes in the generation and use of energy in the coming years.

The Netherlands is divided into 30 energy regions. These regions are all working on a so-called Regional Energy Strategy (RES) in which they determine where they will generate solar and wind energy. The regions are also looking at the use of heat sources to replace natural gas.

What sources of energy do we currently use and which are promising for the future? What is the (future) role of fossil fuels? Does the coronapandemic play a role in the transition to more sustainable energy?

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Fossil fuels

The objective of switching to a fully sustainable energy system does not alter the fact that fossil sources will still be needed to meet energy demand in the years ahead.

Internationally, despite the effects of Covid-19, there will be growth in fossil fuels other than coal. This is partly due to large population growth in some parts of the world (Asia, Africa) and increasing prosperity.

The Dutch government has decided that gas production from Groningen will be phased out as soon as possible. The gas demand in the Netherlands will not decrease at the same pace. As a result, part of the (low-calorific) Groningen gas will be replaced by imported gas, high-calorific gas. The lower nitrogen content means that more energy can be extracted from high-calorific gas. High-calorific gas will have to be mixed with nitrogen in order to be suitable for domestic connections in the Netherlands. A nitrogen plant in Zuidbroek is expected to come on stream in 2022.

In addition to Groningen gas, the Netherlands has approximately 200 smaller gas fields (onshore and offshore). Gas will continue to be extracted from these in the near future.

 

Solar and wind energy

Solar and wind energy are the main sources of sustainable energy in the Netherlands. The target is to generate at least 35 Terawatt hours (TWh) of renewable energy from solar energy and onshore wind power by 2030.

In their RESs, the energy regions determine the locations at which wind turbines will be placed. However, they regularly encounter resistance from citizens who, for example, do not want wind turbines in their backyard.

Small-scale solar energy projects seem to be preferred to wind energy in the various RESs. In an initial response, Minister Wiebes of Economic Affairs and Climate has indicated that he wants to jointly examine a balanced distribution of solar and wind energy.

Offshore wind energy also plays an important role in the Dutch energy transition. The costs of offshore wind energy have fallen in recent years and Dutch companies have a high profile in this sector, both at home and abroad.

The objective is to install 4.5 GW of offshore wind power capacity in the Netherlands by 2023. This should grow to 11GW by 2030.

 

Does COVID-19 change anything about our future energy mix?

  

Geothermal

Heat is high on the political and social agenda. Geothermal energy makes use of heat from the ground by pumping up hot water. This heat water is used to heat tap water. The warmed-up tap water is then used to heat homes and greenhouses, among other things. The cooled water is returned to the ground.

Geothermal energy is still in its infancy. The aim is to produce 50 PetaJoule by 2030 and 200 PetaJoule by 2050. The contribution of geothermal heat will lead to a total CO2 saving of 3 Mt in 2030 and 12 Mt in 2050. Geothermal heat is expected to increase from 0.5% of total heat production to 5% in 2030 and 23% in 2050.

 

 

Hydrogen

We can distinguish three types of hydrogen: grey, blue and green. Grey hydrogen is made from natural gas and is already widely used, but it is not sustainable. Blue hydrogen is also produced from natural gas, but the releasedCO2 is captured and stored. Green hydrogen is hydrogen from water by electrolysis with sustainable sources like sun and wind.

In the Netherlands, approximately 75,000 tons of green hydrogen could be produced by 2025. This would require an electrolysis capacity of 500 MW. It is estimated that the electrolysis capacity in 2030 will be around 3 to 4 GW.

Hydrogen applications are primarily focused on industry and mobility. However, hydrogen can also offer a solution in the built environment.

There are various initiatives for developing green hydrogen. The high costs involved are currently an obstacle to large-scale development.

Bioenergy

Currently, bio-energy is the most important sustainable energy source in the Netherlands. Bioenergy is produced from various biological materials. Examples are wood waste, biodegradable waste and sewage sludge. Burning biological material releases CO2. This CO2 is absorbed again by the growth of trees, for example.

There is currently much discussion about the sustainability of bio-energy, because in a number of cases there are doubts about the CO2 neutrality of some forms of bio-energy. For example, wood waste must be transported and there are doubts about the felling vs. planting of forests.

 

 Nuclear power

Nuclear power was a no-go area for a long time. The costs of building a new nuclear power station were too high and the construction took too long. With the Chernobyl (Ukraine, 1986) and Fukushima (Japan, 2011) disasters, public concern about nuclear energy has grown. There is also the question of what to do with nuclear waste.

The political picture of nuclear energy is slowly changing and various political parties are in favour of exploring the possibilities of new nuclear power stations and the contribution of nuclear energy to the energy mix.

Recently, Elektriciteits Produciemaatschappij Zuid-Nederland (EPZ) indicated that it intends to keep the present Borssele nuclear power station open for another 10 to 20 years after 2033 and that there is a possibility of building two new nuclear power stations. These new nuclear power plants could be ready around 2035.

 

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Scenarios

The International Energy Agency has developed four scenarios to estimate the energy demand and mix of the future, post-Covid-19:

  1. Stated Policies Scenario: Covid-19 is brought under control in 2021 and all policy announcements proceed.
  2. Delayed Recovery Scenario: Covid-19 will remain in place longer and the global economy will only return to pre-crisis levels in 2023. This has a major impact on energy demand, which will be lower for a longer period.
  3. Sustainable Development Scenario: this scenario is dominated by a renewable energy policy and includes the targets as agreed in the Paris Agreement
  4. Net Zero Emissions By 2050 Case: this scenario goes beyond the previous scenario. A growing number of countries aim for net zero emissions in 2050. In the previous scenario, this is in sight by 2070.

 

The demand for oil increases in the first two scenarios towards 2040. In the third and fourth scenarios, demand for oil declines sharply. The share of gas increases in the first two scenarios, decreases very slightly in the third, and declines sharply in the last.

Demand for renewable energy rises sharply in all scenarios. The share of nuclear energy increases in all scenarios, but is strongest in the third and fourth scenarios. Coal demand declines (sharply) in all scenarios.

In almost all scenarios, energy demand will increase in the coming years. It depends on the choices of individual countries to what extent clean energy sources will increase in the coming years and to what extent we will meet the targets agreed in the Paris Climate Accord.

 

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Mirthe Lantman

Senior Consultant Strategy