AleaSoft Energy Forecasting, June 23, 2023. This is the third and final instalment of a series of three articles on the fifteen main vectors of the energy transition. On this occasion, biomass, biofuels, CO2 capture and storage, self‑consumption and regulation are analysed.
In the first and second instalments of this series of articles on the vectors that will be key during the energy transition, solar and wind energy, renewable energy demand, green hydrogen, electricity transmission and distribution grids, systems of storage with batteries, with pumping stations, solar thermoelectric energy, international interconnections and smart grids were analysed. In this third and final instalment, the remaining five vectors will be covered, as well as their role in decarbonising the economy and achieving net zero emissions by 2050.
Biomass and Biofuels
Biomass is the organic matter that is used as a source to produce energy. It can be obtained, for example, from forest residues, energy crops, agricultural residues, waste from the food industry and the degradable fraction of biological origin of municipal waste. Biomass can be used for the production of thermal energy, biogas, biofuels and electricity.
Biomass for energy generation is currently the main renewable energy source in the European Union. In 2021, the total energy production from biomass exceeded 114 Mtoe, (followed by wind energy with 33 Mtoe and hydro with 30 Mtoe), which represented approximately 8.2% of the total for the region and 45% of total renewable energy. Countries like Sweden, Finland and Austria have a great dependence on biomass and reach higher percentages in production of renewable energy from this source. In the coming years, the role of biomass will continue to be fundamental in the energy transition and several European countries, mainly those in the north of the continent, are committed to continuing to develop this technology.
In the case of Spain, biomass has a marginal role in the total electricity generation mix. According to data from CNMC, in 2023 there are 238 facilities in Spain for the generation of electricity from biomass, with a total capacity of 1023 MW. Pending the publication of the new version of the NECP (National Energy and Climate Plan), the current objective set for this technology is reaching 1408 MW in 2030.
As mentioned before, one of the uses of biomass is the production of biofuels. Biofuels are fuels produced from natural resources and biomass and are less polluting than conventional fuels. It is considered that the net balance of its emissions is zero because the CO2 that is emitted in its combustion is compensated with that previously removed from the atmosphere by the raw material used to produce it. They can be used to generate electricity, heat, in industry and in transport, so they will have great potential in aviation, shipping and heavy road transport where electrification is not feasible. Some biofuels are bioethanol, biodiesel, biogas and biomethane.
The European Union aims to reduce the intensity of greenhouse gas emissions in transport by 13% by 2030 and established a quota of 2.2% for the use of advanced biofuels by that date. Also, as part of the REPowerEU plan, the goal of increasing annual biomethane production to 35 billion cubic meters (bcm) by 2030, from the current 3 bcm, was set to help reduce dependence on Russian gas.
CO2 Capture and Storage
The CO2 Capture and Storage (CCS) consists of capturing the CO2 emitted in industrial processes and in the energy generation with polluting processes, to later transport it to another place where it will be stored, for example, in underground geological formations or in the depths of the ocean, thus preventing it from reaching the atmosphere. In addition, there is the option to use the captured CO2 in different chemical processes, such as the production of renewable fuel, known as CO2 Capture, Use and Storage (CCUS).
Although its detractors allege that what this technology does “is hiding the problem” because it continues to contaminate, its use will be necessary to help decarbonise those industrial sectors in which it is difficult to do so in other ways, such as steel, iron or cement.
Although this technology is not new, until now it had failed to take off as it was not economically viable. However, in recent years there has been a boom in new projects, encouraged by the increase in CO2 emission rights prices and because some governments are promoting it. For example, the Inflation Reduction Act of the Biden administration in the United States (IRA) includes tax benefits for power plants that use these techniques and in the United Kingdom 20 billion pound sterling will be invested to boost this technology.
According to data from the International Energy Agency (IEA), there are currently 35 facilities that apply CCUS, which capture almost 45 Mt CO2 per year. In addition, around 300 projects in various phases are being developed and 200 new facilities that would be operational by 2030 have been announced, which could capture more than 220 Mt CO2 per year.
Self‑consumption
Self‑consumption is the consumption of electrical energy by one or several consumers when the energy is generated in a nearby facility, associated with these consumers. The self‑consumption of renewable energies, both individually and collectively, allows the use of natural resources on a larger scale and turns consumers into protagonists of the energy transition. On the way to achieving net zero CO2 emissions, a lot of renewable energy will need to be generated, so the potential offered by self‑consumption will be very valuable to achieve that goal.
In recent years, the installed capacity of self‑consumption has been accelerating. In addition to the fact that society has increased environmental awareness and that the price of photovoltaic panels has been falling, the high electricity prices of recent years have become another motivation to self‑produce the energy that is consumed, or part of it, to reduce the electricity bill.
In the case of Spain, where there is great potential to develop photovoltaic self‑consumption due to the large solar resource available, currently the installed capacity amounts to 5249 MW, which each year prevents the emission of 2.7 million tons of CO2‑eq to the atmosphere, according to data from the Spanish Photovoltaic Union (UNEF). The Roadmap for Self‑consumption approved by the Spanish Government establishes the objective of reaching 9000 MW of installed capacity of self‑consumption in 2030, although according to a study by the Institute for Energy Diversification and Saving (IDAE) on this date it could even reach 14 000 MW.
According to IEA forecasts, it is expected that, in Europe, the countries with the greatest increase in distributed solar energy in 2024 are Spain, the Netherlands, Germany, France, Sweden and Italy. They also estimate that distributed solar energy in Europe could reach 35 GW in 2027 if expiring support schemes are extended and remuneration levels are raised to make self‑consumption more attractive.
Proper regulation
To develop all technologies and, in general, all changes necessary to carry out the energy transition, regulation will be essential. A stable regulation where the rules of the game are not changed because this scares away investment, and billions of Euros in investments will be needed along this path. A regulation that responds to a strategy of ordered development of renewable energies to avoid imbalances such as the duck curve. A regulation that gives clear signals of the objectives to be achieved and supports changes with aid, especially those aimed at developing technologies that are still not sufficiently mature or that are not yet economically competitive, but that are necessary, such as storage with batteries and green hydrogen and electric vehicles. A regulation that has a long‑term vision and that takes steps to develop the necessary infrastructures for the deployment of electric vehicles, of green hydrogen, to improve and adapt the transmission and distribution grids to a less centralised electricity system capable of managing the large amount of renewable energy that is expected. A regulation that gives signals to the demand to move its consumption towards the hours of largest renewable energy production, that encourages self‑consumption and promotes the electrification of the economy. In summary, proper regulation will help the rest of the vectors to develop at an appropriate pace and to face the challenges that will arise.
The complex interplay of the energy transition
The decarbonisation of the economy and energy independence are great challenges that demand energetic action. Although the European Union’s goal of achieving energy independence and net zero emissions by 2050 may seem distant, it is less than 30 years to radically transform the way energy is produced and consumed. This paradigm shift requires the full involvement of society and the use of both existing technologies and those yet to be developed in the coming years. In addition, the energy crisis caused by the Russian invasion of Ukraine has accelerated the need to achieve energy independence from abroad.
Many steps can already be taken and cannot wait. The new NECP, besides setting targets for 2030, must also establish a roadmap to meet them. In recent years, the development of solar photovoltaic energy and self‑consumption has been ahead of the other mentioned vectors and has changed the price profile in the electricity market: since spring it has been seen that the hours with the lowest prices are in the solar hours. How can the duck curve be avoided?
- Green demand must be encouraged, for example, by encouraging the purchase of electric vehicles.
- It is necessary to help develop battery projects with direct aid and through a capacity market as occurs in other countries.
- It is necessary to facilitate electricity consumption during solar hours by establishing tariff periods with lower prices.
- To avoid or reduce curtailments, it is necessary to invest more in transmission and distribution grid infrastructure.
- The production, storage and distribution grid of green hydrogen, green ammonia and green methanol must be encouraged as much as possible.
There is no time to lose or margin to delay the changes. Determined action must be taken now to achieve the energy independence and ensure a carbon‑free and sustainable future.
AleaSoft Energy Forecasting’s analysis on the prospects for energy markets in Europe and the financing and valuation of renewable energy projects
Undoubtedly, the energy transition is a great challenge in which the whole society must be protagonist. In this sense, AleaSoft Energy Forecasting and AleaGreen do long‑term forecasts of energy markets price curves that are an input for the financing and valuation of renewable energy projects and hybrid systems of renewable energy with batteries. These forecasts use a science‑based methodology that takes into account the markets equilibrium and probabilistic metrics to estimate future price variability.
Source: AleaSoft Energy Forecasting.
