The availability and affordable cost of electrical energy are determining factors for Europe to keep its commitments to carbon neutrality in 2050. The war in Ukraine upsets the balances and trajectories initially imagined, obliging all players, from producers to consumers to rethink their roadmaps.
Why and how is the crisis in Ukraine changing the situation?
The outbreak of the crisis in Ukraine caused an immediate shock on the energy markets. A recent study by Euler Hermès anticipates an impact on the growth of the energy bill of European households of +30% in 2022. This shock is in addition to the strong tensions generated by the rapid recovery of the world economy in phase exit from the Covid epidemic.
The operation of the single European electricity market and its progressive liberalization since the 1996 directive (96/92/EC) means that the price of the MWh is determined by a logic of marginal production cost of the last power station put into service to cover demand and not according to the cost of production (nuclear, wind, solar, gas, coal, etc.).
Clearly and following an environmental principle, when demand increases, the least polluting power stations are called upon first and consequently gas and coal power stations are very often the last to be called upon.
And it is the latter which weigh heavily on the fixing of the wholesale price of electricity. According to Eurostat, Russia providing 48.4% of the European Union’s natural gas imports, geopolitics directly influences prices. This is why, among other things, the European Commission is currently thinking about a potential decoupling of the price of electricity from that of gas.
Whatever the outcome of the conflict in the medium or long term, the consequences will be profound because this situation requires European countries to review their global energy strategy, aligned with achieving carbon neutrality by 2050.
Germany has advanced its goal of carbon neutrality to 2045, choosing to eliminate nuclear in 2022, coal in 2030 and gas in 2040 as primary energies in its electricity production. In 2020, according to a study by the Jacques Delors Energy Center, the German electricity mix was made up of 45% renewable energies, 23% coal, 16% gas and 11% nuclear.
The extreme dependence on Russian natural gas and the questioning of the Nord Stream 2 gas pipeline thus reinforce the imperative for the massive production of renewable energy installations each year, in a context of increased local resistance and regulations from the Länder. sometimes complicating the deployment of onshore wind farms. The short-term pressure is therefore becoming extremely strong. In addition, the gas was supposed to dampen the intermittency of renewable energies while waiting for “green” hydrogen or batteries to take over.
France, less dependent on Russian gas, is resolutely turned towards nuclear power and will have to quickly solve its problems of availability of its power plants (27 active reactors out of 56), control the cost of new installations while strongly accelerating the development of renewable energies. .
All strata of society are affected with, for some, immediate effects.
Mayors of certain French cities, not benefiting from the tariff shield, have had to drastically limit or suspend public lighting, the cost of which may have increased by +30% to +40%. So-called “electro-intensive” companies such as those active in the production of aluminium, ferro-alloys and PVC plastic find themselves particularly exposed. And the examples are legion in ETIs and SMEs.
The electrification of entire sectors is becoming a strategic issue
Many studies converge on a prediction of the doubling of the demand for electricity in Europe by 2050. The electrification of entire sectors of the economy such as transport, industry, the tertiary sector and the building is at the origin of this high demand. At the same time, the carbon intensity of the production of this energy will have to continue to decline knowing that there is a great disparity between European countries. Thus in 2020, Poland or Estonia found themselves well above the average while France or Sweden, below.
Faced with the increasing complexity of end-to-end electricity management, heavy investments will be necessary at all levels, from infrastructure to management solutions, including for businesses and individuals. The latter must be in direct contact not only with the facilities but also with their entire ecosystem to be able to leverage real-time data (IoT) and with the support of artificial intelligence and to optimize the energy operational efficiency. Thus, ENEL, the main producer and distributor of electricity in Italy, is changing to a “Utility-as-a-Platform” model by decoupling data flows, infrastructures, customers, services to meet the challenges of a world more agile, interconnected and organized around ecosystems. Better interconnection of networks between countries is also considered strategic.
It will also be important to accelerate the development of decentralized and bidirectional electricity production with the participation of individuals and businesses. As such, Germany with the EEG (Renewable Energies Act) has created the conditions for citizens to already own 40% of renewable energy production capacities. The example of EWS (Elektrizitätswerke Schönau eG), created in 1996, shows how a cooperative was able to grow to supply more than 220,000 customers in the country today.
Energy sobriety remains a strong area for improvement because the increase in demand linked to electrification does not imply neglecting the frugality of the uses of individuals and companies. In 2020, the majority of global internet traffic passed through data centers. This traffic increased by +40%, driven mainly by the use of video streams (including videoconferences), online games and social networks. According to a November 2021 study, the International Energy Agency (IAE) estimates that data centers used in 2020, 1% of global electricity demand, i.e. between 200-250 TWh (excluding crypto-mining). currencies).
Telecommunications network operators are also working on this task, particularly with the deployment of 5G. Between 2015 and 2020 the Spanish group Telefónica reduced its electricity consumption by 2% while traffic on its networks had increased fivefold. After a boom phase of the cloud and the promise of unlimited resources, it is now a question for digital service companies (ESN) to systematically think about the architectures, the code of the solutions they produce and its execution in such a way as to what they minimize the consumption of resources in the data centers.
Electricity, a key element of our low-carbon transformation
By 2050 electricity will play a central role in the transition to a carbon-neutral society, particularly in Europe. All European players are mobilized: States, communities, citizens, businesses and academic institutions. The emergence of a more decentralized and interconnected logic of production and distribution will encourage the creation of new operational and business models.
We are therefore faced with a formidable revolution to be carried out in a few years with considerable weight on public decision-makers and an unprecedented capacity for adaptation required of all actors in society.