Transforming the climate and energy policy landscape

For over a year now, Europe has experienced a dramatic conflict, putting an end to the period of peace on our continent, together with increased tensions in energy markets.

On the energy side, we faced the loss of a substantial part of the European supply of gas, the shutdown of several nuclear reactors and a period of severe drought. While all these resulted in much higher energy prices, the supply of energy was ensured through the winter, thanks to the swift actions from customers – including energy efficiency, sobriety, but also less positively, demand destruction – and from energy companies, such as ENGIE, which helped ensure the security of supply due to an accelerated diversification of its gas supply and through its infrastructures, including terminals, pipes and storage. While prices have somewhat receded to more usual levels and storage systems are filling up, the energy system will remain under some tension, with increased volatility and less room for manoeuvre than before.

These shocks in the energy market have reminded us of the importance of energy supply, and energy prices, for our economies. This comes at a time when we need to drastically accelerate the energy transition and reduce Europe’s greenhouse gas emissions by 4% annually versus 1% in the previous decade.

More than ever, achieving the energy transition will require a vigorous and pragmatic approach, reducing geopolitical risk and optimising the costs of the transition.

As an energy company active in all energies and in many European geographies, and also as a market actor with analytical capabilities to model the supply or demand balance, ENGIE has worked on ways to optimise the costs, ensuring demand for energy is met. From our work, we draw five convictions for the future of Europe.

First, the decarbonisation of our economy requires a non-dogmatic approach. As such, all existing levers and those undergoing development must be activated to make net-zero emissions within 30 years a reality. Transition choices must be guided by a pluri-technological approach to avoid lock-in effects and maximise our ability to reach our ambitious goals.

Second, the reduction of energy consumption across all sectors is a prerequisite for the energy transition. Energy efficiency efforts must be stepped up to achieve a 34% reduction in energy consumption by 2050. In particular, we need to operate a massive retrofitting of European buildings.

Third, with no surprise, electric renewable energies – solar and wind – will play a considerable role in the decarbonisation pathway. Their large-scale development must be accelerated in all countries as they alone can rapidly and economically provide for the growing electrification of uses. With demand for electricity set to almost double by 2050, renewable energies will have to cover 78% of demand in 2035 and up to 90% in 2050. This means that European wind and solar power generation needs to increase 3.5-fold by 2035 and 6-fold by 2050.

Next, the future energy system will require a capacity for greater energy flexibility as it will rely on mainly renewable and decentralised electricity production. The deployment of the many flexible solutions that will be needed must be anticipated as of now. Flexibility technologies, such as battery storage, hydro pumped storage and decarbonised combined-cycle gas turbines, will be needed to meet fluctuations in energy demand, compensate for the intermittency of renewable energies and ensure the stability of the electricity grid. The needs are massive, with 600 GW additional capacity to be developed – which amounts to around a fourfold increase on current capacity.

Finally, the only answer to meeting the ambitious objectives of the energy transition is to combine electricity and gases. We call this ‘the alliance of the electron and the molecule’. In conjunction with biomethane, green hydrogen and derived e-molecules – such as e-methane and e-fuels – will play a key role notably in transport and for certain industrial uses. The strengthening of expertise in these technologies and the use of gas infrastructures for new gas uses will generate cost reductions and ensure the resilience of the system.

With all of the above in mind, the energy transition challenge facing Europe can also be turned into a tremendous opportunity for more sustainable economic growth, if we move fast enough.

As a player in the energy sector, the responsibility of businesses is to contribute to the development of a robust and reliable energy system, at affordable costs for citizens and businesses. The energy transition is a joint responsibility but also an opportunity, provided it is undertaken in a pragmatic and resolutely European way that avoids artificial divides across the continent. The European Union must go ahead and stop dividing itself around definitions, keeping the focus on the common decarbonisation goals, while guaranteeing a reliable and affordable energy system in Europe, for the next generation.

Related content:

• Climate and Energy Summit: integrated thinking for a climate-resilient Europe

This article is a contribution from a member or partner organisation of Friends of Europe. The views expressed in this #CriticalThinking article reflect those of the author(s) and not of Friends of Europe.