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Good COP/Bad COP: Balancing fabric efficiency, flow temperatures and heat pumps

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Heat pumps are widely recognised as the key technology to decarbonise building heat demand in Ireland. To receive grants for heat pumps, homeowners in Ireland are required to have a heat demand per unit of floor area, known as a ‘heat loss indicator’ (HLI), below a certain level. The HLI requirement was designed to protect households from high bills if they switched to a heat pump.  

There is a concern that the HLI is limiting heat pump deployment, thereby hindering Ireland’s goal of net zero in 2050. This review of the HLI policy and associated rules was undertaken alongside a discussion of heat pumping technologies and their operation, optimal performance and innovation. While there is still a major role for building fabric energy efficiency upgrades, innovation in heat pumping technologies means they may be able to more easily replace combustion-based technologies than has been previously assumed due to better performance and higher output temperatures.

To achieve more rapid and potentially smoother deployment of heat pumps, current HLI grant requirements should be reevaluated. Initially, the HLI requirements could be loosened, subject to relevant consumer advice and protections. In the longer term, a focus on flow temperatures and in-situ performance may be more appropriate. Building fabric efficiency requirements could be maintained but simplified. Finally, trials and programmes to evaluate heat pump performance in Irish buildings should be expanded and expedited in order to provide accurate and local data on this strategically important technology.

Turning off the gas: Stronger and coherent EU policy to accelerate the fossil gas phaseout

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Rapidly phasing out fossil gas demand has become a top priority in Europe. Existing European legislation is expected to achieve only moderate reductions by 2030. The ongoing energy crisis has provided an opportunity to aim for even more extensive decreases in fossil gas demand. Legislation under negotiation, informed by the European Commission’s REPowerEU plan, is expected to go further, yet more ambitious targets and a unified policy approach could achieve potential reductions currently left on the table.  

RAP’s analysis finds that even with full implementation of the REPowerEU plan, by 2030 natural gas demand in Europe will remain roughly equivalent to Russian gas imports in 2021. A stronger energy efficiency target in the Energy Efficiency Directive (EED) and a higher renewable energy target in the Renewable Energy Directive (RED) could reduce gas demand and eliminate Russian gas imports. 

Furthermore, the Hydrogen and Decarbonised Gas Market package should emphasize integrated planning and targeted applications of alternative gases to ensure its consistent with a fossil gas phaseout. 

A joint, coherent policy approach — addressing more ambitious targets for the EED and the RED and complementary metrics applied to the Hydrogen and Decarbonised Gas Market package — would guarantee that fossil gas use is rapidly reduced and the infrastructure is in place to meet the remaining demand equitably and efficiently.

How the European Union incentivises inefficient renewable heating

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The EU’s renewables directives count what fuel is burned for heating, as opposed to the amount of heat produced.

Never has the spotlight shone so brightly on Europe’s heating and cooling sector. And for a good reason. Fossil gas makes up around 39% of the energy used to heat buildings and much of Europe wants to rapidly phase it out.

To help do so, the European Parliament recently voted in favour of a key amendment to the Renewable Energy Directive (RED): raising the annual target for the share of renewable energy in heating and cooling.

The new goal—a 2.3 percentage-point increase each year until 2030—is roughly double the one proposed in the Fit-for-55 package unveiled in 2021.

The clear signal has been set, yet there is something off with the way the metric is measured. By counting fuel burned instead of heat produced and not including electricity used for heating or cooling, the RED favours inefficient technologies.

Ignoring the mushy peas on the floor

Imagine a toddler having lunch. Her father has prepared a bowl of 300 grams of mushy peas and figures that this meal should meet half of the two-year-old’s nutrient needs for the day. She is a messy eater though and jettisons around half of her food on the ground. Once her dad sees the empty plate, he pats himself on the back, thinking that he filled her belly. He should look at the floor.

Measuring the renewable share of heating and cooling in the RED is simple. It tallies all the energy used to heat and cool from renewable sources, then divides it by the total. The key question is: which energy counts as renewable?

Unfortunately, the RED’s answer to this is flawed. It only counts final energy use or, in other words, the fuel that is delivered to the customer to use in their heating appliance. That means if someone burns a log in a fireplace at 50% efficiency and it produces 100 kilowatt-hours (kWh) of heat, how much “renewable heat” does that account for?

If you were thinking “100 kWh” you would be wrong. The RED counts that as 200 kWh, since that is the energy content of the biomass that was combusted at 50% efficiency.

That is a big problem because heating systems have different efficiencies. An electric heat pump typically produces 100 kWh of heat with 33 kWh of input electricity. The remaining 67 kWh is drawn from the ambient air for free. An 85% efficient pellet boiler needs 117 kWh.

The point: Less efficient technologies need more input energy for the same useful heat outcome. The RED discourages switching to more efficient heating appliances and electrification. It counts the full weight of the mushy peas, not just those that were eaten.

Anti-electrification policy

The other problem with the RED methodology is its scope. It does not consider the renewable electricity used for heating and cooling at all. Whether it is used to drive a heat pump or just an electrical resistance heater, it does not count toward the renewable heating and cooling target. Even for cooling, which is virtually only based on electricity.

This is an effort to avoid double-counting. The data wranglers do not want to count renewable electricity in both the power sector and the heating and cooling sector. As a data wrangler myself, I appreciate their commitment to neat allocation. But in this case, neatness has its downside.

Electricity providing a heating or cooling service should be considered towards the renewable heating and cooling target. Otherwise, heat pumps could be undervalued in terms of their contributions. If the methodology does not even consider where the electricity comes from, the heat output of the heat pump can never be fully renewable.

If the renewable share of electricity would be considered in the RED’s methodology as a heating and cooling service, the incentive to promote heat pumps would even be stronger. Member States will thus be encouraged to implement policies that aim to achieve the heating and cooling target, with the ancillary benefit of growing the deployment of efficient heat pumps to do so.

As it stands, the least efficient and least electric technologies are those that have the most potential to meet the goals under the RED. More efficient and electricity-based heating appliances risk falling behind.

The way forward

Getting metrics right is crucial to ensuring a rapid and balanced transition to clean heating and cooling. The Renewable Energy Directive’s goal should be to promote efficient heating and cooling technologies that maximise useful energy while minimising input energy.

This means counting the useful heat that is produced by a heating system, not the input energy needed. It also means including the electricity used for renewable heating and cooling.

Since electricity realistically contributes to both the headline renewable energy target (32% in the RED II and voted to increase to 45% by the European Parliament), as well as the renewable heating and cooling target. Both calculations should factor it in so that the statistics are accurate.

Double-counting can be avoided by ignoring the electricity used in the heating and cooling sector when calculating the headline target.

Metrics matter. Only by counting the useful heat produced can the Renewable Energy Directive provide the right incentives for phasing out fossil gas and spurring the clean electrification of heat.

 

A version of this article originally appeared on Foresight Climate & Energy.

Photo: Holger Schué from Pexels.

Five key actions for activating household demand-side flexibility

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Securing a clean, efficient and affordable power system is a complex undertaking in the best of times. The current energy crisis, however, has compounded the challenge with a cost-of-living crisis, the need to free Europe from its dependency on Russian fossil gas, and the ever-present spectre of climate change. A seemingly insurmountable task begs all available resources. One of the most powerful — and often undervalued — solutions is household demand-side flexibility.

Empowering and rewarding consumers who are able to shift how and when they use electricity is a vital power system resource. Demand-side flexibility contributes to a reliable and decarbonised power system while reducing costs, a critical outcome for low-income and disadvantaged households.

On 28 September, the Electrification Academy was pleased to welcome Sophie Yule-Bennett to unpack the insight and recommendations from RAP’s 2022 study The joy of flex: Embracing household demand-side flexibility as a power system resource for Europe. She explored:

  • The benefits of demand-side flexibility: sustainability, reliability, equity and affordability.
  • Barriers to flexibility as a resource.
  • Five key actions for activating household demand-side flexibility.

Metrics matter: Efficient renewable heating and cooling in the Renewable Energy Directive

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The Renewable Energy Directive (RED), designed to help meet the EU’s ambitious 2030 and 2050 climate targets, sets targets for growing renewables usage for heating and cooling in the building sector. As currently written, however, the RED encourages inefficient uses of renewables in buildings to meet these goals.

In this paper, we suggest reforms to the RED would ensure a more efficient and balanced approach to renewable heating and cooling in the EU. It shows that the RED’s metric for determining the contribution of renewable heating and cooling tends to favour less efficient technologies. The paper also discusses how the use of electricity for heating and cooling is not accounted for in the RED definition of renewable heating and cooling, nor in the methodology for the renewable contribution of heat pumps.

By adapting the definition of renewable heating and cooling and updating the definition of renewable heat from heat pumps, the RED can provide a more comprehensive overview of the status of decarbonising the sector. We recommend the following policy adjustments:

  • Amend Article 7 (3) of the RED to calculate the useful energy produced instead of fuels consumed to produce it.
  • Mandate Eurostat to develop a consistent method for counting the amount of (renewable) electricity used for different services including heating and cooling, both in general and from heat pumps. To avoid double counting, remove this electricity from the heating and cooling sector when calculating the headline renewable share.
  • Amend Annex VII of the RED to include the electricity used to drive heat pumps so that it accounts for the full contribution of heat pumps.

‘Game on’ for Germany’s heat pump transformation

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Time is of the essence if Germany hopes to meet its ambitious net-zero emissions target by 2045. To achieve this goal, the country will have to rapidly transform how it heats its buildings while ridding itself of Russian gas. Alongside increasing the renovation rate of buildings and rolling out clean district heating, heat pumps are one of the key technologies that can phase out fossil fuels and bring renewable heat to German buildings.

The situation has become even more urgent following Russia’s invasion of Ukraine and the ongoing fossil gas crisis. About two-thirds of German gas imports came from Russia in 2020 and the building sector is the country’s largest consumer of gas for heating. In the five years leading to 2020, gas boilers made up more than half of the market for space heating, while oil boilers made up another 12%. Heat pumps came in at only 16%.

Germany will need to install around 6 million heat pumps by 2030 to be on track for the 2045 target. That translates to a massive increase in annual heat pump uptake — from 154,000 installations in 2021 to 500,000 yearly by 2023. Up until now, most of these units have been installed in new buildings. The existing building stock will need to bear most of the load and, crucially, low-income households must receive enough support to make the transformation equitable as well.

The challenge is enormous. Despite generous subsidies during the past few years to encourage the replacement of fossil fuel boilers with heat pumps, the market has been stubborn. The year 2021 saw more than 920,000 heating appliances installed in Germany – 700,000 were still oil and gas boilers.

Germany has discovered first-hand that generous subsidies from the country’s federal subsidy program (previously the Market Incentive Program and now the Federal Support Program for Efficient Buildings) are not enough to spur a rapid heat transition in buildings. Recently, Agora Energiewende and RAP released new analysis prepared by the Öko-Institut and Fraunhofer ISE that looks at how to trigger this market transformation.

Germany’s 65% rule: Russian gas out, heat pumps in

To achieve its net-zero target and reduce gas consumption, Germany needs to end fossil fuel boiler installations as soon as possible. Financial incentives for clean alternatives did not trigger the necessary market shifts in the past. Regardless of much higher gas prices, subsidies are unlikely to be enough for the required transition. This is in part because German households pay more than six-times higher taxes and levies per kilowatt-hour of electricity than for fossil gas.

What else can be done? The federal government’s answer was announced in March 2022. Starting in January 2024, all new heating systems will need to run on 65% renewables. This political agreement should apply to heating system installations in new buildings as well as replacements in existing ones.

The 65% threshold must be implemented via laws, but the agreed wording leaves the door open to hybrid heat pumps where, typically, a heat pump is combined with a fossil boiler. That would be the bare minimum — standalone oil or gas boilers are de facto ruled out and even solar thermal systems combined with gas boilers would not meet the 65% baseline.

Hybrid heat pumps are cost-advantageous only in the rarest cases. According to the new analysis, standalone heat pumps hold the economic upper hand until the outside temperature falls to -7°C, at which point it is cheaper to heat with a gas boiler. For comparison, from 1991-2020, January temperatures in Germany averaged 1.7°C.

The plan is ambitious, but Germany is in good company. This policy attention towards heating systems is consistent with efforts at the EU-level, such as the Fit for 55 package, REPowerEU plan and Ecodesign performance standard regulation, and in various Member States, several of which have announced bans for new oil and gas boilers with diverse years of implementation.

Key actions for a swift transformation

Transforming a heating market based on 700,000 fossil fuel heating systems to a market predominately centered around heat pumps in only 18 months is a daunting task. Once implemented, the ‘65% rule’ will become the regulatory instrument that draws the borders of the field on which the game will take place. And in January 2024, it will blow the whistle to kick it off. Before that happens, a massive and swift industrial transformation will be required that sweeps along all members of the supply chain, from manufacturers to installers to households. Targeted support for low-income households will be crucial so they are not disadvantaged.

The total cost of owning a heat pump could slow down their future uptake or significantly increase the cost burden on homeowners. Without considering existing subsidies, the upfront cost of a first time, fossil-fuel-to-heat-pump switch in Germany is still around two- to three-times higher than a gas boiler replacement, though much of this is associated with radiator and pipe upgrades. Upfront costs, however, have risen significantly due to a shortage of skilled craftspeople. Installers say they can reduce costs by shortening the installation time from three to two days, while manufacturers have a 40% cost reduction potential in view based on new production methods as well as economies of scale.

To help reduce operating costs, the government has shifted its famous renewable energy surcharge away from electricity bills onto general taxation. On top of that, it is gradually phasing in a carbon price on heating fuels that should reduce this imbalance in the coming years. The new analysis recommends lowering the electricity price for heat pumps by exempting them from certain levies, reducing the VAT to the EU-minimum, and enabling the use of heat pump tariffs that maximize the contribution of heat pump flexibility to meeting power system needs.

To achieve the Germany’s ambitious net-zero target and provide transparent and predictable market conditions, the whistle is in the hand of the government. Kicking off the heat pump transition in a transparent, equitable and suitably ambitious manner means tabling a draft law to implement the 65% rule as soon as possible.

Read the analysis here (in German).

Revitalising EU-Ukraine cross-border infrastructure for a secure, clean energy future

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The Russian invasion of Ukraine is having a significant impact on the Ukrainian power sector. In recent years, the sector had started moving towards greater integration with the European Union and was making inroads into the shift to renewable energy sources.

The current situation is very challenging; not only is it slowing the nation’s energy transition, but it is also disrupting past achievements. Burgeoning renewable energy sources are being curtailed or shut down at unprecedented rates. This downturn results from the destructive effects of the war, coupled with inflexible generation sources.

One way to rectify this imbalance would be to maximise the current potential for interconnectivity between Ukraine and the EU. This, in turn, would allow the country to work towards three goals simultaneously. The increases in commercial energy flows can contribute to: increasing energy security, providing funds for continuing operation and reconstruction, and allowing for greater integration of renewables, thus achieving decarbonisation objectives faster.

While there are technical and legal requirements which must be fulfilled in order to expand Ukraine’s connectivity with the EU, decision-makers can maximise the value of the process by:

  • Implementing transparent, market-based instruments for cross-border capacity allocation.
  • Ensuring solutions benefit all customers and do not only serve individual vested interests.
  • Laying out a roadmap for long-term structural reform of the Ukrainian energy system. Ideally, it focuses on ensuring energy security and advancing European and Ukrainian decarbonisation goals.

Navigating towards net-zero power system: it is not the ‘heading’ but the ‘course’

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The energy price and supply risks we are facing today are making the decarbonisation of the power sector by 2035 an even more significant challenge. But if we deviate the heading of our ship from the course for longer than necessary, we will lose the course we set for ourselves: cost-efficient power sector decarbonisation writes Zsuzsanna Pató.

The energy price crisis and the war in Ukraine opened a whole new dimension for the need to get off fossil fuels, alleviate energy poverty and assure reliable energy service for consumers. Pursuing these multiple objectives has always been challenging, but the urgency of action adds another facet: we need to accelerate power system decarbonisation and achieve a 75% renewable share by 2030.

We must ensure that the responsive, short-term actions taken to meet today’s security and price challenges are directionally correct for the long-term vision: a decarbonised and well-functioning economy by 2050. Building soon-to-be abandoned fossil infrastructure now is costly.

Similarly, distorting the merit order by capping gas prices slows down the replacement of fossil fuel capacities with clean resources. The scale of the challenge and the ‘need for speed’ is unprecedented. Old thinking will not deliver the new energy system we need.

With that in mind, RAP has developed a Blueprint for a decarbonised European power system, including the necessary regulatory solutions to navigate there by 2035.

A new baseline for clean investments

Recent events revealed the actual cost of gas. This is the new baseline for investment decisions into clean energy solutions. Gas and other fossil fuel prices can jump on a rollercoaster at any time and take Europe for a ride.

Decarbonising the energy system means decarbonising power generation first. Renewable-based generation technologies are proven technologies, and their costs continue to decrease steadily. The most efficient way of decarbonising heating and transport is via electrification. Both of these end-uses rely on imported fossil fuels in Europe.

Climate policy is now security policy

Rapidly displacing fossil fuels, including Russian gas, with renewable power generation capacity has its own challenges. It requires the parallel pursuit of the goals of minimising the cost of the transition, maintaining a reliable power system and safeguarding the equitable distribution of cost and benefits among consumers while alleviating existing inequalities. The ‘great energy capacity swap’ rests on a few key tenets explored below.

The basics of a zero-emissions power system

The core coordination mechanisms are markets and prices. Creating an integrated European power market has already delivered large benefits to European consumers. Prices — that are granular in time and space — are key in optimising production and consumption decisions and responses. The core European power market model is not broken and does not need a fix. However, it requires some safeguards and reinforcements to protect customers from extreme price impacts and ramp up the speed of change.

Energy Efficiency First must take its place as a key overarching principle, not just a slogan or a new name for energy efficiency. To minimise total system costs, the most efficient solution needs to be chosen from the pool of supply, storage and demand options when balancing the system, providing grid services and ensuring resource adequacy.

Low-cost management of a renewable-based power system needs a lot of flexibility from all possible sources: generation, storage and demand. Faster and larger markets further facilitate the integration of variable generation.

Consumers must wear two hats. They are the ultimate vendors, so they should be empowered to define what energy services they need. They also offer essential new system resources by their demand, storage and generation capabilities.

More grid and more generation assets will virtually always equal more reliability, but we need to ask if the gains are large enough to justify the costs each time. Optimal resource adequacy means full transparency over the cost of marginal supply-side capacity and full recognition of the value of demand-side flexibility. Thriving forward markets are key in triggering investment based on consumer choice and — unlike capacity mechanisms — without running the risk of supporting non-economic/fossil units.

Europe has ambitious offshore wind development plans. Scaling up requires new thinking: joint grid planning with anticipatory investment, multipurpose grid use (interconnection and linking wind parks onshore) and single system operation.

Power System Blueprint

RAP pulled the essential building blocks of a future zero-emissions power system in Europe by 2035. The Power System Blueprint takes a systems view, sketching out an integrated plan of regulatory solutions essential for a transition that is efficient and equitable. The solutions are designed to galvanise the dirty-for-clean capacity swap, optimise network investment and safeguard efficient spending and consumption decisions through transparent pricing. They are offered up as a toolbox to assist EU and national regulators as they identify the next steps and formulate strategies, each with its own starting points and priorities.

Conclusion

The war in Ukraine drastically changed the public discourse on energy — systems and markets. Calls for stepping back from the transition as planned to reconsider the fundamentals of markets are myopic. At this pivotal moment, it is incumbent on us to accelerate the transition while safeguarding consumers from extreme price impact while needed. Whenever you decide on next steps, you should keep the eyes on the horizon. Always. Not only on the direction of the wind.

This article previously appeared in Euractiv

Power System Blueprint

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Accomplishing climate neutrality by 2050 requires a zero-emissions power sector by the mid-2030s. Securing a decarbonized power system early will unlock pathways for the whole economy. One of the biggest challenges to accomplishing this ambitious goal is time—we have a need for speed if we want to meet decarbonization goals by 2035.  

This is why RAP has created the Power System Blueprint, an interactive website that allows visitors to view different options for decarbonizing Europe’s power system. The Blueprint lays out how to design the regulatory context to achieve a clean, reliable, equitable and affordable European power system by 2035. RAP pulled together the latest insights for supporting regulators, NGO’s, governments and anyone interested in the decarbonization pursuit. 

The Blueprint is designed as a schematic of regulatory solutions linked to six important central principles. In the suite of regulatory solutions (also known as factsheets),you will find comprehensive information, the most important regulatory steps and further reading. 

The decarbonization of the power sector can be done by 2035 but will require a rapid and systemic rethink of the existing European power system regulatory landscape. Within the Power System Blueprint website, you’ll find solutions to some of the some of the largest tasks we face working within this tight timeframe.   

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