Climate change mitigation is the key energy-policy goal, and the government is addressing this by seeking a gradual reduction in our use of fossil fuels. Expansion of renewables has been successfully promoted over the past few years. But if the energy transition is to be a success, the areas of transportation, heating and electricity will need intelligent interconnections. Sector coupling is now called for. But what does it actually mean?
7 questions to the experts
interview with Volker Stehmann, Corporate Affairs, Head of Markets & Renewables at innogy
1. Sounds complicated, but perhaps it is not really so. What does sector coupling mean?
The idea behind it is easy to explain. The areas of electricity, heating and transportation are no longer separate from one another in an energy industry sense but meaningfully interconnected. But as always, the devil is in the detail.
Although power is increasingly generated by renewables, oil and gas still play the main role in the heating and transportation sectors. These things just don’t go together – and sector coupling is designed to change this.
2. What role will sector coupling play in the energy transition?
One of the main drivers of the energy transition is decarbonisation.
And it is clear that if German climate change targets are to be met, heating and transportation will need to rely more on renewables, for around 60 percent of German greenhouse gas emissions come from sectors other than electricity generation.
One possibility is to bring electricity into heating systems and motor vehicles. “Power to X” is the magic formula, where X stands for heating, gas or some other form of synthetic fuel.
In addition, the energy system itself has to become more flexible. How much renewable electricity is produced also depends on the weather, so at times a lot will be generated and at other times very little. More variable or controllable power consumption in the heating or transportation sector may be one way of balancing out this intermittency.
3. ... and what does this mean in specific terms for innogy?
We initiated an extensive dialogue at innogy which we are calling the “energy policy compass”. It serves as our direction finder for our political and energy industry positioning. An important realisation arising from that process was that sector coupling is a bit like a content bracket around all of our themes. Ultimately, sector coupling feeds into everything from renewables, natural gas, CHP and distribution systems to the big issues of the future like digitalisation and decentralisation.
4. Can you give us some examples?
Sector coupling affects our classic business areas like electricity sales, for more power in the system means more sales, particularly when electricity is used to replace heating oil. But it also creates further growth areas, as new applications give rise to new product packages and services. Examples of this include electric mobility and our Urban Exponentials initiatives.
Furthermore, the expansion of renewables would be accelerated – and as an operator of wind and solar systems we would benefit from this. And, last but not least, we could bring the energy transition to our customers via the Grids – whether directly in the form of renewable electricity or via other options like “green” gas. Sector coupling primarily occurs on the ground, where the distribution systems play a special role.
5. Sector coupling is all very well and good, but is it all more pie in the sky than reality?
Although there are some examples of it already being applied – we still have a long way to go. We still have to work on the economic efficiency and the infrastructure aspects of everything from power-to-gas, heat pumps and electric mobility.
But it is clear that we have to set the course for systemic change in view of the 2050 climate change targets, so we are actively participating in the process.
6. What does that mean in specific terms?
We at innogy are doing all we can to ensure electricity is no worse off than other energy sources. In comparison to heating oil, for instance, consumers pay much higher taxes and levies on electricity, which is at odds with the energy policy goals of the country.
7. Peter Terium highlighted the significance of a sharing mindset for sector coupling. What do these two trends have in common?
The energy industry is changing. It is becoming more complex, more interactive and also more diverse. I now use power not only to turn on my coffee machine, but also to heat my house, fill a storage tank in my cellar and recharge my car. On the other hand, future generations will probably see less value in owning their own cars. People will not only share their cars but also the power they produce themselves by, for instance, leasing their home charging box, including their parking space, to third parties – as the Share&Charge start-up is already demonstrating.
Sharing is about maximising opportunities for shared usage while at the same time saving valuable resources. Sector coupling has a valuable contribution to make here.