Sector Coupling

If the transport system is to become carbon neutral, wind and solar power generation must increase faster than previously projected. The right model for electrifying transport can bolster Germany’s power sector.

Wind and solar power will be the most important forms of energy for the transport system of the future. But the enormous energy consumption of the transport sector will require the generation of additional electricity if its CO2 emissions are to be reduced. The current rate of wind and solar capacity expansion – including the necessary expansion of power grids and storage systems – is too slow. While forecasts of future energy consumption in the transport sector differ significantly, it’s now apparent that the electrification of this sector will increase Germany’s total power consumption by 2050.

The interrelationships between the electricity and transport sector are more complicated than initially apparent. As kilowatt-hour production for mobility applications accelerates, the transport sector must take into account the limitations of the power system in its present form. Specifically, electric vehicles have to charge intelligently, based on the amount of electricity available. The simultaneous charging of too many electric cars could stretch the system to its breaking point. Smart charging requires not only the necessary infrastructure (i.e. charging points and high-capacity power lines). It also requires electricity service plans that incentivise practices of benefit to the power system. Digital technologies have the potential to facilitate these sorts of practices, though it remains unclear what if any role electricity generated by roof-top solar installations for private use will play in promoting smart charging. Other open questions include whether used electric vehicle batteries will see second lives as back-up power storage units and whether synthetic fuels produced with renewable electricity are good options for times when sunlight and wind are in short supply.


Core results

  1. 1

    Germany can achieve climate neutrality by 2050 in three steps while adhering to existing investment cycles.

    The first step consists of a 65% reduction in emissions by 2030. The second step is the complete transition to climate-neutral technologies, for a total emissions reduction of 95%. The third step is the offsetting of residual emissions through carbon capture and storage.

  2. 2

    The path to climate neutrality involves a comprehensive investment programme comparable in scope to the German economic miracle of the 1950s and 60s.

    The core elements of the programme are the creation of a renewable-based energy sector, mass electrification, a smart and efficient modernization of buildings and the development of a hydrogen economy for the industrial sector. Besides achieving climate neutrality, the programme will also improve people’s quality of life by reducing noise and air pollution.

  3. 3

    An enhanced German reduction target of 65% for 2030, in line with the requirements of the European Green Deal, will require significantly accelerating the green transition in the energy, transport and heating sectors.

    This includes the complete phase-out of coal by 2030, a 70% share of renewables in electricity generation, 14 million electric cars on the road, 6 million heat pumps, an increase in the green retrofit rate of at least 50% and the use of some 60 TWh of clean hydrogen.

  4. 4

    The next legislative period will determine how Germany goes about achieving climate neutrality by 2050 and a 65% reduction in GHG emissions by 2030.

    Government action after the 2021 federal election will be pivotal for future climate policy. Intelligent policy instruments will be needed to modernise Germany’s economy and make it sustainable and resilient. They will also be needed to ensure that the structural changes are as fair and inclusive as possible.

  1. 1

    Synthetic fuels will play an important role in decarbonising the chemicals sector, the industrial sector, and parts of the transport sector.

    Synthetic fuels will play an important role in decarbonising the chemicals sector, the industrial sector, and parts of the transport sector. Synthetic fuel production technologies can be used to manufacture chemical precursors, produce high-temperature process heat, as well as to power air, sea and possibly road transport. Because synthetic fuels are more expensive than the direct use of electricity, their eventual importance in other sectors is still uncertain.

  2. 2

    To be economically efficient, power-to-gas and power-to-liquid facilities require inexpensive renewable electricity and high full load hours. Excess renewable power will not be enough to cover the power demands of synthetic fuel production.

    Instead, renewable power plants must be built explicity for the purpose of producing synthetic fuels, either in Germany (i.e. as offshore wind) or in North Africa and the Middle East (i.e. as onshore wind and/or PV). The development of synthetic fuel plants in oil- and gas-exporting countries would provide those nations with a post-fossil business model.

  3. 3

    In the beginning, synthetic methane and oil will cost between 20 and 30 cents per kilowatt hour in Europe. Costs can fall to 10 cents per kilowatt hour by 2050 if global Power-to-Gas (PtG) and Power-­to-Liquid (PtL) capacity reaches around 100 gigawatts.

    The aimed-for cost reductions require considerable, early and continuous investments in electrolysers and CO2 absorbers. Without political intervention or high CO2 pricing, however, this is unlikely, because the cost of producing synthetic fuels will remain greater than the cost of extracting conventional fossil fuels.

  4. 4

    We need a political consensus on the future of oil and gas that commits to the phase-out of fossil fuels, prioritises efficient replacement technologies, introduces sustainability regulations, and creates incentives for synthetic fuel production.

    Electricity-based fuels are not an alternative to fossil fuels but they can supplement technologies with lower conversion losses, such as electric vehicles and heat pumps. Application-specific adoption targets and binding sustainability regulations can help to ensure that PtG and PtL fuels benefit the climate while also providing a reliable foundation for long-term planning.

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