EU Energy System Integration Strategy under the EU Green Deal

The European Commission’s Energy System Integration Strategy is a major piece of the European Green Deal. It sets forth the vision and ambition for the EU’s future energy system. ‘Energy system integration’ is defined as ‘the coordinated planning and operation of the energy system ‘as a whole’, across multiple energy carriers, infrastructures, and consumption sectors’. Published simultaneously with the EU Hydrogen Strategy in July 2020, it emphasises the need for technological neutrality and sectoral integration to reach carbon neutrality by 2050.

The Strategy is based on 3 founding principles: 

1. circularity and energy efficiency;
2. electrification of end-use sectors; and 
3. the complementary use of renewable and low-carbon fuels (where hydrogen is widely promoted). 

The multi-directionality of the energy system (prosumers, vehicle-to-grid, smart grid...) is also mentioned as a horizontal dimension. 

The strategy presents ‘an action plan’ with concrete policy and legislative proposals, notably those under the Fit for 55 package.

The main goals of the strategy are:

• Decarbonisation (along with reduction of air pollution and of energy water footprint);
• Increased energy efficiency and reduction of energy needs;
• Strengthened competitiveness of the European economy (inter alia via the creation and strengthening of key value chains);
• Additional flexibility and storage capacities on the energy network;
• Greater consumer empowerment, improved resilience, and security of supply.

Encompassing these objectives, the strategy lays out 6 main pillars for action:

1. ‘A more circular energy system, with ‘energy-efficiency-first’ at its core’

It aims to increase circularity (including sectoral integration) and energy efficiency in the energy system. This includes the promotion of onsite waste reuse (such as by-product hydrogen) through ‘strengthened requirements’ and the downward review of the Primary Energy Factor (from 2.5 to 2.1), under the review of the Energy Efficiency Directive.

1. ‘Accelerating the electrification of energy demand, building on a largely renewables-based power system’

With its pillar 2, the Commission wants to boost electrification and renewables production. It comprises boosting the development of offshore renewables production while taking into account opportunities for hydrogen production, exploring the establishment of minimum criteria for green public procurement, all this through the revisions of the CO2 emission standards for cars and vans, TEN-E and TEN-T Regulations, and Alternative Fuels Infrastructure Directive (now Alternative Fuels Infrastructure Regulation).

1. ‘Promote renewable and low-carbon fuels, including hydrogen, for hard-to-decarbonise sectors’

The third pillar aim at scaling up alternative low-carbon and clean fuels and energy carriers, where direct electrification and renewable heat might not be feasible or have higher costs. The Commission plans for a ‘quick development’, with a comprehensive industrial value chain approach. As part of this plan, a specific subsection is dedicated to hydrogen, which would have an important role to play, especially in HDVs, captive fleets of buses, non-electrified rail transport, aviation via synthetic fuels maritime transport and inland waterways, as well as in industrial processes such as steelmaking, refining or chemicals production. Hydrogen is considered to have a “nodal role” in an ‘integrated energy system’ as it enables seasonal energy storage and the transformation and use of local renewable energy production for a series of end-uses. 

As envisaged under the EU’s Hydrogen Strategy, renewable hydrogen development will be top priority, while low-carbon hydrogen will also be useful in a ‘transitional phase’. To further stir its development, the Commission aims to establish a ‘comprehensive terminology and a European certification system’ and ‘minimum shares or quotas of renewable hydrogen in specific end-use sectors.’ Besides, it promotes financing and upscaling via the funding of flagship projects with support of various tools including InvestEU, Innovation Fund or Horizon Europe, which will among others, help stimulate CCUS technologies or ‘first-of-a-kind production of fertilisers from renewable hydrogen’ as from 2021.

4. ‘Making energy markets fit for decarbonisation and distributed resources’

The fourth pillar aims at making the internal market regulatory framework fit for the energy transition by issuing ‘guidance to Member States to address the high charges and levies borne by electricity’; ensuring ‘the consistency of non-energy price components across energy carriers’ and aligning ‘the taxation of energy products and electricity with EU environment and climate policies’ (including work towards the phasing out of direct fossil fuel subsidies). This should aim to ‘ensure a harmonised taxation of both storage and hydrogen production’, to avoid double taxation, and to ‘supply more consistent carbon price signals across energy sectors and Member States, including through a possible proposal for the extension of the ETS to new sectors’. Work in this field was carried under the revisions of the State aid framework and of the Energy Taxation Directive, aiming to support ‘cost-effective decarbonisation of the economy where public support remains necessary.’

5. ‘A more integrated energy infrastructure’

Retrofitting and deploying the necessary infrastructure for the energy transition is encompassed by the strategy’s fifth pillar. It will strive to ‘ensure that the revisions of the TEN-E and TEN-T regulations fully support a more integrated energy system, including through greater synergies between the energy and transport infrastructure, as well as the need to achieve the 15% electricity interconnection target for 2030.’ It includes the revision of ‘the scope and governance of the TYNDP to ensure full consistency with the EU’s decarbonisation objectives and cross-sectoral infrastructure planning as part of the revision of the TEN-E Regulation and other relevant legislation.’ Finally, it will ‘accelerate investment in smart, highly-efficient, renewables-based district heating and cooling networks, if appropriate by proposing stronger obligations through the revision of the Renewable Energy Directive and the Energy Efficiency Directive, and the financing of flagship projects.’

6. ‘A digitalised energy system and a supportive innovation framework’

The sixth and last pillar will aim to make digitalisation and innovation enablers for the energy transition, via the adoption of a ‘Digitalisation of Energy Action plan’ or the development of a ‘Network Code on cybersecurity in electricity,’ notably to ensure data privacy, technological leadership, and higher energy security.

On the 19^th May 2021, the European Parliament adopted a resolution on the strategy. In it, the Parliament supports the Strategy and highlights several of the challenges present related to energy system integration.

 

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What’s in it for hydrogen?

The underlying ambition of this strategy is to set the path for the necessary transformations within the European energy system so that it can enable the achievement of the 2050 climate neutrality target. One of the clearly-highlighted required transformations consists in integrating energy sectors with each other – from production, to distribution and storage, to end uses – which means leaving behind the ‘silos-based approach’. In this regard, ‘renewable and low-carbon hydrogen’ is perceived as a key technology to link the components of the energy systems, thanks to its capacity to store energy, potentially for long periods, and to decarbonise a wide range of hard-to-abate sectors whether as a fuel or feedstock. Concretely, hydrogen is especially favoured for long-haul transport (HDVs, maritime transport, and aviation), high-temperature industry, and energy storage. The Commission sees a ‘nodal role’ for hydrogen as part of ‘an integrated energy system.’

To develop and scale up hydrogen, the Strategy plans on setting up a ‘comprehensive terminology’ and ‘a European certification system based notably on full life cycle greenhouse gas emission savings and sustainability criteria.’ It also envisages ‘minimum shares or quotas of renewable hydrogen in specific end-use sectors (notably maritime transport and aviation). This has since been included in a variety of adopted regulations, such as in the revised Renewable Energy Directive, in the FuelEU Maritime, or in the ReFuelEU Aviation.  This acts both to improve visibility for investors and to stir up investment incentives. Besides, the scaling up of offshore renewables production would create opportunities for hydrogen production from electrolysers and for the possible reuse of existing infrastructure of depleted gas fields, the Commission mentions in the Strategy. For the use of low-carbon hydrogen and the production of hydrogen-based synthetic fuels, demonstration and scaling up of carbon capture technologies will be fostered, via the Innovation Fund support for instance and the development of a regulatory framework for the certification of carbon removals based on a MRV approach. Funding channels were also made available via the Next Generation EU recovery instrument, not least via national Recovery and Resilience Plans, national Just Transitions Plans, as well as through InvestEU or under the Innovation Fund and IPCEI frameworks. 

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Links to the original document and additional information:
Powering a climate-neutral economy: An EU Strategy for Energy System Integration - European Commission Communication COM(2020) 299 final

European Parliament resolution on a European strategy for energy system integration