Cleaning Europe's grid
with CEO of Enel
As discussed in last week’s Notes (as well as in many, many other places), the Ukrainian conflict has given renewed impetus to reform and decarbonise Europe’s energy system. This week the EU announced the REPowerEU strategy to reduce reliance on Russian gas, which, alongside diversification of gas imports, includes the accelerated deployment of renewables, easing permitting constraints for generation and grid upgrades, more rooftop solar, heat-pumps and an increase of more than x10 the production of biomethane. These are all directionally in line with the EU’s “Fit for 55” strategy, but are estimated to knock an additional 25bcm (billion cubic meters) off the demand side on top of the 100bcm of savings already targeted (the EU uses about 350bcm today). This episode of Cleaning Up with Enel’s CEO Francesco Starace was recorded prior to the Ukraine invasion, so isn’t dominated by Russian gas, but speaks to issues of transformation and resilience that we’ll be seeing a lot more of. Key takeaway: We have a big job ahead of us, but we shouldn’t be afraid of the work.
- Enel today has 55% renewables in its power generation mix, about half of which is hydro, with the rest as wind, solar and some geothermal. Breakdown of generation:
- When Enel began investing in renewables in the early 2000s, some academic estimates suggested that anything above 2-3% penetration of intermittent solar and wind would wreck the grid. Today, we’ve seen South Australia recently run their grid on 100% renewables for a week, with many countries hitting intra-day 100% renewable generation. [The consistent failure of bottom-up forecasts to account for human ingenuity is one reason to maintain some optimism on the climate transition.]
- The electricity system is more resilient than we might expect. COVID ushered in dramatically different demand patterns with overall demand reduced, but domestic use increased. In this situation, the grid operated as we’d expect it to in the future, with thermal generation being used more for grid balancing and peaking.
- As thermal generation is removed from the power mix, need to have storage, not only to cover the shortfalls, but also to provide grid balancing services, replacing inertia that would otherwise be provided by fossil plants [inertia refers to the shock absorbing effect of the system when it gets out of balance - NREL have a good explainer on it here]
- Europe accidentally has pretty diversified energy mix - each country pursued a different strategy, some of which are concentrated, but the aggregate is well balanced. Now all the grids need to be digitised and linked, which should be resilient with high renewables penetration (sun in Southern Europe, wind in North).
- As an electricity producer, Enel is delighted to see a push for more green hydrogen, although the lift is formidable. Hydrogen production today produces almost 1GT of CO2 emissions. To replace that grey hydrogen with green hydrogen (50kwh / kg of h2) would require the equivalent of all of Europe's electricity use incl UK or about the same as total global wind and solar generation. And that is before its use gets expanded to new applications.
- Hydrogen should be prioritised for use as a chemical input, to make ammonia, e-fuels for hard-to-abate, etc. Doesn’t believe it should be used as long-term storage and turned back into electricity (diverging a bit from Liebreich’s view)
- X links project to bring power from Morocco to UK - need to look for demand growth due to demographics, will Morocco need the power itself by the time it is constructed?
- CCS - considers it a transition tech, won't compete with solid state technology over the long term. Categorically will not work with power generation, maybe in some other applications. The power industry has tried a number of times, both retrofit and from scratch. [It’s not exactly post-combustion CCS, but I wonder if NET Power with the Allam-Fetvedt cycle might have cracked the zero-carbon fossil generation nut.]