ENGIE’s Vision for Europe’s 2050 Energy Transition

Accelerating, pushing on all levers to achieve European goals

Global warming, energy crisis… clearly the world, and Europe, need to accelerate the transition towards carbon neutrality and energy companies have a key role to play. ENGIE will continue to invest 75% of its growth capex into renewable energy sources, energy efficiency and decarbonation solutions. The Energy transition will require the combination of energy efficiency and sobriety, to curb energy needs, and the acceleration of production of renewable molecules and electrons. ENGIE recently unveiled its scenario for Europe´s energy transition towards 2050. This scenario, described below, best ensures the competitiveness and resilience of European economy and provides views on concrete solutions and recommendations to meet European ambition.

I – ENGIE scenario – Key findings

How to best achieve an affordable and resilient energy transition? We will need to multiply by 4 the current pace of emission reduction to achieve the “Net zero emissions” goal by 2050.

Our scenario underlines the importance of activating all decarbonization levers available. This acceleration as well as the inclusion of all energy vectors will be crucial to achieve the climate targets. In a strive to put in place the most effective strategies during the transition, flexibility will be a much needed tool.

We need both to better consume energy, and to consume a greener energy. Meeting European climate commitments entails making significant efforts in energy savings and efficiency. This is true both for consumption, and production processes. Overall, our scenario relies on a 34% reduction in energy consumption by 2050, despite moderate population growth (+2%), an increase in the number of households (+12%), and an expected GDP increase (+1.3%/y). In order to attain this objective, different levers will need to be used – including notably a widespread renovation of buildings. What about the greening of energy ? Our scenario stresses the importance of a rapid increase in the deployment and use of renewable energy sources. It goes without saying that renewable energy sources will play a pivotal role in the energy transition. This is true both for electrons and molecules. Our works highlight the role of wind and solar power in achieving European climate objectives.

As the European demand for electricity is expected to increase by 80% by 2050, it is essential that a majority of this demand is provided by these sources. With this in mind, European wind and solar power production must in turn increase by more than 3 times by 2035, and by 6 times by 2050.

A “stress test” included in our scenario indicated that a delay of five years in the development of wind and solar power would have huge financial, political and environmental impacts, such as not attaining our legally binding European decarbonization goals. This drastic growth in the production and use of renewable energies is therefore an absolute necessity to support the electrification trend.

ENGIE’s scenario insists on the central role of flexibility solutions, in order to face fluctuations triggered by renewable energy sources and demand. This is why we advocate for the development of an additional 600 GW of flexibility capacity, around a four-fold increase compared to current levels. These flexibility solutions include a wide range of technologies to cover the different needs: battery storage, pumped storage or combined-cycle gas turbines burning renewable gases as well as more and more demand based flexibility coming from EV’s batteries or hybrid heat pumps. This way, European energy markets will be more resilient and able to face the speedy rise of intermittent renewable energies.

Turning to molecules, they will continue to be needed, together with renewable heat, for hard to abate sectors and for the flexibility they provide. Their main purpose will be to decarbonize uses that are hard, i.e.. too costly, or impossible to decarbonize otherwise and to act as a support for renewable energies. In this perspective, our scenario envisions a complete decarbonisation of gas by 2050. Green electrons will account for 41% of the final energy mix in 2050. Methane demand will be halved and completely decarbonized via green and low-carbon methane by 2050.

For instance, taking the example of France, by 2050, two-thirds of the demand will be covered by biomethane, as the sector is continually expanding and the most dynamic of the continent. In order to decarbonise hard-to-abate sectors (such as aviation, maritime transportation and high temperature heat in industries), the production of synthetic molecules including hydrogen will be multiplied by eight. Finally, the energy transition wouldn’t be conceivable without massive investments in infrastructures.

The inevitable expansion of renewable electricity makes investment in infrastructure a necessity. In this context, improving and investing in electricity infrastructure must become a priority for all stakeholders, as it would also help to optimise long-term costs. We estimate these investments at €39 billion/year between now and 2040.

In addition, existing gas infrastructures will continue to play a crucial role in meeting demand peaks and making the energy system more flexible, as well as facilitating the transport of biomethane and hydrogen. Here the additional infrastructure investment will be much more moderate – €6 billion/year.

II- Policy recommendations

In order to facilitate Europe’s transition to more sustainable energy production technologies, we have set out a range of policy recommendations destined to European decision-makers and experts. These recommendations go hand-in-hand with our previously mentioned findings. Firstly, policy-makers should even more prioritise the mass development of all renewable energy sources, whether based on electrons or molecules. As stated above, this would allow to cover for the increasing electricity demand. In this sense, policy-makers can stabilize the investment framework to attract more investors, accelerate grid connections and rationalise permitting processes for renewable energy projects.

The development of renewable energies creates increased needs for flexibility solutions, as their intermittent nature cannot ensure baseload energy production, both on demand and on supply side. In particular, it will be essential to create appropriate remuneration schemes for flexible capacity solutions such as batteries and decarbonised combined-cycle gas turbines.

As already mentioned, the rationalization and acceleration of permitting for relevant projects is also necessary.

On demand side, solutions such as hybrid heat pumps do provide the needed flexibility. Moreover, given the essential role that decarbonized molecules will play in the energy transition, the development of the hydrogen sector should be supported in an effective way, in a sufficiently pragmatic approach. Decision-makers must firstly finalise the European regulatory framework for the hydrogen industry and networks in particular but also allocate adequate public support schemes and invest in the conversion of gas infrastructures to accommodate hydrogen. Supporting the production of biomethane in Europe is a no-regret and essential lever for achieving an efficient decarbonization. Establishing effective support mechanisms for biomethane production in terms of pricing and inputs could help further develop this sector, and ultimately provide an accessible, low-carbon and circular energy source. Biomethane would also come in useful in the decarbonization of the building sector. Implementing mass thermic renovation, developing connections to green heating networks and prioritizing the use of biomethane will drastically reduce the emissions of this sector. Relying on hybrid solutions for heating systems, alongside heat pumps, will also play a key role in both decarbonization and the resilience of the energy system. Finally, supporting industrial decarbonization is a necessary step to reduce our overall greenhouse gas emissions.

Decarbonizing the industrial sector will especially go hand in hand with the development of renewable hydrogen industry. Decisionmakers must also accelerate the utilization of wasted fatal energy and renewable heat, ensure more sustainable funding and maintain biomass as a source of renewable energy.

III- Conclusion

In conclusion, we are convinced that, despite the challenges we face, it is possible to achieve the European decarbonization targets, provided that we remove the regulatory obstacles that still exist and secure the public and private investment needed to drive the energy transition through clear and pragmatic frameworks. ENGIE intends to fully play its role !