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Summary
DNV GL has called for taxation to be rebalanced in favour of renewables in order to support faster decarbonisation through sector coupling.
Its new report, ‘Sector coupling: Creating an interconnected decarbonized energy system benefiting industry, the power sector and society’’ is based on quantitative analyses of the impact of sector coupling on energy demand and energy prices in Europe.
The report shows in the heating sector, the average EU tax per kWh on electricity from renewable sources is four times higher than on natural gas, giving gas a high preferential position; meaning that customers are encouraged to use fossil fuels over renewable power.
Existing taxation schemes that favour fossil fuels hold back the use of renewable power during times of oversupply, the company said, meaning energy is wasted.
Instead the report says electrification can connect various industry sectors such as heavy industry, transport and households and services to create new dynamics in the electricity market, bringing down cost and benefiting carbon reduction.
Sector coupling would allow heavy industry, one of the ‘hard to abate’ sectors in the climate challenge, to procure power at favourable costs and would also have a positive impact on the business case for renewables.
But new infrastructure, grid connection regulations and taxation schemes will be essential to realize its full potential, it added.
DNV GL - Energy chief executive Ditlev Engel said: “Through electricity, other energy value chains, such as natural gas, oil and hydrogen, will increasingly be decarbonized and become more tightly connected, forming one large interconnected and increasingly dynamic energy system.
DNV GL proposes that competitive advantages created by sector coupling will lead to a race to grab opportunities first.
Leading this so far is Denmark; recognized for its high contribution of wind energy, it has also a very strong history of coupling electricity and heat: 65% of its population is connected to district heating, fed by combined heat and power generation.
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