1. Research
  2. Products & Topics
  3. Special
  4. Thematic
To listen to a podcast version of this article click here

An electric and renewable century?

Author
James Brand
+44(20)754-74705
An increasing number of European countries have set zero net emission targets and the ambition to rapidly lower greenhouse gas emissions is growing. Although there has been significant investor focus on the power and transport sectors, there has been very limited attention on how to decarbonise the residential and industrial sectors.
These sectors, predominantly through their use of fuels for heating, make up around a quarter of EU emissions. Heating will need to be decarbonised in order to hit European targets, necessitating either the electrification of heating, or a widespread switch from natural gas to green gases. The significance for the European utility sector and the oil and gas industry could be pronounced. 

How to decarbonise heating?

The UK, France, Spain and a number of smaller EU countries have set targets to achieve net zero emissions by 2050, with the EU Commission also proposing a zero net emissions target for 2050. In Europe, around half of energy use is for heating and cooling, with this contributing around a quarter of EU emissions. Natural gas is an important fuel and, while cleaner than other fossil fuels, it will still need to be substituted, or its emissions captured, in order for the increasingly ambitious targets to be met. Significant thought is starting to go into how to achieve this, although there are major challenges. Heating demand, and gas use, is highly seasonal. In the UK peak winter demand for gas can be up to 6x the peak demand for power. Fully electrifying heating would lead to much greater seasonality in power demand which may be difficult to deal with in a world expected to be increasingly reliant on intermittent renewables. Secondly, it is extremely difficult to electrify some industrial processes. These challenges are turning attention towards green gases, in particular hydrogen, in addition to a range of other technology options.

Increasing ambition from policymakers

There seems to be fresh policy momentum in Europe for policies to reduce greenhouse gas emissions. An increasing number of European countries have approved laws targeting carbon neutrality while a number of others target the introduction of such laws. The European Commission currently has an objective for 80-95% emission reductions by 2050 although in November 2018, published a proposal to target net zero GHG emissions by 2050. The EU also has a series of 2030 targets. Member states are required to submit National Climate and Energy Plans (NECPs) and long-term national strategies consistent with the NECPs by year end. The EU’s 2030 targets include the following main objectives:
At least 40% cuts in greenhouse gas emissions (from 1990 levels)
At least a 32% share for renewable energy
At least a 32.5% improvement in energy efficiency
At national level, the UK in June 2019 passed a law with a legal requirement to cut emissions to net zero by 2050. France also in June approved a law with goals for carbon neutrality by 2050. In February 2019 Spain published a draft law for carbon neutrality by 2050, although this has not yet been passed. Among the smaller European countries Sweden and Norway have laws in place taking effect in 2045 and 2030 respectively with governments in Denmark, Finland, Ireland, Portugal and Switzerland also targeting carbon neutral laws.
In a new report Deutsche Bank Research provides an extensive review of the technologies available, their pros and cons, and economics. Read the report here or if you don’t have access contact a Deutsche Bank representative.
The full report is available to clients of Deutsche Bank Research.
For important disclosure information please see: https://research.db.com/Research/Disclosures/Disclaimer
 
 

© Copyright 2021. Deutsche Bank AG, Deutsche Bank Research, 60262 Frankfurt am Main, Germany. All rights reserved. When quoting please cite “Deutsche Bank Research”.

The above information does not constitute the provision of investment, legal or tax advice. Any views expressed reflect the current views of the author, which do not necessarily correspond to the opinions of Deutsche Bank AG or its affiliates. Opinions expressed may change without notice. Opinions expressed may differ from views set out in other documents, including research, published by Deutsche Bank. The above information is provided for informational purposes only and without any obligation, whether contractual or otherwise. No warranty or representation is made as to the correctness, completeness and accuracy of the information given or the assessments made. In Germany this information is approved and/or communicated by Deutsche Bank AG Frankfurt, licensed to carry on banking business and to provide financial services under the supervision of the European Central Bank (ECB) and the German Federal Financial Supervisory Authority (BaFin). In the United Kingdom this information is approved and/or communicated by Deutsche Bank AG, London Branch, a member of the London Stock Exchange, authorized by UK’s Prudential Regulation Authority (PRA) and subject to limited regulation by the UK’s Financial Conduct Authority (FCA) (under number 150018) and by the PRA. This information is distributed in Hong Kong by Deutsche Bank AG, Hong Kong Branch, in Korea by Deutsche Securities Korea Co. and in Singapore by Deutsche Bank AG, Singapore Branch. In Japan this information is approved and/or distributed by Deutsche Securities Inc. In Australia, retail clients should obtain a copy of a Product Disclosure Statement (PDS) relating to any financial product referred to in this report and consider the PDS before making any decision about whether to acquire the product.

20.0.0