Energy Transition: Direct or Indirect Electrification?

Electrification or hydrogen? Potsdam researchers have investigated the role of both strategies for the European energy transition. The results are not surprising. 

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Electrification and hydrogen are considered key strategies for achieving climate neutrality in the European Union (EU) by 2050. Researchers at the Potsdam Institute for Climate Impact Research (PIK) have now examined the role of direct and indirect electrification in modeled scenarios for the European energy transition. The study shows: A share of 42 to 60% of total energy consumption from electricity and 9 to 26% from hydrogen-based energy is required by 2050.

There are basically two options for electrifying buildings and the industrial and transport sectors: One is direct electrification, which uses electricity directly as an energy source, such as heat pumps or battery electric vehicles (BEV). On the other hand, indirect electrification using green hydrogen and e-fuels (electricity-based, synthetic fuels) is also possible. Here, e-fuels can be used to convert electrical energy into chemical energy carriers and use it in conventional combustion engines, for example, as David Bothe from Frontier Economics explains in the German book chapter Indirect Electrification Using E-fuels.

Direct Use of Green Electricity More Efficient and More Widely Applicable

According to the Potsdam researchers, previous research has already shown that the energy system can be converted to renewable energy sources such as wind and solar power in a cost-effective and environmentally friendly manner. However, the question that currently arises is: How can this scarce, renewable electricity be used optimally to replace fossil fuels in buildings, in the industrial and transport sectors? The analysis makes it clear that the direct use of electricity, for example by electric cars and heat pumps, is crucial for many sectors. While the conversion of electricity into hydrogen is only important for a few applications.

One thing is clear: There is higher potential for electrification and a more limited range of applications for hydrogen-based energy. The PIK researchers' analysis is based on the "REMIND" energy-economy model, which was used to examine plausible combinations of both strategies in the transformation pathways of the EU energy system in various scenarios. Across all scenarios, the direct use of electricity is the dominant strategy, for example for cars or for heating buildings and in industry. Hydrogen and synthetic fuels from electricity would primarily be needed for aviation, shipping, the chemical industry and as electricity storage. Electrification and hydrogen would therefore largely complement each other in the overall energy mix, while competing for a small share of around 15 % of final energy. This would primarily affect sectors such as truck transportation and industrial high-temperature process heat.

As early as 2022, a study by the German Institute for Economic Research (DIW Berlin) and the Brussels think tank Bruegel, which compared three scenarios for creating a fossil-free energy supply (electrification, hydrogen and synthetic gas), came to the conclusion that the costs of direct electrification of the economy would also be lower than the extensive use of hydrogen or synthetic gases. "If sustainably produced electricity is first converted into green hydrogen or green synthetic gases instead of using it directly, the whole thing is ultimately much more expensive," says study author Claudia Kemfert. 

Rising Demand for Electricity

For the PIK researchers, direct electrification also offers efficiency and cost benefits. "Expanding power generation from renewables and switching to electric technologies wherever possible is by far the fastest and cheapest way to reduce carbon emissions in most sectors. We therefore assume that the share of electricity in final energy consumption will have to increase from 20 percent to 42 to 60 percent by 2050 to achieve climate neutrality in the EU," says study author Gunnar Luderer, head of the Energy Systems Group at PIK. 

The reason for this is that electrical technologies are increasingly available and use electricity very efficiently, while the conversion into hydrogen and synthetic fuels and their combustion are associated with considerable energy losses. Overall, the demand for electricity in the EU is expected to increase by 80 to 160 % by 2050 in the scenarios, according to the researchers, depending on the volume of hydrogen imports and the role of electrification and hydrogen in uncertain sectors. By then, around twice as much electricity would have to be generated as today.

Taking Both Strategies Into Account

While there is much to be said for direct electrification, indirect electrification should not be written off. From a systemic perspective, e-fuels have numerous advantages over direct electrification, says David Bothe. These include better storage capacity, the possibility of importing and the use of existing infrastructure with the associated acceptance benefits. These advantages would more than outweigh possible disadvantages due to higher conversion losses.

Ultimately, however, both Bothe and the PIK study emphasize that political decision-makers should consider the different sectoral roles of both strategies. According to Bothe, an energy mix of electricity and e-fuels is therefore the most economical solution for the energy supply. Accordingly, politicians and companies are called upon to enable a broad, technology-open mix of solutions for the de-fossilization of the transport sector.

This is a partly automated translation of this German article.