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Electrification

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About this report

With significant potential to mitigate emissions and decarbonise energy supply chains, electrification is an important strategy to reach net zero goals. As more energy end uses become electrified, the share of electricity in total final energy consumption increases in the Net Zero Emissions by 2050 Scenario from 20% in 2021 to 27% in 2030.  

In recent years the share has been increasing steadily, but to get on track with the Net Zero Scenario the speed of this increase will need to nearly double to reach the 2030 milestone. Much of the need can be met by the shift towards electric transport and the installation of heat pumps. In industry the highest potential for electrification is in low-temperature heat processes, such as drying of food and beverage processes. Due to the highly competitive market and long lifetime of equipment, the electrification of industrial end uses is slower.  

CO2 emissions

Electrification holds great potential to reduce final energy demand because the efficiency of electric technologies is generally much higher than fossil fuel-based alternatives with similar energy services. Furthermore, the emission reduction benefits from electrification go hand in hand with an increase of renewable energy. As the number of end-uses increasingly shifts towards electricity, more (flexible) capacity is added to the electricity system, mitigating the effects of integrating variable renewables. Similarly, when the electricity supply becomes increasingly saturated with renewables, the carbon intensity across all sectors will drop.  

The majority of CO2 emission reductions related to electrification between 2021 and 2030 are found in the road transport sector, specifically within the light-duty vehicle segment. This segment benefits greatly from increasing technology deployment and legislation that targets air pollution within urban areas. The second biggest contributor is the electrification of space heating. Currently natural gas boilers have a large share in residential heating, however new energy efficiency standards of buildings will increase the share of heat pumps.  

Relative to today, under the Net Zero Scenario electrification can avoid 1 Gt of CO2 emissions in 2030. Electrification accounts for about 7% of all mitigated emissions between 2020 and 2030. The majority of these reductions are in the transport sector, from the electrification of light-duty vehicles. The second biggest contributor is the electrification of space heating. These numbers do not include the emissions avoided from the use of renewable energy or from energy efficiency – solely the increase in powertrain efficiency will lead to the decrease in total emissions. 

Energy

Strong economic growth, combined with colder winters and warmer summers, boosted global electricity demand in 2021 by 5%, the largest increase since the recovery from the financial crisis in 2010.

Share of electricity in total final energy consumption, 2005-2030

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Strong economic growth, combined with colder winters and warmer summers, boosted global electricity demand in 2021 by 5%, the largest increase since the recovery from the financial crisis in 2010. 

From 2015 to 2021 the share of electricity increased at a compound annual average rate of 2.1%, with the highest increase (4%) seen just before the Covid-19 pandemic (2019 to 2020). The current share of electricity in total final energy demand is 20%. This share grows to almost 30% by 2030 in the Net Zero Scenario - a compound annual average growth rate of around 3.5%. The pace at which electricity increases its share will have to accelerate to get on track with the Net Zero Scenario milestones. 

Despite its major contribution to emission reductions, the road transport sector has the smallest share for electricity in the total energy demand in 2030. The share increases more than 20-fold till 2030, from less than half a percent in 2021 to around 9% in 2030. As the buildings and industrial sectors have a larger electricity share already, they show a slower pace for this indicator, with growth of 40% and 32%, respectively. However, for all sectors the average annual rate at which the share of electricity increases will need to more than double compared to the historical rate.  

Technology deployment

The different demand sectors show a diverse range of technological deployment stages. This deployment is driven partly by emission reduction policies and by cost reductions in energy usage.  

In the transport sector, electric car sales took off across major car markets in 2021. The charging infrastructure to support these EVs is also increasing but deployment must accelerate. Likewise, the electrified bus and heavy-duty segments are slowly gaining momentum, but market share and model availability are still low.  

The most promising electrification technologies in the buildings and industrial sectors are the heating and cooling of air, water and steam. In the buildings sector the technological options are well-developed and today heat pumps have become the most common heating technology in newly built houses. However, progress is still needed to boost the uptake of heat pumps in existing buildings – the need to retrofit buildings for heat pumps and consumer preference are reducing the uptake of this technology. 

In the industrial sector, the deployment of electrification technologies is taking place in the lower-temperature heat segments such as food and beverages, and light manufacturing. Most electrification measures offer few productivity benefits compared to similar technology options, so deployment is slower compared to the other sectors. Hydrogen produced from electrolysis is an indirect form of electrification, and is a viable option in some parts of heavy industry. In 2021 several demonstration projects sparked widespread interest, for example the Hybrit project in Sweden, which produced its first green steel.

Policy

Many countries are tackling electrification from different angles, targeting either an increase in electricity demand or the share of (renewable) electricity in the total energy supply. Some countries are also addressing the distribution network, mainly developing countries, setting targets on the share of the population connected to the electricity network or increasing the system’s capacity.  

Recently Sweden published a strategy solely focused on electrification and how to further enable it. It focuses on expanding the capacity of the grid, further development of the EV charging network and the wind energy sector. Similarly Japan also published a comprehensive response to power shortages.  

Other policy measures related to electrification include the following: 

  • Many regions are working to strengthen their electricity network. In the last few years, numerous governments have created funds or frameworks to achieve this, for example India, the European Union, Hungary and the United States. 
  • Canada and Australia have started to fund smart- and micro-grid demonstration projects, with the aim of improving the resilience and reliability of the electricity supply.   
  • To make society more aware of electrification and its possibilities, some countries have launched information and education campaigns, for example Australia and India. 
  • This year many new initiatives were announced on EV charging networks, most notably in the United States, the United Kingdom and Germany

Policies

Policy
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Year
Status
Jurisdiction
Recommendations for policy makers

As electricity demand and supply will increase significantly in the coming years, it will be essential that the grid can cope with the scale and variability of power. One of the ways to do this is to develop electrification strategies that avoid overcrowding the electricity system. Governments can provide clear pathways for grid operators to allow investments to be made in a timely manner. At the moment many targets exist for EV sales, heat pumps installations and renewable energy capacity – governments will need to translate these targets into concrete geographical capacity that can meet future needs.

In all sectors, the cost of going electric translates into high initial investment costs. Several tools exist to overcome these barriers and to create incentives towards electric end uses. Efficiency standards in buildings and vehicles greatly contribute, as well as realigning subsides and taxes so the business case becomes more favourable.  

The technical potential for electrification in industry is high, but significant innovation and deployment is required to decrease the cost of alternative technologies. Quantifying the benefits of electrification and adjusting industry standards for new equipment will shift the paradigm in light industries.