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Policy Brief / Gas

Policy-Brief

Sector Coupling: the New EU Climate and Energy Paradigm?

Author(s): OLCZAK Maria, PIEBALGS Andris

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ABSTRACT

  • To contribute to the achievement of the Paris Agreement 2°C, and potentially 1.5°C, objectives the EU needs a new energy paradigm. Sector coupling, binding together power and end-use sectors to integrate the rising share of variable renewable energy in the energy system, offers a new framework for this purpose.
  • In order to translate the concept of sector coupling into the EU energy and climate policies, we propose to focus on four building blocks: infrastructure planning; system and market operation; regulatory framework; and research, development, demonstration and deployment.
  • For infrastructure planning, the Ten-Year Network Development Plan (TYNDP) selection process should conclude with one integrated list of projects. Power-to-Gas installations, due to the system value and multitude of applications should become a part of this process and be eligible for the Connecting Europe Facility (CEF) funding.
  • Regarding system operations, a more integrated system would require better correlation between the electricity and gas market design and price structure. Adjustments to the current electricity price structure may be necessary. The gas quality issues will require enhanced cooperation between upstream producers, end-use consumers and TSOs.
  • For the regulatory framework, easing the unbundling rules for P2G in specific cases is worth considering, on the condition that the market test does not provide enough evidence for the development of P2G installations.
  • The possibility of creating a single Target Model for both electricity and gas could be of interest.
  • Research, development, demonstration and deployment is important for decreasing the capital costs of the new projects. Especially in the early stages, companies, industries and the whole sectors may benefit from the shared P2G or carbon storage infrastructure.