Germany and the European Union have set ambitious energy and climate policy targets. A key element in achieving them is linking carbon emission reductions in the housing, transport and industrial sectors, for example by substituting fossil fuels with renewable electricity – so-called ‘sector coupling’. In a meta-study for the German Mechanical Engineering Industry Association (VDMA), published today, Frontier analyses the range of available sector coupling technologies and their relative advantages and disadvantages.

The study concludes that sector coupling will have a major impact on the future development of the electricity sector. The possible spectrum of sector coupling technologies is broad and diverse. At the end-user level, renewable electricity can be used in a wide variety of ways. For example, in the building sector, it can be used directly in heat pumps or electrode boilers to generate heat; or indirectly via synthetic fuels such as methane produced from renewable electricity in a condensing boiler.

This diversity of technology plays an essential role in achieving the long-term climate protection targets in a cost-efficient way. In addition, the large number of possible sector coupling applications requires a wide range of different technologies: for example, heat pumps cannot produce heat at temperatures required for some industrial processes. Using the existing gas transport infrastructure with synthetic hydrogen and methane is also a sensible alternative to expanding the electricity grid in order to address public resistance to new electricity transmission lines.

Frontier’s study argues that if policymakers want to realise the advantages of technological diversity, they need to create a level playing field among sector coupling technologies. This includes reforming the state-induced price components (such as taxes, levies and grid charges), avoiding preferential treatment of individual technologies by regulatory requirements, and maintaining the gas grid infrastructure for synthetic fuels.

Frontier regularly advises public and private clients on market design and energy turnaround issues.

For further information please contact Miriam Rau (m.rau@frontier-economics.com, +49 221 337 130).