Reduction of offshore wind electricity prices and increasing CO2 price give a decisive push to electrification in the industry in 2030-2040

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TKI Wind op Zee

This is one of the conclusions of the report ’Windenergie voor elektrificatie’ (in Dutch, with English Summary), an analysis of the impact of (renewable) electricity prices on the realization of the electrification potential in the industry. The report ‘Windenergie voor elektrificatie’ (in Dutch, with English Summary) was made by CE Delft and commissioned by RVO, TKI Wind op Zee and TKI Energy and Industry. 

The report examines the relation between realizing the electrification potential in the industry and the electricity price of offshore wind. With this information, the effect of offshore wind cost reduction on the electrification in the industry is demonstrated. The report looks at both direct and indirect electrification via green hydrogen, all without any subsidy.

The study is based on scenarios with different levels of both CO2 prices and electricity prices in the period up to 2050. In the so-called middle scenario, the following levels for CO2 prices are assumed: 2030: € 46/tonne, 2040: €153/tonne, 2050: €290/tonne.

The report shows very interesting conclusions:

The study shows that the level of the CO2 price has a very substantial effect on the electrification potential. At a very low level of CO2 prices, it is not possible to produce offshore wind electricity at a price low enough to persuade the industry to switch to electricity as an energy source. On the other hand, at a very high level of the CO2 price, the effect of the electricity prices on the realization of the electrification potential is only modest. In this case, the realization of the electrification potential is largely determined by the CO2 price. However, with CO2 prices at an intermediate level, the electricity price has a substantial effect on the realization of electrification potential. With offshore wind prices in the range from 20-30 €/MWh the realization of the electrification potential is rising rapidly up to 60-100 TWh.

Assuming a gradual rise in CO2 prices in the period 2020 – 2050 and a continued decrease in offshore wind electricity prices the period 2030 - 2040 offers excellent conditions for the large-scale transition of the industry to the use of electricity as the main energy source, both directly as indirectly (by green hydrogen). In this period the reduction in electricity prices, together with rising CO2 prices, gives the decisive push towards electrification of the industry.

The study also indicates '’tipping points’ for different industrial techniques. With decreasing electricity prices electrification first becomes profitable for various heating techniques. Reaching an electricity price level of € 20/MWh the use of green hydrogen, produced using electrolysis, also becomes profitable.

In these scenario's no account is taken of subsidies. The introduction of subsidies (or a faster rise in CO2 prices) could speed up the process of electrification, but only under the condition that the electric infrastructure will be adjusted soon enough to handle the higher supply and demand of electricity.

Please, find out more by reading the report.