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Transforming the energy system: here is how

Since the European Green Deal has been announced, sustainable development has become more of an expectation than a call. This is particularly true for the players of the energy industry. We have merely 9 years to reach the EU climate targets for 2030 and less than two decades to curb carbon emissions sufficiently and live in line with the Paris Agreement.

Ambitious investments will be necessary to reshape power generation and energy use both on the supply and demand sides. And energy transition means first of all renewable, which have witnessed an incredible growth through the last few years, mainly driven by falling prices of solar panels on one hand and higher prices of coal on the other hand.

“The basics are clear: we are phasing out coal and lignite and by 2050, a 90 per cent coal phase-out is possible,” said Zsófia Beck, Managing Director and Partner at Boston Consulting Group (BCG), speaking at the Budapest Climate Summit on 7-8 October.

“The real challenge is how to fill the gap between 2021 and 2050,” she continued. “We have flexibility and system reliability issues and short term challenges as well. This is what we also see at an international level and these issues have to be solved.”

Earlier in September, BCG has identified six actions that distinguish leaders from the rest of the pack. These actions include developing sustainability strategies anchored in purpose, capturing the business value, unlocking new sources of growth and assessing the sustainability of their existing portfolio and operations.

However, companies’ representatives highlighted that progress takes time.

“The capacity to connect our grid is doubled in the past years, but we are still running after the development,” said Zsolt Jamniczky, Member of the Board of Directors at E.ON Hungaria. “What we need to do is to try to make it in a cost level which is still acceptable. In a way, we have to reconsider the whole system, we have to distribute. This means activating and integrating the prosumers, to use their flexibility and energy as demand-side response.”

Also Gergő Lencsés, General Manager, Gas Turbines Value Chain at GE Gas Power mentioned technical issues that must be solved.

“We have to speak more about the technical challenges we are facing today, rather than legislation,” he underlined. “Intermittency is the major problem, but this is the case with renewables, including PVs. There are two parts of the power factor: active and reactive energies and we need a balance between them. PVs only creates active energy. If we want to have frequency stability and reliability in the system, we have to fix this power factor problem.”

energy system
Budapest Climate Summit, panel discussion.

Another way to increase the efficiency and flexibility of the energy system is sector coupling. And Zsolt Bertalan, Chief Technology Innovation Officer at MVM Hungarian Electricity emphasised again the importance of time as well to really be ready for this level of change. Péter Horváth, CEO of the Dunamenti Power Plant at MET Group added that flexibility is a crucial challenge and we have to make many studies before transforming the grid.

“We have to go step by step then extend and go further, but the very first step is decarbonising every megawatt,” he added.

Mr Bertalan also talked about the importance of solar power:

“At the end of the day one thing is sure: many people are talking about hydrogen but also solar energy is important as 80 per cent of energy coming from the sun reaches the surface of the planet and it must be stored somehow,” he said.

Other than time, another big issue is the financing part. Who is going to pay for the decarbonisation? We will all pay the price if we do not act now, and everybody agreed that the most sustainable and the cheapest energy is the one we do not use. Thus, at the end of the day, there must be a mindset change.

“Something like 700 billion Hungarian forints [almost 2 billion euros] would be needed to integrate all the renewables,” highlighted Mrs Beck.

But the main question is: are w ready to accept that electricity is not always there?

“If not, it will cost a lot of money,” concluded Mr Bertalan. “I’m not saying it is about blackouts, but about frequency as well.”

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