The role and potential of Power-to-X in 2050

METIS Studies : Study S8 - Study

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Within the 2015 Paris Agreement, the European Union has committed to climate action to keep warming well below 2°C above pre-industrial levels. According to the scientific community of the Intergovernmental Panel on Climate Change (IPCC), this implies that GHG net emissions fall to a level close to zero shortly after 2050 and that all energy sectors reduce drastically their emissions. The emissions from the power sector are successfully reduced and a full decarbonisation by the year 2050 appears manageable. Instead, the transport, buildings and industry sector, which still rely primarily... on gas and liquid fossil fuels, are the sectors with the highest carbon abatement costs. In this context, power-to-gas and power-to-liquid solutions, together with the development of low-carbon electricity generation capacities appear to be promising solutions. The objective of this study is to evaluate under which conditions power-to-gas and power-to-liquid (referred to as power-to-X technologies in this document) can compete with alternative low-carbon production processes by the year 2050. A literature review is realised in order to gather technical and economic information about various power-to-gas and power-to-liquid technologies, along with competing solutions. For three different use cases (plus two sensitivities), the study estimates the costs related to generating synthetic gas or liquid, considering different technologies and CAPEX evolution. It determines the profitability of each power-to-X solution across all EU Member States, taking into account their peculiarities in terms of power generation mix and hourly electricity prices. The prices are determined with the EU power system model METIS, which simulates the hourly dispatch of all generation, storage and interconnection capacities, considering demand-side flexibility and in particular power-to-X technologies. The capacity mix and annual electricity demand of individual EU Members States are based on the EUCO30 2050 scenario, with 65% of the EU’s net electricity generation provided by renewable energies. Besides, the economic analysis focuses on the competitiveness of the first power-to-X projects compared to alternative benchmark solutions. The analysis underlines that the profitability of power-to-X is primarily subject to the availability of low electricity prices. In the studied scenario, countries like Spain, Ireland or Greece exhibit more than 2 000 hours of near zero electricity prices due to their high shares of variable renewable energy (solar and wind energy accounts between 53% and 75% of the national electricity demand for these countries). In France, the high nuclear capacity, coupled with an increasing share of solar and wind energy, implies electricity prices below 10 €/MWh during more than 2 000 hours per year. For these countries, water electrolysis (i.e. power-to-hydrogen) appears to be a competitive solution compared to hydrogen production by Steam Methane Reforming with Carbon Capture and Storage, in particular if the electrolysers are associated with large-scale hydrogen storage: storing synthetic hydrogen (generated during periods of low electricity prices) avoids to invest in expensive back-up solutions to respond to the demand during the rest of the year. In contrast to power-to-hydrogen, power-to-methane and power-to-liquid technologies are more capital intensive. At the same time, the generated final energy carriers are also more difficult to decarbonise as alternative carbon-neutral process chains (biomethane and advanced biofuels are considered in this report) prove costlier than the decarbonisation of hydrogen. In comparison to these alternatives, the study reveals that power-to-X technologies are competitive only in countries with more than 3 000 hours of electricity prices below 10 €/MWh, namely Spain, Portugal and Cyprus. However, this result highly depends on the evolution of the technology CAPEX, along with the cost and availability of alternative solutions. In particular, if biomethane and advanced liquid biofuel potentials are already dedicated to other uses, or if their availability is limited (due to land use constraints, other policies objectives, etc.), the utilisation of power-to-X may become necessary and competitive.