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A complete summary of all the 12 articles of the course Energy Transition and Innovation. For €5,95 you will get a 29 pages summary. This is less than €0.5 per article.
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Energy Transition and Innovation articlesMcKinsey & Company, 2016
As a member of the EU, the Netherlands is expected to support the region’s ambitious aims
For reducing GHG emissions. The Netherlands need to accelerate its transition to a low-carbon
economy. This raises some crucial questions. What policy measures, technological advances, and
industrial shifts would support a near-total decarbonisation of the energy system and the economy?
How much spending and investment is needed to pay for those changes? And can the Netherlands
achieve economic growth while reducing its GHG emissions to meet the EU targets?
The country has gradually made improvements in the energy efficiency and renewable energy use
over the past two decades; it remains a heavy user of fossil fuels: only 6% comes from renewables.
GHG emissions are now 187 million metric tons, in line with EU-wide targets, would bring the
Netherlands’ greenhouse emissions down to 44 million metric tons. Therefore, the Netherlands need
to cut its emission by at least 2% per year – three times the annual reduction it realized between
1990 and 2014. This is a hard question, because of the high living stand and the GDP growth.
Pursuing the EU’s emission reduction goals can also produce economic benefits for the Netherlands.
The keys to this approach include setting and following a longer-term master plan, reducing costs
while capturing potential benefits, and replacing infrastructure and assets at end of life. The
Netherlands can realize a modest medium term GDP increase of around 2% by accelerating its
transition to a low-carbon energy system. This impact could be larger if the Netherlands invests in
areas with high growth potential, such as electric mobility, sustainable building heating, offshore
wind, innovation in energy storage and transport solutions, heavy industry, and (offshore) carbon
capture and storage or usage. A crucial question for policymakers and business leaders is whether
there is a way to minimize these investments and to increase the economic benefits of such
investments through increased efficiency and creation of new (export) sectors.
Netherlands is a small and densely populated country, where new infrastructure investments can be
done economically given high utilization. Energy plays an important role in the Dutch economy and
makes a disproportional contribution to GDP compared to other countries. Has the 2nd highest
penetration of electric vehicles globally.
This paper finds that an accelerated but flexible approach to reducing GHG emissions will yield value
in terms of GDP and employment. Approach of this paper was to estimate the economic costs and
benefits of one set of emission-reduction options for four major sectors: transport, buildings, heavy
industry and power. Considered one scenario with technologies that are proven today or that appear
likely to become workable in the near term.
Investing EUR 10 billion per year between 2020 and 2040 in a low-carbon energy system would
generate a positive GDP impact and potentially create tens of thousands of jobs in the long run, with
45,000 installation jobs at minimum in the near term.
Changing energy demand: moving to high efficiency and low-carbon technology:
Applying a combination of energy efficiency measures and speeding up the implementation of new
technologies could decrease the demand for primary energy by approx. 30 percent. In short term,
some demand-sectors could launch initiatives that rely on proven, economical, and readily available
knowledge and technology. Examples include gasoline powered vehicles with EVs and improving
insulation in buildings so they can be cooled and heated with less energy and introducing new
1
, heating solutions. In other sectors, changes will unfold more slowly, largely because the necessary
technologies are not yet widely available or practical to apply on a large scale.
Decarbonizing the energy supply: one-third less energy, one-third more power. Energy demand will
decrease; power demand will increase. There would be also a higher demand for bio-based fuels and
feedstocks and lower demand for fossil fuels. In this scenario, the electricity grid, the gas distribution
network, and fuel or bunkering stations – would also need to change significantly. By increasing the
system’s renewable power generation capacity to 80% and introducing flexibility measures, such as
demand-side management and energy storage. All in all, this would lower (energetic) CO2 emissions
by about 55%. These changes require capital and operational expenditures of approx. EUR 10 billion
per year. This amounts to some EUR 2.5 billion more than for a fossil-fuel-reliant system.
The fully loaded unit cost of electricity will increase form EUR 54 per MWh to EUR 64 per MWh
without transmission and distribution, and from about EUR 66 per MWh to EUR 79 per MWh with
transmission and distribution costs. A system that runs on 80% renewable energy would produce
75% fewer GHG emissions that it does today.
Overall, the cost of energy for the Netherlands would come down slightly: from about EUR 23 billion
to EUR 22 billion. The higher the oil price, and the lower renewable costs, the larger this difference
becomes. The resulting power system would also perform and look differently from todays.
1. It would be a reliable, flexible transmission and distribution network capable of delivering
the higher peak demand.
2. Balancing of the loads on the grid, across a “portfolio” of millions of EVs, heat pumps, and
other electric power devices using demand-side management technologies.
3. The ability to store and manage excess power generated by intermittent renewable sources,
such as solar and wind.
4. Consistently delivery of electricity throughout the day and night, throughout the seasons,
drawn when necessary from stored energy or shifted moments of demand.
The primary risks will be related to financing and the need for developing a new market model.
Investors must accommodate high upfront capital requirements and near-zero marginal costs;
intermittent generation of power by wind and solar must be integrated into the system; and year-
round energy security needs to be ensured through the availability of back or storage capacity with
relatively low utilization rates.
Maximizing the value of investments in the energy transition:
Energy transition is very capital intensive, there are four major ways in which to increase the
efficiency of the investments required:
1. Creating nationwide economies of scale through large-scale, planned programs for those
technologies that would benefit from central roll out.
2. Avoid investment in equipment that eventually needs to be replaced again with low- or zero
carbon equipment before reaching its economical or technical end-of-life, and leapfrog to
low-carbon or carbon-neutral technologies right away.
3. Increase investments in those sectors and capabilities where the Netherlands can build
competitive differentiators on a European or global level.
4. Transforming adjacent economic sectors. More investments and innovation in supporting
fields will require changes in technology, business models and financing as well.
Estimating the economic impact of the energy transition, triggering growth:
Investment and spending on goods and services required for the energy transition will generate GDP
growth of 2% in the short to medium term. Over time this direct effect will slowly fade away. In the
longer term, further upside can be created. Shift in economic activity away from sectors with lower
economic multipliers (like large plants) and towards sectors with higher economic and employment
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