The Nordic Energy Technology Perspectives (NETP) series assesses how the Nordic region can achieve a carbon-neutral energy system by 2050. NETP 2016 marks the second edition in the series, the first having been published in 2013, and presents technology pathways towards a near-zero emission Nordic energy system in addition to in-depth scenarios tailored to inform policy-making in the region.

The analysis conducted in NETP 2016 is presented around the Nordic Carbon Neutral Scenario (CNS), which calls for an 85% reduction in emissions by 2050 (from 1990 levels).[1] To achieve this target, three macro-level strategic actions are elaborated. The first of these calls for the planning and incentivisation of a Nordic electricity system that is significantly more distributed, interconnected and flexible than at present. The second calls for the accelerated development of technology that will increase the decarbonisation of long-distance transport and the industrial sector. Finally, the third strategic action aims to tap into the positive momentum of cities to strengthen national decarbonisation and energy efficiency efforts in transport and buildings.

Achieving a carbon-neutral energy system

The Nordic countries have already decarbonised aspects of their energy systems, having decoupled CO₂ emissions from GDP growth over two decades ago. However this process will have to pick up in pace if the CNS is to be achieved. Policy and technology innovation will be crucial in this regard. The policies and technologies implemented to date have already captured the most cost-effective opportunities to weaken the link between economic growth and emissions, leaving greater challenges in sectors where progress has been more difficult.

The CNS requires a dramatic change in the composition of primary energy supply, coupled with aggressive energy efficiency policies that substantially reduce demand. Under the scenario, bioenergy surpasses oil as the largest energy carrier, with total demand for biomass and waste increasing from almost 306 million MWh in 2013 to over 444 million MWh in 2050. However, the most dramatic transformation of the Nordic power and heating system will come from the combination of a decline in nuclear and a significant build-out of wind power, resulting in generation that far exceeds domestic demand, even when reduced nuclear generation is figured in.

With an increase from 7% of electricity generation in 2013 to 30% in 2050, wind will displace fossil and nuclear. While the transition of heating networks from fossil fuels to heat pumps and electric boilers will add flexibility to an integrated power and heat system, the increase in wind generation will put new demands on how the electricity market is organised. Hydropower will be increasingly valuable for regulating the market, but will not suffice on its own. The increase in variability will require balancing through a combination of flexible supply, demand response, storage and electricity trade. Increased trade will reduce system costs and enhance flexibility, but long lead times in setting up interconnectors and strengthening the grid may delay achieving full potential.

Industrial sector decarbonisation the greatest challenge

The 60% reduction in the CO₂ intensity of industry called for in the CNS will require aggressive energy efficiency combined with other measures, such as switching fuel and feedstock to lower-carbon energy mixes, and the deployment of low-carbon innovative processes, including CCS. Increased international cooperation will also be required, for example through international carbon pricing or energy performance auditing mechanisms, as these will play a key role in mitigating the risks of the low-carbon investments needed to decarbonise industry, thereby reducing potential impacts on competitiveness.

Achieving the CNS will require a 10% increase in investments over that needed for the 4DS1 target in the period from 2016 to 2050, representing an additional investment of about EUR 298 billion.[2] The greatest relative investment increases are required in buildings and industry, with an increase of 47% required in the five industrial sectors analysed, which together account for 80% of the total final energy use by industry in the Nordic region. This represents a cumulative investment of around EUR 27 billion, mainly associated with energy efficiency improvements and the deployment of low-carbon innovative processes. At EUR 179 billion, the largest share of additional cumulative investment is accounted for the by transport sector.

Radical transformation of transport

Transport, which currently accounts for almost 40% of Nordic CO₂ emissions, delivers the greatest emission reduction in the CNS. Transport requires a dramatic emissions slash – from about 80 million tonnes of CO₂ in 2013 to just over 10 million tonnes in 2050. This target can be achieved through a three-pronged ‘avoid-shift-improve’ strategy of reducing transport activity (avoid), shifting to more efficient or less carbon-intensive transport modes (shift) and adoption of more efficient or less carbon-intensive transport technologies and fuels (improve). Improvements to technologies and fuels will play the largest role in the transformation of transport, largely because avoid and shift strategies have already been deployed.

In the face of steadily rising demand for transport services, the success of taxation and subsidy approaches in power and heat generation will provide a solid foundation for similarly assertive policies in transport. Consequently, transport’s overall energy use in the CNS will decrease by over 20% compared to 2000, despite a 70% increase in overall passenger and freight activity. Under the scenario, electricity accounts for 10% of final energy use in transport in 2020, but thanks to the high powertrain efficiency of electric motors, electricity’s share of transport activity is much higher: 64% of road and rail passenger kilometres and 42% of road and rail freight activity.

Furthermore, the CNS requires a tripling of the current rate of improvement in space heating energy intensity of Nordic buildings. This will be achieved primarily through the deep energy renovation of existing buildings, which will constitute 70% of the Nordic stock in 2050. Energy efficiency gains in buildings can unlock biomass and electricity for use in other sectors, avoiding infrastructure investments in power and heat and CO₂ emissions in transport and other sectors.

Recommendations

The NETP 2016 stipulates that governments will need, individually and in a coordinated manner, to play a lead role in stimulating actions to achieve the set targets. Specifically, actions in four key areas are identified. Governments will need to strengthen incentives for investment and innovation in technologies and services that increase the flexibility of the Nordic energy system. Furthermore, efforts will be required to boost Nordic and European cooperation on grid infrastructure and electricity markets.

It will also be necessary to ensure the long-term competitiveness of Nordic industry while reducing process-related emissions. For this, governments will have to act to reduce the risk of investment in low-carbon industrial innovations and use public funding to unlock private finance in areas with significant emission reduction potential but a low likelihood of independent private sector investment.

Finally, governments in the region will have to act quickly to accelerate transport decarbonisation by using proven policy tools such as congestion charges, differentiated vehicle registration taxes, bonus-malus regimes and altered parking fees. At the same time they should step up investments in cycling, public transport and rail networks. Implementation of these short-term policy recommendations will create the framework conditions for the ambitious partway outlined by the CNS to be achieved.

Nordic Energy Research

Nordic Energy Research is an intergovernmental organisation supporting and coordinating sustainable energy research in the Nordic region. It is the platform for cooperative energy research and policy development under the auspices of the Nordic Council of Ministers. Nordic Energy Research’s governance structure is closely connected to both the national political systems of the five Nordic countries as well as the intergovernmental Nordic system. This creates a constant interaction between research strategies, results and key issues on the political agenda. For more information, see Nordic Energy Research’s strategy.