European Energy Sector Research Articles

Systemic Innovation in the European Energy Sector: A Collective Outlook

Applying the principles of systems thinking in the evolution of energy systems is a crucial approach to meet the long-term horizons of goals in the energy sector. Through a participatory approach, this paper outlines what we view as the trends shaping the current development of the energy sector; the challenges we must face as a result, and the transitions required to tackle them. Furthermore, we discuss how systems thinking can address these challenges through changing not the components, but rather their relationships and structures. Contributing to the emerging stream of literature applying more holistic approaches to energy transitions, in contrast to more linear systems modelling. We provide innovative insights into how future energy systems could be designed to become more regenerative, resilient, empowering, whilst technologically- and economically feasible; to overcome the challenges of carbon lock-in effects and carbon capture, the rebound effects of efficiency strategies, and social sustainability for just transitions.

Maturity assessment of grid-scale flexibility and energy storage services towards a decarbonized Europe

Background The study evaluates the maturity of grid-scale flexibility services, essential for Europe's transition to a decarbonized economy. Conducted under the Horizon-Europe SINNOGENES project, it focuses on energy storage technologies, regulatory frameworks, and stakeholder perspectives. Methods The methodology comprises three phases. First, significant grid-scale energy storage and flexibility technologies, including Battery Energy Storage Systems (BESS) and Vehicle-to-Grid (V2G) systems, were reviewed. Second, the regulatory framework for flexibility services at the EU transmission systems level was assessed, analyzing key EU directives and national regulations from Spain, Portugal, Germany, Cyprus, and Switzerland. Third, stakeholder perspectives were gathered through a survey of forty-four stakeholders in the European energy sector and bilateral interviews with companies and organizations in the energy sector. Results Technological advancements in grid-scale flexibility services have been identified, along with persistent regulatory challenges. The survey and interviews revealed a varied perception among stakeholders regarding the maturity and implementation of these services. A high demand for flexibility was noted, with 77% of stakeholders expressing a need for or active use of flexibility services. Electrochemical energy storage and demand response were highlighted as the most relevant technologies. However, high implementation costs, perceived insufficient benefits, and regulatory uncertainties were major barriers to widespread adoption. Conclusions The study concludes that despite notable technological progress and some regulatory advancements, several barriers still impede the full maturity and integration of grid-scale flexibility services in Europe. Addressing these regulatory and market challenges is crucial for achieving a fully functional and integrated flexibility service framework across the European grid. Harmonized regulations, financial incentives, and clear long-term pricing signals are essential to support the market.

Safe haven between European ESG and energy sector under Russian-Ukraine war: Role of sustainable investments for portfolio diversification

The shortage of oil and gas supply to Europe during the Russia-Ukraine conflict has triggered a price hike in the European energy sector. To mitigate the impact of higher energy prices on consumers, the EU introduced a price ceiling mechanism to curb gas prices from exceeding market norms. This interplay between supply shortages and price controls further heightened volatility in energy market prices. Consequently, our study aims to explore the efficacy of ESG indices as a safe haven against the highly volatile European oil and gas sectors to reduce portfolio losses during conflict. Using advanced analytical techniques such as cross-quantilogram to predict directional predictability, we find that bullish ESG markets are a safe haven against the bearish oil and gas markets in short, medium, and long-term investment horizons. Further, to identify the net receiver/transmitter of spillover between ESG indices and oil and gas sectors, our quantile time-frequency connectedness analysis shows ESG is a net receiver of spillover before the conflict and during wartime. Additionally, we explored the indicator of uncertainty that influences quantile spillover between ESG indices and European oil and gas sectors. We find that uncertainty's role in quantile spillover is significant and asymmetric, and it becomes more volatile during wartime. This feature tends to be amplified during short and long-term spillovers. Finally, the portfolio rebalance strategy suggests that a safe haven portfolio based on a one-month investment horizon yields positive returns during wartime. Hence, this study suggests investors include ESG indices as safe haven assets at times of crisis and for policymakers to understand the role of uncertainties in reducing price volatility and risk contagion among ESG and energy markets.

Integration assessment of turquoise hydrogen in the European energy sector

Turquoise hydrogen from natural gas pyrolysis has recently emerged as a promising alternative for low-carbon hydrogen production with a high-value pure carbon by-product. However, the implications of this technology on the broader energy system are not well understood at present. To close this literature gap, this study presents an assessment of the integration of natural gas pyrolysis into a simplified European energy system. The energy system model minimizes the cost by optimizing investment and hourly dispatch of a broad range of electricity and fuel production, transmission, and storage technologies, as well as imports/exports on the global market. Norway is included as a major natural gas producer, and Germany as a major energy importer. Results reveal that pyrolysis is economically attractive at modest market shares where the carbon by-product can be sold into high-value markets for 400 €/ton. However, pyrolysis-dominated scenarios that employ methane as a hydrogen carrier also hold promise as they facilitate deep decarbonization without the need for vast expansions of international electricity, hydrogen, and CO2 transmission networks. The simplicity and security benefits of such pyrolysis-led decarbonization pathways justify the modest 11 % cost premium involved for an energy system where natural gas is the only energy trade vector. In conclusion, there is a strong case for turquoise hydrogen in future energy systems and further efforts for commercialization of natural gas pyrolysis are recommended.

External costs of electricity generation in 27 European countries from 2010-2030: Pathway toward sustainability or business as usual?

Electricity generation in Europe is undergoing a fundamental change. The aim is to increase sustainability by reducing emissions. Each country has a different electricity mix, and there is no established method for measuring environmental impacts of electricity production with a single monetary indicator, in a uniform manner, and with country-specific data. To address this gap, a model that measures the costs of 19 environmental externalities (usually, types of emissions) has been developed. Using country-specific technologies, electricity mixes, and external cost rates, the development of external costs of generating electricity in 27 European countries between 2010 and 2030 is assessed and analyzed. The simulation results show that the external costs vary heavily between 2.1 and 22.4 euro cents per kWh in this period. Despite the initiated transformation of the energy systems in many EU countries, external costs per kWh are decreasing in only eight of them. This fact underlines the need for a drastic change in national energy strategies. Overall, the results show that more far-reaching policy measures are needed in order to significantly reduce the external costs of the energy sector in Europe. The article raises the level of granularity of research on the external costs of electricity in Europe by combining extensive country-specific emission data and country-specific external cost rates.

The upcoming Network code on cybersecurity and its impact on resilience of the european energy sector

The upcoming Network code on cybersecurity and its impact on resilience of the european energy sector

Analysis of Environmental and Energy Policies in Turkey, the European Union and the United States

Energy consumption plays a pivotal role in the development of societies. Sustainable Energy Resources are vital inputs for daily life, and energy and industrial products are essential for economic growth (Ministry of Energy and Natural Resources, 2022). Consequently, those responsible for managing a country's energy sector must ensure the uninterrupted, reliable, timely, clean, and affordable supply of energy, as well as diversify energy sources to enhance energy security.
 The concept of "sustainable development" has emerged in response to the need to prevent irreversible environmental damage caused by conventional energy sources and outdated technologies while ensuring access to energy as a fundamental human right under optimal conditions (Pamir, N 2005). Developed societies have transitioned from planning based solely on energy source acquisition and production to a planning approach that carefully considers the energy-economy-ecology balance (3E) while taking into account resource diversity and geopolitical realities (Energy Policies and Global Developments, emo.org.tr).
 Turkey remains heavily dependent on energy imports, accounting for approximately 74% of its energy needs (Ministry of Energy and Natural Resources, 2023). The multifaceted nature of Turkey's energy strategy and its energy dependence emphasize the importance of international relations in this field.
 U.S. energy policies have global ramifications, particularly in areas such as energy resource utilization, energy trade, and energy independence (Ministry of Energy and Natural Resources, 2022). U.S. energy policies play a significant role in international relations, impacting relationships with other countries, especially in matters related to energy exports and imports.
 In Europe, there is uneven progress towards clean electricity, with both successes and challenges in transitioning to a low-carbon energy system. While the European energy sector has taken significant steps towards decarbonization, there has been limited progress in some countries, and much more progress is needed. Achieving a fully decarbonized energy system in Europe requires united efforts and coordination to address the challenges posed by fossil fuel dependence and climate change.

INTEGRATION OF HEATING SYSTEM OPERATION

Ukraine has a huge asset in the form of existing district heating (DH) networks and demand for related services. DH is transforming the European energy sector, attracting efficient, local and renewable energy resources where this was not possible. However, due to the old material base of spare parts, insufficient level of investment and low level of management, Ukrainian DH systems are ineffective and do not meet the needs of consumers. The experience of European Union member states in central Europe shows that deep and sustained reforms can address the current challenges of the heating sector, including improving energy efficiency and economic competitiveness, strengthening environmental sustainability and enhancing energy security. The DH sector in Ukraine has not yet undergone the structural reform that other sectors of the economy have already gone through: over the past 30 years, the quality of services has decreased; subsidies have increased; the old material base is falling apart; The question arises whether it is worth continuing to support DH. As a result, Ukraine's DH sector is in dire straits, with financial, operational and technical problems compounding each other. Comprehensive and well-planned efforts must be made to create the conditions for exiting this state. Such structural reforms are essential to attracting the investment needed to improve the quality, efficiency and long-term potential of the district heating sector.
 The article examines the possibility of using modern technological solutions to modernize heat supply systems in order to improve their efficiency, which can lead to improved district heating services, transparency and financial stability.
 Keywords: energy resources, renewable energy sources, fossil fuels, automated heat and power plant, electricity, hot water, hot air, heating, private households, electric water heater, geothermal heat pump, wind power generator, low-power boiler house.

Implications of open eco-innovation for sustainable development: Evidence from the European renewable energy sector

This study aims to look inside the vague construct of an open eco-innovation (OE) network to reveal underlying strategic factors of combining complementary resources to overcome complexity. Results show that uncertain economic outcomes might reduce the motives of certain partners to engage in OE. In this case, OE network transformation is needed to reduce risks of market failure, driven by bridging nodes. This transformation should focus on exploration and future complementarities of network members, instead of exploitation and existing complementarities, despite technological maturity. This study is the first to demonstrate the significance of future complementarities in OE network evolution.

Assessing the Impact of Energy-related Sanctions on Russia and Their Consequences for Europe

This research paper investigates the impact of energy-related sanctions on the European energy sector in light of the Russian-Ukrainian military conflict. The study analyzes the S600ENP index returns using data from June 2018 to July 2023, divided into three distinct periods: pre-invasion, during sanctions, and post-sanctions. Descriptive statistics and distribution analysis reveal distinct market behaviors and volatility clustering during each period. The analysis of variance (ANOVA) test does not show significant differences in mean returns across the periods, indicating relatively consistent index performance. The stationarity test suggests non-stationarity in the index returns. The ARCH model demonstrates the persistence of volatility shocks influenced by geopolitical events like Russian sanctions. The findings underscore the importance of understanding market dynamics during geopolitical uncertainty and its implications for the European energy sector. Though the representation of the S600ENP index limits the research, future studies can explore alternative datasets and periods for more comprehensive insights.

Decarbonization challenges and opportunities in the Central European energy sector: Implications for management

AbstractWhile decarbonization and hydrogen energy are at the top of European policymakers' agenda, research and innovation (R&I) management of energy companies must focus on clean technologies (cleantech) which could decrease greenhouse gas (GHG) emissions in the sector. The Central European energy sector, however, might face a decarbonization challenge because of the specific geopolitical situation, so aligning R&I directions with regional policy and conditions seem to be crucial to accelerate sectoral and corporate adaptation. This study focuses on the decarbonization progress and strategies of the Visegrád 4 (V4) countries, concerning some of the most promising hydrogen-driven cleantech R&I directions which might induce strategic changes in Central European energy companies. Besides promoting renewable energy sources, results show that V4 strategies usually include the development of nuclear energy capacities to reduce GHG emissions and using the extended natural gas infrastructure for renewable energy storage. The analysed cleantech innovations are included but usually not central in these strategies. Strategic changes in energy companies, however, could be driven by these promising R&I directions, e.g., the hydrogen economy development by power-to-X (P2X) technologies, industrial decarbonization by carbon capture, utilization or storage (CCUS) technologies in the mid-term, and cross-sectoral integration and optimization by smart energy system (SES) development in the long-term.

MEASURING PROGRESS TOWARDS OCEAN ENERGY COMMERCIALISATION

The EU aims to achieve climate neutrality by 2050 through the European Green Deal and its commitment to global climate action under the Paris Agreement. Transitioning to a carbon-neutral society requires increasing the share of renewable energy across different sectors. Ocean energy can contribute to job creation, economic revitalization, and grid balancing. However, public funding and financial instruments are necessary to reduce risks, advance technology, and to support demonstration and pre-commercial projects in the ocean energy sector. The SEETIP Ocean project, supported by the European Commission through the Horizon Europe framework programme, aims to accelerate the deployment of the ocean energy sector by promoting collaboration among stakeholders. As part of the project, an analysis is being conducted to assess technological progress, identify implementation gaps, and update the Strategic Research and Innovation Agenda (SRIA) for Ocean Energy. The analysis reveals reasonable progress in research and innovation, albeit with smaller project sizes compared to current SRIA recommendations, and the need for increased support from national programmes. Some topics have been covered more than proposed funding and number of projects, while others not at all. This highlights the need for effective communication and collaboration between both the European Commission and Member State funders and their programmes. In addition, public support and funding is crucial to lower investment risks and propel ocean energy technologies towards commercialisation. With appropriate funding and policy support, the European ocean energy sector could strengthen its position as a worldwide leader and harness the socio-economic benefits from the sector. Keywords: Climate neutrality, Ocean energy, Funding, Strategic Research and Innovation Agenda (SRIA), Challenge Areas, Priority Topics.

Digitalisation: an enabler for the clean energy transition

Russia’s war on Ukraine and the resulting energy crisis have painfully reminded Europe that it must urgently reduce its dependence on fossil fuels. For a sustainable, secure and affordable energy future, the coming years will require a massive scale-up of renewable energy across the EU and a tremendous effort by European businesses and households to cut their energy consumption. The use of data and digital solutions can play a pivotal role in bolstering these efforts. This has been recognised in the European Commission’s EU Action Plan on digitalising the energy system of October 2022, the first comprehensive plan for a twin green and digital transition in the European energy sector. While this plan is undeniably commendable, it is just a start. To fully unlock the potential of digitalisation in the transition towards sustainable energy systems, built around the active participation of consumers, significant shares of renewables, energy savings, and efficient energy use, the EU and its member states need to: Accelerate work on a common European energy data space, characterised by interoperable data standards, effective incentives for data sharing and adequate data protection and privacy safeguards for consumers. Ensure that citizens possess the necessary digital skills and information to reap the full benefits of the twin transition in terms of consumer empowerment and access to affordable and clean energy. Put in place the necessary safeguards regarding cybersecurity of energy networks to ensure that digital transformation does not jeopardise the resilience of EU energy systems. Use financial tools to accelerate the deployment of digital solutions in the energy sector and equip existing networks with the necessary digital infrastructure.

Dynamic volatility transfer in the European oil and gas industry

The study examines dynamic volatility transmissions among European energy industry participants along the production lines of Upstream, Midstream, Downstream, and Integrated Oil Gas (IOG) segments. Using Diebold-Yilmaz (2012, 2014) spillover index, during the sample period of October 2006 to June 2022, we find significant internal volatility spillover among the European energy sector participants, primarily emanating from Upstream companies. In subsamples, we show that Downstream and Midstream segments can also become volatility transmitters under certain conditions. More importantly, the large Russian IOG companies became significant volatility transmitters after 2022 with the onset of Russia's war on Ukraine, potentially causing major system instability because these IOG firms were traditionally volatility absorbers in the network. Overall, we provide insights about the interconnectedness among European energy companies during normal and extreme market conditions and highlight important system dynamics that could be useful for policy makers and investors.

C3S Energy: A climate service for the provision of power supply and demand indicators for Europe based on the ERA5 reanalysis and ENTSO‐E data

AbstractThe EU Copernicus Climate Change Service (C3S) has produced an operational climate service, called C3S Energy, designed to enable the energy industry and policymakers to assess the impacts of climate variability and climate change on the energy sector in Europe. The C3S Energy service covers different time horizons, for the past 40 years and the future. It provides time series of electricity demand and supply from wind, solar photovoltaic and hydropower, and can be used for recent trends analysis, seasonal outlooks or the assessment of climate change impacts on energy mixes in the long term. This article introduces this service and the resulting dataset, with a focus on the design and validation of the energy conversion models, based on ENTSO‐E energy data and the ERA5 climate reanalysis. Flexibility and coherence across all countries have been preferred upon models' accuracy. However, the comparison with ENTSO‐E data shows that the models provide plausible energy indicators and, in particular, allow comparing climate variability effects on power demand and generation in a harmonized manner all over Europe.

Relationship between ESG and corporate financial performance in the energy sector: empirical evidence from European companies

PurposeConsidering environmental, social and governance (ESG) factors is vital in climate change mitigation. Energy companies must incorporate ESG into their business plans, although it unquestionably affects their corporate financial performance (CFP). This paper aims to investigate the effect of ESG on energy companies’ profitability through return on assets by analysing the combined score and individual dimensions of ESG.Design/methodology/approachThe study examined a panel data sample of 911 firm-year observations for 85 European energy-sector companies during 1995–2020. Two distinct modelling specifications were applied to explore the impact of ESG components on the CFP of EU energy companies. The financial data and ESG scores were obtained from the Thomson Reuters Eikon database in July 2021.FindingsThe empirical findings revealed that energy companies’ profitability is marginally and negatively affected by their ESG performance. Whereas independent evaluation of the ESG subcomponents indicated that environmental responsibility has a significant negative effect. In contrast, corporate social and governance responsibilities are positively but not significantly associated with the company’s CFP.Originality/valueThis study fills a research gap in the ESG–CFP literature in the European energy sector, a pioneer in sustainable development. To the best of the authors’ knowledge, this study’s originality lies in its analysis of ESG factors’ role in profitability by considering different EU countries and energy sectors.

Assessing the sustainability of bioenergy pathways through a land-water-energy nexus approach

Bioenergy can significantly contribute to facilitating the transition to a self-sufficient low-carbon energy sector in Europe. The establishment of sustainable bioenergy systems needs ex-ante analysis that considers specific contexts and potential trade-offs, including competing uses of natural resources such as land, water and energy. The use of marginal and underutilized lands has been emphasized as a valuable strategy to overcome the food vs fuel paradigm and the direct and indirect land use change that can derive from the cultivation of bioenergy crops. Nevertheless, the fragmentation of these lands can significantly affect the energy efficiency of the systems, due to increased energy needs for inputs and transport, with trade-offs on the carbon footprint of the pathway. This study performs an ex-ante assessment of the sustainability of a short bioenergy pathway through the Land-Water-Energy nexus approach, by the iterative use of a web geographic information systems platform, developed on the methodology of the Global Bioenergy Partnership. The simulations show that the production of bioenergy from oilseed crops is expected to reduce greenhouse gas emissions by 73% compared to the reference emission value for fossil fuels in transport. The platform proofs to be effective and user-friendly for assessing and optimizing the intricate interlinkages among the various nexus domains that coexist within the bioenergy system based on the cultivation of underutilized land. Its use can facilitate the nexus operationalization serving as a timesaving decision-support tool for the development of sustainable bioenergy systems that contribute to the transition towards a low-carbon energy sector in Europe.

The Relationship Between Sustainability Reporting and Corporate Performance. Evidence from the European Energy Sector

The Relationship Between Sustainability Reporting and Corporate Performance. Evidence from the European Energy Sector

The Relationship Between Sustainability Reporting and Corporate Performance. Evidence from the European Energy Sector

The Relationship Between Sustainability Reporting and Corporate Performance. Evidence from the European Energy Sector

Regulatory sandboxes: Do they speed up innovation in energy?

Regulatory sandboxes are generally seen as an important tool to make policy and regulation evolve with the changes in our energy system and to create an equal playing field for new technologies and business models that arise with the energy transition. Although an increasing number of legal frameworks on regulatory sandboxes are being implemented in Europe, the pioneers in the Netherlands decided to close their sandbox program. These contradictory events lead to questions about the potential of regulatory sandboxes to bring innovation to the European energy sector. This paper contributes to this discussion by examining the experiences with regulatory sandboxes in Austria, Belgium, France, Germany, Great Britain, the Netherlands, Norway and Spain. We compare approved sandbox projects based on their scope and regulatory derogations to identify areas of innovation and regulatory learning brought by regulatory sandboxes. We also examine the legal frameworks of the concerned countries to evaluate the interaction between the implementation of the framework and its potential to bring innovation. In this way, we develop best practices on the topics of regulatory sandboxes and their implementation frameworks.