Electrification

In the last year notable progress was made in these countries:

• China reached an electric vehicle (EV) sales share of 29% in 2022. As such, the government’s target of 20% new energy vehicle sales in 2025 was comfortably met 3 years ahead of time. 
• In France and the United States, heat pumps outsold fossil fuel-based heating systems in 2022. 
• Over half of India’s three-wheeler registrations in 2022 were electric. 
• New Zealand banned the installation of new low- and medium-temperature coal boilers in 2021 to encourage cleaner alternatives for industries.
  

Electrification holds great potential to reduce final energy demand because the efficiency of electric technologies is generally much higher than fossil fuel-based alternatives with similar energy services. Furthermore, the emission reduction benefits of electrification go hand-in-hand with an increase of renewable energy. As the number of end uses increasingly shifts towards electricity, more (flexible) capacity is added to the electricity system, mitigating the effects of integrating variable renewables. Similarly, when the electricity supply becomes increasingly saturated with renewables, the carbon intensity across all sectors will drop.

The majority of electrification-related CO₂ emission reductions are in the road transport sector, specifically within the light-duty vehicle segment, with an increase in powertrain efficiency alone avoiding about 1 Gt of CO2 emissions in 2030 relative to today under the NZE Scenario. This segment benefits greatly from increasing technology deployment and legislation that targets air pollution within urban areas. The second biggest contributor is the electrification of space heating. Currently, natural gas boilers have a large share in residential heating, but new energy efficiency standards of buildings will increase the share of heat pumps. Additional reductions will occur with the increased use of renewable energy that often comes with electrification. 

After a strong increase in electricity demand in 2021, demand remained resilient in 2022 amid the global energy crisis triggered by Russia’s invasion of Ukraine. While electricity demand declined in Europe and growth slowed down in China, the United States and India saw a high increase in electricity demand following a relaxation of coronavirus (Covid-19) pandemic restrictions and an increase in economic activity. Demand rose by about 2%, which is just below the average growth rate seen over the period 2015-2019.  

From 2016 to 2022 the share of electricity increased at a compound annual growth rate of 1.7%, with the highest increase (4.5%) seen in 2020. The current share of electricity in total final energy demand is 20%. This share grows to more than 27% by 2030 in the NZE Scenario - a compound average annual growth rate of around 4.1%. The pace at which electricity increases its share will have to accelerate to get on track with the NZE Scenario milestones.  

Despite its major contribution to emission reductions, the road transport sector has the smallest share for electricity in the total energy demand in 2030 under the NZE Scenario. The share increases twenty-fold until 2030, from just under half a percent in 2022 to around 9% in 2030. As the buildings and industrial sectors already have a larger electricity share, they show a slower pace of acceleration for this indicator, with growth of 40% and 30%, respectively. However, for all sectors the average annual rate at which the share of electricity increases will need to more than double compared to the historical rate. 

The different demand sectors show a diverse range of technological deployment stages. This deployment is driven partly by emission reduction policies and by energy use cost reductions.  

In the transport sector, more than 26 million electric cars were on the road in 2022, up 60% relative to 2021 and more than 5 times the stock in 2018. In the bus and heavy-duty segments electric options are slowly gaining momentum as well. More electric models are becoming available, with 220 new bus and truck models entering the market in 2022. Most heavy-duty vehicle deployment is currently happening in China, with over 80% of all sales located there, however sales in Europe and North America in this segment more than doubled in 2022 compared to 2021.  

The most promising electrification technologies in the buildings and industrial sectors relate to the heating and cooling of air, water and steam. Technological options in the buildings sector are well-developed, and today heat pumps have become the most common heating technology in newly built houses. In 2022 global sales of heat pumps grew by 11% compared to 2021. Europe, Japan and the United States saw the highest growth in sales, with increases of 40%, 19% and 11%, respectively. However, there is still a need to boost the uptake of heat pumps in existing buildings – the need to retrofit buildings for heat pumps and consumer hesitance are reducing the uptake of this technology. 

In the industrial sector, electrification technologies are being deployed in lower-temperature heat segments such as food and beverages, the paper industry and light manufacturing, as well as for some low-temperature processes in the chemicals industry. Options to electrify industrial processes include electric and plasma arc furnaces and high-temperature heat pumps. Industrial heat pumps are currently a viable option in processes that require temperatures between 90 to 140 °C, including many steam processes, being most efficient when maintaining a temperature difference of 50 to 60 °C. Furthermore, electric arc furnaces are already commonly used in secondary steel production. In the iron and steel industry, ore electrolysis offers another electric pathway besides the conventional fossil route; pilot projects in France (Siderwin) and the United States (Boston Metal) are expected to lead to commercial plant deployment around 2030.  

Hydrogen produced from electrolysis is an indirect form of electrification and is an important option for some parts of heavy industry. While costs are expected to remain higher than direct electrification, its most important use case will be high-temperature processes for which no direct electrification options are possible.  

Many countries are tackling electrification from different angles, targeting either an increase in electricity demand or the share of (renewable) electricity in the total energy supply. 

Policy measures related to electrification include the following: 

• In 2022 Sweden published a strategy soley focusing on how to enable further electrification, including the expansion of the capacity of the grid and further developing the EV charging network and wind energy sector. 
• Many regions are working to strengthen their electricity networks, anticipating an increase in demand and supply in the future. For example, in 2022 Spain budgeted EUR 7 000 million for more than 10 000 km of transmission lines. As well as the United States, where over USD 8 billion in loans became available for the enhancement of the transmission network. Furthermore, connecting power grids can support resilience, for example the recent linkage between Egypt and Saudi Arabia, due to start operations in 2024. 
• A number of governments are using funds or subsidy schemes to stimulate investments of electrification in heavy industry. Finland initiated a subsidy fund to support the electrification of heavy industries. Similarly, the REPowerEU plan doubled the budget available in the Innovation Fund, enabling a budget of EUR 1 billion for innovative electrification in industry and hydrogen. 
• Several governments created EV charging strategies or plans to further develop existing infrastructure, such as Canada, Ireland and Israel.  
• To raise awareness of electrification and its possibilities, some countries have launched information and education campaigns, for example India and Switzerland, highlighting the benefits of electric vehicles or using electricity for cooking.