ELECTRIFY THE ECONOMY

Climate change is an undeniable fact, and the decarbonisation of the economy is a necessary way forward. Electrification with renewable energy is the most efficient and competitive solution to massively reduce emissions, reason why it is necessary to ensure a level playing field in order to deploy this option as soon as possible. Something that can only be done if each product reflects its true carbon footprint. The consumer has to understand the real cost of the different alternatives to be able to choose the most efficient and economical one.

What is happening at the moment? Since the roll-out of renewables energies has occurred mainly in the electricity sector, the cost of the additional support needed by these technologies has been borne exclusively by electricity bills, despite the fact that renewable target is set based not only on electricity but also on petrol and gas consumption.

The upshot is that the electricity tariffs, which have the largest share of clean energy, are more expensive than more polluting energy sources, putting them at a competitive disadvantage. Because of this, electricity ends up being more expensive than other alternatives, since the electricity consumer is bearing the environmental cost that derives from fossil fuels consumption.

To correct this distortion, all energy products should include in their final price the cost of their emissions and their proportional share of renewables support costs, in keeping with the "polluter pays" principle, so that all consumer are aware of the real environmental costs of the energy they use.

In addition to the renewables' support, electricity bills traditionally include other costs unrelated to the supply of electricity. The European Commission has calculated that on average at least 40 % of European electricity bills are due to taxes and costs unrelated to the electricity supply.

Again, the result is that the price of electricity is higher in comparison with other types of energy, which makes the electrification of the economy and decarbonisation more difficult.

For the consumer to be able to choose correctly between the different energy options, all costs unrelated to supply need to be removed from the electricity tariffs allowing electricity and its end-use applications, such as electric cars and heat pumps, to compete on equal terms with other more polluting existing options.

The transport sector is responsible for approximately a third of total energy consumption and a quarter of emissions in Europe. However, it is the only sector that has increased its emissions, by around 20 % since 1990, as opposed to reductions of more than 30 % both in the electricity sector and in industry. It Is still based mainly on fossil fuels, with renewable alternatives accounting for less than 10 % of the energy consumed.

Is also one of the main causes of air pollution, which is responsible for 400,000 premature deaths in Europe every year.

Given the greater difficulty of reducing emissions in sectors such as aviation, sea transport or long haul heavy transport, efforts now need to be focused on light road transport, with the aim of decarbonising this sector completely by 2050. The last internal combustion vehicle must be sold by 2030-2035 at the latest, giving way to the electric vehicle which is the most effective, efficient and sustainable mature solution for light transport:

1. Charged with renewable electricity, electric vehicles represent a renewable alternative.

2. They are two to three times more efficient than conventional vehicles.

3. They do not emit CO₂ or other pollutants.

Despite their multiple benefits, electric vehicles are still uncommon in Europe, mainly due to their cost and the lack of public recharging infrastructure.

To enable this technology change, a European strategy must be implemented to facilitate its mass development. The European Union is now developing and reviewing regulations as part of the so-called Green Deal, to implement an emission-neutral economy by 2050. This opportunity should be taken to:

1. Establish that all new vehicles from 2030-2035 must be zero emissions.

2. Encourage administrations to be pioneers in implementing measures through official vehicles and public transport.

3. Deploy a minimum recharging network infrastructure, with mandatory targets for 2025 and 2030 that will allow the market to take off.

At Iberdrola, we are contributing to the roll out of electric vehicles by developing and marketing private and public recharging services. Iberdrola's solutions meet the needs of individual customers, companies and fleets for zero-emissions mobility by integrating energy from renewable sources with value-added services and the latest recharging technology.

Buildings account for a quarter of total energy consumption and almost 15 % of emissions in Europe. Heating and cooling in the building sector is essential in achieving carbon neutrality by 2050 and, although it has reduced its emissions by more than 25 % since 1990, in recent years there has been an upward trend.

Heating is also one of the main causes of air pollution, since it depends more than 60 % on fossil fuels.

In view of this situation, the electric heat pump arises as a real, mature and competitive alternative to decarbonise heating, domestic hot water and cooling in buildings. But what is an electric heat pump and what are its benefits?

• It is a thermal machine that very efficiently transfers heat or cold from the air or the ground to the desired space. It is three times more efficient than conventional gas boilers.
• It is capable of generating up to 4 kW of heat for every 1 kW of electricity, so its performance can reach up to 400 %. Three quarters of the energy generated comes free from renewable natural resources.
• It does not emit CO₂ or other pollutants.

Despite its benefits, heat pump penetration in the building sector in Europe is less than 1 %, mainly due to the high cost of the machines; their installation and the refurbishments required to buildings, compared to that of a gas boiler.

To promote this technology change, a European strategy is needed that facilitates its massive development. The European Union is currently developing and reviewing regulations of the Green Deal, to implement a carbon-neutral economy by 2050. This opportunity should be taken to:

1. Reduce the economic barriers slowing its development by establishing incentives.

2. Establish standards for CO₂ emissions and other pollutants. From 2025, all new systems should be free of CO₂ and other pollutants.

3. Establish a uniform energy certification system for buildings in Europe and set a mandatory path for the progressive improvement of efficiency in buildings.

Iberdrola is committed to the electric heat pump, offering alternatives tailored to our customers' needs through our solutions.