Gas in Grim Times Requires Cooperation with Coal, Nuclear, Renewables - How?
The gas industry is called to solve a riddle: How can it compete and cooperate with other industries in the energy sector? How can gas maintain or increase its clout, while promoting joint efforts with coal, nuclear and renewables? That is the most challenging question for gas companies at the moment. Needless to say, the question is not simple even for the industry’s leaders.
With coal hitting new lows and renewables becoming more competitive, the light could get even dimmer for gas. According to the panellists of the second day of the European Autumn Gas Conference, the main chance is to find new markets and to increase efficiency. Lobbying against coal or, conversely, cooperation with other industries are opportunities too.
LOBBYING AND MARKETING
“We need to come up with solutions. If those solutions are accepted, institutions will then be able to support us,” Beate Raabe, Eurogas' Secretary-General, said during her intervention on Thursday.
Her point of view is simple. Gas experts will have to come up with a detailed plan for politicians, providing them with a complete energy strategy. In other words, gas experts should contribute with analysis and possible solutions, the kind of job that politicians are not really able to do themselves.
Reforming the ETS system would help, and some early signs seem to indicate that positive externalities might soon emerge. Germany is indeed mulling a policy change to meet its greenhouse gas emissions goals.
On Wednesday, Rainer Baake, a member of the Greens serving under Social Democrat Economy Minister Sigmar Gabriel, said Berlin could promote a decline in coal consumption to achieve its 2020 targets.
“We are looking at whether it could be sensible to take a certain amount of coal power plant capacity out of the market and put it in a reserve," Baake said as reported by EurActiv on Wednesday.
In Germany, coal-fired plants represented 45% of power generation in 2013.
SURVIVAL AND PROTECTING EXISTING ASSETS
The other priority is to survive. New long-term investments are indeed possible, but not a real necessity. At the moment, it is preferable to keep the value of existing assets.
“We have to be flexible in building options and preserve the value of infrastructures before committing to new investments,” Marco Arcelli, Enel’s Executive Vice President of the Upstream Gas Division, commented.
Arcelli named three possible projects: a pipeline from Spain to France, storage facilities in Eastern Europe and reverse flow between Italy and Northern Europe. The integration is becoming a clear reality and those three projects could further help. Nonetheless, this single process will not secure the role of gas in the future.
“A sustainable future requires an higher integration of the systems, … we have to work much more together with the other players of the energy section,” said Han Fennema, Gasunie Chief Executive Officer.
In this sense, gas demand, impacted by economic crisis and gas displacement in power generation, heavily depends on the industry’s ability to do more, putting additional effort into cooperation with coal, renewables and nuclear to build momentum in the energy sector.
NEW BUSINESS OPPORTUNITIES
“We believe we are now at the minimum in terms of gas demand in power generation,” Total’s Vice President Laurent Vivier commented.
Despite the nice words, though, doubts remain. How can the gas industry cooperate with other industries if it does not have a single voice? The reality is that years passed and industry associations are still in their infancy. They don't have much of a strong voice.
In this context, the main hope is that the gradual tendency towards a spot market will decrease competition between companies, paving the way for more concerted actions. Ironically enough, financial difficulties could open the eyes to energy companies.
Sergio Matalucci
Sergio Matalucci is an Associate Partner at Natural Gas Europe. Follow him on Twitter: @SergioMatalucci