[NGW Magazine] Decarbonising European Power
This article is featured in NGW Magazine Volume 2, Issue 15
Many businesses accept the need to limit global temperatures, and those in the energy sector need to be innovative and develop new solutions to these challenges, the GIE conference heard.
The development manager of Germany’s second biggest grid Ontras, Ralph Bahke, told the industry group Gas Infrastructure Europe’s annual conference in Prague in June hat it was crucial for the energy sector to look at networked gas, a fossil fuel that produces CO2 when it is burned. He and other speakers grappled with questions such as “What does the future hold for gas in the decarbonising European energy markets?” and “How can gas carve out a niche for itself amidst the impending, overwhelming wave of solar and wind power?”
And because burning gas results in greenhouse gas emissions, its phase out, immediate or gradual, Bahke said, was due to the gas industry not being at the forefront of the decarbonisation strategy. Still, he remarked that in many countries gas demand would not see negative influence from that in the medium term, as gas provided a way to get to the energy transition more effectively.
Bahke said that most agreed on the need for natural gas for a long time going forward, if only in order to meet the goals of the Paris Agreement on Climate Change.
“Natural gas produces relatively little CO2 compared to all other fossil fuels, so it makes sense when possible to decrease the use of lignite, hard coal, heating oil and diesel, instead using natural gas,” he said, adding that that applies to power generation as well as the heating market and transportation. But he still thinks that gas use will fall gradually. Unabated gas should have no place in power systems by 2050, and so far, commercial carbon capture and storage is not being developed much in Europe.
Serving new wine in old bottles
“But a phase out doesn't have to mean the end of natural gas as an energy source and its existing infrastructure,” Bahke pointed out, saying it is like the opportunity to serve new wine in old bottles.
He said the gas in the network will become more environmentally friendly and that there, biogas production is going up. It can be injected into the gas network at virtually any scale, and schemes to improve this are going on in a number of countries such as the Netherlands, the UK and Germany. But progress is slow: According to the German biogas association, the expection was that there would be 9,004 plants with combined power capacity of just 4.17 MW last year, combined with 7,858 plants with combined capacity of 3.6 MW in 2013.
Among the other new opportunities, Bahke reported that synthetic methane could be made via power-to-gas technology. “Synthetic gasses are therefore CO2 neutral,” he said. “Synthetic methane can be blended with natural gas and biogas at any volumes.”
Modifications needed for storage, he added, are only minimal. He recalled that only a few years ago, power-to-gas technology was viewed with scepticism. The attitude has changed dramatically – "today we recognise the value of the technology for a fresh, new energy system," he said.
“It is a matter of connecting to solar and wind power, so that when they produce excess electricity that would not go unused. From this we can produce large amounts of synthetic methane, which we can then inject into the networks and into storage facilities.”
The crucial point he said, is the existing gas infrastructure, in combination with power to gas, allows renewable energy to be stored for a much longer period of time, and at a lower cost. “There are no other convincing methods that can offer this solution,” said Bahke, “which ensures stability of the system and security of supply. Ontras is convinced in the technology and operates two injection stations, with a third under construction.
“If we can liberate ourselves from the idea that decarbonisation must mean the end of gas, then maybe we can recognize the massive potential which also exists in the automobile sector, and using this opportunity can get us closer to actualising our climate goals,” he said.
While Bahke said that gas should not compete with electric cars, uses like transport of heavy goods for long distances and fleets that need to cover long distances. Volkswagen's compressed natural gas Mobility Initiative, he said, is a letter of intent signed by companies aims to put 1mn CNG vehicles on the road by 2025, also aiming to increase fleets to 2,000 in Germany.
The key, he said, is for infrastructure operators not to see the long-term transition as an existential threat. “Gas and decarbonisation can work together,” he said. “Indeed, the energy transition needs gas.”
Burning coal in Germany
Europe is not actually on the way to a low carbon future, said Uniper’s senior vice president for regulation, Sabine Augustine.
To back up her claim, Augustine gave the huge increases in renewables in Germany as a case in point, while CO2 emissions have remained constant. “At the European level all the measures that have been put in place already would put us to a CO2 reduction of 25-35% by 2030. That's clearly not enough to reach the minus 40% target, and if we miss the 2030 target it will be even more complicated to reach the 2050 target – almost impossible to have a realistic decline there,” she said.
She said, it is clearly not enough to make a convincing argument that gas is the cleanest fuel for all sectors, including power generation: “Something needs to happen to make that actually come true.”
As for the prospect of market interventions for gas, Augustine said that the industry needs a positive framework for gas in power generation. “If you look at the example of the UK, they have shown how you can make it happen – a switch from coal to gas. In the last six years, the UK managed to reduce emissions in the power sector by more than one third, and they've put good framework conditions in place to make that happen,” she said, referring to the carbon price floor that assumes a more realistic carbon price than today's. The UK has also put a capacity remuneration mechanism in place to ensure the supply of back-up generation even if the capacity is idle most of the time. Still, she conceded, more needs to happen to make the switch from coal to gas.
According to a Eurogas study, Augustine said that there is already enough gas-fired power capacity to enable all coal-fired generation to be turned off. “And if only the load factor of existing gas-fired generation was increased from 35 to 65%, it would reduce CO2 emissions by 300mn metric tons/year,” she said.
Enough pipeline?
A senior fellow at the Bruegel think-tank, Georg Zachmann, said there was no need to build more gas infrastructure for decarbonisation. “What we indeed see is that it might be necessary to change some parts of the network in order to accommodate gas flows that might be necessary under a transition scenario.”
Gas infrastructure, he said, could become even more important, “because you need higher higher peaks – you need a lot of gas when the wind turbine is not turning and the sun is not shining, but you might need less volumes.”
Instead of selling large volumes over the course of a year, and the capacity to match, instead the grid would need to be more flexible in order to allow large amounts of gas to flow through in short periods.
Zachmann said that gas will likely need to be completely decarbonised to be in the market in the longer term in consideration of the EU's 2050 target. “It becomes somewhat of a challenge. The question for me would be, is it worthwhile to switch from coal to gas and reduce emissions by half, or is it better to switch directly from coal to renewables, to reduce emissions by 100%?” he queried, offering that the option of switching to gas needs to be twice as cheap than going directly to renewables.
Still, he conceded he is encouraged by reducing the carbon footprint of gas and the switching to low-carbon or no-carbon gas solutions. “That's the way that the industry needs to be going, but regulators need to acknowledge that,” he said.
Betting on gas
The CEO of Czech gas trader Prazska Plynarenska, Pavel Janecek, said he did not see the question of switching from coal to gas or coal to renewables as a monetary consideration. “It's not only a money issue; gas is not for transition, but something that helps to decrease pollution in high density areas. To wait until the transition directive means that we'll postpone that by 20 years or something.”
Janecek offered an opinion he said was based on his background in the investment sector. “If someone said that by 2020 or 2050 'gas will be almost shutdown and we don't consider it will play a significant part of the energy transition' in countries like Germany or France, then I would not invest my money in it.”
The investment climate for gas infrastructure is good, countered Gascade’s regulatory affairs manager, Dennis Wehmeyer. “Even if we see that the German national regulatory authority has lowered the rate of return on equity to under 7%, I think that there are still a number of investors who are willing to invest in gas infrastructure.”
As to the question of whether gas-fired generation is still required in the future, and whether it can be retained without policy, Wehmeyer said that if one wanted to reduce CO2, increase renewables and maintain security of supply, gas is needed as a backup. He commented: “Nevertheless, I think there should be a managed period of transition.” He said it needs to have efficient management, as evidenced by Germany: “We spend about €20-25bn/year producing renewable energy, but at the same time there's no reduction of CO2 emissions, because we do not manage it efficiently.”
A functioning emissions trading system, he said, would help things out, putting gas at the top of the hydrocarbons merit order.
Drew Leifheit