Versatile Gas Can Be Eco-Friendly Resource, Say Experts
As large gas fired power generation plants are experiencing major problems across Europe, other solutions can be found to reassert the centrality of gas in the European energy mix. Combined Heat & Power (CHP), small-scale LNG infrastructures and gas for transportation are some of the options presented recently by some experts during the European Autumn Gas Conference 2013.
Alternative usages can revitalize European gas market, despite the present problems and in accordance with greenhouse gas emissions targets.
“We believe that the outlook for natural gas is better than currently proclaimed, both worldwide and in Europe,” Timo Vehrs, Director Business Development for Gazprom Germania, said.
Europe remains the main market for Gazprom’s exports. The top Russian gas producer recently said to be on track to deliver its highest volumes of gas to Europe this year since 2008. Imports from Gazprom could soon hit a 5-year high.
On the other hand, European companies are concerned of the increasingly difficult business environment. Several analysts and consultants stated that European gas and electricity markets are disturbed and distorted. In its 15th European Energy Market Observatory (EEMO) report, Capgemini underlined that the present situation poses a threat to Europe’s energy security, with ‘gas plants closing quickly’.
GAS FOR TRANSPORTATION
If gas for power generation is said to run out of steam, the prospects still remain positive. Hydrocarbons are expected to remain the backbone of the energy mix in the next 20 years and eventual ground lost in the power generation could be easily offset by alternative usage.
“We are leaving out an important part of the story: natural gas for transport is an available and environmentally friendly solution to Europe’s ambition to significantly reduce emissions,” commented Vehrs.
In June, the International Energy Agency said that natural gas is set to emerge as a significant new transportation fuel over the next five years. The Paris-based energy watchdog said it expects natural gas use in road and maritime transportation to cover around 10% of incremental energy needs in the transport sector.
This transition could be fostered by several factors. As explained by Vehrs, natural gas emits less than oil. At the same time, the present softness in demand in electricity markets makes a convincing case for a growth of gas for transportation.
COMBINED HEAT & POWER (CHP)
But gas for transportation is not the only trump card in the hands of gas suppliers. There are other available usages. Among these alternatives, CHP is the one preferred by environmentalists.
‘In the UK, CHP has enormous potential,’ wrote Greenpeace on its website.
If environmentalists appreciate this technology, the industry warmly welcomes it as well.
“Gas based CHP will increase the role of natural gas and compensate for losses due to efficiency increases,” Christoph Merkel of Merkel Consultants commented.
According to Merkel, German industry and large commercial customers are strongly engaged in decentralized power generation: 8% of the industry has already its own power generation, while 21% is planning or constructing its own power generation.
“Large CHP technology in industry and the commercial sector based on natural gas in combination with renewables is on the forefront,” commented Merkel.
At the same time, Merkel argued that small commercial customers and households are lagging behind, as unit costs for micro CHP are relatively high: 55€/MWh for large energy intensive industry, 120€/MWh for the industry, 200€/MWh for the commercial sector and 260€/MWh for domestic use.
Despite the high costs for the so-called “mass market”, CHP are said to be viable given the high value of power when consumed on site.
“Micro CHP in the mass market is knocking on the door due to the high value of domestic electricity. In 2 to 3 years micro CHP will be competitive to condensing boilers,” said Merkel, explaining that micro CHP will become even more attractive as technologies mature.
LNG AND GAS AS A FLEXIBLE RESOURCE
If CHP and gas used for transportation may sound futuristic to some inexperienced in the field, LNG is undeniably a growing reality. This usage is more common, but it already showed some difficulties.
Firstly, the utilisation rates of European LNG terminals went down from around 40% in 2009 to 20% in the first nine months of the current year. Secondly, some European investors are hesitating. They are waiting to understand the effect of shale gas on prices before pouring money on long-term projects.
Nonetheless, the huge Russian investments in the sector indicate that the future of gas markets will be strongly related to the future of liquefied natural gas. Russian companies are shrewdly selecting options to explore LNG’s potential. They are both considering small-scale and large-scale projects.
According to Pierre Cotin, Chief Strategy, Development and Marketing Officer at Elengy, the approach is correct, “as new producers and new consumers create new needs”. Big projects can coexist with small terminals.
“Re-loading and transhipment services bring additional flexibility to new LNG chains,” explained Cotin.
In this sense, transfer LNG from standard into smaller vessels and fleet optimization are needed to improve logistics for LNG, to make it a more versatile resource.
All in all, that is what the game is about. The future of natural gas depends on the ability of the industry to make it a flexible resource, in accordance with the existing legislation on greenhouse emissions. Alternative usages are already something to speak about, especially if the environment becomes an ally and not an enemy. In 2015, for instance, new regulations on sulphur emissions in the shipping sector will come into place in the North and Baltic Sea. These new laws will help the transition from oil to gas.
As remarked by panellists, there is no reason to think that gas will not have a rosy future. Experts at the European Autumn Gas Conference 2013 illustrated many possibilities. Combined Heat & Power (CHP), small-scale LNG infrastructures and gas for transportation can play a central role in reasserting the centrality of gas, in accordance with the needs of the societies and the demands of environmentalists.
Sergio Matalucci