EU’s Cañete warns gas pipelines risk becoming ‘stranded assets’

European Commissioner for Climate Action and Energy Miguel Arias Canete speaks during a press conference with European Commission Vice-President for Energy Union Maros Sefcovic (not seen), on the long term strategic vision for 'A Clean Planet for All' in Brussels, Belgium, 28 November 2018. [EPA-EFE/STEPHANIE LECOCQ]

Miguel Arias Cañete, the EU Commissioner for climate action and energy, had an unpleasant message for the gas industry when he presented the European Commission’s 2050 vision for a “climate neutral” economy earlier this week.

Electricity from renewable energy sources like wind and solar – combined with nuclear power – “will be the backbone” of a decarbonised energy system by the mid-century, the European Commission said in its 2050 strategy, dubbed “A Clean Planet for all”.

“We will have fully decarbonised the European Union in 2050,” Cañete said. “And the role of gas will not be the same in 2050 than today,” he added.

Fossil fuels “may still be needed” in some industries, the Commissioner said in reference to sectors like plastics and petrochemicals where there are no viable alternatives, but not in road transport where electric mobility is expected to take over.

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The European Commission will unveil its long-awaited strategy for a “climate-neutral Europe” later on Wednesday (28 November), in an effort to show EU countries how to stick to the goals of the Paris Agreement.

“Only e-gases, Power-to-X and hydrogen will be present there – for sure,” Cañete said in reply to a question from EURACTIV on the future role of gas in the EU’s energy mix.

“That’s why we must be very clever when managing investment in infrastructure that they don’t become stranded assets,” he warned.

This is also why EU funding for energy infrastructure has tended to focus “on electricity projects and not so much on gas pipelines” over recent months, Cañete explained.

Reducing import dependence

Cañete’s warning may have been aimed at the Nord Stream II gas pipeline project, which the European Commission has fiercely resisted, arguing it will increase the EU’s reliance on Russian gas and weaken European attempts to preserve Ukraine’s role as a transit country.

However, the context in which his comment was framed, focusing on the EU’s long-term decarbonisation efforts, suggests it applies across the board to any pipeline project that increases the EU’s reliance on imported gas.

In its long-term strategy, the Commission says cutting fossil fuel dependence – mainly oil and gas – would slash the EU’s import bill by €2-3 trillion over the period 2031-2050.

This, in turn, “would positively impact EU’s trade and geopolitical position” and free up resources to modernise the EU economy, it said.

Such a move is welcomed by environmental groups. “A focus on avoiding stranded infrastructure assets is very much needed,” says Jonathan Gaventa of E3G, a climate and energy think tank, underlining that the current gas network is already “oversized” across most of Europe.

Natural gas consumption reduces to less than a fifth of 2015 consumption in two of the eight scenarios listed in the Commission’s long-term strategy, says Lisa Fischer of E3G.

The European Commission also implies that the future role of gas as an energy carrier more generally is very uncertain, even when including the role of new gases such as e-fuels, and hydrogen, she points out.

“It is clear that the role of gas will decline dramatically in both 1.5°C scenarios and will grow in none of them,” Fisher told EURACTIV, referring to the UN objective of limiting global warming to 1.5°C.

According to her, the transition from a gas system based on imports to one that is significantly downsized “consumes a mixture of hydrogen and methane, which is largely produced domestically”.

However, she says the EU’s long-term budget proposal (2021-2027) largely ignores this.

“The current infrastructure priorities would continue to lock the EU into the first of both worlds and hinder instead of help the transition,” Fisher says.

Five steps for a climate-friendly EU Budget

The EU’s next Multi-Annual Financial Framework (MFF) must reflect the commitment the EU has made to decarbonise its economy, in line with the aims of the Paris Agreement. Strong overall coherence to ensure that funds are spent in targeted and intelligent ways is the key to its success, writes Jonathan Gaventa.

Hydrogen

Indeed, gas still has a role to play in the Commission’s 2050 vision document. But in the Commission’s view, it will mainly have a supporting role in the electrification of the economy, “through the production of e-fuels” like e-hydrogen.

Hydrogen “is likely to become more prominent in a fully decarbonised energy system,” the Commission says, whether it is obtained by water electrolysis or from natural gas of fossil origin, in combination with Carbon Capture and Storage (CCS) technology to remove the associated CO2.

There is a big caveat, however. Although these technologies become more attractive in the context of abundant electricity generated from renewable sources, “the drawback is that their production is energy intensive,” the Commission notes. And in any case, they will take years to be developed on a commercial scale.

Until this happens, this leaves an almost existential question mark hanging for the gas sector.

Natural gas has received much of the credit for enabling a switch away from coal, the most polluting fossil fuel. But meeting long-term decarbonisation goals beyond 2030 will require phasing out gas of fossil origin, or getting rid of the associated CO2 emissions one way or another.

“It will not be possible to represent gas as a clean fuel beyond 2030 unless carbon capture and storage can be developed on a large scale,” said Jonathan Stern, from the Oxford Institute of Energy Studies. “And potentially, even in the 2020s, there will be pressure to phase-out gas,” he told EURACTIV in an interview earlier this year.

The gas industry, as one would expect, begs to differ.

Natural gas has been a key factor in reducing emissions from energy use since 1990, and it “still has a lot to offer,” says Eurogas, a trade association. Gas is 50% less carbon-intensive than coal when combusted and “enables deep and immediate decarbonisation,” it argues, thereby making it easier to reach the 2°C objective of the Paris Agreement.

Renewable gas can be scaled up and reduce costs in decarbonising the EU energy system

As the debate on the future role of gas in a decarbonised European energy system heats up, Navigant energy experts Daan Peters and Kees van der Leun explain why they see a large potential to scale up renewable gas sustainably.

Sector coupling

For Eurogas, the future battle lying ahead is to position gas as a reliable bridge to the electricity sector, via power-to-gas and the wider use of renewable gases produced from livestock manure or waste.

“As the Commission vision points out, natural gas can be decarbonised applying carbon capture and storage (CCS) or use (CCU), forming an important feedstock for hydrogen that will be needed in various sectors such as industry and transport as well as in heating,” says Eurogas Secretary General Beate Raabe.

It is now calling for “a detailed strategy” to flesh out the Commission’s 2050 vision, including an implementation roadmap that looks at the energy system as a whole, bringing together industry, heating and mobility – so-called “sector coupling”.

“A smart combination of the electricity, gas and heat systems can deliver early achievements, allow more renewables, lower costs, and increase security of energy supply,” Eurogas argues.

Future of gas: Decarbonise or go bust

Widely accepted as a “transition fuel” until 2030 to help wean Europe from coal, gas is also positioning itself as a clean fuel in its own right beyond that date. But meeting the EU’s 2050 climate goals will require a deep transformation of the sector, amid growing competition from solar and wind power.

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