‘We need this dinosaur’: EU lifts veil on gas decarbonisation strategy

Biogas unit in Next Kraftwerke's Power Plant. [Next Kraftwerke]

As the new European Commission of Ursula von der Leyen prepares to take office, one of its key priorities will be to deliver on a new market design for gas that will have EU decarbonisation objectives at its core. And natural gas of fossil origin will play a significant part, officials say.

It now looks like the legislative proposals, due in 2020, will be renamed the “gas decarbonisation package,” reflecting a growing focus on natural gas as a lower-carbon alternative to coal and oil that could work hand-in-hand with renewables going forward.

Florian Ermacora, head of electricity and gas wholesale markets at the Commission’s energy directorate, told a Brussels audience last week that the strategy will have the decarbonisation potential of gas at its heart.

“Natural gas is a fossil fuel – it’s one of the dinosaurs,” he said.

“But we need this dinosaur for the time being. Because we can see we can achieve major decarbonisation by replacing coal with gas,” he told an energy conference hosted by the Florence School of Regulation on Thursday (12 September).

“Wind and sun cannot do the trick, they need something in addition,” Ermacora continued, saying “We need gas because it can be stored, flexibly produced, and more cost-effectively transported than electricity.”

“We are convinced that natural gas will play an important role,” the official said, in a blow for environmentalists who are pushing for a quick phase-out of fossil gas from Europe’s energy mix.

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A transition fuel – but for how long?

The importance of natural gas, Ermacora noted, is reflected in the mission letter Von der Leyen sent to the new energy Commissioner-designate, Kadri Simson from Estonia.

“Gas will have a role to play in the transition towards a carbon-neutral economy, notably through carbon capture and storage,” the letter reads. “You will assess how sources of supply can be diversified at competitive prices, in particular by making full use of the potential of affordable liquefied natural gas.”

However, views differ on exactly what type of gas will be filling this role – and for how long.

Some envision a world where natural gas is only part of the energy mix in the medium term, to be replaced by new zero-or-low-carbon gases such as biogas or hydrogen later on.

Others see a world in which natural gas remains an important part of the overall energy mix. One thing all agreed on is the national energy and climate plans due shortly from all EU member states will be critical in setting the direction.

“What happens between now and 2030 will be determined by the national energy and climate plans,” said Giles Dickson, CEO of WindEurope, a trade association. “When the new Commission takes office, they will have only two months to determine that those plans are detailed and ambitious enough.”

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.

Gerald Linke is president of the natural gas technical association Marcogaz, which is part of the industry partnership GasNaturally. Speaking at the event, he said there are two visions for Europe’s gas future – a short-term replacement of coal and a long-term partnership with renewables, where gas is produced from renewable electricity in the form of hydrogen.

And, according to Linke, the former could be done quite quickly.

“If in Germany we replaced lignite with natural gas, it could be done in a day, and it would save us 100 billion tonnes of CO2 per year. It would take 20 years to build up 20,000 windmills to have after 20 years the same effect,” Linke said.

Meanwhile, all efforts should be made to deploy renewables. “Both things should be done simultaneously. We cannot afford to choose just one source,” Linke said.

An open infrastructure

Simon Worthington, head of European government affairs at BP, said market conditions to develop low-carbon forms of gas have been difficult so far.

“We see this hydrogen world with zero carbon,” he said. “There’s a roadmap along the way, and there’s things we’ve done in the past that we can learn from. But I feel sometimes we are falling into the old traps.”

“Biomethane makes a lot of sense,” Worthington added. “But only three EU member states have implemented the ability to do this in law. It’s a limited market where we could start setting up these businesses.”

But Linke said the prominent place of traditional natural gas networks in Europe can help speed up the market for new forms of gas. For instance, it is envisioned that existing pipelines can be used for new gas forms.

“How can we bring hydrogen costs down? Well, it’s produced in large quantities for the industry in Europe. I think therefore the industry can get hydrogen at competitive costs in the short-term future. It’s also important to make the transport of hydrogen cheap. Therefore the use of natural gas infrastructure is an obvious choice.”

“As a recommendation, I would say we have to shift the focus from the power turnaround to the energy turnaround. Here gas is again a quick solution, especially when it comes to the transport of heavy freight like buses and trucks. We should make use of this quite quickly,” he added.

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New market design for gas

Dennis Hesseling, head of the gas department at the Agency for Cooperation of Energy Regulators (ACER), said the same regulatory principles that exist for fossil gas should be sufficient for new forms of gas.

“We don’t have a lot of hydrogen yet but we can see it coming. At the same time, we see that the regulatory principles that have worked very well overall in the gas market should be the same for hydrogen.”

“We should avoid the lengthy discussion we had at the time on unbundling [for natural gas],” he added. “Let’s say it goes through a pipe, it’s quite similar, let’s have all the same principles on day one of the legislation. “

The Commission’s Ermacora said enabling the market for these new gases, and how they can use existing infrastructure, will be a key part of the commission’s gas package.

“We’re looking at biogas and hydrogen. Our position will be at the end of the day for the most cost-efficient decarbonisation, it should be the competition in the market choosing the winner, it should not be an EU official who starts choosing a percentage for blue hydrogen, one for green hydrogen and one for biogas. We need a level playing field.

“Promotion needs to come from large targets. Our CO2 target will enable hydrogen,” Ermacora said.

“Gas will play an important role, but natural gas alone will not do the trick in the longer term,” Ermacora added. “2030 yes, 2040 less and by 2050 we’ll have a zero-carbon economy. The objective of the president-elect is that we don’t want so many fossil fuels in the energy mix. So we need to start thinking of gas alternative forms instead of natural gas.”

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Setting a target for low-carbon gases such as hydrogen or biomethane is going to be tricky even though the idea is supported by industry, a senior EU official has said, warning against a one-size-fits-all approach.

New momentum for CCS

The gas package is also expected to look at how the role of pricing, and the use of carbon capture and storage (CCS), will be involved in the decarbonisation of gas.

Speaking at the conference, outgoing Energy and Climate Commissioner Miguel Arias Canete acknowledged that EU funding for CCS demonstration projects so far has not been a success story. But he said that, in his view, CCS still holds potential.

“CCS was once considered the silver bullet for everything,” he said. “We have financed a lot of projects that didn’t succeed. We can’t keep financing projects that don’t succeed. But decarbonisation will require this technology. We need investment this time not to develop the technique but to reduce the costs and scale up. We have a very powerful tool – the innovation fund under the ETS. But we can’t have that fund with a carbon price of five euros,”

Paula Abreu Marques, head of unit for renewables and CCS policy at the Commission’s energy department, added that “CCS has had ups and downs as we all know, but we see there is a new momentum for CCS because of the goal of carbon neutrality”.

“This changes the perspective. The ETS and the CO2 price is moving in the right direction to incentivise investments. As we see it, only certain industries will be able to manage CCS. In the past we were looking at CCS for the power sector, but now the focus is on industrial emissions.”

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2050 carbon neutrality goal

But that carbon neutrality goal remains in doubt. At their last summit in June, EU leaders failed to get an agreement on the Commission’s proposal to get the EU down to net zero emissions by 2050 after the idea was vetoed by Poland with the support of other Eastern European countries.

The Council will revisit the issue in December, but this will come too late for the UN Climate Summit in New York in September.

“There is a clear willingness from the new president of the Commission to achieve a lot in the first 100 days,” noted Boyana Achovski, chair of the steering committee for GasNaturally and secretary-general of Gas Infrastructure Europe.

“But it’s complicated because the member states, especially in Central and Eastern Europe, still don’t have a decision related to carbon-neutrality by 2050. So the decision needs to be taken in December but there is no consensus for unanimous agreement now.”

It remains unclear when von der Leyen, who is expected to take office on 1 November, will unveil the gas package. But there has been speculation that it will be released as part of her European Green Deal, which she has promised to deliver within her first 100 days.

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[Edited by Frédéric Simon and Zoran Radosavljevic]

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