Gas industry boss: ‘We have to make gas greener’

"We will live the same revolution as the electricity business," with more decentralised gas production, says Jean-Marc Leroy. [eu2018at / Flickr]

The European gas industry is on the cusp of a green revolution similar to the one that took place in the electricity sector, with a greater variety of low-carbon gases feeding into the grid at the local level, says Jean-Marc Leroy.

Jean-Marc Leroy is the senior executive vice president for external relations at ENGIE, the French energy company. He spoke to EURACTIV in his capacity as president and chairman of the board at Gas Infrastructure Europe (GIE), an organisation representing operators of gas transmission pipelines, storage facilities and LNG terminals.

INTERVIEW HIGHLIGHTS:

  • Greening gas is the industry’s top priority in the coming years
  • Hydrogen produced from renewables is the main focus
  • Using storage and LNG infrastructure is part of the industry’s long-term vision
  • In 2050, more than 50% of gas production could be connected to the distribution grid
  • “We will live the same revolution as the electricity business”
  • “There is a gap” between projected green gas production and current gas consumption

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The European Commission’s long-term strategy for climate change foresees a very different energy system in 2050, where 53% of final energy demand is met with decarbonised electricity, coming mainly from renewables and nuclear. What role does that leave for gas?

To prepare the future, the first priority is what we call “negawatts” – meaning energy savings, in electricity, in heating and cooling, or in the gas business. So, I don’t expect a big increase in energy consumption across Europe, be it for electricity or gas.

I also believe we should be very humble because we don’t know what technologies will be available in 2050. So we have to stay open-minded and keep a wide portfolio of solutions open.

Because the objective of the energy transition is not only CO2 reduction, it’s also about reducing our CO2 footprint. If Europe cuts its own emissions but ends up importing CO2 from other countries because it buys foreign products, then it’s not a good solution for the planet. And it will hurt the European economy. So it’s something we should be aware of.

Quality and affordability of energy is key in this respect. We should aim to extract the most from each type of solution. Take renewable electricity: It’s wonderful but it’s intermittent and it’s not flexible. Gas, on the other hand, is very flexible. It’s ten times cheaper to transport than electricity. And it’s by far more efficient to store.

But the problem with gas is CO2 emissions. So we have to make gas greener.

The long-term strategy aims for net-zero emissions by 2050. How can the gas sector achieve that? Does it mean the end of drilling within the next 20 years, for example?

Our strategy is to better use existing infrastructure rather than to develop new solutions from scratch. So using storage and LNG infrastructure is part of our long-term vision. We call that the three ‘i’s – infrastructure, integration and innovation.

But does that mean decarbonisation?

For sure, it’s all aimed at achieving this goal.

Gas still produces emission when burned, so how do you get that down to zero?

There is a portfolio of solutions. One is to develop green gas and biomethane production. The potential in Europe is huge, particularly in France. With biomethane, we can reinvent agriculture and the way we’re dealing with territories.

There is also hydrogen. And green hydrogen should be the focus. That will allow balancing the energy system, using cheap excess electricity from renewables. Part of this hydrogen could be transported in our transmission network, under certain conditions, and another part can be stored. So there is a way to reinvent how we use existing infrastructure in this way.

Carbon capture and storage or use will also be part of the solution, with utilisation of the carbon where possible, for example in agriculture. And we should focus innovation on how we can really boost the efficiency of all these solutions using digital technologies. Because we are going through a revolution, which is the digitalisation of energy. And that will allow a more efficient way of managing energy facilities and develop sector coupling.

Gas must be ‘completely’ decarbonised by 2050, says UK think-tank

Britain must entirely get rid of fossil-based natural gas in the coming three decades if the country is to meet its long-term decarbonisation objectives, according to a think-tank close to the ruling Conservative party.

You mentioned efficiency as the top priority. That probably means less demand for gas by 2050. What does that mean for the gas pipeline network? Is it inevitable that some pipelines will end up as stranded assets as a result of falling demand?

Stranded assets are the consequence of business decisions. But the best you can do with existing assets it to use them. So we should invest more time reflecting about that rather than to develop a stranded asset approach.

Are you saying there will be no stranded assets in the gas sector?

I’m not saying that. In a world in evolution, some assets will be competitive at one moment and not at others. What we have to focus on is how we can use existing assets. And during the Madrid Forum, the deputy director general at the European Commission, M. Klaus-Dieter Borchardt, said exactly that. Stranded assets will be part of the game but it’s not the purpose. It should not be the focus.

The competitive landscape in Europe was developed during the 1990s. And now we live in a very different period. In the 1990s, the energy infrastructure was rather new, there were no renewables, and digitalisation was not an issue. So the focus was more on short-term efficiency.

Today, a lot of investment is needed. And the market is not always the trigger for these investments. So we see more and more investment from the state to develop a harmonious energy mix. And the future will be geared not so much towards volume anymore but towards capacity and flexibility.

And this is especially the case for the heating sector. Batteries will be a good solution for short-term flexibility in the energy system. But for seasonal purpose, how can you deal with the winter peak without the gas network? So you should be able to mobilise capacity in order to deal with this flexibility issue. Because in winter, unfortunately, you have little wind and solar. So you have to complement that with other means. And gas is perfectly fitted for that. But it should be green gas.

Presumably, fossil gas will have to be entirely phased out by 2050. That means a big amount of stranded assets at least when it comes to the part of the network dedicated to fossil gas, correct?

That is probably a scenario. We can also imagine another one where we use CCS, CCU or plasma technology to decarbonise methane and transform it into hydrogen close to the consumption site. And then you can re-use carbon or graphite at the local level.

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

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.

Are you saying there is a scenario where all gas infrastructure is still in place in 2050 and put to good use for carbon neutral purposes?

No. Gas assets are subject to amortisation. At one moment, there is no more residual value. So, we have to manage the transition of the system taking all of that into account. But using as much as we can and when reasonable the existing assets in order to transform and succeed in having an affordable energy transition is a key point.

I won’t tell you that we will need all the existing gas infrastructure in 2050, the landscape by then will probably be totally different. Nobody was talking about hydrogen 20 or 30 years ago.

… Well, there was a big hype at the beginning of the century. And then it fizzled out.

Yes, but now a lot of people are working on that. So we should be cautious not to close the door to potential solutions when taking a long-term perspective.

You mentioned affordability. And gas is indeed an affordable way of storing energy and keeping the electricity system in balance, especially during winter. But that also requires investments in infrastructure in order to integrate the gas and electricity sectors. How are you going to make this happen?

We need an integrated vision, not only for gas and electricity but also for heating and cooling. Individual cooling devices – air conditioners you can buy in supermarkets – are the least efficient tools you can imagine. Cooling networks are by far more efficient. So we should develop a global approach including new solutions, like geothermal, heat storage, etc.

And gas infrastructure operators are very able to deal with these new technologies. Because they’re dealing for instance, as far as storage operators are concerned, with underground management which is key for massive heat storage or geothermal.

So we have to project ourselves in a European landscape with new solutions, using existing competences and infrastructure. Salt caverns, for example, could be used also for storing hydrogen. And that could be a way to have seasonal storage also for hydrogen.

So you’re saying a lot of the seasonal storage and coupling between gas and electricity can also happen with existing infrastructure, without making new investments?

No. We should develop a holistic vision – with digitalisation, data mining, and data management. We need also to develop bridges between the different solutions. There is a bridge at the house level, with hybrid heating solutions for instance. And there is a bridge to be developed also at the grid level, for instance, power-to-gas. The focus in the coming years should be to develop those solutions.

These solutions need to be developed on a much bigger scale in order to decarbonise the gas sector. Have you quantified this in terms of investment? 

What we’re trying to do today is to have a joint approach between the gas business and the electricity business. We very much welcome the fact that ENTSOG and ENTSO-E have jointly developed a ten-year network plan. That’s the first brick. If you develop a common approach, you can then have an idea of the amount that needs to be invested.

But I will not speak about investments only. Because when you make an investment, you also make savings. In Germany for instance, several studies demonstrate that gas can save money compared to a scenario with 100% electricity. And that also brings guarantees when it comes to security of supply.

Most projections point to relatively stable demand for gas until 2030, mainly because of the expected switch from coal to gas. But beyond that, a very steep decarbonisation needs to take place, which means switching to renewable and decarbonised gases. How is gas the industry preparing for this?

We will live the same revolution as the electricity business. In the old times, you had production, transmission and consumption. Now, you can have electricity production at the distribution level.

And you believe the same can happen with gas, with more distributed generation?

For sure, yes. Some people consider that in 2050, more than 50% of gas production will be connected to the distribution grid. And that is a completely new way of doing business.

How does that work? Biogas or biomethane can be produced locally in places like France, but can that be enough to meet gas demand for the whole of Europe?

First, we assume that there will be energy savings, so we won’t have to cover the same volume. Also, we envisage a more connected grid system where gas supply and demand are more fluid, allowing greater solidarity between territories and regions.

And there will be a greater variety of decarbonised gases available: biomethane and biogas but also second-generation gases, for instance, biomethane produced from plastic bags and other types of waste.

This decentralisation of the gas system, how long will it take?

It’s already happening in France, in the Netherlands, and in Germany.  Each has a different approach, but the move has already started.

What does that mean for the network?

That means big change, bringing gas from the local distribution networks to the broader transmission network, in a kind of reverse flow. Our companies are already working on that now.

You know, biomethane production is a very specific business. With 80% of the production, you make 50% of your revenue. Which means that with the extra 20%, you make a big part of your revenue. And sometimes, you are prevented from injecting biomethane in the distribution network because, for instance,w, the local demand is just not there.

So it’s absolutely key to be able to reinject the gas back into the transmission network and store it there. And that allows you to deal with seasonal flexibility as well.

So in a way, the gas pipelines network becomes a storage network.

It will help. It could be for day-to-day storage but that’s not the purpose. The purpose is to use it for seasonal storage.

In France for example, electricity in winter represents, an output of 100 GW. Gas covers around 200 GW. And you need to mobilise the two in order to meet demand for heating. So imagine the amount of money you will need if you want to deal with winter consumption with electricity only. And so gas capacity will be needed to deal with this seasonal flexibility issue.

The Gas for Climate consortium published a study last year, which said biomethane and green hydrogen can be scaled up to reach 122bcm by 2050, at best. This means much lower volumes than current demand, which reached 548bcm in 2017. And with fossil gas presumably out of the picture because of climate change, this points to a much smaller gas sector. How is the industry preparing for this?

There is a gap, that’s true. But we don’t know what solution will emerge to fill the gap. Hydrogen will probably be part of the solution.

As I said previously, CCS or CCU can be a solution as well because heavy industries need high temperatures, which means it will be very difficult for them to get rid of gas. So the question is whether it will be green gas or decarbonised gas. And whether we are able to achieve that with CCS and carbon utilisation in agriculture and industry, which is a way of making the economy circular.

You’re alluding to so-called “blue hydrogen”, where fossil gas is stripped of its CO2 and injected underground.

As I said, we should use the whole portfolio of solutions that are available to us. And that includes blue hydrogen as well, yes.

When he unveiled the 2050 strategy, Commissioner Cañete said “only e-gases, Power-to-X and hydrogen will be present in 2050 – for sure”. Is that the way you see it as well?

I would like to know what will be the result in 2050 but probably I won’t be there to see it… More seriously, making forecasts is very difficult, especially for such a long time period and when technology is moving so fast. Look at mobile phones – all of these things that simply did not exist 20 years ago and which we are currently using.

When I started in the energy industry, there was no issue with data centres. They were using zero electricity. Today, they use 15% of electricity and it’s increasing dramatically, at 7% per year. In 2030, we will each have on average 50 connected objects using the Internet of Things (IoT). So we really have to focus on reducing carbon emissions. And keep the doors open to new technologies that we may not even know today.

Take electric cars. Twenty years ago, they were not there. And now it’s obvious they will be part of the future of mobility. It’s so obvious. So I’m very respectful of Mr Cañete. But as the saying goes: “Prediction is a difficult art, especially as far as the future is concerned”.

Cañete sees gas as ‘a bridge’ to reach EU’s clean energy goals

Natural gas will remain “an important component” of the EU’s energy mix for decades to come, but its role will evolve by the mid-century to become a “complement” to wind and solar power, the EU’s energy chief has said in comments that has ruffled feathers in the industry.

You mentioned hydrogen. But the pipeline network is not fully ready to take so much more of it. Parts of the network are ready to take up to 30% hydrogen – like in Germany – while other parts can take up only 10%, like France. And in Eastern Europe, many pipelines will struggle to take any amount of hydrogen because they are made with asbestos. How can the industry deal with this challenge? Is a big refurbishing effort being planned so that the pipeline network across Europe is capable of handling similar amounts of hydrogen?

There is a position paper of Hydrogen Europe to which GIE is invited to contribute, about how much hydrogen we can reasonably inject in the pipeline network today. And I think it’s a good approach to decarbonisation: first knowing what we can do today.

Then, there is a lot of research going on. For example, analysing how hydrogen reacts with steel to prevent damage being done to the pipeline. And if a limit is established, then what can we do to go above? So we should have a transformation process and invest a lot in research in order to do this.

Europe is at the forefront of the energy transition. That should be a trigger for European industry to develop innovative solutions, and improve Europe’s welfare by selling these solutions to other parts of the world. So research and innovation is a key issue.

Keeping with hydrogen, should the European Commission consider some kind of harmonisation at the EU level with for example a minimum requirement or blending obligation for hydrogen? Or is it too early?

We are dealing with this question in one of our gas associations, called Marcogaz. This deals with gas quality, impact and final use in heating systems. So we first have to make a diagnostic and then see what needs to be done to go above the current limit and boost hydrogen development in the future.

There is a new buzzword in town these days, called sector coupling. What is your understanding of sector coupling, how would you define it?

Sector coupling is about using the global energy system in the most efficient way – all along the value chain, from production to consumption. You can have sector coupling at the production level – gas to power for example. Or sector coupling at the level of your house, with hybrid heating systems using both gas and electricity.

So sector coupling is about diminishing the cost of the energy transition by using the advantage of each system. And I think GIE was one of the first to develop this idea.

What we recommended is to stop thinking in silos and have a system-wide approach to the energy transition. But in this respect, I think industry is probably more advanced than policymakers. A more global view is needed in the transformation of the energy system.

Take biomethane. When I talk to a farmer today, he doesn’t speak about producing energy. He speaks about transforming his agricultural production methods by reusing digestate in order to save massively on chemical fertilisers. When you know the production of 1 tonne of fertiliser requires 7 tonnes of CO2, you realise there are massive savings to be made there. So Europe needs to develop this global vision in order to integrate different sectors.

We’re only getting started with this sectoral integration, through various associations like the European Biogas Association, Hydrogen Europe, carmakers and the whole ecosystem. We need to join our forces to manage altogether the transformation.

About a year ago, Eurelectric presented a joint initiative with Eurogas and DSOs, saying electricity and gas were complementary. How do you see electricity and gas working together?

We are very supportive of the proposals that the European Commission made in preparation of the next Madrid Forum. The Commission asked different industry associations to steer one working group each. But other associations should be included as well. I also really appreciate that Hydrogen Europe and the European Biogas Association were invited to the Madrid Forum. Heating system suppliers were invited too, which I think was a good move.

But we should open up to even more organisations if we want to develop a new ecosystem. This will be the best way to achieve Europe’s decarbonisation goals in a way that is acceptable and affordable for European consumers.

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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