Gas, Renewables & Electricity – A Perfect Combination
Investments in gas projects are largely dependent on the evolution of the power mix worldwide, according to Yves Louis Darricarrere, President, Gas & Power, Total. For Darricarrere, gas, renewables and electricity represent a perfect combination.
Still, today coal represents 40% of power generation, while gas has a 23% share. He stated, “The gap between the two fuels is expected to narrow in the next 15 years, mainly due to the decline in the share of coal – a third of the power mix in 2030.”
Darricarrere explained that while disparities exist among regions, gas demand for power generation, to some extent, will be driven by national environmental policies, like in the US, where clean power plants and new performance standards were soon to be forthcoming.
China, he noted, is gradually embracing market reforms and environmental priorities. Mr. Darricarrere observed: “Even though the authorities aim at reducing the importance of coal in the national power needs, the priority had been diverted to non fossil fuels such as hydro, wind, biomass, solar and nuclear generation – so we believe gas' share will increase slowly, from under 2% in 2010, to under 6% in 2030, with coal at 77% in 2010 and 56% in 2030.”
He mentioned the forced retirement of coal plants in Europe and nuclear phase-out to the benefit of renewable generation, saying, “We believe gas' share of fossil fuels will increase from 2020 because of the need for flexible back-up to deal with the increasing share of intermittent renewables.”
These examples, he said, demonstrate that the evolution of the power mix relates to regulations and policies – coal substitution and the development of renewable energies. Still, gas has unique strengths, he said.
“It is abundant, is widely distributed around the world, flexible, increasingly affordable, easily transportable and much cleaner than other fossil fuel in power generation. That's why investing in gas can be considered the right choice to meet the growing energy demand, while participating in the fight against climate change,” said Mr. Darricarrere, who noted that substituting coal would reduce the amount of greenhouse gasses emitted via power generation – gas emitting 50% less than coal per kilowatt hour, among the cheapest solutions to battle climate change.
He said the resources to meet global energy needs do exist and are perceived as less scarce than in the past. “Indeed, the emergence of unconventional resources, together with recent conventional discoveries and the development of new technologies, have XX our view that resources are abundant,” he explained, adding that unconventionals had been a game changer in North America, and are potentially huge elsewhere, even if their development is unlikely to be as fast.
According to Total's estimates, global gas resources comprise 2,900 billion barrels of oil equivalent: “140 years of production.”
WHile gas resources exist, Mr. Darricarrere said the question remains whether the industry will be able of developing them reliably, acceptably, sustainably and economically and fast enough to meet demand.
The energy market, he said, is a growing one in the long-term, driven by world population growth and the development of emerging economies. Energy demand, he reported, should rise to 340 million barrels of oil equivalent in 2030. Countries/regions like China, India and the Middle East are frontrunners.
“Gas should become the second largest source of energy, accounting for a quarter of primary energy needs in 2030 as climate change considerations push toward a decrease in the share of coal, which will fall to around 20% of the energy mix. We see this as a logical evolution, as natural gas is abundant and also much cleaner than coal,” he explained.
Renewable energies, he said, including solar, wind and biomass will represent more than 15% of the energy mix in 2030. Even though renewables will increase significantly in the future, Mr. Darricarrere opined that it will be a long time before they can replace fossil energies, and several decades are needed before they reach technical and economic maturity.
He said the energy transition, which consists of companies cutting back their proportion of carbon energies, will require technological innovation and substantial investment in all energy sources.
“This makes it the responsibility of the gas industry to develop a responsible strategy for satisfying the energy demand of tomorrow and offering our full support to the energy transition. We firmly believe that natural gas has the rightful place and plays a key role to play in that context.”
Long term demand for gas, he said, is expected to progress steadily, at a rate of 2% per year on average, with more than half of the additional demand coming from Asia and the Middle East. To meet the demand, Mr. Darricarrere said that the equivalent of existing supply of gas will be needed in the next 15 years. The situation of LNG, he added, is even more challenging: “We anticipate a significant upsurge in LNG demand, expected to double by 2030, mainly driven by Asia.”
But more than half of anticipated supply, he said, has not yet been sanctioned, creating a challenge for the industry.
“Although gas resources are abundant, although growing gas demand supports the launch of new projects, and although gas developments are more economic than other energies', putting gas resources into implementation will always require more innovation, adequate prices and significant investments,” he opined.
The use of gas, he explained, will remain focused on three main sectors in the next 15 years: residential and commercial, industrial and power generation.
The residential and commercial sector being mature, Mr. Darricarrere said industry and power generation will be the main contributors to the global growth of gas demand, increasing by 3% every year on average. “Power generation will dictate the evolution of gas demand upward and downward in North America and Europe,” he commented, adding that gas demand from power generation will represent 40% of the total gas demand in 2030.
Nuclear phase-out, coal displacement, environmental regulation, support for renewables, unconventional gas development – all, he said, are major issues impacting the gas market in the coming years.
Peter Coleman, CEO and Managing Director, Woodside Energy, spoke of the benefits of burning gas, like the use of LNG imports in Asia to replace coal-fired power generation, given that the latter is a major contributor to air pollution, arguing that natural gas should be part of a cleaner air solution.
Regarding power generation, he explained, “Natural gas emits only trace particulates, and using natural gas compared to coal also reduces dangerous Nox and Sox. Burning natural gas produces nearly half the carbon dioxide per unit of energy compared with coal – so the numbers are compelling.”
The recent boom in natural gas in the US, said Mr. Coleman, has contributed to a 3.8% drop in carbon emissions in 2012 alone, a number which is likely getting even better, he opined.
He reported that despite for every ton of GHG emissions in the production of LNG in Australia, at least 4 tons of GHG emissions are avoided in customer countries when that LNG is used to displace coal-fired power generation.
So while coal may cheaper than gas, the full lifecycle costs of coal versus natural gas are much greater, according to Mr. Coleman, who opined, “Our industry has historically been too timid to aggressively address the shortcomings of coal, but now's the time for us to stand up and we need to stand united.”
The gas industry, he said, must do more to highlight the benefits of gas over the products of its competitors. “Give me a break,” he quipped. “Who coined 'clean coal'? And why did we let that happen?”
According to him, natural gas should and must play a key role in addressing climate change, and the conversation must not be limited only to price.
-Drew Leifheit