Integrating Gas In The Future: Business As Usual No Option
How to promote gas in the context of more renewables and energy efficiency in a future, low carbon energy market? Several speakers in a session at Flame in Amsterdam, the Netherlands grappled with that question.
Mr. Torben Brabo, Senior Vice President, ENERGINET.DK, observed, “We see the European energy system that's currently being revolutionized – the production of fossil fuels and demand for them is going down and climate friendly fuels are coming in via subsidies. Renewable energy is booming; energy efficiency is going well, perhaps too well, as demand is going down, for gas as well.”
The gas sector, he said, is in the middle as an observer, struggling to find its feet and a way forward. Business as usual, he added, is not an option.
“Can gas be an attractive fuel, and how? Will we only use gas in transport, or will it also be used in power production. Can we reach the outside players in the other energy sectors – can we copy from those?” he asked.
Finally, he posed the question as to how the gas sector can team up with others.
According to Sir John Grant, Executive Vice President, Policy and Corporate Affairs, BG Group, governments are supporting renewables, doing nothing for gas, and is letting coal in the back door. “My message and my proposition is that as an industry we need friends who are prepared to speak out on our behalf – we can't rely on our efforts to advocate for gas.”
He stated that in order to gain more friends and encourage them to speak out, the gas industry needs to address six things, the first of which is to be to be more united as an industry, which is difficult because the interests along the value chain vary.
Secondly, according to Sir Grant, there's a big opportunity at the climate change conference in Paris at the end of 2015, where countries like China and the US will come with powerful stories about gas. He commented, “We need to persuade European policymakers that they need to be equally powerful about gas.”
His third point is that the gas industry needs to partner with renewables.
“The renewable sector has been very successful at winning public support and exerting influence on policymakers at the European and national levels,” he observed. “By positioning ourselves as a partner for the renewables industry – and we are naturally well-equipped to do that – we will have more influence, gain more public support and may find it easier to get through the door with governments and policymakers.”
There are also negative issues that need to be taken on, he said. “Despite the fact that unconventional and shale don't have a significant footprint in Europe in the way that they do in the US, in a lot of people's minds we are, as an industry, associated with fracking,” he explained.
The key to that, he said, is talking actively and being proactive about the safety record of the gas industry and its efforts to avoid damaging the environment.
He continued, “We have to recognize the success of coal in positioning itself as part of the energy mix and explaining to people why they should be allowed alongside carbon-friendly policies – we have to draw some lessons from that.”
Finally, Sir Grant opined, using gas as a significant part of the energy mix doesn't make the industry dependent on a country trying to use its energy relationship for political purposes – i.e. Russia.
Ajay Shah, VP (Ventures) Integrated Gas, Shell, said that gas is integrated into the energy markets, although perhaps imperfectly or by mistake. Now, he explained, it is a matter of gas maintaining that integration in the future.
Letting markets work, he said, is the one thing that would enable that to happen.
He offered, “I'm a great believe that when you have stable, undistorted, well regulated – when regulation's required – working marketplaces, you'll get innovation, responses from participants – not only to market signals, but also to the needs of customers.”
Alas, said Mr. Shah, markets don't always work, which is when regulators and/or lawmakers intervene.
He outlined three things that are not working, the first being the Emissions Trading Scheme (ETS) market. “We've seen many ways and proposals to reform it, and I would advocate that it needs to be done quickly and efficiently.”
Regarding power markets and the value of power capacity markets, which he said is not being talked about to his dismay. His third aspect is infrastructure markets, regarding crossing borders, interconnection and two way gas flow.
“There, the Energy Union discussions may have an impact,” he said, adding that these are three areas that the gas industry needs to help fix.
According to Jeremy Sainsbury, Director, Natural Power, and Chairman, Renewables Committee, ENERGY UK, the natural gas industry needs to demonstrate that it's a mature technology to make for a natural partnership with renewables.
“I think it's a logical partnership and CO2 efficient,” he commented, adding that in 10 years' time renewables is likely to be the cheapest energy in the world, likely wind. “Where energy is cheap, markets will use it – that's something we have to recognize. So this partnership needs to be well-crafted in policy and with consumers.”
The next 20-25 years, he explained, would likely be seen as revolution, when the gas industry would rather see an evolution. “The industries have to work together to achieve that,” he said.
In terms of capacity markets, Mr. Sainsbury named new competitors like smart grids, interconnection, storage, energy efficiency, etc. “These change the way we think and work.”
Forecasting, he said, will be absolutely critical to determine what's happening with aspects like demand or generation, giving gas a role to balance the marketplace.
“The message is, 'partnership but flexibility'. I think if those two things are achieved, then we are in a position where we can work together as an energy industry with gas and renewables being at the forefront.”
Kristian Ruby, Partner, OPERATE & Campaign Leader and Advisor to former Climate Commissioner, Connie Hedegaard, predicted a decline for gas unless a radical change will be seen in the commodity.
He reported, “The European Union is not looking at a low carbon energy mix by 2050; it's looking at a decarbonized energy mix.”
For the power sector, he explained, there is no room for emissions by 2050.
“Unless we can create a gas sector which does not emit CO2, we're not going to see any gas in the power sector by 2050. That is, basically, the role of gas in the next 35 years, unless we do something radical, unless the sector transforms.
“That means that the political opportunity here is to kick out coal from the mix,” said Mr. Ruby, who added that real partnerships required change and choosing allies wisely.
Only a strong ETS framework, he concluded, will allow for gas to have a continued role in the power sector.
-Drew Leifheit