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    A Hierarchy for Gas Leaves Heating out in the Cold [the Brussels Conversation]

Summary

This is first and foremost a debate about space heating. Installing heat pumps may be expensive, but using gas for heating is even more so, some observers argue.

[The Brussels Conversation]

by: Sonja van Renssen

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A Hierarchy for Gas Leaves Heating out in the Cold [the Brussels Conversation]

Gas makes the energy transition more affordable. This is one of the key arguments of the European gas industry, arguing for a central role in the transition to a net-zero emissions economy. The logic is simple: Europe has two hundred thousand kilometres of transmission-level gas pipelines and another ten times that at distribution level. Why spend millions on the build-out of electric power lines – and court a backlash to the energy transition through the Nimby effect – when “green" gas is on the horizon ready to breathe new life into this grid? Big new gas pipelines have always raised the hackles of NGOs worried about fossil fuel lock-in. What’s new in Brussels today is an emerging debate about how much and what kind of local gas infrastructure Europe needs in the future. 

This is first and foremost a debate about space heating. Gas – and in the context of a Europe committed to decarbonisation that means "green" gas – should not be more than a “niche” solution to residential heating in future, suggested Dries Acke, an energy expert at think-tank the European Climate Foundation (ECF), at a conference hosted by the European heat pump industry in Brussels May 15.

He imagines a residential heating system dominated by heat pumps and district heating. Gas – and that must be zero-carbon gas, he emphasised – could supply “residual" demand. And even for that, it would compete with solar thermal and geothermal power. It costs €10bn/yr to maintain Europe’s local gas grids, Acke said and canisters may be a more sensible solution.

Unsurprisingly, James Watson, who heads up Brussels-based gas lobby Eurogas, did not agree. “I believe the gas sector will show its ability in the coming years to decarbonise,” he told the same conference. He suggested that green gas – biomethane, green hydrogen (produced via electrolysis), blue hydrogen (produced with carbon capture and storage (CCS)) or their derivatives – could make up 30-35% of final energy consumption in 2050. A straw poll in the room showed that most of those present expect a 20:80 mix in favour of green electricity. No surprise perhaps, at a heat pump conference; but there is a growing debate in Brussels about how much green gas will be available when and what it should be used for. The studies carried out so far give very different answers, with major implications for energy infrastructure.

Acke’s remarks were based on a study carried out by ECF and published at the end of March, which concluded that green hydrogen should be steered to where it has the highest value, in other words, seasonal storage for electricity and industry. The authors argued that extending its use to residential heating and road transport risks “supersizing” Europe’s energy infrastructure. The additional costs of gas grid upgrades and maintenance (+248%) would outweigh the savings on electricity infrastructure (-22%), they calculate.

A study by Frontier Economics and RWTH Aachen University on behalf of gas grid operators, published in April, came to a very different conclusion. Based on an analysis of eight countries, its authors suggest that a “hybrid" system that maintains both a gas and electricity grid can save €500bn and €800bn between now and 2050 (or €1.3-2.1 trillion in the EU as a whole).

It would also help security of supply and public acceptance. The savings come from avoided investments in: electrifying end-user appliances (especially heating), expanding the electricity grid (especially distribution) and extra domestic renewables build-out (replaced by cheap domestic biomethane and imported renewable gas). The extra costs for gas grid upgrades and maintenance are a “moderate" €700mn/yr, this study suggests.

The gas distribution grid itself is a storage facility, Watson told the heat pump conference. He suggested that a hybrid gas boiler-heat pump solution is a promising way forward. The multi-stakeholder “Freedom” project in Wales, which trialled such a combo, reduced CO2 emissions from homes by 80% even on natural (not green) gas, Watson said. Digitalisation will help households switch from electricity to gas at the right moments in future, he added. A study by consultancy Navigant earlier this year for a Brussels-based “Gas for Climate" consortium concluded that the cost-optimal use of gas in a net zero emissions energy system is together with heat pumps in buildings that are already connected to the gas grid. This delivers the highest savings cost savings per MWh.

At a power-to-gas conference in Munich, Germany May 16, the official in charge of renewables and CCS at the European Commission, Paula Abreu Marques, said she expected the role of gas to evolve “significantly… We recognise the importance and possibilities of technologies like power-to-gas and their role to tackle climate change.”

Over 300 MW of power-to-gas projects are under development in Germany alone while the Netherlands aims to deliver emissions-free hydrogen at commercial scale by 2030. Companies and governments in the Northern Netherlands unveiled a €2.8bn investment plan in February that is intended to turn their region into a “hydrogen valley”. The initiative is supported by 50 partners from around the world.

As well as plans for small and large-scale electrolysers – including some built directly into wind turbines so that they produce hydrogen, not power – the Dutch intend to upgrade and build gas pipelines, create hydrogen and CO2 storage sites, (partly) convert a 1.32-GW natural gas power plant to hydrogen, and roll out projects for hydrogen fuelling stations and residential heating. The idea is to transform the region’s existing natural gas expertise into green gas expertise. Most of the investment foreseen in the Northern Netherlands is for hydrogen production; only a small part of it is intended to upgrade the existing gas infrastructure.

Yet the need to decarbonise gas in the first place and then adapt the grid to handle it raises questions about the affordability of gas as an alternative to electrification. Eurelectric, the Brussels-based electricity association, expects about half to two-thirds of European buildings’ energy consumption to be electric by mid-century (up from about a third today). That increase is driven by changes in heat pump economics (and considerable energy efficiency improvements).

Heat pumps grew by double-digit figures (12%) for the fourth year in a row in 2018, reported the sector last week. There are nearly 12mn of them installed in Europe now, or about one for every ten buildings. One of their biggest challenges is high power prices. Even so, heat pumps are an economical choice in many markets. An electricity tax reform is on the cards in others.

Brussels itself is looking to take a more active role on tax reform with a proposal from the Commission to move from unanimity to qualified majority voting on tax issues, notably also with a view to addressing climate change. Member states have yet to react. European energy infrastructure policy is also likely to be reviewed. The European Parliament and stakeholders such as municipal utilities have called for a review of the Trans-European Networks for Energy (TEN-E) regulation. This decides which projects are European priorities - and thereby eligible for regulatory fast-tracking and EU funding. It has traditionally supported transmission-level projects, mostly gas, but with a shift to electricity in recent years. Now there are calls for it to focus much more on the distribution level. That would also open it up to the heating sector. 

But will the smart, local projects that it picks out be electricity- or gas-based? Or hybrids of the two? By the same token, could the “gas package” that the European Commission has tentatively announced for 2020 become a “heating” package instead? The latter is certainly what Acke and a sector like heat pumps are suggesting.

No one disputes that gas – and once again in Europe that ultimately means green gas – is part of the future energy system. It will be essential in industry and for balancing out variable renewables such as wind and solar. Where views differ is at what point local gas networks start making the energy transition less rather than more affordable.


The Brussels Conversation

Monthly column by Sonja van Renssen from the EU capital on the developments affecting natural gas.