Decarbonizing Europe's 'Sick Men'

In the final afternoon of Gas Week 2013, president of the International Gas Union (IGU) Jerome Ferrier spoke of the possibilities for decarbonizing Europe while fostering competition, which he explained was a major issue for his organization as it was dedicated to promoting the contribution of natural gas and LNG to successful economic growth, a secure energy future and to competitive access to energy for all consumers.

"The EU is experiencing an unprecedented recession, both in depth and duration, which has resulted in an unacceptable level of unemployment," said Mr. Ferrier, who noted that in just over a decade European unemployment numbers had grown from around 9% to 11.9%; things were even more critical for people under 25—near 50% unemployment, for example, for young people in Greece.

He commented: "Energy is an important component of production costs and competitiveness. This means that considerable efforts have to be developed for mastering the energy challenge, both in terms of supply and demand."

The EU, he noted, had been active on those two fronts, even before sharp increases in oil and gas prices from 2000-2009. He said remarkable results had been recorded, because of policy, like the Roadmaps leading to a less carbonized and more efficient economy.

Ongoing application of such policies, he said, ensured that highly effective and competitive electricity and gas markets had been set in motion, with a much larger number of actors trading on a series of active marketplaces.

"The European economies are leading the world in lowering the energy content of their exports and the development of energy efficiency investments. They are the front-runners in reducing the energy per unit of exports, which is a critical factor since the EU has a total share of 30% of foreign-sourced energy for its total exports," he explained, offering that the US figure ran at 18%.

Natural gas, he suggested, could be used for promoting an efficient, low carbon and competitive European economy. But it didn't appear to be happening.

"The demand of gas is not only stagnating but decreasing: after a decline of 11.7% in 2011, the consumption of gas decreased a further 2% last year due to coal consumption with the closing of 5,000 megawatts of gas fired generation."

He noted that another 10,000 megawatts was planned, commenting: "This paradox is not only harmful to the gas industry but also to consumers who will have to pay more for their electricity bills in the mid and long term."

Reducing greenhouse gas emissions, he said, could be done in two ways: 1) by switching from coal and lignite plants to efficient combined cycle gas turbine (CCGT) plants and implementing gentle, phased growth of renewables according to European industries' ability to develop competitive renewable schemes at a global level; or 2) by developing renewables with a fast-track approach, often with the use of imported equipment, mainly substituting fossil fuels for the generation of electricity.

Mr. Ferrier explained, "The second option is much more costly for consumers, and the EU power industry doesn't have much room to maneuver since the constraint of implementing the very high share of renewables set forth by the EU into the production mix in 2020 and 2030 deters them from choosing the first option."

He added that it was also costly because of subsidized renewables. Policy, he said, must adopt a more predictive approach on the average CO2 content per unit of electricity produced in the EU.

"For the sake of the EU economy the IGU thinks that the gas industry has a crucial role to play in the dialogue between the European Commission and the Parliament for ensuring a better convergence of EU goals with reality," he said. "It is also our duty to unlock the contributing power of natural gas on two fronts: competition and innovation.

"This means engaging more actively into the development of shale gas as a means to creating a renewed competition with imported resources and a lot of new jobs. On the second front, we must make additional efforts in R&D and develope an EU-wide sector of industries investing in new technologies that may enhance the demand of natural gas such as micro generation, fuel cells, natural gas vehicles and LNG vehicles, and the development of active interfaces between the electricity and gas networks."

He said altogether he was confident in the future of natural gas and LNG in the EU, but said efforts were needed towards a fine tuning of EU goals.

Mr. Ferrier concluded: "We should be partners for bridging goals and reality, not simply observers hoping the EU may eventually look us in the eye and ask us 'What did you expect?'"