[NGW Magazine] Interview: Engie exits carbon, by degrees
Engie's head of gas assets, Didier Holleaux, spoke to NGW about the company's decarbonisation strategy: exiting coal and improving the credentials of gas, while accepting that change takes time.
Engie has been transforming itself, from a company whose name phonetically suggests a strong presence throughout the natural gas chain, into an enterprise that is now almost as much associated with renewable energy. When it bought Langa Group in early June, Engie said the deal consolidated its position as the foremost generator of wind and solar in France.
With its upstream production business sold to UK Neptune and its liquefied natural gas assets sold to French Total, Engie's future is focused more on carbon-free energy, while still retaining interests in LNG as a bunker fuel (although it exited a bunkering project at Antwerp). Wind and solar farms now are a big part of what it does, while announcements relating to gas are mostly in research and development, including hydrogen.
Hydrogen as a fuel is still some way off, commercially, but the company says that it bridges the gap between energy systems – electricity, gas and liquids – and may be used on its own or combined with recycled CO2 to make synthetic fuels.
Engie's gas chief, Didier Holleaux, says that hydrogen behaves very similarly to methane, and it will be the future. "Decarbonising gas means first using biogas, then later hydrogen and electrolysis. It will solve some of the problems of climate change. Energy companies can and must produce hydrogen and take responsibility," he told NGW late June.
So for the time being Engie recognises that gas is indispensable if Europe is to meet its carbon emissions targets, and that means new infrastructure, he said after his presentation at the World Gas Conference in Washington, DC.
"Gas is flexible; it complements the intermittency of most renewables apart from large hydro schemes. We must remember that the big battle today is to replace coal with gas in the power sector. Every coal-fired plant is eating up the remaining carbon budget, and it is essential to fight this," he said.
Engie has been practising what it preaches, with the closure of "three major coal plants": Gelderand in the Netherlands (0.6 GW, which it closed January 2016 in compliance with Dutch law); Rugeley in the UK (1 GW), and the 1.6-GW Hazelwood plant and the associated coalmine in Australia. "Two more coal-fired plants in Chile we will also close. The rest we have sold or are in the process of closing down or selling," he said.
Sometimes the baby has to be thrown out with the bathwater, as happened in southeast Asia where Engie sold Glow, two thirds of whose portfolio was gas-fired generation. Engie was not able to separate the gas from the coal assets in the combined heat and power operations, Holleaux said. "The two fuels used the same network and it was technically too difficult to convert it to all gas. However, we have done most of the homework where coal is concerned."
So with those carbon intense activities out of the way, Engie can concentrate on making carbon go further, mixing it with renewable capacity. "Ideally the partnership of gas and renewables will manage the contribution of the power sector for climate change. But for now this means methane, as an urgent replacement for coal. This is why we support Nord Stream 2 (NS2). Between now and 2050 when all gas has been replaced by biogas, we will need additional methane if only to get coal out of Europe and replace the worst fossil fuel with the best fossil fuel," he said.
By insisting on banning NS2 on the grounds that it locks Europe into burning fossil fuels for decades to come, as green groups have done, protesters are shooting themselves in the foot, he says. "NS2 is good for competition in Europe but non-governmental organisations cannot do the calculations to justify their conclusions. And it is not possible to get locked into a pipeline that only costs a few billion dollars.
Do the maths
"The capacity of energy storage is not enough to meet peak demand, and it is very difficult to face peak, seasonal demand without some gas. You can manage the odd day without it but not recurrent peaks in a short period. Batteries have a short life and are expensive. Storage needs molecules, and these can be methane, hydrogen, biogas or come from methanation. We believe biogas has a very significant role in the long run.
"Take France at a peak hour, say 8 in the morning in winter. It needs 330 GW of energy. That is 100 MW of electricity – mostly nuclear and some imports; 100 GW for networks, fuel and gasoline; and the other 130 GW is gas. Wind is unlikely to contribute on such days. No-one can build an energy system that is able to supply 330 GW of electricity. Where will it come from, without sun or wind? And in 20 years, France’s nuclear plants will be closed and unlikely to be replaced," he said.
"On the other hand we do not want NS2 to be used as a weapon against Ukraine. Engie is selling gas to Ukraine and working with Ukraine on gas storage studies. We are very keen to find a compromise: we want the additional capacity but we do not see any point in killing off the existing transit system," he said.
Elsewhere on the globe, there are simpler problems to solve that will cut emissions: "The first step that we must take is to save energy, reduce peak demand – a lot needs to be done. In developed countries we can replace condensing boilers and install heat pumps. In southeast Asia you can install district cooling systems or central cooling units on the roofs, instead of the individual air-conditioning units on the back of each housing unit, which is much less efficient. Power demand is lower at night so that is when water can be cooled more cheaply.
"We are doing what we can to improve access to energy with projects in Indonesia and Africa. A solar system can be built for a village to deliver 24-hour energy with batteries. This is enough to keep a limited number of appliances running, such as a fridge, a mobile charger and a television. As far as heating is concerned, the issue is trickier; but this too can be solved by a mix of geothermal energy, methane and biogas," he said.
CCS is not workable in 99/100 cases
Where large-scale carbon capture and storage or carbon capture, use and storage (CCUS) is concerned, Holleaux is highly sceptical; and critical too of those who make claims for it. "I do not believe that CCS or CCUS is a mass-scale solution to removing carbon. As a mining engineer, I am not comfortable with injecting something as acidic as CO2 underground. There are exceptions such as gas fields that already have a high carbon dioxide content, such as K12B in the Netherlands where we reinjected CO2 for a dozen years. Those rocks had held CO2 for millions of years. Or it could work in enhanced oil recovery where the presence of oil lining the rocks protects them from the acid.
"But putting acidic gas in rocks that have never contained it is a major issue, and one that is completely ignored. CO2 dissolves carbonates so it could most probably dissolve them and come out at ground level and we do not know what the consequences of that will be. If you look at all the places where there has been hydrogen sulphide or carbon dioxide, you would be lucky if you could store 1% of the global annual output of CO2 in them.
"There was even one occasion where 70% of the CO2 that had been injected at the fringes of a gas field to increase the pressure came out of the production well. It must have bored through the rock and mingled in the native gas stream. It was all being recycled.
"Other companies who say that CCS is a part of the solution are lying through their teeth as they need to protect their licence to operate. They can say that CCS will come soon and in the meantime they can continue with oil and gas as before.
"So we do not believe that CCS is a mass-scale solution. It might have opportunities here and there; but not on a big scale. It won’t be accepted by the local population; and it is too expensive to do it offshore.
For the International Energy Agency too, CCS helps: it is the missing link in its belief that the carbon target is achievable. "The IEA needs something to plug the gap as it wants to limit global warming. But we must put that notion aside if we want to decarbonise quickly," he concluded.
Holleaux's career trajectory has paralleled that of Engie. He is the last executive from former state-owned Gaz de France (which merged with Suez in 2008, later becoming Engie) still on the management board, having joined GdF in 1993, headed GdF's UK upstream business from 1997 to 2000, shifting to pipes and grids until 2004, heading LNG until 2007, then serving as Engie E&P chief from 2007-15 prior to the latter's divestment.
At board level, his responsibilities now span gas infrastructure, Engie's China and Asia-Pacific businesses, and nuclear development (Engie owns Belgian Electrabel).