Recognising the Gas and Renewables Partnership
The COP21 agreement late last year in Paris could mean good things for the gas industry. For one, the recognition of natural gas as the best partner for renewables may finally be coming to fruition. Meanwhile, the European Commission is preparing a proposal on how to redesign the market for electricity.
Francois-Regis Mouton, who is in charge of Gas Advocacy in Europe for GasNaturally, a partnership of five associations representing the whole gas value chain in Europe, says both sides – the natural gas and renewables industries – are reinforcing the notion that they should be complementing each other. "At the GasNaturally event at COP21, it's been expressed by both sides," he says. "The solar power industry in Europe has been insisting that they need gas every day because we're providing them the flexibility they need; we're the partner they need."
Mr. Mouton, who has been toiling for this acknowledgment for several years, says that he recently heard another call for marrying natural gas with solar and wind – but not at a natural gas event. He heard it at the "World Future Energy Summit" conference in Abu Dhabi, at a debate organised by the International Energy Agency and the International Renewable Energy Agency.
"It was very interesting for me to see that there was a great recognition by the renewable community of the role of gas in the future vis-á-vis the development of renewables," he says.
Mr. Mouton says the "great opportunity" to capitalise on is power market design, a subject that underwent a consultation by the European Commission last year, and on which now the EU executive is preparing a proposal.
Now, he says, ideally, it would be time for the two sides – gas and renewables – to make joint proposals on power market design: arranging how market actors generate, trade, supply and consume and use the energy infrastructure. If the two industries fail to do that, according to him, they will miss the train leaving the station...and so will the de-carbonisation of the power sector in Europe.
How the Solar Industry Sees it
"In former times, it was always 'either renewables, or anything else is bad'," says the President of Solar Power Europe, Oliver Schaefer, who shares the sentiment of mutual cooperation between renewables and gas. "I think there's a growing understanding that solar, wind and gas work very well together. Looking at the past 15 years, the three of them have been leading in new installed capacity, in Europe at least."
The cooperation also makes technical sense, he adds.
"Wind and solar are very predictable, but still need some sort of a flexible source coming in. Gas can provide that – it's super flexible compared to coal and nuclear, which are neither flexible nor sustainable; gas is, for some time to come," Mr. Schaefer says.
"I think now we are moving toward a more logical and pragmatic way of saying that this combination of solar, wind and gas does make sense – it reduces emissions drastically, still, and we can increase the shares of solar and wind dramatically, much more than whatever goals suggest. We can go far beyond those if we have a partner that provides flexibility, and gas can be one of these partners, like others such as storage and increased demand and supply side management."
In Germany, however, he points out that the country is protecting traditional interests via the burning of coal to back up renewables rather than thinking of the future. "This is really like what we tried 100 years ago to protect horses when cars came along. Twenty-five years ago, if they had protected the telecoms industry we wouldn't have mobile phones. So this is what is happening in Germany, where they're trying to protect coal – it's shortsighted."
He notes that modern, highly efficient, flexible and relatively low CO2 emitting gas-fired plants are sitting idle in Germany.
"The system is organised in a way that it's not economically viable to run them," says Schaefer. "So instead of changing the system they still try to protect coal which is preventing gas-fired power plants from making money. This is stupidity, which I cannot emphasise enough. It's totally backward thinking."
Working from COP21
In light of COP21, Schaefer says the partnership between gas and renewables may have been given a boost.
"We need to change the market design," says Schaefer. "So far the market is organised according to merit order and marginal costs, mainly protecting the 24/7 sources like coal and nuclear, but that doesn't make sense any more in a world where you have no marginal cost sources, CO2 sources, and sources needed that provide flexibility. So you need to give a benefit to low marginal cost, indigenous sources and a benefit to those offering flexibility instead of protecting the old ones."
This, he says, calls for a complete change in market design.
"In Paris, they agreed to save the climate, so the first thing they need to do is find a way to switch off coal."
While efforts are being made to improve the way the emissions trading system works, Schaefer observes that, so far, they have not succeeded. "I see us doctoring a system that's not looking bright for the future. They're spending too much time on the ETS [EU emissions trading system] and trying to change it every year."
Goodbye to coal
Francois-Regis Mouton contends that if Europe is serious about its energy and climate objectives, Europe must address the power generation emissions that are coming from coal. "If you want to de-carbonise the power generation sector, you have to address coal, which is producing 28% of the kilowatt hours generated every year in Europe – but accounts for 76% of the total emissions of the sector!"
However, there may be some good news for European power generation in spite of the challenging climate investment, according to him, who points to what he says is an interesting report from an NGO called "Sandbag".
"The recent Sandbag report on EU power generation shows that European gas generation increased marginally for the first time since 2010," he says. "The report also shows that if gas generation had stayed at 2010 level and coal had fallen instead, then European power sector emissions in 2015 would be 15% below what they actually are!"
Complementing the ETS?
At January's European Gas Conference in Vienna where NGE met with him, Mouton said: "I have the feeling that things are starting to roll, even though not fast enough when it comes to tackle coal in power generation." He added, "this is certainly linked with some kind of COP21-induced effect. It is disappointing to think that we need the Paris Agreement to finally start to begin to address such a major issue in Europe, but at least something is moving."
"The European Commission still sees in the longer-term future a very important role for gas in the European energy mix," Director for the Internal Energy Market at the European Commission's DG Energy body Klaus-Dieter Borchardt said at the conference in Vienna. "First and foremost, we still believe that gas will stay as the dominant source for heating and, in future, will remain a very important source for power generation."
He said it was "crystal clear" that if Europe wants to deliver on COP21, it must shift from coal to gas in the long-term. That decision, he said, has been taken, but had not seen success because of the ETS, which he added is undergoing modification.
"If this time we're not getting it right, then it is clear that we might have to look for alternatives," said Borchardt. "For me, I can only see two alternatives: what the UK is doing, leaving it to the national level and see everywhere that carbon taxes are popping up; at EU level there is no competence for doing that. What we could do, or contemplate, would be to go for emissions performance standards – that's the only alternative I see at EU level."
Emphasising emissions performance standards?
Oliver Schaefer, President of Solar Power Europe, also suggests the adoption of an Emissions Performance Standard (EPS) in the European power generation sector.
"We should set clear goals about how much emissions could be there [and] how any emitter should perform instead of trying to give CO2 a price. [CO2 pricing is something] we can continue to do but first we need clear answers and clear results, something which could be done quickly via the setting of an emissions performance standard."
Strength in partnership
Schaefer adds, "We see the limits of solar and wind when they are together with inflexible sources. I believe that forces within the different industries are smart enough to understand that and join together.
"We have grown up believing that renewables will immediately get 100% share – that was the belief we had in the early years. Now we have to be realistic that this will not be the case; we will have to have some hydrocarbon sources for quite some time, and we all prefer the most flexible hydrocarbon sources with the lowest emissions – modern gas-fired power plants that give us flexibility."
That combination, together with energy performance standards, may signal the acceptance of the renewables industry to have gas as a partner.