There have been some remarkable and widely publicised success stories for renewable energy in recent months. For example Sweden, which already meets well over half its power generation needs through renewable energy, introduced a bill this February setting the target of becoming a net carbon-neutral economy by 2045. The following month, Portugal succeeded in producing more renewable energy than it was actually able to consume.
Sweden and Portugal are of course two of Europe’s highest performing adopters of renewable energy; but the direction of travel is clear across the continent. The European Environmental Agency estimates that if the rate of growth for renewables is sustained, the EU is on track to meet its target of 20% renewable energy share for final energy consumption by 2020.
Where will this trend lead us over the long term, and what will it mean for natural gas? To provide a properly informed answer to that question, two things need to be taken into account: the challenges of an entirely electric approach to meeting the total end use requirements of the energy system, and the uncertainties surrounding the proposed solutions to these issues.
Intermittency & Inter-Seasonality
The output of renewable power production is entirely dependent upon environmental factors such as the intensity of sunlight, the amount of wind or the quantity of rainfall. This creates obvious problems given that consumers expect a continual flow of on-demand energy, especially as peak energy use often takes place at the times when the supply from renewable sources is low. During the 24 hour cycle, energy demand typically peaks between 6pm – 9pm, at the time power output from solar drops off. Likewise, over the course of the year energy demand for home heating is at its highest during the winter months when solar power generation is at its lowest.
Also worth noting is that the environmental factors that influence renewable energy output vary widely from region to region. Part of the reason for Sweden’s considerable success with renewable energy adoption is number of rivers it possesses suitable for hydro-electric power generation; the country now has 46 hydro-electric power plants with a capacity of 100MW or more. Portugal also has a well-established hydro-electric industry, while its blustery Atlantic coastline has allowed for the installation of approximately 5313MW of wind capacity (according to NREAP figures).
Taken together, the effect of intermittency and the uneven geographical spread of renewable energy development have resulted in some unavoidable inefficiencies. During spikes in power production, networks are sometimes forced to resort either to curtailment, in which renewable power sources are taken offline during peak production hours to avoid overloading the grid, or to selling excess electricity on to consumers or other regions at unprofitable rates. In one example, residential consumers in Germany were effectively paid to consume energy over the 2017 Christmas period, during the hours when a slump in demand from industrial users coincided with a surfeit of wind power generation. Similarly, on several occasions California has had to set negative prices when selling excess solar electricity on to its neighbouring states.
Peaking Power Plants & Battery Storage
There are two solutions to the problem of intermittency. One is the use of peaking power plants – typically natural gas power plants which can step in during the hours when demand is high and renewable power supply is low – while the other is storage of the excess energy. Of the available options for grid energystorage, including pumped hydro storage, battery storage and power-to-gas hydrogen storage, the first is currently the most prevalent, but is limited in its potential for growth by the need for a conducive local geography. Much attention has therefore been paid to battery storage as the natural complement to renewable energy generation, being preferable from an emissions standpoint to peaking power plants.
Accurate speculation about the timelines involved is hindered by the fact that there are still significant uncertainties about how storage is likely to develop. As Geoffery Hureau of Cedigaz puts it, “how much progress there will be… in energy storage, and at what pace this will happen, is not known precisely now.” A December 2017 position paper by the UK’s All Party Parliamentary Group (APPG) on Energy Storage is indicative of the conditional tone of the debate. The paper predicts that the capacity of “the battery storage sector could grow from 60 MW (.06 GW), where it was in 2016, to up to 12GW by the end of 2021,” – a twentyfold increase. But the group stipulates that this can only happen if the “UK regulatory framework is speedily upgraded”. Regulatory backing will also need to be matched by technological improvements if the economics of deployment are to swing in batteries’ favour. “You have to be able to factor in the technological progress,” Hureau says. “And we can’t be sure of that at the moment.”
What is more certain is that the challenges of short term intermittency are more easily dealt with than the problems caused by inter-seasonal variations in demand and supply. “I think short term storage is going to make progress,” Hureau says, “and this will eat a share of gas’s potential as backup. For longer term storage, the situation may be more complicated.” Simply stated, the challenge is that the storage capacity required to retain energy from the months when renewable power is abundant, for use in the months in which it is lacking, would have to be much greater than that required to maintain grid stability over shorter periods.
Until this problem can be solved reliably and economically, natural gas seems destined to continue playing a role in the power sector. As a fossil fuel, it has the advantages of being flexible, energy dense and easy to store. And as Johan Zettergren of Swedegas points out, it is also “more abundant, more easily affordable and more environmentally friendly than other fossil fuels.” In his opinion, the key task for the industry is communicating these benefits. “It is all up to the gas industry to cooperate with all its stakeholders to show that we are part of the solution and not part of the problem. I think the future is very bright.”
Power Grid Infrastructure & Home Heating
But power generation is only one aspect of the challenge involved with a renewables based electrification approach. Justin Goonesinghe of National Grid explains that in the UK “we transport something like 900 terawatt hours of gas energy, and 300 terawatt hours of electricity energy. Therefore to build up the electricity network so it’s able to deliver all the energy that the gas sector delivers today is a daunting prospect.” Most of this 900 terawatt hours of gas demand comes from home heating and industrial use. Alongside the difficulty of upgrading the grid to support so much extra power supply, electrification in these areas presents its own difficulties.
With home heating, there are concerns about the costs and disruption caused by the installation of electric heat pumps. There are also questions about whether consumers would be satisfied with the results. In the UK there are “20 million homes that use gas today,” Goonesinghe says, “and while they maybe don’t talk about it much, they’re probably quite happy with gas. It works, its functional, and at only one third the commodity price of electricity, it’s relatively cheap.”
Goonesinghe believes that change in the energy sector will come about primarily in response to shifts in the needs and views of consumers: “I do think that a concern about the end consumer, and the uses of energy, is what’s driving the changes to the energy markets.” One approach that can be taken to balance the needs of consumers with the imperatives of decarbonisation is the use of hybrid heating solutions. “What we tend to see is that a hybrid heating system is the favoured technology,” Goonesinghe says, which is essentially “the electrical heat pump being used on the majority of days, but… below about five degrees the hybrid heating system switches to the gas boiler back up because you’re unable to get enough heat out of the pump.”
Natural Gas Use in Transportation
National Grid’s projections for electrification in the transport sector, on the other hand, are less conservative. “We strongly believe that electric vehicles will be taken for the best solution, the most convenient solution, and the lowest cost solution for consumers,” Goonesinghe tells us. But there is room for growth in the use of gas too, particularly in the short term while so much of the power used to charge electric vehicles comes from dirtier fossil fuels.
In the opinion of Zukunft ERDGAS’s Timm Kehler, “CO2 intensity needs to be established as the critical success factor of the energy transition. Hence, a fuel switch needs to take place from high-carbon to low-carbon fuels, which clearly puts natural gas on the decarbonization agenda.” It is Kehler’s view that failure to tackle decarbonisation in mobility – both through electrification and switching to low-carbon fuels – is one reason why Germany’s impressive record of renewables uptake has not over the last few years translated into the expected reductions in CO2 emissions. “In terms of systems costs,” he explains, “CNG and LNG vehicles feature the highest level of emissions savings for both the vehicle itself and the related infrastructure.”
Johan Zettergren is also convinced of the advantages natural gas presents for use in transport – and points to signs that the automotive industry is beginning to understand them too. “Both Scania and Volvo have just launched new LNG powered trucks, which proves that they see a market coming. For instance, Volvo has indicated that they expect a penetration of at least 10% of LNG registrations in Sweden within 2-3 years,” he says. “Even ‘all-electric’ optimists would probably agree that it makes sense not to put all our eggs into one basket. To be able to comply with the Paris agreement we will need several good alternatives, including gas.”
The transport equation is not limited to the automotive industry, however. Dan Sadler, of the H21 Project, summarises the situation neatly: “my view is that when we talk about transport the level of conversation is very narrow - people in their minds default to domestic cars. But actually transport in terms of climate change is cars, vans, haulage, heavy haulage, garbage trucks, trains, planes, boats – everything. So you can’t get, for example, an electric cruise liner. You can’t get electric garbage trucks. The point here is that electric vehicles – as much as they may be preferable from a tailpipe emissions standpoint – are only actually clean if you’ve got excess renewables, which nobody has yet.”
It is these heavier duty forms of transportation, for which the energy density requirements of fuel sources are more demanding, which present the greatest opportunities for natural gas. Zettergren highlights the growing success of LNG in the shipping industry as an example: “the number of LNG fuelled ships globally will exceed 200 next year, with the Baltic Sea as one of the frontrunners,” he says. “Marine emission controls are tightening and ship owners already having made the move to LNG seem very pleased.” It seems likely that the outcome of the IMO’s Marine Environmental Protection Session this April, which set the target of reducing GHG emissions from shipping by 2050 to 50% of 2008 levels, will provide added momentum to the use of LNG as a marine fuel. (If you're interested, you can read more about this topic in our interview with Carnival Corporation's Tom Strang).
Gas as Part of the Solution
What all-electric optimists correctly surmise is that renewables will have to meet a much larger share of net energy demand to keep on track with climate targets – in other sectors alongside power generation. What they overlook, however, is that electrification without pre-existing surplus renewable energy often imposes higher system scale carbon costs than a gas based approach. Enlarging upon the role of gas as a fuel for certain types of transport, and boosting its contribution to power generation in economies still heavily reliant upon coal-fired power plants, generally provides a swifter option for achieving emissions reductions in real terms.
Moreover, the electrification argument also undervalues what Zettergren aptly terms “the excellent complementarity of intermittent renewable fuels and the gas system” – the ability of gas networks to provide year-round energy in large quantities, their effectiveness in meeting demand for some of the applications that are hardest to electrify, and the genuine options that exist for decarbonising them in the long term.
The last of these benefits will be key to gas’s survival in a low carbon energy system. The crucial point about decarbonising gas is that it provides a pathway for continuing to develop the gas network without coming into conflict with the objectives of the energy transition. Investing in gas infrastructure does not imply “sunk costs,” Timm Kehler offers, “since natural gas is increasingly becoming more renewable.”