Dr Axel Wietfeld is managing director of Uniper’s Energy Storage Division. Speaking at the Flame conference in Amsterdam, he explained the value of a healthy gas storage sector – both in terms of pipeline infrastructure cost reductions in the present, and as a means of interseasonal energy storage in a future dominated by renewables.
“There is also a future value to gas storage… if we close storage sites now, we won’t have them in the future when we really need them for the future energy industry.”
Q: Storage is a word that we are hearing more and more often. How well developed is the market?
Wietfeld: I think the market is very mature. The availability of storage facilities in Europe is extremely high, and we saw a completely different market situation this winter compared to last winter. Whereas this winter we ended the season with a pretty high storage level – about 40% in Europe – last winter it was an extremely low level, because we really needed the storage for providing sufficient gas.
For example, last winter in some of the cold days, storage provided for 60% of daily gas consumption in some European countries, which is extremely high, and shows how much storage capacity is needed.
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Q: What sort of percentage could the system go up to from storage? You say 60% - what could the system do if it needed to?
Wietfeld: It could do even more, depending on the time of season. At the beginning of the season when pressure levels from storage are high, then of course we can withdraw a lot more than at the end of the season when the fill level is quite low. Sometimes we forget about that when we talk about security of supply – that it makes a difference when you need the gas.
Normally we need it at the end of the winter, and that is one of the risks we are facing – that then the pressure level is no longer sufficient to provide these high quantities.
Q: Let’s bring some politics into this. Are policies moving in the right direction for you and for your part of the industry?
Wietfeld: I think it depends on the country and the level you are looking at. We believe that it would be important to acknowledge the added value that storage provides. If we for example think about the system value, then storage can help to avoid significant infrastructure developments on the pipeline and transmission side. However, that is a benefit that storage is not really acknowledged for.
If we take the insurance value, with storage we could avoid even higher price peaks than those seen in the winter one and a half years ago. Our customers have an insurance about really high prices if they book storage capacity and if they have sufficient gas in the storage sites.
There is also insurance about the traditional security of supply considerations we talk about – potential supply disruptions. In some European countries there is a regulatory framework to ensure this added value. For example some countries have obligatory bookings, and some have strategic storage.
In other countries – for example in Germany – we don’t have this framework. I genuinely believe that it would be fair to place storage on a level playing field, and adapt the regulatory framework to make sure that storage operators are offered sufficient benefits to operate those storage sites.
Q: You mentioned obligations. Do you mean where gas goes and who is able to access storage when they need to?
Wietfeld: Yes, but also in the sense that if you have a certain amount of gas demand, you are obliged to have a percentage of this demand stored somewhere physically so that it is available.
Q: How do regulations account for the different needs of domestic consumers and industry?
Wietfeld: There are various options to do so.
Q: And do you think that they are set up in the right way?
Wietfeld: Again that depends on the country. I don’t think that one size fits all. However, what we have seen over the last few years is a decrease in storage capacity, and even more of a decrease in planned projects. I think we have 40% fewer planned storage projects than two years ago, and that shows that a lot of storage operators are in difficult economic situations.
Those operators are considering closing down storage sites, and we all know that it is a difficult procedure. But we also know that it is even more difficult to somehow make them operational again – I would say nearly impossible. Having said that, it is a shame for our existing economy, because as we have seen again and again we need gas storage.
But there is also a future value to gas storage. We are moving into a decarbonised energy industry, and I truly believe in future we will see a lot more green hydrogen and blue hydrogen in the system. The supply of electricity from renewables is fluctuating, and we have to store this electricity somehow.
As it is difficult to store electricity directly, we will have to convert and transform it. There are a lot of academic institutions, and consultants, and professionals suggesting that hydrogen is one of the best solutions to do so.
To store this as hydrogen, or to store it as synthetic methane, gas storage sites are a superb option. What I’m saying is that if we close them now, we won’t have them in the future when we really need them for the future energy industry.
Q: That means that you’ve got to convince not only the industry, but also investors. Many people would advise not investing in hydrogen, but investing in renewables, solar and wind instead.
Wietfeld: I think it is not either or. Obviously we will have more renewables in future – that is what the industry is heading for, and that is absolutely fine. In addition to that, we need a solution for storing large amounts of electricity.
Batteries are not the solution for long-term storage and for large quantities, and therefore one of the answers to this high amount of renewable electricity is that we have the hydrogen economy available.
Q: Do you think you’ll be able to convince investors that hydrogen and storage for hydrogen are things we should be investing in?
Weitfeld: I think so. I think that a lot of investors are already convinced. You’re absolutely right that projects for green hydrogen are not yet economically viable, so why is that? The answer is that there is not yet sufficient incentive for investors and for project owners.
Q: Policy wise, or just in terms of the returns they will make from it?
Wietfeld: Policy wise. For example, if you erect a power-to-gas facility, then you have to pay renewable levies, additional taxes and fees because you are treated as an end consumer. That is not fair, because actually what you are doing with power-to-gas facilities is debottlenecking the electricity grid. So there is a system value that power-to-gas operators would provide to the electricity grid. That should be acknowledged, and they should be reimbursed for that. That’s one example.
The other example is refineries. As we speak they use grey hydrogen. If they substitute grey hydrogen for green hydrogen, that should also be acknowledged, because they would reduce emissions. These are the kinds of regulatory incentives that should be provided by politicians.
Q: Converting an industrial unit from grey hydrogen to blue hydrogen takes a lot money. Is the desire there to invest that much?
Wietfeld: We believe so. I currently see a trend towards green hydrogen, so definitely a lot of projects are being developed – not yet positively sanctioned, but being developed. Blue hydrogen, in terms of gas splitting, that will come. It will come, but currently the vast majority of projects are in the green hydrogen area.
For example, in Germany there is now a funding scheme, the “Reallebore”, and there are a lot of initiatives and ideas about green hydrogen projects. So there is the will, there are technological solutions, the industry is ready, and with some technical support I believe that in future we will have a growing green hydrogen economy.
This transcript has been edited to improve readability.
