Where does gas fit in a more integrated and greener European energy market?

Is it realistic to envisage a future where the gas industry integrates and partners with renewable players? This was the challenge for the discussion at Flame 2016 – with a panel representing equally the two sides of this debate.

A more integrated future

Arno Büx, Chief Commercial Officer of TSO Fluxys, is convinced that a more integrated world will be a reality in the future. In Büx’s view, the gas sector must integrate with at least two or three additional sectors in order to thrive – the first one of these is the electricity sector, the second is the transport sector and the third is agriculture.

There are many different aspects relating to these industries, but the obstacles that exist with all of them is regulation, says Büx. “The unbundling of the gas sector also comes from a very different perspective. It has been designed in a world where there was an integrated gas industry from upstream to downstream with a single mission.”

As a result of the campaign to tackle climate change, says Büx, the rules that have been set up to isolate different parts of the value chain to prevent us interacting also prevent us, to a certain extent, from reinventing the business and co-operating in more flexible ways with other industries.

The view from renewables

Jonathan Gaventa, the director of energy and climate think-tank E3G, provided an outside observer’s perspective. He believes that the gas sector could learn some lessons from what has happened to the coal industry, which did not have a ‘credible long-term story’ around its future. He warned against a similar complacency in the gas sector.

For Gaventa, there are three major waves of integration on the horizon for the gas industry – the first is the electricity market integration. The second will be the integration between sectors and between infrastructure types: for instance, we will see increasingly complex systems integration between gas, electricity, heat and digital both in buildings and at a macro-level. The third big integration is policy integration – in the past we have had a situation where our gas policy is based on expectations of rising demand whilst renewables policy has been based on falling demand expectations. According to Gaventa, that will not always be the case.

“It’s not clear to me that gas is the automatic winner in this space,” said Gaventa. “We’re seeing an increasing boom in new business models, new technologies for demand response and for different forms of storage. Gas will compete in this more flexible market, but it will compete against a rapidly increasing number of players.”

Key elements for a gas vision

Amongst those players are renewables, such as wind. Giles Dickson is CEO of WindEurope, believes there are some crucial changes that need to happen in a market where the percentage of renewable supply is growing rapidly.Dickson believes that we need a number of changes in the energy sector, including urgent reform of the electricity markets. He told the audience that WindEurope recently partnered with GasNaturally to submit a joint paper to the European Union with some clear proposals for changes to the electricity market.

These proposals include more intraday trading, market balancing across wider geographical areas, full access for all types of power generation to balancing and other ancillary services and more demand response.  “If the electricity market is designed along those lines,” said Dickson “then it’s better for renewables and it’s better for gas.”

A flexible market

For facilitator Torben Brabo the challenge for the gas industry in partnering with other agencies is the sheer scale of gas projects. “We are not so good at small", he says, “and we may need to wait for 5 to 10 years before we can offer the flexibility these renewables partners will need.”

The importance of winning the battle for flexibility may be overemphasised by the gas world, said Arno Büx.

“I think for the gas sector it’s more important to choose the battle around who will replace nuclear and the base load and how to construct price competiveness with regards to coal in the EU. That’s the name of the game.”