ForTheDoers Blog

Gas – a partner of electricity as a carrier of carbon-free energy

Vesa Ahoniemi  ·  14 February 2020

The need to decarbonise the European economy raises the bar for the energy sector – how to deliver emission reductions at an affordable cost while keeping the lights on? One of the main answers is likely gas – first, natural gas and eventually clean gas.

City view

Flexibility in high demand

Things used to be simpler. Just a few decades ago, Europe had separate electricity markets served by national, vertically integrated energy companies with the help of a massive overcapacity of oil-, coal- and gas-fired power plants. The environmental burden was high but went largely unnoticed, and the costs to consumers were huge but mostly invisible. Electricity was like any other fuel.

Market liberalisation put an end to overcapacity – the electricity markets of different countries became interconnected, increasing overall efficiency and reducing costs to consumers by tens of billions of euros annually.

The climate impact of electricity generation has also plummeted. After many twists and turns, EU power generation has reduced its carbon dioxide emissions by almost 45 percent between 1990 and 2019, vastly outperforming the rest of the European economy. The share of intermittent renewables has risen to 18 percent of production.

As a result, more and more often electricity is recognised as the greenest carrier of energy, capable of decarbonising other sectors such as transport, where emissions have increased by a staggering 20 percent since 1990.

The change won’t end here. One important lesson learnt in Europe’s path towards decarbonisation has been that building just solar and wind will not suffice. Problems of market design, security of supply, overall costs, investment uncertainty, grid congestion, multinational grid planning, local resistance and many others point to a still-high need for other, complementary energy carriers.

In short, there is an increasing need for flexibility.

Present is prologue

The role of gas in today’s Europe has much to do with flexibility. Roughly 70 percent of gas demand is weather dependent. Weather itself affects the energy system in many ways.

On a daily horizon, gas storages help the electricity system absorb more intermittent renewables by injecting more gas on windy days and vice versa. On a more seasonal horizon, gas ensures winters are matched with a corresponding increase in energy delivered – in the first quarter of the year, gas consumption is on average some 800 TWh or 90 percent higher than in a summer quarter. The same figure for electricity is 100 TWh, or 15 percent.

Gas is also crucial for meeting demand on extremely cold days – for example, in Germany, the difference between the day of highest and lowest demand was 4 TWh in 2018, almost seven times that of electricity. As a thought exercise, one would need to double the German electricity generation capacity to deliver the same variation using electricity alone.

While the electricity grid is frequently congested, the European gas grid faces no such issues. Storage of gas is easy and Europe has the world’s highest gas storage capacity in relation to its consumption, some 1,000 TWh in total. By comparison, electricity storage is measured in GWhs.

None of the above is to say electrification is a dead end – quite the opposite. There is virtually no alternative to increasing electricity use if we are to reach Europe’s climate targets. But that’s far from the whole story.

Paradigm shift from fossil fuel to clean gas

So we know gas is crucial to today’s energy system and that it has many of the qualities electricity lacks. Equally, we know there is no room for net emissions in the long-term future of European energy. This means gas will have to become emission-free. The likeliest option is hydrogen.

Technologies for emission-free production of hydrogen, such as steam methane reforming with carbon capture and storage, electrolysis and pyrolysis, are already available. They are not cost competitive in the current market, but this could easily change within a decade, as pilot projects all over Europe spring up and learning curves work their magic.

Suddenly, gas becomes just another energy carrier, one that is particularly easy to store and move around and, as such, is able to complement electricity in the journey towards a decarbonised energy system.

The complementarity manifests in a number of ways. Take transmission. If we compare two energy transmission methods, a gas pipeline and an electricity transmission line, the former is able to transfer 30 times more energy with the same amount of euros invested.

Take the demand side. Since 2008, European power markets have seen a steadily increasing number of hours when the electricity price falls below zero. This means that the energy system is not able to find a use for all the renewable electricity being produced. Production of green gas via electrolysis can provide a flexible source of demand and allow even more renewables to be integrated. In fact, hydrogen production can itself become a major source of electricity demand – up to 50 percent of the total by 2050 in some scenarios.

High-temperature process heat where electrification is not feasible is another example of a use for hydrogen, as well as heavy road and maritime transport. In residential heating, almost half of which relies on gas today, several pilots are experimenting with conversions of entire gas grids into hydrogen. It turns out that a gas pipeline is no more of a fossil fuel infrastructure than an electricity transmission line is.

Full decarbonisation could require increasing hydrogen’s share of final energy use from a rounding error now to well over 30% by 2050.

A decarbonised future may seem far away, but to make the journey manageable, there is no time to waste. For example, if we are to decarbonise residential heating by 2050, conversions to hydrogen would likely have to start already in the 2020s. Meanwhile, emission reductions while maintaining security of supply have to continue and to spread to other sectors. Gas can deliver on both, which makes it an ideal partner of electricity.

Vesa Ahoniemi
CEO Advisor
vesa.ahoniemi@fortum.com