Europe must coordinate infrastructure plans to secure gas supply and avoid fossil fuel lock-ins – EURACTIV.com
Governments across Europe are investing in natural gas production and transportation infrastructure to replace imports from Russia. This is justified to some extent, but risks over-expansion and fossil blocking, write Friederike Altgelt and Martin Albicker.
Friederike Altgelt is Senior Expert for Hydrogen and Synthetic Energy Carriers at the German Energy Agency (dena). Martin Albicker is senior industry expert at dena.
Russia’s war against Ukraine has caused global disruption in energy markets. Europe has been the target of deliberately induced shortages since 2021, with several countries completely cut off in recent months. This jeopardizes the security of supply for households and industry and risks plunging Europe into its worst recession in decades. Gas shortages are also leading to a rebound in coal-fired power generation and therefore significantly higher emissions.
Therefore, Europe must urgently prepare for the possible cessation of gas imports by Russia.
The REPowerEU package stresses the need for the EU to become independent of Russian fossil fuel imports “well before 2030” – recent developments prove that this will have to be achieved much sooner. The package emphasizes energy savings through improved efficiency and accelerated deployment of renewables to reduce and replace natural gas consumption in power generation, industry and heating. The third pillar is the diversification of supplies to replace Russian gas.
This will undoubtedly require new gas infrastructure, particularly in Central Europe, including onshore LNG terminals and floating storage and regasification units (FSRUs), which have advantages in terms of permit requirements, time and cost. It will also likely need additional exploration activity in Europe and/or LNG-exporting countries (including, unfortunately, other autocracies).
At the same time, however, it is essential to avoid an expansion of gas infrastructure capacity exceeding demand, as this would have the effect of:
- wasting money on “stranded assets” that would be better spent elsewhere
- lead to an oversupply of gas production and transmission capacity within a few years, while European demand decreases, making fossil gas attractive again as a “gateway technology” in Europe and abroad, leading to a sustainably higher global consumption and reducing the pressure to decarbonise
- damage Europe’s international credibility on climate protection
- in many cases arrive too late to remedy the current shortage of supply
It is difficult to navigate the difficult situation between emergency measures to avoid acute gas shortages in the coming months and precautions to avoid overinvestment in fossil infrastructure in the years to come.
Any capacity expansion should therefore be guided by demand forecasts based on ambitious decarbonisation scenarios at European level. In particular, the need to invest in new gas infrastructure must be well justified with a factually established supply gap given the expected reductions in demand.
The current windfall of new European gas developments casts doubt on the consistency of this practice. An assessment carried out by the European Network of Transmission System Operators for Gas (ENTSOG) on behalf of the European Commission concluded that it would be possible to fully compensate for the cessation of Russian gas imports by a combination of reductions in request, as offered as part of the “Fit for 55” (Ff55) case and only ““limited” gas infrastructure additions beyond those already planned before the invasion of Ukraine by Russia.
However, the number of newly proposed or revived gas infrastructure projects across Europe since February has already exceeded 20, with a planned capacity of more than 150 billion m3/year, not counting the planned investments upstream and in the transport in the MENA region and elsewhere. In comparison, total annual EU demand is around 400 bcmof which 150 Gm3 were supplied by Russia in 2020 and 20216.
Yet by the time all new and revived projects come on stream, total EU gas demand will be considerably lower than it is today: the European Commission predicts that proposals from the Ff55 package, such as renewable energy and increased efficiency, will lead to a sharp drop in demand for natural gas in Europe by 27% until 2030 if fully implemented.
The REPowerEU package, together with national measures, will further reduce demand. High natural gas prices will constitute an additional “push” effect towards alternative energy sources/carriers.
Therefore, investments with a long lead time or duration or high capital expenditure required for the infrastructure should be avoided. This also implies favoring the accelerated exploitation of existing gas fields connected to existing infrastructures rather than the exploration of new fields.
It would also help keep Europe on a path consistent with the goals of the Paris Agreement, which – under decarbonisation strategies such as those outlined in the IEA’s “Net Zero by 2050” scenario – are incompatible with the large-scale exploration of new fossil resources. deposits.
Close European coordination is needed to optimally integrate existing capacities into the planning of infrastructure expansion in order to minimize the expansion required and avoid redundant projects. European planning must be binding and implemented in time.
The EU’s revised state aid guidelines for climate, energy and the environment (CEEAG) which were adopted at the start of the year stipulate that member states must demonstrate that new investments in gas infrastructure do not create a lock-in effect for the use of natural gas, for example by showing that they are ready for the use of hydrogen and how they contribute to the achievement of the Union’s climate objectives .
These provisions give the Commission a gatekeeper function in assessing the compatibility of new public investments in gas production and infrastructure with the Paris decarbonisation commitments. It is crucial that these provisions are respected and not watered down.
However, these evaluations consider the effects of individual projects in isolation and lack comprehensive planning at European level. The EU Energy Platform, created in April 2022 to buy gas, LNG and hydrogen, should be further developed to coordinate these processes.
To this end, it should bring together experts and stakeholders from EU institutions and national governments, taking into account existing and planned infrastructure and future gas demand forecasts.
This should be implemented as soon as possible. Timely involvement in the early planning stages of new projects would allow the EU to focus its efforts on achieving energy independence without wasting money or undermining its climate commitments.