Molecules – The Eurogas Newsletter (December 2019)

December 18, 2019

Happy Christmas from Eurogas

As we head towards the snows of winter, the political atmosphere in Brussels is heating up. The new Commission, installed at the beginning of December, has the most ambitious climate agenda of any previous administration and will propose, amongst other major initiatives, a law binding the EU to a carbon neutral 2050 timeline, an increase in the carbon dioxide reduction target from 40% to at least 50% in 2030 and expansion of the ETS to maritime transport. This is just the start. These initiatives alone would be considered ambitious and would require a huge amount of time and resource to prepare under normal circumstances, but this Commission is looking to drive these initiatives through in the next few months. Of course the Member States will have their say on the programme, and the climate law is already being held up through the failure to gain unanimous support for the measure in the European Council. It will indeed be interesting to see how the Member States respond to this new dynamic Commission’s intentions to fundamentally re-write the climate rule book in the EU.

Bubbling just below the surface of this new hot December in Brussels is another piece of major legislation, the so-called ‘gas’, ‘decarbonisation’ or ‘smart sector integration’ package which now seems to be due to be launched in 2021. This will involve the full review of the existing gas legislation but will likely see other initiatives attached to it. This would be the 4th gas package of a type and would reflect the change we are seeing in energy towards more focus on improving effectiveness between the different energy sector uses. Recalling that this is the 4th package, requires a little reflection on all that has been achieved in the previous three.

From a Eurogas point of view we must extend our thanks to Margot Loudon who has navigated the association through all the previous packages and I hope that you will all enjoy reading her reflections on the achievements of the past packages and the challenges that need to be addressed in the forthcoming one. I would like to personally thank Margot for all her constructive advice and input to Eurogas over the years and wish her the very best as she paints a new chapter of her career.

Whilst we wish Margot the best for the future, this year has also seen a new leadership team inaugurated in Eurogas, with our new President Philippe Sauquet of Total elected in June to lead the association into a new direction to drive the better understanding of the role of gas in the energy transition. One of the first decisions of the Board under his leadership was to support the European Commission’s call for a carbon neutral EU in 2050. This was a key decision and underlines the important role that gas can play in delivering the energy transition in an effective way, and in a least cost way.

At about the same time as the new leadership was shaking up the direction of Eurogas, we commissioned a poll of consumers (in the sweltering heat of August!) to ask them about their heating preferences. The poll found that citizens want to play a part in tackling climate change alongside companies and governments. It also found they don’t really want to change their heating habits and continue to show strong positive sentiment towards using gas for heating. This is in part as they don’t want to undertake renovations to their homes, but also because they like the convenience and affordability of gas. The Chair of our Gas Advocacy Committee, Anton Buijs of GasTerra, writes more about the poll in his article, so without spoiling that read for you, I would only add that the poll supports the proposition that it is necessary to provide renewable and decarbonised gas for consumers to make sure that they can participate in the energy transition and do so in a cost effective way. Obviously the best way to bring those gases on is to set EU wide binding targets for renewable and decarbonised gases, and with all this policy action in Brussels now is the right time to make that commitment in the EU!

I hope that you enjoy this our last newsletter of the year, and I wish you all a Merry Christmas and a Happy New Year!

James Watson
Eurogas Secretary General

Margot Loudon – 30 Years

Hindsight is a wonderful thing but although we cannot change the past, we should learn from it.

When I arrived in Brussels in 1986, national gas champions were still enjoying the benefits flowing from lack of competition, while the economy and consumers experienced the disadvantages. During the 1990s, European policy makers decided this had to change. Involving successive legislative packages over almost 30 years, the work involved was fascinating and enlightening. The gas sector, often abetted by national interests, remained for too long opposed to any real change. When in recent days I shredded old position papers, I reflected on the less than constructive arguments I used on behalf of Eurogas in the early years. I think now that the sector in seeking to maintain the status quo then misread for too long European policy makers’ determination to effect change.

Granted when it eventually came, adjustment was painful for many companies; notably the incumbent mid-streamer role has been progressively squeezed. Change, however, brought opportunities. Meeting the challenges to their traditional business models enabled many national businesses to transform into global energy players. The stock arguments used before the Third Gas Directive by an over conservative gas sector had exaggerated negative consequences. Justified checks and balances on market operations have been assured by a sound approach to a regulatory framework and strengthened legislation on supply security. The policy framework has largely delivered in the wider European public interest.

I find it ironic that as market issues have been progressively addressed and, if properly implemented, the framework is there for a robust, liquid gas market, concerns have moved to uncertainties over the role of gas in the energy market. There too, I think the sector has been slow to see the need for faster change and opportunities from disruption. When in the last decade, legislation already signaled the growing determination of policy makers to decarbonize energy supply, the focus on internal market issues coupled with a complacent perception that gas would be the fuel of the century, meant that the risks as well as the innovative opportunities of the decarbonization pathway were not acknowledged sooner.

Now the sector needs to catch-up on those missed opportunities. Today it seems it is indeed underestimating neither the political will nor the necessity to effect changes. Its response is multi-faceted, reflecting the different contexts in which companies operate. I wish the Eurogas team well in harnessing and steering this evolving mindset.

If I am permitted a further Xmas wish, I would like to see robust advocacy for particular causes melded across the Brussels energy associations with a genuine pursuit of holistic energy solutions. The challenges of climate change are too great and the consequences of failure too grave, not to do this. Eurogas is well-placed to offer leadership in this direction.

Margot Loudon

Anton Buijs – Consumer Choice

Recently Eurogas launched its heating campaign. It was in a certain way non-typical. Usually, industry associations like Eurogas base their exchanges with EU officials, lawmakers and (critical) friends on its own insights and positions. Not this time. The heating campaign is based on what EU citizens think about climate change and on what they believe they can do about it. A poll commissioned by Eurogas and carried out by Savanta ComRes – a leading market research agency – shows that most Europeans acknowledge that individually they share a responsibility with their authorities and industry to combat climate change. They also understand that home heating is one of the most important contributors to carbon dioxide emissions. At the same time, when considering an upgrade of their heating system, they admit that environmental concerns are not the main factor that drives decision making – costs are – but do play a role.

Around Europe gas is the most prevalent type of home heating. And although natural gas is a fossil fuel, many EU citizens want to stick with or consider switching to gas. They appreciate the comfort, cost and energy efficiency and relative environmental friendliness of gas systems. Others favour 100 percent green energy, notably solar power but also other sources of electricity.

Of course, the EU citizen does not exist. Circumstances in EU member states are diverse. Take the Netherlands. This country, being self-reliant for its gas needs since a huge onshore natural gas field was discovered in the northern province of Groningen in 1959, has traditionally depended almost exclusively on natural gas for its heating needs. More than 90 percent of the country’s households use gas to heat homes. Industry uses natural gas both as feedstock as fuel. Gas fired power plants are the backbone of power production. Nevertheless, gas has lost its good reputation in recent years. The production from Groningen causes earthquakes, which in many cases are heavy enough to damage houses and other buildings. This forced the government to phase out the extracting of gas from Groningen; in 2022 production is scheduled to stop. Because many also point at natural gas as one of the sources of climate change, a majority of politicians support a complete overhaul of the heating system and a switch to non-gas solutions.

Remarkably, according to the Eurogas poll, most Dutch citizens are still attached to their gas fuelled home heating. They fear the high costs of switching to all electric systems with heat pumps, which require perfect insulation of their houses. Most older buildings are not energy efficiency enough. So slowly, more and more people start to realise that the gas age is not over yet. The interest in renewable gases – bio-methane and green hydrogen – is growing.

Compare this with Germany. The Energie Wende has created a considerable flow of new renewable energy. However, as we all know wind and solar power are intermittent sources, so the need for a reliable backup system is stronger than ever. German authorities understand, after a period in which gas basically was either opposed or ignored, that presently gas is the solution to this issue. The existing lignite fired power plants definitely are not. Moreover, to curb carbon dioxide emissions even further, households are encouraged to switch from heating oil to gas.

These two examples show that the success of the EU’s green ambitions will be strongly influenced by the situation in individual member states and within these countries by local circumstances. Whether transition programmes can be effective, is to a great extend determined by the attitude and preferences of citizens. The Eurogas heating poll shows that the majority of them, in all selected member states, see gas as a practical, cost efficient and environmentally acceptable choice and therefore a logical option to start or continue heating their homes.

That is the core message of Eurogas’ heating campaign.

Anton Buijs, GasTerra

A Just Industrial Strategy

The Eurogas paper A Just Industrial Strategy for Climate Leadership looks at how a just industrial strategy can support the European Commission’s 2050 climate ambitions, while maintaining and strengthening European leadership in clean gas technologies. The paper includes overviews and recommendations on:

Coming up – Events

LNG and the EU Green Deal: teaming: up for a decarbonised 2050: An event of LNG Protocol*, supported by Florence School of Regulation and GasNaturally. This event will be an opportunity to discuss LNG as a fundamental asset that helps meeting EU`s long-term decarbonisation targets and its valuable contribution to the EU Green Deal. Mark your agenda for 20 January 2020, Brussels.

*LNG Protocol is the informal communication platform of 9 organizations that together drive the LNG industry forward. LNG Protocol members support the diffusion of knowledge, best practices and new technologies related to liquefied natural gas.

The conference is renowned for the quality of its speaker faculty, the seniority of its attendees and the scope of its discussions.

On 20 January 2020, the European Social Dialogue Committee Gas will hold its first meeting in Brussels. The social partners will elect a Committee Chair and discuss key priorities on the role of gas for a Just Transition. This will include a presentation on the European Green Deal and the future role of gas. For more information contact Fiona.Dubernet@eurogas.org.

Eurogas, in partnership with IENE, are organizing this highly focused workshop on Gas Supply and Competition in SE Europe (22 January 2020, Brussels). This event will focus on the South East Europe energy perspective, bringing together some major actors of the SE region. As the arrival of new gas volumes from several destinations in South East Europe is imminent and will take place almost simultaneously in the course of the next few months in 2020/2021, there are bound to be important repercussions in terms of trading and supply patterns. Register here.

The 6^th International LNG Congress will take place on 2nd-3rd of March in Brussels, Belgium. On the Congress gas majors, EPCs, LNG shipping companies, LNG terminals, service providers and end users will discuss the perspectives of the global LNG market projects. Request more information about the Congress program on the website. Eurogas is a media partnership of this event.

Organised by the Sustainable Energy Council, The World Hydrogen Fuels Summit is taking place in Amsterdam (The Netherlands) on 10-11 March 2020, aiming to advance the conversations between industry and government, particularly in efforts to address real-world needs and key barriers to deployment. The two day event will provide a practical approach to infrastructure, developing international integrated hydrogen supply chains, covering everything from hydrogen production to storage, transportation, and use. The overarching theme for 2020 will emphasise the effort for international collaboration showcasing the world’s most promising projects and global solutions. Eurogas is supporting this event.

Flame is Europe’s largest and most influential meeting place for the global gas industry. Taking place on 11 – 13 May, Flame 2020 will provide a vital forum for 600+ gas professionals to discuss the effects of decarbonisation policy, the security of supply implications of new and existing gas infrastructure, the progress of European gas market integration and the outlook for global LNG supplies. The conference is renowned for the quality of its speaker faculty, the seniority of its attendees and the scope of its discussions. James Watson, Eurogas Secretary General, will speak at this event on 12 May 2020 in the panel discussion “The prospects for hydrogen & bio methane to 2050 – reality check!” .