CLIMATE NEUTRAL EUROPE A study based on eight European countries 9 - PowerPoint PPT Presentation

THE VALUE OF GAS INFRASTRUCTURE IN A CLIMATE NEUTRAL EUROPE A study based on eight European countries 9 April 2019

Our study : An in-debt review of the future role of gas in eight European countries Main report 8 country studies frontier economics 2

Scope: This multi-country study analyses various renewable and low- carbon gases in various sectors across the entire energy supply chain Multiple countries and Various renewable and low- analysis of differences carbon gases Biomethane H 2 Green H2 CH 4 Synthetic CH4 H 2 Blue H2 There are studies on the This future value of gas out study Natural gas there… extends the … but most of these are Across the entire energy Various sectors existing supply chain limited to certain research countries, gases, sectors Generation/ and/or supply chain Households Industry Conversion stages. Transport Storage Transport Appliances frontier economics 3

The 3-fold challenge of decarbonisation : Supply, storage and transport of large amounts of (mostly renewable) energy 3 1 2 Challenge of REN supply Challenge of energy storage Challenge of energy transport Schematic annual profile of PV generation Final energy demand served by electricity from wind and solar (TWh/a) in EU28* > 6,000 310 Monthly average gas load in 8 countries analysed 2017 Vision 2050 Need for renewable energy generation will be substantial , Intermittent renewables and seasonal Effective energy transport and creating the challenge of finding heat demand require vast seasonal distribution is crucial when exploring appropriate and accepted generation energy storage more and more renewables locations within Europe frontier economics 4

The offers of gas infrastructure : Existing gas infrastructure is suited for a variety of REN & low-carbon gases, diversifying energy supply Gas infrastructure can accommodate a variety of Challenge of REN supply 1 renewable and low-carbon gases Electrolysis Final energy demand served by electricity from wind and solar (TWh/a) in EU28* CO 2 Synthetic methane Green hydrogen CCS Blue hydrogen Biomethane Natural gas Electricity Imports Biomass C CO 2 > 6,000 Process CO 2 310 2017 Vision 2050 Need for renewable energy generation will be substantial , creating the challenge of finding appropriate and accepted generation locations within Europe * This assumes a 40% reduction in final energy demand between 2017 and 2050, a constant amount of biomass and water frontier economics 5 potentials, and a full replacement of fossil- and nuclear-fuelled energy generation by wind and solar.

The offers of gas infrastructure : Gas is easily storable and already stored in bulk Gas storage volume is almost 1,000 times as large as Challenge of energy storage 2 electricity storage volume in analysed countries Energy storage volume in 8 analysed countries Schematic annual profile of PV generation Gas storage 550 TWh Monthly average gas load in 8 countries analysed Electricity storage Intermittent renewables and seasonal heat 0.6 TWh demand require vast seasonal energy storage Source: Frontier Economics based on Gas Infrastructure Europe and Geth et al. frontier economics 6

The offers of gas infrastructure : Transport capacities of gas infrastructure are enormous and exceed those of electricity by large Cross-border transport capacities for gas exceed Challenge of energy transport 3 those of electricity by large Cross-border transport capacities for gas and electricity to / between eight countries analysed Effective energy transport and distribution is crucial when exploring more and more renewables Source: Frontier Economics based on Entso-E and Entso-G frontier economics 7

Scenarios : We consider three scenarios to analyse the additional benefit of the continued use of gas networks All-Electric All-Electric plus Gas Storage Electricity and Gas Infrastructure Biogas Biogas Renewables Renewables Renewables PtG / GtP Gas storage PtG / GtP Gas storage Electricity networks Electricity networks Electricity networks Gas networks Liquids Liquids Liquids ? € Appliances Appliances Appliances To estimate delta in system cost between scenarios we applied ▪ Bottom-up approaches based on country-specific data (e.g. for costs of Not realistic & required electricity and gas or electricity distribution costs) ▪ prohibitivly expensive Top-down approaches based on detailed study on Germany for FNB, corrected by fundamental country differences (e.g. electricity transmission costs, end appliance costs in households and industry) frontier economics 8

Results : Use of gas grid can save € 30 to 49 billion per year in the eight analysed countries by 2050… Annual cost savings in 2050 in „Electricity and Gas Infrastructure“ scenario compared to „All - Electric plus Gas Storage“ scenario Maximum cost savings Minimum cost savings Maximum savings* 48.6 50 Minimum savings* 45 40 35 30 Billion EUR/a 25 20 13.5 13.3 15 29.5 9.2 10 5.5 4.6 11.7 3.2 5 7.6 0.8 4.1 3.5 2.5 0 -0.7 -0.7 -5 End applications End applications End applications Electricity Electricty network Gas network Electricity & gas TOTAL COST - Heat - Industry - Transport network - - Distribution generation/import SAVING Transmission … adding up to € 487 -802 bn cumulated cost savings ** until 2050 frontier economics * Interval of costs savings resulting from variation of assumptions on development of key input parameters (e.g. future cost of biomethane; gas import share). 9 ** Assuming linear development path, real values.

Results : Cost savings vary across countries due to differences in the role of gas today, demand paths, geographic resources and policy focuses * ▪ NL with highest gas ▪ DK with challenge of penetration today (93% transporting wind power from of households connected) west coast to load centres ▪ Likely to substitute Groningen ▪ Gas infrastructure can help (e.g. natural gas by blue and green based on large biomethane hydrogen (e.g. from dedicated potential & wind-gas), even if offshore production) gas penetration today limited ▪ BE with nuclear phase-out ▪ DE with nuclear phase-out and limited domestic and large REN shares already REN potentials will be net facing challenges e.g. re elec importer of electricity & gas transport from North to South ▪ Gas import facilitated by large ▪ Large gas infrastructure, both infrastructure (incl. largest H2 storage and transport ( North to network in Europe ) South ) helps to overcome this ▪ In CZ natural gas with ▪ FR already today important role for accommodating high e-heating decarbonisation given low penetration domestic REN potential and ▪ REN gas (mainly biomethane large coal share today ▪ CH with limited domestic non- and PtG) with important future ▪ Massive gas infrastructure , hydro REN potentials will be net role, particularly when nuclear importer of electricity & gas including transit, facilitates role power generation is reduced for REN and low-carbon gas ▪ Gas network covers all densely- populated areas , while electricity network expansion is costly due to Maximum cost savings (EUR/a/capita) geography Minimum cost savings (EUR/a/capita) frontier economics 10 * Sweden has been analysed qualitatively, but was not within the scope of the quantitative analysis.

Conclusion : Gas infrastructure holds the key for many challenges of Europe‘s energy transition … Transport Storage … capacity of gas helps avoiding … capacity to bridge seasonal Gas storage costly extension of power lines 550 TWh fluctuations makes gas an ideal and overcoming acceptance partner for intermittent REN issues energy Electricity storage 0.6 TWh Electrolysis Households Industry Flexible infrastructure End applicances C O 2 CCS Bio ma Synthetic methane ss Green hydrogen CO Blue hydrogen Renewable and low-carbon 2 Biomethane Electricity … for various renewable and C Imports O 2 Transport gases can play an essential role Pro ces s CO low-carbon gases 2 in all sectors Remote areas Global trade Link to global energy sources … can be supplied e.g. by small- enhances security of supply and ensures Europe’s scale (bio-)LNG competitiveness € 487 -802 bn Cost savings € … of scenario with gas networks compared to scenario without cumulated cost savings until 2050 gas networks frontier economics 11

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