Gas could be the ideal partner for renewable energy generation in a future sustainable energy mix, writes Remi Eriksen, Group President and CEO of DNV GL, one of the largest risk management providers in the world with operations in more than 100 countries. However, for this to happen, the oil and gas industry must help policymakers and the public become aware of all the benefits of gas, notes Eriksen, not just the economic ones. Also, the industry should tackle methane emissions.
Faster-than-anticipated global growth in power from renewables1 is among trends that have cast doubt over the renowned 2011 forecast by the International Energy Agency (IEA) of a ‘Golden Age for Gas’.2
Gas demand has risen just 1% annually since 2012, according to the IEA, which now sees growth averaging only 1.5% per year from 2015 to 20213. One factor weighing against faster growth for gas over this period is a current surge in the supply of cheap US coal to Europe.
Being ‘frenemies’ requires more co-operation between renewables and gas. Shared infrastructure is a good example
However, the IEA’s medium-term forecast of growth for gas is still positive compared to the other fossil fuels – oil and coal. Furthermore, the agency’s long-term forecast foresees natural gas and renewables becoming the big winners in the race to meet energy demand growth until 2040.4
We are now in a Blue Age of Gas, referring to the vibrant colour of burning natural gas in stark contrast to that of competing fossil fuels, where natural gas is seen as part of the solution, rather than the problem.
Regulators and investors are pushing companies to reveal the impacts of business activities that contribute to global warming, while signatories to the COP21 Paris Climate Agreement must define national decarbonization targets and keep strengthening efforts to achieve these. The Paris Agreement, and the terms of its subsequent ratification, suggest an ever-more constrained path for hydrocarbons’ longer term position. Estimates of renewables’ current and future shares in the future energy mix are adjusted upward almost routinely.
No-one underestimates the headwinds against gas, but these developments could lead to positive prospects for gas. Gas and renewables will be ‘frenemies’, healthy competitors and allies. Renewables do and will compete with gas, just as cheap gas can impede the development of renewables in the short term. But they will lean towards friendship in the long term, because gas can also provide baseload electricity to grids, complementing variable renewable power.
Compared with other fossil fuels, gas is approaching 50% less carbon intensive; offers large reductions in SOX and NOX emissions and other pollutants such as black carbon, mercury and arsenic; and involves less power plant water usage. Moreover, abundant underutilized regasification capacity and pipeline infrastructure offer efficient routes to market.
Instead of discussing a 100% renewables-powered world, the industry should think 70/30 or even 80/20 energy mix long term
The switch from coal to gas has been a growing theme in the US alongside shale gas proliferation, and we have also seen progress in other key energy-intensive markets, including the UK. China’s moratorium on new coal-fired generation post-2020 is significant in this story. With policy support and industry action, there could be a large switch from coal to gas as a baseload fuel to complement rising renewables in the developing world. Additionally, the gas transportation infrastructure can take some renewable forms of gas such as biomethane and hydrogen (H2) produced using power from wind.
Being ‘frenemies’ requires more co-operation between renewables and gas. Shared infrastructure is a good example. Imagine a future power-to-gas value chain where surplus electricity from offshore wind is converted to H2 for injection into existing infrastructure. DNV GL’s managed joint industry project (JIP) HYREADY aims to develop technical guidelines for injecting H2 into gas transmission and distribution networks in order to ensure that such injection takes place safely and at acceptable cost.
Gas in transport
The proportion of gas currently used in the transport sector is very low – some 5% of the transportation fuel mix. Shipping moves about 80% of world trade by volume, and does so while emitting the least amount of greenhouse gases (GHGs) per transported unit. However, cleaner alternatives to bunker oil and diesel will have a significant positive impact.
For deep sea shipping, LNG and LPG are probably the only viable alternatives, aside from nuclear power, for significantly reducing emissions of GHGs; and nuclear propulsion is not being publicly accepted. European Union TEN-T projects include an initiative to provide a trans-European gas fuel infrastructure to boost uptake of LNG for ships.
While the advantages of gas are clear, leakages and intentional venting and flaring of methane in the value chain diminish claimed advantages of natural gas over coal
Legislation also has a role. For example, the International Maritime Organisation (IMO) has set January 2020 as implementation date for requiring all ships to use fuels with a maximum 0.5% sulphur content.
Hydrogen, biomethane and compressed natural gas are in early growth stages as transportation fuels. They are highly dependent on incentives and sensitive to the plunging cost of battery powered electric vehicles.
As renewables become cheaper, gas is at a regulatory disadvantage. We still lack a global price on CO2 emissions, which would improve the competitive position of gas versus coal.
That said, gas offers benefits that are unrelated to price. Instead of discussing a 100% renewables-powered world, the industry should think 70/30 or even 80/20 energy mix long term.
For the gas industry to ensure it will fuel its share of power generation, it must help policymakers and planners desire non-price benefits. It needs to talk about air quality and public health, not only about greenhouse gas emissions.
Gas can also star in distributed power generation. It can make a critical contribution to the UN Sustainable Development Goal of everyone having access to affordable clean energy.
Realizing claimed advantages
While the advantages of gas are clear, leakages and intentional venting and flaring of methane in the value chain diminish claimed advantages of natural gas over coal, while boosting actual advantages of renewables.
Methane is a potent greenhouse gas and should not be overlooked. Measuring actual emissions is difficult. Research differs over how much is currently released, but we do know that emissions are larger for unconventional gas than conventional gas on a comparable basis.
The North Sea can be the CO2 storage hub for Europe and source a new billion-dollar industry, with huge cost savings for combating climate change, representing a massive upside for gas in the future energy mix
The industry should come together to build and share knowledge on current emission challenges and potential abatement options. Sound maintenance programmes and reasonably easy-to-implement alternatives to venting can assist. New technologies, including use of sensors, connectivity, analytics and machine learning, will also help to control and reduce emissions.
Initially, no-cost options can be quickly deployed to reduce methane emissions. Implementing these technologies represents at least 35% of CO2 methane abatement opportunities, compared with 10% for coal. The industry should take advantage of this immediately.
Carbon capture and storage
Carbon capture and storage (CCS) should be another priority. Long-term scenarios limiting global warming to two degrees Celsius or less assume varying degrees of CCS for coal, industrial operations and gas. It cannot be assumed that coal or others will bear the brunt of CCS investment.
The industry can take heart from government-industry CCS value chain feasibility initiatives in Norway. By 2022, the Norwegian Continental Shelf could host a CO2 storage hub. Commercially, gas with CCS is technically feasible, but there are cost barriers as CCS technologies are still not widely deployed by industries. As it becomes more widespread, infrastructure sharing, economies of scale, and technical innovation will improve its economic feasibility. However, higher pricing of CO2 is needed to accelerate investments in these technologies.
The North Sea can be the CO2 storage hub for Europe and source a new billion-dollar industry, with huge cost savings for combating climate change, representing a massive upside for gas in the future energy mix. For this to happen, the industry must bring CCS to the whole gas value chain, in particular downstream.
Encouragingly, finding ways to reduce methane emissions and the cost of CCS technology are among the focus areas of the Oil and Gas Climate Initiative’s $1 billion investment fund being created by seven oil companies as a partnership to back development of technologies to cut carbon emissions and promote renewable energy.6
DNV GL is one of the largest risk management providers in the world, with operations in more than 100 countries. The company, with headquarters in Norway, provides classification, technical assurance, software and independent expert advisory services to the maritime, oil & gas and energy industries. It has five divisions, including an Oil & Gas division and an Energy division, which alone employs 2,500 energy experts.
- ‘Renewable energy: medium-term market report’, IEA, October 2016
- ‘World energy outlook 2011: are we entering a golden age of gas?’, IEA, June 2011
- ‘Gas: medium-term market report’, IEA, June 2016
- ‘World Energy Outlook 2016’, IEA, November 2016
- ‘Carbon capture, utilization and storage (CCUS): enabling enhanced performance with carbon management technologies’, dnvgl.com
- ‘Introducing OGCI Climate Investments’, Oil and Gas Climate Initiative, November 2016.