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 renewables1Â is among trends that have cast doubt over the renowned 2011 forecast by the International Energy Agency (IEA) of a âGolden Age for Gasâ.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 âfrenemiesâ requires more co-operation between renewables and gas. Shared infrastructure is a good example
However, the IEAâs medium-term forecast of growth for gas is still positive compared to the other fossil fuels â oil and coal. Furthermore, the agencyâs 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.
Frenemies
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 hydrocarbonsâ longer term position. Estimates of renewablesâ 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 âfrenemiesâ, 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 SOXÂ and NOXÂ 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. Chinaâs 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 âfrenemiesâ 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 H2Â for injection into existing infrastructure. DNV GLâs managed joint industry project (JIP) HYREADY aims to develop technical guidelines for injecting H2Â 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 â 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.
80/20
As renewables become cheaper, gas is at a regulatory disadvantage. We still lack a global price on CO2Â 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 CO2Â 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 CO2Â 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 CO2Â 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 CO2Â is needed to accelerate investments in these technologies.
The North Sea can be the CO2Â 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 Initiativeâs $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
Editorâs Note
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.
ReferencesÂ
- âRenewable energy: medium-term market reportâ, IEA, October 2016
- âWorld energy outlook 2011: are we entering a golden age of gas?â, IEA, June 2011
- âGas: medium-term market reportâ, IEA, June 2016
- âWorld Energy Outlook 2016â, IEA, November 2016
- ‘Carbon capture, utilization and storage (CCUS): enabling enhanced performance with carbon management technologies’, dnvgl.com
- âIntroducing OGCI Climate Investmentsâ, Oil and Gas Climate Initiative, November 2016.
José DeSouza says
Just wait till battery prices start coming down owing to increased mass production. But there’s more to it: the convergence of solar, batteries and electric mobility (and autonomy) just around the corner. https://www.youtube.com/watch?v=M27KECEL5Zo
FF are likely to become far less important (a.k.a. stranded assets) in the not so distant future (~2030). As to CCS, I’m still skeptical whether it works. Anyway, why bother if one can avoid emitting CO2 altogether?
S. Herb says
It would be interesting to have some more information on “the North Sea as a CO2 storage hub for Europe.” Costs, capacity, uncertainties, politics. Isn’t there a recent project in Rotterdam which has been put on halt?
Bob Wallace says
Natural gas is likely to be the last fossil fuel standing. Coal is dying. Petroleum should hit its era of declining demand in the next three to five years and then suffer a rapid drop.
Natural gas will hang is as a fill-in for wind and solar but is already being replaced by storage. Making more demand dispatchable will further eat into NG’s market share.
“Instead of discussing a 100% renewables-powered world, the industry should think 70/30 or even 80/20 energy mix long term.”
Way too optimistic a future for NG, IMO. Try something under 95/5 for a RE/NG mix. Don’t forget, it’s likely to be cheaper to use biogas than NG with CCS. And we’ll probably put a price on carbon well before 2050 unless we invent an affordable way to pull carbon back out of the atmosphere and re-sequester it.
Tilleul says
The first fuel to get out during an energy transition is the imported one.
Natural gas is the most unpractical fossil fuel to move around. As petroleum will stop being used in car we will be able to use it back for electricity… Having a diesel genset for security reason is a requirement for a lot of activities for safety reason or for reliability issues so we can just use them and spare the double spending.
Bob Wallace says
Highly unlikely we would start building diesel generators for the grid. Getting more and more unlikely the planet will build many more fossil fuel plants of any kind.
Between the economics of renewables and the growing global desire to combat climate change there’s going to be less and less FF use. And the rate of abandonment should accelerate.
Tilleul says
Then you have no clue of the world behind the meter…Hospitals, fire stations, police stations, universities, labs, industries, office towers, datacenters, telecom towers… There a huge amount of human activities who needs power to be avalaible with a higher reliablity that pole & wires can provide. And guess what ? They do that with a diesel tank because that’s the cheapest option for something which run only marginaly. So it will always be there and they have no fixed cost…
So it’s not that we will build diesel generator : they are already there. Then how a natural gas powerplant which needs to pay for its CAPEX and high fixed OPEX (gas grid) can beat an aggregator whose only expense is an IT interface and who has no fixed costs… (you can even do that at negative costs as emergency genset needs to be tested regularly).
So I vote for oil as the last fossil fuel to stand, coal as the second and natural gas as the first one to leave (which is coherent with what’s happening in Germany).
Bob Wallace says
Please read what I wrote – “Highly unlikely we would start building diesel generators for the grid.”
I was not addressing emergency backup generators.
Natural gas is on the wane in Germany because Germany has to import NG from Russia and Russia uses gas to jerk other countries around. NG is being abandoned for national security and political reasons, not for best energy practice reasons.
In the US coal peaked at a 54% market share but is now down to 30% and continuing to fall. Coal use is falling around the world. Global coal use was down 1.7% in 2016 with almost no countries showing any significant increase in coal use.
Only India and Indonesia used appreciably more coal in 2016 than 2015 and India is working hard to reduce and eventually eliminate coal use.
Tilleul says
Well, emergency generators are precisely my point so can we continue ? They are generators and they are connected to the grid and they are now getting used to stabilize the transportation grid through aggregators and soon for distribution grid through active DSOs. Best energy practice is to use oil for every of our needs because that’s an easy to use, easy to transport, easy to clean, easy to transport fuel… The only reason the world stop to use oil was not because of the superiority of coal or natural gas but because of lack of supply in oil.
Natural gas was the last resort fuel : it’s not a fuel you can trust if you want reliable energy because every part of the supply chain is unreliable…
Fossil fuels, specially natural gas, have very large fixed infrastructure cost, it. Oil can be used for every needs : heat, transportation, electricity so it will be the logical conclusion to see it killing coal and natural gas in a world which will see fossil fuel use decrease to almost zero very quickly…
Bob Wallace says
Emergency generators at hospitals and other buildings are not connected to the grid. They supply power to that specific building when the grid is down.
In the US petroleum use for grid generation has fallen 72% over the last decade. Petroleum now supplies only 0.3% of all US electricity.
That will disappear as more wind/solar replaces NG and the displaced NG generation replaces the few remaining diesel generators.
Oil use for heating in the US has greatly fallen. It’s been replaced by natural gas and very efficient heat pumps.
We are short years away from affordable long range EVs. EVs that will cost less than same-feature ICEVs. Lower purchase price + much lower operating prices should quickly kill the gasmobile and crater oil demand.
Short years = probably less than five.
Helmut Frik says
This is wrong. because they need the grid connection also for the testruns, in which they export their maximum output to the grid. Otherwise a expensive Resistor battery would have to be installed, and the reisky switch off grid and on grid would have to be performed.
OK, 40-50 years ago it was done like this without grid connection in some cases. Today the emergency generator synchronise with the grid automatically, and participate in frequency reulation etc, because they have to do this in island operation, too.
Petroleum use for grid generation is usually not diesel generator, but oil fired generators, they are located in germany next to big refinerys and were run by burning wastes of the refinery here. They also represent just a tiny fraction, but are cheap to operate, also cheap to keep them ins tandby, and can ramp relatively fast. But they have nothing to do with backup diesel generation.
Bob Wallace says
Petroleum plays a tiny role in the US.
“Today the emergency generator synchronise with the grid automatically, and participate in frequency reulation etc, because they have to do this in island operation, too.”
Yes, there has to be grid synchronization as the grid comes back up, but when the grid is down the hospital’s emergency generator is powering only the hospital. It is not providing power for other buildings.
That’s what I meant when I said that individual business backup generators are not connected to the grid. I meant ‘not grid electricity suppliers’. I just did not say it well.
I have no doubt that we will keep diesel generators as deep backup for a number of years.
Then, as we free up more and more natural gas generators, we will sell those diesel generators off for scrap metal.
Tilleul says
Today is not tomorow, before the oil crisis oil played a huge role in electricity and there was no natural gas because gas was too unpractical… If you stop using oil for transportation thanks to electric car and don’t need so much fossil fuel for electricity thanks to renewables, we will go back to pre-oil crisis fossil fuel situation…
It does not matter than a diesel generator be connected to the grid to offset a peak load : France was managing its nuclear fleet during a long time by giving a special tarif to industries who would disconnect to the grid during the peak days.
However islanding of diesel genset is just a choice of the DSO because they need to be sure there are no hazard for people working on the lines when there are no active metering on the distribution grid and you can’t be sure everything is correctly disconnected. As we are deploying smartgrids we will be able to use them more actively.
Nigel West says
Diesel engines run fine on liquid or gaseous fuels so no need to scrap them. But essential services back-up generators are best fuelled by on site stored liquid fuels for security reasons. I have never come across back-up emergency generators powered by natural gas. Nuclear power stations standby generators would not use natural gas.
The one point in favour of using natural gas over diesel fuel in an engine is the emissions burning natural gas are much cleaner.
Helmut Frik says
when the grid is down the hospital etc. switches off the connection to the grid and supervises it. But backup generation for the grid starts before the grid is down.
Due to the behavior of a island grid, the capacity of the diesel engine must by far (multiple times) exceed the average consumption in the island grid, because peaks can be high in this small area (no statistical smoothing) and load jumps due to bigger units switching on require a significant bigger engine than the pure load in W during peration would require.
So to support the grid the diesel can export many times the average consumption of the hospital etc for which is originally built, and support the grid by doing so. NEXT is combining such systems and sells them for grid service purposes already, but many more such generators could be utilised in the future. they just need the information when to switch on or off. everything else is already there.
Helmut Frik says
Diesel Gensets are built today as emergency backup.Usually grid conneced. Germany today has about 20GW of such diesel generation which does not show up in any ststistic, but can be contracted to provide backup for the grid as well. Key aspect of these gensets is that there are built never to be used in the best case, but to be there in the worst case.
Fuel consumption of such systems, used for real backup so one time in x od xx or xxx years, is negible. But they are good for the peace of mind, and in usually alse economical reasonable, avoiding the high costs of a blackout in case something goes wrong – locally or on grid scale.
Bob Wallace says
Something new is emerging in the energy world – dispatchable solar.
Builders of large solar farms are starting to add battery storage to their systems in order to sell some of their product into the more profitable hours between sundown and midnight. There is enough solar online in some markets to start lowering the selling price midday.
Even the companies not now adding storage are designing their new facilities so that storage can be quickly and easily added when battery prices drop a bit more.
This is going to be a disaster for coal and nuclear plants who depend on making some money during higher demand/lower solar-wind hours. And it’s going to cut NG use.
The more battery storage added the larger the battery market grows and the faster prices fall.