In early November a first vote is expected in the European Parliament on the Recovery & Resilience Facility’s €672.5bn budget. Esther Bollendorff at CAN Europe runs through the arguments against providing any funding for new gas infrastructure. She presents evidence to show that the EU is already oversupplied with gas import capacity, and all new fossil gas transmission projects have been rejected by the market since 2017. Solar and wind energy are now the cheapest source of newly installed electricity generation in many European countries, and that cost advantage is likely to increase and spread across borders. Although gas is seen as a better alternative to coal, a methane leakage rate of over 3% along the supply chain makes fossil gas emissions worse than coal. With governments now focussed on economic recovery and job creation, she quotes the IEA’s figures that say unabated gas power generates 3.5 jobs per million euros invested, much lower than the number for solar PV (8.5 to 12) or for energy efficiency (10 to 15). Add all this to climate policy pressure and new gas infrastructure may end up as stranded assets and a waste of money. Europe should instead put its limited resources into energy efficiency and renewables, concludes Bollendorff.
Funding fossil gas infrastructure with the EU’s finite financial resources is unlikely to be a fruitful investment for helping the European economy bounce back from the Covid-19 pandemic induced shock.
The 2021-27 EU budget and the economic recovery package, together some 1.82 trillion euros, risk missing their purpose if the national governments and members of the European Parliament agree in the coming weeks to allow for funding to fossil gas to continue as part of these funding instruments.
A first vote is expected early November in the European Parliament on the Recovery & Resilience Facility, a €672.5bn heavy envelope. Allocating public money to gas infrastructure would be detrimental to both boosting an economic recovery in the shorter term and building more resilient societies for the longer term.
Europe doesn’t need new fossil gas infrastructure
New fossil gas infrastructure is unnecessary in the European energy landscape. The existing gas infrastructure is resilient to a wide range of potential extreme disruptions, including year-long disruptions of Russian and Algerian supply, according to a recent Artelys report. This proves that the security of supply argument is an artificial issue.
Potential increases in fossil gas demand should not raise concerns either. This is not only because future gas demand must decrease for Europe to be in line with Paris Agreement Compatible scenarios, including the European Commission pathway to climate neutrality. Today, the EU is oversupplied with gas import capacity and, in spite of that, an additional 22% expansion of gas generation capacity is already under development. This infrastructure will more than satisfy future gas demand – which has been consistently overestimated in the last years – under any energy transition scenario, including under a rapid coal phase-out.
Investing in fossil gas infrastructure is risky
Investing in fossil gas infrastructure is also becoming riskier. The Covid-19 crisis has once more put the fossil fuels industry’s lack of resilience to shocks under the spotlight. In Europe, the case for investing in gas infrastructure has already cracked for years.
According to the EU Agency for the Cooperation of Energy Regulators (ACER), all fossil gas transmission projects have been rejected by the market since 2017, “indicating low market interest in new gas transmission capacity”. Such projects are not economically viable anymore and this is unlikely to change in the future, as other risks for the gas industry are growing from numerous sources, including regulatory pressure and the falling costs of renewables.
Investing in gas infrastructure will not make societies more resilient
Building a resilient economy without a commitment to a more equal society will prove to be devious. That is why a large number of European funds established under the EU budget (the Multiannual Financial Framework – MFF) and the recovery package (Next Generation EU) – including those established under the EU’s Cohesion Policy (ERDF), as well as the Recovery and Resilience Facility (RRF) and the Just Transition Fund (JTF) – are meant to push Europe forward while “leaving no-one behind”. Making gas infrastructure eligible under these funds will achieve the opposite: rather than closing the gap between countries and regions, it will widen it.
Fossil gas is not the cheapest option
A flawed argument for expanding fossil gas capacity is that gas is cheap and it can help communities at risk of energy poverty avoid the negative impacts of the energy transition. This remains highly debatable in the short-term – in many European countries solar and wind energy are now the cheapest source of newly installed electricity generation – and surely is not credible in the longer term.
Regions investing in gas today will have to go through another transition in a couple of decades, as Europe has committed to climate neutrality by 2050. This transition must happen well before the end of the new gas infrastructure operational lifetime and long before it will be paid off. A new pipeline or LNG terminal can operate for 80 years. Rather than resulting in rewarding returns for the economy, they will become stranded assets for communities and taxpayers to pay. This problem is intensified by the fact that in many EU countries gas consumers are forced to directly pay for the costs of maintaining and expanding the gas grid.
Fossil gas projects do not create more jobs
Gas infrastructure projects will not create more jobs either. They are not as job-intensive as the renewables sector, which the OECD says already employs more people per unit of investment and energy than fossil-fuel generation. According to the International Energy Agency’s (IEA) data, unabated gas power generates around 3.5 jobs per million euros invested, which pales if contrasted with job creation in solar PV (photovoltaics) – 8.5 to 12 – or energy efficiency – 10 to 15 per million.
Fossil gas does not contribute to reducing GHGs emissions
Building a more resilient society is also unrealistic without addressing climate change, our biggest long-term threat. Investing in more fossil gas is simply incompatible with Europe’s commitment to climate neutrality by 2050, and even less by 2040, which is what is needed to limit temperature increase to 1.5°C and be in line with the Paris Agreement.
Fossil gas is not a clean fuel. As a matter of fact, it is already responsible for more emissions in Europe than coal. Even if the newest and most efficient gas power plants were to be funded, they still would have higher emission intensity (300g CO2/kWh) than the EU power and heating sector average (between 199 and 282 g CO2/kWh).
The production, transport and use of fossil gas also cause leakages of methane, a greenhouse gas with a global warming potential more than 80 times higher than that of carbon dioxide over 20 years. Above a leakage rate of only 3% along the supply chain, the climate impact of fossil gas is worse than that of coal in power generation.
Competition from Heat Pumps
Fossil gas is also losing ground in terms of energy efficiency, especially in heating. Heat pumps are already at least three times more efficient than gas boilers. While the best condensing gas boilers attain 90-96% efficiency, heat pumps produce more heat energy than the input energy they receive, and typically have an efficiency rate of around 300%. Hydrogen, which can be produced from fossil gas, is also a much less efficient alternative, as it generates 4-6 times less heat than heat pumps per unit of electricity used.
Investing in fossil gas slows the transition
Using the new wave of EU funds to invest in more fossil gas infrastructure will slow down Europe’s path towards climate neutrality. As a consequence, it would increase the economic costs that Europe will incur in the future. The cost of inaction for the EU alone is estimated by the European Commission’s Joint Research Centre at €175bn a year (equaling 1.4% of GDP) for the 3°C world we are heading towards with current policies.
This is not in Europe’s interest. Europe should put its limited resources into energy efficiency and the energy source – renewables – that could truly fuel its recovery. It is policy makers’ responsibility to exclude fossil fuels, including gas, from the scope of the European funds and specifically from the Recovery&Resilience Facility to be voted on in November.
Esther Bollendorff is the EU Gas Policy Coordinator, Climate Action Network (CAN) Europe
Peter Poptchev says
A sizeable part of implementing the European Green Deal is challenging myths and establishing new energy and industrial thinking and approach. The article by Ms. Bolendorff should be regarded, and commended, in this context. Nine years ago the EU Energy Security Strategy was adopted. Para. 4.1. states that any major energy/gas infrastructure should first be consulted upon by the affected Member States. This has not happened with the well-known gas import infrastructure, part of the 22% intended increase referred to in the article. Presently, EGD-related arguments, including the decisions by the IEB and other financial institutions not to fund fossil gas E&P and infrastructure projects seem to play a stronger role than the EU Energy Security Strategy. Which does not mean that European public opinion should be left in the dark as to where the European Green Deal is going. The professional, public and political value of this article is in its substantiated challenging of established mind-sets in the European gas policy of the past 10 years.