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Germany wrestles with gas

Germany’s first climate law does not include fossil gas, but behind the scenes discussions about the role of gas in the country’s energy mix, particularly hydrogen gas, is intensifying

The energy transmission debate in Germany is turning to whether its massive shift to reliance on renewables can be achieved without gas as a supplement and whether that gas can partially or wholly be zero-carbon hydrogen. Continued use of natural gas would likely leave Germany dependent on imports from Russia

INCONVENIENT TRUTH
Gas from fossil fuels looks set to play an important role in Germany’s energy mix beyond 2030 even though it is not among the policy proposals underpinning the country’s first climate law presented in October 2019

PROPOSAL
The Gas 2030 Dialogue, a forum including business and decision makers, has concluded natural gas will play an important role in the energy system and in industry beyond 2030. Longer term, hydrogen gas derived using renewables electricity is being discussed, but is not viable commercially without technology breakthroughs and significant investment

KEY QUOTE
Even if we assume maximum energy efficiency and use green electricity directly whenever possible, without converting relevant quantities into hydrogen, we will not be able to cover the green energy demand of all sectors of our economy”_

Germany’s first climate law features a series of measures for reaching the country’s 2030 emissions reduction targets. The raft of policy proposals presented by the government on October 9, 2019 ranges from an emissions trading plan for the transport and building sectors to a target of one million charging points for electric vehicles in 2030. What is not included is a policy proposal for natural gas. Yet this does not mean gas will no longer play a role in the country’s energy mix. On the contrary. Gas may have been removed from the major climate debate and hidden safely out of the public eye, but it is being subjected to ever intense scrutiny. On the same day the climate law was presented, Germany’s economic affairs minister Peter Altmaier presented the first (“initial”) outcome of the Gas 2030 Dialogue — a stakeholder dialogue process” started in December 2018 by the ministry. Under the umbrella of Gas 2030, over 100 companies, business associations, NGOs, researchers and political representatives, coordinated by DENA, the German energy agency, have been discussing the future of gas in Germany. DENA was established by the ministry of economics and technology in 2000 to implement Germany’s Climate Protection Programme. The forum’s conclusion is that: Natural gas will play an important role in the energy system and in industry beyond 2030.”

Reassessing gas

For market watchers the increased attention paid to gas does not come as a surprise. Germany is reassessing the role of natural gas,” says Ralf Dickel, senior visiting research fellow at the Oxford Institute for Energy Studies (OIES), previously of the World Bank, the International Energy Agency and the Energy Charter Secretariat. The government has come to realise an all-electric all-renewable future will not work,” he claims. Renewable energy is mainly confined to the electricity sector and an all-electric world will not come in time for a net zero system in 2050.” Germany is returning to gas,” affirms Christian Egenhofer, Head of the Energy and Climate Programme at the Centre for European Policy Studies (CEPS), an influential think tank in Brussels. Germany actually never had a real policy on gas. But it is logical that it should be turning to gas. You push nuclear energy out, you push coal out, but then when you get to very high levels of renewable energy, you realise you need flexibility.” Frank Umbach, independent consultant and research director of the European Centre for Energy and Resource Security, King‘s College, London, agrees. Gas is returning,” he says. This has to do with the problems of the Energiewende. We are the only country in the world phasing out coal and nuclear at the same time. With huge public pressure on the government to bring the date of the coal phase-out forward, we will have no choice but to rely on gas as backup.” According to Umbach: The statistics on renewable energy may look impressive, but they are misleading. Especially if you look beyond the power sector, at heating and industry, the contribution of renewables to primary energy demand is disappointing. Gas is needed more than we thought.” In 2018, renewables, including biomass, contributed to meeting 14% of total German energy demand.

Green hydrogen

Gas can only be part of the energy mix under the goals of Germany’s climate policy if its eventually decarbonised or replaced by zero-carbon alternatives. Altmaier, in the foreword to the Gas 2030 report, writes: In the long term, with ambitious climate targets, gaseous energy carriers will remain a key element in the energy transition”. But, he adds, the gas Germany will use must be CO2-free or CO2-neutral”. The question is how this can be done. For Altmaier, the answer is clear: Germany must become the number one in hydrogen technology in the world.” The Gas 2030 forum sees a role for biogas and biomethane, but only in a very limited capacity and its future potential is yet to be defined. That leaves only hydrogen. It is no coincidence the German government has promised to come up with a national hydrogen strategy before the end of the year. But hydrogen, if it is to be zero-carbon, throws up another dilemma: it can be based on renewables, produced through electrolysis (the green” variant), or it can be based on fossil gas, produced through steam methane reforming, with the CO2 removed and stored underground (the blue” variant). For most German climate activists blue hydrogen” is not an option. Greenpeace Energy – a renewable energy cooperative, set up by, but independent from, Greenpeace in Germany – released a set of reports in September 2019 showing how Germany can transition to a zero-carbon energy system by 2040 fully based on renewable electricity and green hydrogen. One finding from the reports, authored by researchers from the think tank Wuppertal Institut and consultancy Energy Brainpool, is that the future German energy system will actually need more gas in the form of green hydrogen (1089 terrawatt hours) than green electricity (959 TWh). We have come to the conclusion that electrification alone will not deliver all the goals,” says Michael Friedrich from Greenpeace Energy. Even if we assume maximum energy efficiency and use green electricity directly whenever possible, without converting relevant quantities into hydrogen, we will not be able to cover the green energy demand of all sectors of our economy.” The hydrogen is needed in particular to decarbonise areas such as heavy transport and industry for which the researchers say electrification is not feasible.

Daunting

Greenpeace, the government and the gas industry all suggest gas is indispensable in a future energy system, but Greenpeace stipulates green hydrogen, with no role for natural gas. The requirements for a massive green hydrogen effort look daunting, however. The Greenpeace reports assume that 115 gigawatts (GW) of electrolysers will have to be built over the next 20 years. That is a lot given there are currently only a couple of dozen pilot projects of a few megawatts. The Greenpeace scenario further assumes huge energy savings (the number of cars is projected to go down from 47 million in 2018 to 21 million in 2035) and a substantial further expansion of solar and wind power at much higher growth rates than Germany has so far been able to consistently achieve. Even at 115 GW, the domestic production of green hydrogen will only cover a quarter of demand — three-quarters will have to be imported. Since there is virtually no production of green hydrogen in the world, there is also no international trade taking place. This would have to be built up from scratch. Friedrich is optimistic it can be done. There are potentially huge quantities of surplus renewable energy that can be used to make hydrogen,” he says. Both in Germany and abroad.” But not everyone shares this optimism. It is difficult to envision enough solar and wind power being generated to produce green hydrogen on the scale needed,” says Egenhofer. In Germany everyone assumes that there will be enough green electricity available, but my analysis shows there won’t be.” Egenhofer and two of his colleagues at CEPS recentlyreviewed 23 studies which look at the evolution of the EU gas market up to 2030 and 2050, concluding that if Germany wants to go the gas route, there is no way around blue hydrogen. One thing is evident from these studies,” he says. None of them saw a transition to a hydrogen economy, unless you use blue hydrogen. But this reality is ignored in Germany.” Dickel came to the same conclusion last year. In a paper he wrote for Oxford Institute for Energy Studies, published in April 2018, he wrote: Instead of natural gas being a bridge fuel, decarbonised natural gas, mainly in the form of [blue] hydrogen, must become part of the carbon-free energy world.”
German climate plan: scattered references to gas
Scattered references to gas appear in the climate action plan presented by the German government in October 2019, but the document contains no dedicated section on gas. The type of gas referred to is mainly unspecified (hydrogen, biogas or fossil gas). Gas is particularly referred to in connection with the replacement of old oil based heating systems by modern gas boilers (and other alternatives). Furthermore the government favours the substitution of coal power plants by gas-fired plants and renewable energy; and it sees a role for compressed natural gas (CNG) and liquid natural gas (LNG) in transport in addition to electric and hydrogen cars. None of these measures is described in any detail.__The plan also says it sees a central role for green hydrogen”. It does not make any mention of blue” hydrogen, based on natural gas in combination with CCS, but it does include a proposal for a CCS and CCU (carbon capture and utilisation) R&D programme in the energy-intensive industrial sector. It states: A large majority of studies and scenarios concludes that CCS-technology is indispensable to achieve climate neutrality in 2050.”

Optimistic

A choice for blue hydrogen would have considerable implications. It would mean that natural gas (fossil gas) would stay in the energy mix much longer than is anticipated at the moment. And it would imply that Germany would have to start getting serious about carbon capture and storage (CCS). Friedrich of Greenpeace Energy rejects this possibility. We don’t regard CCS as a safe or efficient solution. We see it as a way in which the gas industry tries to avoid the real consequences of the energy transition. If we want to avoid the dangerous — and expensive — effects of climate change, blue hydrogen is no solution. We need a phase-out of all fossil fuels by 2040 and a synchronised massive roll-out of renewables as a production basis for green gases.” Egenhofer and Dickel are more positive about the chances of CCS becoming acceptable in Germany. The CCS discussion in Germany was very negative, but it is changing rapidly,” says Egenhofer. In informal settings everybody acknowledges we need it.” Dickel also believes the CCS discussion is opening up. I tend to be an optimist,” he says. The German public connected CO2 storage with the storage of nuclear waste, states Dickel. That misperception must be corrected. The industry has not done enough to communicate with people.” Matthias Deutsch, Senior Associate at Agora Energiewende, an influential Berlin-based think tank and policy institute dedicated to supporting the energy transition, offers some middle ground. It has published two reports this year on policy priorities for the energy transition, one focused on Europe and one on German climate policy, and concludes a certain amount of blue hydrogen is acceptable. For Germany, we recommend a mandatory quota for hydrogen of up to 10% of gas supply by 2030, which can be filled both by blue and green hydrogen, with the latter accounting for at least 50%,” says Deutsch. Agora’s quota proposal would imply a maximum of 45 TWh of blue hydrogen in 2030, says Deutsch. This would require only around one-tenth of the fossil gas used in Germany today. We believe blue hydrogen could serve as a bridge to a green hydrogen system, but for us the focus must be on supporting green hydrogen,” he states. Germany and Europe will need to provide sufficient financial support to create a market for green hydrogen with stable demand. That will enable both domestic and foreign producers to invest in production and to reduce cost through technology learning.” Likewise Deutsch does not rule out CCS, but he does not see it as a major part of the solution. If a country like Norway will develop CCS, it will have to take long-term responsibility for ensuring the CO2 will stay in the ground. We have not seen that discussion yet. But it might be useful to develop some CCS capability, which we will need anyway, for example, for unavoidable process emissions from the cement sector.”

Sensitive

Nevertheless, if the highly ambitious plans for a green hydrogen economy are not realised or only much later, Germany may have no choice but to rely on blue hydrogen, or worse, unabated natural gas. It would offer a lifeline for natural gas,” says Egenhofer. This in turn raises questions around security of supply and German dependence on Russia. At this moment, Germany gets at least 40% of its gas from Russia. The exact percentage is apparently undocumented. In 2016, the official German statistics agency AG Energiebilanzen stopped providing figures on the gas import shares of producing countries, although it still supplies this information for oil and electricity. The official reason is that the significant amount of trade in gas makes it impossible to trace its origins accurately. Umbach for one finds this unconvincing. The real reason may well be that the figure is higher, which would be too politically sensitive,” he says. Dickel and Egenhofer are both convinced that even if Germany needs to buy more gas, security of supply will not become a problem. Germany imports gas from Norway, says Dickel, and even though the country does not yet have any LNG import terminals of its own, it can import LNG via other terminals in Europe. You have to look at this from a European perspective. Gas flows freely throughout the EU market and there is a lot of transit through Germany.” In addition, says Dickel, Germany has a lot of gas storage capacity. We can store enough gas to cover a major supply disruption for up to six months.” Umbach is not so sanguine. He believes several LNG terminals will be built in the coming years in Germany. More terminals will enable other suppliers, such as the US, to compete in the German gas market. But that will not necessarily solve the problem of dependence on Russia, according to Umbach. He notes that the Russians are also starting to supply LNG. President Putin has made a decision that it is in the Russian interest to provide LNG to Germany. So the Russian share in the German gas market could actually become even higher than it already is.”

TEXT Karel Beckman PHOTO Jason Leung


Ahead of publication of analysis by E3G on Germany’s gas plans, the think tank’s Lisa Fischer says: The forum does not see a future for unabated fossil gas” in the country’s energy system: Its conclusions to expand gas infrastructure, including imports, are inconsistent with this vision and will create liabilities for the consumer and the climate in the future,” says Fischer. Concerns over a continued build out of infrastructure — including liquid natural gas terminals — have been raised by civil society throughout 2019, but they have not been reflected by the forum.”