Climate Policy Coal Infrastructure / Innovations 25 September, 2019 10:00 am   
Editorial staff

Future of gas is not only methane, but also hydrogen (INTERVIEW)

There is a big discussion in Germany right now: to what extent can we use existing infrastructure to transport and distribute hydrogen? Can Germany at least partially move its infrastructure from natural gas to hydrogen? Therefore, it will be interesting to see what the federal government writes in its announced national hydrogen strategy – says Matthias Deutsch from Agora Energiewende in an interview for Where is the discussion on the German coal exit at? What are the main players and positions?

Matthias Deutsch: Germany has taken quite some time to find common ground within the so-called “coal commission”. At the end of January of this year it has given its recommendations, with two key elements: financial and infrastructural support for regions in transition with expected job losses, and the coal phase-out. The governing coalition of Social-Democrats and Christian-Democrats want to implement those recommendations. The party base of the Social-Democrats is not sure if the coalition should last until the next regular parliamentary elections. They need to figure that out until the end of this year. 

Might they exit the coalition?

That is absolutely possible, but not decided yet. Social Democrats were once a big party. Now they are struggling with around 15 percent support. They are looking for a new team of leaders. Depending on which team gets elected, they might exit the coalition. 

Might they be against the coal exit?

No. There is no clarity about the pace of implementing the recommendations. Officially, Social Democrats support the content of those recommendations. The goal of the “coal commission” was to find common ground between all relevant actors, that is, coal industry, unions, non-governmental organisations and policy-makers. The most prominent opposition is the Green Party, which is more in favor of a faster decarbonisation than the agreed phase-out by 2038. The Fridays for Future initative demands an even more ambitious approach. The question is if any party could actually deliver a coal phaseout by 2030. With the Greens being relatively strong in current polls, they might well be a part of a next coalition, and then we would see if they can increase the speed of the coal phase-out process.

Is there any timeframe of agreement on this plan?

So far there are only those recommendations. Now politicians will decide how to implement them. If Social Democrats want to remain in the government, they possibly would support the implementation of the recommendations. If they leave, this would take more time, but then Greens might enter the governing coalition, and they might want to increase the speed of the energy transition.

There is also this idea of a green tax.

You probably mean a carbon dioxide (CO2) emissions tax. On 20th of September, the coalition is to make fundamental decisions on pricing carbon dioxide in the sectors not covered by the European Emissions Trading System ETS. There are two options on the table: On the one hand, introducing a CO2 tax supported by Social Democrats and Greens and, on the other hand, a separate carbon cap-and-trade scheme only for Germany, as favored by Christian Democrats and liberals. While the already existing EU-ETS creates a price signal in the power sector, there is no CO2 pricing for building heat, transport and agriculture yet. The CO2 tax option gives you a clear price but you cannot predict the resulting emission reduction. A carbon cap- and-trade system takes considerable time to implement, like two to three years at least. That is, it means two or three years lost in terms of climate mitigation, whereas a tax could be introduced from 1st of January 2020. Maybe we will see a hybrid system as a compromise – with a tax in the beginning and a carbon cap-and trade system after some years. 

The way to achieve the energy transition is gradual change with increasing usage of natural gas instead of nuclear and coal?

Let’s put it this way. We will need more dispatchable gas power plant capacity to balance the power system. But the biggest consumer of gas is building heating. The question is how fast we can renovate our building stock. Depending on the overall speed of renovation, we will see a decrease in general gas consumption. It is likely that for some district heat production, abandoning combined-heat-and-power coal plants will lead to a temporary increase in gas usage, because generating renewable heat may not be possible that fast. But what is the long run perspective after the gas bridge? The public discussion it moving towards “climate neutrality by 2050” at the European level, as indicated in the speech by Commission President-Elect Ursula von der Leyen. In this scenario, natural gas as it is right now is ok until 2030, but afterwards it needs to become green to stay in the system. That is why the German gas industry itself has claimed: “[Natural] gas can be green”. We need to start this process of greening. Of course, natural gas has the lowest emission density among all fossil fuels. But the federal government also wanted to start a discussion on the greening of gas. This year, it held a stakeholder dialogue, called “Gas 2030”, about what to do next. The dialogue will have its final conference on 9th of October. There are ideas on how to get gas greener with less carbon emissions. The dialogue was very welcomed by the gas industry because it gave a sign that gas will still be needed in the energy transition. One spin-off product of the “Gas 2030” process is that the German government will prepare a hydrogen strategy until the end of 2019. 

If you use gas only as a bridge fuel, why do you need Nord Stream 2 or LNG terminals planned to work for decades?

If you look at the entire supply of natural gas for Germany, we have still some very small production inside the country. It will be phased out until about 2030. We are also importing gas from the Netherlands. Recent earthquakes made them decide to stop extraction in Groningen until the end of 2022. Both production decreases in Germany and in the Netherlands increase the need for imports from elsewhere. The question is where to get it from. With respect to Nord Stream 2, Germany obviously pursues an approach which is not well-coordinated with its European neighbours – and that does not look like a good idea. The other side of the coin is that typically LNG is more expensive than gas from Russia. From the climate perspective, LNG tends to have higher fugitive upstream methane emissions than Russian pipeline gas. 

Coming back to hydrogen, the Polish government is also thinking about this.

Especially in light of the higher climate risk of fugitive methane emissions, it is really important to realize that the discussion on the future of gas is not only about methane, but also hydrogen. 

Where could this hydrogen come from?

The German discussion was dominated for at least two past years with an idea that we can make gas green by Power-to-Gas (P2G) technology, to produce “green hydrogen”. In the long run, this is certainly the most important part of discussion. However, what is relatively new for the German discussion, but better-known in, e.g., the United Kingdom and the Netherlands is “blue hydrogen”. That means climate-friendly hydrogen, coming from fossil natural gas and freed from CO2 through carbon capture and storage (CCS) technology. A prominent actor in this discussion is Norway. Norwegian companies are planning projects to make hydrogen of natural gas and store CO2 in CCS facilities under the North Sea. Green and blue hydrogen have two competing underlying technologies. In the long run, the renewable green option is more sustainable, but according to Norwegian cost estimates, the CCS option is cheaper. Our position would be that some mix of different kinds of hydrogen is possible. However, we need to find some European policy support for P2G to have the price curve of this technology decrease to bridge today’s cost gap between fossil gas and green gas. There are now three German business associations demanding a quota obligation for P2G – something that we as Agora Energiewende have also proposed for some time. With such a quota in place, a gas company is obliged to deliver let us say 10 percent of renewable gas by 2030. It is a similar obligation to a renewable target in power generation. Such an obligation is required to make gas greener. 

Do we need a European goal?

Europeans are waiting for the fourth natural gas package to come next year. Some Germans would like to see European support to bridge the price gap between P2G and fossil gas. It depends on the European Commission’s interpretation of the gas package. It might include mainly new gas market rules – or some dedicated support for P2G, as well. 

You cannot afford supporting everything. Could this initiative make financial support for conventional gas infrastructure like PCI and LNG decrease?

If there is policy support for P2G, everybody should benefit from the long-run decrease in technology cost. On the other hand, the need for new infrastructure depends on how much gas we need. Our goal should be to strive for sufficient energy efficiency improvements to reduce overall gas consumption so that the existing infrastructure is sufficient. The other key question is if our infrastructure is “hydrogen-ready”. That is a big discussion in Germany right now: to what extent can we use existing infrastructure to transport and distribute hydrogen? Can Germany at least partially move its infrastructure from natural gas to hydrogen? Therefore, it will be interesting to see what the federal government writes in its announced national hydrogen strategy.

With this hydrogen revolution in place, would Nord Stream 2 planned for 50 years become obsolete?

So far, the German discussion has been mainly about P2G from renewable electricity. But Germany will not be able to produce all the hydrogen it needs on its own. The more recent discussion now also includes the Norwegian idea of blue hydrogen. Moreover, Gazprom states it is feasible to have a mix of 70% hydrogen and 30% natural gas in modern gas pipelines of the “Nord Steam” type. If Norwegians offer climate-friendly gas solutions, we can expect that Russians will find something similar, too. So, it is good to move the discussion forward. In the long-run, gas will have to become climate-neutral so that Europe can achieve its climate targets for 2050. There is also room for other countries like Saudi Arabia or Morocco with high solar generation or Norway with high wind generation perfect for P2G. Some projects already started and there are candidate states like Morocco, Chile, South Africa. The required P2G plants are big chemical factories that need to be built in the first place. That will not happen overnight, but we need to start now to create a world in which decarbonized gas is free for exchange. 

Interview by Wojciech Jakóbik