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Tomorrow‘s role for gas ?

Tomorrow‘s role for gas ?. W A L T E R B O L T Z Former ACER Gas Working Group Chair, ACER BoR Vice Chair CERRE, Brussels , June 14, 2016. Agenda. Source: https://ec.europa.eu/energy/sites/ener/files/documents/trends_to_2050_update_2013.pdf. Economy Gas Market Realities

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Tomorrow‘s role for gas ?

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  1. Tomorrow‘sroleforgas ? W A L T E R B O L T Z Former ACER Gas Working Group Chair,ACER BoR Vice Chair CERRE, Brussels, June 14, 2016

  2. Agenda • Source: https://ec.europa.eu/energy/sites/ener/files/documents/trends_to_2050_update_2013.pdf CERRE, June 14, 2016, W. Boltz Economy Gas Market Realities Gas Ambitions Can the Gap be bridged?

  3. Economy – Driver of Gas Demand • Source: https://ec.europa.eu/energy/sites/ener/files/documents/trends_to_2050_update_2013.pdf CERRE, June 14, 2016, W. Boltz EU growthratesfor 2016 solid but on a lowlevel (1,6% - 1,8%) ECB stimulustocontinueandgrow in volume Global outlookcharacterizedbyuncertainties • Concernsabout China • Greekrecovery ? • Brexit Y/N • Refugeescreateseverepoliticalstrains Business & consumerconfidencegoingup (slightly)

  4. Gas Market RealitiesLong phaseofdecline -17% 2008/2015 CERRE, June 14, 2016, W. Boltz Source: ACER Market Monitoring Report http://www.acer.europa.eu/Official_documents/Acts_of_the_Agency/Publication/ACER_Market_Monitoring_Report_2015.pdf

  5. Declineof gas in heatandsteamgeneration CERRE, June 14, 2016, W. Boltz

  6. CION‘sdecarbonisationplanswill changetheenergy mix by2030/2050 • Source: https://ec.europa.eu/energy/sites/ener/files/documents/trends_to_2050_update_2013.pdf CERRE, June 14, 2016, W. Boltz Steam and heat demand continues to grow in the EU28 till 2020 and then stabilises. Main sources of demand are industry and households Fierce fight for market share between fuels – globally and in the EU Coalisdoingmuchbetterthananticipated Gas share likely to decline… LT carbonemissiontargetsrequire CO2 „free“ power productionandheating

  7. EU Policycallsfora decliningShare of Gas e.g. in electricitygeneration CERRE, June 14, 2016, W. Boltz Source: https://ec.europa.eu/energy/sites/ener/files/documents/trends_to_2050_update_2013.pdf

  8. Gas Market RealitiesCurrent Situation – a glimmerofhope ? • Source: https://ec.europa.eu/energy/sites/ener/files/documents/trends_to_2050_update_2013.pdf CERRE, June 14, 2016, W. Boltz Total demandshouldgrow 4% to 496 BCM in 2016 Strong increase in pipelineimports (RUS +16%, N +11%, ALG +40% ) in Q1&Q2 LNG imports -4 % Indigenousproductionfurther down (-10% in 2015) Power sectorlikelytodrive a small gas demandgrowth Europe isverywellsuppliedwith gas Prices shouldstayquitelow (11,5 – 12,5 Euro/MWh) Isthereanyupside potential for gas?

  9. Gas Ambitions • Source: https://ec.europa.eu/energy/sites/ener/files/documents/trends_to_2050_update_2013.pdf CERRE, June 14, 2016, W. Boltz To retain and possibly grow the market share of gas in the EU fuel mix To replace coal as the fuel of choice as backup for REN To be recognized as a flexible and attractive (at least mid term) alternative for stabilizing the electricity grid in times of high REN shares To support climate change actions by e.g. replacing oil in transport with gas

  10. Natural gas set for a revival ? ……in Spanish power sector: Sedigas Barcelona (Platts)--20 May 2016 1047 am EDT/1447 GMT Natural gas could increase its share of primary energy supply in Spain to up to 33% by 2030 given the flexibility of gas-fired power plants and abundant gas infrastructure, industry group Asociacion Espanola del Gas (Sedigas) said.With EU legislation urging a move to a reduced carbon scenario as well as moves by regional sector players in Spain to reduce their coal-fired output, Sedigas said Friday the future lay in a combination of renewables and back-up thermal technology.Sedigas, citing a study conducted in conjunction with consulting group KPMG, noted gas-fired plants can, in many cases, reach full output in less than an hour, while Spain's seven LNG terminals and three major import pipelines afforded a high level of security of supply.Between 5.5 GW and 10 GW of new-build combined cycle gas plants might be necessary if Spain is to conclude the move to a lower carbon future and meet renewable targets at the same time, the group said.(full article: http://www.platts.com/latest-news/natural-gas/barcelona/natural-gas-set-for-a-revival-in-spanish-power-21502307 ) CERRE, June 14, 2016, W. Boltz

  11. Energy mix in the EU overthe timeNet electricitygenerationby plant typeCCGT sharedeclinesfrom 17% in 2010 to 14%/12% in 2030 /50 CERRE, June 14, 2016, W. Boltz Source: https://ec.europa.eu/energy/sites/ener/files/documents/trends_to_2050_update_2013.pdf

  12. ChallengesarisingfromincreasedRENOpportunitiesfor Gas ? CERRE, June 14, 2016, W. Boltz REN expansion still rather expensive anddifficulttofinance in lowerincome EU memberstates A too quick „Energiewende“ will result in strandedinvestmentsandquite high surchargesforconsumersand in electricitypriceseverywhere in therangeof DK/D Only rather otimistic forecasts show that in spite of the rapid REN expansion beyond 2020, electricity prices could stabilize and even decrease. ( hope dies last!) The impact of high REN shares on total energy system costs is in any case that they become much more capital intensive over time.

  13. Opportunitiesfor Gas ? CERRE, June 14, 2016, W. Boltz Gas hasthe potential tomakethestructuralchanges in theenergytowards a moresustainableelectricitysectorlesscostlyandriskyandmorepredictableandmanagable Outside the gas industryand a fewstubbornsupportersof gas this potential futureroleof gas onlyfinds limited support so far E.g. the EU Roadmap 2050 seesno gas beingused in 2050

  14. ENTSO-G TYNDP 2017: „Gas beforecoalscenario“ in electricityproduction, April 2016 source: http://www.entsog.eu/public/uploads/files/publications/TYNDP/2016/TYNDP046_160511_TYNDP17_Scenarios_storylines.pdf Scenarios: co-existenceof REN & Gas ENTSO-G „Green Transition Scenario‘: April 2015: gas demandfor power generation will in-creasefrom 94 bcm (2015) to167-232 bcm in 2035. source:http://www.entsog.eu/public/uploads/files/publications/TYNDP/2016/TYNDP046_160511_TYNDP17_Scenarios_storylines.pdf CERRE, June 14, 2016, W. Boltz

  15. CERRE, June 14, 2016, W. Boltz

  16. EUROGAS „Environmental Scenario“ (Envt.): gas increaseto 230 bcmby 2035, assuming a rebalancingforthe power mix towardsmorerenewablesand gas (33%) , RES (44%) andcoaldecreaseto 6% ttp://www.eurogas.org/uploads/media/Eurogas_Brochure_Long-Term_Outlook_for_gas_to_2035.pdf pre-requisite: cost-efficientlow-carboninvestment EU policy… Scenarios: co-existenceof REN & Gas CERRE, June 14, 2016, W. Boltz

  17. EUROGAS „Environmental Scenario“ (Envt.): gas increaseto 230 bcmby 2035, assuming a rebalancingforthe power mix towardsmorerenewablesand gas (33%) , RES (44%) andcoaldecreaseto 6% ttp://www.eurogas.org/uploads/media/Eurogas_Brochure_Long-Term_Outlook_for_gas_to_2035.pdf pre-requisite: cost-efficientlow-carboninvestment EU policy… Scenarios: co-existenceof REN & Gas CERRE, June 14, 2016, W. Boltz

  18. Todays Panels CERRE, June 14, 2016, W. Boltz Gas hasthe potential tomakethestructuralchanges in theenergysectorlesscostlyandriskyandmorepredictableandmanagable Most gas experts will agreetothisstatement But gas so far lack a broadersupportamongstpolicymakers Today´spanelsshouldlookintothequestionwhatcanbedoneaboutthisbroadermisconception

  19. Panel 1: What is the role of Gas in today’s EU energy mix? Does it need to reinvent itself? CERRE, June 14, 2016, W. Boltz Questions: • Q1: Renewables will play a key role in helping the EU meet its energy needs beyond 2020. With a renewable target of 27% for 2030 (and 40%+ by 2050 ) how much gas will still be needed in the EU energy mix then ? • Q2: What measures are needed to replace coal by gas in the power generation sector? • Q3: When do youthinkthe EU will really not needany (substantial amountsof) gas in theenergy mix anymore ?

  20. Panel 1: What is the role of Gas in today’s EU energy mix? Does it need to reinvent itself? CERRE, June 14, 2016, W. Boltz • Q4:: In their ‘Green Transition’ scenario of the TYNDP ENTSOG projects a gas demand for power generation of 167-232 bcm in 2035 (95 in 2015/154 in 2010) What would need to change in the EU energy market for this to happen ? Source: CEPS Report, February 2016https://www.ceps.eu/system/files/GasDemandFinal.pdf

  21. Panel 2: What would reinvention look like for Gas? CERRE, June 14, 2016, W. Boltz Questions: • Q1: Howcould a longtermviewofthe EU energymarketlook like with a sizableshareofgas • Q2: Howcould gas attain a majorrole in transport? Andwhen? • Q3: Isthereanything (besides ECS) thatcouldincreasetheattractivenessof gas vs. coal? • Q4: Whyisthere so littlepolicysupportforthelongtermuseof gas?

  22. Walter BoltzFormer ACER Gas Working Group Chair,Former ACER  BoR Vice Chaircontact: walter@boltz.at CERRE, June 14, 2016, W. Boltz

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