Natural gas for heating by 2030 - Are we missing opportunities for clean energy transition?

ARTICLE

Wind Renewal and Heinrich Böll Stiftung Greece have started a constructive debate with researchers, representatives of business units, social and environmental bodies as well as experts about “Green Deal” and its significance for Greece, particularly in four fields:

  • Climate and energy
  • Agrifood
  • Residences, cities and transportations
  • Green finance

and in four horizontal policies:

  • Social cohesion, social policy, social pillar
  • Education, youth, employment
  • Gender dimension, social inequalities and discriminations
  • Social business, social and solidarity-based economy

The aim is to develop, through systematic consultation, a proposal for a Green Deal that will leave no one behind and will contribute to the creation of a new production and consumption model. In this context, we have started publishing a series of articles on these topics.

oikonomou natural gas

The 16th article, by Vlasiοs Oikonomou, Director of the Institute for European Energy and Climate Policy, focuses on the issue of clean energy transition and the changes that take place, emphasising on the use of natural ( fossil) gas, which must be treated as a fuel that is nearing the end of its use.

 

On 21 April 2021, European Commission presented the taxonomy of sustainable technologies that will be able to receive funding from European funds and be considered as contributing to the energy transition and the European Green Deal. After a lot of pressure, natural gas has been put off the list along with nuclear energy. It will be reviewed at the end of the year by the Member States and everything indicates that it is no longer in line with the energy targets.

Europe has also laid the foundations of the first Climate Law by increasing the greenhouse gas target that requires over-multiple green investments (for Greece alone, more than 10 GW of new RES by 2030 are required, combined with the investment in energy saving target), which makes the sustainability of natural gas as fuel impossible...

Moreover, the very same week, Greece stated that the country cannot become a field of fossil fuel extraction (after the withdrawn of several consortia), which marks yet another development that does not provide security of further natural gas supply. So, given the clean energy transition we have targeted as a country and Europe as a whole, one reasonably wonders how natural gas, which belongs to fossil fuels, will contribute to these goals and how it will help society locally and regionally.

Here are some questions that can help us in the puzzle...

Is the project for new pipelines supported by European Funding? These investments will no longer receive European funding in the period 2021-2030, due to the fact that it is not considered as a transition fuel. In addition, the “Renovation Wave” and Europe’s plans for buildings that will reduce by 60% the greenhouse gas emissions by 2030 (compared to 2015), through building upgrades and the replacement of their heating system with electric heat pumps, do not leave much room for gas after this period. This means that these investments risk becoming stranded assets - and, reasonably, the question that raises is why not invest directly in demand regulation through energy efficiency (the Commissioner for Energy has boldly stated that energy upgrade will be the new norm) and cleaner forms of energy. By all appearances, today, natural gas is what lignite was 10 years ago… It is no coincidence that all these projects were excluded from the Recovery Fund… The phrase of the President of European Investment Bank is now well-known: “Gas is over”...

Can natural gas be sustainable and cheap for the domestic and commercial consumer? The viability of such investments and the benefit to the consumer are quite questionable now because the price of gas is starting to become quite volatile now (One only has to look the increase in prices due to low temperatures in Europe these days), while at the moment, the large increase in its cost due to the price of CO2 in the European Union has not been calculated as it tends to rise up to 45 E/t and further up to 100-150 E/t (so it will also increase the price of fossil gas).

In addition, the cost increase will be very high after the introduction of building sector in the Emission Trading Scheme (as officially stated by the Community Commissioner and to be decided this summer by the Commission) where each natural gas heating unit will be subject to the increased price of CO2.

So, it is no coincidence that European Consumers Union also sent a memorandum to European Commission requesting the removal of fossil fuels from heating and cooling (following the European goal of complete decarbonisation of heating and cooling systems of buildings).

An increase in the price of fuel in heating will not lead to a reduction in demand (due to high inelasticity of demand), while change to a new cleaner technology (when the value of gas has not been depreciated) will not be easy (as cost of new technology installation will also be required).

In conclusion, one cannot guarantee that natural gas will be a cheap fuel for consumers in the coming period (given the reduction in the prices of alternative fuels such as photovoltaics on roofs in combination with heat pumps). It is also useful for consumers to know that the experience of other European countries (e.g. the Netherlands phasing out natural gas) shows that, after its completion, each household has to pay between 30-40,000 euros to change fuel…

Can natural gas be more efficient for the domestic and commercial sector? The issue of 40% cost savings mentioned is quite debatable and it may have made sense some years ago. We must not forget that the efficiency of natural gas in the domestic/commercial sector (with the newest boilers being 98.5% efficient, much lower now than the heat pumps –with over 300% efficiency). The cost of fuel is dependent of course, so, if the pump is indeed combined with RES, then it is definitely cheaper (respectively the life time of a boiler is 8-12 years while that of the pump is 15-25 years). In addition, the trend in European legislation is to impose a) minimum efficiency standards on heating equipment which will phase out the new gas boilers by 2030 (as has already been done in Denmark and Norway), and b) minimum energy standards of existing buildings, which will promote energy upgrades of buildings and changes to heating systems by setting schedules, according to which the buildings will have to comply with energy and climate criteria (as was done in Scotland and the Netherlands). 

The first assessments based on the life cycle of a gas boiler indicate that it could be much cheaper and more efficient to convert the system to pumps right from the beginning (with or without RES). A key question, then, is whether it would be more useful to request a programme from both the current and the new NSRF (or even the Recovery Fund) for heat pumps in all buildings and increase the rate of energy efficiency upgrade (>1% so that to reach the Renovation Wave targets).

The European Commission, in its guidelines for public funding, advocates higher financial support for energy upgrades, as it is the only substantial and structural solution to tackle energy poverty (which is particularly widespread in our country). 

Are there any prospects for hydrogen in the future? This investment, if made, should be aimed at hydrogen use in the future without the need for modifications to the existing network (so without digging again and creating new costs…) and should be related exclusively to transport. In domestic and commercial sectors, hydrogen is very expensive ( https://energypress.gr/news/ydrogono-gia-thermansi-ktirion-stin-ellada-ehei-noima) and with very low efficiency (as for example, the hydrogen domestic boiler has an efficiency of 47-59%, when the heat pump working with electricity from RES has a corresponding efficiency of 270%!). Respectively, the annual cost of heating with a hydrogen boiler is 1200-3700 Euros when with a RES heat pump is only 600 Euros.

Can natural gas bring new job opportunities? Recent European Commission studies show that investing in fossil fuels offers far fewer jobs (because they have a small turnover after construction –only maintenance remains) compared to the most important part of the building, its renovations and energy efficiency.

For every million invested in the building energy renovation sector and in energy efficiency, 18 long-term and local job opportunities are created (that will remain local) while at the same time only 5 in fossil fuel industry (see also here https://ecopress.gr/peloponnisos-ape-kai-energeiaki…/). Without interventions in buildings and energy demand regulation, it makes absolutely no sense to carry out grid extensions (which is also contrary to the Energy Efficiency First principle).

Will the municipalities starting to use the Natural Gas not win? Municipalities that have formulated or are formulating their Sustainable Energy and Climate Action Plan (SECAP) setting goals for the new period, should realise that mass use of a fossil fuel will increase their climate footprint, thus making it more difficult to achieve their targets and forcing them to take much more action. In addition, as European funding bodies have decided to avoid funding investments in fossil fuels, this means that municipalities will not have equal opportunities for funding from energy and climate projects (compared to others using cleaner technologies) and this will create resource issues in the near future...

Based on the above, it may be useful to have a constructive dialogue with stakeholders of local communities to discuss these issues. The real energy transition can be the true starting point of the local economy, without relying on imported fuels. Let us not forget the well-known saying of the International Energy Agency “energy efficiency is the first fuel”.

Could it be possible to make a serious discussion about whether decisions made 10 years ago make sense today and present all the facts about the viability of such investments for consultation (by presenting the needs of households and businesses, their energy consumption, etc.) and find the best solutions?