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Made Here for EU: European Gas Technologies

European Climate Innovation and Clean Gas Technologies: At Eurogas we believe that in a changing  world, with the challenges of both a digital and an environmental transition, innovations are key to keeping Europe as a climate leader – as well as helping European industry to adapt, modernise, and stay ahead of the game.

There is an opportunity for Europe’s championship in the development and use of clean energy technologies. These technologies can provide skilled work, help us to decarbonise, and demonstrate how Europe remains a climate leader. In turn, the technologies can be exported, to support decarbonisation in every corner of the world.

Finding the barriers to decarbonisation in every single sector of our economy is now imperative. We must come together to achieve a carbon-neutral industry by 2050 – but we must also put solid measures in place to save European industries from tough global competition.

The Role of Lower-carbon Gases in the EU’s Transition to Climate Neutrality

By David Wells, Vice President Shell Energy Europe and Environmental Products

Shell welcomes the European Green Deal and supports the EU’s target to achieve climate neutrality by 2050. To contribute to this ambitious objective, the European gas industry will need to embark on a significant transformation and the gas market will need to be decarbonised over time.

In the run up to 2030, natural gas will play an important role as a substitute for coal and nuclear in dispatchable power generation, as well as a source of flexibility in electricity systems. In the medium term, gas can act as a partner for renewables in providing power. Longer term, decarbonised and renewable gas will continue to be essential in meeting energy demand that cannot be electrified. Shell believes that, together with large-scale electrification, lower-carbon gases will have an important role to play.

In order to meet the EU’s climate ambitions there must be change across all sectors. For the gas industry, reform is vital in residential heating, industry, power and gas in transport. Shell believes this will require:

  • A system that supports effective large-scale renovations of buildings for the successful decarbonisation of the residential heating sector;
  • The right regulatory framework for harder to decarbonise sectors such as energy-intensive industries and mobility to invest in breakthrough technologies. Green and blue hydrogen, biomethane, and carbon capture utilisation and storage play a central role in reducing emissions in these sectors;
  • Further coal-to-gas switching in Central and Eastern Europe for power generation; and
  • Fast and ambitious methane regulation involving measurement, reporting and verification (MRV) standards, rapid progress on leak detection and repair, and targets.

Clean hydrogen at the core of the transition to climate neutrality

Decarbonised and renewable gases, notably hydrogen, will have a key role to play by helping to decarbonise sectors where electrification is not currently an option such as freight, heavy road transport or industry. Shell Scenarios Sketch “A Climate-Neutral EU by 2050” shows that to achieve net-zero emissions in the EU energy system, hydrogen would need to rise from negligible levels today to at least 10% of the EU’s total final energy consumption by 2050.

Accelerating the deployment of clean hydrogen will require measures to kickstart markets in key sectors in tandem with incentives for investment in supply and infrastructure. Consideration could be given to demand-side mandates for the use of clean hydrogen in specific hard-to-abate sectors, particularly in the shorter-term.

Where is Shell investing to enable this transition?

Achieving this scale of hydrogen deployment will require significant investment. Shell has already made a start. Along with partners, Shell is building the world’s largest polymer electrolyte membrane (PEM) hydrogen electrolysis plant. Supported by the Fuel Cells and Hydrogen Joint Undertaking, the REFHYNE project will use renewable electricity to produce green hydrogen at Shell’s Rheinland refinery in Germany. And we are also active in blue hydrogen. Together with our partners, we continue to advance our project to provide CO2 from clean hydrogen production to the Port of Rotterdam Transportation Hub and Offshore Storage (PORTHOS).

The transition to a low-carbon gas market will require investments in other forms of decarbonised and renewable gases such as bio-LNG or biomethane. Our projects include a strategic partnership with Renewi and Nordsol in the Netherlands to jointly produce bio-LNG. This collaboration aims to contribute to the circular economy and completes the cycle of turning organic waste into a sustainable fuel for long-haul transport. Shell Energy Europe entered into an agreement to buy biomethane from Nature Energy in Denmark. The long-term agreement is the largest of its kind and demonstrates the important role that biomethane can play in Europe’s transition to a lower-carbon society.

Regulating methane as a matter of priority

The environmental benefits of gas depend on managing methane emissions. Any comprehensive effort to limit global warming must include strong, ambitious and urgent action to reduce emissions of this potent greenhouse gas across the full natural gas supply chain. The Commission’s new Methane Strategy is a positive step that Shell greatly welcomes.

The Commission’s proposal on MRV processes for energy-related methane emissions will help to understand supply chain emissions of all gas sold in the EU and will enable other policies that hinge on credible quantification of emissions. Beyond this, we strongly believe that a methane performance standard of 0.20% should be set for all gas sold in the EU market, including from imports, from 2025. This would be a strong next step to further advance the Methane Strategy.

Embed a sectoral approach to deliver climate neutrality

For the EU to achieve climate neutrality by 2050, every economic sector will need a pathway to net-zero. The pace and the policy mechanisms required will be different in each sector, but they will all need to get there. Earlier this month, the European Parliament voted to introduce sectoral pathways to net-zero in the draft European Climate Law. These will provide an important mechanism to accelerate and scale up the demand for clean energy, including decarbonised and renewable gases, in sync with supply and infrastructure. Our ability to transform as an industry, presents both a challenge and an exciting opportunity to stay relevant and make a significant contribution to the EU’s transition to climate neutrality.

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Disclaimer

On March 4, 2020, the EU Commission proposed the European Climate Law that would establish a legally binding target of net-zero greenhouse gas emissions by 2050. Shell strongly supports the proposed European Climate Law and its binding target of net-zero greenhouse gas emissions by 2050. We believe meeting this target will be extremely challenging but possible. This article contains an assessment of what we believe may be needed to decarbonise the energy system in order for the EU to meet the proposed target of net-zero greenhouse gas emissions by 2050. This overview is not intended to be proscriptive and there are other pathways for the EU to follow in reaching the target. It is important to note that the suggestions contained in this article are those to be taken by the EU, and not necessarily Shell. While Shell is supportive of the EU target of net-zero greenhouse gas emissions by 2050, our current business plan is not consistent with the proposed EU target. However, as announced on April 16, 2020, Shell aims to be a net-zero emissions energy business by 2050. Accordingly, we expect that over time, our business plan will change as society and our customers move toward meeting the goals of the Paris Agreement. We believe that the proposed European Climate Law is a significant step in this journey. The companies in which Royal Dutch Shell plc directly and indirectly own investments are separate legal entities. In this article “Shell”, “Shell Group” and “Royal Dutch Shell” are sometimes used for convenience where references are made to Royal Dutch Shell plc and its subsidiaries in general. Likewise, the words “we”, “us” and “our” are also used to refer to Royal Dutch Shell plc and its subsidiaries in general or to those who work for them. These terms are also used where no useful purpose is served by identifying the particular entity or entities. ‘‘Subsidiaries’’, “Shell subsidiaries” and “Shell companies” as used in this article refer to entities over which Royal Dutch Shell plc either directly or indirectly has control. Entities and unincorporated arrangements over which Shell has joint control are generally referred to as “joint ventures” and “joint operations”, respectively. Entities over which Shell has significant influence but neither control nor joint control are referred to as “associates”. The term “Shell interest” is used for convenience to indicate the direct and/or indirect ownership interest held by Shell in an entity or unincorporated joint arrangement, after exclusion of all third-party interest. This article contains forward-looking statements (within the meaning of the U.S. Private Securities Litigation Reform Act of 1995) concerning the financial condition, results of operations and businesses of Royal Dutch Shell. All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements. Forward-looking statements are statements of future expectations that are based on management’s current expectations and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in these statements. Forwardlooking statements include, among other things, statements concerning the potential exposure of Royal Dutch Shell to market risks and statements expressing management’s expectations, beliefs, estimates, forecasts, projections and assumptions. These forward-looking statements are identified by their use of terms and phrases such as “aim”, “ambition”, ‘‘anticipate’’, ‘‘believe’’, ‘‘could’’, ‘‘estimate’’, ‘‘expect’’, ‘‘goals’’, ‘‘intend’’, ‘‘may’’, ‘‘objectives’’, ‘‘outlook’’, ‘‘plan’’, ‘‘probably’’, ‘‘project’’, ‘‘risks’’, “schedule”, ‘‘seek’’, ‘‘should’’, ‘‘target’’, ‘‘will’’ and similar terms and phrases. There are a number of factors that could affect the future operations of Royal Dutch Shell and could cause those results to differ materially from those expressed in the forward-looking statements included in this article, including (without limitation): (a) price fluctuations in crude oil and natural gas; (b) changes in demand for Shell’s products; (c) currency fluctuations; (d) drilling and production results; (e) reserves estimates; (f) loss of market share and industry competition; (g) environmental and physical risks; (h) risks associated with the identification of suitable potential acquisition properties and targets, and successful negotiation and completion of such transactions; (i) the risk of doing business in developing countries and countries subject to international sanctions; (j) legislative, fiscal and regulatory developments including regulatory measures addressing climate change; (k) economic and financial market conditions in various countries and regions; (l) political risks, including the risks of expropriation and renegotiation of the terms of contracts with governmental entities, delays or advancements in the approval of projects and delays in the reimbursement for shared costs; (m) risks associated with the impact of pandemics, such as the COVID-19 (coronavirus) outbreak; and (n) changes in trading conditions. No assurance is provided that future dividend payments will match or exceed previous dividend payments. All forward-looking statements contained in this article are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Readers should not place undue reliance on forward-looking statements. Additional risk factors that may affect future results are contained in Royal Dutch Shell’s Form 20-F for the year ended December 31, 2019 (available at www.shell.com/ investor and www.sec.gov). These risk factors also expressly qualify all forward-looking statements contained in this article and should be considered by the reader. Each forward-looking statement speaks only as of the date of this article, October 23,  2020. Neither Royal Dutch Shell plc nor any of its subsidiaries undertake any obligation to publicly update or revise any forward-looking statement as a result of new information, future events or other information. In light of these risks, results could differ materially from those stated, implied or inferred from the forward-looking statements contained in this article. We may have used certain terms, such as resources, in this article that the United States Securities and Exchange Commission (SEC) strictly prohibits us from including in our filings with the SEC. Investors are urged to consider closely the disclosure in our Form 20-F, File No 1-32575, available on the SEC website www.sec.gov.

Innovating to Improve Methane Performance is a Matter of Commercial Survival

The role of gas and relevance of Europe’s gas industry to the European energy transition and welfare stands at a pivotal point in time. While some national governments and companies support gas as a transition fuel through infrastructure investments and their purchasing decisions, most do so opportunistically and not as a matter of long-term strategic planning. In addition, the sector is under increasing pressure to improve its environmental performance by a much broader set of stakeholders, including investors and civil society. This requires a radically different mindset of an industry, which is used to interact with few, big, strategic partners.

In response to the increasing pressure, the industry has enthusiastically embraced hydrogen, biogas and biomethane – three technologies and markets at different stages of development and commerciality which have nevertheless one thing in common: they become competitive to the core business, gas, at CO2 prices of EUR 80- 90/tn. However, until the political will to support these price levels is there, gas will inevitably play a role as a bridging fuel in the short-to-medium term in countries that rely heavily on coal for power or oil for heating.

This has been the UK playbook for quickly reducing emissions and it has proven effective in reducing CO2 emissions. However, what we know in 2020 – and that the UK did not in 2010 – is that the climate value of gas is challenged by its methane emissions footprint. And this has to be factored in all energy decisions, both strategic and opportunistic.

Fortunately, there are many technologies, both new and mature, to reduce methane now. With this in mind, the key differentiator between companies that are likley to succeed commercially and those that are likley to struggle is the willingness to invest and become the first buyer of innovative methane management technologies.

An array of monitoring and detection solutions are being developed by highly competitive EU start-ups to see how best to minimise risk of methane leakages and cut emissions, at limited or no net cost. It is the demand for such new technologies that needs to increase to turn them into market innovation. As Europe starts working toward climate neutrality, these first users will stand to gain the most.

Nurturing Europe’s place in the low carbon gas technology market can also result in new high-skilled, well-paid quality jobs. There are plenty of valuable skillsets across the oil and gas industry that could be transferred to the emissions mitigation sector. Prominent companies in the methane management market like The Sniffers, Carbon Limits and Kayrros are all led by former oil and gas workers. Over the longer term, the skills of many traditional oil and gas workers will be in demand constructing and maintaining offshore wind turbines, engineering and operating industrial carbon capture and storage projects, or producing and distributing the ‘green’ hydrogen that could one day play a role in meeting the energy needs for transportation, industry and buildings.

This is why it is not only in the sector’s best interest to become a good first-user and a better buyer of innovation, but also to support policies that ensure its products are fit for a climate neutral purpose. The upcoming EU gas market reform represents the next big opportunity to provide industry with the regulatory certainty it needs to spur innovations that can help oil and gas companies virtually eliminate methane emissions.

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Poppy Kalesi leads EDF’s Energy program in Europe with a focus on delivering ambitious EU policies that will contribute to deep reductions in global oil and gas methane emissions by 2025. Poppy’s experience includes energy and climate policy, business strategy and technology innovation from roles previously held with the European Commission, the European Parliament, Eurelectric, Statoil and the Norwegian Ocean Industries. Based in Norway, Poppy has also served on the Boards of the European Aquaculture Technology and Innovation Platform and the Norwegian Institute for International Networks.

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