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Insight from Brussels: EU gas sector pins hopes on ‘green tags’ to face low-carbon future

Summary:
Trading tags guaranteeing renewable or low-carbon properties could be a key way to secure the EU gas industry’s long-term future in a decarbonized energy system. The EU will soon consider enshrining a 2050 net-zero emissions goal into law, after the European Commission’s president-elect, Ursula von der Leyen, promised to propose this by early 2020. A net-zero commitment is a step up from the current EU goal to cut emissions by at least 80% on 1990 levels. Von der Leyen promised to focus on decarbonizing energy demand from transport and buildings – both sectors where renewable and decarbonized gases could contribute to emission cuts. Setting up an EU-wide guarantees of origin (GO) system for such gases would be an efficient way to promote them, according to energy traders and gas industry

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Trading tags guaranteeing renewable or low-carbon properties could be a key way to secure the EU gas industry’s long-term future in a decarbonized energy system.

The EU will soon consider enshrining a 2050 net-zero emissions goal into law, after the European Commission’s president-elect, Ursula von der Leyen, promised to propose this by early 2020.

A net-zero commitment is a step up from the current EU goal to cut emissions by at least 80% on 1990 levels. Von der Leyen promised to focus on decarbonizing energy demand from transport and buildings – both sectors where renewable and decarbonized gases could contribute to emission cuts.

Setting up an EU-wide guarantees of origin (GO) system for such gases would be an efficient way to promote them, according to energy traders and gas industry representatives.

GOs are tradeable electronic documents already used in the EU’s electricity market to prove that a specific amount of electricity comes from a specific renewable energy or cogeneration source. This is a small but growing market, with almost 510 TWh demand in 2018, according to ECOHZ.

Go deeper: As demand for ‘green’ power soars, utilities turn to Guarantees of Origin

GOs enable customers to choose their preferred electricity source, creating a market-based mechanism for supporting ‘green’ electricity that is more efficient than subsidies, according to Jan van Aken, secretary general of the European Federation of Energy Traders, EFET.

Creating a similar system for gas could help transport and industrial energy customers prove they are decarbonizing their fuel sources, a growing concern within corporate social responsibility efforts.

“There are a lot of environmentally-conscious consumers and companies who are interested in green electrons and green molecules. They are willing to pay more and they are creating demand for this,” van Aken said at an EU sustainable energy event in Brussels in June.

Setting up GOs for “green” gas would require cooperation between many parties, including EFET, the European Commission, EU standards agency CEN, European gas suppliers’ body Eurogas, and gas infrastructure operators’ bodies Entsog and GIE, he said.

“We must go for one harmonized European system in the long run for all GOs – for renewable and low-carbon gases and liquids,” van Aken said.

Creating a successful GO system means developing credible products based on clear, EU-agreed definitions, he said.

More complex than power

Agreeing those definitions is more complex in gas than power, as the varied ways renewable and low-carbon gas can be produced create many product options.

The International Council on Clean Transportation identified 19 possible variations in a paper presented to the EU’s Madrid gas regulatory forum in June.

These included high level definitions such as standard natural gas versus renewable gas, which covers biogas, renewable methane and renewable hydrogen.

Insight from Brussels: EU gas sector pins hopes on ‘green tags’ to face low-carbon future

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There were also more detailed definitions taking life cycle emissions into account, such as carbon-neutral hydrogen, which reduces life cycle greenhouse gas emissions by at least 100% after being burnt compared to natural gas.

The 100% reduction takes into account upstream greenhouse gas emissions from direct and indirect land use change, methane leakage and indirect changes to electricity production.

Legal framework

Formal EU gas grid operators’ body Entsog is keen to see an EU obligation to use GOs for gas, according to its network codes markets manager Irina Oshchepkova.

The EU extended the legal framework for GO systems to cover gas, including hydrogen, when it updated its renewable energy directive last year.

But only electricity suppliers are required to disclose the renewables share of their energy mix on consumer bills, which is proved with GOs.

National governments are free to implement something similar for gas, but the gas sector wants more certainty, Oshchepkova said.

It would help if there was an energy source disclosure obligation in the EU gas directive, for example, she said.

The EC has been analyzing what to put in a potential EU gas legislation package that could be proposed next year, if the incoming EU commissioners who are due to take office in November approve.

EU power sector lobby group Eurelectric has also supported the idea of GOs for green gases, while being against specific targets for their share of EU final energy demand.

Transport demand

EU-funded pilot project CertifHy is trialing the first European GOs for green and low-carbon hydrogen.

The project offers GOs for hydrogen produced from either renewable (green) or low-carbon energy with life cycle emissions 60% below those of hydrogen produced from natural gas without carbon abatement.

It issued more than 2,700 renewable hydrogen GOs in January and February, equivalent to 2.7 GWh.

Two big customers so far are Transport for London, which has fuel cell buses, and H2Mobility Germany, which provides hydrogen refueling station infrastructure.

The hydrogen suppliers in the project are Air Liquide, Belgian retailer Colruyt, Uniper, and Air Products/Nouryon, with plants in France, Belgium, Germany and the Netherlands.

 

S&P Global Platts has proposed to launch European Guarantee of Origin price assessments for electricity in the near future and is inviting feedback.

The post Insight from Brussels: EU gas sector pins hopes on ‘green tags’ to face low-carbon future appeared first on Platts Insight.

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