Gas demand and conversion
European gas demand
Gas demand in Europe was approximately 587 billion cubic metres in 2017; the highest level since 2011 (Source: Wood Mackenzie publication “Europe gas supply 2017 in review”). Demand for gas rose in the electricity sector in particular as a result of a fall in hydropower and nuclear energy generation and high coal prices. The rise is also due to cold weather at the start of the year and a higher demand for gas from industry.
Russian and Norwegian gas supplies to the European Union reached record highs in 2017. Member States are becoming increasingly dependent on gas produced outside the Union because their own production is declining. This is certainly also true for the Netherlands because of falls in production from the Groningen field and small fields.
During the climate summit in Paris in 2015 agreements were reached on a number of issues, including the desired reduction in emissions of greenhouse gases such as CO2. They relate to the reduction in energy consumption, the use of sustainable alternatives, and less polluting choices for fossil energy. At the climate summit in Bonn several European countries, including the Netherlands, presented an initiative to end electricity production from coal before 2030. This could lead to an increased demand for gas in the electricity sector. For the Netherlands, the European agreements will be integrated into a climate law that should be ready in broad outlines in 2018.
Development of demand for gas in the Netherlands
Gas is used for various energy functions in the Netherlands: low-temperature heat, high-temperature heat, power and light, mobility and as a raw material. It is clear that natural gas continues to play a significant role in a number of these energy functions (in 2017 approximately 38 bln. m3) (Source: NEV 2017, m3 (35,17)), but this will decline in future. The climate policy target of an 80-95% CO2 reduction in 2050 puts a great deal of pressure on natural gas in the energy mix. Savings and replacement by renewable energy will cut demand for natural gas. In a climate-neutral energy supply, natural gas can still play an important part in combination with CCS (capture and storage of CO2).
In the low-temperature heat function, gas is an important source of energy for heating homes and various other buildings such as shops, schools and office premises, greenhouses and for industrial processes. It is expected that the use of gas for these applications will fall in the future thanks to the application of insulating measures and increased sustainability. This increase in sustainability can come about through the use of green gas in central heating systems and hybrid heat pumps, the use of sustainable electricity in (hybrid) heat pumps and the use of sustainable heat (from geothermal sources and biomass) in heat networks.
As well as being an important energy source in the form of high-temperature heat for industrial processes, gas is also used as a raw material especially for the production of artificial fertiliser. The use of CCS can also offer a solution here, in addition to electrification and the use of biomass as a sustainable raw material and fuel. CCS can be applied after combustion by filtering the CO2 out from the exhaust gases. But application before combustion is more efficient. Converting gas into hydrogen and CO2 allows the CO2 to be captured quite easily. The remaining hydrogen can take on the role of natural gas as a fuel and raw material. Hydrogen from electrification of surplus sustainable electricity can also be used here.
The power and light energy function relies on the production of electricity. Electricity generation will have to be stepped up to meet the rising demand for electricity as a result of electrification of mobility and heat. Gas still plays a role here, but sustainable energy from wind and solar sources will play an increasingly important role. The role of gas may rise temporarily to some extent depending on when the production of electricity from coal comes to an end. Gas may retain a longer-term role in highly efficient energy production (CHP) and as back-up. This is partly due to the development of alternative technologies for the storage of electricity, opportunities of demand response or the opportunity to increase flexibility of supply from other countries following the expansion of international electricity connections.
Finally, gas still plays a minor role in the mobility energy function: as CNG in buses and cars and as LNG in freight vehicles and ships. The proposals in the government agreement for emission-free new cars from 2030 onwards mean that CNG probably has no future in cars. (Bio)LNG in freight vehicles and ships could certainly contribute to cutting emissions in the mobility function and could therefore bring about a limited increase in demand for (bio)LNG.
Conversion (from L-gas and to H-gas)
As a result of the fall in production of Groningen gas, plans are being developed in Germany, Belgium and France to convert gas equipment from Groningen low-calorific gas (L-gas) to high-calorific gas (H-gas). Almost 100,000 items of gas equipment were converted from L-gas to H-gas in Germany in 2017. The latest report from the German network operators states that this number will rise to 200,000 in 2018, 300,000 in 2019, 400,000 in 2020 and over 500,000 a year in 2021 and beyond. Exports of L-gas to Germany will therefore start to decline year on year from winter 2019/2020.
Belgium and France are launching their first conversion projects, regarded as pilots, in 2018. Conversion will gradually build up in both countries from 2020 onwards, and so exports of L-gas will decrease year on year. As a result, exports of L-gas will steadily decline between 2020 and 2029. Exports of L-gas are expected to cease in 2030.
Until recently, conversion in the Netherlands was not thought to be likely. In the 2016 energy agenda, the Ministry of Economic Affairs and Climate Policy still stated that conversion was not necessary in principle. However, the government agreement does refer to some conversion in the industry. Recent developments following the earthquake in Zeerijp have accelerated this debate.
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