Exclusive interview: Ilaria Conti, Florence School of Regulation
by Joe Mitton, September 20, 2019
Increasingly the question is how, not whether, the gas sector will play a major role in the energy transition so regulatory developments are key indicators for strategists and analysts. From possible new curbs on methane pollution, to a power-to-gas technology revolution, to questions over import pipelines, it is a fascinating time for the European gas industry. Energy Post’s Joe Mitton interviewed Ilaria Conti, gas sector expert at the Florence School of Regulation, ahead of next month’s Madrid Forum.
Set in the tranquil hills above the historic city, the Florence School of Regulation (FSR) is an independent academic centre for research, training and policy dialogue. The School’s work on EU energy and climate matters has influence across Europe, and beyond. As an example of the School’s input into policy thinking, the European Commission (DG Energy) has tasked the FSR to work with industry, regulators and others on a sector coupling research project to be presented at the Madrid Forum (a twice-annual gathering to advance the EU’s internal gas market). We sat down with FSR’s Head of Gas, Ilaria Conti, to talk about regulatory challenges and opportunities, new developments in gas technology, and the politics of this important sector.
How to classify green hydrogen and synthetic gas
We begin by discussing power-to-gas technology (P2G). Whilst high capital requirements remain an issue for P2G plants – still in their infancy – prospects are evidently good. P2G is a common feature from promoters of renewable infrastructure planning. For example, Denmark’s largest energy firm, Ørsted, includes a significant P2G component in its proposals for new North Sea wind farms. The hydrogen – which can be created and used for many different purposes, including powering hydrogen vehicles, or adding to existing natural gas supplies – is entirely green. But P2G technologies can go further, by upgrading hydrogen to a synthetic gas product. “The synthetic gas molecule created is very similar to natural gas, and importantly, it can flow through existing pipelines and infrastructure”, says Ms Conti.
New power-to-gas plants are exciting for the industry and for investors, but also for policy-makers and regulators. The European Commission still need to take a view on how to classify and regulate these plants. Some businesses, for example, use the gas generated as a storage mechanism rather than for immediate sale – ITM is one such example. Are they to be treated as primarily energy storage sites, or gas production sites or power generation sites? The answer will have consequences for this burgeoning technology, says Ms Conti. Until now, entities operating in the gas market have either owned and traded in gas, or they have simply managed and delivered gas which they do not own – the latter are most commonly Transmission System Operators (TSOs), tasked with managing gas through existing infrastructure. P2G plants present a challenge to this traditional division. And to complicate the matter further, several TSOs are now also investing in power-to-gas technologies themselves.
These policy challenges fall under the topic of ‘sector coupling’, an important item on the agenda for the next Madrid Forum on 23-24 October. FSR will speak at the gathering which includes gas associations and bodies such as the Agency for the Cooperation of Energy Regulators, ACER, and ENTSOG, the European Network of Transmission System Operators for Gas. (For Energy Post’s recent interview with ENTSOG’s Managing Director, click here). Network Codes Implementation is also due to be discussed, which is hosted by the Spanish Regulatory Agency.
Looking beyond the immediate priorities of the next Madrid Forum, Ms Conti says addressing methane emissions will become increasingly important in the 2020s. The production and transportation of gas is a cause of methane leaks into the atmosphere. The David Suzuki Foundation says “cutting methane emissions from oil and gas is one of the cheapest, most effective ways to address climate change”. The Foundation’s research shows that over a 20-year period, a methane molecule traps 84 times as much heat in the atmosphere as carbon dioxide does. (Of course, with CO2 emissions still much more voluminous, carbon dioxide remains the primary cause of global warming). Nevertheless, the Foundation claims that methane is responsible for 25 per cent of already observed changes to Earth’s climate.
As we look forward to the development of the EU’s 2020 Energy Package, Ms Conti’s colleague at FSR, Maria Olczak, has been examining how a new European methane emissions strategy could evolve. Collaborating with the former European Commissioner for Energy, Brussels veteran Andris Piebalgs, Ms Olczak looks at how effective regulation is already tackling methane emissions in the USA, Canada and Mexico.
Providing research and policy suggestions on tackling methane leaks is precisely the kind of topic that the Florence School of Regulation can specialise in. As an independent centre (financially and institutionally) but with good connections to industry and EU policymakers, the School is well-placed to suggest policies and regulatory approaches to methane, and to make sure the ideas disseminate across public and private sectors. Ms Conti explains that the majority of the School’s funding comes from delivering training sessions, and the participants comes from across Europe and beyond. Gas industry executives and regulators join the classes, including from as far as China and southern Africa. The exchange of policy solutions is two-way, Ms Conti says. Exchanging ideas and keeping a dialogue on energy matters also with non-EU parties is particularly important nowadays, and Ms Conti recently participated in the launch of the EU-China Energy Cooperation Platform.
Gas and politics
This brings us to the geo-political considerations for the gas sector regulators. Along with renewables, gas energy is on the ascent in Europe, whilst coal is phased out and nuclear is halted or even decommissioned (as in Germany). But the rise of gas, mostly imported and much of it from Russia, raises political questions. The new Nord Stream 2 pipeline will potentially bring even more affordable Russian gas to Europe via the Scandinavian peninsula, for example, but its construction has worried the US government and strained EU-US relations. The US cites concerns about Russian influence in Europe, but of course the US also has its own competing LNG exports which it wants to promote.
Ms Conti has an insightful view on the matter. Earlier this year she attended a high-level summit in Brussels, the EU-US Energy Council B2B forum on LNG, looking at competitive pricing, infrastructure investments and technological innovation which would allow large-scale US LNG imports. But for all the positive words about strategic partnerships and trans-Atlantic alliances, it became apparent that it is going to be very difficult for US LNG to compete with Russian gas on price. “The political agenda often differs from the core market needs. There is not a strong market demand for US gas in Europe at the moment”, says Ms Conti. “Dependency on Russian gas has long been a fact for Eastern Europe”, and efforts in Central and Eastern Europe are to become energy “resilient”, rather than energy “independent”.
Regulation in the 2020s – engaging the European Parliament
We concluded our discussion by considering the newly-elected European Parliament. Ms Conti points out that there is historical precedent for Parliaments pushing Commissioners to set more ambitious energy targets. “The Parliament’s views are becoming more important. The vote share is going up across Europe. Youth engagement and interest in energy policy is up. There are now 75 Green MEPs in this Parliament, but also 173 Eurosceptic MEPs. Sixty percent of MEPs in this Parliament are new. So there is a lot of space for discussion and learning”, says Ms Conti.