May 15 2017 brussels

May 15, 2017

Friends of the Earth Europe accuses the gas industry of unduly influencing EU energy policy. Through ENTSO-G, an “NGO” that is in reality a lobbying organisation, the sector has embedded itself at the heart of EU decisions on EU energy policy, according to Friends of the Earth. The attack comes as the European Commission draws up a new list of energy infrastructure projects that will benefit from faster permitting and may be eligible for EU funds. It is also revisiting the regulations that underpin this work.

Last week, the UN Framework Convention on Climate Change (UNFCCC) organised the first ever official workshop on how to deal with non-party stakeholders at the latest round of international climate talks in Bonn, Germany. The big question was “should fossil fuel lobbyists be excluded from climate meetings?” after a report by Corporate Accountability International highlighted their influence.

At the same time, back in Brussels, Friends of the Earth Europe attacked the European gas industry for undue influence in EU policy-making.

It targeted the European Network of Transmission Operators for Gas (ENTSO-G), which was created by the EU itself back in 2009 to “promote the completion of the internal market for gas and stimulate cross-border trade,ensure the efficient management and coordinated operation of the European gas network, andfacilitate the European network’s sound technical evolution”.

Conflict of interest

It all sounds very technical. But Friends of the Earth lists a series of problems. First, it points out that two-thirds of ENTSO-G’s members, which are gas Transmission System Operators (TSOs), are also members of Europe’s main lobby for gasnetworks, Gas Infrastructure Europe (GIE). Moreover some of these TSOs are ultimately part of big oil and gas companies– Engie owns 75% of GRT gaz for example. The NGO lists several examples of “revolving doors” cases between ENTSO-G and GIE.It cites an ENTSO-G board member in 2013 saying: “We need to show the economic superiority of our product… We have to convince consumers and policymakers of this.”

ENTSO-G calls itself an “NGO” in the EU’s Transparency Register, while its sister organisation for electricity, ENTSO-E, puts itself – in the eyes of Friends of the Earth more appropriately – in the category “in-house lobbyists and trade/business/professional associations”.

But ENTSO-G told Energy Post that contrary to the seamless integration of regulatory obligations and lobbying in ENTSO-E, the separate existence of GIE ensures a “clear distinction”. This is why ENTSO-G is registered as an NGO, it argues. Some stakeholders have suggested that electricity TSOs should also create a separate lobby to ENTSO-E and that Distribution System Operators (DSOs) should get two representative bodies. ENTSO-G adds that all certified unbundled TSOs in the EU are obliged to join it; their knowledge is “absolutely necessary” for its support to policymakers.

Gas demand

The second big problem for Friends of the Earth is that ENTSO-G’s apparent conflation with gas interests,results in gas demand forecasts that are consistently too high. ENTSO-G has predicted that demand will go up, even as it has decreased. Gas consumption in the EU-28 is down to the levels of the mid 1990s after peaking from 2005-10 (see EUenergy app).ENTSO-G responds that “many unforeseen factors” have influenced a reduction in gas demand, such as the economic crisis, the nuclear disaster at Fukushima, and gas vs. coal prices. Gas demand in 2016 falls within the group’s most recent predictions, it adds, and actually went up in 2015-16.

Looking further into the future, Friends of the Earth also points out that none of the three scenarios in ENTSO-G’s latest Ten-Year Network Development Plan (TYNDP) for Europe, finalised at the end of last month, take into account a 30% EU energy efficiency target for 2030 as proposed by the European Commission in its Clean Energy Package. ENTSO-G says that one of the scenarios is “close”. They were drawn up before the Commission put out its 30% proposal. It has not yet been decided which of the scenarios will be used when assessing the PCI candidates however, Energy Post understands.

Priority projects

Friends of the Earth’s third and most pressing problem stems from the first two: ENTSO-G is the EU’s primary source of gas demand (and supply) forecasts, and its biennial TYNDP forms the basis for Commission decisions over which infrastructure projects should get a “Project of Common Interest (PCI)” label that qualifies them for expedited permitting procedures and can render them eligible to apply for EU funds from the Connecting Europe Facility (CEF).

Every two years the Commission revisits a list of PCIs that was first created in 2013. The third edition is due to be finalised this autumn. NGOs like Friends of the Earth have criticised it for being too gas-oriented. Of 195 projects on the current list, 77 are gas projects vs. 108 electricity, 3 smart grid and 7 oil projects. No gross imbalance perhaps. But the figures for EU funds dispensed to assist such projects paint a very different picture: gas projects cashed in on just over €1 billion or about two-thirds of the EU money disbursed in 2014-16.

This is despite the 2013 CEF regulation suggesting that most of the money should go to electricity projects. The Commission has said that Europe’s gas infrastructure is largely fit for purpose and it aims to reduce support to gas in favour of electricity projects going forward. ENTSO-G said in a press release on 28 April that the TYNDP 2017 “confirms that the current gas infrastructure is close to achieving the infrastructure-related aims of the internal gas market”.

Roles and responsibilities

Friends of the Earth’s attack on ENTSO-G coincides with the drawing up of the next PCI list and, equally important, reviews this year of the CEF and the Trans-European Networks for Energy (TEN-E) strategy that defines the criteria for becoming a PCI in the first place. Both those reviews are now getting underway. “The real task is not to change ENTSO-G but how we decide on the PCI list,” said Hungarian Green MEP Benedek Jávor at the NGO’s report launch.

Friends of the Earth estimates there are some 130 gas candidates (the Commission has reportedly received 109 so far), most of those put forward by ENTSO-G members. It argues – and ENTSO-G says – that the group plays a “key role” in the PCI selection process. As well as providing the Commission with contextual information through its gas demand forecasts and TYNDP, ENTSO-G will carry out a cost-benefit assessment together with project promoters for each candidate (according to a methodology laid down by the Commission). The final PCI list is decided by the Commission, after scrutiny from regulators and recommendations from member states. ENTSO-G emphasises that it facilitates, but does not participate in decisions on the list.

Friends of the Earth believes that ENTSO-G has a role to play but should not be a “privileged partner”, says campaigner Antoine Simon. The NGO urges the Commission to develop its own scenarios for gas demand and network capacity. In theory this will soon be possible with the development of in-house modelling tools like POTEnCIA and METIS. In addition, ENTSO-G should input to, not lead, cost-benefit assessments. ENTSO-G says Friends of the Earth has not taken up its invitations to attend open workshops or meet to understand in more detail what it does.

Agendas

In an ideal world, Friends of the Earth would like to see no EU funds at all flowing to new gas projects. “The EU already has enough infrastructures to import twice as much gas as is currently used,” Simon says. If some countries are still 100% reliant on Russian gas, “it’s for geopolitical, economic or contractual reasons, not missing infrastructure”. The EU’s “common interest” now is to decarbonise.

Electrification is a key part of the energy transition. Compared to 109 gas proposals, the Commission has reportedly received 130 electricity proposals for the new PCI list so far. The European Environmental Bureau, another NGO,estimates that there are in actual fact 246 cable and 19 electricity storage projects in the running for the new PCI list however.

The PCI list has always been about grids, but it has evolved. Originally intended to get big cross-border connections up and running, it has expanded into storage for example. Could  renewables, electro-mobility and energy efficiency projects be Europe’s next PCIs? This is what Green MEP Claude Turmes suggests in his fledgling proposals on Energy Union governance. The TEN-E and CEF reviews this year are unlikely to trigger big changes. That will probably have to wait for the next Commission and a new EU budget for after 2020.

What is sure is that as the energy system changes, the definition of “PCIs” should change too. The question is who decides what it is. In Bonn, the debate over how to deal with vested interests in the UN climate talks is only just beginning. In Brussels, it’s part of the programme.

May 15, 2017

Here’s a new take on the controversial Nord Stream 2 project: it’s good for the environment. In a rare briefing at its Brussels offices last week, Russian gas giant Gazprom espoused the climate benefits of its new pipeline plan to ship more gas directly from Russia to Europe, bypassing Ukraine. Attendees included energy experts and representatives from its European partners in Nord Stream 2, as well as journalists.

Warning that the EU might miss its 2030 climate and energy targets, a Gazprom representative emphasised the value of natural gas in the energy transition, vs. coal in particular. Europe has enough spare capacity in gas-fired generation to replace coal-fired generation entirely, he said. The coal-to-gas switch could cut EU emissions by nearly a tenth. More unusually, he also argued that the global life cycle carbon footprint of a renewable technology like solar PV is similar to that of coal, while that of gas is about a third lower. The EU should do more to push gas-fired combined heat and power (CHP) and gas in transport, he suggested.

A colleague followed up with an overview of Gazprom’s own commitments to environmental protection and decarbonisation. Konstantin Romanov, head of Gazprom’s committee on environmental protection and energy efficiency, highlighted methane emissions (e.g. as a by-product of gas production) as a top priority in Russia where they are more tightly regulated than in Europe. He also suggested that (especially man-made) methane is less of a climate culprit than many people think and cited isotopic studies as proof that “Russian natural gas is not the source of methane growth in the atmosphere”.

Romanov highlighted the future potential of hydrogen (made from natural gas, of course). Most interesting of all however, he said that transporting Russian gas to Europe via Nord Stream 2 rather than Ukraine could save 9 million tonnes of CO2 a year – or more than all the emissions of the Netherlands or the entire German transport sector over 25 years. This is primarily because Nord Stream 2 would apply more recent, more efficient technology, he told Energy Post.

Pursuing this new line of thought, it turns out that the Nord Stream 2 consortium has commissioned a study which compares its project to LNG import alternatives for Europe in terms of greenhouse gas emissions. The “GHG intensity of natural gas transport” study was presented at the briefing by Oliver Schuller, Principal Consultant and Team Lead on Energy and Oil & Gas at thinkstep, the sustainability consultancy that did the work. The researchers concluded that Nord Stream 2 is the gas supply option with the smallest carbon footprint (by 2.4-4.6 times), based on life cycle analysis comparing its emissions to LNG imports from Algeria, Australia, Qatar and the US. This is because it has none of the liquefaction, liquid transport, purification and re-gasification needs of its LNG competitors, and the smallest production and processing emissions.

The biggest differences between the LNG options – Australia (Queensland) scored worst, followed by the US – were down to transport, and production and processing. “Distance does matter,” said Schuller, hence the poor performance of Australia. Thanks to shale, the US has the highest production and processing emissions, making up half its LNG carbon footprint. The results of the study were confirmed by three independent German organisations: the Fraunhofer research institute, the Wuppertal Institute for Climate, Environment and Energy, and Dekra, a certification and audit firm.

In response to a question from Energy Post about why other pipeline alternatives (e.g. Norway, the Southern Gas Corridor) were not included in the study, Schuller said that this was not part of the brief. In any case, Norway was unlikely to be able to supply more gas in future, he added, and southern supply routes were not direct competitors to Nord Stream 2 (which is looking to supply northern/central Europe). He acknowledged that the emissions of LNG are likely to improve in future. More important however, he said, is that the appeal of different fuels depends too on their final destination: LNG is well-suited to transport’s liquid fuel market. Thinkstep will be bringing out another study on this, carried out in collaboration with the Natural Gas Vehicles Association (NGVA), in the next two weeks.

Where does that leave Nord Stream 2? As a deeply political project with a security of supply dimension that ultimately leaves politicians cold to any environmental or indeed economic analysis I suspect. But the climate angle provides a new hook for the project’s European partners and Gazprom a welcome additional voice for the gas sector in Brussels.