Securing energy supply and speeding up the transition towards a reliable, sustainable, low-carbon energy system are among the major current and future challenges facing Europe. Natural gas and ample interconnectors play a critical role in the context of transforming the energy system. However, the key drivers of decisions today are different from the past as they need to comply with the objectives of EU’s decarbonisation strategies.
Whilst the short-term priority is to complete the internal energy market by developing missing interconnectors, the energy infrastructure planned today must, at the same time, be compatible with longer term policy choices. For gas, these long-term objectives may be interpreted as a diversified gas infrastructure that facilitate safe supplies to the European Union based on a stable and predictable regulatory framework and the development of a favourable investment climate.
If the necessary commitment is maintained, and there are no delays in implementing current key projects, the eastern Baltic sea region and central south-eastern Europe area will achieve a well-interconnected, flexible and future-ready gas grid in the coming years.
The indispensable link
Between the natural gas upstream operations and the end-user, whether industrial or consumer, there is an indispensable link that is vital for making the transition into a competitive low-carbon economy happen: the pipeline. The financing, construction, operation and regulation of pipelines are one of the EU’s top priorities for strengthening its energy security. Without these links an effective integration of Member States' networks would not be possible.
When looking at the goals and priorities established by EU’s Baltic Energy Market Interconnection Plan for Gas (BEMIP) it is evident that a successful integration for this particular region is fulfilled through the development of gas infrastructure that will end the isolation of areas that have been historically dependent on a single gas supplier, and to reinforce internal grid infrastructures accordingly. The efforts of the European Commission to ensure diversification of gas supply in this region are delivering concrete results. These actions are ending dependency on a single supplier, increasing the resilience of the Member States’ energy systems, enhancing competition, and decreasing prices by connecting markets.
The latest project to support these objectives is the funding of Baltic Pipe Project, which together with GIPL (Gas Interconnection Poland–Lithuania) and the Balticconnector Pipeline Project will contribute to the integration of the natural gas market through bi-directional gas flow. Moreover, these are strategic gas infrastructure projects with the objective to provide new gas supply corridors on the European market. Among these reasons, the projects have been identified by the European Commission as Projects of Common Interest (PCI) and are funded under the Connecting Europe Facility (CEF).
The Baltic Pipe Project, connecting Denmark with Poland and enabling the transmission of gas from Norway, will according to current plans be operational in 2022. It is planned that the infrastructure connecting Polish and Lithuanian as well as Baltic and Finnish natural gas transmission systems with the continental European gas network will be established by the end of 2021. The Balticconnector pipeline will be ready for commercial use as of 1.1.2020, simultaneously ending Finland's gas isolation from the rest of mainland Europe.
Together these projects contribute to EU’s performance targets by adjusting both to market needs and challenges that the BEMIP region is going to face in the future. These projects play an invaluable role in the dynamics of the region as without these, the acceleration towards an EU-wide low-carbon economy would not be possible.
The role for natural gas in the low-carbon energy system of the future
Today, natural gas provides about one quarter of the EU’s energy supply and the European Commission sees natural gas play a critical role in the energy transition during the decade to come. The Centre for European Policy Studies (CEPS), suggests that demand for natural gas will remain stable or go down slightly until 2030, followed by a stronger decline out to 2040 and 2050 when new, alternative gases start making an appearance. This forecast proves the importance of significantly increasing the gas system's flexibility and resilience, and to support gas' role as a back-up fuel for variable electricity generation, without overlooking the benefit from the recent developments in the LNG markets and biogas.
It is evident that the gas infrastructure will have to play its part in the decarbonisation of the energy system by preparing itself to transport growing shares of other gases than natural gas, such as hydrogen, biomethane, synthetic methane.
When talking about an integrated market one needs to keep in mind that national energy systems differ quite significantly, depending on natural resources, past energy policy choices, or specific regulatory traditions. Hence, a harmonised transition does not mean that each Member State is impacted in the same way at the same time. This underlines the crucial importance of understanding the large-scale context in order to meet specific energy policy goals on a European, regional, national, and local level.
Consequently, the legal framework needs to be up to date in order to be accessible and support a smoother transition towards a sustainable economy. The next important policy milestone will be the EU’s Gas Package, which is currently being formulated, and described as “having at its heart the decarbonisation potential of gas”. The intention by the new Commission for this to be finalised, will according to current estimates be in late 2020, early 2021.
Nothing remains constant except change itself
The energy transition is an inevitable and global reality shaping tomorrow’s energy systems by affecting energy supply structures and the way citizens and companies contribute to rapid need of decarbonisation. Still, energy transition is too often viewed as a long-term objective, the impacts of which will not be felt for decades to come. Having said that, this view is an imprecise presentation of reality.
Although the completion of transition might take decades, the increased uncertainty around the transition impacts the energy markets on a much shorter time scale than the transition itself. Integrated and reliable energy networks are a crucial prerequisite not only for EU energy policy goals, but also for the economic strategy. It is of paramount importance for the industry to envisage the future needs, based on which it must make investment decisions today that will affect its business decades ahead. Natural gas is justifiably seen as the bridge to a low-carbon energy system, but what will the landscape look like on the other side of the bridge?
There is no silver bullet solution available and it is thus up to the industry players to develop decarbonisation narratives for its contribution to achieve EU’s targets. The current model of gas markets transporting a homogenous product will change significantly in the future, which means there will not be a single European narrative but a range of narratives.
The time before EU’s set targets of 2035 will be a crucial period for the gas community to put forward and demonstrate how it will deliver credible decarbonisation frameworks of developing commercial scale projects for alternative resources. This will also require to further develop our energy infrastructure across the full breadth of the gas cluster and allow consumers to benefit from new technologies and intelligent energy use.
It is time to look at natural gas as more than just a bridge, and more as an enabling partner for the large-scale deployment of alternative energy sources well beyond 2030.
Project Coordinator, Baltic Connector Oy