10/26/2020 | Press release | Distributed by Public on 10/26/2020 03:02

Molecules – A Special Issue Eurogas Newsletter

By David Wells, Shell

Shell welcomes the European Green Deal and supports the EU's target to achieve climate neutrality by 2050. To contribute to this ambitious objective, the European gas industry will need to embark on a significant transformation and the gas market will need to be decarbonised over time.

In the run up to 2030, natural gas will play an important role as a substitute for coal and nuclear in dispatchable power generation, as well as a source of flexibility in electricity systems. In the medium term, gas can act as a partner for renewables in providing power. Longer term, decarbonised and renewable gas will continue to be essential in meeting energy demand that cannot be electrified. Shell believes that, together with large-scale electrification, lower-carbon gases will have an important role to play.

In order to meet the EU's climate ambitions there must be change across all sectors. For the gas industry, reform is vital in residential heating, industry, power and gas in transport. Shell believes this will require:

  • A system that supports effective large-scale renovations of buildings for the successful decarbonisation of the residential heating sector;
  • The right regulatory framework for harder to decarbonise sectors such as energy-intensive industries and mobility to invest in breakthrough technologies. Green and blue hydrogen, biomethane, and carbon capture utilisation and storage play a central role in reducing emissions in these sectors;
  • Further coal-to-gas switching in Central and Eastern Europe for power generation; and
  • Fast and ambitious methane regulation involving measurement, reporting and verification (MRV) standards, rapid progress on leak detection and repair, and targets.

Clean hydrogen at the core of the transition to climate neutrality

Decarbonised and renewable gases, notably hydrogen, will have a key role to play by helping to decarbonise sectors where electrification is not currently an option such as freight, heavy road transport or industry. Shell Scenarios Sketch 'A Climate-Neutral EU by 2050 ' shows that to achieve net-zero emissions in the EU energy system, clean hydrogen would need to rise from negligible levels today to at least 10% of the EU's total final energy consumption by 2050.

Accelerating the deployment of clean hydrogen will require measures to kickstart markets in key sectors in tandem with incentives for investment in supply and infrastructure. Consideration could be given to demand-side mandates for the use of clean hydrogen in specific hard-to-abate sectors, particularly in the shorter-term.

Where is Shell investing to enable this transition?

Achieving this scale of hydrogen deployment will require significant investment. Shell has already made a start. Along with partners, Shell is building the world's largest polymer electrolyte membrane (PEM) hydrogen electrolysis plant. Supported by the Fuel Cells and Hydrogen Joint Undertaking, the REFHYNE project will use renewable electricity to produce green hydrogen at Shell's Rheinland refinery in Germany. And we are also active in blue hydrogen. Together with our partners, we continue to advance our project to provide CO2 from clean hydrogen production to the Port of Rotterdam Transportation Hub and Offshore Storage (PORTHOS).

The transition to a low-carbon gas market will require investments in other forms of decarbonised and renewable gases such as bio-LNG or biomethane. Our projects include a strategic partnership with Renewi and Nordsol in the Netherlands to jointly produce bio-LNG. This collaboration aims to contribute to the circular economy and completes the cycle of turning organic waste into a sustainable fuel for long-haul transport. Shell Energy Europe entered into an agreement to buy biomethane from Nature Energy in Denmark. The long-term agreement is the largest of its kind and demonstrates the important role that biomethane can play in Europe's transition to a lower-carbon society.

Regulating methane as a matter of priority

The environmental benefits of gas depend on managing methane emissions. Any comprehensive effort to limit global warming must include strong, ambitious and urgent action to reduce emissions of this potent greenhouse gas across the full natural gas supply chain. The Commission's new Methane Strategy is a positive step that Shell greatly welcomes.

The Commission's proposal on MRV processes for energy-related methane emissions will help to understand supply chain emissions of all gas sold in the EU and will enable other policies that hinge on credible quantification of emissions. Beyond this, we strongly believe that a methane performance standard of 0.20% should be set for all gas sold in the EU market, including from imports, from 2025. This would be a strong next step to further advance the Methane Strategy.

Embed a sectoral approach to deliver climate neutrality

For the EU to achieve climate neutrality by 2050, every economic sector will need a pathway to net-zero. The pace and the policy mechanisms required will be different in each sector, but they will all need to get there. Earlier this month, the European Parliament voted to introduce sectoral pathways to net-zero in the draft European Climate Law. These will provide an important mechanism to accelerate and scale up the demand for clean energy, including decarbonised and renewable gases, in sync with supply and infrastructure. Our ability to transform as an industry, presents both a challenge and an exciting opportunity to stay relevant and make a significant contribution to the EU's transition to climate neutrality.

*** This oped was contributed by David Wells, Vice President Shell Energy Europe and Environmental Products. David was appointed President of Shell Energy Europe Limited in May 2017 and is responsible for the marketing and trading of gas and power in Shell's European energy markets. His organisation is also responsible for the Shell Group's global trade in environmental products. Please see here for Shell Disclaimer