Natural Gas Infrastructure at the core of the Energy Transition

The General Manager of EDA THESS, Mr. Leonidas Bakouras, answers  whether the energy crisis marks the end of Natural Gas.

 Interview of the General Manager, Mr. Leonidas Bakouras, to 

Recent geopolitical developments do not affect the role of natural gas, since in all the realistic scenarios that have been put on the table, gas will continue to be the fuel delivering reliability to the energy system of Greece and Europe for the coming years. This is what the General Manager of EDA THESS, Mr. Leonidas Bakouras pointed out in his interview, adding that the role of natural gas will therefore be sustained and will not be relegated by the RePowerEU plan for reducing energy dependence on Russia.

According to Mr. Bakouras, an important reason is that – taking into account the increasing penetration of RES in the power generation mix  – natural gas is the most efficient solution for power adequacy,  while at the same time it is a reliable source of energy for industries, providing multiple advantages. As a result, along with its increasing use in the residential sector, it will continue to catalyze the achievement of targets set for climate change mitigation (fit-for-55).

In this context and given that Greece has received gas late compared to the rest of Europe, there is an urgent need to increase its penetration throughout the country, through the investments for the development of new distribution networks that are in progress. Moreover, he added, the same distribution networks that are currently accommodating natural gas, will in the future act as multipliers for the penetration of renewable gases into the final energy mix, accelerating its decarbonization.

The General Manager of EDA THESS also pointed out that along with the investments in new networks, there should be incentives in order for the citizens in the new areas to switch to the use of natural gas. Also, energy saving programs for existing consumers (such as household condensing boilers that reduce consumption by 25-30%), could partially offset high prices. 

  1. After three months of warfare in Ukraine and following the “response” of the EU through the REPowerEU plan, is the role of gas relegated in your opinion?

 The transitional role of gas will be sustained and will not be relegated by the RePowerEU. On the contrary, in all the realistic scenarios that have been put on the table, natural gas will be the fuel that will offer reliability to the energy system of Greece and Europe for the coming years.

The REPowerEU plan provides for a number of actions to diversify gas supply sources, save energy and further develop renewable energy sources. Natural gas is the cleanest fossil fuel, its CO2 emissions amounting to only half of the emissions from coal combustion. Replacing coal with natural gas reduces total emissions by hundreds of millions of tonnes annually in Europe.

There is no question of relegating the role of gas but it is necessary to replace polluting fuels such as lignite and coal. Νatural gas will support the country’s power generation with alternative supply sources (LNG), covering peak loads and helping to meet the demand that RES are unable to address due to intermittent production and the lack of large-scale storage.

Especially for industry, gas is a reliable form of energy that is always available as it is continuously supplied through the grid, without need for storage tanks and without supply outages. It thus allows industries to plan and manage their productive activity in the optimal way. At the same time, the supply and combustion of natural gas can be regulated with high precision, which makes it an ideal solution for immediate adaptation to the various operational needs of the production process.

The transitional role of natural gas in our country is reflected on the total consumption, which has increased by 10% from 2020 to 2021 and by 6.18% in the first quarter in 2022 compared to the corresponding period last year.

The critical importance of natural gas is reinforced by the large infrastructure projects currently implemented in the country, securing and diversifying energy supply. Projects such as the upgrade of the Revythousa Terminal, the construction of floating LNG storage and regasification units (FSRU), the underground gas storage facility in South Kavala and the cross-border pipelines that have been put into operation (TAP) or will be put into operation soon (IGB), safeguard the adequacy of supply and at the same time, turn Greece into a Liquefied Natural Gas Hub for the Balkans (as supplies are already directed to Bulgaria and Romania) but also for the whole of Europe.

 Emissions reduced by 50% in cities supplied by gas 

  1. Do you believe that the recent geopolitical developments will negatively affect the deployment of new distribution networks in Greece? 

To achieve RePowerEU’s energy goals and aspirations, one must consider the different starting point and maturity of each EU Member State.

Greece, unlike other European countries, welcomed natural gas late. At the moment, a large investment program in new distribution networks is underway, in order to supply natural gas to 70% of the territory, which to date does not have access to gas. It is worth noting that with the distribution network covering the rest of the country, the number of gas delivery points (meters) – which today exceeds 500 thousand – is expected to double, reaching 1 million by 2030.

The same networks, being widely dispersed, will in the future act as multipliers for the penetration of renewable gases into the final energy mix, accommodating and circulating renewable gases (biomethane, hydrogen, synthetic methane) to end consumers currently connected.

If our country really wants to drastically reduce greenhouse gas emissions and achieve the NECP targets, natural gas must first penetrate all areas and replace conventional fuels – namely fuel oil in industries and heating oil in households. This will lead to the immediate reduction of the carbon footprint and the improvement of the environment throughout the country. As I have pointed out in the past, in every new city where gas penetrates, greenhouse gas emissions are reduced by 50%.

The main transitional fuel in Greece for at least another 25 years 

  1. In the context of revised National Plan for Energy and Climate, do you think that the geographical expansion of natural gas in our country will remain a priority?

Europe’s ambition to zero carbon emissions must ensure that the transition to climate neutrality is financially sustainable, socially just and that it safeguards the countries’ security of supply. Existing and planned energy infrastructure are important assets that policy makers must utilize to avoid huge investments that will disproportionately burden end consumers. In the same context, the EU financial tools should be used to the maximum, taking into account the know-how of the Operators, who are the connecting links between consumers and the energy market.

The revision of NECP, in addition to the frontloaded goals it will set for the increase of RES and the production of renewable gases, should strengthen the role of natural gas as the main transitional fuel of our country for at least the next 25 years. Both the NECP and the financial programs and tools should convey the appropriate signals to the market in order for the networks to be deployed throughout the territory, and on the other hand, for the infrastructure to enhance the adequacy of supply and the resilience of the country’s energy system, strengthening the role of Greece as a “gateway” of natural gas for the wider region.

In this regard, the quantified target set for the 50% increase of natural gas use in the end consumption sectors by 2030 compared to 2017 should be preserved in the revised NECP. Funding for the development of gas infrastructure should remain as the top priority; dual-benefit infrastructure, which on the one hand will contribute to achieving the goals of tackling climate change (fit-for-55) and on the other hand, will accelerate the transition to RES and the carbonization of the energy mix.

  1. How do you assess the measures that the Commission has taken to diversify sources of supply and to strengthen security of supply and price competitiveness? Do you think that more drastic measures could be taken to decelerate prices? 

The diversification of the gas import routes achieved in our country through the infrastructure I mentioned, guarantees the resilience of the energy system and the adequacy of supply for all consumers.

In the same context, the obligation to fill gas storage facilities by 90% throughout the EU by next winter, will further enhance security of supply.

With regard to price formation, the voluntary joint procurement mechanism (EU Energy Platform) can enable Member States to jointly negotiate more competitive prices. However, the most drastic measure proposed by both the Greek State and several other European states is the price cap on the wholesale market at least until the end of the war. A measure that will decouple prices from the upstream reference markets (TTF), in order to reduce the effects of price pressures and to adjust the price charged to end consumers according to the fluctuation of supply and demand.

If this proposal is adopted by the European Commission, prices charged to end consumers are expected to gradually decelerate. Let us not forget that, despite the fact that we are in the middle of the summer season and household consumption is limited, energy-intensive industries are still faced with high energy prices affecting their sustainability, competitiveness and the implementation of planned investments.

Triple benefit from biomethane injection

  1. Going back to the changes in the energy mix that are promoted for the coming years, what should be the role of biomethane in the NECP? In countries like Greece, what is the potential for creating a biomethane supply chain?

The injection of biomethane in the distribution networks is a challenge that will bring a triple benefit for our country. Initially, it will help achieve the 35 bcm biomethane target set under REpowerEU. Furthermore, it will contribute to the decarbonisation and greening of the distribution networks, while strengthening the country’s circular economy.

The biggest advantage of biomethane is its full compatibility with the existing distribution networks; networks which, due to their geographical dispersion in urban and interurban areas, will allow the cost-effective connection of production and injection facilities. Therefore, biomethane is a “key” asset for the country, as it will directly help reduce over-reliance by replacing part of Russian gas, while also making distribution networks sustainable.

Today in our country there are about 40 biogas production units which – due to the lack of regulatory framework – are used exclusively for power generation. However, injecting biomethane into the grid is more energy efficient than using biogas to generate power. About 90% of energy is preserved when injected into the grid, compared to only 65-70% when biogas is burned to generate electricity. The first step is to submit proposals for the introduction of the appropriate legal and regulatory framework in line with the European directives, to support appropriate incentives for business initiatives to thrive. In particular, the NECP targets on the production of renewable gases in line with the REpowerEU plan should be made binding. In this regard, it is advisable to apply Feed-in Tariff / Premium mechanisms for producers as well as to establish a framework for Guarantees of Origin.

Energy saving as a “counterweight” to cost

  1. 6. As a measure to reduce reliance from Russian gas imports, REPowerEU also includes energy savings to reduce consumption. What measures could be implemented? 

Together with the REPowerEU plan, the Commission presented the EU communication to promote immediate energy saving by citizens and businesses through changes in consumer behavior and strengthening medium- to long-term structural energy efficiency measures.

The key strategic question for Europeans is what we should do to stop wasting energy. Especially for heating, solid and coordinated efforts by all involved bodies are required in order to take full advantage of the benefits delivered by natural gas as well as the various technological solutions available.

In this context, the State should continue to provide incentives for potential consumers to switch to natural gas, by introducing subsidy schemes for replacing oil heating systems with natural gas systems. These schemes should be granted in all Regions throughout the territory.

For existing residential consumers using Natural Gas, funding should be provided for the replacement of the old burner – which in many cases dates back to 2000 – with modern natural gas condensing boilers; a measure that will directly contribute to energy savings by at least 25-30% while improving the environmental footprint of consumers.

In the same context, the competent bodies that manage the municipal and public buildings should raise their awareness, so that saving programs such as “Electra”, include actions to modernize the installations and the boilers that have been used for more than 20 years and are now considered obsolete, their energy efficiency being lower than 60%. Modern gas boilers with compensation control systems can achieve an efficiency of up to 100%.

Similar programs should be introduced for the upgrading of industrial facilities with technologically advanced equipment that will result in higher energy efficiency and the rationalization of resource management while ultimately promoting their competitiveness and environmental sustainability. It is therefore obvious that energy savings can offset some of the high energy prices.

Distribution networks are also key for the decentralized production of “green” hydrogen

                         It is said that the final answer for the decarbonization of hard-to-electrify activities will be given through the development of a “green” hydrogen economy. What is your opinion? 

Greece has recognized the role of hydrogen in the green transition, highlighting the strategic position of our country as a future producer of green hydrogen for European markets. Moreover, Greece’s potential in RES energy production paves the way for the development of large green hydrogen production projects such as the White Dragon that is expected to be completed in 2029 with a planned production amounting to 250,000 tons of hydrogen / year.

Despite the promising potential, there is currently no production of “green” hydrogen in Greece. The main challenges concern the development of hydrogen demand both for existing uses (heavy industry, refineries) and for new uses (electricity, residential heating). The development of a hydrogen value chain will also depend on the successful completion and connection of production, transmission, distribution, storage and end-use infrastructure. This requires coordinated investment by all actors along the value chain.

As evidenced by other European projects (Ready4H2) that have been piloted, gas distribution networks – with appropriate modifications – will be able to accommodate quantities of hydrogen mixed with natural gas and biomethane in the future. This means that hydrogen will be incorporated in the mixture supplied to the end consumer, utilizing the existing infrastructure and the already implemented investments.

In the future, the biomethane production model I mentioned can be replicated for “green” hydrogen, where Gas Distribution Network Operators will collect and circulate the decentralized production of hydrogen from “small-scale” electrolytes to their networks, utilizing local RES power surplus; a surplus that, in fact, if not converted to hydrogen and introduced into the gas distribution system, will not be exploited. This is a cost that Europe cannot bear if it wants to meet its target of 20 million tonnes of hydrogen annually by 2030 to regain its energy independence and achieve its environmental ambitions.

In this context, we plan long-term investments for the upgrading, repurposing and digitization of infrastructure with new technologies and automatic control systems, so that the networks are ready for the future injection and accommodation of renewable gases.

Realistic goals for a just and smooth energy transition 

  1. What do you think should be done to promote your proposals at National and Community level?

It is easily understood that distribution networks and Operators now play a pivotal role in accelerating the achievement of the RepowerEU goals for energy independence, diversification of resources and the protection of the right of consumers to access affordable energy, which is now one of the key challenges to address.

In this context, we, the Operators, should be able to participate in the Energy Committee – as is the case in the rest of Europe – as through our experience and familiarity with market conditions, we can highly contribute to the drafting of policies and plans that will link the theoretical objectives with realistic and readily applicable solutions for the benefit of end consumers, of the society and the environment.

One of the key issues for energy transition is the revision of the 3rd energy gas package. In this context, the Gas Distributors for Sustainability GD4S – of which EDA THESS is a member -, actively participate in the consultations for the shaping of a framework on the biomethane, hydrogen and decarbonated gases market (Gas Decarbonization Package). To this end, it is appropriate to incorporate the binding objectives of REpowerEU into the Community Directive under consultation and to set the horizontal and vertical separation rules for Operators, to enable them to operate renewable gas networks, supplying initially biomethane and in the distant future, hydrogen.

By raising its voice at Community level, GD4S rightly advocates the creation of a separate EU Gas DSO Entity for natural gas, biomethane and later hydrogen, in order to achieve the objectives I mentioned, utilizing existing Natural gas infrastructure. Thus, the role of Distribution Network Operators is taking hold in the context of European planning.

In a transitional period with intense ambiguity, where on the one hand the gas market tends to stabilize, while on the other, the long-term goal at Community level is to reduce and finally eliminate the use of fossil fuels, it is obvious that realistic objectives for a just and smooth energy transition should be set at both European and national level. In this sense, not only has the end of Natural Gas not come but now its momentum is at its highest, as the role of Natural Gas is being upgraded and acting as a catalyst, it can be the bridging fuel for the achievement of Community goals.