Op-ed articles

The future of natural gas in the global energy mix

Laurent Vivier.
Laurent VivierPresident Gas of Total

"The Switch from Coal to Gas Could Be a Climate Game-Changer"

To keep global warmingGlobal warming, also called planetary warming or climate change... within the lower limits set by the international community, powerful tools that can be quickly rolled out are needed out to ensure that goals are met. Switching from coal-to gas-fired powerIn physics, power is the amount of energy supplied by a system per unit time. In simpler terms, power can be viewed as energy output... generation is one of these tools. Laurent Vivier, President Gas of Total, provides his analysis.

The Paris production sharing contract (or agreement)Oil contract under which the oil that is produced is shared between the state and the oil company..., adopted at the Paris climate conference (COP 21), aims to cap the increase in global average temperature by the end of the century at 2°C, or ideally 1.5°C, above pre-industrial levels. To achieve this, countries will gradually need to switch from coal- to gas-fired power generation over the next few years.

This transition is one of the factors that will help dramatically reduce the amount of greenhouse gas (ghg) Gas with physical properties that cause the Earth's atmosphere to warm up. There are a number of naturally occurring greenhouse gases... emissions. Increased energy efficiencyIn economic terms, energy efficiency refers to the efforts made to reduce the energy consumption of a system... and the breakthrough of renewable energies will also play a key role, but they are time consuming, expensive and require new regulations and complex management of power grids. The benefits of switching from coalCoal is ranked by its degree of transformation or maturity, increasing in carbon content from... to gas, however, can be demonstrated with basic arithmetic: for the same amount of energy produced, natural gas emits half as much co2See Carbon Dioxid as coal, even when the full lifecycle of both resources – from the mine or the well to the power plant – is taken into account.

Today's situation is conducive to this switch.

In this environment, technological developments and huge investments in LNG will make natural gas a credible alternative to coal in power generation and a decisive lever in curbing greenhouse gas emissions.

Natural gas is much more than just a bridge to renewable energies, as it is often described. In addition to power generation, new uses are emerging for natural gas, including as a fuelFuel is any solid, liquid or gaseous substance or material that can be combined with an oxidant... in road transportation – in China, more than 200,000 trucks run on natural gas – and in shipping. This suggests that natural gas will remain an integral part of the global energy mixThe range of energy sources of a region. for decades to come.

Laurent Vivier, President Gas of Total since August 1, 2015, started his career within the Group in 1996, holding successive positions in the tradingThe buying and selling of products in financial markets... offices in Paris, Geneva, London and Houston. He moved back to Paris in 2011 where he held various positions as head of strategy for gas, power and renewable energies. Born in 1970, he is a graduate of the EDHEC School of Business in France and the London School of Economics and Political Science.

François Lévêque.
François Lévêque is Professor of Industrial Economics and Energy Economics at Mines ParisTech engineering school in France, Director of the Chair of Economics of Natural Gas

"Natural Gas, an Energy that Complements Renewables"

Natural gas is often referred to as a "bridge fuelFuel is any solid, liquid or gaseous substance or material that can be combined with an oxidant..." that could pave the way to more widespread use of renewable energies. However, strong growth in renewables has made thermal powerIn physics, power is the amount of energy supplied by a system per unit time. In simpler terms, power can be viewed as energy output... plants more complicated to operate and led to the emergence of complex new "capacity mechanisms". In this article, François Lévêque, Professor at Mines ParisTech engineering school, sheds some light on the situation.

It is impossible to understand how natural gas and renewable energies can complement each other without first looking at intermittency, a characteristic of solar and wind power, and then analyzing how it can be offset. Everyone understands that when the sky clouds over, when night falls or when the wind stops blowing, solar- and wind-powered generators produce less electricityForm of energy resulting from the movement of charged particles (electrons) through a conductor..., and sometimes none at all. Some of these swings in output are predictable, others are random.

The question is how to solve this problem, as today's consumers would never accept regular power outages. While intermittency can be somewhat offset by leveraging combined output – that is, transferring electricity generated in one region where the wind is blowing to another where it is not – the result still falls short. Not all areas are suitable locations for pumped‑storage hydroelectricity plants, which delay electricity generation by pumping water into a raised reservoir during periods of excess capacity and releasing it through a turbine when demand increases.

The optimal solution would be to store solar or wind power in high-capacity batteries. However, we do not currently have the technology to do this – at least not at an acceptable cost. And although this situation is likely to change in the future, it will probably not be in the next ten-to-twenty years.

The most flexible method available today therefore lies in harnessing complementary means of generating electricity, with thermal power plants that are switched on or ramped up when renewable output declines or stops completely. While coalCoal is ranked by its degree of transformation or maturity, increasing in carbon content from... is an easily accessible option for powering such plants, it is also a source of pollution, particularly co2See Carbon Dioxid emissions, and is not suited to the needs of modular power generation. Nuclear power is even less able to cater to urgent demand.

Gas, on the other hand, offers a fitting solution. Gas-fired power plants have the technological ability to ramp up or down quickly, adapting output almost as easily as you would adjust the hot water from a faucet.

However, no clearheaded business person would invest in a power plant that would only be used occasionally, depending on the weather. There would be no way to know whether it would be profitable, let alone cover the overheads. The boom in renewable energies in Europe has driven down wholesale power prices and led energy companies to mothball a number of gas-fired power plants, some of which are brand new, because the operating costs outweigh the profits.

Rewarding Available "Capacity"

This situation has prompted several European countries to introduce "capacity mechanisms". Under this system, plant owners are provided with a dual source of income, earning revenue both for actually selling electricity and for having generation "capacity" available if needed. This essentially mirrors how consumers purchase power. When we flip a switch, we do not buy electricity as such but rather its "availability". Power is not just a product that we buy, it is also a service.

Despite their inherent difficulty, several solutions for rewarding "capacity" have emerged around the world, particularly in Europe. One system gives grid operators, who plan how much electricity they will need on an hourly basis, the option to purchase potential capacity in advance. Another involves setting up markets where participants can buy and sell commitments to generate electricity based on the age-old concept of supply and demand.

If capacity were not rewarded this way, there would be nothing to encourage investment in complementary means of power generation, especially since renewable energies gradually push down wholesale power prices as they become more widespread.

France, Germany and the United Kingdom have already begun implementing such mechanisms. Unfortunately, however, the piecemeal approach they have taken leaves the European Commission with yet another area to harmonize on the road to creating a "European Energy Union".

François Lévêque is Professor of Industrial Economics and Energy Economics at Mines ParisTech engineering school in France, where he also directs the Chair of Economics of Natural Gas. He has edited numerous works in the field of energy, most notably Competitive Electricity Markets and SustainabilitySustainability indicates a state that is sustainable or reasonably manageable over the long term. (Edward Elgar, 2006), Electricity Reform in Europe (Edward Elgar, 2009), Security of Energy Supply in Europe (Edward Elgar, 2010), and The Economics and Uncertainties of Nuclear Power (Cambridge University Press, 2014). He has also published extensively in such academic journals as Energy Policy, World Competition, Competition and Regulation in Network Industries, La Revue Lamy de la Concurrence, Concurrences, Electricity Journal and Information Economics and Policy.

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