EU businesses were facing an avalanche of legislation even before the war in Ukraine, most notably the ‘Fit for 55’ package, adopted by the European Commission in July 2021, and the hydrogen and gas decarbonisation package, adopted in December 2021. These proposals alone would have kept stakeholders busy for months.

Russia’s invasion of its neighbour in February has ramped up the legislative agenda considerably with what EU Commissioner for Energy Kadri Simson described at last week’s annual Eurogas conference as “our blueprint for removing Russian fossil [fuels] from our system as early as possible”—the RepowerEU proposals, published in May.

31pc – Share of Russian gas imports into EU as of April

“There is a double urgency to transform Europe’s energy system: ending the EU’s dependence on Russian imports in the short term, while tackling the climate crisis in the medium and long term, by acting as a union,” she says. “With public and private sectors working together, we can make this happen.”

There has been significant progress. The share of Russian gas imports into the EU fell to 31pc in April 2022 from 45pc in April 2021, says Simson, while the share of Russian pipeline gas fell from 40pc to 26pc. “This has been mirrored by the highest level of LNG imports we have ever seen,” she adds.

Embracing decarbonisation

The Eurogas conference brought together representatives from a wide cross-section of Europe’s gas industry—including the CEO of Ukrainian gas company Naftogaz—as well as from the European Commission and the European Parliament.

Despite expectations that RepowerEU will lead to gas consumption in Europe falling faster than previously anticipated, there is consensus that decarbonisation of gaseous fuels should be embraced and that Europe’s response to Russia’s invasion is imparting new momentum to that process.

There is strong emphasis in the plan on developing alternatives to natural gas such as green hydrogen and biomethane. It sets 2030 targets of 10mn t/yr of domestic renewable hydrogen production and 10mn t/yr of imports. The biomethane target is 35bn m³/yr by 2030.

Didier Holleaux, president of Eurogas and executive vice-president of French utility Engie, says the association’s members “very much welcome” much of the RepowerEU legislation, especially proposals to boost energy efficiency and the volume target for biomethane.

He cautions, however, that RepowerEU “should also come with a realistic view of the need for gas in the energy transition in 2025, in 2030 and in 2040 so that the gas industry can build its plan on reliable scenarios of the role of gas in the transition”.

“This is not the case for the time being,” he adds.

Recognising the limits to electrification, the Commission expects gaseous fuels to account for one-fifth of EU energy consumption by 2050, two-thirds of which will be renewable and low-carbon gases and the remainder fossil gas with carbon capture, utilisation and storage.

Sense of urgency

What was also clear at the conference was that legislators sense the urgency for change. Cristian-Silviu Busoi, chair of the European Parliament’s Industry, Research and Energy Committee, told delegates that the revision of the EU security of supply regulation proposed in March had been completed, and the regulation adopted, in record time.

“There is a double urgency to transform Europe’s energy system” Simson, EU energy commissioner

“The European Parliament is ready to work as fast as possible on the concrete [RepowerEU] proposals made by the European Commission,” he says. “Some of these measures increase energy efficiency, and boost ambitions for renewables and hydrogen. This not only makes sense in the context of Russian aggression in Ukraine but also in the long economic and environmental sense.

“We need to make sure Europe is independent from Russian gas [and] we need to get rid of suppliers who finance the Russian war in Ukraine—and we need to do it quickly.”

Naftogaz CEO Yuriy Vitrenko, in a live address from his office in Kyiv, said Ukrainians had “earned a moral right to call on Europe to do more to stop Putin’s bloody regime”. He called for implementation of a transfer cap mechanism that would freeze much of what offtakers of oil and gas paid to Russia until Moscow withdrew from Ukraine and paid reparations.

Vitrenko’s call appears to have been drowned out by events since, as Russia has cut exports to Europe, leading to ever higher prices amid deepening concerns of further cuts, especially in Germany, just as a fire has shut down a large US LNG export project.

Hydrogen targets

RepowerEU proposes ambitious measures to accelerate development of hydrogen and renewables. It envisages additional energy investment of €210bn ($221bn) between now and 2027 on top of what is needed to realise the Fit for 55 reforms, which aim to reduce the bloc’s greenhouse gas emissions by 55pc below 1990 levels by 2030.

To create the necessary infrastructure, this would lead to large-scale investments in electricity grids, an “EU-wide hydrogen backbone” and “targeted investments” in gas infrastructure totalling €10bn by 2030 to enhance security of supply.

Felicia Mester, director of public affairs at industry association Hydrogen Europe, questioned the feasibility of the domestic green hydrogen production target. It would, she told delegates, require an enormous amount of renewable electricity and electrolyser capacity.

To produce 10mn t/yr of green hydrogen would require “90-100GW of installed electrolyser capacity,” she says. Current installed capacity is just 1.75GW.

“The objective of the European electrolyser manufacturers is to have a combined installed electrolyser capacity by 2025 of 17.5GW,” says Mester. “So we would need 25GW/yr to be installed after 2025—a major challenge.”

The import target of 10mn t/yr would also be challenging, adds Holleaux. “A lot of investment would need to be done in the third-party [supplier] countries. We also must be sure that this hydrogen is produced in conditions which make it good for the planet.”

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Author: Alex Forbes