Strengthening natural gas is the key to an efficient energy transition

Kassel. Housing, mobility and power generation: There is a growing focus on low greenhouse gas emissions in all areas. That poses great challenges for municipal utilities and energy suppliers throughout Europe. Natural gas, the most eco-friendly source of energy, can assume a key position in decarbonization. In an interview with WINGAS, Dr. Volker Breisig, a partner at the auditing and business consulting firm PricewaterhouseCoopers, explains what opportunities and risks are associated with the natural gas market, why digitization is so important for municipal utilities and what role LNG plays at the European level.

Dr. Breisig, the European gas market is growing even closer together as a result of a large number of infrastructure projects. At the same time, coal production in the EU has fallen sharply and then France also had problems with its nuclear power supply at the beginning of the year. In view of that, how do you assess the role of the natural gas market for Europe’s energy supply?

Everyone was able to see how important natural gas is to our energy supply when France had power supply problems due to its nuclear plants. Natural gas was the source of energy that was able to supply the market. That revealed how quickly a bottleneck can occur, as well as how crucial natural gas is in eliminating it. Energy suppliers must be ready for such situations in the future. The storage infrastructure is also of particular importance in ensuring a secure supply and sufficient output.

There’s a comfortable supply of natural gas in Northwestern Europe. What opportunities does that create for energy suppliers in terms of procurement?

Developments in the natural gas arena are indeed pleasing, particularly the price is attractive. Moreover, especially Western Europe is highly diversified thanks to its numerous LNG terminals. That will ensure the gas market will not be overly volatile in future, either. Procurement costs will therefore grow in importance and municipal utilities should use these short-term situations to obtain good purchase prices. At the same time, natural gas suppliers should also launch new and smart product offerings that reward flexibility or energy efficiency on the part of the end customer, for example.

What role does liquefied natural gas play for the European gas market?

LNG forms a price ceiling, i.e. it determines the level of prices and is therefore playing an increasingly important role on the European gas market. It can be converted and fed into the network or used directly, for example in the transport sector.

What must municipal utilities do in order to drive the fuel switch?

Energy supply companies must push ahead with digitization to enable targeted planning. Local data is crucial, it’s the tool for implementing the energy transition on the ground. A municipal utility has to know who has an oil-fired heating system in their area or how high natural gas consumption in a specific district is. Only then can it determine the fuel switch potential and tap other business segments by offering customers efficient energy solutions that deliver additional value. At the moment, the gas industry is lagging behind electricity suppliers, who are already much further advanced when it comes to using big data.

What risk factors do you see in the natural gas market?

The idea of an “all-electric society” is widespread among consumers and policymakers. If natural gas can’t be positioned more strongly as an alternative, this represents a risk for the natural gas market. That’s also a problem for the natural gas infrastructure. It guarantees the use of power to gas and is therefore vital for possible sector coupling. The gas industry must not rest on its laurels, even if the figures are good at the moment. Natural gas isn’t “business as usual,” but a key component in a successful energy transition which has to be promoted.

How can municipal utilities and industrial companies minimize these risks?

I don’t see any risks for industrial companies. As large purchasers, they are rather presented with opportunities and new possibilities within the scope of the energy transition. However, municipal utilities are going through an upheaval; their traditional fields of business are being called into question. Their local and regional roots represent a clear advantage: Of course, they have the best access to the infrastructure, are usually well organized and enjoy a high level of trust among customers. They have to leverage those advantages much more strongly and be active drivers of the energy transition. Then the risks are modest.

What impact will the decline in L-gas production in the Netherlands have on the natural gas market?

Of course, the Netherlands’ withdrawal from natural gas production is a warning signal. However, Germany is well diversified and can cover its needs with H-gas from Russia and Norway, as well as with LNG. What counts first and foremost now is to manage the switch from L- to H-gas in as smooth and structured a way as possible.

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