FRESH pipeline investment is crucial in Europe if gas is to be brought to markets from increasingly remote producing regions, warns the International Energy Agency.
In a major global gas study, the IEA insists that intra-regional connections need to be strengthened to provide greater resilience, security and competition in gas supply. With demand for gas rocketing, especially for power generation, there is a growing urgency to tackle the problem.
In the power sector, its role has increased sharply from barely 7% of power output in 1990 to 16% in 2000, and more than 20% in 2005. Moreover, this trend is expected to continue, growing further to 25% by 2010 and becoming the second most important source of power behind coal and ahead of nuclear. By 2020, gas-fired power output is forecast to reach 1100TWh (tera-watt hours), up from 660TWh in 2005. In the UK alone, gas accounted for 40% of power generation in 2005, but is forecast to rise to 60% by 2020.
On the need for spending on new infrastructure, the IEA says: “When compared to North America, European investment remains relatively weaker, and long-haul pipelines are subject to delay and cost escalation.
“Many proposals remain at the planning stage. Within the European Union (EU), gas production, supply and user infrastructure have tended to be developed on the basis of individual countries’ own reserves and in relation to diverse national energy policies.”
The very nature of the EU means that gas use tends to vary markedly between countries, both in its contribution to total primary energy supply (TPES) and internal consumption.
Because of this historical growth pattern, cross-border trade, except for transit agreements, has only grown slowly, even when domestic supply has declined. One notable exception is The Netherlands, where international gas trade has been an important feature of that country’s gas development.
The European gas network has been built along major transit routes, east-west with Russian gas imports, and for western Europe, from the north with Norwegian and Dutch gas supplies and from the south with Algerian and Libyan pipelines.
Within the EU, internal non-transit interconnections are underdeveloped and frequently congested. Energy believes this is particularly worrying for the UK, despite extensive linkage with Norway. Natural gas has been an important source of energy diversity in EU energy supply, growing from 10% of TPES in 1973 to 18% in 1990 and 25% in 2005. In the period between 1990 and 2005, gas use grew by 50%.
The UK, Germany and Italy are the major gas users. The importance of gas in TPES varies from, for example, 23% in Germany to 35% in the UK, 38% in Italy and 42% in Hungary.
In Spain, gas has moved from barely 8% of TPES to 22% over the course of the decade to 2006.
Gas provides some 28% of industrial energy needs EU-wide and more than a third of residential and commercial needs, being especially important in space heating.
As already indicated, the power sector’s appetite for gas is growing rapidly.
It’s quite simple; gas has become the preferred choice for new power plant investment in most EU countries, and in several cases, the default option, as new nuclear plants are often formally prohibited and coal plants are difficult to develop even in traditional coal-using countries.
Of course, gas-fired plant has many advantages, including relatively small size and low capital cost, hence minimising risk, plus a smaller environmental and greenhouse-gas footprint.
As the IEA says: “Its flexible operation makes it the preferred choice to meet Europe’s increasingly peaky and seasonal power demand, plus the obvious technical and economic choice to back up intermittent renewables generation such as from wind.”
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