The Future of Gas – The Nordic-Baltic Region

The energy mix is mainly a national responsibility, however, regional cooperation between Baltic and Nordic countries is gradual path to European integration and a single EU energy market. As the Nordic-Baltic region is very strong in using renewable energy sources, we asked Laura Huomo, the Energy & Capital Markets Counsel at Roschier Attorneys Ltd. from Finland, what the role gas has in the transition to a lower carbon economy set by the European Commission’s 2050 roadmap.

The future of gas in the transition to renewable energy – How important is gas in the energy mix regarding the transition to the highly demanding renewable targets?

The EU aims to transition to a low-carbon economy by 2050. The European Commission views natural gas as a key factor in reducing emissions until at least 2030 or 2035. The major focus on the energy mix should also be placed on how to utilize the existing energy transportation infrastructure within the Baltic countries, Finland and other Nordic countries. Recent research efforts have focused on the potential to blend hydrogen in the existing network and the possibility to expand the use of biomethane. Taking into account the time it takes to build up renewables and to find solutions that will answer also to the demand of the amount of energy needed, switching from coal to gas can be seen as the fastest method of reducing emissions. Utilizing gas can provide flexibility and back­up capabilities for power systems with high levels of intermittent renewable energy.

What are opportunities for investment in the region created by new legal frameworks?

The Baltic countries and Finland are together creating new investment opportunities as they have opened their natural gas markets. Finland will be the last market to open 1 January 2020. The open markets create new business opportunities through the new market roles that have been created through regulation. Also in terms of the common goal of decarbonising the energy system, this creates new opportunities and challenges for market participants. The new Electricity Regulation (EU) 2019/943 sets forth new opportunities for also for renewable energy production and also smart grid development. Electricity interconnectors throughout the EU have a special place in regulation and also in the way these projects can receive financial assistance from the European Commission (PCI projects).

What kind of change did you observe in the energy sector in the last 10 years process?

Speaking globally, one reality that the whole sector has had to face is the volatility of the price of crude oil and the increased concern for climate change. This has led the energy sector to seek new solutions. Another reality is the global energy consumption increasing at a fast rate, which forces countries all over the world to come up with new energy sources and improve energy efficiency. Globally, renewable capacity experienced two decades of strong expansion and covers now over 25% of global power output. However, the renewable capacity growth stalled in 2018, whereas energy-related CO2 emissions increased by 1.7% in that same year, almost one-third of them originating from coal use. China, India and the United States accounted for 85 % of the net increase in emissions, while in Germany, Japan, Mexico, France and the United Kingdom the emissions decreased. However, coal is being phased out especially the EU countries, which is increasing the demand for natural gas. Also in Asia, there have been important initiatives of phasing out coal and coming up with coal replacing solutions.

What kind of activity is happening in the energy markets/in the sector in the world in 2019?

A lot is happening in the energy markets and for one, technological breakthroughs and new technology are influencing energy production. For example, in the United States, the “shale revolution” using hydraulic fracturing and horizontal drilling, has resulted in a significant increase in natural gas production (by 52% in a decade) turning the United States from gas importer to gas exporter. As a result of increased natural gas and crude oil production, as well as an increase in renewables production, the total domestic energy production has also grown making the United States less dependent on energy imports. Another important are to watch has been Africa. For example, in Morocco, where there is a lot of RD&I activity relating to concentrated solar plants, their ability to store energy has increased significantly. Morocco also has the world’s largest concentrated solar park. An even bigger solar park is expected to be in operation by 2020 in Dubai, in United Arab Emirates. In Asia, China is on a mission to build a “super-grid” for electricity transmission on a global scale. This super-grid is based on ultra-high voltage cable technology that allows power to be commercially transported over vast distances with lower costs and increased load. The strategy is based on acquiring power transmission infrastructure across Latin America, Africa, Europe and then during 2020-2030 promoting intra-continental interconnections.  Globally, the existing technology is becoming more sophisticated and efficient all the time. For example, wind turbines are getting taller, bigger and stronger, increasing the production by turbine and making it possible to position them offshore in strong wind areas. Storing energy will be a crucial factor in developing future energy solutions in all continents.

Join our 11th Baltic and Nordic Energy Summit and alongside Laura Huomo and other energy stakeholders explore the major issues dominating the conversation in investing in regional energy projects in the coming year.

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