Enabling the integration of renewables into Europe’s energy system
In the context of the energy transition, the development of renewable energy sources (RES) raises numerous questions around intermittent power generation, the management of peak consumption and electricity storage. Various solutions are being investigated, and Power to Gas (PtG) is one of them. Despite the numerous opportunities PtG offers, the growing interest for this technology within the political, scientific and industrial areas has yet to be materialised with a concrete development strategy to reduce costs and optimise the benefits. These technical and economic advances will also have to be bolstered with regulatory changes in order to fully seize the benefits of PtG.
In this article we will address the concept of PtG, the associated challenges and opportunities for the market.
Increasing need for system flexibility
The critical balance between supply and demand which ensures a proper functioning of the electricity network is increasingly at stake due to two main factors. On the one hand is the growing use of intermittent power generation sources, mainly wind, which generates new situations on the grid: oversupply of electricity during off-peak periods or non-reliable generation assets during peak periods. Looking ahead at the long-term decarbonisation goals, the share of renewable energy sources (RES) in the power generation mix will only rise, putting even more pressure on the electricity grid over the next decades. On the other hand is the inadequate transmission capacity on the electricity grid during peak demand, and during peak generation hours from RES.
To overcome this problem the power grid needs new sources of flexibility. One of these flexibility sources gaining increasing attention is Power to Gas.
What is Power to Gas?
Power to Gas technology consists in converting power generated from e.g. a wind park into synthetic gas such as Hydrogen or Methane, through the steps described in Figure 1.
Figure 2 : Conversion, storage, transport and use of RE power
Opportunities offered by Power to Gas
Laying at the cross-road of the electricity, gas, heat and transport sectors, PtG offers various opportunities and applications, as shown in Figure 2.
Figure 2 - Conversion, storage, transport and use of RE power
The first opportunity offered by PtG is to use and value a surplus of power generated from RES that would be wasted otherwise. The produced hydrogen can be injected in the transportation gas grid (to a limited amount of about 6%), or used to power fuel cell vehicles. Further down in the process, methane can be used as feedstock for the industry, or as fuel for green mobility.
The second advantage that PtG offers is to use the existing gas infrastructure – gas storage and pipelines – to store and transport the gas without heavy investments in a completely new infrastructure. Gas can then be withdrawn where and when needed, or used as fuel for gas-fired power plants.
Eventually PtG is a scalable and long term storage solution with high capacity and responsiveness. It relieves the transmission congestion on the power grid, and defers the investments in line reinforcement. Power to methane also presents the opportunity to recycle CO2, which is consumed during the methanation process, and the generated heat can be injected into the heat network.
With these promising perspectives, PtG has gained increasing attention in the last few years and many projects of different nature were launched.
Large investments in R&D, pilot and demonstration projects have been made by public national and European organisations as well as utilities (Engie, RWE, E.ON, Vattenfall). In April 2015, European transmission system operators GRTgaz, Fluxys, Gasunie, ONTRAS, Swedegas, Gaznat and Energinet.dk released a joint declaration about green gas initiatives, including power-to-gas, demonstrating their proactive role in shaping the future of energy and their interest in the PtG process.
2014 and 2015 mark a turning point for PtG as national and European funding programs for the 2014-2020 period are renewed and large scale projects are launched (e.g. INGRID and GRHYD in France, E.ON/Hamburg in Germany, Energy Valley in the Netherlands). These different projects are used to test the injection of hydrogen into the gas grid, as well as to further shape the business case and steer R&D to optimize the process efficiency, in hope to reach a profitable business case, which has yet to be proven.
Lack of viable business case
Three main drivers deeply affect the profitability of PtG plants and the marginal production costs of 1 MWh of hydrogen and methane: the original CAPEX investment costs, the capacity factor and the electricity prices.
The market prices for electricity can be expected to decrease due to further use of wind energy in the future and its advantageous position in the merit order. On the other hand the price for methane and natural gas is expected to increase (according to IEA 2012). Even with these beneficial developments the business case of PtG remains negative and the investment does not pay back over the exploitation period. Only in optimistic scenarios with low electricity prices, high methane prices and high capacity factors is the investment in a PtG plant profitable.
Looking ahead: key success factors
Approaching the COP21 Paris climate conference in December 2015, regulatory and political signals are late, and significant efforts are still required to materialise the willingness of PtG actors and experience gained in PtG projects:
- Development strategy: develop a shared roadmap between power and gas actors for the industrialisation of PtG (industrials and institutions),
- Regulatory changes: to determine feed-in tariffs for “e-gas” and electricity network access tariffs for PtG systems, value PtG in capacity mechanism and ancillary services, address safety issues around hydrogen usage, harmonise EU rules in terms of injection of hydrogen into the gas networks,
- Technological advances: in order to improve process efficiency and reduce costs to reach profitability,
- Funding: support R&D and pilot projects via funding programs,
- Communication: around PtG to raise stakeholders and public awareness, change perception around hydrogen and PtG in order to ensure future acceptability.
PtG is to be considered as a new pillar for the development of our future energy system, and a catalyser for green mobility and the hydrogen sector. Looking at 2050 when, according to the EU directives, no CO2 emission should be released and consequently no fossil fuel used, alternative energy storage solutions will have to be found. In the meantime Power to Gas appears to be a valuable ally for the necessary transition towards a decarbonised energy system.