News / The Future of Gases, part II: the Beginning of a Journey webinar recording is available

The Future of Gases, part II: the Beginning of a Journey webinar recording is available

Questions from the webinar audience:

How likely can you achieve your vision 2035?
– Our vision 2035 is “Gases enable a carbon neutral society – we provide a platform for it”. We believe it is possible to achieve our ambitious Vision 2035, but there can be a wide spectrum of outcomes of that vision. Platforms of gases will be part of the future energy and resource system. But how exactly, is yet to be determined. What is best in Finland may differ in Germany and vice versa. Therefore, we need to start now together with customers and other stakeholders. We believe in market-based and technology neutral solutions and aim to development Gasgrid and gas markets towards that direction.

Can Gasgrid be profitable with the new strategy? The transition period can be difficult.
Yes, it can. We focus on two dimensions of the market: current and future. In the current customer-centric market we aim at efficiency, reliability and predictability for our customers. This should enable us to keep tariffs for customers at competitive level and Gasgrid remain profitable according to regulatory model.

The future market and platform are then investigated and developed in a gradual manor. Gasgrid has capacity to invest in developing the future market. We will do this together with our existing and potentially new customers. We have planned to do this in a way it does not jeopardize our current customers and business. If the future markets of clean gases develop well in the coming decades and TSO will have a major role there, this can be a factor to enable positive growth. There are uncertainties but that is the reason why we see strategically important to start the development early together with our stakeholders.

Any practical examples how Gasgrid can be involved in sector integration without endangering its neutrality as TSO? What are the obstacles for sector integration?

Sector integration is a wide topic that can be understood in various ways. One way to address sector integration is to approach it from a system optimization point of view. In this holistic approach, it’s important to pinpoint the challenges and obstacles that are currently hindering or slowing down more flexible energy transfer between different energy carrier systems, such as gas and electricity sectors. For example, from the optimization of the whole energy system, in some cases it may be more resource efficient to transfer energy as electricity and in some cases as gases. It is also important to recognize regulative or legislative limitations and develop them to allow a more flexible system. When sectors and potentially different markets are integrating harmonization of market rules and clarification of responsibilities of different stakeholders is needed. This development towards a more flexible and greener system requires systematic development and collaboration between different TSO’s, DSO’s, customers and energy users as well as the regulators to first identify the challenges of integration and then developing a plan on how to overcome the challenges in the best way.

Gasgrid can be involved in energy sector development and for example:

Evaluate together with parties from other sectors the differences in market mechanisms, regulations, taxations etc. and influence the development of these to a direction that allows more flexibility in the energy system without jeopardizing safety, security of supply, neutrality and customer needs.

In addition, we at Gasgrid can develop our own services and systems interfaces to be more flexible and consider future needs related to sector integration.

Is National/European legislation able to support new technologies in gas sector (Biogas, Power-to-Methane, Power-to-hydrogen) equally compared to battery technologies?

I have understood that there are few problems in tax legislation considering this subject. For example, biogas is being taxed similarly to natural gas from the year 2022 beyond in Finland. What separates biogas from synthetic methane in this case?

Doesn’t this drive energy field to use hydrogen and batteries over biogas and synthetic methane in energy storage?

Gasgrid strongly supports a market based and technology neutral approach in developing and implementing new solutions. However, it must be recognized that adaptation of new solutions often requires support before the solutions can become profitable and all the technological challenges that are prominent in early implementation phase have been solved. The energy sector is currently going through a major transformation and as many things are changing simultaneously it’s possible that some challenges in managing the regulations and other steering mechanisms will occur. Therefore, it possible that in some cases the technology neutral approach may not realize at all times, depending on the set of steering mechanisms that applies for a certain energy carrier or technology. For the technology neutral and market-based approach to be fulfilled, its’ important to have a frequent and open discussion in the energy sector generally and towards the policy makers and regulators.

What is the potential bio-methane production capacity in Finland?

According to the Finnish biogas association production capacity could add up to 4-7 TWh in 2030 in Finland. Theoretical maximum for digestion technology is up to 25 TWh/a and with current logistics and production solution techno economical potential is around 10 TWh/a.

What is the current H2 fraction that you allow in your gas grid? Is it possible that GasGrid would even build a separate hydrogen grid(s)?

Currently, over 99% of the gas transferred in our gas grid is natural gas and less than 1% is biogas. Natural gas typically contains less than 1% hydrogen.

We are currently starting evaluations in order to understand what the implications of a higher hydrogen content would be and what kind of investments a higher hydrogen content would require. This evaluation must be done very carefully, as a higher hydrogen content affects in addition to our system also our customers systems, processes and equipment and the current systems have been designed for natural gas with a low hydrogen content.

Our vision 2035 is “Gases enable a carbon neutral society – we provide a platform for it”. Separate hydrogen grids are one potential way of introducing hydrogen to energy and raw material systems in the future and influence the transition of energy systems towards carbon neutrality. As hydrogen transmission grids do not yet exist and the need for developing hydrogen economy has appeared relatively quickly, there is significant need for market and regulatory development. This may include also some adjustments to the definition of Gasgrid’s potential role in the future regarding hydrogen as Gasgrid currently has a clearly defined task as TSO of the natural gas grid in Finland. However, Gasgrid has excellent expertise and experience in gas transfer, which can be useful also for hydrogen systems in the future. As we are involved in developing the pathway towards carbon neutral society, we have started to evaluate the possibilities related to hydrogen and other clean gas systems together with our customers, energy regulator, policy makers and owner.

In case the RES share (wind/solar) in the total electricity supply will grow significantly, I assume, that it would mean volatility in the electricity prices. Meaning that there would be very low prices when there are suitable weather conditions, but also high prices when the there is not wind/solar output available. Can the hydrogen technology adapt to “generate hydrogen” price dependent (i.e. start/shut down the processes in relation to the prices)?

With increase of volatile renewables in the energy system, more flexibility of the energy system is required. It will be interesting to follow the development of P2X technologies (e.g. hydrogen production), to see whether hydrogen production can provide required flexibility to the system.

However, CAPEX of an industrial plant is typically in a significant role, when calculating the profitability of process. In order to pay back the CAPEX and get a return on the investment, many industrial production processes require high yearly operational hours. This of course depends on a multitude of factors in addition to CAPEX and operational hours, such as in this case the electricity price and the value of hydrogen. Regarding hydrogen production it remains to be seen what kind of business cases will be feasible and what will be the best ways of operating a hydrogen production plant both from economical and technical point of view.

Nevertheless, gases as fuels, regardless of their origin, can provide flexibility to the system as they have reliable supply and energy production with gas is easy and fast to adjust. Turning on or off, or adjusting the capacity of gas engines, boilers and turbines is possible with a short response time. In addition, gases have typically a high energy content and they can therefore be also stored either in pipelines to some extent or in liquified form in separate gas storages.

When volatility increases, the energy markets must adapt to changes. In the future it’s possible that solutions with capability to provide flexibility and capacity changes with short response times will be valuable.

 

Any practical examples how Gasgrid Finland can be involved in sector integration without endangering its neutrality as TSO? What are the obstacles for sector integration?
– Sector integration is a wide topic that can be understood in various ways. One way to address sector integration is to approach it from a system optimization point of view. In this holistic approach, it’s important to pinpoint the challenges and obstacles that are currently hindering or slowing down more flexible energy transfer between different energy carrier systems, such as gas and electricity sectors. For example, from the optimization of the whole energy system, in some cases it may be more resource efficient to transfer energy as electricity and in some cases as gases. It is also important to recognize regulative or legislative limitations and develop them to allow a more flexible system. When sectors and potentially different markets are integrating harmonization of market rules and clarification of responsibilities of different stakeholders is needed. This development towards a more flexible and greener system requires systematic development and collaboration between different TSO’s, DSO’s, customers and energy users as well as the regulators to first identify the challenges of integration and then developing a plan on how to overcome the challenges in the best way.
Gasgrid Finland can be involved in energy sector development and, for example, evaluate together with parties from other sectors the differences in market mechanisms, regulations, taxations etc. and influence the development of these to a direction that allows more flexibility in the energy system without jeopardizing safety, security of supply, neutrality and customer needs.
In addition, we at Gasgrid Finland can develop our own services and systems interfaces to be more flexible and consider future needs related to sector integration.

How do we get from today’s business to the future, how will Gasgrid Finland do business within the next five to ten or fifteen years? Can Gasgrid Finland be profitable with the new strategy? The transition period can be difficult.
– Yes, it can. We focus on two dimensions of the market: current and future. In the current customer-centric market we aim at efficiency, reliability and predictability for our customers. This should enable us to keep tariffs for customers at competitive level and Gasgrid Finland remain profitable according to regulatory model.
The future market and platform are then investigated and developed in a gradual manner. Gasgrid Finland has capacity to invest in developing the future market. We will do this together with our existing and potentially new customers. We have planned to do this in a way it does not jeopardize our current customers and business. If the future markets of clean gases develop well in the coming decades and TSO will have a major role there, this can be a factor to enable positive growth. There are uncertainties but that is the reason why we see strategically important to start the development early together with our stakeholders.
3. How likely can you achieve your vision 2035?
Our vision 2035 is “Gases enable a carbon neutral society – we provide a platform for it”. We believe it is possible to achieve our ambitious Vision 2035, but there can be a wide spectrum of outcomes of that vision. Platforms of gases will be part of the future energy and resource system. But how exactly, is yet to be determined. What is best in Finland may differ in Germany and vice versa. Therefore, we need to start now together with customers and other stakeholders. We believe in market-based and technology neutral solutions and aim to development Gasgrid Finland and gas markets towards that direction.

What is the current H2 fraction that you allow in your gas grid? Is it possible that Gasgrid Finland would even build a separate hydrogen grid(s)?
– Currently, over 99% of the gas transferred in our gas grid is natural gas and less than 1% is biogas. Natural gas typically contains less than 1% hydrogen.
We are currently starting evaluations in order to understand what the implications of a higher hydrogen content would be and what kind of investments a higher hydrogen content would require. This evaluation must be done very carefully, as a higher hydrogen content affects in addition to our system also our customers systems, processes and equipment and the current systems have been designed for natural gas with a low hydrogen content.
Our vision 2035 is “Gases enable a carbon neutral society – we provide a platform for it”. Separate hydrogen grids are one potential way of introducing hydrogen to energy and raw material systems in the future and influence the transition of energy systems towards carbon neutrality. As hydrogen transmission grids do not yet exist and the need for developing hydrogen economy has appeared relatively quickly, there is significant need for market and regulatory development. This may include also some adjustments to the definition of Gasgrid Finland’s potential role in the future regarding hydrogen as Gasgrid Finland currently has a clearly defined task as TSO of the natural gas grid in Finland. However, Gasgrid Finland has excellent expertise and experience in gas transfer, which can be useful also for hydrogen systems in the future. As we are involved in developing the pathway towards carbon neutral society, we have started to evaluate the possibilities related to hydrogen and other clean gas systems together with our customers, energy regulator, policy makers and owner.

What is the potential bio-methane production capacity in Finland that could be injected into the transmission grid?
– According to the Finnish biogas association production capacity could add up to 4-7 TWh in 2030 in Finland. Theoretical maximum for digestion technology is up to 25 TWh/a and with current logistics and production solution techno economical potential is around 10 TWh/a.

Is National/European legislation able to support new technologies in gas sector (Biogas, Power-to-Methane, Power-to-hydrogen) equally compared to battery technologies? I have understood that there is few problems in tax legislation considering this subject? For example biogas is being taxed similarly to natural gas from the year 2022 beyond in Finland. What separates biogas from synthetic methane in this case? Doesn’t this drive energy field to use hydrogen and batteries over biogas and synthetic methane in energy storage? What are or should be the key actions of European H2 strategy regarding hydrogen transmission (and production/demand)
– Gasgrid Finland strongly supports a market based and technology neutral approach in developing and implementing new solutions. However, it must be recognized that adaptation of new solutions often requires support before the solutions can become profitable and all the technological challenges that are prominent in early implementation phase have been solved. The energy sector is currently going through a major transformation and as many things are changing simultaneously it is possible that some challenges in managing the regulations and other steering mechanisms will occur. Therefore, it is possible that in some cases the technology neutral approach may not realize at all times, depending on the set of steering mechanisms that applies for a certain energy carrier or technology. For the technology neutral and market-based approach to be fulfilled, its’ important to have a frequent and open discussion in the energy sector generally and towards the policy makers and regulators.

In case the RES share (wind/solar) in the total electricity supply will grow significantly, I assume, that it would mean volatility in the electricity prices. Meaning that there would be very low prices when there is suitable weather conditions, but also high prices when the there is not wind/solar output available . Can the hydrogen technology adapt to “generate hydrogen” price dependent (i.e. start/shut down the processes in relation to the prices).
– With increase of volatile renewables in the energy system, more flexibility of the energy system is required. It will be interesting to follow the development of P2X technologies (e.g. hydrogen production), to see whether hydrogen production can provide required flexibility to the system.
However, CAPEX of an industrial plant is typically in a significant role, when calculating the profitability of process. In order to pay back the CAPEX and get a return on the investment, many industrial production processes require high yearly operational hours. This of course depends on a multitude of factors in addition to CAPEX and operational hours, such as in this case the electricity price and the value of hydrogen. Regarding hydrogen production it remains to be seen what kind of business cases will be feasible and what will be the best ways of operating a hydrogen production plant both from economical and technical point of view.
Nevertheless, gases as fuels, regardless of their origin, can provide flexibility to the system as they have reliable supply and energy production with gas is easy and fast to adjust. Turning on or off, or adjusting the capacity of gas engines, boilers and turbines is possible with a short response time. In addition, gases have typically a high energy content and they can therefore be also stored either in pipelines to some extent or in liquified form in separate gas storages.
When volatility increases, the energy markets must adapt to changes. In the future it’s possible that solutions with capability to provide flexibility and capacity changes with short response times will be valuable.

 

Gasgrid Finland Oy is a Finnish state-owned company and transmission system operator with system responsibility. We offer our customers safe, reliable and cost-efficient transmission of gases. We actively develop our transmission platform, services and the gas market in a customer-oriented manner to promote the carbon-neutral energy and raw material system of the future. Find out more: www.gasgrid.fi/

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