outlook for natural gas in europe
TRANSCRIPT
OUTLOOK FOR NATURAL GAS IN EUROPE
6th German-Norwegian Energy Conference
Dr. Berit Tennbakk, Partner, THEMA Consulting Group
2THEMA Consulting Group
Europe: Falling demand
– Coal outcompetes gas in the
power market
– Decreasing industrial demand
Asia: High price region –
recent fall in prices
– Strong economic growth
– Phase-out of nuclear in Japan
– Strong link to oil price
– Lately: Slower economic growth
and falling demand, nuclear
coming online in Japan
US: Dramatic changes
– Increased supply from Shale gas
– Expected imports not needed
– Will start LNG exports early 2016
MAIN DRIVERSHISTORICAL DEVELOPMENT
FALLING AND CONVERGING GAS PRICES
RETROSPECT
Source: World Bank
Shale gas revolution
Financial crisisFukushima
Oil price
crash
3THEMA Consulting Group
GAS CONSUMPTION 2004 AND 2014 CONSUMPTION PER SECTOR
TREND: FALLING EUROPEAN GAS DEMAND
RETROSPECT
Source: BP Statistical Review of World Energy 2015
4THEMA Consulting Group
Based on plans from each country
developed for Paris 2015
The Bridge scenario adds the
following measures in order to
achieve the 2 degrees target:
– Increased energy efficiency in
buildings, industry and transports
– Increased renewable investments
– Measures against coal, ban on new
coal power plants
– Phase-out of fossil subsidies
– Measures against methane emissions
from oil and gas
IEA BRIDGE SCENARIO ENERGY CONSUMPTION IN EUROPE
IEA: STABLE FUTURE GAS DEMAND IN ORDER TO
ACHIEVE THE 2 DEGREE TARGET
OUTLOOK
Source: IEA (2015)
5THEMA Consulting Group
Industrial gas consumption in
Europe has not recovered after
the financial crisis
Industrial production is shifting to
less gas (energy) intensive
sectors
– Particularly in the UK and Italy
European Commission “Energy
Trends to 2050” predicts future
energy efficiency improvements
«CHEAP ENERGY IS THE NEW CHEAP LABOUR»
NEW INDUSTRIAL DEMAND OUTSIDE EUROPE?
OUTLOOK
Source: Financial Times
6THEMA Consulting Group
«CHEAP ENERGY IS THE NEW CHEAP LABOUR»
NEW INDUSTRIAL DEMAND OUTSIDE EUROPE?
OUTLOOK
Source: Financial Times
“There are no energy-
intensive investments taking
place in Europe now”
“Why would you locate a new
investment in a place with
both high labour costs and
high energy costs, many of
which are self-inflicted?”
Dieter Helm, professor of
energy policy at the University
of Oxford
7THEMA Consulting Group
Increased share of electricity
– Energy efficiency measures
increases use of heat pumps
Efficiency gains yield
reduced energy intensity
– 16% reduction in household
heating
– 25% reduction in commercial
heating
EU Commission: Oil heating
replaced by gas heating
– Falling oil prices may reduce
this effect
TRENDS HOUSEHOLD ENERGY DEMAND IN EU REF SCENARIO
EU: FLAT DEVELOPMENT IN RESIDENTIAL GAS
Sources: EC (2013), EU Energy, Transport and GHG Emissions – Trends to 2050, reference scenario 2013;
IEA (2015): World Energy Outlook Special Report – Energy and Climate Change.
OUTLOOK
kWh/m2
2013
2030
kWh/GDP
8THEMA Consulting Group
GAS SET TO RE-ENTER THE POWER MARKET
OUTLOOK
MERIT ORDER CURVE GERMANY
Source: THEMA projections
9THEMA Consulting Group
GAS SET TO RE-ENTER THE POWER MARKET
OUTLOOK
MERIT ORDER CURVE GERMANY
Source: THEMA projections
10THEMA Consulting Group
ETS reforms (MSR,
annual cap reductions)
may drive up carbon
prices
Large-scale fuel
switching from coal to
gas at around 30
EUR/tonne
Gas completely
outcompetes coal when
the carbon price reaches
around 50-60 EUR/tonne
BACKGROUND HIGHER CO2 PRICE BENEFITS GAS
EU ETS KEY FOR GAS TO POWER
OUTLOOK
Source: Model results TheMA power market model (Carbon market module)
GENERATION GERMANY 2030 GENERATION NETHERLANDS
0
100
200
300
400
500
600
700
0 10 20 30 40 50 60 70
TWh
Carbon price [EUR/tonne]
Bio
CHP
Hydro
Solar
Wind
Gas
Oil_shale
Coal
Lignite
Nuclear
0
20
40
60
80
100
120
140
160
0 10 20 30 40 50 60 70
TWh
Carbon price [EUR/tonne]
Bio
CHP
Hydro
Solar
Wind
Gas
Oil_shale
Coal
Lignite
Nuclear
11THEMA Consulting Group
HIGHER CARBON PRICES INCREASE GAS UTILIZATION
OUTLOOK
MERIT ORDER CURVE GERMANY 2030
Source: THEMA projections
12THEMA Consulting Group
HIGHER CARBON PRICES INCREASE GAS UTILIZATION
OUTLOOK
MERIT ORDER CURVE GERMANY 2030
Source: THEMA projections
13THEMA Consulting Group
GAS AND RENEWABLES – A BEAUTIFUL RELATIONSHIP?
OUTLOOK
Source: THEMA projections
14THEMA Consulting Group
GAS AND RENEWABLES – A BEAUTIFUL RELATIONSHIP?
OUTLOOK
Source: THEMA projections
15THEMA Consulting Group
MAIN MESSAGES
Gas continues to play a significant role in Europe’s energy mix through the
energy transition
Renewable build-out mainly replace coal generation capacity
But the volume of gas to power depends heavily on carbon prices
Industrial gas consumption hinges on global gas prices and CO2 costs
Residential gas consumption is set to remain flat due to efficiency gains
