EU’s energy transition resilience needs action, gas infrastructure funding

Europe’s energy transition is at a critical juncture. While challenges towards decarbonisation persist, balancing energy security with sustainability, leveraging renewable and low-carbon gases, and addressing infrastructural and financial hurdles to electrification remain key issues in the discussion.

These issues were explored in a recent Euractiv discussion on ensuring resilience in the European Energy Transition, where stakeholders highlighted sector-specific challenges and the urgent need for accelerated action.

Gaseous fuels

Ahead of the discussion, Frontier Economics Director Christoph Gatzen and Manager Stefan Lorenczik presented key takeaways from a new study commissioned by industry body Eurogas.

Lorenczik highlighted the benefits of gaseous fuels in Europe’s energy transition, enabling a competitive energy system and supporting decarbonisation goals, relying on balancing affordability, security, and sustainability.

The study found gases were able to lower energy costs for industry and consumers by repurposing existing infrastructure and reducing electricity prices by up to 21 per cent. Hydrogen prices could also drop by 30 per cent with wider gas availability.

According to the study, gas and hydrogen-fired power plants maintain energy reliability as renewable electricity grows and demand becomes increasingly electrified. Gases are also vital in achieving EU decarbonisation objectives.

It concludes that even with high electrification, gases and, in particular, hydrogen, will remain key energy carriers in 2050, the EU’s goal is to be climate-neutral and have an economy with net-zero greenhouse gas emissions.

Blue hydrogen

Commenting on the study, Raphael Hanoteaux, Senior Policy Advisor at E3G, called for the use of gas as an “enabler of more electrification and renewable penetration into the energy system, rather than trying to take the place of electrification”.

The approach aligns with the European Commission’s hydrogen strategies, which emphasise the development of renewable and low-carbon hydrogen.

Blue hydrogen, derived from natural gas using steam methane reforming (SMR) and carbon capture and storage (CCS), is seen as a transitional solution. Still, concerns about methane leakage and its long-term viability must be addressed to ensure its compatibility with climate targets.

“Blue hydrogen has a big transition role, but it is also there to stay. This is not about percentages but making sure that we actually start this transition. At the moment, we are stuck, and that is worrying us,” said Corinna Grajetzky, Director for European Affairs at ENGIE.

Electrification challenges

Europe has made significant progress in electrification, but the journey is far from complete. Christoph Gatzen highlighted the complexity of the electricity system, which requires real-time balancing of supply and demand.

Achieving this at scale will demand massive infrastructure investments, including an estimated 2000 GW of solar capacity and 300 GW of batteries. “While we have embraced electrification, we do not see how [the energy transition] is possible with almost only electrification,” Gatzen explained.

But for specific industrial sectors like ceramics, which consume significant amounts of gas, switching to electricity poses a significant barrier. “We cannot do that because the grid is completely saturated,” Renaud Batier, Director General of Cerame-Unie, told the panel.

According to him, substituting gas cannot be seen as an advantage, as it represents a huge challenge in capital and personal expenses. Many in the sector do not have access to many of the new solutions, and the industry’s CO2 emissions are too small for CCS to be a solution in most cases.

“Today, gas costs 45 EUR/MWh. Our competitors in the United States have it at 9 EUR/MWh, and most of our competitors have it between 5 and 10,” Batier remarked, highlighting the Draghi report as an excellent diagnosis to what extent the EU is competitive.

Resilience, diversification, innovation

Diversifying both energy sources and supply chains is a recurring theme in Europe’s energy transition. While the continent has cut ties with Russian gas, its dependency is shifting to other suppliers, such as the United States and Azerbaijan.

This has introduced new vulnerabilities, according to Hanoteaux. The volatility of fossil fuel prices and geopolitical uncertainties necessitate a stronger focus on renewables and local production.

“We are creating dependencies… on gas from the US, from Donald Trump, who is a character that will probably not hesitate to use it politically,” Hanoteaux warned. To mitigate these risks, the Commission is encouraged to accelerate the adoption of renewables, which are already experiencing significant cost declines.

Financing the transition

Europe’s Internal Market must be streamlined to eliminate barriers to private investment, and public mechanisms need to align with the scale and urgency of the task. “We need to improve the framework for private investments,” said Grajetzky.

“The next few years will be decisive in investments. We need to make decisions now,” she emphasised, adding that the Clean Industrial Deal offers a test case for the European Commission’s commitment to decarbonisation.

A flexible approach to renewable hydrogen rules and increased funding for industrial decarbonisation could provide the necessary momentum. All the while, Grajetzky called for not getting lost in “dogmatic discussions” but keeping all options open to ensure resilience in the energy transition.

“We need low-carbon hydrogen for various reasons, but also to help develop renewable gases. We need the market to kick off now and to incentivise infrastructure. Let’s be pragmatic and have all options open,” Grajetzky remarked.

[Edited By Brian Maguire | Euractiv’s Advocacy Lab ]