Energy doesn’t get cheaper than it is today. Or rather, the bottom of the barrel is also the bottom of the bottle. Dropping oil and gas prices, can go lower but lower prices are not conducive for pushing innovation in either the oil and gas sector nor in the areas of renewable energy and energy efficiency.
The race to the bottom in Central and Eastern Europe, for price competition against Western Europe is based on artificially low prices subsidized through ‘hidden’ losses in selected companies, environmental degradation and even human health. Despite this dirty side of the gas business, which is wrapped up in the geopolitics of gas, the gas industry as a whole offers innovative and fulfills important niches in the region’s energy system. Nonetheless, each region and each country pursues gas developments in different fashions.
Speaking on the panel ‘The Role of Gas in the Future Energy Mix‘ at the Krynica Economic Forum, in Poland, I outlined both the race for the bottom pursued by countries like Hungary and Bulgaria, but I also considered some very interesting innovative distribution methods I learned that Shell is now using. Speaking on the panel from Shell, was Chris Johnson, General Manager New Markets Europe from Shell. I learned from him, that Shell is now using small scale Liquified Natural Gas (LNG) that comes into the terminal in the Netherlands and goes directly into trucks for delivery and into transport vehicles like shipping and public transport. Instead of re-gasification, the gas remains in its frozen state. Mr. Johnson also mentioned the potential in Africa for expanding Shell’s gas business, including consumers and large scale power plants. Thus they can pursue a strategy of delivering gas for centralized and decentralized power and transport systems. I am usually skeptical about the gas industry and what it offers, as renewables can provide a competitive alternative in many cases. But I see the strong role in transport and replacement for coal or oil fired power plants.
The increasing role of gas also begins to fill a role in the idea of ‘energy justice’. As Sovacool et al in their book, ‘Energy Security, Equality and Justice‘ explain, there are differences in OECD and non-OECD countries and how affordability (OECD) and access (non-OECD) to energy resources are granted. Getting to a cheaper price of gas, may alleviate affordibility for OECD housholds, who have trouble paying their energy bills. But often, it is the poorer of society, that also lack support for energy efficiency measures in their homes or government programs that support their energy use. Lower energy prices – to a point – help these households out, but price is only one component.
Long term, it is important to address the role of energy efficiency in alleviating energy poverty. Targeted energy efficiency measures reduce consumption and subsequent financial support will need to be less.
In non-OECD countries, the growth in renewable energy taps into a distributed energy system. Costly centralized systems that were rolled out in the past in OECD countries can largely, in non-urban areas, be avoided for the developing world. Even in urban regions, solar collectors for hot water heating alleviate the needs for an extensive urban gas distribution system from being established. Energy justice in this sense applies to a range of energy technologies that are used at the micro-level thereby alleviated unsupported demand on electrical grids that are often failing in developing countries.
And finally, we get to the role of gas in energy security. For this brief blog post, I’ll avoid an extensive or even mild discussion of energy security in the gas sector. Rather, I’ll emphasize the split in Europe in how to address energy security. There are three camps: Western European, which believes in market orientated and supply diversification options to boost energy security; Poland, Czech Republic and Romania display a cautious attitude about expanding gas the use of gas in their energy systems and any dependency that may result from this expansion; Then we have the ‘divergent attitude’ countries of Hungary and Bulgaria that are fine with importing more Russian gas while expanding their interconnectors at a glacial pace, essentially delaying the inevitable infrastructure integration that goes along with EU membership. These final two countries also support any plan floated by Moscow to maintain their traditional source of gas at politically flexible rates.
The future of gas is wide ranging. As we all commented on the panel, the past 10 years of the gas market included events and technological developments nobody could predict. I concluded my comments outlining that the rapid technological changes in energy technologies is only set to accelerate. We are building a new energy system, whether this includes government support or even when there is no government support. People are taking energy matters into their own hands, and the price point of generation technology is there for them to make it happen. In the area of gas, while renewables should be pushed harder to compete against gas, the familiarity and ability to fit centralized and decentralized systems make it a strong contender to continue to influence how the energy system develops.