GasTerra's G3: Newsletter July 2014

Column Martijn Vegter: Natural gas fund

The coalition parties VVD and PvdA, together with the parties supporting the coalition, D66, CU and SGP, have reached an agreement on the (re)introduction of a Dutch natural gas fund. The government is taking this step to prepare us for a time when there will be no more income from natural gas to boost public funds. I expect this day lies many years in the future, especially if the Netherlands, along with the sustainable (!) Danes, opens the way to trial drilling for shale gas.

The Dutch government is now proposing that profits from natural gas should be removed from the budget and placed in a separate fund. The interest income will be used to promote innovation in SMEs and fundamental scientific research. These are excellent objectives in themselves, but I think the money could be put to other uses.

Doesn’t the idea of a natural gas fund sound wonderful? Our thoughts immediately turn to the vast financial reserves of 650 billion (!) euros which Norway has built up over the years. Norway’s pot of money is now so full that it is threatening to overflow, which is why the Norwegian state investment fund NBIM is taking a larger stake in companies from 2016 onwards.

We have recently heard and read much pointing to a modest recovery in industry. Growth in the chemical industry, higher employment in the processing industry and rising demand for metal. But just because things are better does not mean that they are good; growth could well falter.

Furthermore, Dutch energy-intensive industry still has to fight hard to compete on the world scene because of major differences in world energy prices. Innovation is likely to play a key role in this fight. At the start of this year VEMW was still saying that the absence of a level playing field with other countries in the region and with other continents meant that companies which had to compete internationally were at a disadvantage. Innovation in appropriate use of energy, production processes and products helps industry face up to the competition.

So it would be wonderful if a third use of money from the natural gas fund could be added: innovation in energy-intensive industry. This would encourage new investment in this sector and allow us to retain this sector which is so important to our economy.

Martijn Vegter, account manager at GasTerra

GasTerra and Eneco have concluded a unique wind-dependent gas supply agreement

GasTerra and Eneco signed an innovative agreement on 19 May. The key feature of the agreement is that the quantity of gas which Eneco takes from GasTerra depends on the predicted wind speed. The flexible use of natural gas which this agreement allows will encourage Dutch energy supply to become more sustainable.

Wind is an uncertain factor

This agreement came about as a result of interaction between Eneco and GasTerra. Eneco is an important player in the sustainable energy market, and wind farm capacity is an important part of its activity. As wind is an uncertain factor, revenues from installed wind capacity (and consequently the yield on investment in wind energy) vary. Eneco’s need for gas also varies in line with fluctuations in the amount of electricity generated from its wind power; if the amount of electricity generated from the wind farms is low, Eneco needs more gas to use in its gas-fired power plants.

Transfer of risks

GasTerra and Eneco have developed a wind-dependent gas supply system to minimise these risks. This agreement means that GasTerra is taking over some of the risks from Eneco via the gas supply system. When wind speeds are low, GasTerra will supply more gas to Eneco, and Eneco will pay a lower price for it; but when wind speeds are high GasTerra will supply less gas and Eneco will pay a higher price. This means that variations in yields from wind energy will be balanced against the use of gas.

Natural gas as an ideal transition fuel

By reaching this agreement, GasTerra and Eneco are reflecting in commercial terms the prominent role which both parties wish to see gas playing as an ideal transition fuel in the move towards sustainable energy supply. As natural gas is the cleanest fossil fuel, and as the large-scale and flexible options for using natural gas are a perfect match for the uncertain output of increasing sustainable energy generation, this transition role is tailor-made for natural gas.

Kees-Jan Rameau en Gertjan Lankhorst tekenen het Windflex-contract
Signature of the wind-dependent gas supply agreement by Kees-Jan Rameau of Eneco (l) and Gertjan Lankhorst of GasTerra (r).

New balancing regime

GTS switched to the new balancing regime at 6 a.m. on 3 June 2014. This step was the result of the decision of the European Network of Transmission System Operators for Gas (ENTSOG) to amend the European network code for balancing in order to promote transnational trade and competition in Europe. The new regime is very similar to the old one, with only a few changes.

The biggest change is that the bid price ladder has been replaced by within-day trading on the title transfer facility (TTF). If there is a surplus or shortage in the transmission network, GTS no longer calls on the bid price ladder; gas is bought from or sold to ICE Endex.

Another change is the introduction of a linepack flexibility service (LFS). Under this mechanism, shippers pay a fee for the use of GTS’s network buffer. The fee is based on the 6 a.m. portfolio imbalance signal and is 0.4% of the neutral gas price.

The transition went smoothly as can be seen below.

SBS gasday 3 June 2014
SBS gasday 3 June 2014

The first within-day balancing action took place on 7 June because the system was long. GTS sold a surplus of gas on the exchange to rebalance the system.

GasTerra CEO elected as President of Eurogas

On June 20th, the General Assembly of the European branch organisation Eurogas has elected Gertjan Lankhorst, CEO of GasTerra, as its new President. He succeeds Frenchman Jean-François Cirelli who has headed Eurogas for the last four years. The Eurogas Presidency is an ancillary position, Mr Lankhorst will continue in his post as CEO of GasTerra.

Eurogas brings together a total of 45 gas sector companies and organisations, dealing in gas trading, distribution and retail, from 25 different countries. It is responsible for protecting the sector’s common interests in Brussels.

EnTranCe: research centre in Groningen for future energy systems is taking shape

The transition towards a sustainable energy supply is a challenge that will last several decades. Consequently, a considerable body of knowledge needs to be acquired so that the desired transition can be dealt with responsibly. The Energy Academy Europe (EAE) has been set up in Groningen to develop this knowledge. GasTerra was one of the groups behind the establishment of the EAE, an institution where energy education, research and innovation meet. The applied research centre (EnTranCe, or Energy Transition Centre) is an important part of the EAE, located close to the EAE on the Zernike complex. Businesses, entrepreneurs and academics are working together here to create tomorrow's energy supplies.

Research centre occupying one hectare

EnTranCe currently occupies a one-hectare site, but has space to expand to five hectares. Research into gas conversion, production of sustainable gases and energy storage is currently taking place in portocabins.

Test facilities in portocabins
Test facilities in portocabins

Research into gas conversion focuses mainly on achieving higher yields from small CHP installations. Stirling engines, fuel cells and small gas turbines are used for this purpose. Research is also being conducted into the combination of sustainable energy and gas, such as a (new generation) solar boiler with a high-efficiency combi boiler. Work is also being done on a combination of a small electrical (air/water) heat pump and a high-efficiency combi boiler. Both combinations involve optimising the use of sustainable energy and gas back-up.

Finally, eight fuel cells have been installed to investigate the flexibility of decentralised electricity production in combination with large-scale use of decentrally located solar panels in towns. The research concentrates on how quickly the fuel cells can be upregulated and downregulated when the power provided by the solar panels fluctuates, for example in cloudy weather.

The storage of energy will play a crucial role in large-scale integration of sustainable energy in our energy system. This would involve both short-term storage for a day, for example, and long-term storage for an entire season. EnTranCe is working on various forms of energy storage: electricity storage (either alone or in combination with electric transport), heat storage (including the use of phase transition materials) and gas storage (including hydrogen).

The various technical innovations are integrated by means of a ‘pipe duct’: the link between the various research projects. This ‘pipe duct’ contains power cables with various voltage levels, pipes for heat and cold transmission at various temperature levels, and pipes with various types of gas.

GasTerra has produced this newsletter to raise the profile of EntranCe in industry. Go to the Entrance website for more information and contact details.