Atlantic Council

2020 Global Energy Forum

The Great Gas Debate: The Role of Gas in the Energy Transition

Speakers:

Fatima Al Nuaimi,

Chief Executive Officer,

ADNOC LNG

Marco Alverà,

Chief Executive Officer,

Snam S.p.A.

Adnan Amin,

Distinguished Fellow, Global Energy Centre,

Atlantic Council

Tom Earl,

Chief Commercial Officer,

Venture Global LNG

Moderated By:

Ambassador Richard Morningstar,

Founding Chairman, Global Energy Center,

Atlantic Council

Location:  Abu Dhabi, United Arab Emirates

Time:  11:00 a.m. Local

Date:  Sunday, January 12, 2020

ANNOUNCER:  Ladies and gentlemen, please welcome to the stage founding chairman of the Atlantic Council’s Global Energy Center Ambassador Richard Morningstar.  (Applause.)

RICHARD MORNINGSTAR:  Thank you.  And good morning, everybody, and welcome to “The Great Gas Debate,” which I think you’ll find to be very interesting and I hope entertaining as well.

You all know about the shale gas revolution in the United States and the effect that gas has had on reducing emissions in the United States and replacing coal in many instances.  But when we talk about gas it generates a huge amount of debate, of which there are several different – at least four different views that we’ve come up with which we want to talk about today during the panel session.

There are some who believe that gas should just play no role in the global energy mix; that it should have – that it’s a fossil fuel, it should be disregarded, and not play any role.  Others think that gas will be an enabler for key game-changing renewable technologies; not just solar, wind, and so forth as a – as a complementary source, but also in working through making hydrogen a reasonable source and a good source as a new technology.  There are some who would take the position that gas is a necessary bridge fuel and will be a critical, critical part of shifting the energy mix away from coal, particularly in high-demand regions such as Asia.  And then some who literally have called gas a destination fuel and provides the clean baseload energy needed for the developed world to grow.

Those are some of the particular issues.  There are sub-issues – some who would argue that just bringing, you know, gas infrastructure and developing gas infrastructure will delay new technologies because of the costs and lifespans of those – of that infrastructure.  Also, the issue of reducing the environmental concerns with respect to gas production and how significant that can be.

So what we’re going to do is we’re going to have a poll in which basically those four points that I made will be part of the poll, maybe even in a somewhat simpler manner.  And it’s not up yet.  I hope it will go up there on the screen.  And I would appreciate if most of you or all of you could vote with respect to what you believe with respect to those four, and we’ll see what you say.  And then maybe after all the presentations we’ll vote again to see if anybody has succeeded in changing your mind.

So on that score – having said that, I would invite the panel to come out onto the stage and we can begin our discussion.  I’ll be asking questions of the panelists.  There will be no – here, come right ahead.  There will be no opening presentations as such.  And then we’ll leave time for audience participation.

Let me introduce our esteemed group of panelists.  I’m going to give very brief introductions because you have the full biographies in their – in your – on your app or in whatever materials you have.

First we have Fatima Al Nuaimi, who is the chief executive officer of ADNOC LNG.  So we’ll have – she’ll be an important contributor.

Marco Alverà, who is the CEO of Snam, which is the – one of the largest utilities in Europe, an Italian company, who has very interesting and I think progressive views with respect to gas.

Adnan Amin, who I will say first is a distinguished senior fellow at the Atlantic Council, and also say that he is the – was the first and longtime director-general of IRENA, the International Renewable Energy Agency.  And, Adnan, I think you’re responsible for putting IRENA on the map.

And then, finally, Tom Earl, who’s the chief commercial officer of Venture Global LNG, a U.S. company.  And he’ll have his views as well.

So I’m going to get off of my feet because I don’t think I can stand for an hour, even though – even though the people who are running the show think the moderators should stand for an hour, and then we’ll get into – get into the questions.  You will note I have sort of sneakers on, but – (laughter) – but anyway.

So let’s start.  And we’ll start with you, Madam Al Nuaimi, and ask you the role that you see natural gas playing in the energy transition – how it can work in developing countries, your views how some of the environmental impacts can be addressed in gas production.

FATIMA AL NUAIMI:  OK.  Salaam aleikum and good morning, everybody.

Well, the title of such a panel is quite unique because a couple of years ago nobody raised this question.  It was a given.  It was promoted, like, that natural gas and LNG, as the cleanest of fossil fuel, is an integrated part of the future energy mix.  And this has been proven in many cases.

If I just talk about ADNOC LNG, for example, we were established to address such challenge that our partners in Japan were facing, to address their energy security as well as their quality of air back in the ’70s.  And today this example repeats itself; as the percentage of gas increases in the power sector or the energy mix, you see declining emissions.

I was reading just last night about Germany this summer having bigger percentage of gas in their energy mix during the summertime, and contributed to lowering their CO2 emissions by one-third.  And of course, there was an economical factor to it because gases were – gas were very – was very economical and lower prices this summer.

The U.S. is also, because of the shale and availability of gas, the availability of gas made it easier to be part of their power sector, and witnessed lowest emissions since the mid-’80s.

So that’s the line that, as LNG or gas sellers, we always use, that it’s the cleanest of the fossil fuels.  And the question on energy mix is not simple.  It cannot be addressed or it cannot be answered by just, let’s say, emotional factors.  It’s very complex.  It takes into consideration so many variables.

Nations, when they decide on their energy mix, they take into consideration the environmental impact, of course; having an economical source; having it accessible; and security of supply.  And to me, gas takes all of the above.

In terms of reliability, this is a source of gas that – this is a source of energy that does not rely on the days or months – days of the month where wind is blowing or sun is shining.  So in terms of reliability, it’s there as long as you have access to the – to the source of gas.

And if I talk specifically on LNG, LNG bridged some of the geopolitical constraints that pipeline gas previously raised.  And as in the past 10 years we have more nations joining the club of gas, so access today is available.  We’ve seen examples of countries like Pakistan, for example, bridging their requirement of gas because of the declining local resources by just hooking into an FSRU and to this available, abundant source.

So in terms of reliability, availability, and economics as well – and I think Tom will be talking about the evolution and the progress of technology and how this is contributing to making it more economical – all of this is ticking the box.

But still, as a mother and as a citizen of the world, I cannot say and use that line.  Global warming, the disasters that the world is witnessing every day, is something of reality.  So we cannot just ignore that.

So there is a responsibility on the industry to address – even if we are talking about emissions being half of that of the CO2, we have to address that there are some emissions happening because of the burning of gas and fossil fuels.  So in my view, we cannot isolate future gas development from capturing the carbon, CCUS programs, to be associated and part of it.

The other part, as an industry we should not be just working as defending the gas; we should also educate the public about the benefits of natural gas as an integrated part of the energy mix.  People’s behavior drives a lot of the consumption trend.

There is an example I keep giving all the time.  People who have seen me talk, maybe they would remember this.  I used to work on the – on the gas supply section in ADNOC, and – to the local power plants.  And it was August.  It was the peak of summer.  And I was having a debate with the power company where they want to consume gas above the quota and the contract to cater for the heatwave that we had.  So it was a tough meeting.  I finished that meeting and I wanted to relax, so I went to a spa.  And that spa – it was August – temperature was above 45 (degrees).  And in that spa I come into the room and there is a heater in the room.  And I told the therapist, so what is this for?  She said, because it’s central cooling system in the whole club, and there is a gym, and we want to keep people who are exercising cold, but the spa rooms are too small so we put a heater.  So we have air conditioning on the highest and we have a spa room with a heater.

MR. MORNINGSTAR:  That’s a fantastic story.  (Laughs.)

MS. AL NUAIMI:  So that – it was not relaxing time I spent in the spa – (laughter) – definitely.

So people’s behavior also need to change because we keep talking about the energy mix.  We keep talking about what fossil fuels or what renewables we put into the – to this.  But at the end of the day we have – in society or in the globe we have people who do not have access to the basic necessity.  You have a kid who needs to go to the street to do his homework because they don’t have access to power.  And you have different people who are misusing the energy.

Thank you.

MR. MORNINGSTAR:  OK.  Well, thank you.  Thank you very much.  I take it also from your comments that you would – that you believe that gas and renewables are not a zero-sum game, that you can have both and that gas can be a contributor to renewables.

MS. AL NUAIMI: I don’t think we can have it any other way, frankly.  It’s complementing each other.  It’s not just about – it’s also how renewable work and how gas work; how peaks of demand comes and how the reliability and continuation.  You don’t want to have electricity just when the sun is shining.

MR. MORNINGSTAR:  Thank you.  And we’ll go to Marco and then to Adnan and Tom, and Adnan promised me, by the way, that he would be very controversial, so – (laughter) – I hope when we get to you, Adnan, that you will live up to that given some of the comments that you’ve already heard.

So, Marco, where do you think natural gas is going?  How does it fit into what you are doing with Snam, some of the technologies that you are looking at such as hydrogen, and what role do you see?

MARCO ALVERÀ:  Thank you.  Well, first of all, thanks for having us here, and you’ve set a high bar with asking this panel to have some humor out of gas, which is – I never heard that before.  (Laughter.)  And then you also challenged whether we can change the opinion of such a well-informed audience, so you’ve really set the bar very high indeed.

I think gas has been always and will continue to be a very regional market as opposed to oil, which is global, and so I will assume we will have different bits of the questions you raised apply differently to regions.  So gas-producing regions have very cheap gas.  We went from 26 years of proven gas reserves to well over 400 in the last 15 years, and this means that gas, in most parts of the world, is going to be cheaper than oil, kind of indefinitely.  And so there is going to be a huge oil to gas switch in transport, for instance, and in other oil uses where gas is cheap.

And then you have the gas importing countries that are paying the price of the logistics, which is very significant, and unfortunately the big coal producers are the gas importers.  And the reason we need to get rid of coal is because switching today’s coal to gas would save six billion tons of CO2.  We are spending globally 300 billion per year on renewables; in the last decade we spent two-and-a-half trillion euros, and CO2 emissions are rising.  So there has to be an urgent effort to get rid, as much as possible, of that coal.  And this will only happen if we can lower the cost of liquefaction.

And we don’t need new technologies; we kind of just need to go back to the old technologies because, when I was in the upstream business, I built a liquefaction plant – that wasn’t too long ago – for just over $200 a ton, and that’s – you know, less than a third of what, today, it would cost to build.  So the effort has to be to compress the cost of infrastructure and liquefaction, get natural gas into the coal-consuming countries at a price point which makes a switch happen the same way it happened in gas-producing countries like the U.S., and that’s the first effort.

And then you have the new gases, so the energy transition has really just been an electricity transition.  We haven’t really changed the world of molecules yet.  And even IRENA would say that in 2050, you know, just – (audio break) – and integrate renewables.

And I think what we need to do going forward is really converge a lot more the world of electrons and the world of molecules.  Hydrogen has the beauty that it can be produced by electricity, but it behaves exactly like natural gas in many of its applications.  So the opportunity is to really not only have natural gas as a balancing for the intermittence of renewables, but really work much more at the sector coupling, integrating – physically integrating some of these networks, and that’s what we’re doing in Italy.  We’re converting some of our gas compressor stations from gas to electricity so that we take peak capacity out of the electricity system when they have excess renewables and compress the gas.  We can turn the gas pipelines into essentially a free storage instrument because we can put a lot more pressure into the system.

So we’re doing this in Italy, around Europe, and as Snam, we’re looking to countries like the UAE, and we’re working with players here to try to replicate this model where the sector coupling is really happening.  And the cost of storing hydrogen is 10 times less than the cost of storing electricity, so there’s a very strong argument that countries that have a lot of sun, or a lot of wind, or a lot of tide, or whatever their kind of natural natural resource is, can use as much of that natural natural resource to then be able to free up conventional hydrocarbons to be exported to the countries that are still using coal.

So I’m sorry if I don’t have one solution, but I think gas will play different roles in different parts of the world, and we’re certainly going to see green gas compete with conventional gas where it’s sunny.  And our research shows that we can lower the cost of electrolysis, we can produce green hydrogen from solar in the next five or 10 years at costs that are competitive with certain hydrocarbons, especially where you have to import them.

MR. MORNINGSTAR:  Thank you very much, and your presentation reminds me, yesterday I thought Fatih Birol had a very compelling presentation, and I was struck particularly by the graph that basically said if we’re going to deal with lowering emissions we have to take an all-of-the-above approach.

MR. ALVERÀ:  Yeah, that’s 21.

MR. MORNINGSTAR:  And he listed –

MR. ALVERÀ:  Twenty-one categories.

MR. MORNINGSTAR:  – it was 21.  Yeah, 21 categories or whatever, which, you know, a difficult task, but I found it a compelling slide.

Well, let me go now to Adnan.  You know, it seems like we’ve had some, you know, pretty reasonable presentations by the two first panelists, and you may come from a somewhat different view – and love to hear it.

ADNAN AMIN:  Well, thank you very much, and let me say what a great pleasure it is to be here now as a fellow.  In the past you always invited me.  I would make a very bullish speech on renewables, and leave.  And the predominant part of the audience is oil and gas people, and they would be extremely frustrated because they wanted to take a few swings at me.  So I’m here.  (Laughter.)

MR. MORNINGSTAR:  Although I think we – I think we actually do have today a very wide diversity in the audience.

MR. AMIN:  OK, well, I thought you were setting me up.

MR. MORNINGSTAR:  No, no.

MR. AMIN:  I’m happy to do that.  Like Donald Trump, I’m a good counterpuncher.  (Laughter.)

But let me say, you know, there has been – (audio break) – you know, commercial interest to start to understand what the system of the future that can guarantee sustainability for us will look like.  And in this context, we have been talking about, for the last few years, gas as the bridge.  There is an inevitability about bridges – is that sooner or later you get to the end of the bridge.  And as we look at what is happening in terms of economics, technology, geopolitics, I think the end of that bridge is getting closer much quicker than we anticipated.  And that’s for a number of reasons. 

One is we thought that the advent of gas and its replacement with coal – switching with coal was going to really decrease emissions.  And as you said, there is a regional phase to that which is, in the United States, replacing coal actually reduced emissions.  But if you look at global emissions in 2018, they rose by 2.8 percent.  That was the highest rate of increase for carbon emissions for seven years at a time when gas was entering the electricity mix in a very decisive way.

So, you know, we have to start questioning all those assumptions about what is happening with carbon, what is the optimum mix that is going to get us there.  We know, also, that the economics of energy are changing dramatically fast.  If you look at clean energy portfolios in the United States, they have decreased in cost by about 80 percent in the last decade.

Today, clean-energy portfolios are competing with new gas, some around 80 percent lower than new gas, and the assessment is that, in five to 10 years, it will be cheaper to install new renewable capacity than to run existing gas plants.  So this whole issue of stranded assets is becoming something that has to begin to focus minds.

Then we have the geopolitical angle.  You know, all this discussion about Nord Stream and the malevolence of the Russians is actually covering the fact that this is a competition for markets.  There is a massive competition between cheap U.S. LNG – you’ve installed all of this liquefaction and you’re exporting to Europe – with Russian pipeline gas that is being directly provided to European markets.  But that is happening at a time when the future of the gas market in Europe is under question.

If you look at a number of countries, today in the United Kingdom new renewables are beating any form of power generation.  Take a country like the Netherlands.  They have stopped their fracking program and they’re moving into a very heavy concentration especially on offshore wind and being part of this north European hub for wind generation.  So with the advent of their new big deal or the Green Deal or whatever it’s called now the targets for renewables have increased exponentially, which means that the cost of installation of renewables is going to decrease with scale.

The other argument about gas is that gas manages the intermittency of renewables.  Now, that may have been true five years ago and it was an extremely important part of enabling renewables to get to the new stage.  But we have a number of developments that are happening now and we are seeing that large solar and wind installations, with local battery storage – even in Australia they have grid-scale battery storage – is beginning to create a framework for dispatchable renewable electricity.  And the application of artificial intelligence to the management and smart grid to the management of renewables in the grid is creating a stability for that, and demand-side management is allowing you to have an efficiency for the management of those systems.

If you look at a country like China, their application of AI and smart-grid infrastructure, they rolled out, you know, half-a-billion smart meters.  Their state grid is the biggest company in China, employs 2 million people, and their new transmission infrastructure is state-of-the-art.

So we’re going to see a lot of this happening very fast, very soon, and it’s going to be very disruptive to energy markets.  But in the end if we are going to decarbonize we need to address how all hydrocarbon sources can be used more efficiently and less in the future.  And you know, the technological developments and the economic developments of renewables enable us to do that today.

MR. MORNINGSTAR:  Thank you for the – you know, the responses to what’s been said already.

Let me ask you just as a follow up, if you’re right that in fact new renewable generation is going to be significantly cheaper, won’t the market make that determination?  And will it happen on its own?

Related to that, are you suggesting, as some of the financing agencies particularly in Europe have suggested, that there should be no more government financing of gas infrastructure?  And would you go so far as to try and shut off gas as soon as possible?

MR. AMIN:  You know, we only complain about subsidies when they’re applied to renewables.  We never complain about subsidies when they’re applied to fossil fuels.  So I really think it’s time to stop state support for fossil infrastructure.  Makes no sense.  Makes no sense economically and it makes no sense environmentally.  So that’s one.

But as an aside, I had a very interesting conversation with the CEO of Equinor, a gas business.  They have this huge plan because, you know, the Nordics have this kind of guilt complex – on the one hand we got very rich from hydrocarbons, but we are actually green.  So it’s like a very guilty thing.  So they’ve come up with this idea where you can use your existing hydrocarbon resources to generate hydrogen.

You know, the CCS, in my view, has been overplayed by many analysts, and it’s not really a reality in most places because of the geological formations you need.  But in Norway they have a very usable massive storage capacity under the continental shelf under Norway.  So they want to store the carbon there and they want to use their existing gas infrastructure to export the hydrogen.  The only issue there is that we still don’t know – you would know better than me – whether the efficiency and the supply of electrolyzers at the scale that we need can come onstream quickly enough.  And the other is the embrittlement of gas infrastructure potentially by hydrogen, which we don’t know – at least I don’t know; maybe you have a better idea – how that can be handled.

So we have green gas, potentially, green hydrogen coming.  I think generating hydrogen from burning coal and fossil fuels makes no sense unless you have sequestration, storage.  But I think that in the future what we’re going to see is that renewables are competing without subsidies in the marketplace and are cheaper, and that new technologies are enabling the ability to balance renewables in a grid in a way that we haven’t had up to now.  So I think this is the game-changer that we are seeing, and government policy needs to understand this and not protect stranded assets in the future because we will end up paying a lot more for them later on than we will today.

MR. MORNINGSTAR:  Great.  I’ll make two quick things.  I would be good, I think, if we could post the results of the poll and we can see what it is now, and then we’ll do it again – do it again after the presentations are over and you hear all of the presentations.

I also just might say – some of you may know what I’m talking about, but – when talking about Norway, the third season of the series “Occupied” is now on Netflix, and I would suggest it.  Some of you may know.  I won’t get into what it’s all about, but take a look.

Here’s the – OK.  Interesting, it’s pretty close.  Looks a little bit like the polls in Iowa for the primary.  (Laughter.)  They’re all so – take a look at that.  We’ll keep that up and we’ll do it again a little bit – a little bit later.

Thank you, Adnan.  That was very, very compelling, your comments.

And now we’ll let Tom Earl respond.

TOM EARL:  Well, I think that’s a really – quite a good case for gas.  I just think I’m under somewhat pressure – a lot of pressure not to make it worse in the next few minutes while I – while I speak.  (Laughter.)

But it is a serious pleasure to be back here at the Atlantic Council.  This was – this is the second year I’ve been here, and I note that we’ve somewhat moved up the agenda earlier in the second day.  And it’s also a lovely thing that the amount of people in the audience, I can say, is about five times what it was on the gas panel last year, so something really good is happening.  And it’s a real pleasure to sit here again and an honor – an honor to be back.

Whether it’s – and there’s a lot of good things that have already been said that we – that we would agree with as an LNG producer, a U.S. LNG producer.  And the case for gas I think looks very rosy, and as I think the numbers there show, whether it’s for climate change aspects, air quality aspects, or whether it’s for partnership with renewables for some of the reasons that have been talked about by Fatima on intermittency of renewables or whether it’s for the growing need for electrification.  I think yesterday Fatih Birol made some really strong points, nearly a billion people still without electricity, and then he showed a fascinating graph of the world’s energy mix as it’s developed since the start of the last century.  And you see this growing segment for gas as it progressively displaces coal for a lot of the reasons that Marco mentioned earlier as well.  So I think those are the – the general points for gas look very good.

But I certainly echo what Fatima was saying about the fact that it needs to be – the growing role of gas has to come with the respect and the application of the other aspects of gas to make it more acceptable.  Maybe some of the points of fact that we’ve seen on the – on the ground in the last 24 months or so as an energy – as an LNG producer could be helpful to the – to the debate.

Firstly, on the demand side, if you look at the reaction – the points of fact in the reaction of countries to gas and the role of gas within their countries, we can pick a few sort of datapoints.  The China aspect and the reaction of the Chinese, the PRC and the NRDC in China, has been comprehensive as a shift towards the – towards gas from their blue skies policy.  The China case is particularly well discussed, but as a point of fact there is not a single regasification terminal – existing regasification terminal in China that is not being expanded today.  So you could – and that’s not to speak of the new terminals they’re building.  So there is an extremely strong case for gas – for LNG imports into China.  Power of Siberia, the pipeline, not to forget the Russian aspect in China, is also extremely important.  But that shift of air quality for those that went to Beijing 10 years ago and for those that go now, if you’re on the – above about the 40th floor of any building in China you – in Beijing you can now see the mountains, I would say, on eight or nine times out of 10 that you go there.

Regionally, as well, similar aspects in Taiwan.  You see companies such as CPC, who have contracted more liquefied gas from Cheniere, who are here, only just recently.  And that is because of the shift in Taiwan towards more use of gas.

It’s going to be the same in Thailand.  You see the expansion of the terminals in Thailand as they make an active choice towards gas over coal.  They’ve been particularly active on that.

You can see it in Brazil.  As a datapoint in the last – only in the last three or four months there was a PPA auction, a power auction in Brazil where Brazil needs – particularly in the north it needs gas to complement the intermittency of hydroelectric power up in Pará in the north of Brazil.  They have conducted an active program, but very successful program in Brazil which has shifted towards gas.

And then, you know without going on and on too much, you start to see – and I think Minister Pradhan from India has been very vocal on this in the last few months – you start to see a different activity in India on natural gas as well.  And I think Fatih Birol just arrived here yesterday from India and he made some comments on that yesterday, about the case for gas in India as part of the solution – only part of the solution to solving the air-quality aspect in India.

The supply reaction is comprehensive on gas.  You see enormous new financial commitments not only in the U.S., as Ambassador Morningstar was just saying, not only projects such as our own or Cheniere or Golden Pass from Exxon; you see a lot of new investment in natural gas.  You see great investment in places like Mozambique, as well, on the supply side; Canada; Russia, too.  I think here in the Middle East you start to see a reaction, as well, of increasing liquefied gas capacity to answer the gas need.

Then lastly, as a small point, I think if you looked at the gas industry – and this is really sort of – Marco’s very kindly set me up for this quite nicely, and unplanned as well I might say – from an innovation aspect you would think or one would think that the LNG industry is still trucking along in its same old path or the way that we built projects in companies where I worked in Total, for example, or the old-style projects are being built.  But actually there’s a lot of – if you scratch the surface of natural gas and LNG there’s actually a lot of innovation going on.  And it is a back-to-basics aspect, as Marco said.

If you look at – and one datapoint on that is the work that Baker Hughes have done in Italy with ourselves, where we – right now as we speak in Avenza/Massa, which is a very well tried and trusted plant in Italy with Baker Hughes, there is the world’s first factory-complete LNG train, which is about halfway through construction.  And that standardization and that cost-cutting exercise is going to improve the price of LNG, and therefore improve the competitivity of liquefied gas.

So there is innovation going on, as well, and standardization getting traditional factory savings out of traditional factory-style production, which is going to have a significant effect on the affordability of LNG and drive down the price and enable it to compete with coal a bit – a bit more.

MR. MORNINGSTAR:  Let me – these have all been really excellent comments so far.  Let me ask a practical question, I think a practical question.  You know, we talk a lot about Europe and you can argue about gas, both sides of the issue.  And please come to our panel this afternoon when we launch our report.  But beyond Europe, there – and it’s come up, I think, so far in this conference – there’s a real conundrum to some extent between dealing with climate change and the need to increase energy for those deprived of energy, how to deal particularly in Asia.  I thought that some of Fatih’s slides yesterday were pretty scary, showing that there’s greater use of coal today than there was 20 years ago.  I mean, I think that’s pretty shocking.

As a practical matter, can renewables and new technologies satisfy all those needs?  Or do we need to have some gas infrastructure, particularly in Asia – and I’m sure Fatima Al Nuaimi will have some comments on this, and probably Adnan as well.  Don’t we need – I don’t want to make it a leading question.  Do we need gas infrastructure particularly to deal with the coal issues in Asia, and that new technologies can’t do it alone?  Maybe I’ll start with you, and then any one of you who want to address the issue.

MR. ALVERÀ:  So I think IRENA does an excellent report, and one came out a few months ago, and they project there sustainable development scenarios.  So I think out there it’s probably the most ambitious renewable and new-technology scenario for 2050, and that still has about 48, 49 percent of the energy mix based on molecules out in 2050.  So, A, that bridge to 2050 is not a short bridge.  And it’s not a complete bridge because it’s still assuming there’s about 50 percent of molecules.  Electricity’s starting at 20 percent today.  So that’s already a huge – a huge task.  And then the electricity itself has to get green.  So there’s two huge tasks to get to that 50 percent.

So that remaining 50 percent of molecules today should better be all natural gas, with the exception of hydrogen where there will be a lot of sun.  That can compete with natural gas, especially if it’s imported, with the cost of electrolyzers coming down.  And as Adnan said, with let’s say blue hydrogen, with CCS, where you produce gas.  So there’s no model out there that assumes that minimal role for gas, even in 2050 that some people in the audience had vouched for or expect.

And so it’s a huge challenge.  We do need all of the above.  And there will be different solutions for different parts of the world.  If you produce upstream gas at a cost of $1 or $2, then blue (coal ?) with CCS is going to be the cheapest, especially if you don’t have a lot of sun.  If you have a lot of sun, then green hydrogen is going to be cheaper.

But let’s not make a mistake.  I mean, what you can achieve in California and Australia with batteries you cannot achieve in most parts of the world.  You need seasonal heating.  You have huge swings of energy demand in between seasons, and there’s no battery out there that can do that.

And let’s not kid ourselves that you can transport electricity over long distances.  The transport of electricity today on average in the world is 50 kilometers and you lose a lot of energy as you do that.  And so even people building the big offshore wind farms, they’re planning to convert that wind into hydrogen to bring that onshore because they’ve decided and tested and worked out it’s a lot cheaper than transmitting electrons over greater distances.

MR. MORNINGSTAR:  Thank you.  And let’s have some brief responses.  We only have exactly 11 minutes left and the people here, they will not be happy if we go over.  So brief responses and then hopefully time for a couple of questions.

MR. AMIN:  I think it’s exactly right.  You know, when you make this argument about decarbonization, a lot of people say, oh, you’re arguing for 100 percent renewables.  That’s a completely fool’s paradise.  I wish we could get there, but that’s not feasible.  So there’s going to be a mix.  We have to ensure that that is the optimal mix both for our social, economic, and environmental requirements.

Now, if you – if you look at what’s going to happen to the carbon budget if we merely build out the gas infrastructure that we have planned until 2030, is that we will not meet the two-degree target.

On the economics, I think that we are seeing more and more new-build renewables.  It is not only beating gas; it’s beating coal.  So there’s a replacement potential.

You’re right, there – the issue of managing the flexibility for renewables depends on a lot of things.  Battery storage is one of them.  But we are seeing more and more dispatchable electricity from renewables that’s available at a cost that’s competitive in the market.

I think that green and blue hydrogen are going to be extremely important parts of the mix.  But they will be a bridge because there’s a technological development going on today that is underestimated by a lot of people.  I’m talking to a lot of technology companies, many of them incidentally in China – and we need to be very aware that the investment in R&D in China in these technologies has outstripped everybody.  They hold almost twice as many patents in clean energy as U.S. companies do today, and that’s an element of geopolitical competition that we need to start focusing on for the future.  But they have built ultra-high-voltage transmission lines across thousands of kilometers, which minimizes the loss of electricity.  And you’re right, in conventional – in conventional transmission we lose a lot of electricity once you get over 50 miles or whatever.  But with ultra-high-voltage transmission, which is now being used for offshore wind in Germany and in Northern Europe, you have minimized those losses.  Then you have this AC to DC switching that allows you to manage that electricity very economically.

So what I’m saying is that the disrupter here is going to be technological progress, which is altering the economics of this paradigm on a daily basis.  And that’s the only way, I think, that we can achieve the level of climate-safe world for the future that we aspire to.

MR. MORNINGSTAR:  Fatima Al Nuaimi.

MS. AL NUAIMI:  We’ve always talked about renewable and gas being – playing a complementary role.  And I think we have to be realistic, especially when we are talking about parts of the world that today they don’t have access to the modern life, to the – to the basics.  Those usually are parts that are very price-sensitive.  So the IEA slide that shows that people are still investing in coal, because when it’s time to make a decision, and especially when you’re at – trying to access to people who are not the wealthiest of the world, so economics becomes the defining factor.

And I think the cost curve and how renewables evolved in terms of their competitiveness is quite impressive, and that’s the role of technology that’s playing.  But, again, storage is an issue.  And that’s why we’re saying the difference and the role that each source of energy is playing is different, and we cannot just apply – it’s not a straight line all over the year.  It’s not a straight line in each part of the world.  So we will have to have customized solutions and different energy mix, depends on where we are talking about, which region of the world we’re talking about.

MR. MORNINGSTAR:  Good.  I think that’s right.  Your point on the cost of coal and people screaming if they have to pay more than the alternative is important, and that’s going to take strong government policy to deal with that issue but also to develop the alternatives that are important.

And Adnan – Tom, did you want to add anything now, or?  And then –

MR. EARL:  Only very briefly to say that one of the first jobs of gas is to improve its competitiveness, to take the place as much as possible of coal for the – for that.  But that’s –

MR. MORNINGSTAR:  OK.  Adnan just briefly and then we’ll have time for a couple of questions.

MR. AMIN:  Just on energy access, very glad IEA is in this space but we have been – we in IRENA, we were working on this since the beginning.  In energy access, I’m the only one here from a developing country.  I’m from Kenya.  We have achieved 150 million people having access to energy, coming below the 1 billion point for the first time, over a 10-year period largely because of standalone solar devices.  Coal is not a solution for rural areas in Africa.  Gas is an important part of that because we don’t have a solution for cooking.  So we can do lighting.  We can have a solar capability with efficient devices that can do some productive use applications – TVs, whatever.  But you can’t do cooking.  And the LNG part is extremely important because replacing firewood and replacing coal for cooking is going to be critical.

MR. MORNINGSTAR:  Critical, yeah.  Right.  And there is – and in the developing world there’s a difference also because rural and urban needs and how to deal with that.

Questions?  Can we get a couple of questions?  We have four minutes and 31 seconds.  No questions?  God, this is a shy crowd.  We have a question in the back.  John Roberts will always have a controversial question.

By the way, can we also put the poll back up and can we revote and see if there are any changes?  Please, for those in the back.

Q:  How long do you reckon it will be before we have large-scale commercial battery technology that can ensure that renewables do not need gas as cover?

MR. AMIN:  Great question.  It’s already happening in different settings.  You’re seeing grid-scale application of batteries that are grid-competitive today.

But I’ve been talking to some of these companies.  There’s one Chinese manufacturer I was in a meeting with recently who was extremely upset about Elon Musk.  He said, what is it about Elon Musk that gets all this publicity?  I’m building five gigafactories, all of which are larger than his.  My batteries are going to be cheaper, they’re going to have higher energy density, and they are – they are going to be safer, including batteries for electric vehicles.  Where, you know, the Tesla battery has a critical incident rate of about one in 5,000, the Chinese guy is saying he doesn’t have any.  So I think the innovation and the development of battery technology is moving faster than anybody appreciates, and I say in the next five years we’re going to see more and more locations where battery technology, grid storage capability, integration of electric mobility into the grid, V2G technologies is going to change the dynamic completely.  So I would say another five, six years.

MR. MORNINGSTAR:  You had a comment, Marco?

MR. ALVERÀ:  Yeah.  I just want to say when we talk about batteries we need to really be – make a big distinction.  One thing is to make sure that there’s energy at night when the sun isn’t shining, and that’s a grid – and then there’s a grid intermittency balancing.  Another thing is to think of a country like the U.K. or Italy or France or Germany where you consume six times more energy in the winter than you do in the summer and there’s not nearly half the amount of sun at that time.  And there’s no battery solution out there or envisaged that can cater for that seasonality.

So as I said, in California you have a lot of air conditioning in the summer, not so much heating in the winter.  Same in Australia.  So you have kind of a flattish outlook.  But when you enter into countries that consume six or seven or eight, or some parts of China consume 30 times more energy in the winter than in the summer, that’s not something that anyone is planning to address with batteries.  That’s where you need hydrogen.  That’s where you need conventional storage, pumped hydro, and other means.  And that’s where the cost is really making a huge difference.  And that’s where natural gas today and gas with CCS or hydrogen really, really comes in.

MR. MORNINGSTAR:  Can we get the poll back up so that people can vote again, whoever’s handling the screen back there?  Please?  Well, OK.  So you can all vote again.

And the last question goes to Branko Terzic, who’s also a senior fellow at the Atlantic Council and former member of –

Q:  Thank you.  I’m older – I’m older than I look because we have been in the gas industry in North America for about 200 years.  The first hundred years the gas was used for lighting and it was predominantly hydrogen.  It was town gas.  Second hundred years we went from lighting to heating, and now more recently electricity.

I wanted to talk about hydrogen.  I was a little confused.  Will natural gas, methane, be the source of hydrogen in the future, or will it only be electrolysis of water?  It wasn’t clear to me what you thought the future there was.  And once you have the hydrogen, does that enable the fuel cell for transportation?

MR. ALVERÀ:  Yeah.  So I think fuel cells will certainly be the future because with one kilo of hydrogen you can drive a car 150 kilometers and you need a thousand kilos of batteries to achieve the same.  So you’re actually moving weight around.  And so – and so that will really work.

When it comes to which solution, it really depends on where you are.  So if you’re in the U.S. where you produce natural gas at $2, it will be blue hydrogen.  It’s going to be a lot cheaper than green hydrogen.  Where you are, like in a country like where we are now, you can produce in the near future sun-induced electrolysis, hydrogen – so green hydrogen – probably at a cheaper cost than blue hydrogen.  So it really depends on what the upstream costs and what the sun level is.  If you’re in the Netherlands you’re going to have a lot of wind to – wind to green hydrogen with electrolysis.  If you’re in Norway you may have blue, or in Russia indeed blue.

The cost of an electrolyzer is a thousand bucks per kilowatt today.  And we’ve talked to all the producers, and they say they can bring that down by six or seven times just by scaling it up with no new technology.  So once that happens, you’re going to have hydrogen at 25 bucks per megawatt-hour delivered wherever you want.  So that’s really when the revolution’s starting.  It can be in the next five years.

MR. MORNINGSTAR:  OK.  We are now out of time, but it’s a very interesting result that there is a change, a significant change on number three particularly, where – that gas will enable – will enable and integrate with key low-carbon technologies such as hydrogen.  I think we got a lot of that from Marco, and the comments also with Adnan I think were very helpful in that direction.  And the – and the – but it’s also interesting that gas as a bridge fuel displacing coal demand has gone down significantly.  And so very, very interesting results  It says that the panel, which I think has been an extraordinary panel, have done – all of you have done an excellent job, and want to thank you very much.  And let’s all give the panel a good round of applause.  (Applause.)

Thank you, everybody.

(END)