European carmakers are required to reduce their CO2-emissions, but the Volkswagen affair has shown they find it increasingly difficult to do so. There is a way out, however, writes energy consultant Mike Parr: they could follow the example of Audi and invest in power-to-gas systems. This would kill two birds with one stone, argues Parr: it would help decarbonise the transport sector and could enormously help the integration of variable renewables in the electricity market.



EU legislation requires EU carmakers to reduce emissions from their new cars to 95g CO2-km (on average) in 2021, a target which they are finding it hard to meet. In 2014, the average emission level of new cars sold in Europe was still 123.4 gCO2/km, according to figures from the European Commission.

To meet the target they need to ramp up sales of electric cars (EVs) or hydrogen fuel cell cars (HFCVs), both of which options are by no means easy. As Dieter Zetsche, Chair of the Management Board at Daimler AG, said at a conference in Brussels in June: “Given physics and the time left, it’s not possible without introducing a certain percentage of more or less hybrid cars.” However, he added, “unfortunately customers are not buying them”. He concluded: “It’s not a given the 95gCO2/km will be accomplished.”

Yet carmakers may have another option: they could invest in power-to-gas systems (P2G), as Audi has been doing. To understand how this could work, we need to discuss what P2G is and how it could change the energy market.

Disruptive

One of the well-known problems with renewables such as PV and wind is that they are not always present when you need them. They are also seen by some as disruptive to network operations, although this is not a homogeneous view amongst European TSOs, as this article by the CEO of 50Hz, a German TSO, shows. (50Hz appears to cope well with RES penetration levels of over 40%.)

Synthetic natural gas is considerably more expensive than ordinary natural gas used in electricity production. However, compared to CNG used in transport, SNG is very much competitive

Current regulatory trajectories for renewable energy point to PV and wind having to provide “grid services” such as frequency response (FR), which is needed to maintain stability in the transmission network. This becomes more important as the amount of synchronous generation connected to the network declines (closure of coal, nuclear and gas-fired power stations). There is also the “need” (demand?) for renewable energy to be “integrated” into intra-day and day-ahead markets.

The provision of frequency response can be accomplished by bolting battery storage onto a wind farm (or PV farm). Various (government funded) projects in several EU member states have shown that storage can certainly provide FR and also smooth variable output of wind or PV hour by hour. However, once one moves into the area of storing significant quantities of energy (i.e. multi-MWh or GWh), battery storage, whether lithium-ion, vanadium reflow or sodium-sulphur, becomes expensive. Prices tend to sit at around Euro1 million/MWh. Most EU-storage projects are government funded because the capital cost of storage does not match the net present value of any benefits that the storage brings i.e. benefits << costs.

Other storage systems exist such as pumped hydro. But this is limited by geography. The best location, Norway, unfortunately has Norwegians that are not exactly jumping for joy at the thought of becoming Europe’s biggest battery. Other options such as CAES (compressed air storage) always seem to be just around the corner in terms of being commercially ready.

New things out of Africa

Whilst the above does not look promising we can take heart from Pliny’s “semper aliquid novi Africam adferre” substituting technology for Africa.

Recent research conducted by my consultancy PWR into power-to-gas (P2G) suggests that this technology can do several things and, at MWh-scale and GWh-scale, is already delivering these “several things”.

In a P2G system, renewable electricity is converted into hydrogen (through electrolysis) and then, by adding CO2, into synthetic methane. This is called synthetic natural gas or SNG. For the second step it is helpful to have a source of CO2 at hand, e.g. a biogas plant.

Currently, the largest operational P2G project is located in Werlte, Germany. The plant was designed and built by Etogas for Audi and has a capacity of 6MW. The plant uses renewable power to produce hydrogen which is then combined with CO2 (from a neighbouring biogas plant) to produce methane. The biogas plant reuses heat produced by the P2G process which gives a good overall process efficiency for the P2G system. The gas produced by the P2G system is injected into the local gas main.

Falling into the “strange but true” category, the plant is operated (but not owned) by the TSO, Tennet, which uses the plant for secondary frequency response and also for balancing purposes on intra-day and day-ahead markets. In other words, Tennet decides when it puts the renewable electricity on the grid or uses it to produce hydrogen. In this way it becomes dispatchable load for Tennet.

The VW affair

Now what has all this to do with carmakers?

Audi has a car called the g-tron. This runs on both compressed natural gas (CNG) and petrol. There are around 1000 CNG refuelling stations in Germany (other EU member states have varying but growing numbers). Audi, however, does not use the SNG it produces in Werlte in its cars. Instead, Audi will match SNG injections into the gas system at Werlte to CNG consumption by g-trons at CNG stations in Germany. Expressed another way, g-tron owners will be carbon-neutral when driving their cars.

The north-south gas network in Germany can actually carry energy an order of magnitude greater than the north-south electrical interconnectors

In other words, this is a compensation scheme. What I suggest is that other carmakers follow Audi’s example and start investing in SNG production. This could be a relatively painless route for them to meet EU emission targets – and it could be of great benefit to renewable energy in Europe.

It may be objected that it really is a task of energy companies to invest in P2G. Why would car companies enter into it? The reason is that for electricity producers, P2G is not competitive: SNG is considerably more expensive than ordinary natural gas used in electricity production.

However, compared to CNG used in transport, SNG is very much competitive. I have made calculations showing SNG will cost some 10 eurocents/kWh, which is more than the 5 or 6 eurocents/kWh or so which natural gas costs, but considerably less than the roughly 26-29 eurocents/kWh that CNG costs.

For the moment it is clear that SNG could not be used directly in transport. This would require investments in distribution infrastructure that do not make sense for small volumes. In time, if carmakers were to invest heavily in SNG production, this may be an option.

There is a question whether SNG production as a compensation scheme will be allowed for carmakers to count towards meeting their CO2 emission target, but I believe this hurdle can be overcome.

Storage

For European policymakers who would like to see renewable energy expand in Europe, large investment in P2G systems could be very important – perhaps much more important than they realise.

P2G production systems are scalable, you can make the plant as large (50MW) or small (0.5MW) as you want. As already noted, gas storage is free and more or less infinite. For example, the storage capacity of the German gas network is roughly 150 to 200TWh. Putting this into context, electricity consumption in Germany is roughly 500TWh per year.

The north-south gas network in Germany can actually carry energy an order of magnitude greater than the north-south electrical interconnectors. Food for thought as the Germans are planning to spend billions expanding the north-south interconnections (against much public resistance) to carry electricity from offshore wind farms in the north to consumption centres in the south. The gas grid is already there, ready to be made use of.

At the moment policymakers seem to be unaware of what this technology could do for Europe both in terms of the “RES problem” and the “transport emissions” problem

On a more negative note, pushing SNG through a gas turbine will not give you a very good round trip efficiency, perhaps 30%? But this is rather to miss the point of P2G, which is to provide to the TSO dispatchable load of a size that could help handle large amounts of non-dispatchable (although predictable) renewable generation.

Readers who are tempted to take the view “fine in theory – but it will never happen” may wish to consider the following. Companies now playing in the P2G (and power-to-hydrogen) space include Gas Natural Fenosa, RWE , GDF Suez, EON and Enel, as well as Audi. All the projects, without exception, include the provision of network services from the P2H/P2G systems and for the most part are well north of €10 million per project in terms of funding.

Key costs

The cost of electricity is a key determinant with respect to the ultimate cost of SNG. Connecting P2G directly to wind farms (or PV sites) is a possibility provided the levelised cost of electricity (LCOE) for a given farm supports the economics. In North Germany this would work given LCOEs of around €59/MWh for onshore wind (source: Prognos).

Moving to windier locations, the northwest coast of Scotland or western Ireland have vast tracts of land with average wind speeds of 9m/second. This gives onshore wind capacity factors of 43 to 47% and LCOEs around €25/MWh. Cheap energy by any account and thus low cost SNG.

At the moment policymakers seem to be unaware of what this technology could do for Europe both in terms of the “RES problem” and the “transport emissions” problem. It remains to be seen if they wake up.

P2G is not (and never will be) a “silver bullet”. However, my calculations suggest a business case already exists, although there will need to be some regulatory adjustments, for example in Germany, plus perhaps a European-wide rule that SNG and biogas get free transport in the gas network.

Any government support would be limited to, for example, supporting the roll-out of more CNG stations and encouragement for the European transport fleet to move towards this fuel.

Editor’s Note

Mike Parr is Director of energy consultancy PWR which undertakes research in the area of climate change and renewables for clients which include a G7 country and global corporations. See his author archive on Energy Post.