Consensus grows for green gas policy in Germany

Market: Hydrogen, Natural gas
28/10/24

Germany's two main political parties are beginning to back a national green gas sales quota, increasing the likelihood of its development after the 2025 general election.

The German government is yet to put forward a green gas quota proposal, unlike several European neighbours such as Denmark, the Netherlands and Austria. Economy and climate ministry BMWK — led by the Greens — has opted for more active industrial policy to ensure the ramp-up of hydrogen production, rather than a broader green gas policy that would let market prices have more decisive influence over whether hydrogen or alternative green gases prevail.

But politicians from the centre-left SPD and centre-right CDU are increasingly referring to a green gas quota as an attractive policy option. The SPD is in government but not in charge of BMWK, while the centre-right CDU is leading the polls for the general election.

SPD politicians Bengt Bergt and Andreas Rimkus last year put forward the most concrete proposal yet for such a policy, and it has since found some resonance among politicians and industry. Bergt, the SPD's energy spokesperson, told Argus that he had heard "from a well-placed and high-up source in BMWK that there was ongoing work on a quota solution". BMWK declined to comment on this.

CDU politicians too have repeatedly voiced interest for some form of green gas quota. A green gas quota is one option for creating a "lead market" to ensure the most cost efficient delivery of the energy transition, the CDU's deputy head Jens Spahn said in an energy policy paper seen by Argus. The green gas quota is "clearly in the CDU's programme" as a solution, the SPD's Bergt told Argus.

With the CDU, SPD and the green-led ministry working towards the plans, Berg said he is looking "quite positively into the future even if it does not come to fruition within this legislative period".

The proposal itself

Bergt proposes to mandate any supplier of gas to end consumers to evidence a certain proportion of carbon-free or low-carbon gas in its portfolio. This is different to the green gas blending model proposed in other countries.

The required proportion of green gas would rise slowly at first to allow for the ramp-up of the hydrogen economy, and takes into account expectations of falling demand later in the next decade, Bergt told delegates at the Handelsblatt Jahrestagung Gas in Berlin earlier this month (see graph).

The policy foresees that only renewable gases can be used in German gas grids from 2045. Any low-carbon gases could also be used to fulfil this quota, as long as the CO2 savings are equivalent to what they would be if the quota were fulfilled completely with climate-neutral gases. Gases that have lower CO2 emissions per kWh than methane derived from fossil fuels could be used to fulfil the quota for a certain period, including blue hydrogen. But when the CO2-savings targets are high enough, only carbon-neutral renewable gases such as hydrogen or biomethane could be used to meet the quota. In case of non-compliance, utilities would be penalised according to the amount of surplus CO2 emitted compared with the legal pathway, at a minimum cost of €1,200/t CO2.

This policy approach would allow Germany to meet its climate goals, ensure security of supply and low energy prices, all while avoiding carbon lock-in effects, at no extra cost to the German state, Bergt said.

Gas industry welcomes planning security

Several gas industry members agreed with the basic points of the proposal, welcoming the long-term security it could provide for planning horizons.

The proposal would answer the hydrogen industry's calls for a policy that supports demand in Germany, panellists at the conference said. But the policy would at the same time allow for price-driven competition between hydrogen and biogas, ensuring the lowest societal cost for decarbonisation, panellists said.

Panellists warned against overcomplicating the policy, in light of the general bureaucratic burden.

Swiss trading firm MET chief strategy and business development officer Joerg Selbach-Roentgen told Argus in February that the firm was in favour of a green gas blending obligation as it provided a more reliable regulatory framework.

A green gas quota is a "valuable instrument to reach the market ramp-up for new gases of all kinds", gas and hydrogen association Zukunft Gas executive director Timm Kehler said at a parliamentary committee hearing late last month. Zukunft Gas praised Bergt's proposal in a position paper in March but asked for further freedoms in compliance, whether through trading of quotas or taking into account uncertain weather-dependent aspects of demand each year.

By Till Stehr

Percentage of green gas in suppliers' portfolio by year %

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18/12/24

Nordic Electrofuel expands e-SAF plans to Middle East

Hamburg, 18 December (Argus) — Norwegian firm Nordic Electrofuel is expanding its plans to produce renewable hydrogen-based sustainable aviation fuels (e-SAF) to the Middle East, and has struck preliminary deals for plant developments in Saudi Arabia and Oman. The Saudi plans have been approved by the government, with land set aside for the e-SAF plant and the associated solar photovoltaic (PV) assets in the Jubail region, Nordic Electrofuel's chief executive Gunnar Holen told Argus . The plant could produce 350mn l/yr, or around 300,000 t/yr, of e-SAF, Holen said. This makes it one of the largest facilities planned globally and Holen said the plant could be operational by 2029 if its development is "fast-tracked". The size of the potential plant in Oman has yet to be decided, he said. In Saudi Arabia, Nordic Electrofuel plans to produce the renewable hydrogen itself, although the solar PV assets would be developed by partners, Holen said. In Oman, the company might look to buy hydrogen from other projects. Oman has drawn strong interest from would-be hydrogen project developers, and state-owned Hydrom recently announced a third auction for plots of land , having already allocated eight. Some of these developers are bound to be looking for potential offtakers, Holen said. In both countries, Nordic Electrofuel expects to benefit from low renewable power costs driven by highly favourable conditions for solar and wind generation. Power supply could be available at around $20/MWh, according to Holen. Nordic Electrofuel is primarily targeting its offtake at regional airlines. This means its e-SAF will not be dependent on access to biogenic CO2, which would be required for compliance with the EU's definition of renewable fuels of non-biological origin and associated mandates, such as under the ReFuelEU Aviation legislation. The firm intends to initially use CO2 captured from industrial installations for its Middle Eastern sites. But Holen said it could be possible to secure biogenic CO2 at a later stage, even though supply is not as abundant as in parts of Europe and other regions. In the long term, direct air capture could provide another source of CO2, although this will depend on the technology's further development. Few e-SAF facilities have been announced in the Middle East, with most plans concentrated on Europe where the ReFuelEU Aviation mandates are expected to drive uptake. But some companies from the region, such as UAE-based renewables firm Masdar , have argued e-SAF is an attractive proposition. In Norway, Nordic Electrofuel is developing a pilot plant in Heroya. The company aims to take a final investment decision on this by the third quarter of 2025, Holen said. The plant is due for commissioning in 2027 with a capacity of 10mn l/yr, which the company aims to ramp up in subsequent stages. Nordic Electrofuel has signed a binding term sheet for offtake from the Norwegian facility, Holen said. By Stefan Krumpelmann Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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India’s AMNS in talks to build Suvali LNG terminal

18/12/24

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18/12/24

India’s AMNS in talks to build Suvali LNG terminal

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Viewpoint: Japan eyes methanol as marine bridging fuel

18/12/24

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18/12/24

Viewpoint: Japan eyes methanol as marine bridging fuel

Tokyo, 18 December (Argus) — Japanese demand for methanol as an alternative marine fuel is expected to increase, especially after 2027, but it is likely it will mainly be used as a transition fuel before the commercial launch of ammonia- and hydrogen-fuelled vessels. The Japanese shipping industry is expected to launch more methanol-fuelled vessels from 2027 ( see table ), to help reduce greenhouse gas (GHG) emissions from the global maritime sector. Global regulatory body the International Maritime Organization (IMO) in 2023 pledged to achieve net zero emissions in international waters by or around 2050. To help achieve the IMO's target, a total of 26 methanol-powered vessels are expected to be commissioned worldwide by the end of this year, followed by 54 ships in 2025 and 96 carriers in 2026, according to a report released in November by Japanese classification society ClassNK. This would increase global methanol demand to 4.5mn t/yr by 2026, said the report. As of June, there are 33 methanol-fuelled vessels currently in use. Methanol-fuelled vessels can refuel at around 130 major ports all over the world, except in Japan, according to Japanese shipowner Mitsui OSK Lines (Mol). The city of Yokohama in the eastern prefecture of Kanagawa, in co-operation with Mitsubishi Gas Chemical (MGC) and Maersk, launched a study on methanol and green methanol bunkering in the port of Yokohama in December 2023. Since then, the group, in collaboration with new partners — Japanese refiner Idemitsu, MGC's shipping subsidiary Kokuka Sangyo, domestic shipping firm Uyeno Transtech and Yokohama Kawasaki international port — has conducted a ship-to-ship bunkering simulation at the port of Yokohama in September. Expectations of the increase in methanol use, especially cleaner e-methanol, have led Japanese firms to become more involved in upstream projects to secure the fuel. 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Fellow shipping company Nippon Yusen Kaisha (NYK line) is also mulling the development of smaller methanol-fuelled handymax ships that are unable to be equipped with large ammonia fuel tanks, to aid with decarbonisation. Methanol a temporary solution But Japanese firms see methanol mostly as a "bridging fuel" rather than a zero-emission fuel, as methanol can reduce GHG emissions only by 15pc compared to traditional bunker fuel, although it can curb sulphur oxide and nitrogen oxide emissions by up to 99pc and 80pc, respectively. It would be vital to begin introducing much cleaner marine fuels, such as ammonia and hydrogen, to meet the maritime sector's net-zero goal. Tokyo is trying to promote the development of ammonia and hydrogen-fuelled ships by providing financial support, while the utilisation of such clean vessels could materialise from around 2030, the ministry of land, infrastructure, transport and tourism (Mlit) said. Japan's state-owned research institute Nedo plans to provide ¥35bn ($229mn) to support the development of engines, fuel tanks, fuel supply systems and other core technologies for zero-emission ships that use hydrogen and ammonia, as well as LNG and e-methane, under its ¥2.76 trillion green innovation fund. But the grants are much larger than those for the development of methanol-fuelled ships, which are currently available only from Mlit and the environment ministry, with the amount of ¥100mn per vessel over two to three years. The scheme has been open for application every year since 2023. But the ministries' scheme also targets LNG-fuelled ships, with a breakdown of allotment for methanol-powered vessels unclear. By Reina Maeda and Nanami Oki Japanese firms' methanol projects Methanol-fuelled ships Company # of vessel Type Target commercialisation Announcement Mitsubishi Gas Chemical, Mitsui OSK Line 1 Ocean-going methanol carrier Jul-05 May-23 Toyofuji Shipping, Mitsubishi Heavy Industries 2 Ro-Ro vessel 2027-28 fiscal year Jun-24 Mitsui OSK Line 1 Coastal methanol carrier Dec-24 Jul-24 NS United Kaiun, Nihon Shipyard, Jaman Marine United, Imabari Shipbuilding Multiple Bulk carrier After 2027-28 fiscal year May-24 Orix, Tsuneishi Shipbuilding 2 Bulk carrier Jul-24 Production Company Product Country Target commercialisation Target capacity (t/yr) Mitsui E-methanol US Jan-24 1630000 Mitsubishi Gas Chemical Bio-methanol Japan Jun-24 Small amount Mitsubishi Gas Chemical, Kobelco E-methanol Japan NA NA Cosmo, Toyo Engineering E-methanol Japan NA NA Sumitomo Chemical E-methanol Japan 2030s NA Mitsui, Asahi Kasei Bio-methanol US Jun-23 NA Toyo Engineering E-methanol India 2030 NA Investment Company Product Country Target commercialisation Target capacity (t/yr) Mitsui E-methanol Denmark NA 42,000 Idemitsu E-methanol Brazil, US, Chile, Uruguay, Australia 2,030 4,000,000 JOGMEC E-methanol Brazil, US, Chile, Uruguay, Australia 2,030 4,000,000 Mitsu OSK Line E-methanol Brazil, US, Chile, Uruguay, Australia 2,030 4,000,000 Table source: Firm's company releases Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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US funding bill to allow year-round E15 sales

18/12/24

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18/12/24

US funding bill to allow year-round E15 sales

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LNG dual-fuel vessels best suited for FuelEU: Study

17/12/24

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17/12/24

LNG dual-fuel vessels best suited for FuelEU: Study

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