In September, the European Parliament voted on the Just Transition Fund. First there was a proposal that made it impossible to finance investments in fossil fuels with this pot of money. But this proposal was weakened, which means natural gas projects can now get money from this fund, provided they meet certain criteria. How is this possible and what are the consequences? Will the Commission continue to support the fossil sector?
You are asking how did this happen? Well, what you increasingly see in the EP is a discussion between East and West Europe. Eastern Europeans in the Social Democratic and Liberal groups have ensured that these texts are included. Christian Democrats are voting for them anyway. As a result, a less-than-ideal text has been submitted. We tried to get it out in the plenary — it was a narrow minority — but the official position is that the JTF money can now also be put into gas.
Yet, that money just shouldn’t go to fossil fuels. It’s a shame to have gas projects awarded for that. It should go to ‘green’ projects.
The member states, i.e. the Council, still have the initial, more progressive position on the JTF. This time, the Council has a better position than Parliament, which is not very common. I hope that in this case, the Council will win. Here, the Council has overruled the Eastern European countries. It is not yet entirely certain what will happen because the negotiations have yet to take place — we still have a chance. But the inclusion of fossils is indeed the starting point of the negotiations. It is clear that this is a controversial position, so hopefully the negotiator will see that too. But we are now in their hands and there are many Eastern Europeans among them.
In an earlier press release from GroenLinks, you called this money ‘a new fossil subsidy’.
Well, it’s public money that goes to gas. I don’t know what else to call it. In my opinion, this is a textbook example of a fossil subsidy.
The projects that receive money from the JTF must meet certain criteria: it must be for a transition and it must not lead to a lock-in. But it is very much up to the evaluator — the Commission — to assess this. It gives countries like Poland the opportunity to still submit requests and deal with them in an inventive way.
It is much better to be clear in advance. Otherwise, a country like Poland is inventive enough to adhere to those criteria. This does not make it easy for the Commission — they have to look at each application separately. The Commission was therefore initially in favor of excluding fossils completely. As I said, there is still a chance that it will be weakened, but we will have to see about that.
Does this discussion also apply to the Next Generation EU fund? And the next EU budget?
The Next Generation EU Fund is indeed the next discussion. This JTF negotiation is a bad start. Most of the money in the Next Generation EU fund is the recovery and resilience facility — a pot of money for the countries. Still, the discussion about infrastructure gas is about to start, we have to fight for that now.
Most of the EU budget goes to structural funds (regions) and agriculture, but there are still some infrastructure issues on the table as well, such as what to do with airports. The discussions we’ve just had about JTF will come up again.
Are these European funds also meant to invest in other types of gas, like hydrogen?
There will be a separate bill for hydrogen. Before the summer, the Commission presented the hydrogen strategy. The Commission has clearly stated here that the focus must be on clean hydrogen. That is positive. But the legislative proposals have yet to come, and then these discussions will return. Countries such as the Netherlands want the EU to be a frontrunner in the field of hydrogen.
Gas is often seen as transition fuel. In countries like Poland, which are still heavily dependent on coal, do we really need new gas pipelines?
If you look at the gas infrastructure in the urban environment, you should not say that no money should be spent on gas infrastructure. Refinement of natural gas infrastructure is really necessary in some places. But the problems we see now, including with the latest PCI list, is that investments go to really enormous projects aimed at increasing natural gas imports from countries. Within a country, new infrastructure might still be necessary to improve interconnectivity, and I’m not necessarily against that. This includes smaller investments that are part of the energy transition, which take place at a regional or decentralised level. But such large pipelines and projects such as the ones included on the PCI list cannot simply be presented as ‘transition investments’.
We already import twice as much natural gas as we use. The demand for gas will even decrease from 2030 onwards. Even in the scenarios of the gas sector itself, this is the case. So why do we still need additional imports? That is really not compatible with the climate ambitions.
Gas is important, of course, but if the gas sector says that we need additional infrastructure to meet the growing demand for gas, that is simply not true. Nobody can defend that there is still a growing demand for gas.
How should we assess the argument that countries like Poland will have increasing ‘energy poverty’ if they were to phase out fossil fuel energy?
If you look at the development of offshore wind parks, it’s gigantic. The Netherlands has enormous potential in the North Sea. The same applies to Poland, with the Baltic Sea. It is becoming more and more profitable. They always talk about energy poverty when it comes to energy transition. But subsidies for coal are now actually increasing, which means that fossil fuels are in fact becoming more expensive at the moment, while renewables are becoming cheaper.
We must ensure that the price of energy does not go up, and that people with less means will not suffer as a result, but my view is that in order to do so, you need to invest in long-term solutions. In the short term, an immediate switch to electric while doing everything that can’t be done electrically via hydrogen is indeed very expensive for a country like Poland. That would be a huge switch and hardly feasible. But you don’t have to do that. Certain smaller investments in natural gas are still plausible for a country like Poland. But the question is: where do your large, long-term investments go? In gas, in electricity or green hydrogen? For the long term, you need a sustainable investment agenda.
What about a project like TAP?
Exactly, those are the kind of projects you can’t really justify. Diversification of the gas supply is always the argument, making sure that we do not become too dependent on Russia, for example. But with a project like TAP, you only make yourself more dependent on Turkey and Azerbaijan. Is it wise to become dependent on Turkey and Azerbaijan? Who would you rather be bitten by?
Nord Stream 2 is another example. This one is not in the PCI list, but it is a big problem. Trump also pointed this out, and this time, he is right. This project makes Europe even more dependent on Russia.
Could the4th PCI list still change? The European Ombudsman has started an inquiry into the process and the verdict is not out yet.
We have asked questions as well. The Ombudsman’s questions are mainly about the transparency of the process. But that will not change the list anymore. These questions should be seen as the start of the next discussion.
In order not to repeat the process of the 4th list, the criteria would be sharpened for the 5th PCI list, but will that actually happen?
It is up to the Commission to come up with proposals — this is what they promised. As far as we are concerned, it is very clear: exclude fossil projects from the list. That would be compatible with the Green Deal. This is the easiest way to tighten the Commission’s rules. However, I can imagine that this won’t happen. As an alternative, the Commission could introduce a threshold for Co2 emissions per Kwh. The European Investment Bank (EIB) also uses this method — they have an emission limit for their investments. They de facto exclude coal, but not gas. The EIB is now debating whether to further lower the threshold. For the Commission too, this could be a kind of compromise.
The easiest thing, however, would simply to say: no money to fossils. That means not to blue hydrogen either — natural gas with CCS is also fossil. It seems very clear to me. But I expect there will be quite a discussion about it. With the threshold system, you could still use hydrogen.
Is it realistic that the Commission will going to sharpen the criteria?
Yes, it is realistic, but it’s still a battle we have to fight. The pressure to exclude fossil fuels is strong, and it’s increasing. The Commission has felt the heat of the previous list. They are definitely going to come up with stronger criteria, but the details are still to be seen. But they will come up with something.
And what is the time frame?
They shouldn’t wait too long, but they said they would look at it this year. The first steps of the next PCI list should already be taken by the end of this year.
There is a lot of criticism of the role that network operators (Entso-G) play in drawing up gas demand scenarios, on the basis of which new infrastructure projects are planned. But this may change with the revision of the TEN-E regulation in December. How feasible is it that this will actually change?
It is absolutely true that gas dependency has been built into these scenarios, with outdated price developments, and so on. The Commission can steer these scenarios with more specific assignments. The Commission could say, ‘You have to come up with a scenario in which you keep the gas demand as low as possible’. This would of course involve a cost price. Gas is just cheap, so it scores well in these scenarios. But you could say, ‘We want as little gas as possible, even if this costs a bit more’. Then the Commission could determine how much gas we actually need and how much it would cost. The costs of renewables is changing so fast — renewables are becoming cheaper much quicker than people think. The energy demand models need to focus more on renewable energy and more explicitly on non-gas. The Commission needs to steer more politically in this direction.
And when it comes to lobbying and influencing, when looking at the people who advise the Commission, the Commission could just try to expand its network a little. If it includes Entso-G, you know what you are going to get. Include others, for example the regulatory body, ACER. They will look at the network with a much broader perspective. When choosing the network, you already include certain assumptions, like the need for gas. The choices of the models largely determine the outcome. And at the moment, the focus is still on gas, so gas will also be the result. Carbon in is carbon out.
Who could or should take over this process of forecasting energy demand?
You can think of ACER, but also other institutes. The German Öko-Institut, for example. Almost all network managers are subjective. Make sure you have all the different perspectives at the table and think about which energy models you use.
Is it realistic that this will change?
It is realistic that this is becoming more and more of a discussion. This process used to be in the hands of DG Energy entirely. They just worked on it quietly, but relatively little of the process was in the spotlight. Those days are over. Society is watching, and DG Energy needs to engage more with social discussions. Things are going to change, yes. But to what extent, and how much — that will still be part of a political battle. But DG Energy knows very well that they have to change course.
Isn’t it a bit late?
Yes. Climate issues often result in long battles. And the fossil sector has had its way for a long time now. But that is now going to change slowly.
There is the argument that these new pipes can be reused for hydrogen. How realistic is that?
You would have to make some adjustments to the natural gas pipes, but it is actually getting easier to quickly lay hydrogen-compliant pipes. So technically, there aren’t many problems.
But the real question is, what volumes of hydrogen are we going to transport in the future? Pipelines are in the habit of being filled after they are built. An empty pipeline is not exactly what investors consider a good investment. So they want to fill it. If we all have to fill the new pipelines with hydrogen, where is the hydrogen going to come from? The pipelines will now be based on where the fossil gas comes from. Will Azerbaijan provide us with hydrogen?
We are now laying pipelines based on new gas. If we say that they will soon be used for hydrogen, aren’t we already accounting for huge amounts of hydrogen? And how will it be made? Is it going to be blue? Will it be green? Purely from a technical perspective, hydrogen can be transported through the pipes, but this is not the only question. The other questions are about politics and volumes, about the issue of what is needed. And you have to think about that too.
Is promoting hydrogen also a way for the industry to continue using fossil gas for the time being?
That is our concern, of course. The gas lobby has now jumped on hydrogen. They think the distinction between blue and green is a bit nonsensical. They both still need subsidies (both green and blue hydrogen are unprofitable now). We then ask ourselves, why would the government invest in blue hydrogen? Why not in green? Indeed, green is now even more expensive than blue — but why should the government make that gap even wider?
The companies that invest in blue hydrogen are the fossil guys, like Shell. They still have quite some money available, so why should the government support these companies with subsidies?
The places where the potential of the production of green hydrogen is great are large areas where you can generate a lot of electrons, for example on the sea, or in very sunny areas like parts of Spain or North Africa. That’s where you will have to establish connecting infrastructure that will enable you to transport that hydrogen to other parts of Europe in the future. But the natural pipelines we have now go to Russia. I don’t necessarily see Siberia as a source of sustainable energy, of green hydrogen.
Is hydrogen a hype then?
You always have to be careful that a new technology does not become the next holy grail. Which means you have to look at the necessary volumes: how much do you actually need? And where is it really needed? Certain industries need concentrated energy, which is now provided by gas. Gas provides large amounts of concentrated energy, much more than electricity. That’s why hydrogen can offer a very good intermediate solution for industrial purposes. But for cars, that’s not necessary — they can also run on electricity. Investing in hydrogen for cars is a waste of money and energy. In Paris, there was a recent experiment with hydrogen-powered cabs, but that is really a bad idea.
For the energy-intensive industry, hydrogen is necessary, and perhaps also for long-distance transportation, such as heavy trucks, but even there, electric batteries are developing quickly. For ships and for aviation, you need hydrogen, but that’s about it. Don’t try to put the hype on every sector.
Does the industry see it as a lifeline?
For the gas industry, the argument that hydrogen is important is in their interest: I understand that Shell plugs hydrogen everywhere, since it allows them to continue to use natural gas.
What does the Commission’s hydrogen strategy propose? You said you are positive about it, since it specifically mentions ‘clean hydrogen’?
Yes, it was quite a fight — the gas lobby was on top of it, but we managed to keep it reasonably in line with green ambitions. However, this is just the strategy. Soon the next debates will start: where does the money go, what about additional legislation, what will be the source of the hydrogen? This colour coding scheme will keep coming back. What do we call clean, what do we call renewable? They have done that well up to now. But legislation and funding will be the next battles. We haven’t finished with the whole gas discussion yet.
And what about groups like Hydrogen Europe and the Clean Hydrogen Alliance: what do they do, how much influence do they exert? What is their goal?
Hydrogen Europe is a traditional lobby club — there are a lot of gas companies involved. It is also trying to plug hydrogen.
The Clean Hydrogen Alliance is an advisory group. The Commission said that if we want to be internationally-leading in the field of hydrogen, we have to consult various social and private experts, and therefore decided to launch an alliance. I don’t disagree with that idea, but it is striking to see that the officials who are always working on energy — the same ones who put together the PCI list — are now also putting this alliance together. The people from DG Energy set out to work on the alliance. And again, all the gas companies are involved. Only in the end were some sustainable energy companies and NGOs added to the alliance.
This alliance aims to put Europe at the forefront with hydrogen. That sounds like a logical idea, but then at least put the right people in the alliance. If you only include gas companies, then I could already predict what their focus will be.