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Natural gas: the key to achieving an orderly and effective energy transition while guaranteeing supply and affordable prices

Natural gas: the key to achieving an orderly and effective energy transition while guaranteeing supply and affordable prices

April 25, 2024
For about a decade, the energy transition has been one of the main strategic pillars through which the European Union seeks to distinguish itself to effectively combat climate change.

Original article in Spanish: El Economista

Author: Ángel Crespo, CEO of MET Energía España

This pioneering role in the decarbonization of the economy has as its main foundation the drawing up of a coherent and adaptable roadmap that marks the way to carry out this transformation in an orderly and successful manner, without disrupting the economy with unattainable goals, costs, and prices. The success of the transition depends on it.

To achieve this, Spain and Europe must place the concept of technological neutrality at the core of their strategy, which is essential to ensure free competition among different technologies without prioritizing some over others and allowing their full development. Additionally, the continent must consider the current energy trilemma, which is characterized by the need to ensure three main issues: supply security, affordable prices, and an orderly decarbonization of the economy.

However, in order to carry out this sustainable transformation, first of all, Europe must make a greater push to replace the most polluting energy sources such as coal or oil-derived products with natural gas, which is destined to play a leading role in the energy transition towards sustainability (not just at a European level, but worldwide). And it is necessary to highlight that natural gas is the fossil fuel with the lowest environmental impact of all those employed, both in the extraction, processing and transportation stages as well as in the usage phase. Moreover, as published by the Ministry for the Ecological Transition, its emissions are 40-50% lower than those of coal and 25-30% lower than those of fuel-oil.

On the other hand, natural gas maintains and will maintain its advantages: Being a reliable, safe and accessible source of energy, with an extensive infrastructure and a competitive price signal, which currently makes it the most sustainable option for the energy-intensive industry. Likewise, it will consolidate itself as an energy backup that allows guaranteeing the orderly development and implementation of renewable energies, without compromising the industry.

However, the strategy followed by our country and the collective community institutions suffers from mainly focusing sustainable efforts on generation, while it becomes increasingly evident that demand is lagging behind, and it is as crucial as the former. This is evidenced by the energy balance conducted by the Energy Club and the Ministry of Energy Transition, which shows that energy demand in Spain has been significantly decreasing for several years, without being able as a country to recover the pre-pandemic figures—in the case of electricity, the decrease in 2023 was 2.3% according to Red Eléctrica.

This fact is significant once the country has regained a state of stability after the impact of the pandemic and the high energy prices resulting from the war in Ukraine, which points to a decrease in both the economy and the significance of the industry that our country is experiencing.

Sectors such as the industrial and heavy transport, which are energy-intensive, require sustainable public plans and goals that are realistic and achievable, as these are processes that are difficult to decarbonize and lack a clear short-term strategy. Thus, setting sustainable obligations that cannot be met by the sector can lead to a gradual relocation of Spanish industry to geographical regions with more accessible regulations that allow their economic activity to progress. In this case, the security of energy supply transforms into another problem: greater dependency on foreign industry, with a consequent negative effect of not having mitigated global emissions.

Along the same lines, another worrying fact is the decrease of the national demand for electricity with cogeneration, which has fallen from 10% in 2021 to 6.5% in 2023, according to the latest data from the Spanish Cogeneration Association, ACOGEN. This represents a new indicator of the fragility of the Spanish industry and the consequent loss of energy efficiency and competitiveness of the industries.

Combined cycles, on the other hand, should constitute a European commitment to become a backup technology for renewable generation, both for their reliability and greater sustainability, with a much lower impact than coal or fuel oil thermal plants. However, in order to recover the viability of natural gas generation systems, it is urgent to publish the new regulatory and investment frameworks through capacity auctions and stable remuneration mechanisms over time, allowing for a new investment cycle, as is the case with cogeneration.

We find ourselves at a moment when it is necessary to prioritize a logical gradualness in the replacement of the most polluting energy sources. Within this framework, the promotion of natural gas, not only as a central backup element in this transition scenario, but as a way to carry out this transformation in a safe and competitive manner, guaranteeing the industry, is crucial. Let's consider a central element: the roadmap to achieve an effective energy transition is just as important as the set goals. Only in this way can we navigate this path, which should currently focus on incentivizing, primarily, the demand and not just renewable production.