Natural gas has long been hailed as a reliable energy source to complement green energy solutions in the decarbonization agenda of businesses and countries. The traditional emphasis is that it can deliver a substantial reduction of emissions compared to coal and oil which pushes its role as a back-up of renewable energy.
However, the environmental groups are abolishing those claims, insisting it should follow coal in phasing out. Recently, natural gas prices have been soaring out, additionally supporting the efforts to drive fossil fuels out of the economy.
The Three Pilars Of EU Energy Policy
Europe has always claimed its climate and energy policy rests on three pillars: security of supply, affordability, and sustainability. Natural gas now is under a question mark on all three of them.
The gas supply is once again threatened by geopolitics as Russia is not providing enough. That situation seems to legitimize Germany’s acceptance of the Russian Nord Stream 2 pipeline, however, that would increase the EU’s dependency on Russian gas.
Prices are increasing due to other factors too, like weather and rebounding post-pandemic demand. However, these events really point out one thing – the need for more investment in alternative sources like renewable energy projects and green hydrogen.
In the meantime, gas serves as a stepping stone away from dirtier oil and coal but in the future, the question remains what will replace it. Green hydrogen is one of the promising alternatives, and natural gas prices spiking to new records breathes fresh air into it.
The natural gas price today is around $5.35 while green hydrogen is about $6. European electricity prices have reached their highest levels in over a decade in recent weeks – above €100 per megawatt-hour in many markets, according to the IEA.
Electricity prices have tripled over the past year in countries like Germany, Spain, and the UK due to increasing costs of fossil fuels imports. Statistics also show that currently, over 50 million European families do not have access to the energy they need.
Green Energy Solutions Could Solve The Problem
Well-managed green energy solutions are seen as a way out of the current energy market crisis in Europe and certainly not a cause of them, according to the IEA’s executive director Fatih Birol. Renewable energy is highly competitive with fossil fuels – generating electricity from existing UK gas plants is three times more expensive than from new onshore wind and almost twice that from new solar.
The higher natural gas prices also jeopardize the economics of the production of blue hydrogen as it is in competition with green hydrogen and also deemed much less clean.
Green hydrogen is one of the promising alternatives to natural gas as a reliable source of electricity, however, further investments in capacity and infrastructure are needed to drive down costs and increase deployment. Current problems with energy supply and affordability in Europe are bolstering the case for financial support of green energy solutions like green hydrogen and renewable energy investment.