Post on 02-Jun-2020
The Green Gas Opportunity
Baker Hughes Annual Meeting / Energy Forward
Florence, 3rd February 2020
Marco Alverà– Chief Executive Officer
2
EU Total Final Consumption 2018, Mtoe
Source: IEA, World Energy Outlook 2018 & 2019
41%
22%
21%
4%
9%3%
Coal
Oil
HeatNatural gas
Electricity Biomass and other RES
33%
2%
Coal
4%
8%
Nuclear
10%Other renewables
Power Mix
18%
24%
Oil
Hydro
Biomass
Natural gas
Reaching net zero by 2050 is a huge challenge for Europe
Given current energy mix, a full electrification from renewables seems unrealistic
1.155
EU Power sector mix 2018, Mtoe
3
Gas infrastructures are crucial to cover seasonal peaks Gas allows seasonal storage
Gas consumption in Italy, GWh
-
500
1 000
1 500
2 000
2 500
3 000
3 500
4 000
4 500
Electricity
Gas
Average price: c. 51 Eur/MWhAverage price: c. 13 Eur/MWhCommodity1
Gas Electricity
Transport BBL: 11 Eur/kw/100 km Britnet: 230 Eur/kw/100 km
Storage 1 bcm ~ 10 TWh(0.5-1.0 bn EUR)
700 mn new Tesla Powerwall 2 (investment cost: €5.6tn)
=
Operational storage costs2, Eur/MWh
Minutes /hours
Intra-day
Weekly/daily
Monthly
100 GWh to 100 TWh
Up to 10 GWhUp to 1000 MWh<10MWh
Demand volume
Compressed air
Hydro-pumps
Natural gas storage/ renewable gas
Batteries
5
20
65
110
200
220
Hydro pump
Hydrogen storage
Natural gas storage
Zinc battery
Compressed air
Lithium battery
1. 2019 September average 2. Excluding commodity costs and eventual final conversion into electricity
Gas asset provides flexibility to the energy system, hard to replicate
4
Fossil fuels also power industry and heavy transport, which are hard to electrify
Cement Steel Plastics
Heavy road transport Shipping Aviation
HeavyIndustry
Heavy-duty Transport
10 Gt CO2
(30%)
Emissions from hard to abate sector represents 30% of the total…
… their share will increase as decarbonisation goes on
5
Green gas – biomethane and hydrogen – can help solve these issues
Both Hydrogen and biomethane have a
zero carbon footprint
H2 can transport and store solar and
wind energy, allowing for sector
coupling
They can leverage existing infrastructure
for instance for winter heating
Sector coupling
Carbonfree
Gas Gas
grid
They can be swapped in for fossil fuels
with limited adjustments
Easy to use
6
A mix of renewable electricity and green gas is the lowest-cost decarbonisation option for Europe – Navigant Study
6
Biomethanewith CCS
Source: «Gas for Climate 2019»
Decarbonisation by using 270 bcm of green gases would save €217 billion annually
Renewable gas Low-carbon gas
BiomethaneGreen
HydrogenSynthetic methane Blue Hydrogen
Natural gas with CCS
H2 H2CH4
95 bcm 15 bcmConsumptionestimate:
160 bcm
Import
H2
Hard-to-decarbonisesectors
7
2010 2020 2030 2040 2050
In Italy, hydrogen will be competitive within 10 years
Electrolyser Capex €/kW
Solar/Wind cost €/MWh
350
21
162
12
Cost evolution (€/MWh)
1080
48
1,800
324
Source: Thomson Reuters, Snam Terna scenarios, GME, ICIS, analysis on market estimates
0
20
40
60
80
>500
Natural gas (with CO2)
Green H2
Blue H2
Grey H2 (with Co2)• Green hydrogen may develop particularly
rapidly in Italy owing to solar resource
• Cost decline, driven by cost of solar and wind, and electrolyzers
• Breakeven between blue and green hydrogen expected before 2030
• First two H2 uses to become competitive will be «grey» hydrogen and long-distanceheavy transport, also owing to fuel cellefficiency
• Internalisation of rising CO2 costs necessaryto make H2 competitive with natural gas
… large-scale adoption
Electricity (PUN)
Gasoil (with CO2)
8
Buildings
Transportation
Industry feedstock
Industry energy
By 2050, hydrogen could provide almost a quarter of Italy’s energy demand
1629
218
2017 2030 2050
91
2040
Total final energy demand, TWh
Thereof H2, %
Hydrogen demand by end-use sector,TWh
~ 1,400
1%
~ 1,300
2%
~ 1,100
8%
~ 950
23%
Existing feedstock
1 40 91
xxElectrolyzer capacity necessary to supply all demand1, GW
1. Assuming an electrolyzer efficiency of 75% with a 35% load factor2. Less industry demand as existing H2 demand in Italy is lower vs the rest of Europe (as gas prices are high in Italy, SMR is less competitive); More buildings uptake as green H2 costs decline faster in Italy than in the rest of Europe (due to cheap solar) and hence become
competitive for heating (primarily in buildings) heating
SOURCE: IEA, Team analysis; EU Hydrogen roadmap
Outlook in line with EU hydrogen roadmap (24% of demand from H2 in 2050), but with more uptake in buildings, and less demand from industry2
9
Italy is optimally positioned to become a leading hub for green hydrogen from North Africa to Europe
SOURCE: Snam analysis
The Dutch government plans to export green hydrogen made with offshore wind across the whole of Europe
Italy could use its solar resources and its existing connection to North Africa (which has even better solar resources) to set up a leading hydrogen hub
Envisioned hydrogen trading
hub by Dutch government:
Groningen
High solar availability in the
south of Italy
Italy can set up hydrogen trading hub, which due to high domestic production potential, and import
from North Africa can serve as primary European hub
Potential to import fromNorth Africa
LNG
Organic & agricultural waste
Power to gasHydrogen
Natural Gas
Energy efficiency for residential and industrial customers
CNG/LNG stations
Snam4Environment
Incentives on biomethane for mobility for 10 years
Industrial &Residential
Transport & off grid userSmall scale LNG
€400m investment targeting high single/low double-digit low-risk returns
Future proofing the network
Biomethane
Snam’s strategy for the energy transition
Snam as an Enabler; Hydrogen BU created
• Pipelines: network is largely hydrogen ready, key reason to underpin replacement
• Components: gas chromatographs and other minor instruments would need replacing (<1% RAB)
• Gas compressor units: testing the impact of a 5-10% blend.
• Geological storage sites: ongoing analysis and research
• Ongoing assessment of use of membranes to separate NG and H2 out of NGH2 blend
• Evaluating potential opportunities/pilot projects to scale up clean H2 production and use
• Potential partnership with other operators of the value chain
• Scouting for promising technologies
• Long-term scenarios: Expected key role of hydrogen in the energy mix
• Grid evolution: Development of pathway analyses with increasing share of green gasses
• Technical standards: involvement in focus groups to develop common rules on H2 in Italy and Europe
Negligible investment to reach5-10% NGH2 readiness
Ongoing investment in the grid«Hy-ready»
Ongoing workto support
long-term grid planning
Scouting the marketfor investment opportunities and
partnership
Asset Readiness1. System design2. Value chain development3.
The new hydrogen BU
12
The hydrogen blending experiment in Contursi Terme
EU 1. Pasta production
EU 2.Water bottling
75 bar 5 bar
H2NGSna
m G
as
net
wo
rk
Lenght ≈ 700m
C.R. 818
10% H2NG