OPINION - Is gas balancing “common sense” for all European markets?

Natural gas prices in Europe have dropped to pre-war levels and we seem to be back to the conversation around the suitability of gas as a transition fuel.

In February, the Dutch TTF benchmark for gas prices in Europe experienced a huge drop and arrived below EUR 25 per MWh. Then in mid-March, the UK government outlined plans to support the building of new gas power stations as a “common-sense” move to ensure the country’s long-term energy security. “There are no two ways about it. Without gas backing up renewables, we face the genuine prospect of blackouts,” Energy Security Secretary Claire Coutinho said at the time.

But is it really such a “common-sense” move for any European market?

SeeNext recently held a business event in Sofia focused on the progress and challenges faced by the renewable energy sector in Southeast Europe. Energy storage was the focus topic of a discussion moderated by Renewables Now senior editor Ivan Shumkov and it briefly touched on the competitiveness of gas.

COST

One key aspect of natural gas (and all fossil fuels) we need not forget is its volatility, Mariyana Yaneva, vice president of the Association for Production, Storage and Trading of Electricity (APSTE), said at the event. It is quite easy to start drawing plans for gas power plants that will balance renewable power generation when the price of gas is down. But what security do we have that in a year or two, or maybe sooner, we would not be back in a scenario where the price is quadrupled or ten times higher than it was in March?

Veselin Troyanov, Technical Solution Manager at Huawei Digital Power, pointed out that unlike the unpredictable natural gas price curve, we could be pretty sure that the price of energy storage will remain on a downward trend. This is something that happened with solar and it is something that is happening with battery projects. The energy storage density of battery cells and systems is constantly growing and looking at the price curve for the past 10 years it is quite visible that we are getting there.

COMPETITIVENESS

The heated discussion revolved around Bulgaria’s need to prepare for unprecedented growth in solar capacity additions and the challenges brought forward by renewables' intermittency. Grid upgrades and energy storage investments are the obvious tried-and-tested solutions for experts in the renewable energy field, but the role of natural gas was also discussed.

According to Severin Vartigov, CCO and Country Manager for Bulgaria at Enery, even if gas prices remain stable in the longer term, Bulgaria would not have an advantage from a regional perspective given the limited sources of supply and relatively small market. Investing in gas-fired facilities makes more sense for countries like the UK, Greece, Romania and other markets with easy access to a variety of natural gas suppliers. In any way, energy storage holds much more potential for boosting short-term system flexibility.

DECENTRALISATION

Most countries in the region of Southeast Europe are still choosing the energy storage technology that they know best – pumped-hydro. This is one of the main conclusions of the 2024 edition of the Renewable Energy Industry in Southeast Europe report by SeeNext and another important point in the discussion held at the SeeNext event.

Bulgaria's energy strategy, for example, outlines plans to expand the Chaira pumped storage hydropower plant by 2030, construct 1 GW of new pumped-storage facilities by 2035, introduce 600 MW of battery storage by 2030, and implement 1.5 GW of seasonal storage systems by 2050.

Mariyana Yaneva reminded us that Chaira, the largest pumped-hydro storage facility on the Balkans, has been offline for nearly two years. The facility, with a capacity of 864 MW in generating mode and 788 MW in pumping mode, suffered a major breakdown in 2022. The cost of repair is huge, as is the period of time needed to bring it back online.

“Relying on a few giant power generation, balancing and energy storage facilities is not the wisest option when you look at the energy security aspect of a country or a region’s energy system. We have seen this with renewable energy and we are seeing it again with energy storage - decentralisation pays off. It gives you greater flexibility, reduces risks and can definitely minimise downtimes,” Mariyana said.

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