Frontier report identifies commercial and policy barriers for various pathways to import renewable and low-carbon gases such as hydrogen or bioLNG to Europe, and develops policy recommendations to overcome these barriers.
Renewable and low-carbon gas is expected to play a major role in achieving the EU’s climate targets, alongside other decarbonisation options such as electrification. Imports will be necessary to complement domestic gas production in a similar way to fossil gas imports today. Gas LNG Europe (GLE), representing 15 LNG terminal operators in Europe, has defined several decarbonisation pathways involving the import of renewable and low-carbon commodity gases and fuels, and asked Frontier to suggest high-level policy recommendations to overcome the regulatory gaps and barriers in each pathway.
The pathways involve importing different gases and fuels, including LNG with downstream decarbonisation, bioLNG, synLNG, hydrogen carriers, and e-fuels. LNG import facilities can play a vital role in most of these pathways by leveraging existing equipment, expertise, and personnel in relation to the transport of liquified gas. For example, LNG import facilities are able to import bioLNG or synLNG today without upgrades. And there is potential to convert existing LNG bunkering and fuelling infrastructure to handle some hydrogen carriers.
In our report, we identify several key barriers across the pathways where policy solutions are necessary to enable decarbonisation:
- Renewable and low-carbon technologies cost more than high-carbon alternatives. This is caused by the incomplete internalisation of societal carbon emission costs and technological immaturity.
- There is limited existing demand for hydrogen today. This causes significant uncertainty for investors in hydrogen production, import facilities, and network operators.
- Large scale infrastructure investment is required across the value chain for some technologies, which implies coordination challenges including lack of clarity over roles.
- There is a lack of a common way of describing the carbon content and sustainability of renewable / low-carbon gas.
Our study assesses various policy solutions to each of these barriers and proposes a shortlist of policy options. We conclude that in the long run, an extension of the EU-ETS to further sectors (e.g. heating and transport) will address the key cost barrier and enable a low-carbon society. In near term, more targeted subsidy policies on production, infrastructure and consumption level are needed to support the take-up of renewable and low-carbon commodities. Additionally, investor protection and government facilitated coordination between EU and non-EU states is important to provide certainty to investors across the value chain. And a certification scheme which proves the avoided operating emissions of gases and fuels, ideally including broader sustainability, will be crucial for tradability.
Role of LNG terminals
LNG import facilities are already well placed to support EU decarbonisation goals through the import of bioLNG and synLNG, and could play a role in managing commodity quality standards. Competition between different import routes for low-carbon commodities should be supported by ensuring subsidies are neutral to import route as far as possible. Subsidising the conversion of LNG import infrastructure to handle alternative fuels through a competitive and efficient allocation process will enable competition with other import routes. Under the hydrogen carriers pathways, EU policy should provide clarity on the roles of actors including LNG import facility operators within any new regulatory framework to ensure there are no unnecessary barriers, for example in relation to CO2 capture and handling.
Frontier regularly advises on energy transition, sector coupling, hydrogen and on alternative fuels and combustibles.
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