Ofgem Golden Age of Gas 2 July 2014

The Golden Age of Gas Biomethane, CNG for Trucks and Shale Gas 2 July 2014 John Baldwin Managing Director CNG Services Ltd john.baldwin@cngservices.co.uk www.cngservices.co.uk

http://www.goldenageofgas.com/

The Golden Age of Gas (1) 1.

CNG Services Ltd

2.

Biomethane a) b) c) d) e) f)

CO2 Removal Technologies & CV increase Grid Entry Rules Project Review Green Gas Certificates UK Market forecast Biomethane Conclusions

The Golden Age of Gas (2) 3.

CNG for Trucks a) Market for gas b) Trucks c) Benefits of the LTS

4.

Shale Gas a) Extended Flow Tests b) Building on biomethane c) Proximity to Gas Grid

5.

Conclusions

CNG SERVICES LTD

CNG Services Ltd • Supports projects to inject biomethane into the gas grid – Didcot, Poundbury, Vale Green, Stockport, Doncaster, Minworth, ReFood Widnes etc.

• Bio-CNG as a fuel for trucks – Own UK’s largest CNG filling station – Sell Bio-CNG (20% biomethane)

• Support onshore gas developments

We work on innovation in natural gas

BIOMETHANE

Biogas Composition • • • • • • •

Methane CO2 O2 N2 H2S H2O Siloxanes

55 - 60% 35 - 40% 0.1 – 0.4% 0.4 – 1.6% 200 – 2,000 ppm Biogas is saturated with water Typically present in sewage derived biogas

To get biomethane into the grid, need to remove all H2S, most CO2 and dry the gas

Water Wash

• • • • •

99% of biomethane goes into grid, <1% methane slip 14 - 16m high towers Plant also removes H2S and siloxanes 3 suppliers active in UK Proven and low risk

Membrane Separation

• 3 variants now in UK • Two stage with CO2 liquefaction (Haffmans , Springhill Nurseries) • Two stage with RTO device to burn off 2% CH4 in off-gas (Air Liquide, Future Biogas, Doncaster) – now Air Liquide offer 4 stage with no RTO • Three stage with <0.5% CH4 vented (DMT, Methapower, Envitec, MTEnergie)) • Well suited to plants with <1,000 m3/hr biogas flow rate

Chemical Absorption

• 99.8% of biomethane to grid, <0.2% methane vented • Needs significant heat to raise steam to recover chemicals and hence good fit if excess heat available from biogas CHP • Less electricity required • Requires less propane as less CO2 remains • 2 suppliers in UK though only 1 active (Purac, Crouchlands Farm) • More expensive and complex than water wash and membrane

UK Suppliers • Water Wash – Malmberg – Chesterfield Biogas

• PSA – Schmack Carbotech

• Chemical Wash – Purac Puregas

• Membrane – – – – – –

Air Liquide DMT Envitec MethaPower MT Energie Pentair Haffmans

Propane Enrichment Propane mixing unit

Propane storage tanks

• • • •

The Gross Calorific Value (GCV) in the GB gas grid is 38.8 – 39.5 MJ/m3 Typical biomethane GCV is 37 MJ/m3 (CH4 with 2% CO2/N2/O2) Enrich to Flow Weighted Average CV Typically 10% propane by energy, cost penalty of 2- 3 p/kWh

Gas Quality and CV Measuring Equipment • Biomethane treated same as gas going from NTS into LTS • This has no quality monitoring, just CV • Biomethane projects measure all safety components • GS(M)R • NTS to LTS “Letter of Direction” not appropriate, adds cost and complexity, no consumer benefit (gas enriched to FWACV) • Highly complex system for communicating data to Xoserve • Work underway to develop simpler regime, reduce costs, promote competition

Didcot – UK’s First BtG Project

Anaerobic

Digesters

Propane Storage

Gas bag

Propane Injector

Telemetry Energy & quality Measurement

H2S and Siloxane filters

Biogas upgrader

Flow of biogas - 100 m3/hr First gas to grid on 3rd Oct 2010

Poundbury • • • • •

UK’s first commercial project Membrane CO2 removal plant Gas injected into 2 bar grid 500kWe CHP Development is a JV between Duchy of Cornwall and some of its tenants • Achieving 98% availability

Prince Charles opened the project in Nov 12

Flow of biogas – 500 m3/hr First gas to grid – October 2012

Vale Green 1 • Hybrid Membrane and Cryogenic CO₂ separation plant • Separated CO₂ used to grow more tomatoes • 75% gas to grid with a 490kWh CHP • 7 bar gas grid

Flow of biogas – 600 m3/hr First gas to grid – August 2013

Future Biogas - Doncaster • • • • • •

Agricultural feedstock 80% gas to grid 499 kWh CHP Membrane CO2 removal plant 7bar gas grid First project in National Grid area

Flow of biogas – 900 m3/hr First gas to grid – October 2013

ReFood Widnes • Food waste feedstock • 100% gas to grid • Water-wash CO₂ removal plant • 1bar MP gas grid

• Is there a better gas to grid project on Planet Earth?

Probably not….

Flow of biogas – Estimated 2,000 m3/hr First gas to grid – Q2 2014

Severn Trent Water Minworth • • • • •

Sewage feedstock 20% gas to grid – with existing 7MW CHP Water-wash CO₂ removal plant 20 bar LTS grid Blending allowed so minimal propane

Flow of biogas – Estimated 1,200 m3/hr First gas to grid – Estimated Q2 2014

REAL Green Gas Certificate Scheme • Designed to allow ‘tracking of biomethane from injection point to customer’ • Integrity - no ‘double counting’ • Separate from the gas to provide flexibility

• Can only be used once

GGCS is the UK’s Not for Profit Green Gas Certificate scheme

CNG Services and Barrow Shipping Ltd Gas can be used to fuel trucks on CNG

Crewe Customers Sale of CNG in Crewe

â&#x20AC;&#x2DC;Certificatesâ&#x20AC;&#x2122;

Barrow Shipping Purchase of biomethane energy

8 Projects signed up with Barrow Shipping and REAL GGCS

Organic Material

Processing via Anaerobic Digesters

AD Developer

Normal grid gas

Gas Distribution Network Inject gas into grid Clean-up plant and grid injection

Brit European • Provide transport services for JCB • Run 36 dual fuel diesel-CNG trucks • Purchase Green Gas Certificates to demonstrate gas sourced from UK organic feedstock

Biomethane projects per year 2010-2015 Projects

Projects per Year

Speculative

Cumulative

50 43

45 40 35 25

30

19

25 20 15

10 4 5 1

1

2010

2011

2

0 2012

2013

2014

Could have over 60 projects before 2016

2015

Annual Biomethane to Grid and RHI for 2012-2015 Total TWh per annum

RHI per annum

TWh/annum

Annual RHI

3

£180,000,000 £156,412,959

2

£160,000,000 £140,000,000 £120,000,000

2 £100,000,000 £80,000,000

£60,717,023

1

£60,000,000

£40,000,000

1 £778,719

£20,000,000

£4,510,803

0

£0 2012

2013

2014

2015

Biomethane to grid may be largest RHI technology

Benefits - CO2 Impact • Forecast 1.8 TWh injected into gas grid in 2015 • 130,000 tonnes of gas • 130 x (44/16) = 360,000 tonnes of CO2 saved at the burner tip • Marginal gas to UK is Qatar LNG • The 130,000 tonnes of biomethane displaces 130,000 tonnes of LNG – 15% higher CO2 than UKCS gas on a “Well to Tank” basis – 7-9% CO2 vented in Qatar – So around 50,000 tonnes on top

• So, around 400,000 tonnes/annum benefit • Material contribution towards 2020 renewable energy targets

Benefits – Using the Gas Grid • UK has great gas grid – 85% of domestic market connected to grid – 95% of industry – Power generation back up to wind

• To build gas grid and central heating etc would cost around £100 billion • Vital UK asset • All our Grid Owners are very supportive and have created an attractive regime to allow projects to go ahead at lower cost/quicker

Proportion of Projects in Each Feedstock Category

Sewage Sludge

Agricultural

Food Waste

Food Processing

Biodegradable

GGG Feedstock Category

Number projects in Category

%

Sewage Sludge Agricultural

6 29

10% 49%

Food Waste

13

22%

Industrial Food Processing

9

15%

Biodegradable

2

3%

Unknown

0

0%

Total Projects

59

Biomethane Market Forecast

• UK total gas demand now is around 800 TWh/annum • •

Around 50% domestic heating, 25% power gen and 25% industry Stretch maximum biomethane by 2030 is around 20 TWh

• For heat in cities there are few practical/economic alternatives •

Biomass (air quality), heat pumps (do not work in very cold weather), district heating (too late to dig up cities)

Biomethane to Grid Conclusions • It has taken 6 years but the regime looks good: • Over 50 projects in next 3 years is possible, all technologies

• Majority of biomethane from waste feedstock • Around 2 TWh in 2015 • UK total gas demand 700 TWh • 130,000 tonnes of LNG not imported

• Focus on reducing capital costs • • • •

Grid Entry Unit costs reduced by 50% in last 5 years New processes being developed for high pressure connections 7 active biomethane equipment providers in UK – competition Membrane plants have potential to be significantly lower cost

UK biomethane market growing fast, delivering significant benefits and helping meet 2020 renewable energy targets

CNG FOR TRUCKS

HGV Sector Provides Best Opportunity for CNG

Fuel options in each sector

Cars are not the target for natural gas â&#x20AC;&#x201C; trucks relatively few in number, limited other options, use a lot of diesel and cause significant GHG emissions

Dual Fuel • Dual fuel trucks are available • Hardstaff/Mercedes Benz • Clean Air Power/Volvo • Prinz/DAF/MAN/Mercedes Benz

• Euro 5 dual fuel a good way to start a shift to CNG

32

Dedicated CNG – 340 bhp

Dedicated CNG tractors are coming….first 5 in UK in autumn 2014

Dedicated CNG – 400 bhp • • • •

Entry for Niche Vehicle Competition (3rd July 2014) Dedicated CNG Kenworth with Cummins 12 litre gas engine Trial in UK (CNG/LNG) Low noise ideal for moving shale gas waste water

Expected to give 20% lower CO2, very low NOX and particulates 50% less noise

UK Gas System Local Transmission System

LTS is a vital national asset - ideal for CNG – it would cost >£15 billion to build NTS/LTS – these assets can help reduce diesel demand and reduce CO2 from trucks

Benefits of Using LTS • Lower pressure lift o Reducing electricity used in compression o Reduces number of stages of compression from 5 to 2

• Higher flow rates o Compressors run for less time, lower maintenance o Very high capacity per CNG station

• No leakage of gas in LTS o Higher pressure grids made with Carbon Steel pipes

• Dry Gas o No gas drier needed

The 6,000 km of 20 – 35 bar LTS means that 95% of major UK distribution centres are within 2 km of the ideal energy source is a vital national asset

Energy Used in Compression

As the grid (inlet) pressure increases the electricity used in compression decreases and higher flow rates of above 2,000m3/hr are possible which reduces the running hours of compressor and/or provides very high capacity

CNG Conclusions • OEMs now making trucks that run on natural gas • Dedicated - Scania • Dual fuel - Hardstaff, Clean Air Power, Prinz, G-Volution

• Gas Distribution Networks supportive • Great gas grid

• Oil – gas price differential • Never been as large as today - gas 25% of cost of oil on an energy basis

• CNG-diesel duty differential • Fixed for 10 years

• CNG very good for depot based distribution • Shale gas may be abundant and low GHG UK set for growth in CNG for Trucks

SHALE GAS

UK Oil Production and Demand 1990 - 2020 UK oil production

UK oil demand

DECC forecasts that by 2025, UK will be importing around 1 million barrels of oil per day, almost all for road transport This is the Elephant in the room......Question - How does UK plc afford this extra import bill of around ÂŁ40 billion/year

Answer – Don’t Import It!

BGS say that Bowland alone gas resources could be 1,500 TCF - assume 10% recoverable = 3 TCF (84 BCM)/annum for 50 years (UK annual demand around 80 BCM)

Lancashire 350 million years ago Bowland shale at 4,000 feet thick

Most US shale at 300 feet thick

Imagine an inland sea where Preston is today...... is this going to be one of the 10 largest gas fields on planet earth?

A bit of the gas leaked out and was captured in a different strata ....we call this gas “South Morecambe” – our largest gas field to date, mostly produced

Morecambe Gas • • • • • •

In 1973, Gulf (now part of Chevron) drilled through the South Morecambe gas field –

They said it was dry….

John Bains of British Gas looked at the logs and identified 600 feet of pay!

–

Clever chap

Probably the single most important event in the history of Centrica, BG Group and National Grid 172 BCM of gas = 69 billion therms Worth £50 Billion at today’s gas prices Key to UK energy from 1985 - 2000

I was a graduate trainee on South Morecambe commissioning...with hindsight the whole of Morecambe was just an early indication of the shale gas available in Lancashire.....

Largest Gas Fields Who knows where Bowland shale will fit?

Bowland shale may be one of largest gas fields on earth

Injecting gas from onshore production into the gas grid?

• Wytch Farm • Biomethane • Never been done to NTS

Wytch Farm

Gas Distribution Network – for Extended Flow Tests • Used for biomethane • Flows of 3,000 m3/hr likely (equal to around 9 million th/annum)

National Transmission System – for LNG Displacement Flows • For large volumes

Capacity in the NTS The NG 2012 Ten Year Statement shows the decline in flows from St Fergus, Teesside, Barrow: http://marketinformation.natgrid.co.uk/Gas/CapacityReports.aspx

By far the best place in UK to find shale gas is under Lancashire â&#x20AC;&#x201C; NTS capacity available

Gas Quality Requirements • Gas Safety (Management) Regulations set out gas quality, basic parameters for shale gas producers are: – – – –

No H2S Dry gas Wobbe within a range Total inerts (CO2/N2) limit (7%)

• North Morecambe, for example, has high N2 and has to liquefy methane to reduce the N2 • Shale gas may be like Southern North Sea gas?

• NTS Network Entry Agreement has no restriction on Calorific value • GDN entry may need enrichment with propane or blending (level of ethane and inerts is key) due to increase in grid average CV in last 30 years due to decline in Southern North Sea gas and replacement with high CV Norwegian gas and LNG

The key cost issues are high levels of H2S, CO2 and N2

Shale Gas GHG compared to LNG

Lancashire shale likely to be 30% lower GHG compared to LNG

Shale Gas Conclusions • Location: – NW in particular is very attractive for gas due to existing gas grid, capacity available – Developments can be quicker than people think

• Gas Quality: – Probably straightforward

• UK regime for gas injection is good, getting an NTS or lower pressure connection is unlikely to be critical path • Biomethane market is perfect model for Extended Flow Tests, start to finish in less than a year • Shale gas into NTS, then out of LTS to run trucks - perfect We have waited 350 million years, we are ready!

GOLDEN AGE FOR GAS

Conclusions • Low GHG Options – – – –

Biomethane Bio-SNG Power 2 Gas H2

• Shale Gas – Qatar LNG pays no tax, Lancashire gas likely to pay 60% tax – 30% lower GHG – Jobs

• CNG for Trucks – Use LTS, shale gas, biomethane – Lower GHG, improved air quality, low noise

The Golden Age for Gas – without it, you can’t have wind/solar