Denmark must drive a cost-effective green transition in the EU, including by pushing for the development of a well-functioning European market for green gases. Among other things, there will be a need for documentation (guarantees of origin or the like) which can guarantee that gas sold as green gas stems from renewable energy sources. There will also be a need for technical challenges to be handled at the EU level to ensure that national requirements for the quality of green energy (such as biogas) does not become a technical barrier to trade for Denmark in practice.
The Danish gas system and gas market are a closely integrated part of the European gas market.
For Denmark, it is important that we have a well-functioning European market where there are no restrictions on the sale of gas across borders. This benefits the EU's green transition, consumers and security of supply. Denmark must drive a cost-effective green transition in the EU, including by pushing for the development of a well-functioning European market for green gases. The
Government will work towards creating a framework for a well-functioning and credible market for green gases such as biogas, e-methane, green hydrogen, etc. in Europe. The Commission's Fit for 55 package is therefore an important step in this direction.
The European Commission is expected to present a new hydrogen and decarbonised gas market package by the end of 2021, revising the existing gas package to phase out fossil natural gas and create a market for green gases and hydrogen. In addition, the European Commission is expected to present a new proposal to regulate methane emissions in the energy sector. Methane emissions
are currently not regulated at the EU level, which is why this proposal is expected to include a common monitoring, reporting and verification instrument that makes it possible to estimate the need for reducing methane emissions within the EU.
The presentation of the hydrogen and decarbonised gas packaged is particularly relevant not only because Denmark is the biggest green gas consumer in the EU, but also because Danish
companies have a high level of ambition in relation to developing hydrogen and PtX technologies.
Preliminary Danish priorities in the Hydrogen and Decarbonised Gas Package
• A market for green gases with a focus on renewable gases such as biogas and green hydrogen
• A common framework for the free trade of green gases across borders
• Elimination of trade barriers, including common standards for gas quality
• Development of hydrogen infrastructure, integrating rules into existing legislation
• Developing sector integration and PtX technologies
In addition, the Government is pushing for an overall EU target of 45% renewable energy by 2030.
Achieving such an ambitious target would make it important for Denmark’s own positive
experiences with green gas to be disseminated at the European level. It is important that Danish companies are able to operate under good market conditions, including a well-functioning European market for guarantees of origin or the like (see below) for trading green energy across national borders.
A green transition of the gas sector - not only in Denmark, but in the whole EU - implies that natural gas will be phased out in the long term. Therefore, the Government will work towards ensuring that in the future, EU funds are not used for cross-country long-term EU projects that solely entail transporting natural gas. Denmark will accordingly seek to influence the content of European Commission’s proposal to revise the TEN-E (Trans-European Network for Energy) Regulation with that goal in mind. With respect to the TEN-E Regulation, Denmark has taken a leading role in an alliance with like-minded EU countries in relation to regulating this area. The proposed revision of TEN-E is still undergoing negotiation with the European Parliament.
Guarantees of origin and similar measures to ensure transparency across borders As long as fossil natural gas remains in the gas system, there may be a need for documentation (guarantees of origin or the like) which can guarantee that gas sold as green gas stems from renewable energy sources. This is not least important in relation to the future European hydrogen infrastructure. It is crucial that this infrastructure is supported by a well-functioning market for green hydrogen and allows green gas to be exported and imported between EU Member States.
FACT BOX: Trade in green gases
When a biogas plant feeds biogas into the gas system, it is mixed with other gas. In the gas system, both biogas and natural gas are mixed to form a uniform gas. In order for the gas supplier to prove the origin of the gas supplied to the final customer, guarantees of origin are used.
Energinet issues guarantees of origin, thereby ensuring that it can be documented that a consumed volume of gas is matched by an equivalent production of green gas. This system prevents double-counting of renewable energy, allowing companies and other consumers to pay for green gas.
As the European Commission is expected to present a market model for hydrogen in the future, the Government will push for a clear framework for the development and trade of green hydrogen across the EU. A future common European hydrogen infrastructure should be reserved for green hydrogen, as opposed to hydrogen based on fossil fuels and nuclear power. This would create a basis for sector integration and thus also the development of PtX. Hydrogen should be viewed in
particular for its potential to enable the green transition of heavy industry, which is why hydrogen should be prioritised for areas where it can be used in the most cost-effective way.
Uniform standards for gas quality
As biogas - and with time, other green gases - begin to make up a greater share of Danish gas consumption, the technical requirements for gas quality may face challenges as it becomes less uniform. This is because biogas contains a small proportion of oxygen, and the amount of oxygen permitted in Danish gas is higher than in neighbouring countries. Therefore, Danish gas exports to other countries such as Germany may become a challenge as biogas production increases. It is important that these technical challenges are handled at the EU level to ensure that special national requirements for the quality of green energy such as biogas does not become a technical barrier to trade for Denmark in practice.
Vision for the role of gas in the green transition
Denmark’s gas system carries implications for the green transition of Denmark’s energy system.
The gas system is an important asset in the green transition which the Government wishes to utilise to meet Denmark’s climate targets and further strengthen the country’s position as a green frontrunner. Initially, the country’s gas infrastructure must be able to handle a decline in gas consumption, a changing consumer landscape and an increase in biogas production. In the slightly longer term, gas infrastructure may need to be adapted to meet the demand for transporting and storing other green gases such as hydrogen.
The Green Gas Strategy makes it apparent that there are several paths to realising the goal of entirely green gas consumption, both through reducing gas consumption while also increasing production of green gas. Danish gas consumption can become 100% green by 2035 if, for instance, Denmark introduces further subsidies for biogas along with higher fees and other
measures that can further contribute to the phaseout of fossil natural gas. The Green Gas Strategy also shows that Denmark has sufficient biomass resources for the green gases needed for this green transition of gas consumption.
In the future, other green gases may come into play, resulting in the development of several gas systems operating in parallel. Existing gas pipelines may therefore need to be converted for new green gases, and new pipelines may need to be established.
The Government’s Green Gas Strategy sets a course aimed at ensuring that:
• gas is used in areas where electrification is not an option to the greatest possible extent. Gas production and consumption must also supplement energy efficiency improvements. Gas can play an important future role in Danish industry above all. The Government will work towards creating the right incentives for further electrification, thereby ensuring that green gas only serves as an alternative where appropriate.
• that green gas supports employment in Denmark. This will require tariffs to be kept at a competitive level to allow companies using green gas to compete internationally and produce goods with a low climate footprint.
• that future green gases are produced on market terms and able to compete with green forms of energy. The Government will accordingly work towards ensuring that green gases can
eventually become competitive on market terms. To that end, it is important to establish a clear legislative framework that ensures fair competition. Competition on market terms can reduce the need for subsidising the production of green gas.
• that green gas is sustainable, i.e. with the lowest possible negative impact on the environment and climate. The Government will also work towards ensuring an appropriate green transition of the gas sector in close dialogue with affected households and with consideration for wildlife, nature and the environment.
• that Denmark’s gas infrastructure is prepared to support future green gases such as hydrogen.
The Government will therefore create the proper framework for establishing, operating and using hydrogen infrastructure in the future, which will also entail repurposing existing gas pipelines to transport hydrogen. The Government will also work towards creating a framework for a well-functioning and credible market for green gases such as biogas, e-methane, green hydrogen, etc. in Europe.
• that the Danish gas system contributes to flexibility and security of supply in Denmark bey continuing to interconnect the country’s electricity, heat and gas systems. Sector integration will in the future also include PtX. One of the Government’s priorities is to ensure the Danish energy system not only becomes green, but also capable of ensuring security of supply, and gas can play a role in that.