With a PhD in Chemical Sciences, Arturo Gonzalo Aizpiri will be Enagás' top executive from February 2022. He has been a member of the Repsol team since 1990, where in his last stage he was general manager of people and organization and of communication, institutional relations and presidency. In the political sphere, he has been, among others, general secretary for the Prevention of Climate Change at the Ministry of the Environment between 2004 and 2008.
Enagás' top executive considers green hydrogen transport the activity of the future for Enagás, taking advantage of the current natural gas networks, a fuel whose demand is decreasing, and the opportunity offered by the corridor project between Barcelona and Marseille, the H2Med, with an investment of 2,850 million euros. Arturo Gonzalo Aizpiri (Madrid, 1963) is committed to hydrogen, despite doubts about its possible profitability and technological application.
Enagás is undoing its positions abroad and withdrawing in Spain. Are you entrusting everything to green hydrogen?
Our strategic focus is security of supply and decarbonization in Spain and Europe. Our presence in the European gas system is totally strategic and the first step towards being in the future European green hydrogen system, which will be increasingly integrated. The priority in security of supply has been placed by the war in Ukraine, but that priority will gradually give way to decarbonization and the deployment of renewable gases, because they also contribute to security of supply and energy independence.
"Regulation will force us in 2030 to reduce our presence in the production business, because of the separation of activities."
But green hydrogen is a liberalized activity and Enagás is a regulated company.
As a regulated and public utility company, the Government's More Energy Security Plan includes the start-up of the El Musel plant, the expansion of the compression capacity of the interconnection with France and the small-scale terminals of our Mediterranean plants for the virtual gas pipeline to Italy. Our priority is the full availability of the system and reducing the environmental footprint, with measures such as the replacement of gas compressors with electric ones.
But we also want to participate, insofar as the regulations allow us to do so, in the deployment of renewable gases, especially green hydrogen. We do this through our subsidiary Enagás Renovable, but the regulatory framework will force us to progressively increase our presence in the production business. Because of the requirement to separate activities, we will not be able to be present in the entire value chain of renewable gases, just as we cannot be present in the entire value chain of natural gas: if you are in the transportation business, you cannot market gas. This will happen in 2030, according to the European directive to be approved this year.
Would the consumer pay the toll for these networks?
The concept of tolls has to be seen in two stages: between now and 2030 and from that year onwards. According to the proposed gas and hydrogen directive, from 2030 onwards it will be regulated and the infrastructures will have to be put in the hands of an HNO (the hydrogen equivalent of the current natural gas network managers and transporters, or TSO). Until 2030, infrastructures can be promoted on a liberalized basis; if it is not a transporter with the aspiration of being an HNO, the participation would be temporary and it would have to offer the producer and the consumer a transport tariff that makes the project competitive. From the end of this decade, a regulated toll would already apply.
"We want to play the role of HNO, manager and transporter and be a benchmark in Europe."
And what role will Enagás play?
Our objective in the coming years will be green hydrogen infrastructures and we aspire to play the role of HNO, as the directive has named it, and to be a benchmark in Europe. Between 60% and 70% of future hydrogen infrastructures will be adapted natural gas infrastructures. That is where we will have a differential role.
The demand for gas is being destroyed and is not expected to recover, but its replacement by hydrogen is far off.
The framework will be set by Europe. The REPowerEU (REU) sets the objective for Europe to replace Russian gas as quickly as possible: at 150 bcm (billion cubic meters), compared to 500 bcm in 2021, and for this it foresees that 20 million tons of green hydrogen will be consumed by 2030, at least 10 million tons produced in the EU. This will require the creation of a network of hydrogen corridors in Europe because the major consumption centers do not have the capacity to produce all their demand. The Iberian corridor will be key, as the Peninsula has the potential to generate a surplus of H2 in Europe at competitive prices. The States and TSOs have presented our proposals to achieve that H2Med is considered a project of common interest (PCI) of cross-border networks. We have submitted it jointly with France and Portugal.
But these funds will clearly be insufficient.
Yes, the European Union is aware that there will be a competitiveness gap. In the U.S. the subsidy will be three dollars per kilo of hydrogen, and the EU, within the framework of the industrial green pact, has launched the European Hydrogen Bank, which will allocate a green premium to production through auctions to make it competitive. The first will take place in autumn, with an initial financing of 800 million. Producers can go to them, but they have to provide the PPAs of the associated renewable generation and what they call HPAs or consumer purchase agreements.
"With the purchase of the Reganosa network, we have become the only high-pressure operator in Spain".
Precisely, the most complicated thing will be to sign contracts with consumers.
That is the key point, and it means that the first projects to mature will be anchored in the current large hydrogen consumers. Today, eight million tons of gray hydrogen are consumed in Europe. Spain is a major producer, because the sectors that are at the forefront (refining, fertilizers and steel) need it. In fact, the most important projects that we know of in Spain - in Asturias, the Valencian Community and Aragon - could be the first major projects to mature, they have a horizon of between 12 and 18 months, they are very advanced.
Will green hydrogen be able to compete with pink or nuclear hydrogen?
My impression is that French nuclear hydrogen will be recognized as low-carbon and could help France meet part of its objectives, but it will not be comparable to green hydrogen for the purposes of aspiring to PCI projects and meeting the 20 million ton target set by the REPowerEU. But even if they could fit into those 20 million tons, the experts' analysis is that quantitatively it would have a very small impact, because the possible French surplus would be limited.
"The demand for gas in Europe is going to fall by 40% in this decade. In the case of Spain, without the Russian pressure, it will be 30%."
Many question whether hydrogen transport is profitable.
We have to differentiate between the technological challenges of the large-scale hydrogen economy and those that are not. They are already well proven in the world: hydrogen pipelines are a fully tested technology, with 5,000 kilometers in operation. The first one in Europe was built in Germany in 1939, during World War II, and is still in operation. In Europe alone, eight million tons are consumed per year, there are hydroproducts in operation in the refining sector, the chemical sector.... It is not really a problem, it has to be managed with technical solvency and safety because it is a very light gas.
What about the need for electrolyzers?
Another thing is how to produce the electrolyzer capacity we need to install between 15 and 20 GW per year by the end of this decade. The challenge for our industry is to develop hydrogen compressors on the scale we are talking about, but manufacturers believe it is within our reach. Preparing our regasification plants to be compatible with ammonia, which is very similar to natural gas, but somewhat denser, is a challenge that should not be underestimated, because it requires resources, a public-private partnership and signals to manufacturers.
What are your forecasts for demand and prices this year?
If no unexpected event occurs, according to forecasts, the price will not rise steadily above 45-55 euros/MWh. That scenario would give immense peace of mind. It should be remembered that we have seen prices of 300 euros/MWh. The injection campaign in subway storage is being carried out very quickly and we are currently already at levels much higher than usual at this time of year. There are countries that just at the beginning of the campaign, taking advantage of these prices, started injecting. What the REU says is that gas demand in Europe is going to fall by 40%. Given that Spain does not have the urgency of replacement that Germany has, as we are not exposed to Russian gas by pipeline, our estimate is that demand here will fall by 30%. However, not all of that demand is going to be replaced with green hydrogen: some of it will be savings and efficiency and some of it will be electrification, but, given that hydrogen is much less dense, there will be an increase of gas transported in our system. The demand for gas is being reduced in a way that is compatible with this -30% scenario, but with increases in gas exports to France by pipe, which is breaking historical records this year. Last year, by reloading ships at our plants the volume we transported grew by 4.4%, and this year, for the time being, we are going to be at levels similar to those.
"Brussels expects 20 million tons of green hydrogen to be consumed by 2030, at least 10 million tons produced in the EU".
With so much gas having been stored at high prices, which now has to be sold at much lower prices, could there be a crisis in the companies?
That is a question about which we have limited visibility. In Spain it does not happen, the storage facilities have not been filled in that way or at those prices, although it is confidential information known only to the operators. But the industry consensus is that this has not happened in Spain, far from it. It has certainly happened in other countries, probably in Germany or the Netherlands, but we do not know the intensity of the problem. In any case, we believe that it will come to the surface as this gas is placed on the market much more gradually than initially expected.
How are the gas filling and reserves coming along?
We finished the extraction campaign with storage in Europe at 55%. Currently, the levels are at maximum levels at this time compared to other years. In Europe, reserves are at 66% and in Spain, above 90%.
Has this been helped by the drop in demand?
The drop in demand has been helped by the mild temperatures of last winter. But it has also fallen due to the Government's structural measures in response to price signals. There have been months with a drop in consumption in sectors with more fuel switching capacity, such as refining and petrochemicals.
But last year there was a big rebound in the consumption of natural gas for electricity generation.
Combined cycles respond to price signals from the electricity system and renewable generation when there is wind, is the factor that depresses prices and prevents the operation of combined cycles that come into play when there is anticyclone and little hydraulicity. Last year all the factors came together: a dry year, less wind and a lot of anticyclone.
"El Musel will be a 40% regulated plant".
Q. How is the project to convert the regasification plant of El Musel, in Gijón, into a logistics services plant?
R. El Musel will be a 40% regulated and 60% non-regulated facility. Because of its unique character, it will operate as a logistics services plant, because the system does not need more regasification capacity; but, for technical reasons, when you have LNG in storage, part of it becomes gas, because the storage is not perfect, and 40% of that gas must be injected into the system.
P. But the investment of this hibernated plant is paid back to Enagás.
R. It was paid, but it was not amortized. Maintenance costs were paid, but it was not amortized. Once it starts operating, the investment will be paid for its amortization, like a 40% regulated plant.
PT After buying Reganosa, Enagás will take over the entire Spanish gas pipeline network. Will there be total integration?
RH We have bought their 130-kilometer network, which will be integrated into the Enagás network, making us the only high-pressure operator in Spain, which is an important objective for us. And we became promoters of the Guitiriz-Zamora hydro-product, which is in the process of being included in the EU's list of PCIs. For its part, Reganosa buys 25% of El Musel and thus becomes a partner in this plant, but maintains ownership of the Mugardos plant.