EU governments can hit the gas to empower municipalities in driving gas phase out…or miss the opportunity

The EU member states have a choice: increase the risks of stranded gas assets, the cost of gas distribution and the expense of the energy system’s transformation or, they can empower municipalities to properly plan for infrastructure in the revision of the EU gas market directive.

The European Parliament proposed last month that gas network operators should comply with heating and cooling plans of local authorities when planning gas infrastructure. This would be a first of its kind legal mandate for municipalities across EU. However, the European Council seems reluctant to let them get their noses in grid operators’ business. Here are four reasons for EU governments to pick up the European Parliament proposition during the upcoming Trialogue negotiations.

Reason #1: We can’t let gas grid operators plan the network alone.

No one wants to cut the hand that feeds them. While all realistic scenarios for climate neutrality imply a drastic reduction of natural gas consumption, there is a limited move of gas network operators to encourage consumers to disconnect from their pipes, especially in the residential sector. The European Union agency for the cooperation of energy regulators regretted in December 2022 that grid operators don’t analyse enough options for reducing emissions and for decommissioning gas infrastructure in their national development plans. There is a clear tendency of the gas industry to overestimate the needs of investments in gas networks and infrastructures. A good example is the gold rush to Liquefied Natural Gas (LNG) import capacity to replace Russian gas since the Ukrainian war. An independent study showed that scenarios based on energy efficiency measures, renewable deployment and flexibility solutions can deliver security of supply compared to strategies based on investments in LNG import capacities but at a lower costs.

Reason #2: Gas networks need to be resized for less gaseous fuels, not expanded.

Keeping the same length of gas infrastructures while the gas consumption decreases raises an economic and social question. Gas networks are mostly financed in proportion to the gas they transport: with less gas circulating in pipes, the distribution costs for the remaining gas consumers will rise. For instance, in the city of Grenoble (FR), the distribution tariffs increased already by 40% in 2022 to compensate for the expected decrease of gas sales. This situation will become worse: the EU consumption of natural gas has dropped by 19% in the period August 2022-January 2023 compared to past years according to Eurostat. Dismantling the less-used parts of the network would allow cost optimisation, and avoid (another) bill increase to consumers. Pioneer municipalities, like Winterthur (CH), are already doing so.

Reason #3: There is no point for local governments to develop heating decarbonisation strategies if they don’t have any means to get them enforced.

In parallel to the revision of the gas market directive, the EU institutions are revising the Energy Efficiency Directive. This text will introduce mandatory development of local heating and cooling plans by local authorities of more than 45,000 inhabitants. However local authorities won’t have means to implement them if gas grid operators don’t have to comply with these plans. This lack of legal mandate in terms of network planning is very often mentioned as a barrier by municipalities who already have such plans. The city of Vienna, participating in the DecarbCityPipes 2050 project, has released its Out of Gas Strategy in December 2022, but the implementation will be difficult if the gas network operator still have the obligation to connect customers to the grid upon request, as stated in the federal Gas Act. National and EU policies need to align legal frameworks.

Reason #4: The local coordination of decarbonisation policies will reduce costs and bring social benefits.

We can’t continue planning the different energy infrastructures (gas, electricity, heat) separately. A mix of different technologies (heat pumps, district heating, green gas) need to be implemented at local level to achieve climate neutrality. And there is increasing evidence on the benefits of a locally coordinated delivery of this transformation. One study from Energy Systems Catapult and UK Research and Innovation suggests that a fully planned and locally-coordinated energy scenario will save £252bn in the UK compared to an unplanned and non-coordinated approach. Another study by UK Research and Innovation estimates that adopting a place-specific approach to delivery climate neutrality would save £137bn in investment cost and generate an additional £431bn in energy savings and wider social benefits compared to a place-agnostic scenario in which measures are adopted uniformly across places.

Local authorities, best placed to drive decarbonisation, have to be part of gas network planning. EU governments have the opportunity to avoid unnecessary costs and stranded assets by empowering local authorities. They should not miss it.

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