‘LNG is an expensive way to keep the lights on. Cutting EU gas demand is now key’

PODCAST: With special guest Steven Geiger of Innova Partners

“This is not so much a ‘Russian gas’ issue; the flag on the pipeline or on the [LNG] tanker is not as important as the overall dependency on gas for the EU and Germany in particular. The immediate thing is to keep the lights on and that’s going to involve a ramp-up of LNG imports, but at what price? It’s not just a security if supply issue, it’s affordability of supply too.”

Listen again to Steven Geiger, founder and president of Innova Partners, discussing the hard choices facing European countries as they scramble to wean their economies off Russian energy exports.

Steven spoke at length about the need to look beyond the question of replacing Russian gas in the electricity sector and attack the real elephant in the room: decarbonisation of residential and industrial heat demand.

This means moving on from fruitless debates over a mooted nuclear revival in Germany, and attacking the ‘stickiest’ source of demand for gas. Sustained investment in long-term seasonal heat storage fuelled by low- or zero-carbon energy sources could progressively replace gas in homes and factories.

Expensive gas is making such solutions competitive on their own terms without subsidy intervention, but many bottlenecks remain to leveraging investment into this space. Private capital won’t be mobilised en masse without a clear message from governments that they are committed and intend to make the switch, he added.

If you want to get beyond the overly-simplified and tribal energy technology debate that the EU-wide move against Russian natural gas has triggered, then this 47-minute episode is a great place to start. I found Steven’s discussion of the structural issues that underpin industrial gas demand particularly enlightening. Here’s the link:

(Please forgive the highly variable volume throughout, this seems to be a bug in the new Android app for Callin.)

If you’re pressed for time, these highlights might whet your appetite:

• ‘When the heat of the moment passes, policy back-peddling is entirely possible’ — 2m 20s

• ‘Displacing a small amount of gas can deliver big cost savings & foreign policy wins due to marginal pricing’ — 2m 20s

• ‘Low-carbon seasonal heat storage is cheap & has immense potential for cutting gas demand at scale’ — 1m 37s

• ‘Decarbonising industrial heat is complex, which is deterring investors’ — 2m 20s

In case you missed it, Monday’s article about big policy shifts in Germany gives a good primer on some of the issues we discussed:

Germany’s seismic energy policy U-turn

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Above all, thanks for reading and listening. I’ll be posting lots of new content as often as I can during this accelerating energy crisis, so stay tuned.

Have a great week,

Seb