What does a gas country do without gas? The Netherlands gives the answer

(Bloomberg) — The Netherlands is seeking to save pipelines that are about to become abandoned assets with hydrogen.

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The country will end most natural gas production this year, forcing the NV Nederlandse Gasunie to find alternative uses for its 15,000km of pipeline. The state-owned company is studying which segments of its extensive network to adapt to transport, produce and store hydrogen in the next decade as the European Union seeks to green its economy.

The Netherlands, which boasts what was once Europe’s largest gas field, has decided to shut down production at Groningen after decades of exploration and pumping triggered tremors. Demand will also decline as the government has pledged to cut greenhouse gas emissions by almost half this decade. That leaves Gasunie with 15,000 kilometers of pipeline to fill with an alternative, inactivate or dismantle.

“The Netherlands will need hydrogen,” said Han Fennema, CEO, in an interview. “We will have to move away from natural gas, there is no other option.”

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Although fossil fuels cover 80% of the country’s energy needs, the national industry is not doing well. Government revenue from natural gas fell to 140 million euros ($160 million) in 2020, compared with 10.7 billion euros a decade earlier, according to national statistics.

The country also lost much of Royal Dutch Shell Plc, which is moving to London after a court ordered it to speed up emissions cuts and the biggest pension fund said it was selling stakes in fossil fuel producers.

In addition, pollution is becoming more expensive. Additional increases are expected over the winter, just as the continent grapples with an energy crisis that is sending gasoline prices higher and higher.

All of that makes alternative sources like hydrogen more attractive and, eventually, more competitive. By 2050, green hydrogen produced with renewable energy will be cheaper than gas in at least 16 countries, including three in Europe, according to BloombergNEF.

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Clean hydrogen could meet a quarter of the world’s energy needs by 2050, with annual sales reaching 630 billion euros ($714 billion), the European Commission said. Europe wants to build 40 gigawatts of green hydrogen capacity by 2030, roughly double that of China’s Three Gorges Dam, the world’s largest power plant.

Hydrogen, green with no emissions or blue with low emissions, is the continent’s main remedy for sectors such as heavy industry and transport that have few alternatives to fossil fuels and cannot rely solely on electrification. The Netherlands points to this.

That’s a long-term view, as green hydrogen isn’t expected to be cost-competitive before 2030. Production is currently about four times more expensive than natural gas in most countries, according to BNEF. Therefore, the remodeled sections of the pipeline could remain inactive for years while the situation stabilizes.