In Europe, there are two areas of concern with respect to renewables: the provision of technical services (e.g. frequency response) and the integration of renewables into intra-day and day-ahead markets. Storage, usually electrochemical batteries, is used to provide technical services and smooth out sub-one hour power fluctuations of wind farms. However, such storage systems are too costly given prices around Euro1 million/MWhr to provide a solution for the market integration of renewables which requires 10's of MWhs of storage. Not surprisingly, although there are quite a few battery-storage projects, most depend on government subsidies for their existence.
PWR (who what is PWR?) has recently conducted research, in Europe, into the use of power to gas systems (P2G) i.e. using renewable electricity to produce methane. In our view, P2G appears to provide a solution to the provision of technical services and the market integration of renewables at a cost, in Euros/MW, that is similar to "conventional" electro-chemical storage but with the potential to store almost unlimited amounts of energy at close to zero additional cost.
The largest currently operational P2G project, is located in Werlte, Germany. The plant was designed and built by Etogas for Audi and has a capacity of 6MW. The plant uses renewable power to produce hydrogen which is then combined with CO2 (from a neighboring biogas plant - Germany has 8000 biogas plants) to produce methane. The bio-gas plant reuses heat produced by the P2G process thus giving a claimed efficiency of around 78% i.e. 1MWh of electricity gives you 780kWh of methane.
Falling into the "strange but true" category, the plant is operated (but not owned) by the local Transmission System Operator (TSO), Tennet, which uses the plant for secondary frequency response and also for balancing purposes on intra-day and day-ahead markets. This activity means that the plant is getting electricity at around Euro20/MWh. However, the plant has to pay an additional renewable levy of around Euro65/MWh - lobbying is taking place to have this levy removed. PWR calculations suggest that it is producing methane at a cost of around eurocents2.6/kWh (without the levy) or eurocents10.9/kWh (with the levy). The gas is injected into the local gas main. For comparison, wholesale natural gas on Euro markets sells at around eurocents1.8/kWh. So the synthetic natural gas (SNG) is not price competitive on wholesale markets with out-of-the-ground compressed natural gas (CNG).
Audi comes into the picture with a car called the g-tron. This runs on both compressed natural gas (CNG) and petrol. The car will be on the market in Germany in 2016. There are around 1000 CNG stations in Germany (with similar and growing numbers in Italy) and Audi will match SNG injections into the gas system at Werlte to CNG abstractions at CNG stations. Expressed another way, g-tron owners will be carbon-neutral when driving their cars. Furthermore, CNG for transport sells at Euro0.379/litre or eurocents26/kWh (note these prices do not include tax). This suggests a very good margin between production costs of eurocents10.9/kWh and a sales price of eurocents 26/kWh. Note that SNG gets free transport in the German gas system.
P2G systems thus generate revenues from several sources. Providing technical services to TSOs, helping integrate renewables into energy markets and producing transport SNG at a cost less than half the energy only price "at the pump".
Europe has the ambition to "decarbonize" its transport systems although results in this area have so far been minimal. P2G appear to provide a dual solution to the "renewables problem" and the "decarbonise transport" problem. Recognizing this, a number of other MW-class P2G projects are being developed in Europe with roughly similar aims (provision of technical services/market balancing services and gas injection into existing gas systems).
Concluding, most (all?) Euro TSOs have problems with over-frequency at night i.e. a lack of dispatchable load (no - not generation -load). P2G is highly dispatchable and given its MW and GWh scalability is likely to form part of Euro TSO's "future tool-kit" for matching variable renewables to load.
