Changing Role of Gas

What type of regulatory decision on natural gas lie ahead?

Europe’s ambitious energy transition and decarbonisation goals by 2050 point to a changing role for natural gas. Demand for natural gas is expected to decline over time as the decarbonisation goals lead to a substitution of natural gas with other energy vectors. Therefore national regulatory authorities (NRAs) will need to take regulatory decisions on a wide range of issues such as:

• the repurposing of natural gas assets for their use as part of hydrogen networks;
• the potential decommissioning of natural gas assets that become stranded; and
• the reinvestment of assets that reach the end of their regulatory or technical lives.

ACER commissioned consultants DNV to carry out a study on the “Future Regulatory Decisions on Natural Gas Networks”. The DNV study, published in November 2022, addressing issues such repurposing, decommissioning and reinvestments of natural gas networks.

The information and the views set out in this DNV study are those of the author only, DNV, and may not in any circumstances be regarded as stating ACER’s official position, opinion, or recommendation. ACER does not guarantee the accuracy of the data and the statements contained therein.

What is repurposing, decommissioning and reinvestments?

Repurposing

The repurposing of natural gas pipelines for the use of hydrogen transportation will require transferring natural gas assets to dedicated hydrogen networks. This will require

• identifying assets
• defining the value of the asset to be transferred
• deciding on any incentives for the TSO to transfer assets to hydrogen networks.

Decommissioning

The decline of natural gas could potentially lead to some natural gas assets becoming stranded. This raises regulatory challenges such as

• identifying different types of decommissioning costs
• allocating the decommissioning costs and the different measures to prevent asset stranding.

Reinvestments

As assets age and reach the end of their depreciation periods, NRAs will have to take decisions on whether or not to replace these assets or to extend their regulatory lives (where possible or appropriate). The regulatory depreciation times applied for natural transmission assets is often below the technical lives of the assets.

The Bridge beyond 2025 paper jointly released by ACER and CEER in 2019, provides recommendations on the overall framework that could help in reducing the emissions of greenhouse gases and in increasing the availability of decarbonised gases.