Natural Gas and Energy in the Netherlands – Thoughts from Gertjan Lankhorst, CEO of GasTerra

Gertjan Lankhorst is CEO of GasTerra, a Dutch company that began as a public-private partnership in the gas supply and trade sector between the Netherlands, Royal Dutch Shell with 25 per cent and ExxonMobil with 25 per cent. GasTerra trades in natural gas with industry and energy suppliers, among other customers.

He was born in Amsterdam in 1957 and by 1986 had become a policy analyst at the Dutch Ministry of Economic Affairs, eventually becoming Director for Oil and Gas, Director of Competition and Director-General for Energy in 2004. He became GasTerra’s CEO in 2006 and is also President of the Royal Dutch Gas Association and President of Eurogas, the energy industry’s lobbying organization in the European Union. He is a well-respected, and often quoted, expert in the areas of natural gas, energy and European Union policy issues.

Francis: I really enjoyed your speech about the hidden fuel or efficiency, can you elaborate?

Lankhorst: We always have to face the traditional trilemma in energy policy; we want affordable energy, we want sustainable energy, and we want security of supply. In this trilemma, I think energy conservation and energy efficiency is the hidden fuel because it helps on achieving all three targets of this trilemma. We have done a lot in the past, but we have to find new venues, new ways of increasing and boosting energy efficiency because the efforts we did in the past, for instance in natural gas, are amazing. For example, in the Netherlands we introduced condensing boilers as a standard in households which saves about 30 per cent in natural gas use for heating purposes. But that is a success of, let’s say, 10 to 20 years ago. So today we are looking at the potential of combined heat and power and micro combined heat and power, where you have a condensing boiler in your home which also produces electricity, a more efficient use of the gas. We also see potential for gas fired heat pumps and for fuel cells.

Gertjan Lankhorst, CEO GasTerra - Image courtesy of GasTerra.

Gertjan Lankhorst, CEO GasTerra – Image courtesy of GasTerra.

Francis: What is the Netherlands natural gas situation?

Lankhorst: We produce twice as much gas as we consume ourselves. We supply between 10 and 15 per cent of the European markets, mostly the northwest European markets. Gas production is declining, and after the year 2020 we will rely a bit more on imports.

“We produce twice as much gas as we consume ourselves.”

Francis: How have you used P3s, public-private partnerships?

Lankhorst: In 1960, a huge gas field was discovered in the Netherlands. So they decided to create a market for it, to connect all of the town gas grids into one big natural gas grid. This was in fact the start of the natural gas market in Europe. To organize all of this, a public private partnership was founded to coordinate the supply and distribution of the gas. This partnership was 25 per cent Royal Dutch Shell, 25 per cent ExxonMobil, and 50 per cent the Dutch State.

Francis: How is the Netherlands doing toward its emissions targets by 2020?

Lankhorst: The Netherlands has a triple target for 2020: CO2 emission reductions by 20 per cent compared to 1990; 20 per cent energy efficiency compared to 2005 and thirdly, 14 per cent renewable sources in the energy mix. With regard to the first target, the Netherlands is pretty much on track because successful CO2 reductions have already been achieved in the past, but also because of the recession that we have faced since 2008. With regard to energy efficiency, there is still a lot to do. When it comes to the renewables target, last year an agreement was concluded between the government and some 40 private business and NGO organizations to increase the percentage of renewable energy sources in the Netherlands to 14 per cent by 2020. That will be done by a lot of wind offshore and a lot of biomass that is co-fired in coal fired power plants.

“Germany leads the world in renewable energy.”

“Germany leads the world in renewable energy.”

Francis: What do you think of the German move into renewables? It’s quite dramatic, they lead the world and they’ve gotten around the balancing issue, it would seem, and there’s direct ownership of power generation in the hands of businesses, farmers and people to an extent that has never been known before.

Lankhorst: It’s inspiring. It’s a great effort to really change something. I think they have achieved amazing results in the percentage of renewable energy that they have reached already. On the other hand, you now see a lot of the side effects of it. The balancing of the power grid has become a big problem. It has not led to outages so far because the balance is mainly exported to surrounding countries like the Netherlands, Poland, Belgian, and Czech Republic. But this will be an increasing problem because in those countries, their share of renewable energy sources is also increasing, so balancing the electricity grid will become more of a problem. I think that the Germans realize this and they are now working hard to find ways of improving the balance situation. They are doing this not only with storage technologies, but also by creating better arrangements with the countries around them, and creating better arrangements within the country for the allowance to bring power into the grid and so on.

Francis: What are the game changers?

Lankhorst: If I knew what the game changer was, I think I would be in another business and I would put my money on it. I don’t know, so I can guess a little on what are potentially interesting developments. What I do hope is that storage technology is going to help us. Natural gas is a very flexible fuel, not only to use it for central power generation, but also to use it in applications like micro CHP or fuel cells or whatever, which can help to balance the grid at a decentral level.

“I see a lot of advances in using LNG for ships sailing Europe’s big rivers.”

“I see a lot of advances in using LNG for ships sailing Europe’s big rivers.”

Francis: Talk about gas as a transportation fuel.

Lankhorst: That is a very promising development. Liquefied Natural Gas (LNG) is becoming more and more interesting. Not just as a source of energy but especially for what we call small scale applications in trucks for transport. But I also see, for the European big rivers, a lot of advances in using it for the ships that sail on those rivers as a cleaner fuel choice. I also think there is big potential when it comes to Compressed Natural Gas (CNG). Well I’m calling you now from a Mercedes that is fuelled by CNG. It is a fantastic, very clean way of driving a car. You see, in some European countries, like Italy and Germany, there are many more cars on CNG than in other countries, but I think that we can improve it quite a lot. It’s not only good for energy efficiency; it’s also good for the local emissions. It’s much cleaner than the diesel or oil in your car.

Francis: Rooftop solar in the U.S. now, in the high cost electricity areas, is at par with the grid average, and I wondered how that applies to maybe the sunnier parts of Europe?

Lankhorst: You see that the number of solar panels on roofs is increasing very rapidly. I think that it is not only the economic side, but it is also the example that your neighbours give that drives people to install solar panels on their roofs nowadays. I think that this may be an even more important factor than the financial side.

“We have a lot of LNG receiving terminals already on the European Coast.”

“We have a lot of LNG receiving terminals already on the European Coast.”

Francis: Do you want to comment on Russian gas and repeated cutoffs of supplies through Ukraine to Europe?

Lankhorst: So far Russian gas supplies to Ukraine are only limited in the gas that is meant for consumption in the Ukraine. The gas that is meant for transit to the more Western European countries is still put into the grid that goes through the Ukraine. Furthermore, Russia has invested more heavily over the past decade in pipelines that go around the Ukraine; especially the Nord Stream Pipeline that goes through the Baltic Sea, so European reliance on Russian gas is not solely based on transmission through the Ukraine. The European commission has done stress tests to see how resilient the European gas market is to disturbances in supplies in Russian gas. Turns out, 80 per cent of European markets is not affected even if there’s an interruption in Russian supplies for a longer time. There’s enough storage capacity, and there’s enough supply from other sources. It’s mostly countries in Central and Eastern Europe that do not have a very diversified gas grid. What we have to do is invest in infrastructure and invest in better functioning markets so that there is more competition coming on the market in those Central and Eastern European countries. That would be an incentive for other companies to ship their gas also from west to east and that will give a boost to security of supply in Central and Eastern Europe.

Francis: What will be the big game changers for gas markets going forward?

Lankhorst: For Europe, it may be LNG. We have a lot of LNG receiving terminals already on the European coast, but so far they are very underutilized because the price of LNG is too high. But what I expect is that in the coming 5-10 years, a lot of LNG will move from Australia, Canada and the United States. A lot more LNG could be available for the European market and that could be a big game changer.

Francis: What about the future of shale?

Lankhorst: I don’t see a bright future for shale gas in Europe because I think the conditions geologically and fiscally are not favourable. And then I don’t even mention the lack of public acceptance.

Diane Francis, editor at large, National Post and author of “Merger of the Century: Why Canada and America Should Become One Country.”