Nina Febo: Thank you very much for supporting the Mozambique Gas Virtual Summit. FNB will be speaking in a session about Energy Transition. What do you believe the role of gas to be, in helping to achieve today´s energy transition goals?
Keith Webb: Gas power generator technologies are very flexible and can typically be started up quickly – which makes them ideal to balance variable power generation from renewable solar and wind power. As such, gas power generation can form a powerful enabler of the renewable energy transition. In addition, gas (particularly LNG) as a fuel results in a cleaner burn – far cleaner than diesel. They are also very efficient which means more electricity for less carbon-dioxide emitted. In a “closed-cycle” format, gas turbines can be even more efficient as a baseload power supply to replace coal-fired power.
NF: Historically, coal has been widely used and one of the cheapest energy sources, making it very challenging to promote coal-to-gas switching. How can coal to gas reflect on savings?
KW: Coal-fired power was historically preferred as coal was readily available and easy to mine, easily handled and transported and therefore cheap as a source of primary power. The concern with coal is the broader cost to society in terms of emissions. This now recognised through “carbon taxes”. In many instances, the coal resource around power stations built in the 1970’s has been depleted so new, cleaner technologies can and should be used to generate power. Recently, there have been substantial discoveries of gas (as in Mozambique) and the technology to transport this around the globe through liquefaction has improved substantially. The gas supply chain (upstream gas production, liquefaction, shipping, importation, and trucking or piping and regasification) needs to continually improve its attractiveness to compete against coal. A big driver of this is spreading the substantial upfront capital investment across greater volumes. This requires growth in the user base – firstly through gas fired power stations in conjunction with renewables; and secondly the use of gas directly for heating.
NF: Renewable energy is still widely viewed as having a high initial capital cost? Are there any subsidies available for renewable energy development?
KW: This is not entirely true as renewable solar photovoltaic power is now far cheaper to produce than other forms of power. Renewable power facilities have very limited operating costs, so the key to making renewable power cheaper is to amortise the upfront capital cost across the full life of the asset through longer term funding (longer than 15 years). The cost of that funding is very reliant on having well-structured procurement programmes offering bankable power purchase agreements with credit-worthy off-takers. Development financiers have a role to support commercial lenders to mitigate country risks and assist through tenor extending products. In some instances, they also bring concessional funding to the table.
NF: With so much emphasis on a net-zero carbon world, how do you see natural gas supporting the uptake of renewable energy?
KW: The larger cost with renewable power is not the renewable power itself, it is creating the consistent supply. Industrial processes need stable supply, so to enable cheap renewable energy requires support from gas power. The mix of renewable and gas becomes a very cost-effective overall solution for grid power. Batteries and other storage techniques (hydro-pump storage) are currently expensive but are easy to use for small scale home use e.g. lighting. Technology advancements in this space resulting in reduced costs of batteries will form an important alternative to gas – but the technology is still in early stages.
NF: You will be speaking at the Mozambique Gas Virtual Summit in a few weeks. What are you the most looking forward to?
KW: I’m looking forward to engaging on not only gas developments in Mozambique, but also what these mean for the development of Mozambique and the region along the broader power value chain.