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The challenge – secure, sustainable and affordable energy

Providing secure, sustainable, competitive and affordable energy for all is a major challenge, and is essential to economic growth and prosperity in Europe.

Securing energy supplies for the future while reducing greenhouse gas emissions and improving energy efficiency represents one of the biggest challenges for Europe and the world. It will only be achieved by huge collaborative efforts. The EU’s Energy Union strategy and the UN Climate Change Conference in Paris have set the agenda. One priority is to increase security and solidarity of supply in the EU’s internal market. This will require not only less dependence on imports, but also the ability to store energy in large volumes. Reducing consumption at the same time as decarbonising the energy mix does not simply mean conserving resources – it demands improvements in efficiency, and enabling renewable and conventional energy sources to work together. Given the fact that energy demand continues to rise worldwide, these goals will be hard to achieve without intensive research and development. 

For years, RAG has been working on innovative solutions that take account of changes in energy policies and the situation in the energy industry. 

These efforts are based on three pillars: 

  • Supporting the expansion of renewable energy sources by increasing gas storage capacity – which also plays an important part in strengthening security of supply in Austria and Europe
  • Facilitating and accelerating decentralised, renewable, energy-efficient generation that exploits synergies, from thermal generation and geothermal projects to natural gas vehicles, as well as the development of sustainable, forward-looking technologies such as power to gas, which makes it possible to manufacture synthetic gas from wind and solar energy
  • Energy-efficient production of domestic crude oil and gas, in line with the highest technological standards, to supply industrial and private consumers in nearby regions, thereby reducing imports and safeguarding the environment thanks to shorter transportation distances 

This allows RAG to support the goals of the Energy Union and the Paris Climate Change Conference, as well as making an important contribution to sustainable, secure and affordable energy supplies.

Surging energy demand – changing energy mix

Worldwide population growth, industrial development in previously underdeveloped regions, and structural economic changes have all led to continuous rises in energy consumption, which has doubled globally since 1970. Worldwide consumption is set to increase by a third by 2040. And as global economic output is forecast to increase by 150 percent over the same period, energy efficiency measures clearly need to have a major impact now and an even greater impact in the future. This is especially apparent in Europe, which is targeting a 15 percent decrease in energy use, Japan (targeted decrease of 12 percent) and the USA (targeted decrease of 3 percent) – demand is expected to stagnate or decline in all three regions in the coming years. By 2040, energy supplies will come from four different types of sources, in roughly equal proportion: oil, gas, coal and low-carbon sources. Coal dominated the European energy market up to the middle of the 20th century, but was overtaken by oil in the 1960s and accounted for almost half of global energy consumption by the time of the second oil price shock in 1979. At present, oil and natural gas make up around 56 percent of world energy demand, as well as approximately 56 percent of Austria’s energy needs.

Sources: BP Statistical Review of World Energy 2016; Statistics Austria

Environmentally friendly natural gas

Natural gas is by far the most environmentally friendly conventional energy source, and this means it has a pivotal role to play in the gradual decarbonisation of the energy system. A worldwide increase of almost 50 percent in natural gas consumption has made it the fastest-growing fossil fuel. A fifth of the predicted rise in global energy consumption will be supplied by gas. Thanks to its storability, gas is perfectly placed to support the integration of renewables and to replace other, more carbon-rich fossil fuels. Its attractiveness is enhanced by the currently competitive prices, high energy efficiency and extensive pipeline and LNG infrastructure.

Gas provides round-the-clock security of supply, which is especially important for large industrial companies and small and medium-sized enterprises. 

Natural gas has the fastest-growing share of fossil fuel consumption, since it is increasingly seen as an environmentally friendly alternative for electricity production and other applications. Gas is also an ideal and essential backup for renewables due to its ability to compensate for swings in electricity supply and demand. 

Revolutionary power to gas technology holds the key to affordable solar and wind energy transportation and storage, and thus to the constant availability of these energy sources. Gas has become indispensable not only in electricity generation, but also in heat generation – at cogeneration plants – and liquefied natural gas will soon be an integral part of the transportation sector. With a range of applications that now rivals oil, natural gas fully deserves its reputation as the energy source of the future. The world’s biggest gas producers are the USA, Russia, Iran, Qatar and Canada.

Source: BP Statistical Review of World Energy 2016

The challenge facing oil

Steps taken to boost energy efficiency are having an impact on demand for oil. But there is no substitute for oil in large parts of the economy, where it plays a valuable role – above all the chemical industry, where it as an essential base material. It is an irreplaceable ingredient in over 90 percent of all chemical products, including plastics, detergents, cosmetics and fertilisers.

The current weakness in the oil markets presents major challenges for the entire sector. It is a long-term trend that will persist for a number of years. The oil price has halved since August 2014, and now stands at about USD 50 a barrel. This means efficiency is paramount in order to make sure that oil production remains economic when the price for oil is low. For many years, RAG has been a global industry leader in efficient production methods that help to conserve resources. These methods have allowed us to extract oil from the Zistersdorf field in Lower Austria for over 75 years.

Valuable energy on our doorstep

Austria’s oil and gas reserves play an important part in security of supply. About ten percent of the oil and 14 percent of the gas required by Austria is produced domestically – a major boon for the national economy. Expansion of gas storage in Upper Austria and Salzburg, with billions of euros invested over the last ten years, has made RAG the fourth-largest technical operator of gas storage facilities in Europe – as well as significantly helping to underpin security of supply in Austria and Europe. RAG has now converted about half of the gas reservoirs discovered in its 80-year history into sustainable storage facilities with long useful lives. These are RAG’s response to one of the biggest challenges facing the energy sector, namely optimising storability. Relative to consumption, the country already has the largest gas storage capacity in Europe. 

Source: Statistics Austria

“Conserving resources, boosting efficiency, enhancing storability, reducing our dependency on imports and expanding production capacity are key goals for Europe’s energy sector – and we must work hard to achieve them.”
Markus Mitteregger, Chief Executive Officer, RAG