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The Green Gas Opportunity Green Gas...The Green Gas Opportunity Baker Hughes Annual Meeting / Energy Forward Florence, 3rd February 2020 Marco Alverà–Chief Executive Officer. 2

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Page 1: The Green Gas Opportunity Green Gas...The Green Gas Opportunity Baker Hughes Annual Meeting / Energy Forward Florence, 3rd February 2020 Marco Alverà–Chief Executive Officer. 2

The Green Gas Opportunity

Baker Hughes Annual Meeting / Energy Forward

Florence, 3rd February 2020

Marco Alverà– Chief Executive Officer

Page 2: The Green Gas Opportunity Green Gas...The Green Gas Opportunity Baker Hughes Annual Meeting / Energy Forward Florence, 3rd February 2020 Marco Alverà–Chief Executive Officer. 2

2

EU Total Final Consumption 2018, Mtoe

Source: IEA, World Energy Outlook 2018 & 2019

41%

22%

21%

4%

9%3%

Coal

Oil

HeatNatural gas

Electricity Biomass and other RES

33%

2%

Coal

4%

8%

Nuclear

10%Other renewables

Power Mix

18%

24%

Oil

Hydro

Biomass

Natural gas

Reaching net zero by 2050 is a huge challenge for Europe

Given current energy mix, a full electrification from renewables seems unrealistic

1.155

EU Power sector mix 2018, Mtoe

Page 3: The Green Gas Opportunity Green Gas...The Green Gas Opportunity Baker Hughes Annual Meeting / Energy Forward Florence, 3rd February 2020 Marco Alverà–Chief Executive Officer. 2

3

Gas infrastructures are crucial to cover seasonal peaks Gas allows seasonal storage

Gas consumption in Italy, GWh

-

500

1 000

1 500

2 000

2 500

3 000

3 500

4 000

4 500

Electricity

Gas

Average price: c. 51 Eur/MWhAverage price: c. 13 Eur/MWhCommodity1

Gas Electricity

Transport BBL: 11 Eur/kw/100 km Britnet: 230 Eur/kw/100 km

Storage 1 bcm ~ 10 TWh(0.5-1.0 bn EUR)

700 mn new Tesla Powerwall 2 (investment cost: €5.6tn)

=

Operational storage costs2, Eur/MWh

Minutes /hours

Intra-day

Weekly/daily

Monthly

100 GWh to 100 TWh

Up to 10 GWhUp to 1000 MWh<10MWh

Demand volume

Compressed air

Hydro-pumps

Natural gas storage/ renewable gas

Batteries

5

20

65

110

200

220

Hydro pump

Hydrogen storage

Natural gas storage

Zinc battery

Compressed air

Lithium battery

1. 2019 September average 2. Excluding commodity costs and eventual final conversion into electricity

Gas asset provides flexibility to the energy system, hard to replicate

Page 4: The Green Gas Opportunity Green Gas...The Green Gas Opportunity Baker Hughes Annual Meeting / Energy Forward Florence, 3rd February 2020 Marco Alverà–Chief Executive Officer. 2

4

Fossil fuels also power industry and heavy transport, which are hard to electrify

Cement Steel Plastics

Heavy road transport Shipping Aviation

HeavyIndustry

Heavy-duty Transport

10 Gt CO2

(30%)

Emissions from hard to abate sector represents 30% of the total…

… their share will increase as decarbonisation goes on

Page 5: The Green Gas Opportunity Green Gas...The Green Gas Opportunity Baker Hughes Annual Meeting / Energy Forward Florence, 3rd February 2020 Marco Alverà–Chief Executive Officer. 2

5

Green gas – biomethane and hydrogen – can help solve these issues

Both Hydrogen and biomethane have a

zero carbon footprint

H2 can transport and store solar and

wind energy, allowing for sector

coupling

They can leverage existing infrastructure

for instance for winter heating

Sector coupling

Carbonfree

Gas Gas

grid

They can be swapped in for fossil fuels

with limited adjustments

Easy to use

Page 6: The Green Gas Opportunity Green Gas...The Green Gas Opportunity Baker Hughes Annual Meeting / Energy Forward Florence, 3rd February 2020 Marco Alverà–Chief Executive Officer. 2

6

A mix of renewable electricity and green gas is the lowest-cost decarbonisation option for Europe – Navigant Study

6

Biomethanewith CCS

Source: «Gas for Climate 2019»

Decarbonisation by using 270 bcm of green gases would save €217 billion annually

Renewable gas Low-carbon gas

BiomethaneGreen

HydrogenSynthetic methane Blue Hydrogen

Natural gas with CCS

H2 H2CH4

95 bcm 15 bcmConsumptionestimate:

160 bcm

Import

H2

Hard-to-decarbonisesectors

Page 7: The Green Gas Opportunity Green Gas...The Green Gas Opportunity Baker Hughes Annual Meeting / Energy Forward Florence, 3rd February 2020 Marco Alverà–Chief Executive Officer. 2

7

2010 2020 2030 2040 2050

In Italy, hydrogen will be competitive within 10 years

Electrolyser Capex €/kW

Solar/Wind cost €/MWh

350

21

162

12

Cost evolution (€/MWh)

1080

48

1,800

324

Source: Thomson Reuters, Snam Terna scenarios, GME, ICIS, analysis on market estimates

0

20

40

60

80

>500

Natural gas (with CO2)

Green H2

Blue H2

Grey H2 (with Co2)• Green hydrogen may develop particularly

rapidly in Italy owing to solar resource

• Cost decline, driven by cost of solar and wind, and electrolyzers

• Breakeven between blue and green hydrogen expected before 2030

• First two H2 uses to become competitive will be «grey» hydrogen and long-distanceheavy transport, also owing to fuel cellefficiency

• Internalisation of rising CO2 costs necessaryto make H2 competitive with natural gas

… large-scale adoption

Electricity (PUN)

Gasoil (with CO2)

Page 8: The Green Gas Opportunity Green Gas...The Green Gas Opportunity Baker Hughes Annual Meeting / Energy Forward Florence, 3rd February 2020 Marco Alverà–Chief Executive Officer. 2

8

Buildings

Transportation

Industry feedstock

Industry energy

By 2050, hydrogen could provide almost a quarter of Italy’s energy demand

1629

218

2017 2030 2050

91

2040

Total final energy demand, TWh

Thereof H2, %

Hydrogen demand by end-use sector,TWh

~ 1,400

1%

~ 1,300

2%

~ 1,100

8%

~ 950

23%

Existing feedstock

1 40 91

xxElectrolyzer capacity necessary to supply all demand1, GW

1. Assuming an electrolyzer efficiency of 75% with a 35% load factor2. Less industry demand as existing H2 demand in Italy is lower vs the rest of Europe (as gas prices are high in Italy, SMR is less competitive); More buildings uptake as green H2 costs decline faster in Italy than in the rest of Europe (due to cheap solar) and hence become

competitive for heating (primarily in buildings) heating

SOURCE: IEA, Team analysis; EU Hydrogen roadmap

Outlook in line with EU hydrogen roadmap (24% of demand from H2 in 2050), but with more uptake in buildings, and less demand from industry2

Page 9: The Green Gas Opportunity Green Gas...The Green Gas Opportunity Baker Hughes Annual Meeting / Energy Forward Florence, 3rd February 2020 Marco Alverà–Chief Executive Officer. 2

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Italy is optimally positioned to become a leading hub for green hydrogen from North Africa to Europe

SOURCE: Snam analysis

The Dutch government plans to export green hydrogen made with offshore wind across the whole of Europe

Italy could use its solar resources and its existing connection to North Africa (which has even better solar resources) to set up a leading hydrogen hub

Envisioned hydrogen trading

hub by Dutch government:

Groningen

High solar availability in the

south of Italy

Italy can set up hydrogen trading hub, which due to high domestic production potential, and import

from North Africa can serve as primary European hub

Potential to import fromNorth Africa

Page 10: The Green Gas Opportunity Green Gas...The Green Gas Opportunity Baker Hughes Annual Meeting / Energy Forward Florence, 3rd February 2020 Marco Alverà–Chief Executive Officer. 2

LNG

Organic & agricultural waste

Power to gasHydrogen

Natural Gas

Energy efficiency for residential and industrial customers

CNG/LNG stations

Snam4Environment

Incentives on biomethane for mobility for 10 years

Industrial &Residential

Transport & off grid userSmall scale LNG

€400m investment targeting high single/low double-digit low-risk returns

Future proofing the network

Biomethane

Snam’s strategy for the energy transition

Page 11: The Green Gas Opportunity Green Gas...The Green Gas Opportunity Baker Hughes Annual Meeting / Energy Forward Florence, 3rd February 2020 Marco Alverà–Chief Executive Officer. 2

Snam as an Enabler; Hydrogen BU created

• Pipelines: network is largely hydrogen ready, key reason to underpin replacement

• Components: gas chromatographs and other minor instruments would need replacing (<1% RAB)

• Gas compressor units: testing the impact of a 5-10% blend.

• Geological storage sites: ongoing analysis and research

• Ongoing assessment of use of membranes to separate NG and H2 out of NGH2 blend

• Evaluating potential opportunities/pilot projects to scale up clean H2 production and use

• Potential partnership with other operators of the value chain

• Scouting for promising technologies

• Long-term scenarios: Expected key role of hydrogen in the energy mix

• Grid evolution: Development of pathway analyses with increasing share of green gasses

• Technical standards: involvement in focus groups to develop common rules on H2 in Italy and Europe

Negligible investment to reach5-10% NGH2 readiness

Ongoing investment in the grid«Hy-ready»

Ongoing workto support

long-term grid planning

Scouting the marketfor investment opportunities and

partnership

Asset Readiness1. System design2. Value chain development3.

The new hydrogen BU

Page 12: The Green Gas Opportunity Green Gas...The Green Gas Opportunity Baker Hughes Annual Meeting / Energy Forward Florence, 3rd February 2020 Marco Alverà–Chief Executive Officer. 2

12

The hydrogen blending experiment in Contursi Terme

EU 1. Pasta production

EU 2.Water bottling

75 bar 5 bar

H2NGSna

m G

as

net

wo

rk

Lenght ≈ 700m

C.R. 818

10% H2NG