The role of local, decentralised energy solutions is too often overlooked in thecontext of current EU policy priorities to increase energy supply security whileattaining climate change goals. This presentation will focus on the contribution ofLPG, one of the key energy sources whose distribution is independent from thetransmission grid.

1

SHV Gas is the world’s leading distributor of LPG. Brands include Calor, Liquigaz andPrimagaz. SHV Gas is a privately owned Dutch family company with over 27individual companies spread over 3 continents with around 16,000 directemployees.

This energy company started off as a coal trading company. Today SHV Gas is notonly a distributor of LPG, but is also increasingly helping its customers and theEuropean Union move to the next generation of decentralised technologies such asmicro-CHP and renewables.

2

These two pictures represent two important energy challenges for Europe.

Firstly - How do we ensure that rural communities have access to modern, efficientand sustainable energy?

Secondly - How do we address the air quality problems in our urban areas which stillrepresent a clear and present danger to millions of peoples health today?

These are two different challenges, yet they are united by LPG that helps meet them.

3

LPG (propane and butane) is an inevitable by product of the oil refining and naturalgas extraction processes. It will exist as long as society demands that these twoprocesses happen – and that’s for the foreseeable future.

According to industry predictions, supported by external consultants, it would bepossible to double LPG’s share of total European energy consumption by 2030. With8% average growth in European energy consumption for 2001-2030 and anappropriate regulatory framework, LPG could double its share of energyconsumption in Europe, representing a jump from 31 million to 66 million tons.

It is also a fuel that is less susceptible to political instability due to its dual sourceorigins and variety of transportation options– trains, boats, and lorries.

Why LPG ? Because it is one of the most secure types of energy.

4

Around 120 million people already use LPG in Europe. That’s the equivalent of nearlya quarter of the EU population.

Where LPG has the most to offer is as a low carbon and clean heating and cookingfuel in rural off-main gas areas where the natural gas grid does not go. 50% of themarket for LPG goes into these applications, while around a quarter goes intoautogas applications.

5

LPG is the lowest carbon conventional fuel available to the millions of citizens living

beyond the gas mains. When LPG replaces other fuel technology such as heating

oil, solid fuel and most electricity, there are significant carbon savings.

LPG is one of the cleanest fuels available in terms of CO2 – for example it emits 16-

23% less CO2 than petrol, 18% less than oil and 90% less than coal.

6

According to a European Environment Agency report released this summer, buildingsnow rival transport as the main contributor of pollutants such as SOx, NOx andParticulate Matter (PM).

LPG is a low emission fuel for NOx, SOx, black carbon and Particulate Matters. Itemits 96% less NOx than diesel, hundred times less PM10 than diesel and 99% lessSOx than heating oil.

LPG is exceptionally clean burning with just CO2, water and trace elements beingproduced.

7

The energy challenges of urban communities in Europe are many, but clearly a keycomponent of their energy needs relates to transport and this is where LPG has arole to play in urban areas.

While reducing carbon emissions from transport should be a political priority, it isalso important not to forget the contribution that transport continues to make topoor urban air quality.

The European Environment Agency estimated earlier this year that since 1997 45%of the EU’s urban population may have been exposed to levels of PM 2.5 above EUstandards. This exposure has a real and immediate effect to EU citizens. Again, theEEA estimates that exposure to PM 2.5 in Europe has reduced life expectancy in theEU by more than eight months.

8

Too often the answer to these issues is to do nothing, or concentrate on alternativesthat are far away. LPG is a stepping stone towards the future – a bridging technologyin transport that can deliver immediately. There are 7 million LPG-vehicles alreadyon the road in Europe. The infrastructure is in place, with over 31,000 servicestations offering LPG.

The adoption of autogas brings real benefits. If the LPG-industry roadmap wereachieved, 11,000 tonnes of PM could be avoided. The saving in CO2 emissions wouldbe the equivalent of the total greenhouse gas emissions of Belgium, Sweden,Bulgaria and Lithuania in 2005. In terms of security of supply, Europe’s dependenceon diesel and petrol in the automotive fuel market can be broken as LPG is freelytraded around the world and scores twice as highly as both petrol and diesel on theOECD’s Trade Openness Index.

9

Rural areas face a number of challenges that are different from those of the cities. Inthe UK, for example, there are nearly three times as many households in rural areasliving in fuel poverty compared to urban areas.

In promoting energy efficiency in Europe, rural areas face their own problems. Ruralstanding buildings tend to be older and possibly stone built, very often with solidfloors and located in isolated communities. The nature of the building stock, and thefuel options available in rural areas, also limit the range of low carbon technologiesthat can be employed. Rural housing, often with long electricity transmissiondistances, is also subject to more frequent blackouts than urban housing.

10

The future for rural energy is based on the following four principles:

SustainableSustainable does mean very low carbon but it also means secure, affordable anddeliverable.

DecentralisedLPG is in many ways the original decentralised energy source – in most countries itstarted life providing portable energy to remote farms and hamlets. Today CHPpowered by LPG is gaining in popularity providing total home or business energyfrom a single source.

EfficientLPG boilers are now over 95% efficient and when a micro-CHP unit is used electricityproduction for the average domestic rural property can be as high as 85% ofelectricity needs. Compare this to using electricity which sees an energy loss of 70%before you even switch an appliance on.

ModernRenewable technology is now getting more established and the countryside is inmany ways leading the way in installing these modern units to homes andbusinesses. LPG is almost always used as an essential back up to these technologiesto ensure supply continuity. In markets like the UK, LPG powered fuel cell boilersshould be available on the market as early as 2012.

11

The way forward with policymakers according to SHV Gas:

1. Regulations like the Energy Performance of Buildings – agreed in recentweeks – need to recognise the specificity of rural areas and their accessto energy infrastructure . They also need to take into account that a focuson cost can disincentivise new technologies and the take up of cleanerfuels in the short term.

2. Taxation – The Energy Taxation Directive proposal should ensure thatcleaner fuels are incentivised according to their environmental benefits.Recent drafts of this proposal recognise the CO2 benefits of LPG,however they will make LPG worse off compared to the currentprovisions where LPG has a zero rating for heating and exemptions forautogas. They also do not include considerations of other externalitiessuch as air quality.

3. Market developments – Energy efficient technologies like micro-CHP stilldon’t have a framework put in place by Europe and Member States.Indeed, mCHP has a weak directive and suffers from a lack of political willto do more.

4. Level playing field – A lack of enforcement in many areas sees a threat tolegitimate LPG businesses as they try to compete with unlawfulcompetitors. Other fuels do not have the same high level of standards tomeet.

The LPG industry needs government understanding and support to achieve sharedgoals. When working together real benefits can be achieved to the environment,society and the quality of peoples lives – today.

12

13