Because it emits less carbon dioxide than other fossil fuels, natural gas has long been touted as a key bridge fuel that could help wean the world off dirty coal and eventually give way to renewables and other low-carbon technologies as they mature.
This view still appears to hold water, but the fuel’s outlook is slowly crumbling as the Covid-19 crisis upends energy projections and cleaner alternatives gain ground amid rapid drops in clean energy costs and rising climate ambitions, according to experts.
Speaking at an event titled Bridge or Destination? LNG and Hydrogen in the Energy Transition last week, they said that gas would still have its part to play in reducing coal burning in emerging markets, and in scaling the hydrogen economy.
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But despite the hype that has built up around the fuel, the experts said that gas consumption in the electricity sector and industrial processes could fall rapidly in the decades ahead.
Dexter Wang, Asia Pacific market engagement manager at energy price reporting agency S&P Global Platts, said the impact of Covid-19 on energy markets had made gas’ role as a bridge fuel “shorter and narrower” in the energy transition.
He said the pandemic had deflated overall energy demand growth forecasts while bringing about a range of policy changes, from green stimulus plans to tougher climate targets by major economies like China, Europe, the United States, South Korea, and Japan.
These changes will allow clean alternatives to fossil fuels to take up greater shares in the energy mix in the coming years, dampening the prospects for gas, he explained.
Recent gas market volatility, which poses growing threats to producers and consumers of the fuel, is also set to stifle the industry’s growth momentum, he said.
Earlier this year, a report by the Institute for Energy Economics and Financial Analysis, an energy think tank, warned that erratic gas prices put gas-fired power projects worth billions at risk across Asia.
Climate fight to curb gas demand
Peter Zeniewski, lead gas analyst for the International Energy Agency’s annual world energy outlook said the Paris-based organisation had published two major energy development roadmaps that explore ways to cut emissions to meet climate goals—and both predict a substantial decrease in gas use.
Under the first roadmap—the sustainable development scenario, which would see the world achieve net-zero emissions by 2070—gas helps cut coal consumption across Asia and oil use in the Middle East, he explained.
But rising competition from solar and wind and more stringent energy efficiency standards in more mature economies like Europe and North America would displace about 40 per cent of current gas use by 2040, pushing overall demand 10 per cent below today’s levels, he said.
The fuel’s future looks even gloomier under the IEA’s recently released net-zero roadmap, which lays out what it would take to reach net-zero emissions by 2050, a target that scientists say is critical to give the world a chance of capping heating at 1.5 degrees Celsius.
Under this trajectory, gas consumption briefly rises as the global economy rebounds, but it is still projected to be 55 per cent lower than today by 2050. Other fossil fuels will be hit even harder, with coal demand falling 90 per cent, and oil use dropping by almost 75 per cent.
Gas central to kickstarting the hydrogen economy
While the use of gas is forecast to fall, the experts said the fuel will be important in the years ahead for the global hydrogen economy to thrive, which is widely believed to be a cornerstone of the future net-zero carbon energy system.
Green hydrogen, which is produced using renewable energy and electrolysis to split water, is expected to eventually serve as a clean substitute for fossil-fuel-based energy and feedstock needs in several industries.
For instance, long-haul trucking fleets could replace diesel with hydrogen fuel cells, power generators could exchange natural gas turbines for hydrogen-burning alternatives, and chemical firms that produce ammonia could swap fossil fuel-based hydrogen for lower-carbon equivalents.
The problem is, green hydrogen is at present too expensive for widespread use. In the coming years, falling costs of clean energy and electrolysers are set to make the fuel more viable, but the world cannot afford to wait until that happens before it does something about climate change, said Fabian Kor, group head for strategy and corporate development at Singapore-based power company Pavilion Energy.
Hydrogen demand is predicted to increase six-fold by 2050, but that uptick hinges on supply and demand dancing to the same rhythm. Until costs of green hydrogen come down, gas needs to be coupled with carbon capture and storage technology to produce enough hydrogen to spur industries to invest in new plants, machines and practices to switch to the fuel, said Kor.
So-called “blue” hydrogen could act as a stepping stone away from “grey” and “brown” types of hydrogen, which are produced from natural gas and coal, respectively, and account of the vast majority of the 90 million tonnes of hydrogen that are generated each year today. While they are relatively cheap methods of hydrogen production, they are extremely carbon intensive.
“The steps we take today are important for the climate. We need this transition period as we need time to bring down costs and ramp up the production of low-carbon fuels like hydrogen,” said Kor.
Natural gas is the cleanest burning fossil fuel, but it is still a fossil fuel.
Fabian Kor, group head, strategy and corporate development, Pavilion Energy
But if gas is to fuel the energy transition, countries also need to prepare to eventually leave it behind. “For countries of heavy coal and oil use, we can start by replacing these fuels with gas where feasible, but you must have a clear vision of the low-carbon economy of the future,” said Kor.
“The future energy system needs to be net-zero carbon. Natural gas is the cleanest burning fossil fuel, but it is still a fossil fuel,” he said.
While gas’ carbon dioxide emissions are lower than those of other fossil fuels, methane leakage during its production and transport has come under public scrutiny in recent years. The IEA estimates that the oil and gas sector emitted 82 million tonnes of methane in 2019—about three times the carbon dioxide equivalent that Germany released into the atmosphere that year.
Despite initial industry-led initiatives, government policies and regulations, methane emissions have remained high. With methane the second-biggest cause of human-caused global warming today, reducing it is critical to avert the worst effects of climate change, says the IEA.