Why is natural gas important?

Why is natural gas important?

Natural gas accounts for about a quarter of global electricity generation. It is easily stored and can be delivered through pipelines or liquefied and sent by ship. Gas-fired power plants can turn on and off quickly. Gas is thus a convenient way to respond to both seasonal and short-term demand fluctuations.

What is the role of natural gas in clean energy transitions?

Natural gas, which emits less carbon than most other fossil fuels, has a limited role as a transition fuel from coal to renewable energy sources. Additionally, natural gas power generation may still be needed as back-up for variable wind and solar power.

Why does natural gas matter to energy security?

Natural gas has traditionally been delivered by pipeline, but disruptions to Europe’s supply caused by Russia’s invasion of Ukraine have spurred massive investments in liquified natural gas terminals that will eventually allow gas to be traded much the way oil is.

Global gas markets moved towards a gradual rebalancing over the 2022 and 2023 heating season, following the supply shock sparked by Russia’s invasion of Ukraine in February 2022

Emissions from gas-fired power plants levelled offIn 2022 CO2 emissions from gas-fired power plants largely stayed at their 2021 levels. 

High gas prices led to gas-to-coal switching in many regions. Decreases in emissions from gas-fired power in Asia Pacific and other regions were offset by emission increases in the United States, Eurasia and the Middle East. 

To get on track with the Net Zero Scenario, emissions from unabated gas-fired plants must fall by about 2% on average annually through to 2030. In addition to a gradual reduction in gas-fired generation, this can be accomplished through a combination of applying CCUS, increasing plant efficiencies and co-firing hydrogen-based fuels.

Global gas-fired generation saw few changes as declines from high prices were offset by increased outputIn 2022 gas-fired generation remained relatively unchanged compared to 2021, representing more than 20% of global electricity generation. 

Declines in some countries (such as China and India, among others) were largely offset by a rise in gas-fired generation in the United States, Eurasia and the Middle East. For example, gas-fired output last year fell by around 35% in India and by more than 10% in China. However, in the United States, gas-fired generation grew by around 7% in 2022, reversing a 3% decline in the previous year. Generation from gas plants also increased in Eurasia (up 3% compared to around 8% the previous year) and the Middle East (up more than 1% compared to around 4% the previous year).  

In the European Union, the supply shock from Russia’s invasion of Ukraine drove up natural gas prices on European hubs to record levels. Month-ahead prices on TTF – Europe’s leading gas hub – averaged more than EUR 130/MWh in the first 11 months of 2022, more than 7 times as high as the average between 2016 and 2020. Despite these high prices and reduced nuclear power and low hydro output, gas-fired output remained relatively unchanged in the European Union compared to 2021. 

In the Net Zero Scenario, unabated gas-fired generation declines by an average of around 2% per year by 2030.  

Europe continues push to ease strains on gas markets and reduce reliance on Russia

Alongside the broader structural changes targeted by the Fit for 55 package and the REPowerEU plan, there have been additional policy initiatives to increase the resilience of European gas markets, strengthen solidarity and limit excessive price spikes. For example, in July 2022 the European Commission adopted the European Gas Demand Reduction Plan to provide best practices and guidance on reducing regional demand for gas. This includes switching away from gas use in industry, power and heat sectors towards renewables and cleaner energy sources.  

Thanks to ongoing policy support for renewables, around 50 GW of wind and solar was installed in the European Union in 2022, a record high. These additions avoided the need for around 11 billion cubic metres (bcm) (nearly 400 GJ) of natural gas use in the power sector – the single largest structural driver of reduced natural gas demand in that region.  

Carbon capture deployment lags for natural gas plants but new announcements show promise

Unlike certain industrial applications with relatively concentrated CO2 streams, such as natural gas processing, deployment of CCUS at gas-fired power plants has lagged. As the world moves toward a net zero future, CCUS-equipped gas-fired plants can help meet the growing need for system flexibility and provide important system balancing services as the share of variable renewable electricity in the generation mix increases. 

Since January 2022 around 15 CCUS projects at gas-fired power plants were announced. In total nearly 50 Mt CO2 of capture capacity at gas-fired power plants is in the project pipeline, primarily in the United States and United Kingdom. 

To get on track with the Net Zero Scenario around 230 Mt CO2 must be captured from the power sector by 2030 – up from just under 2 Mt CO2 today.