The role of gas in the transition towards net-zero by mid-century. A global perspective

Natural gas is central to global energy: worldwide consumption has been rising rapidly and in 2018 it accounted for half of the growth in total global energy demand1. Gas has significantly lower CO2 emissions on combustion per unit of energy than either coal or oil but higher emissions than nuclear and most renewable energy sources2. Studies that looked at the so-called ‘bridging’ role of gas in the transition to a low-carbon energy system indicated good potential for gas to act as a transition fuel to a low-carbon future up to 2035 globally under certain conditions3. A key caveat in this bridging scenario is that its potential varies significantly across regions and between sectors4. One crucial factor affecting the decarbonisation potential of gas is the level of fugitive methane emissions that occur during its production, transportation and distribution5. Furthermore, in the long term, the imperative to eliminate most fossil fuel-related GHG emissions could pose a profound challenge to the gas business, which could end up with high carbon, stranded assets. Questions about the role of gas in a low-carbon energy future remain: Can gas substitute for coal as a ‘bridging fuel’? Is it genuinely useful to lower emissions or rather a convenient way to stimulate the market for gas? This briefing note attempts to explore these questions.

The bridge fuel narrative

The industry has made a case that gas can be a critical factor in the energy transition as a bridge fuel, primarily by switching from more-polluting coal. This is because natural gas emits 40% less CO2 than coal per unit of energy produced when used to generate power, does not produce SO2 and emits negligible fine particulate matter6. Therefore, switching from coal to gas can reduce GHG and address the growing problem of urban air pollution. The IEA estimated that coal-to-gas switching globally avoided more than 500 million tons of CO2 emissions between 2010 and 2018, which is roughly equivalent to the total energy-related emissions of all Central American countries over the same period7. Success stories such as the wholesale displacement of coal-fired generation by a combination of gas and renewables in the US and the UK, and the more recent policy-driven coal-to-gas switching in China, underscore the environmental benefits of gas as a transition fuel.

IEA further estimates that up to 1.2 gigatonnes of CO2 (equivalent to 4% of global energy-related emissions) could be abated in the short term if relative prices and regulation are supportive8. The vast majority of this potential lies in the US and Europe. This is because coal-to-gas switching is enabled by the possibility to use existing infrastructure to provide similar energy services but with lower emissions – something which both Europe and the US share. Given the time it takes to build up new renewables and to implement energy efficiency improvements, this also represents the quickest route to emissions reductions according to IEA9.

But beating coal is not good enough to make a case for gas if there are lower-emissions and -cost alternatives to both fuels. The decreasing cost of renewables is the clearest case in point. In many markets wind and solar photovoltaics are already among the cheapest options for a new generation10. Furthermore, the increased combustion of gas does not provide a long-term pathway to global climate objectives. This is partly because gas-fired power plants are capital intensive and require long periods of operation to return investment, therefore policymakers need to be wary about locking in gas-related emissions even as they reduce those from coal. This rationale also applies to investments in gas extraction, pipelines, and liquefied natural gas (LNG) terminals. New and costly infrastructure would still be required to deliver the increase in gas consumption over the next decade envisioned by the IEA. These large investments could lock-in gas production for decades to come. As an analysis by PriceofOil11 suggests: the gas reserves in currently producing projects would exhaust the 2°C carbon budget – which is no longer an acceptable target as indicated by the 2018 IPCC special report12. Therefore, the world cannot afford to burn even the currently developed reserves, let alone add more. These are precisely the reasons why the short-term fixes of gas won’t work.

Furthermore, the issue of methane leaks, flaring and venting, which has received increased attention recently, has the potential to further undermine the environmental credentials of natural gas. According to the latest World Bank data, US gas flaring activity increased 48% from 2017 to 2018 and reached 1.4 Bcf/d last year13, roughly equivalent to the total gas consumption of a medium-sized European country like Romania (1.1 Bcf/d). Flaring has so far been perceived as an economic waste issue and seen as less environmentally harmful than methane emissions because it produces CO2 as a primary GHG. Further research on the GHG impact of flaring due to incomplete combustion may prove otherwise14. There are knowledge gaps in this matter, but the best data15 indicates that the lifecycle GHG footprint of gas is substantially lower than that of coal. Nevertheless, the lack of definitive data has generally not worked in the gas industry’s favour with some environmental activists and academics already suggesting that gas is hardly better than coal from a climate perspective16 and certain policymakers and philanthropists are increasingly calling for the elimination of all fossil fuels from the energy mix as soon as possible17. There is though, significant scope to further measure and address the indirect emissions associated with gas. Upstream leak detection and repair programmes or the electrification of LNG liquefaction may further reduce emissions intensity, but can the industry be trusted to do all of these?

How can we green natural gas?

The long-term threat to natural gas is that the unmitigated burning of all fossil fuels could become increasingly untenable if governments commit to deep decarbonization. This is particularly true in developed economies. To safeguard a transition role for natural gas, some energy actors have started to embrace “green” gas as a low-carbon substitute for conventional methane. The most common pathways to decarbonize the gas mix include biomethane produced from waste products and agricultural residues, “green hydrogen” produced via water electrolysis using renewable electricity, and “blue hydrogen” produced from conventional natural gas via steam methane reforming combined with carbon capture usage and storage (CCUS) technology18. Each of these green gas pathways could help preserve part of the existing gas grid and the associated downstream infrastructure. Blue hydrogen could even extend the reach of gas into new hard-to-abate sectors like aviation or trucking, thus reinvigorating gas demand in mature developed economies. However, the clean, widespread use of biomethane and hydrogen in global energy transitions face several challenges as described in the table below.

Biomethane

• Production faces scalability constraints, due to limited land and feedstock availability and inherent rate limitations of anaerobic digestion. Production can be prone to methane leakage. Lifecycle environmental impacts (e.g. land-use change effects) are not fully mapped out.

• Estimates of the sustainable potential of biomethane supply are small compared to the scale of the existing natural gas system.

• Cost declines from large-scale deployment are limited because the technology of producing biogas and upgrading it to biomethane is well-established.

Low-carbon hydrogen (via renewable electricity or gas combined with CCUS)

• Hydrogen is difficult to handle (e.g. storage and transport over long distances are expensive and it is susceptible to leakage along the supply chain)19.

• Hydrogen is an indirect GHG with an estimated global warming potential 6 times greater than that of CO2 over a 100-year time frame (vs. 28-34 for methane)20.

• Corrosion, embrittlement and heightened safety risks are further issues that could add costs as hydrogen blending gains momentum16.

• The energy density of hydrogen is a third of methane21. Blending it into the natural gas stream will result in an inferior product (i.e. energy content) at additional cost.

• Requires equipment upgrades on the end-user-use side. Thus, low-carbon hydrogen will have to rely on policy support. Regulations currently limit the development of a clean hydrogen industry.

• Green hydrogen requires electrolysis powered by zero-carbon electricity. A dedicated wind/solar power supply would allow intermittent utilisation of highly capital-intensive electrolysis plants, which could undermine process economics.

• Blue hydrogen would require scaling up not one, but two challenging technologies (e.g. CCUS and hydrogen) simultaneously. Where geological CO2 storage is an option (e.g. the North Sea), blue hydrogen may prove fast and cheap to deploy, but not all countries and markets have geological storage options.

Conclusion

Natural gas has played a role to date in addressing air quality problems and reducing CO2 emissions across the world. Coal-to-gas switching can continue to help reduce GHG emissions as the energy transition gains momentum. However, it remains a source of emissions in its own right and new gas infrastructure could lock in these emissions for the future. The extensive use of unabated gas-fired capacity would be incompatible with meeting legislated carbon budgets in most Paris Agreement signatories’ countries. The gas industry will have to address the issues of leakage and flaring if gas is to become a viable and low-cost abatement option in the medium term. However, in the longer term, the gas sector will need a credible decarbonization strategy that addresses the inherent opportunities, challenges and limitations of the current technological pathways. This includes efforts to further reduce GHG emissions via biomethane or low-emissions hydrogen (although the economics don’t add up yet, especially for the latter22). Deployment of CCUS technologies for both is another crucial variable for the future. However, policymakers should be wary. There is no ‘room’ for an increase in gas production and consumption to achieve a 1.5C goal, and voluntary action alone will be insufficient to green the gas mix. Given the multitude of market failures and infrastructure challenges standing in the way of decarbonizing gas on a meaningful scale, we should be cutting coal consumption and replacing it with zero-carbon energy and improved energy efficiency. Everything else may be a distraction.

Notes

1 IEA. (2019). The Role of Gas in Today’s Energy Transitions, pp.7-8. Available at:

https://www.iea.org/publications/roleofgas/. Accessed on 01.05.2020.

2 IPCC. (2006). Guidelines for National Greenhouse Gas Inventories. IGES, Japan.

3 McGlade, C., Pye, S., Ekins, P., Bradshaw, M. and Watson, J. (2018). The future role of natural gas in the UK: A bridge to nowhere? Energy Policy 113: 454-465.

4 Moniz, E.J., Jacoby, H.D., Meggs, A.J.M., (2010). The Future of Natural Gas. MIT, Cambridge, Massachusetts. 5 Howarth, R.W., Santoro, R., Ingraffea, A. (2011). Methane and the greenhouse-gas footprint of natural gas from shale formations.

6 McGlade, C., Pye, S., Watson, J., Bradshaw, M. and Ekins, P. (2016). The future role of natural gas in the UK. London: UKERC. Available at: http://www.ukerc.ac.uk/publications/the-future-role-of-natural-gas-in-the-uk.html 7 IEA. (2019). The Role of Gas in Today’s Energy Transitions, pp.7-8. Available at:

https://www.iea.org/publications/roleofgas/. Accessed on 01.05.2020.

8 Ibid.

9 Ibid.

10 Forbes. (2019). Available at: https://www.forbes.com/sites/jamesellsmoor/2019/06/15/renewable-energy-is-now-the-cheapest-option-even-without-subsidies/#79694fcd5a6b. Accessed on 01.05.2020.

11 PriceofOil. (2019). The IEA’s plan to increase gas consumption locks in climate chaos. Available at:

http://priceofoil.org/2019/08/02/the-ieas-plan-to-increase-gas-consumption-locks-in-climate-chaos/. Accessed on 01.05.2020.

12 IPCC. (2018). Special Report: Global Warming of 1.5 ºC. Available at: https://www.ipcc.ch/sr15/.

Carbon Tracker (2018). Carbon Budgets Explained. Available at: https://carbontracker.org/carbon-budgets-explained/. Accessed on 01.05.2020.

13 World Bank. (2019). Increased Shale Oil Production and Political Conflict Contribute to Increase in Global Gas Flaring. Available from: http://pubdocs.worldbank.org/en/603281560185748682/pdf/Gas-flaring-volumes-Top-30-countries-2014-2018.pdf. Accessed on 01.05.2020.

14 Robert L. Kleinberg, Greenhouse Gas Footprint of Oilfield Flares Accounting for Realistic Flare Gas Composition and Distribution of Flare Efficiencies,” submitted for publication.

15 IEA. (2019). Methane tracker: Reducing methane emissions from oil and gas operations. Available at: https://www.iea.org/weo/methane/oilandgas/. Accessed on 01.05.2020.

16Ted Nace, Lydia Plante, and James Browning. (2019). The New Gas Boom: Tracking Global LNG Infrastructure,” Global Energy Monitor, June. Available at: https://globalenergymonitor.org/wp-

content/uploads/2019/06/NewGasBoomEmbargo.pdf. Accessed on 01.05.2020.

Robert W. Howarth. (2014). A bridge to nowhere: methane emissions and the greenhouse gas footprint of natural gas. Energy Science and Engineering, Vol. 2, Issue 2, pp.47-60,

https://onlinelibrary.wiley.com/doi/full/10.1002/ese3.35. Accessed on 01.05.2020

Earthworks. (2019). Fracking, methane and climate. Available at:

https://earthworks.org/issues/fracking_methane_and_climate/. Accessed on 01.05.2020

17 Lisa Friedman. (2019). Michael Bloomberg Promises $500 Million to Help End Coal. New York Times, 6 June. Available at: https://www.nytimes.com/2019/06/06/climate/bloomberg-climate-pledge-coal.html.

Susie Cagle. (2019). Berkeley became the first US city to ban natural gas. Here’s what that may mean for the future. Guardian, 23 July. Available at: https://www.theguardian.com/environment/2019/jul/23/berkeley-natural-gas-ban-environment. Accessed on 01.05.2020.

18 Losz, A., and Elkind, J. (2019). The Role of Natural gas in the energy transition. Columbia Center on Global Energy Policy.

19 M. W. Melaina, O. Antonia, and M. Penev. (2013). Blending Hydrogen into Natural Gas Pipeline Networks: A Review of Key Issues. National Renewable Energy Laboratory, March. Available at:

https://www.nrel.gov/docs/fy13osti/51995.pdf. Accessed on 01.05.2020.

20 Richard D., Simmonds, P., O’Doherty, S., Manning, A., Collins, W., Stevenson, D. (2006). Global environmental impacts of the hydrogen economy. International Journal of Nuclear Hydrogen Production and Application, Vol. 1, No. 1, January, pp.64. Available at:

https://pdfs.semanticscholar.org/68cb/15a0b9f62711a0310f17a9a2b32e139c2885.pdf. Accessed on 01.05.2020 21 IEA. (2019). The Future of Hydrogen. June 2019, pp.35, Available at https://webstore.iea.org/the-future-of-hydrogen. Accessed on 01.05.2020.

22 Renewable Energy Magazine. (2020). What Place for Hydrogen? An interview with Professor Armin Schnettler of Siemens. Available at: https://www.renewableenergymagazine.com/interviews/what-place-for-hydrogen--20200420. Accessed on 01.05.2020.