For years, analysts and industry experts have predicted the coming of the golden age of gas. “Natural gas is poised to enter a golden age, but this future hinges critically on the successful development of the world’s vast unconventional gas resources,” a 2012 report by the International Energy Agency (IEA) proclaimed. “North American experience shows unconventional gas – notably shale gas – can be exploited economically. Many countries are lining up to emulate this success.”
The report, Golden Rules for a Golden Age of Gas, predicted that by 2035 we would have reached this golden age. It suggested that production of unconventional sources of gas, predominantly shale produced through fracking, would triple by 2035.
However, renewables have developed at a faster rate than many thought possible and are increasingly competitive with gas as a clean, economic and reliable source of power. In 2016, renewables made up two-thirds of new capacity, with solar PV capacity growing by 50%. With the 2050 carbon emission cut deadline set in the Paris Climate Agreement beginning to loom, pressure to decarbonise is increasing and spurring on renewables uptake.
Now, a new report, Future of Gas: The Role of Natural Gas in the Future Energy System, produced by the Energy Institute brings into question whether the golden age of gas will come to fruition at all. “There’s an elephant in the room of the global energy system and it’s called natural gas,” said president of EI Malcolm Brinded in the reports opening letter. “It looks like a golden age for gas in many ways, with unconventional production soaring and global LNG trade forecast to more than double by 2040 (International Energy Agency [IEA] 2017). But at the same time the world has committed to keeping global temperature increases within 2°C, requiring net zero emissions in the second half of this century.”
The natural gas market has seen impressive growth over the last two decades and in all scenarios is expected to continue to play an important role in the energy sector over the coming years. Consumption of natural gas is expected to increase by 20% by 2030 and then begin to plateau. But whether it will truly reach its golden age seemingly depends on overcoming key challenges regarding emissions.
Can carbon capture and storage rescue natural gas?
There are many benefits of using natural gas over other fossil fuels. When burnt it produces half of the carbon dioxide and just a tenth of the air pollutants produced by coal, and as such it has long been considered the ‘clean’ fossil fuel.
There are also economic benefits to the usage of natural gas, in particular when looking at the US. The rise in fracking, unlocking vast stores of natural gas caused prices to drop continuously in the US from 2005 for a decade. This also enabled export growth within the sector and is a model many countries have been keen to follow.
Gas-fired plants have generally been cheaper than their coal equivalents, for example, in March 2016 in the US, power from a natural gas plant averaged out at $16/MWh. Coal plants cost an average of $21/MWh and $23/MWh between 2014 and 2016. Whilst prices are subject to market trends, the combination of lower emissions and an average lower price makes natural gas attractive.
However, whilst it is cleaner than other fossil fuels it production and usage still emits carbon. It has been suggested that carbon capture and storage (CCS) could greatly alleviate this, but it is yet to take-off.
“The problem with CCS and the reason it hasn’t progressed far more quickly and commercially is the absence of a strong commercial driver to do so, either in the form of a powerful carbon price which makes it economically sensible to do, or for that matter substantial government support in many countries,” says Nick Turton external affairs director at EI. “Some countries have been putting money into demonstration and R&D, but the scale of what you might hope to see in the future hasn’t yet materialised and I think it’s to do with that absence of a real powerful economic driver for it.”
Within EI’s research however there seems to be a great deal of optimism about the use of CCS. Of those asked, 56% said that expected decarbonised natural gas to play a significant role in the long-term. This relies of developments in the technology and the incentives, currently there are just 21 projects researching the use of CCS for oil and gas globally, the most advanced of which focus on oil.
Carbon’s poor cousin: Methane and the risk of fugitive emissions
Carbon is not the only major emission to worry about within the gas industry, and the IE’s report highlighted an important but often overlooked problem, fugitive methane leaks which are extremely common in gas production and processing and remain very damaging greenhouse gas.
“It feels like when you look at the debate not just in the industry but more broadly that methane is sort of the poor cousin of carbon,” says Turton. “When people talk about tackling climate change we always talk about decarbonising don’t we. That’s really, really important, but when we think about whether fossil fuels have a continuing role to play you’ve got to look at the methane and fugitive methane emissions that are produced during production. Primarily because the release of methane is a lot more potent in fact than carbon dioxide as a greenhouse gas.”
Methane warms the planet much faster than carbon dioxide, although unlike carbon which stays in the atmosphere for millennia, it deteriorates after a few decades and becomes carbon dioxide. According to the Intergovernmental Panel on Climate Change, methane warms the world as much as 86 times more than carbon dioxide.
Despite the clear damage leaked methane can cause, a large percentage of the industry remains unaware of the possibility to capture and commercialise methane emissions. Of those asked by EI, 66% responded “I was aware of some possibilities, but I’m surprised about the scale”, and 16% answered “I was not aware of the technical possibilities to avoid methane emissions.”
This lack of awareness is something that the IEA also have begun to emphasise. Their World Energy Outlook 2017stated that “Stepping up action to tackle methane leaks along the oil and gas value chain is essential to bolster the environmental case for gas: these emissions are not the only anthropogenic emissions of methane, but they are likely to be among the cheapest to abate. We present the first global analysis of the costs of abating the estimated 76 million tonnes of methane emitted worldwide each year in oil and gas operations, which suggest that 40-50% of these emissions can be mitigated at no net cost, because the value of the captured methane could cover the abatement measures.”
Reaching the golden age: can gas avoid coal’s pitfalls?
Whether the predicted golden age of gas ever truly happens is yet to be seen, but with its environmental benefits so fundamental to its success it is essential that emissions are managed.
“I don’t know if this is a cliché, but it’s about its license to operate,” says Turton. “We live in a world where the general public is more and more aware and more and more engaged in environmental issues, there’s far more scrutiny from the media, be it conventional or social media, of company operations and strategies.
“Coal sort of became the bogey man of the environmental NGO’s and in some senses it’s understandable because coal in high carbon emitting. I think the only way that gas can avoid following coal down that line is to act on these two particular problems, i.e. methane and carbon, and demonstrate that it’s got a legitimate place in the longer terms within a low-carbon mix, obviously alongside renewables and in some countries alongside nuclear and so forth. That’s the only way that I think it can do that, otherwise the questions will get stronger and stronger.”