In 2011, the International Energy Agency (IEA) predicted natural gas could account for more than 25 per cent of global energy demand by 2035, in part because it could be the vital bridge for a carbon-reliant economy in a decarbonized world.
Now, approximately one-quarter of the way into that timeline, it doesn’t seem to be coming true.
“This golden age of gas has not really materialized, and six or seven years later, we are still looking for it, and there is a glut that is emerging in the energy market,” Antoine Halff, the IEA’s former chief energy analyst, told the Canadian Energy Research Institute’s 2017 Oil & Gas Symposium.
“The argument of gas as a bridge fuel is increasingly challenged,” said Halff, who is now a senior research scholar at Columbia University’s Center on Global Energy Policy.
“Particularly the idea that gas is a natural complement to renewables—that gas can easily help renewables get integrated to the grid and deal with the intermittency of normal energy production—that argument…is becoming less compelling all the time.”
That’s partly due to improvements in technology that enable more sophisticated management of the intermittency of renewables, such as the use of solar to offset wind energy and batteries that better store energy.
“Coal technology also is improving, and the most sophisticated coal-fired power plants now are much more adept at ramping up or down with the flexibility to increase or decrease their rates as the intermittence of renewables requires,” said Halff.
“Gas is challenged on all these fronts, and policy has not always been supporting it.”
Gas is being squeezed out of the equation. There’s less public support for natural gas over concerns about fracking, and policy isn’t helping like analysts thought it might.
“In general,” Halff said,” carbon-pricing principles would normally support the gas market, but it has not really worked because carbon prices need to be higher.”
Approximately 20 countries around the world have carbon-pricing policies, “but in 75 per cent of those countries, the price is under $10/ton, and that’s not really sufficient to move the needle,” he said.
But there is hope. In the U.K., the higher carbon price has successfully been pushing coal out of the market, benefiting natural gas.
There is also strong demand for gas from countries that the IEA didn’t expect, like Egypt and Pakistan, mostly due to floating regasification, a new flexible and low-cost technology, said Halff.
He is also optimistic about the growth of natural gas in transportation, in shipping and trucking in particular.