Will natural gas slow progress on renewables?

The Stockholm Institute has released a provocative report that examines the longer term implications of relying on natural gas as a ‘bridge technology’ to a lower carbon economy.  The environmental think tank’s report addresses the question of whether, by turning to natural gas to replace coal fired generation in the near term, we might be limiting our ability to minimize carbon emissions further into the future.

At a fundamental level, the carbon advantage that natural gas offers over coal is immediate and clear.  Natural gas has half the carbon content of coal per unit of energy.  In parallel, natural gas combined cycle plants are more efficient than even that the most modern supercritical coal generators.  As “Natural Gas: Guardrails for a Potential Climate Bridge”points out, the best CCGT plants have an energy conversion efficiency of 60%, versus 44% tops for supercritical coal, giving gas additional advantage in terms of carbon emissions.

In the United States, where gas undercuts coal on price, the switch to the cleaner fuel resulted in a 12% drop in power sector emissions from 2007 to 2012. But the report highlights a downside in this fuel revolution, which is the potentially unhealthy relationship between CCGT and zero-carbon generation.

For the United States, natural gas substitution for non-fossil fuel energy (mainly nuclear, biomass and wind) is greater than for coal, and similar to that for coal plus oil substitution. Similar results are reported for Africa, with some differences in the mix of non-fossil fuels replaced by natural gas (especially wind post-2030)

In other words, natural gas doesn’t just displace coal, it acts as a substitute to cleaner forms of generation to a very significant degree.  This effect isn’t universal, and in China natural gas is expected to substitute largely for coal, with a much smaller impact on wind power.

Nevertheless, in the longer term natural gas does not appear to be a carbon panacea.  In countries where natural gas is cheap, namely the US, lower energy prices may drive higher energy demand, a phenomenon known as the “scale effect”.

Several studies using energy-economy models to reflect interactions between energy supplies, prices and consumption have suggested that more abundant, inexpensive gas supplies would lead to increased energy consumption, partly or fully offsetting the GHG benefits from substitution of other fuels.

Stockholm quotes a number of published reports from the likes of the EIA and others to arrive at a blunt, sobering conclusion:

As a whole…more abundant and less expensive natural gas supplies are, on their own, unlikely deliver a significant climate benefit.

So, when it comes to the embrace of natural gas, are we damned if we do, damned if we don’t?

Not necessarily.  Here the potential role of strong climate policy becomes clear.  Unencumbered, the utility sector might build ever more natural gas generation based purely on natural gas’ strong economics. That urge, however, can be balanced through the passage of stronger renewable portfolio standards to ensure that more renewables make it onto the grid.  Carbon pricing will limit the cost advantage of natural gas and play to the advantage of nuclear power. Policy can also help to ensure that much of natural gas supply is directed toward power generation, where its climate impact is greatest, rather than to the transportation sector where natural gas’ advantages over gasoline and diesel are relatively less.

In addition, strict limits on methane leakage in natural gas production and LNG transport will be critical to reducing potential GHG impact. Methane is more than 80 times more potent as a greenhouse gas than CO2.

Finally, the long term impact of the natural gas market on emissions has to be taken into account.  Rising global demand for natural gas has been enabled in large part by the rising liquidity of the global LNG market, which should expand dramatically over the next few years as new supply comes online.

LNG project developers, who invest many billions of dollars into gasification plants and ocean going LNG tankers, favor long term supply contracts that commonly lock customers in for 20 years.  This in turn incentivizes buyers to vigorously promote LNG demand, potentially to the detriment of wind, biomass and nuclear.

It’s clear that the adoption of natural has had a positive impact on CO2 emissions in the US over the past decade. Nevertheless, as Stockholm points out, that advantage may diminish with time unless policy is used to ensure that investment in lower-carbon forms of power generation are supported.

This article is published in collaboration with The Energy Collective. Publication does not imply endorsement of views by the World Economic Forum.

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Author: Andy Stone is an energy, media and communications professional who offers perspective that spans clean and conventional energy.

Image: A person lights a bio-gas stove. REUTERS.