Natural gas demand will outpace other fossil fuels, IEA says
This story has been updated with an additional statement issued by the IEA’s Executive Director, Dr. Fatih Birol.
Demand for natural gas will grow faster than for coal or oil over the next quarter-century, whether or not the world meets carbon-reduction targets set in last year’s Paris agreement on climate change, the International Energy Agency said Wednesday.
The IEA’s influential World Energy Outlook did not take into account the election of Donald Trump as U.S. president but presented its forecasts on the basis of three possible scenarios: the new policies that are expected to be implemented following recent agreements; no change in current policies on energy and climate change, and the policies that would be needed to meet the Paris target.
Assuming the expected development of energy sectors in coming decades, gas producers like those in Pennsylvania will see global demand increase by an average 1.5 percent a year between 2014 and 2040, while demand for oil and coal will edge up by only 0.4 percent and 0.2 percent, respectively.
If no new emissions reductions are implemented, natural gas demand would grow by 1.9 percent over the period, exceeding 1.2 percent for coal and 0.9 percent for oil, the annual report said.
And if policy makers implement bigger cuts in carbon emissions under a so-called 450 scenario, which aims to limit the global temperature rise to 2 degree Celsius by 2100, natural gas would be the only one of the three major fossil fuels to see increasing demand, according to the projections.
While the projected growth in natural gas demand under the “new policies” scenario is less than the annual 2.3 percent seen over the past 25 years, the fuel will increase its share of primary energy demand from the current 21 percent to 24 percent in 2040, while coal and oil both see declining shares, the 667-page report said.
Higher demand will spur growth in production, two thirds of which will initially come from the United States – where the Marcellus Shale of Pennsylvania and surrounding states is the biggest play – and Australia, the IEA said. But starting in the early 2020s, output is expected to surge in East Africa and the Middle East.
Prices are likely to stay low for some time as “robust” exports of liquefied natural gas, mostly from the U.S. and Australia, will add to the abundant current supply, the report said.
“This ramp-up of supply capacity amidst a general slowdown in demand growth is keeping the global market awash with gas,” it said, but added that LNG overcapacity would be absorbed by the mid-2020s.
Gas accounts for about a third of the projected growth in power generation but it is facing renewed competition from coal as a utility fuel, the IEA said. Even in import-dependent markets like Asia, coal prices would have to be much higher than predicted in 2025 in order for new gas-fired plants to be cost effective.
On the role that natural gas can play in reducing greenhouse gas emissions, the IEA said the fuel emits less carbon than other fossil fuels but leaks methane, a highly potent greenhouse gas, during production and distribution.
Still, it said there’s a “very strong case” for gas as a “relatively clean and flexible source of energy” especially for countries such as the U.S. that have significant resources easily accessible.
Estimates of the size of U.S. gas reserves are uncertain, especially in the Marcellus Shale, the report said, calling the Marcellus “the heart of the uncertainty.”
On international efforts to hit emissions targets set by the Paris accord, most countries have been meeting their requirements but doing so won’t come close to limiting the global temperature rise to 2 degrees Celsius, the report said.
Pledges by the signatories of the Paris agreement would sharply slow the growth of carbon emissions but the overall rate would still be increasing, clearly missing the target of reaching a peak in emissions as soon as possible.
John Quigley, former Secretary of Pennsylvania’s Department of Environmental Protection, highlighted a shift toward renewable fuels that the report said will account for 60 percent of all new power generation by 2040.
But the increasing adoption of renewables, coupled with other emissions policies, still are not enough to slow climate change in line with the Paris target, Quigley said.
“There’s clearly an energy shift going on but that is not fast enough to save us from catastrophic warming,” Quigley said, in an interview.
Plans by President-Elect Donald Trump to pull the U.S. out of the Paris accord and scrap the Clean Power Plan may slow the global “energy transformation” but are unlikely to halt it because renewables are becoming increasingly competitive with fossil fuels, said Quigley, now a senior fellow with the University of Pennsylvania’s Kleinman Center for Energy Policy.
Trump, who has called climate change a hoax, may well follow through on his campaign promises to withdraw from the Paris accord, Quigley said, and that may tempt China, India and Europe to drop their own commitments.
But he predicted that China and India will be compelled to switch eventually to renewable fuels because their existing energy mix, with a large contribution from coal, is creating emissions that are killing thousands of their citizens.
The IEA’s Executive Director, Dr. Fatih Birol, issued a statement after the report was released, saying that the agency’s analysis could be adjusted in light of any changes in U.S. policy resulting from Trump’s victory in the presidential election.
“Governments come and go around the world, this is a perfectly normal thing, and energy policies change with changes in administration,” the statement said. “We may well see a change in US policy and given the size of the US economy and its importance in the global economy, these changes may have global implications. If there are such changes, we will include them in our forecasts and analysis. But for now, it would be premature to speculate on what these policies might be. We will wait for real policies to be announced and put in place.”
In Pennsylvania, a large-scale switch toward cleaner-burning natural gas – though not yet renewables – is shown by the number of DEP permit applications for gas-fired power plants whose total capacity would completely replace remaining coal-fired plants, Quigley said.
That process is likely to continue unless the Trump administration subsidizes coal, a move that would conflict with another campaign promise to boost natural gas output, Quigley said.