Natural Gas—a Temporary Transition to the Future?

The future role of natural gas in the global energy mix has been subject to debate. On one side are those who see natural gas as a competitive threat to a renewable future. On the other are those who see an important role for natural gas in lowering carbon emissions over the short term, even as we transition toward a renewable future.

However, while natural gas is playing a critical role as a transition fuel around the world, its future outlook is positive, and natural gas benefits abound. Here's a look at how natural gas secured its current position in the power industry and how the future of this fuel may play out.

A Revolution in the US Power Generation Mix

Since 2000, there has been a major shift in the US power mix, and that has made a big impact on US carbon dioxide emissions.

Data collected by the Energy Information Administration (EIA) in 2000 and 2017 reveals that electricity consumption in the US has grown by less than 6 percent, but the power mix has undergone a significant change. In 2000, 71 percent of all US electrical generation was from fossil fuels, and 51 percent of the total was produced by coal. Nuclear power was responsible for another 20 percent of electrical generation, while renewables contributed about 7 percent.

In 2017, 63 percent of the electricity produced in the US relied on fossil fuels. However, the share of coal-fired power dropped from 51 percent in 2000 to 30 percent in 2017, according to EIA data. The natural gas share rose from 16 percent to 32 percent in that time. The total renewables share rose from 9.5 percent to 17 percent; but modern renewables like wind and solar power collectively rose from 0.15 percent of net generation in 2000 to 7.5 percent in 2017. Nuclear power remained approximately the same, with a 20 percent share.

The Leader in Reducing Carbon Dioxide Emissions

The key takeaway from this data is that coal has lost significant market share, primarily to natural gas but also to modern renewables—the fastest-growing segment of the power mix. The impact of the huge drop in coal can be clearly seen in emissions data.

According to the BP Statistical Review of World Energy, the US has reduced carbon dioxide emissions by 639 million metric tons per year since 2000—by far the world's largest drop in carbon dioxide emissions. By comparison, the second-largest reduction was in the UK, where emissions dropped by 165 million metric tons per year. China, by contrast, saw its carbon dioxide emissions soar by 6.8 billion metric tons per year over that timeframe.

Thus, the debate over the role of natural gas may miss the point. Natural gas is already performing the role of bridging the gap between a coal-fired past and a renewable future—and the present power industry isn't ready to operate without the natural gas benefits it currently enjoys.

The Bridge to a Coal-Free or Renewables-Led Future?

How long might a full transition from coal to natural gas to renewables take? That depends on several factors. Renewables are becoming increasingly cost competitive, but they still require backup power due to their intermittent nature. Natural gas is playing an increasingly important role in providing backup power for renewables, but that role could someday be filled by a mixture of energy storage technologies.

Looking back at the transition that has taken place since 2000 provides a rough estimate of how long the natural gas bridge will need to be. In 2000, the US generated 1.9 trillion kWh of electricity from coal, 611 billion kWh from natural gas, and about 400 billion kWh from renewables, according to the EIA.

By 2017, it reported, power generated from coal had fallen 700 billion kWh to 1.2 trillion kWh. Natural gas generation increased over that timespan by 700 billion kWh to 1.3 trillion kWh, while renewables grew 300 billion kWh to 700 billion kWh.

Thus, on an absolute basis, natural gas displaced far more of coal's market share, while modern renewables have grown at a much faster rate.

Wind and solar power, for instance, provided 300 billion kWh in 2017. The BP Statistical Review of World Energy shows that the output of the two combined sources over the past five years has more than doubled. That said, growth rates for wind and solar have been slowing, and are influenced by changing government policies. But, assuming a similar growth rate over the next 10–15 years for wind and solar power, renewable output levels could equal coal's output in about 10 years—and the combined current output of coal and natural gas power in 15 years.

So one could envision a bridge of perhaps 10 years before a combination of renewables and natural gas ushers in the complete phaseout of coal. In 15 years, renewables could make serious inroads toward ridding the fuel mix of the natural gas bridge.

A World of Opportunity Still Awaits for the US in LNG

While today China is often lauded for investments in renewables, it's notable that the country's natural gas consumption has also doubled since 2010, according to BP. This may be starting to impact China's coal consumption, which has declined by 4 percent since a high in 2013, BP says. Rivalry: The IHS Markit view of the energy future (2018–50) predicts that the expansion of domestic and international natural gas supplies will take on increasing strategic importance for China in the years ahead. By 2050, IHS Markit expects China to derive almost 17 percent of its energy from natural gas, up from under 7 percent in 2017.

The EIA highlights the growing importance of China as a buyer of US liquefied natural gas (LNG); the nation accounted for 15 percent of the total US LNG export volume in 2017. This made China the third-largest export destination for US LNG, behind Mexico and South Korea.

Thus, while the ultimate future of natural gas is uncertain, there is an opportunity to follow the US roadmap around the world. With the growth of shale gas production, the US may be in a great position to supply the LNG needed for the coming power revolution.