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Natural gas is seen as a good source of electricity supply for a number of economic, operational and environmental reasons: it is low-risk (technically and financially) and lower-carbon relative to other fossil fuels, plus gas plants can be built relatively quickly in around two years, unlike nuclear facilities, which can take much longer.
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About natural gas
Natural gas plants are flexible both in technical and economic terms, so they can react quickly to demand peaks, and are ideally twinned with intermittent renewable options such as wind power. Over the course of a month, various spikes in demand have a sizeable knock-on effect on the cost of delivering electricity, so having a source of energy – namely gas – which can cope with these spikes is a significant advantage. The IEA closely follows gas market developments and trends all over the world and provides advice to our member countries on the current situation and possible future scenarios.
In the United States, with low prices of both coal and gas and where enough coal and gas capacity exists, changes in relative prices of gas and coal give rise to switching from coal to gas or vice-versa in the generation mix. But price is not the only factor determining how much gas and coal is used in power generation. The IEA publication Gas to Coal Competition in the U.S. Power Sector provides useful insights to understand what have occurred and to project the future coal and gas demand.
The trading of natural gas in the Asia-Pacific region is dominated by long-term contracts in which the price of gas is indexed to that of oil. In the report Partner Country Series - Developing a Natural Gas Trading Hub in Asia, the IEA shows what it would take to create a functional, regional natural-gas trading hub in which prices reflect the local supply and demand fundamentals.
While China’s circumstances are, in many respects unique, some current issues are similar to those a number of IEA countries have faced. The report Partner Country Series - Gas Pricing - China’s Challenges and IEA Experience highlights some key challenges China faces in its transition to greater reliance on natural gas, then explores in detail relevant experiences from IEA countries, particularly in the United Kingdom, the Netherlands and the United States as well as the European Union. Preliminary suggestions about how lessons learned in other countries could be applied to China’s situation are offered.
For more information on oil and gas emergency policies in individual IEA member countries, click here.
- Natural Gas Information 2015
- Medium-Term Gas Market Report 2015
- Oil, Gas, Coal and Electricity 2015
- Resources to Reserves 2013
- WEO Special Report 2013: Southeast Asia Energy Outlook
- Production Costs of Alternative Transportation Fuels
- Developing a Natural Gas Trading Hub in Asia
- Gas Pricing - China’s Challenges and IEA Experience