The Role of Gas in Today's Energy Transitions

World Energy Outlook special report
In this report

This World Energy Outlook special report examines the role of fuel switching, primarily from coal to natural gas, to reduce emissions of carbon dioxide and air pollutants. Four case studies, covering the United States, the European Union, the People’s Republic of China, and India, reveal the various opportunities, hurdles and limits of fuel switching as a way to address environmental challenges.

The Role of Gas in Today's Energy Transitions examines the role of fuel switching, primarily from coal to natural gas, to reduce CO2 emissions and air pollutants.

Four case studies, covering the United States, the European Union, China, and India, reveal the various opportunities, hurdles and limits of fuel switching as a way to address environmental challenges.

Key findings

After three flat years, global energy-related CO2 emissions resumed growth in 2017 and 2018, representing a dangerous disconnect with global climate goals. 

It is clear that switching between unabated consumption of fossil fuels, on its own, does not provide a long-term answer to climate change, but there can nonetheless be significant CO2 and air quality benefits, in specific countries, sectors and timeframes, from using less emissions-intensive fuels.

Since 2010, coal-to-gas switching has saved around 500 million tonnes of CO2 - an effect equivalent to putting an extra 200 million EVs running on zero-carbon electricity on the road over the same period.

CO2 savings from coal-to-gas switching in selected regions compared with 2010, 2018

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The four countries and regions chosen for in-depth analysis in this report – the United States, Europe, China and India – display a wide range of market and policy dynamics, which affects the ways in which coal and gas compete.

In the United States, the shale revolution has had a dramatic effect on gas supply and prices. Alongside some state-level as well as federal-level environmental policies this has pushed gas into the energy mix while pushing out coal.

Since 2010, the market share of gas has increased more than any other energy source.

In China, gas demand has risen very quickly in recent years because of a major policy push to improve air quality.

Gas has substituted for coal-fired industrial and residential boilers in many urban areas, but the case for switching in the power sector is less clear.

Shares of coal and gas in primary energy in China, 1990 to 2018

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Shares of coal and gas in primary energy in the United States, 1990 to 2018

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There has been relatively less switching in Europe since 2010, with the notable exception of the United Kingdom.

However today’s combination of low gas prices and higher CO2 prices in the European Union is giving this process renewed momentum.

In India, gas currently has a small share of the energy mix.

Large-scale switching has been held back by supply constraints and affordability issues, as well as a lack of infrastructure.

Shares of coal and gas in primary energy in India, 1990 to 2018

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Shares of coal and gas in primary energy in Europe, 1990 to 2018

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The clearest case for switching from coal to gas comes when there is the possibility to use existing infrastructure to provide the same energy services but with lower emissions.

Given the time it takes to build up new renewables and to implement energy efficiency improvements, this also represents a potential quick win for emissions reductions. There is potential in today’s power sector to reduce up to 1.2 gigatonnes of COemissions by switching from coal to existing gas-fired plants, if relative prices and regulation support this potential. The vast majority of this potential lies in the United States and in Europe. Doing so would bring down global power sector emissions by 10% and total energy-related CO2 emissions by 4%.

CO2 savings from coal-to-gas switching in the power sector at different gas prices, 2019

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Most of the gas and coal produced today is used for power generation and as a source of heat for industry and buildings.

While there is a wide variation across different sources of coal and gas, an estimated 98% of gas consumed today has a lower lifecycle emissions intensity than coal when used for power or heat. This analysis takes into account both CO2 and methane emissions and shows that, on average, coal-to-gas switching reduces emissions by 50% when producing electricity and by 33% when providing heat.

Enhanced efforts from the gas industry to ensure best practices all along the gas supply chain, especially to reduce methane leaks, are a cost-effective means to reduce the emissions intensity of gas supply and are essential to secure and maximise the climate benefits of switching to gas.

Full lifecycle emissions intensity of global coal and gas supply for power generation, 2018

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Full lifecycle emissions intensity of global coal and gas supply for heat generation, 2018

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The shale revolution in the United States has in general brought down gas prices, and the growth of destination-flexible, hub-priced LNG exports from the United States is providing a catalyst for a more liquid global gas market.

However, even though global gas markets are becoming more interconnected, there is still no global gas price. The lower energy density of gas compared to oil or coal means that transportation by pipeline or as LNG takes a relatively high share of the delivered cost, making geographical proximity to resource-rich areas an important determining factor for affordability.

Difference in the levelised cost of electricity between natural gas (CCGT) versus coal plants (supercritical) in the European Union, 2013-2017

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Difference in the levelised cost of electricity between natural gas (CCGT) versus coal plants (supercritical) in the United States, 2013-2017

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Difference in the levelised cost of electricity between natural gas (CCGT) versus coal plants (supercritical) in India, 2013-2017

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Difference in the levelised cost of electricity between natural gas (CCGT) versus coal plants (supercritical) in China, 2013-2017

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The policy push for coal-to-gas switching in China has been concentrated in urban areas, with the objective to replace coal-fired boilers in industrial facilities and residential buildings. These smaller-scale boilers (unlike those at large coal-fired power plants) are rarely equipped with advanced pollution controls and are a major contributor to poor air quality. Reducing their use, particularly for winter heating, is a key part of the effort to make China’s skies blue again.

Electricity provides the main alternative route away from reliance on coal. However, not all industrial applications can easily switch to electricity, and the number of new residential gas users in 2018 was twice as high as those opting for electric heating, suggesting that Chinese provincial governments still back the expansion of gas networks, despite concerns about affordability and higher imports.

In the residential sector, an extra 27 million households were connected to the gas grid in 2005-16 and an additional 7 million in 2017-18 alone.

Range of air quality measurements for the "2+26" cities and Chinese monthly gas consumption, 2014-2018

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The environmental case for building new gas infrastructure is complex, as policy makers need to be wary about locking in gas-related emissions even as they reduce emissions from coal. If new gas infrastructure prevents the combustion of more polluting fuels, this can increase absolute emissions but reduce them relative to what they would have been. In some instances, new gas infrastructure may also deliver services that cannot be cost-effectively provided by low-carbon alternatives, such as peak winter heating, seasonal storage, or high-temperature heat for industry. For both gas and coal, a crucial variable is the availability and deployment of carbon capture, utlisation and storage technology.

From a policy perspective, another key comparison is between the costs and feasibility of expanding the electricity grid versus the expansion of a gas grid that could eventually also deliver decarbonised gases (renewable methane or hydrogen) as well as providing benefits for energy security. Further detailed analysis of the role of gas infrastructure in energy transitions will be presented in the forthcoming World Energy Outlook 2019.