Natural Gas ‘Bridge’ to Low-Carbon Future Set to Peak by 2031
The world hydrocarbon majors’ strategy of pitching natural gas as a less environmentally damaging alternative to oil may be overtaken by the plummeting price of renewable energy sources, Bloomberg suggests in an analysis.
“In 20 years, we will not be known as oil and gas companies, but as gas and oil companies,” Total CEO Patrick Pouyanne told a conference in Russia last month, the news agency reports. The line reflects the industry’s common pitch that gas can serve as “a bridge between a fossil-fuel past and a carbon-free future.” As Bloomberg explains their case, “gas emits less pollution than oil, and can be burned to produce the power that grids will need for electric cars.”
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But that bridge may never be needed. “With the cost of renewable technologies falling sharply, some forecasters are beginning to talk about peak gas demand, spurred by the growth of alternative power supplies, in the same breath as peak oil consumption.”
Last month, Bloomberg New Energy Finance forecast that total gas-fired power generation will peak by 2031, then start to decline. Gas’s share of global power generation will start to drop even sooner, “from 23% last year to 16% by 2040,” the research group anticipated. Earlier this month, the International Energy Agency similarly predicted global gas demand for power generation to be essentially flat for the next six years, growing by 1% a year, down from 4% annual growth from 2004 to 2010.
“Driving the shift has been a sharp decline in the cost of building new renewable power—which, unlike generating electricity from coal or gas, is almost free to run after the initial capital investment has been made,” the Bloomberg News observes. Within five years, BNEF forecast, onshore wind and solar power will be cheaper to build than new coal and gas plants in China, the U.S., and India. By the late 2020s, they will be cheaper to build than running existing coal and gas plants.
That means “wind and solar are just getting too cheap, too fast” for gas to play a transitional role, asserted BNEF’s Seb Henbest.