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    Gas Poised to Resume Growth: IGU

Summary

There are major opportunities to scale up the use of low-carbon gas technologies.

by: Joseph Murphy

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Gas Poised to Resume Growth: IGU

Global gas demand is set to fall by 4% in 2020 after increasing 2% last year, due to the impact of the Covid-19 pandemic, but growth will resume as gas replaces dirtier fuels in the energy mix, a report published on August 6 by the International Gas Union, BloombergNEF (BNEF) and Italy's Snam states.

The Global Gas Report 2020 sees medium-term growth in consumption being driven by gas' cost-competitiveness as well as increased global access to the fuel. In particular, LNG imports rose by 13% in 2019 to 482bn m3, and although a 4.2% fall is projected in 2020, supplies could rebound to previous levels as soon as 2021.

There are ample gas resources to underpin this demand growth, the report states, but increased infrastructure is needed to carry supply to consumers. 

"The pandemic has created disruption in the global energy sector, but low gas prices will ultimately stimulate demand growth as the economy recovers," Ashish Sethia, global head of commodities at BNEF, commented. "We have already seen unprecedented coal-to-gas switching in Europe, and clean air policies in major growth markets such as India and China will drive more gas adoption in the next few years."

"This pandemic crisis comes at great cost to the industry, the economy and society at large. It also reminded the world about the value of clean air and healthy environment for wellbeing, providing a unique opportunity to rebuild better," Joe Kang, the IGU's president, said. "Gas is an abundant, clean, accessible and flexible substitute to more polluting energy sources, and supporting greater fuel switching from coal and oil to gas in the immediate term, while ensuring infrastructure is ready to accommodate progressively greater scale of clean gas technologies in the coming decade, is the way to secure a sustainable and prosperous future."

The longer term presents major opportunities to scale up the use of low-carbon gas technologies, the report states. Clean hydrogen, which can be derived from gas, could abate up to 37% of energy-related greenhouse gas emissions, according to BNEF estimates. But this would require the right policies, including emissions pricing linked to clear, Paris-aligned long-term climate targets; harmonised standards governing hydrogen use; coordinated strategies regarding regional and global infrastructure roll-out, and the deployment of hydrogen-ready equipment, such as pipelines, gas turbines and end-use appliances.

"“It is increasingly clear that the goals of the Paris Agreement cannot be met without a substantial scale-up of clean gas technologies – such as hydrogen," BNEF CEO Jon Moore explained. "While the economics are challenging today, a joined-up policy approach could unleash the investment needed to bring costs down, develop scalable business models and drive adoption across the hard-to-abate sectors."

Developing an international hydrogen market could accelerate adoption, the report states, estimating that Germany, which is striving to become a leader in hydrogen technology, could procure the fuel at the competitive price of only $1/kg in 2050 from various sources, including domestic electrolysers run on renewable energy, or piped imports from North Africa or Southern Europe. 

"The hydrogen market is on the verge of a revolution. The goal is to bring down the cost of green hydrogen until it becomes competitive with fossil fuels in many applications in the next five years," Snam CEO Marco Alvera said. 

Snam has been testing the blending of hydrogen with gas in the Italian grid over the past two years, and recently tested a hydrogen-blend turbine for use in gas networks. 

"We envision a future where clean hydrogen produced in Southern Italy or North Africa can be transported through our pipelines to serve Central and Northern European needs," Alvera said. "While matching supply and demand in the most efficient way, the infrastructure is expected to play a central role in supporting the penetration of hydrogen in the energy mix."

You can find the Global Gas Report 2020 here.