Tracking Natural Gas-Fired Power 2020

Gas-fired generation expanded 3% in 2019, mainly as the result of an 8% increase in the United States and strong growth in parts of Europe. At around 6 250 TWh, gas accounts for 23% of overall power generation.

Gas growth slowed substantially in China (from 30% in 2018 to 6% in 2019) as gas still fuels only a small share (less than 4%) of its power generation. In Europe, gas use in power generation increased by around 4% due to coal-to-gas switching. It fell by 8% in Japan, displaced in part by higher nuclear generation and overall lower power demand.

Gas-based generation growth continues to exceed the overall Sustainable Development Scenario (SDS) trajectory, which shows gas generation peaking in the late 2020s and declining steadily thereafter.

Gas-based generation emits less CO₂ than coal-fired, so when it displaces coal (as in the United States) it can deliver immediate emissions reductions. In the SDS, as the lower-carbon alternative to gas, renewables lead global generation growth at the expense of gas up to 2030.

While there are no large-scale CCUS projects at gas-fired plants in operation today, the SDS envisions 35 GW by 2030. Five of the 16 CCUS projects in development relate to gas-fired power, including plans for a plant in the United States announced in April 2020.

Separately, the NET Power 50‑MW_th clean-energy plant in Texas is a first-of-its-kind natural gas-fired power plant employing Allam cycle technology to use CO₂ as a working fluid in an oxyfuel supercritical CO₂ power cycle. The NET Power demonstration project started operations in 2018.

The trend of declining spending on gas-fired power reversed in 2019, rising to a level similar to 2014‑15. Spending continued to wane in the United States and the MENA region, and increased mainly in Europe and Russia.

The number of final investment decisions for gas-fired generation rose for the first time since 2016, to cover more than 55 GW. The increase in planned gas-fired projects globally, especially combined-cycle plants, responds to the growing need to provide flexibility, firm capacity and ancillary services to the system as more variable renewable projects come online.

The strongest growth was in the United States (+150%), supported by low gas prices, followed by the MENA region (+40%), particularly the Gulf Cooperation Council countries. China’s investment decisions fell to below 10 GW, even as the number remained high in comparison with approvals in recent years, supported by broader targets to increase gas use.

The COVID-19 crisis caused unprecedented energy market uncertainty in 2020. The IEA expects a sharp drop in power sector gas demand in 2020, accounting for almost 60% of the anticipated overall drop in gas demand globally. The sharpest decline is expected in Europe, prompted by lower electricity demand in the industry sector and a more resilient renewables-based power generation system. Very low natural gas prices in North America mean that the impact on gas-fired generation is expected to be less severe there.

The competitiveness of natural gas relative to coal in daily electricity system operations is highly dependent on regional market conditions, particularly fuel prices. However, growth prospects for gas are affected not only by the competitiveness of gas prices, but also by recognition of the local air pollution and climate benefits of gas over coal.

The introduction of carbon taxes and regulation of plant emissions could encourage coal-to-gas switching.

Further electricity market mechanisms that recognise the potential benefits of natural gas-fired power – i.e. that it is a lower-carbon alternative to coal-fired generation, and that its operational flexibility can help integrate variable renewables into the energy system – are also required.

Gas supply security is critical to ensure that investments are sustained and that gas can be deployed at the level set out in the SDS. The IEA will therefore continue to monitor global gas markets, assess supply security and provide up-to-date recommendations to increase gas market efficiency.

Keith Burnard (IEAGHG), Hans-Wilhelm Schiffer (World Energy Council).