Natural Gas is not a transitional fuel, so let’s stop saying it is

Gas is widely branded as a transitional or a bridge fuel. The idea is that on the road from coal to renewables, we need to go through gas which emits, at the point of burning only, half the CO2 emissions. But if we look at countries that significantly reduced coal in power generation, we will see that coal is not replaced by gas and doesn’t behave as a transitional fuel. Countries reduce coal, but gas consumption does not increase but instead stays the same or even declines.

The UK is a striking example. In 2012 coal generation peaked at 40%. Today coal generates less than 3% of British electricity, and it is on the way to being fully phased out in 2024. In the last two decades, gas demand has remained flat. Furthermore, both gas and nuclear have shown signs of relative decline over the previous five years.

Germany is a unique case because of its commitment to close down nuclear by the end of 2022. In the last decade, it reduced its coal power generation by 44% and its nuclear generation by 49%. Amid this massive decline, gas generation has increased by only 13% (or an absolute change of 1.9 percentage points).

With some temporary and seasonal variations, the trend is similar in Denmark, Spain, Italy, Slovenia, Hungary and other European countries. In most cases, gas demand remains flat or declines despite the availability of underutilised gas generation capacity that could be turned on with a switch of a button.

Between 2010 and 2020, coal generation in the EU (the UK included) declined by exactly half. Gas did not replace the lost coal generation, instead, it also declined, modestly, by 7%. The trend is visible also globally – in the last 10 years, coal generation fell from 40% to 34%, while the share of gas power generation has remained the same at around 22%. There are national exceptions to this rule, but that does not change the overall trend.

The reality is that gas does not replace coal. So far, coal has been replaced primarily by renewables and energy efficiency in power generation.

The other two major gas-consuming sectors, buildings and industry, are also unlikely to support the idea of gas as a transitional fuel. In both sectors, the trend is to move away from gas. Countries like the Netherlands, Denmark, Austria, and others with a high level of domestic heating gasification are introducing policies to reduce gas for heating and replace it with heat pumps, highly efficient insolation, and renewables. The industry is also increasingly looking at hydrogen.

The expectation that gas will be the transitional fuel in transport is also not materialising. Battery-powered vehicles have already won the race for passenger cars and, while the jury is still out on long-distance busses and freight transport, it is unlikely that the verdict will favour gas.

It is worth noting that the trend of gas not replacing coal took place when gas prices were low, and the cost of renewables and especially batteries were still high. With the dramatic decline in the cost of renewables and batteries and the skyrocketing gas prices, gas will likely start following the steeper declining trend of coal. If we add the higher carbon reduction ambition of the European Green Deal, we could be confident that gas has missed the energy transition boat both metaphorically and literally.

That doesn’t mean that gas does not have a role in the energy transition. This role, however, is not a transitional fuel and could be better described as a fuel of last resort – when energy efficiency, renewables, storage and demand-side response leave a gap, that gap might be filled with gas. After all, gas still acts as a fuel that balances intermittent renewables generation, though we must not exaggerate that role. A wide menu of technologies is advancing into the balancing position for the power systems.

Batteries are only one of them, but many others are market integration, cross-border grid connectivity, digitalisation of the energy system, long-distance HVDC cables, and others. Gas is increasingly acting as a niche rather than mainstream technology. The niches might be essential and many, but they will remain niches.

One might say: the statement that gas is a transitional fuel is only a PR slogan of the industry, just a phrase, part of a complex debate, and nothing more than a language issue.

Well, language matters. The much-debated EU Taxonomy for sustainable activities is the primary language. It is about calling things sustainable or not sustainable rather than a set of strict prohibitive rules and penalties. Nevertheless, there is a heated war over this “piece of language”, and the battle to get gas in as a green fuel is fierce.

Branding gas as a transitional fuel, or the more delicate bureaucratic term “transitional activity”, is the main argument for including gas as a green fuel in the Taxonomy. This branding will impact many investment decisions, public policies, and spending.

“Gas is a transitional fuel” is the primary justification for allowing countries to build gas power plants under the so-called DNSH (Do no significant harm) principle. When assessing the eligibility of gas power plants as replacement of coal capacity, the European Commission requires that the newly built gas generation capacity should “result in the simultaneous closure of a significantly more carbon-intensive power plant and/or heat generation facility (e.g. coal, lignite or oil) with at least the same capacity”.

In other words, if a country closes 1GW of coal, it will not do significant harm if it builds up 1GW of gas generation.

Looking at the existing trend of gas not replacing coal, that rule means simply that the EC is actively pushing countries to build unnecessary gas capacity and, on top of that, provides financial support for doing so.

Applied to gas, the DNSH principle will inflict harm mainly on Central and Eastern European countries that do not have ready to run gas generation capacity and will need to invest in newly built power plants to “not do so such a significant harm”. This very expensive irony will only widen the technology gap between West and East, and in a few years, we will see how the Green Deal is much greener for the West, but not that green, and not that profitable and beneficial for the East.

This article is also published on Euractiv. Energy Voices is a democratic space presenting the thoughts and opinions of leading Energy & Sustainability writers, their opinions do not necessarily represent those of illuminem.