Natural Gas-Fired Electricity
Technology deep dive
More efforts needed
Authors and contributors
IEA (2022), Natural Gas-Fired Electricity, IEA, Paris https://www.iea.org/reports/natural-gas-fired-electricity, License: CC BY 4.0
About this report
Natural gas-fired power generation increased by nearly 3% in 2021 despite a continuing rise in gas prices through the second half of the year. This pushed up CO2 emissions from gas-fired plants by almost 3%. While there have been efforts to reduce the cost of CO2 capture at gas-fired plants and a growing international consensus on addressing methane emissions has emerged, more efforts to reduce emissions from gas-fired power plants are needed in order to get on track with the Net Zero Emissions by 2050 Scenario.
In 2021 CO2 emissions from gas-fired power plants grew by almost 3%, consistent with the average growth rate over the previous five years.
To get on track with the Net Zero Scenario a reverse in the trend is needed – emissions from unabated gas-fired plants must fall by about 4% on average annually through to 2030.
In 2021 gas-fired electricity generation increased globally by nearly 3%, despite continuing high gas prices in the second half of the year.
These high prices put pressure on gas-fired generators in several regions. The cost of operating gas-fired plants increased across the United States and many European power systems for the majority of the year to levels above those for coal-fired plants. For instance, in the United States Henry Hub natural gas prices in the second half of 2021 were more than double those of 2020, and in Europe gas prices on the TTF jumped to all-time highs in the second half of the year – prompting substantial gas-to-coal switching in these regions. European gas prices surged by 50% day-on-day on 24 February 2022 to USD 44/MMBtu, following Russia’s invasion of Ukraine.
In the Net Zero Scenario, unabated gas-fired generation declines by an average of around 4% per year by 2030.
Unlike certain industrial applications with relatively concentrated CO2 streams, such as natural gas processing, deployment of carbon capture, utilisation and storage (CCUS) at gas-fired power plants has lagged. As the world moves toward a net zero future, CCUS-equipped gas-fired plants can help meet the growing need for system flexibility and provide important system balancing services as the share of variable renewable electricity increases in the generation mix.
Several technological innovations have been proposed to reduce CCUS costs for gas-fired power plants:
- NET Power is developing a 50 MW first-of-a-kind gas-fired power plant employing the Allam cycle technology, which uses CO2 as a working fluid in an oxyfuel, supercritical CO2 power cycle. This has the potential to significantly reduce capture costs.
- J-Power's Osaki CoolGen Capture demonstration project is testing CO2 capture from a 166 MW integrated gasification combined cycle plant.
- FuelCell Energy has developed a highly efficient system that is able to capture CO2 as a concentrated stream that combines molten carbonate fuel cells with coal- or natural gas-fired power plants.
Momentum must rapidly accelerate in order to get on track with the Net Zero Scenario, which calls for around 20 GW of gas-fired power plants to be equipped with CCUS by 2030 – up from zero today.
Launched at COP26 in November 2021, the Global Methane Pledge aims to catalyse action to reduce methane emissions. Led by the United States and European Union, the pledge has 111 country participants who have collectively agreed to reduce methane emissions by at least 30% below 2020 levels by 2030.
In 2021 natural gas accounted for roughly 30% (40 Mt) of global methane emissions from the energy sector. Although the pledge is non-binding in nature, meeting its goals has the potential to make an enormous impact on climate change, similar to the entire global transport sector adopting net zero-emission technologies. Notable success areas could include:
- Developing national action plans or strategies that identify specific actions to encourage emission reductions.
- Proposing new policies and regulations.
- Adopting national reduction targets.
- Participating in a super-emitter rapid response system based on satellite detections.
- Updating national greenhouse gas inventories on a regular basis and working to improve their quality.
- Directing funding towards research and development on abatement and measurement technologies.
Recommendations for policy makers
Governments should consider multiple, complementary policies to support CCUS deployment at gas-fired plants:
- Carbon pricing programmes and emission reduction regulations can incentivise investment in low-emission generation sources.
- Capital grants to projects can reduce high upfront costs.
- Feed-in tariffs and contracts for difference for CCUS-equipped gas-fired plants can provide operators with greater revenue stability and certainty.
- Other policy incentives include tax credits and public procurement requirements.
In March 2022 the IEA released a 10-point plan to reduce the European Union’s reliance on Russian natural gas. One of the IEA’s recommendations is to reduce gas demand in the power sector, which, if implemented in full, could reduce almost 20 bcm of gas demand. These steps include:
- Accelerating the deployment new wind and solar projects: an additional 35 TWh of generation from new renewable projects over the next year, over and above the already anticipated growth from these sources, could bring down gas use by 6 bcm.
- Maximising generation from existing dispatchable low-emission sources: an additional 70 TWh of power generation from nuclear and bioenergy power plants could reduce gas use by a further 13 bcm.
For the private sector
Given continuing high gas prices, almost all of the options to reduce emissions from oil and gas operations worldwide could be implemented at no net cost.
The private sector should consider the cost, reputational and environmental benefits of reducing methane emissions from oil and gas operations. A number of oil and gas companies have already set targets to limit emissions, or reduce their emissions intensity. There are many voluntary, industry-led initiatives, including the Methane Guiding Principles, the Oil and Gas Climate Initiative, the Oil and Gas Methane Partnership 2.0 and the China Oil and Gas Methane Alliance. Through these initiatives, companies have committed to reduce their emissions intensity over time, advocate for sound methane policy and regulation, and to be more transparent about their emissions.
Governments will play an important role in encouraging methane reduction efforts, including through measures such as leak detection and repair programmes, technology and equipment standards, limits on flaring and venting, and measurement and reporting requirements.