Energy transition sparks power struggles

The case for Canadian natural gas playing a key role in drive to decarbonize is strong

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If the energy crisis currently gripping Europe and China has anything to teach the world about energy transitions, it’s the importance of natural gas, which the Intergovernmental Panel on Climate Change (IPCC) calls a “bridge technology” for decarbonizing electricity.

When Canadian officials address COP26 later this month, one thing they need not apologize for is the natural gas that Canada produces.

While its production contributes to Canada’s greenhouse gases (GHG), it is already helping decarbonize Alberta’s electrical grid, and as Canada develops as a liquefied natural gas (LNG) exporter, it can help other countries lower their emissions by using LNG to displace coal power and backstop unreliable wind power.

Nor do Canadian officials need to worry that Canadian natural gas or LNG projects will become stranded assets, because the demand for gas and LNG is expected to continue to grow for at least another decade, especially in Asia.

Use of natural gas and LNG has broken records in Europe and Asia, due to insufficient natural gas storage capacity and an unusually windless summer in Europe that reduced wind power production.

“We’re seeing price increases, but we’re not seeing the kind of volatility that you’re seeing in the European market because we have a much stabler gas infrastructure and gas supply system in North America,” Tim Egan, president of the Canadian Gas Association, said at a recent Canada West Foundation webinar on the energy crisis in Europe and Asia.

Canada has an abundance of natural gas, which can fill gaps in the energy transition. Its biggest problem is the methane emissions associated with natural gas production, something that can be addressed through government regulation, best practices and good engineering.

Acknowledging that natural gas is a lower-carbon alternative to coal, the IPCC cites it as one of the seven “pathways” for reducing energy production emissions.

The ability of natural gas to reduce greenhouse gas emissions when displacing coal has already been measured in Alberta, which is said to be on track to be coal-free by 2023 – seven years ahead of the federal government’s 2030 target. GHG emissions from power generation in Alberta fell 10 megatonnes (MT) in a single year (from 2017 to 2018), thanks to switching coal plants to natural gas, according to the Pembina Institute’s Coal To Clean report, which was released last week.

Natural gas not only provides an immediate 50% to 60% reduction in GHG emissions when it replaces coal power, it is also one of the best backstops for intermittent renewable energy for countries that don’t have large amounts of hydro or nuclear power.

Nuclear power provides good emissions-free base-load electricity, but it can’t ramp up and down quickly the way natural gas plants can.

Although the International Energy Agency (IEA) recently projected that declining fossil fuel demand may mean that no new large LNG projects will be needed once those under construction come online (LNG Canada, for example), there is a strong demand for natural gas and LNG in the medium term.

“Natural gas demand increases in all scenarios over the next five years, but there are sharp divergences after this,” the IEA states in its 2021 World Energy Outlook.

While natural gas use for home heating is expected to decline in developed countries, its use for power generation is expected to increase in regions like Asia.

If current policies are adhered to, the IEA projects demand for gas in China would be 40% higher in 2030 than in 2020.

In “announced policy” scenarios, the increase in demand globally would be just 5% between 2020 and 2030. In more aggressive net-zero pledges, the demand for gas would fall in all regions, “except those that are currently heavily reliant on coal, where it largely displaces coal.” That would include much of Asia, notably China – the market that B.C. LNG would be well situated, geographically, to supply.

Those countries that don’t have domestic supplies of natural gas import LNG, the demand for which is expected to continue increasing, especially in Asia. The U.S. Energy Information Administration (EIA) projects China and India will more than double their imports of natural gas by 2050, with exports coming mainly from the U.S., Russia and Middle East. The Canadian Energy Regulator (CER) projects natural gas production in Canada will increase by 32% by 2040, driven in part by LNG exports from Western Canada.

“I would suggest that we need to keep more gas than maybe the IEA suggested for security,” said Chris Bataille, a Simon Fraser University sustainable energy expert and IPCC Working Group 3 contributor. “But we have to get it out of the ground, move it down the pipe and move it to its final point of use in a much less leaky way than we’re doing it today.

"It’s quite clear that wind and solar are going to be the cheapest bulk energy sources going forward, but you can’t run just wind and solar. You need some sort of firm energy source.

“I personally think what we will probably need to end up doing is having more gas supply and more stored gas than might be considered optimal. We’re going to have to keep enough generation units that can run that gas as a security measure. We may not actually burn it, but it’s there for robustness.”

As for the natural gas methane problem, Canada has signed the Global Methane Pledge to reduce methane emissions by 30% below 2020 levels by 2030, and the gas produced in B.C. is already some of the world’s least methane intensive. In addition, electricity powers some natural gas processing in B.C., which means that LNG exported from the province would have one of the lowest carbon intensities in the world.

A 2018 GHG life cycle analysis by University of Calgary and Johns Hopkins University researchers concluded that LNG exported from B.C. could cut annual CO2e emissions by 52 MT if it replaced coal power in China. 

Editor's note: This story contains additional information on natural gas demand projections not included in the print version.