Gas Technology and Innovation for a Sustainable Future
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Gas Technology and Innovation for a Sustainable Future
Disclaimer The report is an independent study, conducted by Boston Consulting Group and commissioned by the IGU, Snam, and BP International Limited (“BP”) (together “the funders”). The report does not necessarily reflect the views or positions of all of the funders and no warranty is given to readers concerning the completeness or accuracy of the information included. Readers will need to make their own evaluation of the information provided. Neither Boston Consulting Group nor any of the funders can accept any liability for any inaccuracies or omissions (other than for fraudulent misrepresentation) in the Report and any decisions you make based on information contained in this website are your sole responsibility.
Foreword
Joe M. Kang Alan Thomson
President Global Leader
International Gas Union BCG Energy Practice
We are pleased to present this analysis, which quantifies the and the IEA expects an eight percent drop in CO2 emissions
contribution that gas technologies can make to the success this year – which would take them to the lowest level in a
of the global energy transition, helping to build sustainable decade2.
cities and communities, and to provide access to affordable
and clean energy1. Unfortunately, this positive emissions outcome resulted
from a crisis and comes at a great cost of loss of lives and
The analysis and modelling completed for this report show livelihoods. It was not a result of structural changes that
that deploying gas technologies to their economic potential could be easily preserved after economies begin to restart
for fuel-switching from coal and oil, continuing to develop and recover.
distributed energy solutions, enabling access, improving
efficiency, and scaling up renewable and low-carbon gas As the world plans how to recover, we believe that it has an
technologies including renewable gas, hydrogen, and CCUS, opportunity to align to a path toward achieving the needed
could deliver a reduction in GHG emissions of up to 12 GT reductions in air pollutants and emissions, consistent with
by 2040. That is equivalent to nearly a third of global energy the Paris Agreement, and to deliver on the Sustainable
sector GHG emissions in 2019. Development Goals. These two critical global commitments
will more than ever have to be united, because the poorest
While gas technologies cannot address the gap to achieving and the most vulnerable will suffer the most from the
the Paris Agreement goal in its entirety and other clean tech current crisis, as well as from failure meet environmental
solutions such as renewable power and energy efficiency commitments. The gap on sustainable development is also
will also be essential, the potential for progress is too large likely to widen, as a result of the economic downturn from
to ignore, especially given the ease of implementation from this crisis.
the economic deployment of these technologies.
The findings presented in this report are urgent and
Gas technologies also accelerate the world’s sustainable relevant. They demonstrate that there is a huge
development agenda, offering a way to improve people’s untapped potential offered by gas technology and
lives and provide access to clean and modern energy. For innovation, highlighting contribution that a selection of
example, gas could provide access to clean cooking for 1 gas technologies can make to meeting the world’s most
billion additional people, reducing the number of people pressing challenge of restoring growth, while reducing
who currently lack this access by more than a third. This emissions, cleaning up local environments, and supporting
would immensely improve human health around the world fair development.
and reduce premature mortality from lung and heart
diseases. The challenge that the world is facing to accelerate energy
transitions while rebuilding economies, is immense, yet we
From the time when we started this research and worked are convinced that human ingenuity is greater still; and with
on the analysis, to when we were finalizing the report, the focus on the common purpose, political and business will,
global situation has dramatically changed. In a matter of and the right policy and management tools, it can be solved.
months, the world has gone from business as usual, to a
global health and economic crisis by the first quarter of We hope you will find this report helpful.
2020. The first half of 2020 saw entire economies slam on
We invite you to read this report and learn how gas
the brakes. This resulted in a nearly four percent reduction
technologies and innovations can support the reduction of
in global energy demand by the start of second quarter,
energy sector emissions.
1 Natural gas can play an enabling role in other ways, but these three goals
are the core focus of this report.
2 IEA, 2020, Global Energy Review.
Gas Technology and Innovation for a Sustainable Future 1Contents Executive summary 4 Report structure and method 6 Findings highlights 7 Introduction 11 Chapter 1 An action plan for gas technology and innovation 19 Chapter 2 Action on climate change and sustainable cities and communities - enabling immediate GHG emissions reductions and improvements in air quality 39 Chapter 3 Action on climate change - deployment of low-carbon gas technologies 57 Chapter 4 Access to clean energy – more widespread and affordable access to natural gas 75 Conclusion 85
Executive summary
The global economy is in distress, due to the novel coronavirus global health
crisis. Measures to contain the infection resulted in an unprecedented drop in
energy demand1 and emissions.
Unfortunately, this was the result of a vast economic slowdown, and came at
great human cost. As the world recovers from the health crisis, the pressure to
restore growth and prosperity will be great. At the same time, the urgent need
to address the global climate and air quality challenges will remain. That means
that the post-pandemic global energy supply will grow, while the environmental
impacts from its production and use have to diminish. In order to meet this
double challenge, the energy system as we know it today will need to evolve in
leaps and bounds, and that will only be possible if energy innovation becomes
society’s urgent priority.
Technologies and innovation in the gas sector have a transformative potential
impact on the global energy systems.
In fact, there is a vast array of gas technologies, ranging from highly mature to
nascent, and their deployment has the potential to economically reduce up to
one third of emissions from the energy sector by 2040. This report demonstrates
that technology developments and innovation in natural gas are of great
importance.
It does so by analyzing the economic potential of 12 technology applications,
across gas networks and end-uses (see Exhibit below).
GAS TECHNOLOGIES CAN ABATE UP TO 30% OF GLOBAL ENERGY SECTOR GHG EMISSIONS
GHG reduction potential by 20401 (GT CO2) Global GHG emissions maximum reduction potential3
from gas technologies by 2040
Technology Base case² Potential³ GT CO₂e
40
Power switching 0.6 3.3
2.4 35.7 6.0
Industry switching 0.6 2.0
Climate 35
Industrial efficiency 0 0.1 33.3
action and
sustainable Enabling renewable power Enables renewables⁴ 4.9
cities Road transport 0.1 0.4 30
•
LNG bunkeringThe results highlight that gas technologies are Key enablers
already playing a key role in facilitating a sustainable It is pivotal to recognize that these benefits can be
energy transition, and further innovation in the sector achieved by the deployment of gas technologies in a
can significantly enhance benefits for the global market environment. But that doesn’t mean that this
environment and human development in three ways: will happen by itself, substantial private and public
efforts will be required to enable them.
• In the near-term, switching to natural gas from
coal or oil products would immediately reduce Fostering sustainable development and achieving
emissions, both in the form of GHG emissions environmental benefits will require further research
and localized air pollutants. At the same time, gas and development, as well as investment in testing and
technologies can improve global access to clean, deployment, and removing barriers to adoption, such
modern energy, including for the world’s poorest. as a lack of infrastructure, access to upfront capital
requirements, or even cultural and organizational
• In the medium-term, gas technologies can obstacles to changing existing practices. These key
promote structural transitions in the way energy actions can be summarized by the three enablers below,
is delivered and used, by enabling distributed required to unlock the full value of gas technologies.
energy systems and increasing efficiency of
energy consumption. Through the continued 1. Government policy is critical to ensure that the
development and deployment of low-cost and value of reduced emissions benefits enabled
highly efficient technologies, natural gas can by gas technologies is fairly reflected in the
facilitate renewable power integration, while market, through carbon and pollution pricing, or
further reducing both the emissions and costs regulation.
• Progressively over the longer term, low- and
zero-carbon gas technologies–including renewable 2. Infrastructure investment is required for
gas, hydrogen, and carbon capture, utilization, enabling gas-fired power generation and access
and storage (CCUS) provide an efficient and cost- to gas in the near term, while also scaling up low-
effective pathway to dramatically reduce GHG carbon gas technologies for the future. At the
emissions. These technologies are particularly same time, it provides an important assurance of
relevant for sectors where emissions are difficult energy security.
or very costly to abate through other means.
They can also capitalize on the use of existing gas 3. Industry innovation is needed from the
infrastructure to minimize capital investment. sector, where incumbent industry participants
step up their support for innovation and the
continued development and deployment of new
technologies, as well as develop new business
models to commercialize them.
Gas Technology and Innovation for a Sustainable Future 5Report structure and method
This report provides a analysis, academic and industry assessments of
technologies were employed along with base
comprehensive review of the status assumptions from the IEA on more general
of new and emerging technologies energy supply, demand, and commodity prices2.
within the scope of delivery and • Third, case studies were developed across the
consumption of natural gas. In doing technology categories to identify both cases
of successful adoption, and the cases where
so, it focuses on demonstrating technology adoption has been limited. The aim is
how, and under what circumstances, to extract lessons about key enablers to maximize
natural gas can contribute cleantech gas technology impact.
solutions in different value chains,
The report is structured around the three distinct
across regions and sectors. ways that gas technologies can help to achieve the
Sustainable Development Goals. Firstly, through
The analysis underpinning this report takes an near term action on climate change and promoting
unconstrained view of the economic potential for sustainable cities and communities, via fuel switching,
gas technologies to meet the challenges of the industrial efficiency, enabling renewables integration,
UN Sustainable Development Goals and the Paris the use of natural gas in transport, and LNG for
Agreement. It focuses on 12 key categories of gas bunkering. Secondly, through climate change action
technologies, covering the full breadth of natural gas via the deployment of low-carbon gas technologies
consumption, as well as key innovations in the means including renewable gas, hydrogen, and CCUS. And
of delivering natural gas to customers. thirdly, by enabling access to affordable and clean
energy through greater gas adoption of gas in
A common methodology was deployed across buildings, distributed energy, and small-scale LNG.
each of the technology categories, employing the
The methodology is aligned with the long term
following principles:
Paris goal of keeping a global temperature rise "well
• First, the analysis is rooted in a review of each of
below 2° degrees". While the modeling in this report
the technologies, assessing past developments,
is only done to 2040, it incorporates a social cost
as well as forward-looking trends. Particular
of carbon in line with achieving net zero emissions
focus was directed to emerging innovations that
in mid-century. The report therefore captures the
have the potential to increase the efficiency of
emissions reduction potential from fuel switching
operations, reduce capital costs, and improve the
and the adoption of low carbon gas technologies
flexibility of gas technologies. The current scale
through 2040, while beyond 2040 net zero is
and breadth of technology adoption was also
achievement by further scaling of low carbon gas
assessed.
technologies that utilize gas infrastructure along
• Second, the economic potential of the with negative emissions levers.
technologies was assessed to identify what
As a starting point, Chapter 1 provides an overview
role they could play in the future. Critically,
of the key findings across the 12 technology
this was done relative to other fuels and
categories assessed and outlines an action plan to
technologies, identifying where gas technologies
maximize the impact from gas technologies.
offer economic advantages. As a basis for this
2 IEA Stated Policy Scenario assumptions are used throughout while the economic potential for adoption is defined using Sustainable Development Scenario
assumptions on carbon pricing to identify the competitiveness of gas relative to coal and oil particularly a rapid shift in policy toward climate action.
6 Gas Technology and Innovation for a Sustainable FutureFindings highlights
Chapter 1. An action plan for gas technology and • Industry innovation will also be critical to achieve
innovation the fuel’s full potential, through privately funded
R&D, early-stage deployment of technologies,
• Technology development trends indicate that and the development of new business models
significant opportunity still exists to further that provide more efficient ways to use gas
increase the operational efficiency of gas technologies.
technologies, reduce capital deployment costs, • In established gas combustion applications in the
and to improve their flexibility to support greater power, industry, and buildings sectors, technology
cost competitiveness and more widespread developments are improving efficiency of gas
adoption over time. consumption by up to 20%, while reducing the
• The economic potential for gas adoption is capital costs of gas equipment by 10% or more3.
substantial: investing in technologies could • The development of new processes and new
increase the size of the global gas market by up to applications, such as distributed generation and
2.5 times by 2040, while also enabling emissions small-scale LNG, show potential to reduce upfront
reductions equivalent to one-third of the current capital costs for accessing gas by 50% or more4.
total global energy sector emissions.
• New developments are making existing gas
• Achieving the full potential of natural gas technologies more flexible, enabling them to
will require sustained action on three fronts: support renewable power development through
government policy, infrastructure investment, and improvements in plant ramp times of 40% or more
industry innovation. and by providing easily scalable capacity5.
• Based on experience to date, government • Beyond existing uses of natural gas, developments
policy can be particularly effective in promoting in low-carbon gas technologies, including for the
gas technology adoption when it takes a full production of renewable gas, hydrogen, and the
technology cycle approach and places appropriate deployment of CCUS, demonstrate the potential
focus on early-stage R&D, while also taking steps to reduce costs significantly going forward. The
to support commercialization and deployment of development of new processes show potential
most promising technologies – particularly when to improve the operating efficiency of these
it comes to new markets, and efficient adoption technologies by more than 50%6.
measures (such as carbon pricing or local pollution
• Meanwhile, breakthrough innovations, as well as
controls).
experience and scale effects, could reduce the
• Up to $820 billion of infrastructure investment upfront capital costs of new technologies by up
total per year through 2040 would be required to to 65% in renewable gas and as much as 90% in
achieve the economic potential of gas by enabling specific CCUS applications7.
access, developing capacity for end consumption,
and supplying low-carbon gas; this is a substantial
increase over the less than $200 billion invested
annually in mid and downstream gas value chains.
3 Summary based on BCG review of gas technologies; see subsequent chapters for detailed analysis and citations. Examples here include energy efficiency applications
in industrial heat and reductions in boiler capex discussed in Chapter 2.
4 Ibid. Example here includes small scale LNG disused in chapter 5.
5 Ibid. Examples here include CCGT ramp time improvements and the use of gas reciprocating internal combustion engines discussed in Chapter 2.
6 Based on an example of thermochemical applications in solvent-based post-combustion capture discussed in Chapter 3.
7 Based on industry studies for renewable gas and CCUS demonstration examples discussed in Chapter 3.
Gas Technology and Innovation for a Sustainable Future 7Chapter 2. Action on climate change and Chapter 3. Action on climate change –
sustainable cities and communities - enabling deployment of low-carbon gas technologies
immediate GHG emissions reductions and
improvements in air quality • Low-carbon gas technologies – including
renewable gas, hydrogen, and CCUS – all have
• Gas technologies can significantly contribute
the potential to substantially reduce the GHG
to GHG emissions reductions in the near-term,
emissions of existing natural gas systems, and can
through fuel switching from coal and oil,
even achieve net negative emissions when bio-
efficiency improvements in industrial processes,
energy is paired with CCUS.
by enabling the greater deployment of
renewables, and through the adoption of natural • Deployment of these technologies is limited
gas in the transport sector. today, but low-carbon gas technologies show
substantial potential to reduce GHG emissions
• Developments in gas turbine and boiler
going forward (up to 5GT by 2040) given their
efficiencies and design are reducing upfront
competitiveness vs. alternative electricity-based
capital costs and recurring operational
technologies.
expenditures by up to 20%, resulting in improved
cost competitiveness. • Renewable gas has the potential to be a highly
flexible for reducing emissions in existing natural
• Gas technologies in power generation have
gas networks. However, production will need to
become more flexible and cost efficient,
be scaled up from a negligible global amount
enabling gas to complement and enable greater
today to realize potential scale and learning
penetration of intermittent renewable energy
effects.
sources; for example, CCGT ramp times have
improved by up to 44%, while capital costs have • Parts of the hydrogen value chains are
fallen by up to 25%. already established, but emerging low-carbon
technologies – including electrolysis, gas
• Technology developments in the digitalization of
reforming with CCUS, and methane cracking –
energy system management, heat recovery, and
must be further developed and deployed at scale
industrial process redesign are emerging as key
to achieve potential emissions impacts.
enablers of emissions reductions in the industrial
sector. • While CCUS capacity has been slow to develop in
the past, new enabling policies are set to support
• In ground transport, gas engine and storage
near-term growth, particularly in the US, Europe,
technologies are improving the economics of gas
and China. Technology innovation combined with
adoption, but the scaling up of supply chains for
deployment at scale shows significant potential to
vehicles and refueling are needed in most markets
reduce costs of carbon capture by 50% or more.
for gas to be even more cost-competitive relative
to oil products.
• Innovations in LNG bunkering technology are
improving its cost competitiveness versus other
technologies through improvements in engine
power output (by up to 25%) and reducing space
requirements for storage on ships (by up to 60%).
8 Gas Technology and Innovation for a Sustainable FutureChapter 4. Access to clean energy – more
widespread and affordable access to natural gas
• Access to clean cooking fuels remains a major
international development challenge with 2.7
billion people lacking access; natural gas shows
the economic potential to enable access to up to 1
billion people by 2040.
• Technology and business model innovations are
enabling significantly lower cost access to gas in
buildings within non-OECD market costs; in India
for example, residential gas connection costs have
been reduced to less than 10% of those in the US.
• Developments in microturbine and solid oxide
fuel cell technologies have made gas viable in
microgrid or other distributed energy systems.
• Efficiency improvements in gas boilers and the
use of CHP systems in buildings has demonstrated
potential to improve energy efficiency by 20% or
more
• Small scale LNG supply chains have emerged as
a new means of enabling access to natural gas
where existing pipeline infrastructure is not
present, speeding time to enable access and
reducing capital costs by 80% or more relative to
conventional pipeline development
Gas Technology and Innovation for a Sustainable Future 9Introduction
Introduction
Global economy is in distress, due energy systems of the future – namely
to the novel coronavirus global to achieve significant global emissions
health crisis. Global infection reductions and to do so economically.
containment measures came with
The report focuses on the developments
vast economic slowdown that in
in the mid- and downstream segments
turn resulted in an unprecedented of the natural gas value chain, as well
drop in energy demand8 and as the production of low-carbon gas,
emissions. Unfortunately, it also for two reasons. First, this segment
came with a great human cost. lies at the heart of solving the double
As the world recovers from the challenge, as it directly links energy
health crisis, the pressure to restore and society. Second, innovations and
growth and prosperity will be great. opportunities in this segment are highly
impactful, yet often overlooked9.
At the same time, the urgent need
to address the global climate and Gas technologies are already playing
air quality challenges will remain. a key role in facilitating a sustainable
That means that the post-pandemic energy transition, and further innovation
global energy supply must grow, in the sector can significantly enhance
while the environmental impacts benefits for the global environment and
from its production and use have to human development in three ways:
diminish at the same time. In order
• In the near-term, switching to natural
to meet this double challenge,
gas from coal or oil products would
the energy system as we know it immediately reduce emissions, both
today will need to evolve by leaps in the form of GHG emissions and
and bounds, and that will only localized air pollutants. At the same
be possible if energy innovation time, gas technologies can improve
becomes society’s urgent priority. global access to clean modern energy,
In fact, this global crisis provides particularly for the world’s poorest.
businesses and governments • In the medium-term, gas technologies
around the world with an can promote structural transitions in
opportunity to “rebuild better”. the way energy is delivered and used,
by enabling distributed energy systems
and increasing efficiency of energy
This report focuses on the critical role that consumption. Through the continued
gas technologies and innovation can play development and deployment of low-
in helping the world reach a sustainable cost and highly efficient technologies,
future in the shortest possible timeframe. natural gas can facilitate renewable
It starts from the premise that a wide power integration, while further
variety of technologies, applied across reducing both the emissions and costs.
all sectors and fuels, will be necessary to • Progressively over the longer term,
achieve the required transition, including low- and zero-carbon gas technologies–
gas technologies. It then seeks to fill a including renewable gas, hydrogen,
gap in discourse about energy innovation, and carbon capture, utilization, and
which often overlooks the important role storage (CCUS) provide an efficient and
that natural gas can play in accelerating cost-effective pathway to dramatically
global energy transition. This report reducing GHG emissions. These
takes a close look at some of the most technologies are particularly relevant for
promising gas technologies and assesses sectors where emissions are difficult or
how they can interact with other cleantech very costly to abate through other means.
solutions to deliver efficient and sustainable
8 The IEA assessed that global energy demand dropped by 3.8% in the first quarter of 2020, estimating that it could be down by up to 6% in the rest of the year,
depending on the depth of the resulting economic recession. (IEA, 2020).
9 Upstream activities in natural gas are not covered in this report. While there has been significant technological progress and innovation in that space, it has been
covered widely in other publications.
12 Gas Technology and Innovation for a Sustainable FutureIntroduction
The sections of this report assess the Thus, it focuses heavily on recent and
steps by which gas technologies can pave potential improvements in the efficiency,
the way to a sustainable energy future. costs, and flexibility of gas technologies.
Its conclusions and analysis are based
on a comprehensive review of existing Beyond quantifying the potential value
technologies, recent developments, and of gas technologies and innovation, this
emerging trends in 12 areas, covering the report provides a roadmap to achieve that
delivery and consumption of natural gas. potential. It also provides a recommended
Importantly, in addition to the assessment action plan covering investment,
of core technological developments, government policy, and evolution of the
the report also applies an economic industry’s culture, needed to get there.
lens to determine where and how these
technologies will be competitive, especially
relative to other cleantech solutions.
Natural gas and sustainable
development
In 2015, the international community Together, the Paris Agreement and
agreed to two important and closely the 2030 Agenda are the world’s
related accords: the 2030 UN Sustainable ambitious commitment to solving this
Development Agenda and the Paris century’s biggest double challenge: fair
Agreement. The first accord, lays out 17 development and climate change. Today,
sustainable development goals (SDG’s), the world is not on track to solve it.
which became the blueprint for achieving
a better and more sustainable future for Gas technologies can play a decisive
all. The SDG’s are also referred to by the role in support of the two agreements,
UN, as “a universal call to action to end by enabling action on climate change,
poverty, protect the planet and ensure that by promoting sustainable cities and
all people enjoy peace and prosperity by communities, and by providing access
203010.” In parallel, the Paris Agreement to affordable and clean energy11.
commits its 197 signatories to common
but differentiated ambitions, with the goal
to limit global warming to “well below
2° Celsius” by the end of the century.
10 UN Sustainable Development Goals: www.undp.org/content/undp/en/home/sustainable-development-goals.html.
11 Natural gas can play an enabling role in other ways, but these three goals are the core focus of this report.
Gas Technology and Innovation for a Sustainable Future 13Introduction
Enabling action on climate change (SDG #13)
& Implementing the Paris Agreement
Despite government commitments to enable a reduction in GHG emissions the potential for an additional 30%
the Paris Agreement, policy pledges of up to 12 GT by 204013 (see Exhibit or more reduction in overall costs.
since 2015 have failed to deliver 1). This is equivalent to nearly 30% of
what is needed to limit warming to global energy sector GHG emissions in Looking to the next decade
well below 2° C. International Energy 201914. While gas technologies cannot and beyond, natural gas and its
Agency (IEA) analysis demonstrates address the gap in its entirety, the infrastructure can be a direct pathway
that current policy commitments will potential for progress is substantial. to deeper GHG reductions, via low-
help to avoid more than 6 gigatons carbon gas technologies15. For example,
(GT) of CO2 emissions through 2040, Importantly, emissions reductions gas technologies are more efficient
which is still 18 GT short of the level from gas adoption can be achieve in delivering energy for heat, than
required to meet the below 2° target12. immediately and at scale, particularly electricity and can also provide greater
those achieved by replacing more scale than renewable sources in power
Closing this gap will be very carbon-intensive coal and oil products. generation and industrial consumption.
challenging, even with the use of every The technologies that enable fuel- Importantly, using natural gas as a
policy and technology tool possible, switching to natural gas across low-carbon pathway utilizes existing
including natural gas. However, data different sectors are already highly infrastructure—such as pipelines,
modeling indicates that deploying gas efficient, mature, and cost-effective. boilers, and appliances—and therefore
technologies to their full economic Moreover, these technologies are is a cost-effective way to reduce GHG
potential for fuel switching from continuing to evolve, further improving emissions compared to alternatives,
coal and oil, while also scaling up efficiency and costs. In some cases, reducing the cost of transition.
low-carbon gas technologies, could emerging innovations demonstrate
Exhibit 1 - G
AS TECHNOLOGIES CAN ABATE UP TO 30% OF GLOBAL ENERGY SECTOR GHG
EMISSIONS
GHG reduction potential by 20401 (GT CO2) Global GHG emissions maximum reduction potential3
from gas technologies by 2040
Technology Base case² Potential³ GT CO₂e
40
Power switching 0.6 3.3
2.4 35.7 6.0
Industry switching 0.6 2.0
Climate 35
Industrial efficiency 0 0.1 33.3
action and
sustainable Enabling renewable power Enables renewables⁴ 4.9
cities Road transport 0.1 0.4 30
•
LNG bunkeringIntroduction
Promoting sustainable cities
and communities (SDG #11)
Another way natural gas can play a air quality improvements. In China, from fuel switching. This was seen in an
key role in achieving the SDGs is by for example, recent measures to industrial case from the Gujarat region
reducing air pollution, particularly in switch from coal to gas have reduced in India, where a switch from coal to gas
cities. The World Health Organization particulate emissions in the Beijing dramatically reduced major pollutant
has described air pollution as “the region by half, helping to add an emissions by over 70 percent in a major
world’s largest environmental health estimated two years to the average ceramic producing city of Morbi19.
threat” and has estimated that ambient lifespan in the region17. Global
outdoor air pollution causes 4.2 million modeling of the economic potential of Developments in gas technologies
premature deaths annually, while the natural gas suggests that it can play a are making this level of fuel switching
indoor pollution causes another 3.8 significant role in reducing emissions increasingly feasible. Improvements
million deaths16. Natural gas combustion of key air pollutants around the world. in the efficiency and capital costs
produces almost no emissions of With technology adoption aligned of technologies across the power,
particulate matter (PM), sulfur dioxide, with the economic potential for gas, industry, and buildings sectors are
and nitrogen oxide. Thus, when fuel switching could reduce global helping to make natural gas more
switching from coal or diesel to natural average PM2.5 emissions by up to cost-competitive, in turn enabling
gas, or when gas adoption displaces the 12%, nitrogen oxide emissions by up more rapid adoption. Meanwhile,
use of traditional biomass, emissions to 25%, and sulfur dioxide emissions new technology developments in the
of localized pollutants can be reduced by up to 34% by 204018 (see Exhibit supply and use of natural gas in the
drastically and immediately. A growing 2). Local impacts in areas where the transportation sector are increasing
number of cases have shown that switching is highest are much more the potential for greater fuel switching
focused switching to gas from higher pronounced, with reductions of from diesel and fuel oil, which are key
polluting fuels results in significant pollutants amounting to 70% or more contributors to urban air pollution.
Exhibit 2 - N
ATURAL GAS ADOPTION WOULD SIGNIFICANTLY REDUCE GLOBAL EMISSIONS OF KEY
AIR QUALITY POLLUTANTS
Potential 2040 annual local emissions reduction from gas adoption1
Particulate matter Sulphur dioxide Nitrogen oxide
Global emissions PM 2.5 (Mt) Global emissions SO₂ (Mt) Global emissions Nox (Mt)
up to 79.5 up to
80 up to 120
30.8 12% 108.0 26%
34%
30 70
25.9 100
-1.3 60 -9.0
-15.0
-0.7 to -3.6 80 71.4
50
20
37.8 -5.5 to -27.6
40 60
30 -5.0 to -26.6
40
10
20
20 Potential²
10
0 0 0 Base case³
2015 2040 BAU Fuel 2040 2015 2040 BAU Fuel 2040 2015 2040 BAU Fuel 2040
change switching change switching change switching
1. Calculated as potential emissions benefit relative to business as usual 2040 emissions using Current Policies Scenarios from IEA 2016 WEO report;
2. Base case is aligned with IEA New Policies Scenario in prior WEO reports;
3. Potential is based on the economic potential as defined in Chapter 1.
Source: IEA, WHO, BCG analysis.
16 World Health Organisation, “Ambient air pollution: Health impacts”, 2020.
17 IGU, 2018 Global Gas Report.
18 Global scenario analysis assessing the potential economic share of natural gas and low-carbon gas based on technology trends assessed in this report.
19 IGU, “2019 Case Studies in Urban Air Quality”.
Gas Technology and Innovation for a Sustainable Future 15Introduction
Providing access to affordable
and clean energy (SDG #7)
Globally, approximately 2.7 billion for lighting, causes significant indoor as well as distributed generation
people still lack access to clean air pollution, which is estimated to be technologies that enable off-grid uses.
cooking fuels, almost all of them in responsible for 4.2 million premature
Asia and sub-Saharan Africa20. This deaths each year globally22. With more extensive and deliberate
remains one of the greatest global investment in energy infrastructure, it
development challenges. While access Gas technologies for cooking and is possible to achieve universal access
to electricity has improved rapidly heating / cooling in buildings in to clean cooking by 204024, and the
(around 800 million people currently general are well established and highly expansion of natural gas access can
don’t have access to electricity efficient, costing about half of even be a key contributor in that effort.
worldwide, down from 1.2 billion in the most efficient electric technologies Modeling suggests that, by 2040,
2010) universal access to clean cooking (i.e. induction cooking)23. The greatest gas could provide access to clean
fuels has been harder to achieve21. challenge remains providing access to cooking for 1 billion additional people,
Typically, communities that do not natural gas. Technology innovations making a substantial contribution to
have access to clean cooking have are improving the accessibility of gas the improvement of human health
used traditional biomass for their through new methods of distribution around the world25 (see Exhibit 3).
cooking needs. Traditional biomass and use, namely small-scale LNG
for cooking, along with oil products (SSLNG) for distributing natural gas,
Exhibit 3 - N
ATURAL GAS CAN PROVIDE ACCESS TO CLEAN COOKING FUEL FOR UP TO
1 BILLION ADDITIONAL PEOPLE BY 2040
Population without access to clean Access to clean cooking fuels by 2040
cooking fuels relative to gas access
Population without clean cooking access in developing
2017 global population Gas share of buildings countries (billion)
without clean cooking fuel sector energy demand (%)
access (billion) 4
1.5 50 0.5
1.0
3 2.7
1.3 0.9
1.2 40 2 0.4
0.9 1 1.9
0.9 30
0
0.6 20 2017 Est. increase 2040 2040
population in population base potential2
0.4 without access without case
access
0.3 10
Low carbon gas Other clean cooking fuel1
0.1
0.0
1. Other clean fuels consist of clean biomass, LPG, and solar.
0 0 2. Potential is based on the economic potential as defined in Chapter 1.
Source: IEA, UN, BCG analysis.
Developing Africa China Latin Middle
Asia America East
Source: IEA, UN, BCG analysis.
20 IEA, “SDG7: Data and projections”, 2019.
21 World Bank, “Sustainable Energy for All Database”, 2019.
22 WHO “Ambient air pollution: Health impacts”, 2020.
23 Based on US average retail prices for gas and power and considering efficiency differences between gas and electric induction cooking.
24 IEA 2017 World Energy Outlook Sustainable Development Scenario.
25 Global scenario analysis assessing the economically potential share of natural gas and low carbon gas based on technology trends assessed in this report.
16 Gas Technology and Innovation for a Sustainable FutureIntroduction
Key enablers
In order to foster the sustainable 1. Government policy is critical to
development and leverage on all gas ensure that the value of reduced
technologies benefits, further research emissions benefits enabled by gas
and development, as well as investment technologies is fairly reflected in
in testing and deployment, are required the market, through carbon and
to bring down costs and improve their pollution pricing, or regulation.
relative competitiveness, or enable
2. Infrastructure investment is required
market access. And even when economic
for enabling gas-fired power generation
incentives exist, adoption can be hindered
and access to gas in the near term,
by barriers, such as a lack of infrastructure,
while also scaling up low-carbon gas
access to upfront capital requirements,
technologies for the future. At the
or even cultural and organizational
same time, it provides an important
obstacles to changing existing practices.
assurance of energy security.
Therefore, for gas technologies to 3. Industry innovation is needed from
realize their full potential, three sets the sector, where incumbent industry
of enablers are required: government participants step up their support
policy, infrastructure investment, and for innovation and the continued
innovation among industry participants development and deployment of new
in deploying new technologies. technologies, as well as develop new
business models to commercialize them.
Gas Technology and Innovation for a Sustainable Future 17Chapter 1 An action plan for gas technology and innovation
1 / An action plan for gas technology and innovation
Highlights
• Technology development trends indicate that significant opportunity
still exists to further increase the operational efficiency of gas
technologies, reduce capital deployment costs, and to improve their
flexibility to support greater cost competitiveness and more widespread
adoption over time.
• The economic potential for gas adoption is substantial: investing in
technologies could increase the size of the global gas market by up to
2.5 times by 2040, while also enabling emissions reductions equivalent
to one-third of global energy sector emissions.
• Achieving the full potential of natural gas will require sustained action
on three fronts: government policy, infrastructure investment, and
industry innovation.
• Based on experience to date, government policy can be particularly
effective in promoting gas technology adoption when it takes a full
technology cycle approach and places appropriate focus on early-
stage R&D, while also taking steps to support commercialization and
deployment of most promising technologies – particularly when it
comes to new markets, and efficient adoption measures (such as carbon
pricing or local pollution controls).
• Up to $815 billion of infrastructure investment total per year through
2040 would be required to achieve the economic potential of gas
by enabling access, developing capacity for end consumption, and
supplying low-carbon gas; this is a substantial increase over the less than
$200 billion invested annually in mid and downstream gas value chains.
• Industry innovation will also be critical to achieve the fuel’s full
potential, through privately funded R&D, early-stage deployment
of technologies, and the development of new business models that
provide more efficient ways to use gas technologies.
20 Gas Technology and Innovation for a Sustainable Future1 / An action plan for gas technology and innovation
Key technology trends
Significant innovations are taking place • The development of new processes and
across gas technologies; innovations new applications, such as distributed
that are transforming how gas is generation and small-scale LNG, show
used, improving the efficiency of gas potential to reduce upfront capital costs
consumption, reducing the capital costs of for accessing gas by 50% or more27.
gas adoption, and improving its operational
• New developments are making existing
flexibility. In turn, these developments
gas technologies more flexible, enabling
are also improving the competitiveness
them to support renewable power
of natural gas compared to other fuels,
development through improvements in
while lowering the incremental costs of
plant ramp times of 40% or more and
reducing GHG emissions from energy
by providing easily scalable capacity28.
systems. Improvements in the flexibility
of natural gas systems also support more • Beyond existing uses of natural gas,
effective deployment and grid integration developments in low-carbon gas
of renewable power technologies. technologies, including for the production
of renewable gas, hydrogen, and the
Based on a comprehensive review of deployment of CCUS, demonstrate the
gas technologies in 12 different mid and potential to reduce costs significantly
downstream categories, the following going forward. The development of new
key themes emerged from this study: processes show potential to improve
the operating efficiency of these
• In established gas combustion technologies by more than 50%29.
applications in the power, industry,
• Meanwhile, breakthrough innovations,
and buildings sectors, technology
as well as experience and scale effects,
developments are improving efficiency
could reduce the upfront capital costs
of gas consumption by up to 20%,
of new technologies by up to 65% in
while reducing the capital costs of gas
renewable gas and as much as 90%
equipment by up to 10% or more26.
in specific CCUS applications30.
26 Summary based on BCG review of gas technologies; see subsequent chapters for detailed analysis and citations. Examples here include energy efficiency applications
in industrial heat and reductions in boiler capex discussed in Chapter 2.
27 Ibid. Example here includes small scale LNG disused in chapter 5.
28 Ibid. Examples here include CCGT ramp time improvements and the use of gas reciprocating internal combustion engines discussed in Chapter 2.
29 Based on an example of thermochemical applications in solvent-based post-combustion capture discussed in Chapter 3.
30 Based on industry studies for renewable gas and CCUS demonstration examples discussed in Chapter 3.
Gas Technology and Innovation for a Sustainable Future 211 / An action plan for gas technology and innovation
The economic potential of gas
This report is based on a techno-economic of the fuel across sectors in the context of
assessment of gas technologies in the 12 higher and more consistent carbon prices.
different categories. It combines analysis The analysis of the economic potential
of the fundamental costs and applications for gas used in this report is anchored in
of the technologies with an assessment of an assumption of a global carbon price
the relative economics of gas compared reaching $125 per metric ton by 2040,
with other energy sources. That economic aligned with what is required to achieve a
analysis also incorporates environmental 2 degree pathway31. As gas use produces
and social value of lower emissions 50% fewer CO2 emissions than coal and 25%
from gas technologies. The result is an fewer than oil,32 on average, fuel switching
assessment of the economic potential to natural gas results in a significant
for natural gas, specifically identifying reduction in GHG emissions. As such, in an
where gas technologies are projected to environment of increasing carbon prices,
have a cost advantage in the future. The gas becomes more competitive relative
economic potential of natural gas first to other fossil fuels (see Exhibit 4).
reflects a rationale for sustained adoption
Exhibit 4 - NATURAL GAS IS THE CLEANEST FOSSIL FUEL
Emissions factors for natural gas vs. coal and oil
Power generation Road transport Marine bunkering
Coal - super Natural Diesel - CNG HFO LNG
critical gas - CCGT ULSD
1,000 900 200 1,000
Carbon 122 117 742 662
400
dioxide (CO₂) 500 100 500
0 0 0
kg/MWh gross eq g/km eq g/kWh
0.05
0.05 50 0.04
Particulates 25
0.025 25 0.02 0.01
(PM)1 / An action plan for gas technology and innovation
When considering the impact of the switch While many opportunities to switch
on local air pollution, the benefits of gas are from oil to gas have been exploited,
even more substantial. In most uses, natural large gaps remain, due to limited access,
gas emits near zero levels of particulate social or regulatory barriers, or because
matter, sulphur dioxide, and nitrogen oxide. of the upfront capital requirements.
Where large-scale fuel switching efforts In the transport sector, for example,
have been undertaken, air quality has the higher upfront costs of natural
improved rapidly. In Beijing, for example, gas vehicles partly offset the benefits
particulate matter pollution declined by of lower fuel costs, thereby limiting
approximately 50% between 2016 and 2017 the economic potential of gas.
as a result of switching from coal to gas.33
The difference in cost between gas and
To assess the economic potential adoption coal is more varied and depends more on
of natural gas, these environmental regional factors. In many gas-producing
benefits were incorporated along with markets, the cost of natural gas is typically
an analysis of the relative economic lower than coal. In the U.S., for example,
competitiveness of natural gas as a source gas has rapidly displaced coal, largely
of energy. It is necessary to consider gas because of the growth of unconventional
as an alternative to coal and oil in near- gas production and the resulting drop in
term fuel switching, as well as the role of the market price. However, in gas-importing
gas compared with renewables in power and coal-producing regions—such as Asia
generation and the electrification of energy and Europe—coal is typically cheaper35.
consumption. Due to the differences Part of the reason for this “cheapness”
in local energy systems, including the of coal is that a significant part of its cost
power generation mix, results differ is socialized, when appropriate carbon
considerably across sectors and regions. and pollutant emissions controls are
lacking. Thus, putting a value on the
Natural gas is typically one-half to social costs of emissions, through a
one-third of the cost of oil, based on carbon price or controls on emissions
energy supplied34. This cost factor has and air quality regulations, significantly
provided a strong economic argument improves the cost competitiveness of
for fuel switching in the power, gas, and makes the cost of gas lower
industrial, and buildings sectors. than coal in any geographic region36.
33 World Bank, PM 2.5 air pollution data.
34 BCG, IGU, Snam, “2018 Global Gas Report”.
35 Ibid.
36 BCG analysis using LCOE data and social cost of pollution estimates.
Gas Technology and Innovation for a Sustainable Future 231 / An action plan for gas technology and innovation
This modeling exercise shows that the forecast. It outlines a modelled potential
economic potential of natural gas is role for natural gas in the energy mix, and
substantial. At the highest potential depends on economic conditions where
economic deployment, the global natural the environmental benefits of switching
gas market consumption could be from oil and coal to natural gas are valued.
around 2.5 times bigger in 2040 than it is In addition, it assumes a world where
today37. The biggest growth potential is a sustainable development scenario is
in the power and industry sectors where implemented and global energy policies
natural gas can displace coal. These two adjust to meet climate goals, which would
sectors account for about 70% of the require that renewable power and gas
economic potential of gas (see Exhibit 5). technologies are quickly scaled up. That
would allow for near-term emissions
This assessment of the economic potential reductions through fuel switching and
of gas, along with the sustainable progressively also reductions from a
development benefits it offers, is not a transition to low-carbon gas technologies.
Economic
Exhibit 5 - E potential
CONOMIC for FOR
POTENTIAL gasGAS
defi ned on
DEFINED ON the basis
THE BASIS OF of competitiveness
COMPETITIVENESS
IN DIFERENT SEGMENTS OF USE
in different segments of use
ECONOMIC POTENTIAL1
DEMAND GROWTH GHG REDUCTION
SECTOR DRIVERS OF MAXIMUM POTENTIAL OF GAS BY 2040 (BCM) BY 20402 (GT CO2)
POWER • Competitiveness of gas at a national level 2,400 3.3
• Gas replacing coal and oil generation only at the end of average plant
lifecycles
INDUSTRY • Declining cost of gas technologies based on recent innovation trends 1,600 2.0
• Average competitiveness of gas vs. coal in different industrial sub-
segments
BUILDING • Gas replacing all remaining coal and oil products used to fuel 500 0.5
commercial and residential buildings
TRANSPORTATION • Road transport: Impact of technology trends, applied by segment (e.g. 900 0.5
heavy duty most viable for LNG)
• Marine bunkering: Segment of marine consumption most exposed to
action on air pollution
Note: In all cases, increasing cost of carbon assumed in line with requirements to limit warming to 2 degrees as included in the IEA SDS from the
2019 WEO; technology cost trends identified in the report are applied, otherwise economic assumption are generally aligned with IEA SPS from
the 2019 WEO.
1. Potential is based on the economic potential as defined in Chapter 1;
2. Calculated as gas demand growth multiplied the emissions benefit of switching from coal and or oil to natural gas.
Source: IEA, EIA, BP 2019 Energy Outlook, NGVA Europe, IPCC, BCG analysis.
37 BCG analysis.
24 Gas Technology and Innovation for a Sustainable Future1 / An action plan for gas technology and innovation
The role of gas technologies
in a carbon constrained world
As well as considering the economic of the growth in coal demand, but In industrial applications, gas is the
potential of natural gas, it is also constraints on the pace of capacity most efficient energy source for
necessary to assess the role that development and grid integration process heat generation, and it is
natural gas can play in minimizing issues are limiting its role38. the least-emitting feedstock for
the costs of meeting the Sustainable petrochemicals production (other
Development Goals. With regard to Natural gas provides a scalable and than biofuel inputs, which face
climate change action, gas technologies cost-effective means for offsetting the supply constraints). While efficient
are critical for achieving the lowest- growth in coal-fired power generation, electrification technologies are
cost route to reducing the GHG while helping to integrate growing emerging for industrial applications,
intensity of the global energy supply. shares of variable renewables into the they can cost up to five times more than
grids. While coal’s levelized cost of gas on a levelized basis. Even in China,
In the near-term, substituting gas for energy is still lower than gas in much where the cost of electricity is relatively
coal and oil can result in material GHG of Asia, a carbon price of just $20 to low, compared to gas, a carbon price
emissions reductions on a cost-effective $50 per metric ton would bring gas to of between $30-80 per metric ton
basis. This is particularly true in Asia, achieve cost equivalence with coal39. would be required to equalize the
which directly faces the dual challenges cost of electrification options with
of rapidly growing energy demand In industrial and buildings applications, gas40. In the buildings sector, gas and
and the dominance of coal as the main gas provides a highly efficient electricity are closer in levelized cost,
energy source in several countries. source of heat generation, typically though their relative competitiveness
The rapid increase in renewable power at a lower cost than electrification is highly dependent on local factors.
generation is helping to offset part options (see Exhibit 6).
Exhibit 6 - G
AS PROVIDES A LOWER LEVELIZED COST OF SERVICE THAN ELECTRICITY IN MOST
CONTEXTS
US: relative levelized costs China: relative levelized costs
Sector & application Levelized cost per MMBtu Levelized cost per MMBtu
Industry
Low utilization boilers Gas $ 6-14 $ 20-25
Power $ 20-48 $ 28-50
High utilization boilers Gas $ 4-10 $ 15-18
Power $ 16-38 $ 23-40
Buildings
Space heating Gas $ 17-26 $ 19-32
Power $ 26-38 $ 21-35
Water heating Gas $ 25-36 $ 29-37
Power $ 30-50 $ 24-47
Source: NREL, EIA, NDRC, BCG analysis.
38 See for example recent challenges to scaling wind and solar development in India and China.
39 BCG analysis – example of China based on average of 2018-19 LNG import prices.
40 BCG Levelized Cost of Service analysis. Assumes that electricity supply is zero carbon at current power prices.
Gas Technology and Innovation for a Sustainable Future 251 / An action plan for gas technology and innovation
Given the cost competitiveness of gas as Over the longer term, low-carbon gas
a means of reducing the GHG emissions technologies offer the most efficient
intensity of energy, fuel switching can play a means of significantly reducing emissions
significant role in climate change mitigation. from high heat and energy-intensive
Switching to gas from other fossil fuels applications. Consequently, they are
has already cut global emissions: since best placed to help achieve a below 2°C
2010, coal to gas switching has avoided scenario. In these so-called “hard to abate”
0.5 GT of emissions per year worldwide41. sectors in industry and transport, low-
In the future, if gas were to displace coal carbon options, other than the use of
and oil in to its full economic potential, up renewable gas, hydrogen, or CCUS, are
to 6.3 GT of emissions per year could be either extremely expensive or impractical43.
avoided by 204042. The greatest potential Gas technologies, therefore, provide a
for this form of emissions mitigation is in critical pathway for reducing emissions in
the power and industrial sectors in Asia, line with the Paris Agreement targets.
and especially China (see Exhibit 7).
Exhibit 7 - P
OWER SECTOR FUEL SWITCHING PROVIDES THE GREATEST OPPORTUNITY FOR GHG
EMISSIONS REDUCTIONS
Potential1 annual emissions reduction from gas fuel switching by 2040
Power sector Industry sector Buildings sector
GT CO₂e GT CO₂e GT CO₂e
0.6-3.3
3 3 3
0.6-2.0
2 2 2
1 1 1
0.2-0.5
0 0 0
Asia
Pacific
China
North
America
Middle
East
Africa
Europe
Eurasia
Latin
America
Total
Asia
Pacific
China
North
America
Middle
East
Africa
Europe
Eurasia
Latin
America
Total
Asia
Pacific
China
North
America
Middle
East
Africa
Europe
Eurasia
Latin
America
Total
Potential
1. Calculated as the emissions reductions identified from the economic potential in this study relative to the IEA 2019 WEO Stated Policies Scenario..
Source: IEA, EIA, BP 2019 Energy Outlook, NGVA Europe, IPCC, BCG analysis. Base case
41 IEA, “The Role of Gas in Today’s Energy Transitions”, 2019.
42 BCG analysis. Global energy scenario based on assessment of comparative economics of gas vs. alternative fuels across sectors and regions by 2040. Assumes
renewables penetration aligned with IEA Sustainable Development Scenario.
43 See for example recent report Columbia Center on Global Energy Policy, “Low carbon heat solutions for heavy industry: Sources, options, and costs today”, 2019.
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