Gas Technology and Innovation for a Sustainable Future

 
Gas Technology and Innovation for a Sustainable Future
Gas Technology
and Innovation for
a Sustainable Future
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   1
Contents

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 bunkering
The 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   5
Report 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 Future
Findings 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             7
Chapter 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 Future
Chapter 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   9
Introduction
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 Future
Introduction

                                           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   13
Introduction

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 bunkering
Introduction

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     15
Introduction

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 Future
Introduction

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   17
Chapter 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 Future
1 / 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         21
1 / 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   23
1 / 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 Future
1 / 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                  25
1 / 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.

26      Gas Technology and Innovation for a Sustainable Future
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