Natural gas remains the crucial bridge in the energy transition, yet challenges persist


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Natural gas remains the crucial bridge in the energy transition, yet challenges persist

Wood Mackenzie report highlights gas's role in supporting renewables and reducing emissions; carbon prices needed to support LNG’s displacement of coal; analysis shows LNG is 60% less GHG-intensive than coal

LONDON/HOUSTON/SINGAPORE, February 20, 2025 – Natural gas will play a vital role in the energy transition, supporting the expansion of renewables and accelerating the shift away from coal, according to the latest Horizons report from Wood Mackenzie.

The report, titled 'The bridge: Natural gas's crucial role as a transitional energy source,' emphasizes that while the world is increasingly turning to renewable energy, natural gas remains fundamental to meeting global energy needs and reducing emissions in the medium term.

'Gas demand has surged by 80% over the past 25 years, now meeting almost a quarter of the world's energy needs,' said Massimo Di Odoardo, Vice President of Gas and LNG Research at Wood Mackenzie. 'Its success lies in the scale of global resources, low production costs, ease of storage and dispatch, and comparative environmental advantages.'

Surging electrification, increasingly delivered by renewable power sources, will lead the charge to curb CO2 emissions. Electrification can only move so fast, however, and the adoption of emerging low-carbon technologies, such as hydrogen, is currently too slow to achieve net-zero emissions by 2050. With coal still accounting for 30% of the world’s energy needs, shifting to gas as a transition fuel is a compelling option.

Key findings from the report include:

  • Gas produces only half the carbon dioxide of coal and 70% of oil when burned, and generates considerably less pollution, making it the cleanest fossil fuel option.
  • Replacing coal with natural gas has already helped deliver substantial CO2 reduction and can help decarbonize markets across Asia which remain dependent on coal.
  • Gas-fired plants are key to provide reliable and flexible supply supporting the integration of intermittent renewable energy sources.
  • Natural gas can act as a catalyst for advancing other lower-carbon technologies, including carbon capture and storage (CCS) and low-carbon hydrogen.


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Source: Wood Mackenzie Wood Mackenzie Energy Transition Service, Lens Gas & LNG

Challenges remain

The report also highlights challenges facing the gas industry.

According to the report, high LNG prices since 2022 risk undermining the full potential of wider gas adoption in Asia. Carbon prices would be needed to shift the market.

“In China and India, where gas usage is mainly used for peak shaving, gas demand is still expected to grow by almost 100 bcm through to 2050 in the power sector, offering the most practical option for ensuring flexibility as renewable investments surge,” said Di Odoardo. “Without a carbon price of around US$100/tonne, reducing China’s and India’s dependency on baseload coal looks like a massive ask. But the prize could be a reduction of more than 300 Mt of CO2 by 2035”

Emissions remain an issue as well. Gas and LNG both produce substantial greenhouse gas (GHG). However, according to the report, claims that the LNG value chain is more GHG-intensive than coal is unfounded.

“Our analysis shows that, on average, LNG has around 60% lower GHG intensity than coal. Even when considering a 20-year global warming potential (GWP) and comparing methane-intensive LNG with coal burnt in highly efficient plants, LNG is still 26% less GHG-intensive,” said Di Odoardo. “Nevertheless, its carbon dioxide and methane emissions need to be addressed as a matter of urgency to ensure its primacy as a bridging fuel.”

Comparison of LNG and Coal Value Chain Emissions at GWP 20


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The report concludes that natural gas, particularly LNG, will be critical in the shift to a lower-carbon future, bridging the gap as emerging low-carbon technologies strive to reach critical mass.

Read the entire report here: The bridge: natural gas's crucial role as a transitional energy source | Wood Mackenzie

END

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Mark Thomton
+1 630 881 6885
Mark.thomton@woodmac.com

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About Wood Mackenzie

Wood Mackenzie is the global insight business for renewables, energy and natural resources. Driven by data. Powered by people. In the middle of an energy revolution, businesses and governments need reliable and actionable insight to lead the transition to a sustainable future. That’s why we cover the entire supply chain with unparalleled breadth and depth, backed by over 50 years’ experience in natural resources. Today, our team of over 2,000 experts operate across 30 global locations, inspiring customers’ decisions through real-time analytics, consultancy, events and thought leadership. Together, we deliver the insight they need to separate risk from opportunity and make bold decisions when it matters most. For more information, visit woodmac.com.


Natural gas remains the crucial bridge in the energy transition, yet challenges persist


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