The Key Role of Natural Gas As a Transition Fuel
In recent years sustainable energy has surely been the center of attention, with worldwide spending on renewable energy surpassing even that on oil and gas, as stated by Goldman Sachs in one of its latest “Carbonomics” reports.
However, despite the overall growth of the investments in renewables, it seems that the energy industry is generally under-investing, not only in renewable energy but also in the traditional energy space.
Goldman Sachs believes that overall energy investments must increase significantly in order to address the dual challenges of energy affordability and security while simultaneously addressing sustainability. This is because, given the smaller size and higher capital intensity per unit of energy output, the overall expansion of investments in renewables was insufficient to make up for the sharp decline in investments in the traditional energy sector.
The investment bank notes that total energy investment must nearly double in 2027, going from $1,7tn in 2021 to $3,3tn in 2027. This increase in investments should not only be directed towards green energy but a significant natural gas investment will be required to maintain a steady and reasonably priced energy supply as the energy transition progresses.
There have been a lot of discussion regarding natural gas. In fact, during the COP27, one of the contentious issues has been whether natural gas should be regarded a “transition” fuel, or an interim measure as the use of coal is phased out.
TotalEnergies’ Pouyanne affirmed that “We are heavily investing in gas, because gas is a transition fuel” at the Saudi Summit.
While Tarek El Molla, Egypt’s minister of petroleum and mineral resources, stated that gas would “continue to play a key role in the future energy mix” just few days before the COP27.
According to Goldman, due to gas shortages during Russia’s invasion of Ukraine since Europe underinvested in gas infrastructure, some countries were forced to ramp up coal-power output. Germany and Austria, for example, restarted long-dormant coal-fired power plants to ease their energy shortfalls.
As Goldman argues, “The under-investment in energy is not only negatively impacting energy affordability and energy security,” but it is contributing to a short-term revival of coal power, undermining attempts to address the climate catastrophe.
The restriction on gas investment, according to Goldman’s analysts, has “led to an increase in energy costs without any decrease in net carbon emissions,” the bank stated.
The “Carbonomics” also observes that although the consumption of hydrocarbon energy sources will decline over time because of the global energy transformation, the outlook for each hydrocarbon varies depending on the end-use sectors (markets) they serve, their individual rates of energy transformation, as well as their carbon contents. Depending on the climatic scenario considered, demand for natural gas may still rise during this decade.
Natural gas remains a critical part of the energy system for the upcoming years, even in Europe, one of the most determined regions in the matter of de-carbonization.
Sources
- https://www.ft.com/content/a29c1204-70cf-46c1-b266-780788bfa048
- https://www.ft.com/content/c7416d3a-d049-4b92-8a48-bff415baa301
- https://www.goldmansachs.com/insights/pages/gs-research/carbonomics-affordability/report.pdf
- https://www.nytimes.com/2022/11/10/climate/carbon-dioxide-emissions-global-warming.html
Author: Clarissa Colella
The Key Role of Natural Gas As a Transition Fuel
In recent years sustainable energy has surely been the center of attention, with worldwide spending on renewable energy surpassing even that on oil and gas, as stated by Goldman Sachs in one of its latest “Carbonomics” reports.
However, despite the overall growth of the investments in renewables, it seems that the energy industry is generally under-investing, not only in renewable energy but also in the traditional energy space.
Goldman Sachs believes that overall energy investments must increase significantly in order to address the dual challenges of energy affordability and security while simultaneously addressing sustainability. This is because, given the smaller size and higher capital intensity per unit of energy output, the overall expansion of investments in renewables was insufficient to make up for the sharp decline in investments in the traditional energy sector.
The investment bank notes that total energy investment must nearly double in 2027, going from $1,7tn in 2021 to $3,3tn in 2027. This increase in investments should not only be directed towards green energy but a significant natural gas investment will be required to maintain a steady and reasonably priced energy supply as the energy transition progresses.
There have been a lot of discussion regarding natural gas. In fact, during the COP27, one of the contentious issues has been whether natural gas should be regarded a “transition” fuel, or an interim measure as the use of coal is phased out.
TotalEnergies’ Pouyanne affirmed that “We are heavily investing in gas, because gas is a transition fuel” at the Saudi Summit.
While Tarek El Molla, Egypt’s minister of petroleum and mineral resources, stated that gas would “continue to play a key role in the future energy mix” just few days before the COP27.
According to Goldman, due to gas shortages during Russia’s invasion of Ukraine since Europe underinvested in gas infrastructure, some countries were forced to ramp up coal-power output. Germany and Austria, for example, restarted long-dormant coal-fired power plants to ease their energy shortfalls.
As Goldman argues, “The under-investment in energy is not only negatively impacting energy affordability and energy security,” but it is contributing to a short-term revival of coal power, undermining attempts to address the climate catastrophe.
The restriction on gas investment, according to Goldman’s analysts, has “led to an increase in energy costs without any decrease in net carbon emissions,” the bank stated.
The “Carbonomics” also observes that although the consumption of hydrocarbon energy sources will decline over time because of the global energy transformation, the outlook for each hydrocarbon varies depending on the end-use sectors (markets) they serve, their individual rates of energy transformation, as well as their carbon contents. Depending on the climatic scenario considered, demand for natural gas may still rise during this decade.
Natural gas remains a critical part of the energy system for the upcoming years, even in Europe, one of the most determined regions in the matter of de-carbonization.
Sources
- https://www.ft.com/content/a29c1204-70cf-46c1-b266-780788bfa048
- https://www.ft.com/content/c7416d3a-d049-4b92-8a48-bff415baa301
- https://www.goldmansachs.com/insights/pages/gs-research/carbonomics-affordability/report.pdf
- https://www.nytimes.com/2022/11/10/climate/carbon-dioxide-emissions-global-warming.html
Author: Clarissa Colella
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