Emerging Technologies

Clean energy will do to gas what gas has done to coal

Globally, solar and wind projects now have the lowest life-cycle cost of all electricity sources Image: REUTERS/Marcelo del Pozo

Jules Kortenhorst
Chief Executive Officer, RMI
Mark Dyson
Principal, Rocky Mountain Institute
Our Impact
What's the World Economic Forum doing to accelerate action on Emerging Technologies?
The Big Picture
Explore and monitor how Energy Transition is affecting economies, industries and global issues
A hand holding a looking glass by a lake
Crowdsource Innovation
Get involved with our crowdsourced digital platform to deliver impact at scale
Stay up to date:

Decarbonizing Energy

Around the world, an emerging "rush to gas" - a glut of investment in new natural gas-fired power plants and associated delivery infrastructure - threatens to result in significant stranded assets. Innovation in renewable energy and other emerging technologies, including battery storage, has already created cheaper electricity than any new natural gas-fired power plant. This is true even in markets with low gas prices such as the US, let alone in countries that must import expensive liquefied natural gas (LNG).

Renewable energy and other clean energy technologies are ready to disrupt the market for natural gas, just as natural gas has disrupted coal. Embracing this trend now can prevent wasteful and uneconomic investments in power plants, LNG facilities and pipelines, and avoid CO2 emissions over the coming decades.

The need for electricity investment is growing

Fuelled by growing demand for electricity in the world’s developing economies, global power generation more than tripled between 1985 and 2016. The need to increase the supply of electricity around the world isn’t likely to let up anytime soon. For example, just to meet the expected tripling of global demand for air conditioning by 2050, a new power supply equal to the current combined capacity of the US, Europe, and Japan is needed, estimates the International Energy Agency (IEA).

On the other hand, in developed economies, demand for electricity has barely grown in recent years. But the retirement of ageing and costly power plants in these countries is creating a significant need for investment in new resources. For example, in a study of the US electric system, Rocky Mountain Institute (RMI) finds that half of the country’s existing power plant capacity is likely to retire by 2030 due to age and economics. This means that in order to meet demand for electricity, $500 billion will need to be invested in new power plants.

Have you read?
A massive global bet on natural gas infrastructure

Natural gas-fired power plants are often seen as the best choice to replace retiring coal-fired power plants, or, in developing economies, to expand electricity generation capacity. Gas-fired power plant technology is mature and low-cost compared to other fossil fuel or nuclear generation options. It is also seen as a low-carbon option for replacing ageing coal plants. And in some major markets, including the US and Canada, the price of natural gas has fallen dramatically due to the revolution in technologies for extracting natural gas from shale. As a result, natural gas has rapidly taken market share from coal in these markets.

While it is abundantly clear that coal is on the way out, natural gas may seem the most economic resource poised to take its place. For example, Shell’s recent Sky scenario envisions an investment of at least $700 billion in natural gas-fired electricity plants across the global power sector through 2035, at the same time that coal’s share falls by nearly half. In the US alone, more than $100 billion worth of investment is planned for new gas-fired power plants, and $30 billion is planned for pipeline infrastructure to serve those power plants. Globally, $200 billion more investment in new gas pipelines and $650 billion in LNG facilities is required to bring cheap gas to markets that do not have domestic production, based on Shell and International Gas Union data.

Ever-cheaper clean energy will make gas uneconomic

Natural gas is currently cheap and its power plant technology is mature. This is why it is so prominent in electricity production and why so much investment is planned for it. But innovation in other technologies is quickly catching up and will likely put that investment in natural gas at risk. RMI analysis found that the costs of renewable energy, battery storage and energy efficiency are continuing to fall very quickly. In the US, benchmark prices for wind, solar photovoltaic and battery projects have fallen by 65-90% in the past 10 years. They are forecast to continue falling by a further 50% or more through 2030. Globally, solar and wind projects now have the lowest life-cycle cost of all electricity sources, according to data from the World Economic Forum released in December 2016.

The rapid pace of decline in cost has important implications for the global market for new gas infrastructure. Even in the US, with its domestic sources of cheap natural gas, the recent RMI report found that a portfolio of renewable energy, battery storage and energy efficiency can often be developed at a lower cost than a new gas-fired power plant, with lower financial risk and zero carbon emissions. RMI also found that because the cost to develop new clean energy portfolios is falling so rapidly, they are likely to beat just the operating costs of efficient gas-fired power plants within the next two decades.

RMI’s US-focused analysis suggests that hundreds of billions of dollars of planned investment in natural gas infrastructure could be stranded over the coming decades, despite the US’ abundance of cheap, local gas. In many global markets, imported LNG is much costlier than domestic gas in the US (adding US$2–4/MMBtu). In other markets, such as Western Europe, political risks associated with gas supply could limit availability or raise prices even further. As prices for renewable energy fall quickly around the world, more and more markets will find it attractive to lock in low-cost renewables, instead of paying more for natural gas-based power generation.

A unique opportunity to drive the transition to clean energy

The growing global need for electricity creates a unique opportunity to enjoy the benefits of innovation in clean energy. Failing to seize this opportunity would mean large risks for electricity customers, investors and the planet. We have reached a tipping point where clean energy is now a cost-effective way to meet the Paris Climate Agreement goals to reduce emissions and keep the global temperature rise below 2 degrees Celsius.

It is true that replacing coal with natural gas as a fuel for power plants has cut harmful emissions in the short term, in the US and other markets. But spending hundreds of billions of dollars (or euros, or rupees) on new natural gas infrastructure, at a time when clean energy technologies are already cost-effective, threatens to lock in higher prices and carbon emissions for decades to come.

Don't miss any update on this topic

Create a free account and access your personalized content collection with our latest publications and analyses.

Sign up for free

License and Republishing

World Economic Forum articles may be republished in accordance with the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International Public License, and in accordance with our Terms of Use.

The views expressed in this article are those of the author alone and not the World Economic Forum.

Related topics:
Emerging TechnologiesEnergy TransitionNature and Biodiversity
World Economic Forum logo
Global Agenda

The Agenda Weekly

A weekly update of the most important issues driving the global agenda

Subscribe today

You can unsubscribe at any time using the link in our emails. For more details, review our privacy policy.

What can we expect of next-generation generative AI models?

Andrea Willige

May 22, 2024

About Us



Partners & Members

  • Join Us

Language Editions

Privacy Policy & Terms of Service

© 2024 World Economic Forum