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IHS Markit recently released the 2021 Fast Transition Case for
natural gas, which demonstrates a pathway to achieve a net zero
carbon economy by 2050 and analyzes the potential impact on the
North American natural gas market. A low carbon and zero carbon
future presents significant difficulties, but also opportunities
for the natural gas sector. Fast Transition explores the impact of
electrification and efficiency gains in the residential,
commercial, and industrial sector and a near-total power sector
decarbonization by 2050. The introduction of blue
hydrogen (i.e. hydrogen produced from natural gas with
carbon capture and sequestration), especially in the industrial
sector, as well as stronger development of renewable natural gas
supply provide some growth opportunities in otherwise declining
demand for fossil fuels.
The natural gas sector is already feeling pressure from
decarbonization efforts, with increasing challenges to building new
pipeline infrastructure and adapting to increasing regulatory
oversight. In Fast Transition 2021, we look at what this energy
transition may look like for the natural gas sector.
In Fast Transition, the North American natural gas market starts
to decline in the mid-2020s, with total production declining by
more than 35 Bcf/d between 2025 and 2050. Owing to strong
regulatory pressure, no new gas pipeline capacity comes online
after 2022. With lower oil demand due to the electrification of the
transportation sector, oil and associated gas production declines
through 2050.
Demand for natural gas falls dramatically, with total domestic
natural gas demand in 2050 down by more than 48% in US and 46% in
Canada from 2019 levels:
Power sector: A near-total power sector
decarbonization, over 90% by 2040 and 97% by 2050. The power
sector's decarbonization pathway includes the phase out of
conventional coal, deployment of carbon capture and sequestration,
longer life extensions for nuclear plants and a fifteen-fold growth
in solar and wind capacity.
Natural gas cedes baseload generation to renewables and battery
use. Much of the conventional natural gas‒fired power assets in the
United States and Canada remain online and operate flexibly and at
overall low capacity factors, typically under 10% in the late
2040s.
Residential and Commercial: Strong regulatory
pressure results in the adoption of electric space and water
heating for new built structures. Natural gas and fuel oil used for
space and water heating are replaced with electricity in millions
of homes and buildings in the second half of the outlook period.
Residential and commercial natural gas demand declines by 45% and
46% respectively.
Industrial: Electrification and efficiency
gains also lower industrial natural gas demand, but to a lesser
extend than in the previous sectors. New avenues for natural gas
demand open up, with its increased utilization in the production of
blue hydrogen. Fast Transition envisions blue hydrogen adoption in
the chemical sector (mainly ammonia and methanol), steel making,
and to produce low carbon aviation fuel. Annual blue hydrogen
production reaches more than 30 million tons by 2050, utilizing
more than half of the industrial natural gas demand.
Renewable Natural Gas (RNG) can be produced by
anerobic digestion of biomass in landfills, manure, municipal
waste, sewage, and wastewater. In future, commercialization of
'second-generation' technologies such as gasification plus
methanation, can unlock vast new quantities of RNG from
agricultural residues and woody biomass. In our Fast Transition
2021 outlook, US lower-48 and Canadian RNG is expected to grow to
4.5 Bcf/d and 1.4 Bcf/d respectively by 2050.
Substantial infrastructure investment is required for
development of blue hydrogen, RNG supply sources, and in energy
end-use applications.
IHS Markit closely monitors the North American energy markets,
publishing data, key insights and market analysis. Learn more about our
research.
Ankita Vijay, senior analyst on the North America
natural gas team, focuses on North American natural gas market
modeling using the Gas Pipeline Competition Model
(GPCM).
Wolfgang Moehler, director with the Climate and
Sustainability team at IHS Markit, has 15 years of progressive
experience across the energy value chain and leads the IHS Markit
North American natural gas market modeling/analytics.
