Problem
Natural gas is one of the most important energy carriers in both a global and a European perspective for power and heat production, in industry and buildings. In the context of climate change, natural gas is often referred to as a transition technology that in the short to medium term can support emissions reductions by replacing more emissions-intensive coal-fired power generation.
Regulatory framework
European and global efforts to cut greenhouse gas emissions will have a major impact on the gas market. In the short term, these efforts will increase gas consumption as gas-fired generation displaces the more emissions-intensive use of coal, but, in the longer term, efforts to tackle climate change imply the need to phase out unabated gas use, i.e. that not paired with carbon capture and storage, in all sectors.
In the EU, which is taking a leading role internationally in the fight against climate change, these changes are already visible. In addition to investing heavily in the construction of renewable power generation, the bloc is working to develop strategies for reducing emission associated with the use of gas in the industrial and building sectors.
Market analysis
An understanding of gas market drivers and conditions is a key building block in the development of our quarterly European power market price forecasts. A deep understanding of the interaction between the direction of policy, global gas prices and the European carbon market is essential to producing high-quality analysis and forecasts. We therefore continuously monitor policy objectives relevant to the gas market, technology developments on alternatives to gas and the market developments that affect the gas price. We are preparing a distinct gas volumes report that covers the expected power sector demand for natural gas in the countries’ most important for Norwegian gas exports.
We conduct natural gas-related work for several different actors in Norway including public authorities, oil and gas producers, infrastructure companies and other stakeholders. Some example of the current questions that we are working on include:
- How will the EU’s increasingly ambitious targets for emissions reductions and the rapid development of low-emission technologies affect the conditions facing and demand for Norwegian natural gas?
- What challenges and opportunities do the construction of offshore renewable generation capacity and power cables pose to the Norwegian oil and gas industry?
- How will changes to the natural gas market, driven by policy and technology development, affect natural gas infrastructure in Norway and Europe?
- How will a growing focus on sector coupling between the power, transport and gas sectors affect the natural gas market? What barriers exist to the effective coupling of these sectors? What changes to the regulation of the market and infrastructure are needed? These issues are becoming increasingly relevant. The EU recognises that effective sector coupling can solve several issues. First, the use of excess generation from variable sources of generation like solar and wind can be used to produce various gas products, like hydrogen for example. Meanwhile, there is a need to gradually reduce the consumption of natural gas in various sectors. Historically, markets for power, transport and gas have been largely separate, and there is, therefore, a need to develop a new market design that facilities effective integration between these sectors.
Expertise
Our professional background and experience from the power industry make us well placed to solve relevant problems in the natural gas sector:
- THEMA has gas sector expertise related to our understanding of the market, quantitive analysis, and regulatory, political and strategic issues. This provides a solid basis for analysing the future challenges and opportunities facing players in the gas sector.
- We have worked with several different issues related to gas, both from the industry’s own point of view, but also seen from a regulatory and political perspective. Good contact with and understanding of the various actors within or affected by the gas sector allows us to provide informed and high-quality advice during a transformative period for the industry.
- THEMA’s power sector expertise is particularly important for upstream production activities looking to reduce emissions through electrification, but also to understand the potential role that gas can play as a source of flexibility supplier in a future power system dominated by variable renewable power generation.
- We follow developments in the natural gas market closely and have an in-depth knowledge of the central issues affecting natural gas’ future role. We understand global supply, demand and price trends, the technological developments of alternatives to natural gas and the policy changes needed to ensure an effective transformation to low-emission alternatives like hydrogen, biogas, electrification and others.
