IEA: Golden age of gas is nearing an end

The “golden age of gas […] is nearing an end” and demand will begin to decline from the start of the 2030s, the International Energy Agency (IEA) has declared.

A global shift to renewables and the “rise of heat pumps” will see gas use slow over the next decade before the market goes into decline in the 2030s, the IEA’s annual World Energy Outlook predicts.

In another blow to global gas markets, the IEA states that the outlook for hydrogen “is clouded by cost inflation, uncertainty around policy details and supply chain bottlenecks”.

Global natural gas use has increased by an annual average of almost 2% since 2011, but the IEA predicts that this will slow to less than 0.4% per year from now until 2030 before experiencing a “strong dip” in demand.

“The ‘Golden Age of Gas’, a term coined by the IEA in 2011, is nearing an end,” the IEA report states. “The power and buildings sectors – today’s biggest consumers of natural gas accounting for 39% and 21% respectively of total demand – have already seen peaks in natural gas capacity additions for power plants and space heating boilers, and muted demand in these two sectors reduces natural gas use enough to cause it to peak by 2030.”

It adds: “Sales of gas-fired boilers for space heating in buildings have also peaked. At their height, gas boilers accounted for around 40% of total sales of space heating equipment. The subsequent decline in sales over the last few years reflects the rapid rise of heat pumps, especially in advanced economies.

“Heat pump sales have a strong impact on gas demand in the buildings sector in the [IEA’s predicted] trajectory because space heating is by far the leading end-use in terms of natural gas demand today.

“In advanced economies, the rebound in natural gas demand seen in 2021 did not last long, and demand in 2022 was below pre-pandemic levels. This faltering in demand reflects a shift to renewables in electricity generation, the rise of heat pumps, and Europe’s accelerated move away from gas following the Russian Federation (hereinafter Russia) invasion of Ukraine.

“Demand continues to decline […] and by 2030 this more than offsets continued demand growth in emerging market and developing economies.”

The IEA report also predicts for the first time that fossil fuel demand will peak this year and insists that reaching net zero by 2050 is still possible.

It predicts that nearly one in two cars sold worldwide will be electric by 2030, with just 40% of the global energy demand met with fossil fuels by the start of the next decade.

However, the IEA’s director Fatih Birol warns that rowing back on government policies will undermine the effort to decarbonise the energy sector.

“Governments are entitled to their policy choices,” he said in the report’s foreword. “But leaving aside […] climate change and being a good citizen of the world, I believe the world is entering an era of clean energy technology manufacturing. [Countries] are competing with each other for pole position to create good jobs in modern industries.

“Countries who are slowing down in terms of pushing clean energy may well have a disadvantage in terms of their competitiveness for the next chapter of industry.”

Birol’s warning comes just weeks after prime minister Rishi Sunak rowed back on net zero measures in the UK.

While the core 2050 net zero pledge remained in place, Sunak’s 10 Downing Street speech last month saw the phase-out date for internal combustion engine cars and vans relaxed from 2030 to 2035, while around a fifth of households were exempted from the mid-2030s ban on new gas boilers.

In addition, moves to enforce more exacting energy efficiency standards on residential landlords have been abandoned.

Shadow energy secretary Ed Miliband said that the IEA’s report “is further evidence that Rishi Sunak’s retreat from a clean energy future is wrong for Britain and will mean higher bills and less energy security”.

He added: “Shrinking from climate action will send the wrong message to the world just at the moment when the power of our example can show that clean energy means lower bills for families, energy independence for our country, more jobs, and will protect future generations.”

A spokesperson for the Department for Energy Security and Net Zero added: “The UK is a global leader in clean energy having attracted £200 billion in low carbon investment since 2010, with a further £100 billion expected by 2030 – powering up Britain and supporting up to 480,000 jobs.

“We also continue to back domestic oil and gas, which supports over 200,000 skilled jobs, develops supply chains and helps build the engineering expertise needed to support our energy security and end reliance on foreign regimes.

“We have cut emissions faster than any other G7 country and oil and gas will play important role in the transition to net zero supporting the development of low carbon technologies, such as carbon capture, while adding billions to the UK economy.”