The increasing global demand for natural gas is being felt keenly in Europe, prompting billions in new investment and an uptick in the planning and permitting of natural gas plants. Amid geopolitically-driven commodity price spikes and governments’ growing energy security concerns, countries around the world are committing to build new natural gas power stations to maintain safe and reliable energy.
Europe in particular is driving global investment in natural gas as it seeks to rid itself of reliance on Russian supply and bolster grid stability. In fact, analysis from Global Witness finds that Europe’s demand for natural gas is spurring $223 billion in new investment to produce the fuel globally over the next decade. Furthermore, recent reporting revealed that Europe plans to build 72 gigawatts-worth of new gas-fired power stations planned across the Continent – enough to supply 60 million homes!
Germany, Europe’s largest economy, has allocated €16 billion to the construction of four major natural gas plants. In the UK, government subsidies for these power plants have swelled to record levels. The Netherlands too has given approval to build a 500 megawatt natural gas plant.
Despite Europe pushing hard on renewables, it’s clear that demand for natural gas is not going away as governments scramble to shore up supply of baseload power. In fact, Europe’s natural gas demand is set to grow by 3 percent this year. As Claire Coutinho, UK Secretary of State for Energy Security and Net Zero said:
“There are no two ways about it. Without gas backing up renewables, we face the genuine prospect of blackouts. Other countries in recent years have been so threatened by supply constraints that they have been forced back to coal.” (emphasis added)
A Global Trend
This trend and reliance on natural gas is not unique to Europe. As China and other Asian countries continue to transition away from coal to cleaner fuels, plans for new oil and gas power plants grew by 13 percent last year, and demand for natural gas is expected to surge 50 percent by 2040.
In Africa, a similar story unfolds. Gas-fired power plants accounted for 60 percent of Africa’s generating capacity growth in 2023.
In the United States, figures from the Energy Information Agency (EIA) reveal natural gas accounts for 43.1 percent of the U.S.’ utility-scale electricity generation. This is despite the Biden administration’s temporary pause on approving new LNG projects, which as EID has previously explained, risks jeopardising global energy security.
Commenting on the LNG pause and its importance to environmental goals, Alaska Republican Sen. Dan Sullivan said in an interview:
“When we export clean-burning American natural gas to countries in Asia it reduces emissions. So all they are doing is […] undermining jobs, undermining national security and undermining the environment.”
A Warning to Others
Although Germany has made recent strives to take back control of its energy security following the Russian invasion of Ukraine, industry experts have warned the country is unlikely to ever recover fully.
As Chief Executive of energy company RWE, Markus Krebber:
“Gas prices in continental Europe, especially in Germany, are structurally higher now because we in the end depend on LNG imports. The German industry has a disadvantage.”
Fundamentally, without the energy security provided by natural gas plants, governments and their citizens are left at the mercy of unpredictable geopolitics and volatile commodity markets.
A Clean Power Source
A common misconception is that natural gas plants are incompatible with carbon reduction targets – a suggestion that EID has previously debunked. As well as supporting the transition away from coal, advancements in carbon capture and storage (CCUS) technology have enabled natural gas plants to dramatically reduce their emissions whilst future-proofing energy security.
The UK recently set out a plan to boost natural gas power capacity by requiring new gas plants to be able to convert to low carbon alternatives in the future.
Jon Butterworth, CEO at National Gas, commended the UK’s plans and said:
“Gas will continue to play an important role in keeping the lights on, acting as a bridge to a clean power system and complimenting the growth of renewables. In order to deliver a net zero power system, we must develop flexible power technologies including hydrogen, and gas with carbon capture and storage.”
The German government has developed similar plans, in what they describe as the development of “modern, highly flexible and climate-friendly” gas plants.
This follows the European Parliament’s decision in 2022 to label investments in gas and nuclear plants as climate friendly. Speaking on the decision, EU financial services chief Mairead McGuinness stated:
“The Complementary Delegated Act is a pragmatic proposal to ensure that private investments in gas and nuclear, needed for our energy transition, meet strict criteria.”
Bottom line: Natural gas demand is not going away anytime soon. As energy security shifts ever higher up the political agenda, governments around the world are putting their money where their mouth is when it comes to increasing natural gas generation capacity. Europe in particular is recognising that natural gas plants are an essential component of both the energy transition and ambitions to futureproof grid supply and stability.
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