ABU DHABI — The role of natural gas is one of the stickier points of debate related to the global energy transition, and that debate was on full display here this month.

Meg Gentle, president and CEO of Houston-based gas company Tellurian, argued that natural gas is a key driver of the energy transition and is already lowering emissions by replacing dirtier fuels like coal and oil.

“I view natural gas and LNG as already part of the solution,” she said at the Atlantic Council's Global Energy Forum. “We’ll have some emissions throughout our value chain, but the benefit that we will have [for] overall CO2 emissions is actually 10 times the emissions that we will contribute.”

The advent of the fracking boom caused natural-gas prices to plummet, which has helped to rapidly shift coal out of the U.S. power system. Liquefied natural gas (LNG) exports from the U.S. and Australia are now surging and making their way to several of the world’s top coal consuming countries.

But while a transition to natural gas is already underway, it’s unclear what the future of that fossil fuel will look like as policies shift and other, cleaner resources become more competitive.

Adnan Amin, former director-general of International Renewable Energy Agency (IRENA) and current senior fellow at the Harvard Kennedy School's Belfer Center, argued that the role of natural gas is being overstated in most forecasts.

“We have been talking about, for the last few years, gas as the bridge,” Amin said during Abu Dhabi Sustainability Week. “There is an inevitability about bridges, which is that sooner or later you get to the end of the bridge."

The combination of artificial intelligence, smart grid technologies and energy storage is undermining the argument that gas is needed to manage the intermittency of renewable energy resources, Amin noted. The geopolitics of natural gas and rising global emissions are also challenging previously held assumptions around what the optimal energy mix should be.

A recent study published in the scientific journal Environmental Research Letters found that natural-gas use has grown so quickly that emissions from gas over the past six years have surpassed the decline in emissions resulting from a reduced use of coal. The study found that fossil fuel emissions grew at a slower rate in 2019 than in previous years but did not account for methane emissions from fossil fuel production and shipping.

Economic and environmental factors are now prompting a number of U.S. cities and utilities to impose bans on new natural-gas infrastructure. Last week, the California Public Utilities Commission launched a new regulatory proceeding “to manage the state’s transition away from natural-gas-fueled technologies to meet California’s decarbonization goals."

The bridge may be longer than it seems

The cost of wind and solar have decreased dramatically over the past decade, to the point where renewables are now cheaper than new-build natural-gas plants in many parts of the world. According to Wood Mackenzie, solar may be able to out-compete new gas-fired plants virtually everywhere on a levelized cost basis by the year 2023.

Within the next decade, renewables are expected to be cheaper than even existing gas plants, prompting the question of stranded assets.

And it's not just happening in high-income parts of the world. Renewables are already cheaper to build and use than existing natural-gas plants in several of the markets where Enel operates, Enel Green Power CEO Antonio Cammisecra said in a phone interview.

“In many countries, we observe that it is more convenient to build new wind or solar than operate existing thermal assets,” Cammisecra said. “This is really just the start of a big, big phenomenon that is happening in major economies but also in emerging countries where we invest.”

Yet despite the growing scrutiny being directed at natural-gas investments, Marco Alverà, CEO of Italian gas company Snam S.p.A., doesn’t see global gas demand plummeting anytime soon and pushed back on Amin’s assertion that the natural gas “bridge” is nearing its end.

Alverà noted on stage in Abu Dhabi that IRENA’s own reports put renewable energy penetration at just over 50 percent in 2050 under the most ambitious deployment scenario. That means roughly half of the global energy mix will still come from hydrocarbons, according to the renewable energy agency’s research.

“That bridge to 2050 is not a short bridge,” said Alverà. “And it’s not a complete bridge.”

“There’s no model out there that assumes a minimal role for gas, even in 2050, [despite what] some people in the audience have vouched for or expect,” he added.

Fatih Birol, executive director of the International Energy Agency, said at another conference that the IEA sees an enormous increase in natural-gas use in future, fueled by an abundance of supply and high demand from China and India.

Also, while investors are shifting their focus to cleaner energy resources, few have been willing to fully abandon natural gas. Despite committing to shift BlackRock’s capital allocation to more climate-friendly solutions earlier this month, CEO Larry Fink expressed reservations about ditching hydrocarbons entirely.

Musabbeh Al Kaabi, CEO of petroleum and petrochemicals for Abu Dhabi's sovereign wealth fund Mubadala, touted the firm's investments in more than 4 gigawatts of renewable energy power generation. But he said at the Atlantic Council Forum that while "renewable energy is at the core of our view of the future...natural gas...is very important in achieving the energy transition going forward."

The specter of stranded assets

A big challenge for natural-gas interests going forward will be to make the case that their resource continues to be an environmentally friendly option once even dirtier resources are pushed out of the mix.

Meg Gentle of Tellurian acknowledged that the industry needs to do more to reduce emissions over the lifecycle of the product, from the wellhead to the ship. Potential solutions include blocking methane leaks, investing in carbon capture and sequestration, and purchasing carbon offsets, she said.

But even these steps still may not be enough.

European Commissioner for Energy Kadri Simson said at another event that the EU’s Green Deal was crafted not only as an environmental policy but also to address the bloc’s energy security issues related to natural gas.

Simson noted that the EU currently relies heavily on Russia for its gas supply “but [is] moving toward a bigger share of renewables...[so we will not be] so dependent anymore.” Going forward, the European bloc will be investing more into the electricity grid and strengthening links between member states to accommodate a bigger share of renewable energy.

The EU has also expanded its LNG terminals to accept more U.S. gas, and Simson acknowledged that gas “will have a role during our transition period.” But investments in gas must be “future-proof,” she said.

To that end, she said decarbonizing gas with hydrogen is one of the EU’s top priorities. The EU ultimately plans to push out gas completely.

“We don’t need any stranded assets,” said Simson.