Clouds over role of gas as a 'bridge fuel' in energy transition

Natural gas has long been viewed as a bridge fuel for carbon reduction. In recent years, rapid technological advancement and structural changes in energy systems have led many to question if gas is really the bridge fuel we need.

The outlook for gas has shifted in energy sector forecasts this year. While a jump in global gas consumption is anticipated with prices expected to ease, many factors must align for that growth to happen. Shell expects a 60% increase in gas demand to 2040 but also noted that 2024 marked a decade low in LNG trade. The International Gas Union cautions that rapid LNG market expansion is fraught with uncertainties such as project delays, cost overruns, trade restrictions, and geopolitical and regulatory risks.

The World Energy Outlook (WEO) 2025 shows LNG demand growth slowing from 
80 billion cubic metres (bcm) a year, as witnessed in the past decade, to 70bcm a year to 2035 under the Current Policies scenario. Under the Stated Policies scenario (“the prevailing direction of travel for the energy system”), demand growth is even lower, at 50bcm a year. This indicates the high potential for gas to be replaced by a combination of renewable energy expansion, efficiency increases and electrification. Most importantly, in this scenario, the report says, “renewables lead to absolute decline in natural gas use in electricity generation in Europe and advanced economies in Asia”, reaching a plateau in the mid-2030s. 

The decline of gas in advanced economies to 2040 was foreshadowed in the WEO2020. However, the threat of alternative energy sources to gas demand growth was flagged as early as 2015. While that year’s WEO found reason to be upbeat about gas demand due to a massive, anticipated dip in prices, it noted gas faced competition in all end-user segments. 

The WEO2015 expected an increase in gas demand under all scenarios it evaluated. Comparing actual 2024 demand (as per WEO2025) with the WEO2015 forecast for 2025, the United States, China and the Middle East exceeded demand projections while India, Japan and Europe lagged. 

For price-sensitive South and East Asian countries, the WEO2025’s Stated Policies scenario predicts demand growth when relatively lower LNG demand in China and Europe create a downward pressure on LNG price due to oversupply. The outlook also refers to potential additional LNG demand creation from coal-to-gas switching in China and other Asian countries. However, IEEFA analysis has shown LNG is not serving as a bridge fuel from coal for India and China.

Demand drivers face competition in India

The forecast surge in gas demand growth in the WEO2025 is also expected to be driven by China, the Middle East and emerging Asian economies. However, the WEO2025 slashes European demand to 2035 compared with its 2020 forecast. 

Meanwhile, India’s gas demand is forecast to almost double. The WEO2025 expects demand to jump to 139bcm by 2035 and to approach 200bcm by 2050. The WEO2020 expected India’s gas demand to cross 200bcm much earlier, in 2040, likely due to the increasing presence of gas alternatives in the country. The caution on gas demand growth across all forecasts is widely applicable to India.  

As gas faces stiff competition from other fuels across most sectors, these forecasts may need to be revised down further for India. Renewable energy deployment is gathering massive momentum in India, and is already far more competitive than gas for power generation. The country installed 29.5 gigawatts (GW) of renewable energy in fiscal year (FY) 2024-25, and has achieved 30.5 GW installed renewable energy capacity in the first seven months of FY2025-26. India has no plans to build new gas-fired power capacity because of high stranded-asset risks, and has retired 5GW of idle gas-based plant capacity this fiscal year. 

In other sectors, increased renewable energy scalability could crowd out the already limited use of gas in industry and transport, for example. Industrial gas consumption has increased with the availability of more affordable domestic supply. However, the sector remains price-sensitive with higher consumption of alternatives in times of high gas prices. IEEFA analysis found that focusing on energy efficiency and renewable energy-based electric heating would yield better decarbonisation results for the sector. Similarly, in the transport sector where more affordable domestic gas has fueled demand, registrations pale in comparison to electric vehicles (EVs). EV registrations grew from insignificant in FY2017-18 to almost 900,000 in FY2024-25 while CNG vehicle registrations were about 500,000 despite being around much longer.

India’s achievements in grid modernisation and storage deployment will counter gas demand growth in the country. 

Limited role for gas in Net Zero

In the WEO2025 Net Zero scenario – a global pathway to limit temperature rise to 1.5°C above pre-Industrial levels – gas demand takes a massive dip. Under this scenario, the outlook noted that under-construction LNG projects will no longer be needed. Reading between lines of the WEO and other forecasts reveals the challenges to future gas demand. The energy transition is being driven by renewable energy deployment, grid modernisation and enhanced storage systems. Locking in resources for a fossil fuel build-out, especially for a transitional need, looks increasingly unnecessary.

The article was first published in The Hindu Business Line. Read here (behind paywall).