The world is facing its second gas shock in half a decade. After Russia cut flows to Europe in 2022, intending to undermine support for Ukraine, the continent turned to liquefied natural gas (lng) shipped from America and the Middle East, sending prices soaring. Now lng supplies from the Gulf have been cut off, too. Power prices have consequently surged.
Some experts argue that renewables offer a promising way to get off gas, and thereby ensure energy security. They point to Spain, which has pursued huge investments in wind and solar; so far this year gas has set power prices there only 15% of the time, compared with 89% for Italy. Solar’s share of power generation in Pakistan increased from 0.7% in 2019 to 10% in 2024; the country’s import bill for lng for the rest of this year is likely to be $6bn less than it otherwise would have been, according to one analysis.
Unfortunately, the world will remain haunted by the spectre of natural-gas shocks for decades to come. Even in a world dominated by clean energy, natural gas will continue to be a critical part of electricity generation. Solar and wind power, along with batteries, cannot offer complete energy security. Governments can, however, limit the damage that gas shortages can do.
Analysts contend that it is possible to run a cost-effective electricity grid where the vast majority of power comes from renewables in concert with batteries. But a grid that is split between 90% clean energy and 10% fossil fuels does not mean one in which those two sources consistently provide that mix of energy. Instead it is one in which for a tenth of the time, nearly all of the power is derived from fossil fuels.
That is because renewables are at the mercy of Mother Nature. The sun does not always shine, nor does the wind always blow. Batteries are increasingly able to smooth out short-term fluctuations in supply and demand—a cloud passing over a solar array, for example, or the evening peak after the sun goes down—but they cannot keep the lights on for longer periods. Other options are not appealing. Not all countries have the appropriate geography for hydropower, and in any case water is at the mercy of the weather, too; Europe’s crisis in 2022 was worsened by a drought. New nuclear power stations remain prohibitively expensive. Alternative forms of long-duration storage, such as iron-air batteries or hydrogen, are in their infancy. For the moment, analysts’ net-zero projections include a role for natural gas far into the future.
Importers of gas will therefore remain vulnerable to supply disruptions. Governments will have to ensure there is capacity to satisfy all demand, which includes import capacity for LNG, storage facilities and pipelines, as well as power plants. If global gas demand falls, supply may become dominated by a few low-cost producers. The market could become thinner, subject to moments of acute shortage. Beyond seasonal storage, taxpayers may need to stump up for strategic reserves.
Though gas cannot be entirely avoided, there are things governments can do to rely on it less. Grids should become bigger and smarter. That means time-varying prices, which encourage consumers to shift demand to hours when power comes from virtually free sources of energy such as the sun and wind. If prices rise when clean energy is scarce, that will incentivise investment in promising forms of energy storage. Interconnections between grids can reduce exposure to local weather.
Local pricing can also help. At present there is often little incentive for storage and energy-intensive industries to be situated in windier or sunnier parts of a country. As a consequence, grids become congested when it is sunniest or windiest. Allowing prices to reflect local conditions should help alleviate these bottlenecks, meaning that turbines would not need to be turned off when it is windy.
It helps, too, that the costs of relying on natural gas as a backup are far lower than depending on it for everyday energy needs. Britain’s Climate Change Committee, an advisory body, reckons that the additional investment cost of moving from gas to renewables would eventually be offset by substantial fuel savings. There is no getting off gas for a while. But its power to shock can be reduced. ■
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