Baku, Azerbaijan, Oct.9
By Leman Zeynalova – Trend:
Despite many economic advantages of using the gas based technologies and processes, natural gas faces some economic challenges, according to the report of the Gas Exporting Countries Forum (GECF).
The challenges include: the affordability concerns in some key developing countries and the competition with cheap alternatives; the economic pressure due to large penetration of subsidized renewables and the large investments required to support gas infrastructure development.
“Among the main economic challenges facing natural gas is its affordability in some key developing and emerging countries. The affordability issue is related to the difficulties of gas consumers to afford natural gas price because of their level of incomes or because of the competition of other low-cost alternatives, particularly coal,” said the report.
This competition pressure can be highlighted in the deregulated European electricity markets, where the penetration of heavily subsidized renewables has pushed thermal power plants including CCGT to respond to residual electricity demand (i.e. total electricity demand after subtracting renewable-based electricity), and contributed in decreasing wholesale electricity prices (based on marginal costs), according to GECF.
“This has increased competition between natural gas and coal to meet this residual demand, and reduced the operating hours of the gas-fired power plants imposing economic constraints on these assets. This situation has resulted in a drop in gas demand for power generation, observed recently in many European countries,” said the report.
Finally, according to GECF, the gas industry faces significant investment challenges to build critical infrastructure and supply chains. “The lack of infrastructure, including gas networks and pipelines, can hinder the penetration of natural gas, specifically in emerging markets.”
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