Natural-gas prices surged last year as Russia cut off much of its supply to Europe.

The disruption, which came amid Russia’s invasion of Ukraine, both dented the fossil fuel’s reputation as a cheap and reliable fuel, and set off a scramble by European governments to secure gas from other suppliers, including the U.S., often in the form of liquefied natural gas (LNG) transported by ship.

Some policy makers, meanwhile, have moved to limit natural gas over concerns about its impact on the environment. Proponents, though, are hoping that gas-derived hydrogen, which doesn’t emit carbon when consumed in a fuel cell, will sustain investments in the fossil fuel.

What does all of this mean for the outlook for natural gas?

The Wall Street Journal spoke with three energy experts about that. Amy Myers Jaffe is director of the Energy, Climate Justice and Sustainability Lab at the NYU School for Professional Studies, and author of “Energy’s Digital Future.” Kenneth Medlock is a professor at Rice University and senior director of the Center for Energy Studies, part of Rice’s Baker Institute for Public Policy. Leah Stokes, whose research focuses on energy, environment and climate, is an associate professor at the University of California, Santa Barbara and the author of “Short Circuiting Policy.”

Edited excerpts of their responses follow.

Lubmin Port, a new terminal for importing liquefied natural gas in Germany, which is building several LNG terminals along its northern coast.

Photo: Sean Gallup/Getty Images

WSJ: How has the Russian invasion of Ukraine—and the crunch on Europe’s gas supplies—affected the outlook for natural gas?

MS. JAFFE: Countries that might have been expected to rely heavily on natural gas, like India, Pakistan and Argentina, are making other plans, turning to renewables. African states are increasingly turning to hydro, while Eastern Europeans are reconsidering nuclear power. Thanks to Moscow, natural gas’s reputation as a secure, affordable fuel will take years to restore, if that is even possible, at a time when competing low-carbon technologies are becoming increasingly cost-effective.

Amy Myers Jaffe

Illustration: WSJ

DR. STOKES: The energy crisis felt in Europe and beyond has created momentum for renewable-energy policies. Natural-gas usage across Europe dropped by around 15% in the last six months of 2022 and 25% in the last two months, when compared with the same months a year earlier, which is aligned with the commitment EU governments made in July. In Germany, gas imports have declined, energy consumption has dropped and renewable energy currently makes up 46% of the country’s electricity [up from about 41% a year earlier].

DR. MEDLOCK: Russian President Vladimir Putin threw a boulder into the pond with the invasion of Ukraine, and the ripple effects will have lasting repercussions. The short-term impetus globally is one of getting as much LNG as possible to Europe. Competition for supply will intensify with Asia, and high price volatility will be the norm for a couple of years at least. This will stimulate investment in new supply, but since the average time to construct U.S. export capacity is seven years, anything that comes online in the next couple of years will be what is already under construction. The major X-factor that determines how extreme price volatility gets will be demand from China.

A natural-gas pipeline facility in Lubmin, Germany, which is struggling with the effect of the war in Ukraine on gas supplies from Russia.

Photo: Markus Schreiber/Associated Press

WSJ: So what’s next for natural gas? Let’s start with the near-term outlook.

MS. JAFFE: In the short run, the energy market is facing an unprecedented natural-gas supply shock. The market loss of natural gas no longer being shipped by pipeline from Russia to Europe is so large it is as if 15% to 20% of the total volume of globally traded LNG disappeared overnight. Russian gas increasingly sits underground with no physical outlet for its previous pipeline exports to Europe. Roughly 40 million tons a year of future LNG sourced from previously greenlighted Russian projects are also off the table for now. This raises the prospect of persistent high prices for natural gas for importing countries, sparking new questions about whether natural gas is a secure and affordable fuel.

Kenneth Medlock

Illustration: WSJ

DR. MEDLOCK: In the U.S., gas is still a very important balancing fuel in power generation, and likely will remain so for the near term. As electrification continues its inexorable climb, more gas will be directed into the power sector. This will complement renewables and help continue to push out coal. 

DR. STOKES: I don’t see gas as a complement to renewables in the short or long term. We need a full-blown paradigm shift to achieve our U.S. climate goals on time, including 80% carbon-free electricity this decade. So in the short term, we should expect to see a slowdown in new fossil-gas infrastructure in both the U.S. and Europe. In the U.S. electricity sector, there is currently around 90 gigawatts of proposed new gas capacity. Building these plants isn’t compatible with limiting warming to 1.5 degrees Celsius or in line with President Biden’s climate goals. And the Inflation Reduction Act passed by Congress last year, [which includes generous tax breaks for renewable-energy projects] should reduce the business case for them.

WSJ: What about the longer term? What role do you see natural gas playing in the U.S. and globally over the next decade or two?

MS. JAFFE: Up until recently, natural gas was hailed by its proponents as an environmentally friendly, increasingly affordable fuel forecast to be in ample supply, freer from geopolitical interdiction than oil or metals. The energy shock calls that into question at a time when improved understanding of its environmental performance has knocked it out of favor with a rising number of constituencies. Its environmental problems open new questions about whether investment in U.S. export facilities growth can find sufficient finance. 

Leah Stokes

Illustration: WSJ

DR. STOKES: I agree. Americans are realizing how harmful gas is for their health and the environment, not to mention its national and energy security risks. It’s clear that we cannot rely on gas to power our homes or electricity system in the long term. Particularly with methane leakage, it’s clear that fossil gas is a bridge to nowhere. In the U.S., we are starting to see a movement away from gas on the demand side, in homes and other buildings. In 2022, heat pumps outsold gas furnaces. In California, Gov. Gavin Newsom has committed to no new gas appliances being sold after 2030 and more than 50 cities have banned gas in newly constructed buildings.

DR. MEDLOCK: Environmental concerns about natural gas are real, but ultimately addressable. Its long-term viability is conditional on measured environmental performance, which is why we are seeing the emergence of various certification efforts [that aim to identify gas that has been produced and delivered in ways that reduce methane emissions]. Longer term, natural-gas use will evolve and it will become a hydrogen enabler.

WSJ: What impact will passage of the so-called Inflation Reduction Act, known as the IRA, have on natural gas and its rival, renewables?

DR. STOKES: We’re going to see with the IRA that federal policy can really speed up decarbonization. Dozens of new and existing programs will invest hundreds of billions of dollars in clean technology—and since much of the funding in the IRA comes through uncapped tax credits, spending could actually top $1 trillion. Renewable energy sources will become the lowest-cost options.

DR. MEDLOCK: The IRA is substantial, but it isn’t clear the impacts are so heavily lopsided toward renewables. All low-carbon technologies need fully developed supply chains to grow to the size lawmakers anticipate. In certain cases, natural gas plays an explicit role in low-carbon energy options, such as the making of hydrogen, load balancing on systems with high renewables penetration and fuel-switching from coal. In each case, existing natural-gas infrastructure can be leveraged. This has a lot to do with why I see a longer runway for gas to remain a significant part of the world’s energy mix.  

An LNG facility in Louisiana. The so-called Inflation Reduction Act is ‘a mixed bag’ for U.S. LNG, says Amy Myers Jaffe of NYU.

Photo: Martha Irvine/Associated Press

MS. JAFFE: The IRA financing is a mixed bag for U.S. LNG. On the one hand, the industry is now much more serious about carbon capture and storage projects under the IRA legislation than ever before, and announcements have become more forthcoming. But when one looks at the historically high level of public funds being made available under the IRA legislation, developers have to consider the three-to-five year window that it takes to bring any kind of large energy project online and ask themselves: “When I get to year five and my new energy facility is coming online and can operate for 20 to 40 years, what kind of energy will I want to be selling over the life of my asset?”

WSJ: Will hydrogen produced from natural gas allow gas to retain its position in the energy mix? What applications are ideal for it?

DR. MEDLOCK: Hydrogen’s real growth opportunities, at scale, are in existing applications, which are industrial-focused. And in areas where there is already supporting infrastructure, which also happens to be heavy industry. The other sector where growth potential exists is heavy, or freight, transportation. These are fixed routes with easily identifiable points for refueling. These applications will carve a path for natural gas. The path to residential or commercial use, on the other hand, is arduous because there is a lot of infrastructure build-out required at small scale, which means high per-unit costs. That is a difficult hurdle, particularly when electricity can fill the void with lower fixed costs.

DR. STOKES: Hydrogen technology might have future potential, but right now it’s an expensive and inefficient mixed bag. The production of hydrogen is associated with high conversion losses. Alternatively, an electric heat pump is six to 12 times more efficient than a hydrogen fuel cell. No commercially available power-plant turbines can burn pure hydrogen, so to my knowledge, with the technology available right now, even power plants with access to green hydrogen will continue to burn a mixture of hydrogen and fossil gas. Hydrogen in buildings also creates safety risks throughout the existing natural-gas infrastructure system because of the difference in chemical properties between hydrogen and methane. 

MS. JAFFE: My sense is that hydrogen generated from natural gas will face multiple hurdles. I agree with Leah that it could be a very slow process to change end-use equipment across people’s homes and businesses. That has made, as Ken suggests, heavy industry a targeted sector to decarbonize using hydrogen or a hydrogen-natural-gas mix, since getting very high heat with electricity is both difficult and expensive. But even if hydrogen can get beyond the safety fears—almost every energy source we use has risks of fire and explosions, including batteries—gaseous hydrogen will meet similar barriers to fossil natural gas: At what rate is it leaking during transport? Is its combustion free of nitrogen oxides? And can resulting water-vapor emissions from transport usage be controlled at a safe level?

Mr. Eaton is a reporter for The Wall Street Journal in Houston. Email him at collin.eaton@wsj.com.