Natural gas will continue to grow in popularity as a source fuel for power generation in North America, but it still faces obstacles to catching on in other parts of the world, in large part because of disparate gas prices, according to a report by the World Energy Council (WEC).

Meanwhile, in a WEC survey of world energy resources, the rise of shale gas in North America was labeled one of several principal drivers to shape global energy supply and use over the past 20 years, with shale turning the continent “upside down.”

In a 48-page report released Tuesday, the WEC and project partner Bloomberg New Energy Finance found that gas currently represents about 22.6% of global electricity capacity, second only to coal (35.6%). Gas was also the second-highest source fuel for global power generation at 18%; coal was on top at 46%. The difference in capacity and actual burn has to do with the fact that as baseload, coal facilities are used more, while natural gas is more often used for peaking.

“Gas will continue to increase its share of the global electricity mix, particularly in North America, but the relatively high cost of LNG [liquefied natural gas] will constrain the growth of gas as a source of power in Europe, the Middle East and Asia,” the WEC said.

The WEC lauded combined-cycle gas turbines (CCGT) for power generation, stating they are cheaper, cleaner and easier to build than coal plants, and are a better investment in optimal economic conditions. Gas prices were the key factor, however, and since prices in the United States ranged from $3.00 to $4.00/MMBtu, CCGT plants were an attractive option.

“In Europe and Asia, however, the picture is somewhat different,” the WEC said. “Europe relies extensively on oil-linked contracts with Russian suppliers and imported LNG [liquefied natural gas] at $10.00-12.00/MMBtu — up to three times as high as U.S. domestic prices. Although the carbon pricing mechanism in Europe helps gas relative to coal, current carbon prices are nowhere close to the levels to achieve parity.”

The WEC said considering the high prices for gas and low prices for coal in Europe, carbon prices would rise above 40 euros ($53.96) per total carbon dioxide (tCO2) to equalize the cost of running gas and coal plants. Carbon prices are currently about five euros per tCO2 ($6.75/tCO2).

“In Asia, gas prices are even higher,” the WEC said. “Japan, for example, [has] no indigenous resources and imports its gas through expensive LNG cargos, which are typically priced at $16.00-18.00/MMBtu, some four times U.S. prices. These price differentials significantly affect the cost of generating power from gas plants. In Europe, even the most recently built CCGT plants are being mothballed due to the effects of high gas prices and competition from renewable and existing coal plants.”

According to the WEC, the levelized cost of electricity (LCOE) for newly constructed CCGT power generation was by far the lowest in the United States, at $61.00-69.00/MWh. The cost increased to $92.00-108.00/MWh in Australia, followed by $114.00-141.00/MWh in the United Kingdom and $148.00/MWh in Japan. The global average was $69.00/MWh.

In a separate 468-page survey of world energy resources, also issued Tuesday, the WEC predicted gas would continue to make a significant impact on the world energy stage because it is the cleanest of the fossil fuels, is abundant and flexible. The WEC also found the use of gas increasing along with CCGT — with a conversion efficiency rate of about 60% — and said conventional gas reserves had grown 36%, and production 61%, in the last 20 years.

“The exploration, development and transport of gas usually requires significant upfront investment,” the WEC said in the second report. “Close coordination between investment in the gas and power infrastructure is necessary.

“In its search for secure, sustainable and affordable supplies of energy, the world is turning its attention to unconventional energy resources. Shale gas is one of them. It has turned upside down the North American gas markets, and is making significant strides in other regions. The emergence of shale gas as a potentially major energy source can have serious strategic implications for geopolitics and the energy industry.”

The WEC said in 2011, annual gas production in North America totaled 901.6 billion cubic meters (bcm) while annual consumption was 861.5 bcm. Worldwide gas production was 3.51 trillion cubic meters (tcm) and consumption was 3.38 tcm in 2011.

According to the WEC, global gas production was projected to grow to 4.05 tcm by the year 2020, a 62% increase from 1993 when it was 2.18 tcm.

“The recent shale gas developments in the United States clearly demonstrate…the role of technologies,” the WEC said. “The enormous resources of shale gas have always been there, but it is only since the introduction of hydraulic fracturing [fracking] technology at an economically attractive price, that the gas market revolution has become a reality.”