Natural gas prices and renewable energy capital costs will determine the future electric generation mix in Asia, the continent that’s expected to account for half of the world’s energy consumption by 2050, according to the Energy Information Administration (EIA).

EIA released its projections for the Asian energy market Wednesday as part of its updated International Energy Outlook (IEO). The 2020 IEO lays out a range of scenarios that could dramatically reshape the mix of energy resources in Asia, with natural gas prices expected to factor heavily into the equation as lower-carbon resources compete to displace coal.

“In China, the country’s energy policies limit growth in coal-fired generation, which can be further affected by changes in renewables cost assumptions and natural gas prices,” EIA’s report found. “Decreases in natural gas prices produce the largest changes in the generation mix. Natural gas is relatively insensitive to changes in renewable costs in China, and the largest driver of natural gas generation remains natural gas fuel prices.”

Under scenarios in which natural gas prices are low and renewable capital costs are high or near the midpoint of EIA’s modeled range of outcomes, natural gas could overtake coal and renewables in China’s electricity generation sector by 2050.

Under the IEO low natural gas price scenario, delivered prices to China would top out at $8.14/MMBtu by 2050, while the agency’s reference case would see prices rise to $12.86. Under a high natural gas price scenario, EIA’s modeling shows a delivered natural gas price to China of $18.17 in 2050.

Such a high natural gas price would lead to a very different outcome for electricity generation in China, opening the door for renewables to take up a larger share of the power stack through 2050, according to EIA.

“Although low natural gas prices suppress additional penetration of renewables, a combination of low natural gas prices and low renewable costs drive down coal’s share of the generation mix to 22% by 2050…down from 30% in the reference case,” EIA wrote. “With natural gas prices at either reference or high levels, solar generation grows when renewable energy capital costs are low and becomes the predominant source of electricity generation in 2050.”

Under a scenario featuring high natural gas prices and low renewable costs, solar would grow at an annual rate of 8.2% from 2019 to 2050, according to the agency.

Meanwhile, the outlook differs somewhat for other Asian countries not in the OECD, aka the Organization for Economic Cooperation and Development.

“Similar to China, coal is the predominant fuel used for electricity generation in other non-OECD Asia” countries, EIA said. “Natural gas and hydro, however, are also significant contributors to the current generation mix. In this region, without a single overriding emissions policy, the analysis shows a three-way competition between coal, natural gas and renewables.”

Due to its abundance, coal is expected to grow in non-OECD Asian countries outside of China except in scenarios featuring low natural gas or renewable costs.

“Without a unitary emissions policy and with closer natural gas and coal fuel prices than in China, natural gas patterns in this region vary more across analysis cases,” EIA said. “In the lower natural gas price cases, the 2050 share of electricity generation from natural gas generators ranges from 36% to 58%, making it the predominant fuel for electricity use.”

A low natural gas price case would see total natural gas-fired electricity generation increase by 239% over the comparative reference case in 2050, according to EIA.

On the other hand, “in all high natural gas price cases, natural gas generation steadily declines throughout the projection period, and higher levels of coal generation generally displace it, except when renewable costs are low.”

Costs will shape future energy trends in Asia, but as an imported fuel the fate of natural gas would inevitably be tied to policy.

“With the growth of imported natural gas, a tension exists between relying on this internationally-sourced fuel and using domestic resources, which include coal and renewable fuels such as wind and solar,” EIA wrote. “To address this and other factors, some countries have developed energy diversity policies that value localized sources of electricity supply.

“In addition, a number of countries have adopted other policies to address emissions. As a result, market costs are an important, but not the only, consideration in a region’s electricity generation mix.”

This year’s IEO carries over the reference case from the IEO 2019 report, part of a two-year development cycle for its longer-term projections of international energy dynamics. Thus, the IEO 2020 does not reflect impacts from the emergence of the Covid-19 pandemic in 2020.