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Glossary · Energy industry & energy transition

Natural gas

natural gas Glossary Energy power system methane gas-fired power plant

Natural gas is a fossil energy source that consists mainly of methane and is extracted from underground deposits. It is used in households and buildings for heating, in industry as a fuel and as a chemical feedstock, and in power plants to generate electricity. In the electricity system, natural gas is important above all because gas-fired power plants are technically easy to control. They can supply electricity when wind and solar power are not sufficient or when additional generation is needed at short notice.

Energy quantity, net calorific value and gross calorific value

A gas meter measures a volume in cubic metres. However, what is billed and traded is energy, that is, kilowatt-hours, megawatt-hours or terawatt-hours. For household bills in Germany, the following formula generally applies: measured volume times conversion factor (Zustandszahl) times gross calorific value. The conversion factor converts the measured volume to a standard state of pressure and temperature. The gross calorific value indicates how much energy one standard cubic metre contains in the respective network area. As a rough rule of thumb, one cubic metre of natural gas corresponds to about 10 to 11 kilowatt-hours. H-gas, which is richer in energy, has a higher value than L-gas, which contains a higher share of nitrogen and other gases.

The difference between net calorific value and gross calorific value is important. The net calorific value describes the heat released during combustion if the resulting water vapour remains gaseous. The gross calorific value additionally includes the heat of condensation of this water vapour. For natural gas, the gross calorific value is roughly 11 percent higher than the net calorific value. Condensing boilers cool the flue gas enough that part of this heat of condensation is used. Gas bills usually state gross-calorific-value kilowatt-hours, whereas power plant efficiencies are often based on the net calorific value. Anyone comparing figures should therefore always pay attention to the reference basis.

For the electricity system, the distinction between energy and power is also crucial. A gas quantity in terawatt-hours says nothing about how much power plant capacity in gigawatts is available at a given point in time. Conversely, the installed capacity of a gas-fired power plant says nothing about how much gas it actually consumes in a year.

Methane, natural gas and related gases

Depending on its origin, natural gas contains not only methane but also ethane, propane, nitrogen or carbon dioxide. Before being fed into the gas grid, it is processed so that it meets the technical requirements. Relative to its energy content, methane contains less carbon than coal or oil. Per kilowatt-hour of fuel, natural gas produces roughly half to three fifths of the CO₂ of lignite or hard coal. Because modern combined-cycle gas power plants also achieve high efficiencies, direct emissions per kilowatt-hour of electricity are significantly lower than for coal-fired power plants. For this reason, natural gas was long regarded as a comparatively low-emission fossil energy source.

This assessment remains incomplete if one looks only at the chimney. Methane itself is a potent greenhouse gas. Over 20 years, it is many times more potent per tonne than CO₂, and over 100 years it is still about thirty times as potent. If methane escapes during extraction, processing, transport or distribution, the climate balance of natural gas deteriorates considerably. A fair assessment therefore depends on the entire supply chain, not just on the efficiency of the boiler or power plant.

In the EU, Regulation (EU) 2024/1787 on the reduction of methane emissions in the energy sector has applied for this purpose since 4 August 2024. Companies in the oil and gas sector must measure their methane emissions at source level and at site level, have them independently verified and report them. In addition, there are obligations to detect and repair leaks, as well as restrictions on venting and flaring of gas. Importers must also provide information on supply chains outside the EU. This is significant because, according to the regulation, the EU imports around 90 percent of its fossil gas. The obligations take effect in stages. How strict the requirements for imports ultimately turn out to be depends, among other things, on implementing and delegated acts that are still to follow.

Natural gas must be distinguished from related gases. Biogas is produced by the fermentation of organic matter and, besides methane, usually contains a large amount of carbon dioxide. Biomethane is processed biogas of natural gas quality that can be fed into the gas grid. Liquefied natural gas, LNG for short, is not a separate energy source. It is natural gas that has been cooled to about minus 160 degrees Celsius and thereby liquefied so that it can be transported by ship. Hydrogen contains no carbon and behaves technically differently from methane. It can replace natural gas in certain applications, but only if installations, networks, storage facilities and safety rules are adapted.

Consumption and supply in Germany

According to data from the Bundesnetzagentur (Federal Network Agency), Germany consumed around 864 TWh of gas in 2025, 2.2 percent more than in the previous year. That was about 12 percent less than the average of the years 2018 to 2021. In this statistic, 40 percent is attributable to household and commercial customers and 60 percent to the industry group. According to the market data classification, this group comprises large, metered consumers, including power plants. The BDEW (German Association of Energy and Water Industries), using preliminary data, arrives at about 875 TWh. Of this, around 296 TWh are attributable to industry and mining and around 265 TWh to private households. The remainder is distributed among commerce, trade and services as well as electricity and heat supply. The largest part of natural gas is thus not used for electricity but for heat and in industry.

Germany produces only little natural gas of its own, about 34 TWh in 2025. In addition, there were around 10 TWh of biogas fed into the grid. Imports were provisionally about 1,031 TWh, part of which was forwarded to neighbouring countries. Around 106 TWh came into the country via the German LNG terminals, according to BDEW figures overwhelmingly from the USA. Natural gas is therefore above all an import and infrastructure issue: production, pipelines, LNG terminals, storage facilities, long-term supply contracts and the rules of the EU internal market determine how available and how expensive gas is.

Gas storage facilities mainly balance out seasonal fluctuations: in summer gas is stored, and in winter the high heat demand is also met from storage. The EU gas storage rules of 2022 were extended in 2025 until the end of 2027. The filling target of 90 percent remains in place, but can be reached at any point in time between 1 October and 1 December. Deviations are permitted under difficult market conditions. In Germany, the Gasspeicherfüllstandsverordnung (Gas Storage Fill Level Ordinance) prescribes differentiated targets for 1 November: 80 percent in the standard case and 45 percent for several individually named porous-rock storage facilities. Across all storage facilities this amounts to about 70 percent. For the electricity system this is indirectly important, because gas-fired power plants only provide reliably dispatchable generation if the gas supply is also secured.

The role of natural gas in the electricity system

Gas-fired power plants can be ramped up and down comparatively quickly. Simple gas turbines are suited to short operations of a few hours per year. Combined-cycle gas power plants achieve higher efficiencies and tend to run over longer periods. Plants with combined heat and power generate electricity and heat at the same time. They play a role above all where district heating networks, industrial processes or large building complexes are supplied.

With the expansion of wind energy and photovoltaics, the task of natural gas in the electricity sector is changing. Previously, gas-fired power plants ran in base, medium or peak load depending on fuel prices and the power plant fleet. In a system with a lot of renewable electricity, they are increasingly used when the residual load is high. This is the electricity demand that remains after feed-in from wind and sun has been subtracted.

An additional gas-fired power plant therefore does not automatically mean high gas consumption. A power plant first of all provides capacity. How much gas it actually burns depends on operating hours, efficiency, gas and CO₂ prices, wind and solar generation, and market rules. For security of supply, a plant can be valuable even if it runs only rarely. For the climate balance, by contrast, what counts is how much electricity it actually generates and how much gas it burns to do so.

Natural gas price, electricity price and market rules

Natural gas influences the electricity price above all when gas-fired power plants set the price on the power exchange. In the European day-ahead market, the merit order principle applies: the power plants' bids are sorted by their short-run marginal costs, that is, primarily fuel and CO₂ costs. The last bid still needed to meet demand determines, within a bidding zone, the uniform price for all accepted bids in the respective time period. If a gas-fired power plant is needed, rising gas prices can drive the electricity price up significantly. The 2022 energy crisis showed this.

However, the electricity price does not always follow the gas price. In hours with a lot of wind or solar power, other plants often set the price, or prices even turn negative. Grid bottlenecks, the availability of power plants, CO₂ prices, the level of demand and cross-border electricity trading also affect price formation. The gas market and the electricity market are thus indeed connected, but how strongly depends on which power plants are running at the time.

Common oversimplifications

  • Natural gas is clean energy: Combustion produces less CO₂ than coal, but natural gas remains fossil. If methane losses in the supply chain are high, the advantage over coal also shrinks. The climate impact depends on production, transport, leakage, combustion and on how long the installations are used.

  • A bridge function without end: Natural gas can help replace coal-fired power plants and back up fluctuating generation from renewable sources. However, this does not imply an unlimited role for new gas infrastructure. Pipelines, terminals, power plants and heating systems are depreciated over long periods. If they are designed for permanent utilisation, cost structures and interests arise that make the phase-out more difficult. A power plant that runs only a few hours per year, by contrast, earns little from kilowatt-hours sold. It may need other revenue sources for firm capacity, such as a capacity market or tenders.

  • Natural gas equals climate-neutral gas: Biomethane, synthetic methane or hydrogen can replace certain fossil applications. However, their available quantities, costs and conversion losses differ greatly from today's natural gas. For synthetic methane, hydrogen is first produced using electricity and is then combined with carbon to form methane. Every step costs energy. For many applications it is therefore more efficient to use electricity directly. Climate-neutral gases are expected to be particularly valuable where direct electrification is technically difficult or very expensive.

Natural gas between heat, industry and electrification

Gas heating in buildings, process heat, steam generation and chemical feedstocks make natural gas an energy source that links several sectors. Changes in the electricity system therefore affect gas demand but do not fully explain it. The consumption of households and commerce depends strongly on the outside temperature: it is low in summer and high during the heating season.

Electrification shifts these relationships. If buildings are heated with heat pumps, gas consumption in the heat market falls while electricity consumption rises. In energy terms this is no step backwards, because a heat pump turns one kilowatt-hour of electricity into several kilowatt-hours of heat. At the same time, the demands on electricity grids, flexibility, load management and generation during cold Dunkelflauten (periods of low wind and solar output) increase. Gas demand can therefore fall while firm capacity remains important in individual hours.

In industry, replacement is more difficult. Natural gas delivers high temperatures, is easy to control and serves as a feedstock in chemistry. Some processes can be electrified, others need hydrogen, biomethane, synthetic gases or entirely new processes. Replacing natural gas in industry therefore rarely involves just a different fuel in the same boiler. Often, plant concepts, supply chains, investment cycles and location decisions change.

Natural gas is therefore not a simple transitional fuel with a fixed place in the future energy system. It is technically flexible, economically closely interwoven with other markets and limited in terms of climate policy. For the electricity system, the key point is the distinction between gas as a quantity of energy burned and gas-fired power plants as available capacity. Anyone who separates these two things can better judge what role natural gas actually plays for security of supply, electricity prices, emissions and the transformation of the energy infrastructure.

Sources

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Edited by eCMS on 11.11.2026 19:47

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