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US natural gas infrastructure investment increasingly risky: report


State policy, corporate behavior rapidly moving away from fossil fuels

Gas needed to satisfy global energy demand growth for decades: API, AGA

  • Author
  • Jared Anderson
  • Editor
  • Richard Rubin
  • Commodity
  • Electric Power Natural Gas

New York — Investors may be underestimating the risks associated with rapid US power sector natural gas infrastructure build-out that could be incompatible with long-term shareholder and societal well-being, according to report released Wednesday that was refuted by gas proponents.

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The report, "Natural Gas: A Bridge to Climate Breakdown," was produced by shareholder advocacy group, As You Sow, and nonpartisan policy think-tank, Energy Innovation.

"Renewables like wind and solar, complemented by flexible zero-carbon resources like storage and demand response, are already providing the same reliability services and energy as new natural gas plants at lower cost," Mike O'Boyle, director of electricity policy at Energy Innovation, said in a statement.

"New gas infrastructure is increasingly likely to become stranded — the natural gas 'bridge' must end now if investors want to avoid massive stranded asset cost risk," O'Boyle said.

The report contends that gas infrastructure proliferation contributes to "distinct risks" that threaten shareholder value, including investor portfolio risk, company-level physical risk, regulatory and technological transition risk, and reputational risk.

Natural gas had long been framed as a "bridge fuel" that could fill in renewable energy intermittency gaps, while supplying cleaner power than coal until renewable energy resources matured and could satisfy power demand without fossil fuels.

However, that narrative has shifted over the past few years as states and municipalities pursue 100% clean energy initiatives and environmental groups adopt more aggressive positions on cutting greenhouse gas emissions to address climate change.

State-level 100% Clean Energy Power Grid Commitments
Legislative Mandate
100% Renewable Energy
Washington DC*
100% Renewable Energy
100% Renewable Energy
Purto Rico*
100% Renewable Energy
New York
100% Clean Energy
100% Clean Energy
100% Clean Energy
New Mexico
100% Clean Energy
100% Clean Energy
Source: Energy Sage
* Washington DC is a Federal District, Purto Rico is a US Territory

Increasing gas consumption, including as a replacement for most of 2018's coal-fired power plant retirements as well as to supply power for incremental electricity demand, "now stands as an obstacle on the path to clean energy solutions," according to the report.

Greater focus has also been placed on life-cycle analysis with regard to gas emissions, including methane leaks along the value chain from gas production to end use.

2018 research suggests US methane supply chain emissions are likely close to 60% higher than previously estimated by the US Environmental Protection Agency, the report said, adding that this "leakage rate implies gas-fired plants emit closer to 75% of coal-fired plant emissions per-unit of energy."


The report's authors argue that underwriting the roughly 50 GW of new gas-fired combined-cycle plants projected to be built between 2019-2024, as estimated by the US Energy Information Administration, could be incompatible with legislative mandates to stop power sector GHG emissions.

Given the considerable level of clean energy commitments from states and municipalities, coupled with significant projected cost declines for clean alternatives, "these gas infrastructure assets will either become stranded or need to be retrofitted with "expensive and relatively unproven carbon capture" technologies to remain viable.

Another potential investment risk comes from "customer defection" where Community Choice Aggregation programs have emerged as a way for communities to access clean energy, while large corporations increasingly adopt 100% renewable or clean energy goals, the report said.

For example, over 200 companies, including Ikea, Apple, Facebook, and Google, have joined an initiative committed to procuring 100% renewable energy. And Climate Action 100+ is a global investor coalition with over $41 trillion in assets under management that engages companies to reduce emissions.

However, natural gas proponents point to the dramatic role the fuel has played in reducing US GHG emissions as coal-fired power plants have closed and they argue energy demand continues growing globally, creating a need for gas out as far as 2050.

"Increased use of natural gas is the single largest factor in [US] power sector emissions reductions reaching 25-year lows," a spokesperson for trade group American Gas Association said in an email.

Power sector demand for natural gas jumped 60% over the decade and gas-fired power generation went from meeting 24% of the nation's needs in 2010 to 38% in 2019, the spokesperson said.

US oil and gas trade and lobbying group American Petroleum Institute argues that gas still has a valuable role to play in the energy transition to cleaner fuels.

"While API hasn't thoroughly reviewed the study in question, global demand for both natural gas and oil continues to increase, and projections indicate that fossil fuels will provide more than 75% of growing global energy needs in 2050," spokeswoman Emily Smith said in an email.

"Natural gas continues to be the best source of clean energy to replace coal in power generation around the world and it is an indispensable partner to the growth of renewables," Smith said.

"It's also important to remember that surging American energy also is driving progress on climate goals; growing use of clean natural gas is the primary factor behind US success in reducing carbon dioxide emissions, more than any other nation," she added.

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