
| A jogger runs past the Los Angeles Department of Water and Power's Scattergood natural gas plant. |
The natural gas boom that has helped push the U.S. coal industry to the brink of collapse faces a looming threat from low-cost renewables and energy storage systems, which are poised to strand billions of dollars of gas investments within 15 years, the Rocky Mountain Institute said Sept. 9.
By 2035, it will be more expensive to continue operating approximately 71% of the country's planned new gas capacity than to build equivalent clean energy portfolios, RMI, which advocates for clean energy, said in a pair of reports. With around $68 billion worth of new gas plants and $31 billion of pipelines proposed or planned for construction in the next five years, the risk of stranded assets is "significant," the group said.
"Gas is the new coal, and that's not a good thing," said Mark Dyson, a principal in RMI's electricity practice.
Parts of the power industry have started taking note of such warnings. Indiana utility regulators in April denied a proposal by Vectren Corp. to replace coal-fired power plants with a natural gas facility, due in part to "the risk it could be a stranded asset as renewables grow."
Elsewhere, utilities that have set aggressive targets to cut carbon dioxide emissions continue to invest in natural gas infrastructure in a bet that the investments will pay off before the assets become uneconomic, said Amanda Levin, an energy analyst at the Natural Resources Defense Council. If those companies are wrong, the power industry will find itself in the same position it is in now trying to find a way to "equitably transition" away from coal, she said.
"If we do approve all those ... new gas plants, it's likely that they're not going to be economic to operate, but there are still going to be quite a bit of costs that haven't been recovered in regulated markets because they've been planned to be amortized over 40, 50 years, and it's only been 15," said Levin, who contributed to an RMI report on the outlook for gas pipelines.
A growing share
According to RMI, nearly all combined-cycle gas plants will be "economically precarious well before they are fully paid off." At least $90 billion worth of new gas-fired power plants are planned for construction during the next 10 to 15 years, the study found.
RMI's findings about the cost-competitiveness of natural gas are in line with an analysis by BloombergNEF, which said that by the late 2020s it will be cheaper to build wind and solar power plants than to continue operating standard combined-cycle gas turbines. However, without a cheaper way to balance intermittent renewables, low-cost gas supplies should keep existing plants running, Seb Henbest, head of Europe, the Middle East and Africa at BloombergNEF, said in June.
"Natural gas has some kind of irreplaceable purposes in our energy and manufacturing sector, and it has a lot to offer in terms of power generation and is expected to grow in its share of power generation even as renewables grow both domestically and worldwide," Steven Kean, CEO of pipeline owner Kinder Morgan Inc., said Sept. 4 at an investor conference.
Daphne Magnuson, a spokeswoman for the Natural Gas Supply Association, a Washington trade group that represents natural gas producers and marketers, rejected RMI's warnings.
"We see natural gas strongly supporting renewable energy now and in the future energy mix," Magnuson said. "Far from being stranded, natural gas infrastructure is an important part of the path to a better environment and a greener energy future."
