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Cheap Renewables Could Make 90% of Proposed Gas Power Plants — and Many Pipelines — Obsolete by 2035

Cheap Renewables Could Make 90% of Proposed Gas Power Plants — and Many Pipelines — Obsolete by 2035 thumbnail

There’s one big reason that analysts say America’s electrical power should soon run on clean energy sources like wind and solar rather than fossil fuels like coal and natural gas: your power bill.

A lot has changed when it comes to power generation in the past 16 years. In 2003, if you flipped on a light switch most places in the U.S., odds were you were setting into motion the final link in a chain of events that started in a coal mine or a mountain-top removal project. The U.S. got more than half of its electricity from burning coal that year, followed distantly by nuclear and gas. Coal had a long-standing reputation for being a cheap, if dirty, way to get things done.

By now, natural gas — made cheap by the rush to drill shale wells and with its own dirty reputation from globe-warming methane leaks and fracking pollution — has overtaken coal as the primary source of power in America.

But that isn’t the biggest change underway when it comes to where our electrical power will come from just 16 years from now.

That shale revolution, like coal, could see its economic advantage swept away by 2035, as renewable energy choices offer electrical utilities options that not only produce no climate-changing exhaust but are also rapidly falling in price.

Big changes, in other words, are just getting under way. And everyone who pays a power bill has a stake in understanding how their power company, their government regulators, and the companies that seek to make profits from the gas and power industries plan to respond. That stake is linked not only to climate change and its enormous associated costs, but also to the direct price tag of generating the electricity that powers your lights, fridge, and phone.

A pair of reports released this week by the Rocky Mountain Institute (RMI), a nonprofit that supports the transition away from fossil fuels, outlines some of these ongoing changes.

The analysis presents compelling evidence that 2019 represents a tipping point,” RMI concluded, “with the economics now favoring clean energy over nearly all new U.S. gas-fired generation.”

That, however, assumes that utilities, regulators, and investors all respond to rapidly changing market dynamics and build the right kind of infrastructure in time — with tens of billions of dollars on the line.

Look Ma, No Bridge

While renewables’ market share has grown rapidly, they still represent the smallest slice of America’s power generation. The U.S. Energy Information Administration (EIAreports that in 2018, America got 35.1 percent of its power from natural gas, 27.4 percent from coal, 19.3 percent from nuclear, and 17.1 percent from a mix of renewable energy sources including hydroelectric, wind, and solar.

For the past decade, natural gas industry groups have argued, often successfully, that natural gas, which releases roughly half as much climate-changing carbon dioxide pollution as coal when burned for power, should serve as a “bridge” from coal power to a distant future of renewable energy.

That’s despite the fact that in 2011, scientists at Cornell University took a closer look at the gas industry’s pollution, and particularly its pollution of another greenhouse gas, methane. Burning natural gas instead of coal for power, they found, could be worse for the climate than coal because of the industry’s severe issues with methane pollution throughout the supply chain. Their early warnings have since been bolstered by studies from other scientists.

But a rush to drill for shale gas, spurred by fracking and horizontal drilling, drove both gas prices lower and a historic shift in America’s power markets, with natural gas displacing coal as the primary source of American electricity on a monthly basis for the first time in 2015.

Power plants, it turns out, have been buying and burning much of that extra gas production unleashed by fracking.

Gas-fired power plants have driven over 90 percent of the growth in total U.S. gas demand, as use in other sectors of the economy has plateaued over the same period,” RMI wrote. “At the same time, natural gas transmission pipeline capacity to bring gas to power plants and customers in other sectors has increased by over 60 percent since 1997, as pipeline developers have invested over $115 billion in new intra- and interstate projects.”

But now, some electrical utilities have begun taking a bypass, skipping the gas “bridge” entirely and moving straight from coal to renewables.

Solar panels
Solar and other renewable energy sources are increasingly competitive with natural gas for electric power in the U.S. Credit: Pixabay

In the Midwest, Consumers Energy and Northern Indiana Public Service Company are planning to retire most or all of their remaining coal assets and replace them with new [wind, solar, storage] and demand-side resources, avoiding any investment in new gas-fired generation and saving their customers billions of dollars,” RMI wrote. “In Colorado, Xcel Energy will retire two coal plants ahead of schedule and replace them with [wind, solar, storage] and demand-side resources, again avoiding any investment in new gas and while delivering savings to their customers.”

That path has the potential to become a lot more traveled, RMI suggests.

“I don’t think there’s a credible story that [the price of natural] gas is going to go down,” Mark Dyson, co-author of both RMI reports, told Utility Dive. “And it’s not clear that it’s going to go up either, but even with it at its current prices, renewables are starting to undercut it.”

Time Is of the Essence — for Investors and Regulators

Shifting to renewable energy rapidly, the RMI report on power plants found, could save power customers more than $29 billion, while cutting carbon pollution by 100 million tons a year. Those avoided carbon emissions are equal to roughly five percent of the power sector’s yearly carbon pollution.

Timeline of historical and projected costs of clean energy vs. natural gas power plants in the Northeast
Historical and projected evolution of clean energy portfolio (CEP) costs in an example in the U.S. Northeast Credit: Rocky Mountain Institute

But right now, the report suggests, the market may be steering in the opposite direction. “There are at least $90 billion worth of new gas-fired power plants planned for construction in the coming 10–15 years, along with over $30 billion of investment associated with gas transmission projects,” RMI wrote. “We find that [clean energy options] are lower cost than 90 percent of proposed gas-fired generation at the proposed plant’s in-service date.”

By 2035 — just 16 years from now — it will cost more to keep 90 percent of the proposed new gas power plants in the U.S. running than it would cost to install a mix of new wind, solar, conservation, and storage projects that can offer the same performance. Currently, utilities have 88 gas-fired power plants in planning stages nationwide. “Our approach forces [clean energy portfolios] to match the grid services of gas generation,” RMI wrote.

If planned [gas] projects are built,” the RMI report says, “investors will likely face tens of billions of dollars’ worth of stranded assets in the 2030s, as running these gas plants quickly becomes more expensive than building new [clean energy portfolios].”

That tipping point would have a cascading series of impacts, both on how American utilities — and their regulators — operate as well as the degree to which we heat the world’s climate.

As this new economic reality sinks in, clean energy advocates say utility regulators, who are charged with protecting American power consumers, must reconsider not only how the current rules for the power industry will apply, but also the assumptions that have been baked into those rules.

Pipelines to Nowhere

It’s a fight that’s coming not only to hearings over new power plants, but also to the battle over the rush to build new natural gas pipelines, including some of the country’s most controversial pipeline projects.

Our story for gas plants is, if you build it, they won’t run — they won’t run at their expected capacity factors,” RMI‘s Dyson told Bloomberg, referring to the percentage of time that a power plant generates electricity. “And that filters down to pipelines, too.”

In turn, that filters down to how pipeline regulators approach a key question, which the law requires be answered before regulators authorize construction: Is the pipeline needed?

Natural gas pipeline construction site in Pennsylvania
A natural gas pipeline warning at a Pennsylvania pipeline construction site. Credit: Ashley Braun, DeSmog

Historically, as long as the pipeline developer has at least one company, even a corporate affiliate, that wishes to reserve capacity on the pipeline, FERC [Federal Energy Regulatory Commission] will find that the pipeline is required by the public convenience and necessity,” Gillian Giannetti, attorney with the Natural Resources Defense Council’s Sustainable FERC project told DeSmog. “But many other factors are relevant to whether we need to build a 40+ year asset that requires the taking of private property and has significant environmental and climatic concerns. Examples include demand projections, state policies, the existence of neighboring pipelines that might be able to handle the capacity, and more.”

RMI’s study only emphasizes the importance of taking an ‘all relevant factors’ approach to determining need,” she added. “We are in desperate need of a 21st century approach to determining whether a pipeline is needed.”

Peering into a Pipeline’s Future

In 2018, the Federal Energy Regulatory Commission indicated that it might revisit how its rules on pipeline authorizations work — but following the departure of Commissioner Cheryl LaFleur, a Democrat, in July, FERC currently only has three out of its regular five commissioners. Commissioner Neil Chatterjee, one of two Republican appointees, has previously said that he prefers to wait until the commission is fully staffed before rewriting the rules for pipeline certificates.

DeSmog has previously covered one open question facing this group of federal regulators, which relates to a little-noticed rule that critics say has incentivized pipeline overbuilding today.

FERC Commissioners Cheryl LaFleur and Neil Chatterjee
FERC Commissioners Cheryl LaFleur (second from left) and Neil Chatterjee (second from right). Credit: FERC, public domain

But other questions before FERC also could have significant implications for the power sector and the climate, including this one: How long does demand for a project need to last before federal regulators decide it’s needed?

The shifting economics of the gas industry — which arrive as shale gas producers are under pressures of their own — make existing legal questions take on new light.

Take, for example, the Atlantic Coast pipeline, a project that would cross West Virginia, Virginia, and North Carolina, and was originally projected to cost roughly $4.5 billion (a price tag which has spiraled up to roughly $7.5 billion as the project has run aground in court challenges, with Moody’s Investor Services downgrading the project to “credit negative” in February).

A report in January by the Institute for Energy Economics and Financial Analysis questioned the need for the entire project, predicting that demand for natural gas would be eroded by cheap renewables and observing that most of the companies planning to ship gas on the pipeline were actually affiliates of the pipeline’s own sponsors.

In July, 18 Virginia lawmakers wrote to FERC, urging the commission to suspend federal authorization for the pipeline, arguing that developers had failed to show the pipeline was neeeded.

That argument was potentially bolstered this week by the publication of a report focused on a proposed extension of the Atlantic Coast pipeline to Hampton Roads, Virginia. The report was sponsored by Mothers Out Front, an organization focused on fighting climate change.

Dr. Elizabeth A. Stanton, director of the Applied Economics Clinic and author of the report, concluded that the local utility, Virginia Natural Gas, had overestimated demand for natural gas in the region. She noted that the utility’s estimates were five times higher than projections by energy consulting firm Wood MacKenzie.

You have to go to five times higher” than those projections to reach the point where the pipeline makes economic sense, Stanton said, adding that four times wouldn’t cut it. And the prospect of competition from renewable energy sources and efficiencies could add weight to the argument that gas demand can be expected to shrink rather than grow.

Stranded Assets, Sunk Investments

But even assuming a pipeline is economic on the day it’s finished, federal regulators are currently reluctant to examine if and when that pipeline might become a stranded asset.

FERC does not require evidence that the pipeline will be needed for its entire projected lifespan,” explains NRDC‘s Giannetti. “The agreements upon which FERC typically relies often cover half or less of that lifespan.”

And the RMI reports make the case that approach can prove risky for power customers, who willl be left holding the bag for decisions made today.

The financial implications for gas pipelines, of clean energy out-competing gas power plants, are dire,” RMI’s pipeline report says, adding that the question is who will ultimately have to bear the costs of choosing wrong. “In many cases, captive customers of regulated gas and electric utilities ultimately bear the financial risks of investment today in assets — pipelines and power plants — that are likely to become uneconomic sooner than anticipated.”

Likely cost increases for new gas pipelines due to competition from clean energy in five U.S. regions
Likely cost increases for new gas pipelines due to competition from clean energy in five U.S. regions in 2035. Credit: Rocky Mountain Institute

RMI’s pipeline report focused on five regions — New England, the Mid-Atlantic, the Midwest, the Southeast, and New York state — including the states through which the Atlantic Coast pipeline will pass.

It finds that within 26 years, virtually all gas power plants will be economically obsolete in those states. “By 2045, only 3 percent of expected fuel use from proposed gas-fired power plants will remain economic within the focus regions,” RMI wrote.

Fossil fuel advocates historically found much success in arguing to regulators and consumers that, despite the harms from polluting our air, water, and climate, fossil fuels should be viewed as something of a necessary evil — and perhaps on balance, even a good thing, given the benefits that energy can provide.

But if RMI’s predictions prove to be on target and renewable energy continues the trend to becoming the cheapest power option, the industry and its backers will face a rapidly widening range of questions about the degree to which, whether good or evil, fossil fuels are necessary.

descmog blog

19 Comments on "Cheap Renewables Could Make 90% of Proposed Gas Power Plants — and Many Pipelines — Obsolete by 2035"

  1. Dredd on Sat, 14th Sep 2019 8:17 am 

    Where da heat at (In Search Of Ocean Heat – 7)?

  2. diemos on Sat, 14th Sep 2019 9:23 am 

    Wow, A story that completely ignores intermittency and storage.

    What a surprise.

  3. Cloggie on Sat, 14th Sep 2019 9:39 am 

    “Wow, A story that completely ignores intermittency and storage.”

    You need new glasses:

    “By 2035 — just 16 years from now — it will cost more to keep 90 percent of the proposed new gas power plants in the U.S. running than it would cost to install a mix of new wind, solar, conservation, and storage projects that can offer the same performance.”

  4. dave thompson on Sat, 14th Sep 2019 9:43 am 

    Yes of course if we ignore the laws of physics and thermodynamics wind and solar should work just……….FINE!

  5. Duncan Idaho on Sat, 14th Sep 2019 9:49 am 

    Charge and loot– some things the Fat Boy does well:
    U.S. deficit tops $1 trillion in 11 months, highest in 7 years – “Absent more responsible budgets, the deficit and interest costs will continue to grow rapidly, diminishing America’s future”

  6. twocats on Sat, 14th Sep 2019 10:15 am 

    Wind and solar are about 10% of electricity production. At what point does it start to stress the grid? 30%? Somewhere around there. The article is saying that in 16 years, when these gas facilities will be finished, if you had installed 20% renewables (wind/solar) it would be a cheaper option. Maybe you add some storage (pumped hydro, synthetic fuel production, hydrogen, heat sinks, batteries), maybe that gets you to 40% wind/solar. Then another 8% conventional hydroelectric (although renewable doesn’t suffer from intermittency). So you are at almost 50% from renewables.

    That should be the goal 16 yeras from now, and it seems pretty doable.

    And that point you start seeing natural gas plants as supplementary to renewables, so maybe you are building smaller plants that provide baseload along with existing coal and nuclear.

    Then in 15 years, with more research into batteries and other storage, maybe the renewable numbers can be even stronger.

  7. twocats on Sat, 14th Sep 2019 10:16 am 

    Germany is aiming towards 80% renewables and we are bitching about 50% renewables. Americans are a bunch of pussies.

  8. Davy on Sat, 14th Sep 2019 10:52 am 

    Who is bitching? Not all of us

    Many Germans are bitching too

  9. Davy on Sat, 14th Sep 2019 10:54 am 

    50% renewables is doable if we have a behavioral change. This change is more than with the brown conservatives. It is with the rich fake green liberals also who just want more fancy gadgets to buy and play with

  10. Cloggie on Sat, 14th Sep 2019 11:26 am 

    Hey taxi!

    First successful autonomous flight today with “Volocopter” flight taxi in Stuttgart, Germany.

    Cooperation between Daimler and Geely-China, but company Volocopter has the majority shares.
    85 million capital.

  11. dave thompson on Sat, 14th Sep 2019 11:45 am 

    Stop burning coal and the particulates fall out of the atmosphere within days. Look up the global dimming effect. AKA global masking effect.

  12. Davy on Sat, 14th Sep 2019 12:03 pm 

    Did I mention I’m voting liberal in the next election? All of my fancy non REAL Green fancy gadgets? Or how’s about my REAL fancy private jet?

    I think I might of.

  13. Harquebus on Sat, 14th Sep 2019 12:27 pm 

    Yeah, right. TANSTAAFL.

    “Manufacturing wind turbines is a resource-intensive process. A typical wind turbine contains more than 8,000 different components, many of which are made from steel, cast iron, and concrete.
    One such component are magnets made from neodymium and dysprosium, rare earth minerals mined almost exclusively in China, which controls 95 percent of the world’s supply of rare earth minerals.”
    “There’s not one step of the rare earth mining process that is not disastrous for the environment.”

    “Any examination of the global impact of renewable energy-harvesting technologies will quickly dispel any belief that these offer a solution – or even mitigation – for the catastrophe that is unfolding. Global dependence upon fossil fuels has barely moved (from 87% to 86%) in the last two decades.”
    “the mining waste heaps of Europe and North America contain plenty of rare earths that could be just as easily refined as those in China. The only difference is that the Chinese state is willing to tolerate environmental destruction on a scale that would be unacceptable in the west.”

  14. Chrome Mags on Sat, 14th Sep 2019 1:39 pm 

    “Stop burning coal and the particulates fall out of the atmosphere within days. Look up the global dimming effect. AKA global masking effect.”

    True enough, dave. I think it’s estimated at approx. 1C added without dimming, which takes us over the vaunted 2C threshold.

    However, what’s the choice? If we keep pumping GHG’s into the atmosphere to maintain dimming, then we lock ourselves into a dead end.

    If we transition to a much higher percentage of renewables, dimming fades, world temp. goes up but the carbon levels begin to level off and at some point begin declining.

    What could be done is; if dimming falls away, world temps go up and as a temporary measure we have to use a geo-engineering technique of cloud brightening (to reflect more energy), then as carbon levels drop, the C.B. can be tapered off.

    It may also be necessary to sequester carbon from atmosphere to reduce the chances of over acidifying the oceans as well as avoiding runaway GW, which can be argued is in the early stages (permafrost thaw & ice sheet volume decline), it’s just running slow enough now we still have some time to do something to avoid the worst of it.

    It’s a no brainer that people were going to use FF. It was just too easy an energy source not to use. But now we realize its like a person taking heroin. At some point the person passes from the addiction. We don’t want to take that same type of path, and since fusion hasn’t gotten up and going yet, we need to make the transition to renewables and tackle whatever storage etc. problems arise.

  15. dave thompson on Sat, 14th Sep 2019 1:47 pm 

    hey Chrome, Thanks for the input. At scale I have yet to hear or see any information that humans can geo-engineer our way out of this mess. Humans face a predicament in regards to global planetary biosphere disruption and over all temp rise. A predicament has no solution.

  16. Cloggie on Sat, 14th Sep 2019 2:00 pm 

    “China’s gambling on a nuclear future, but is it destined to lose?”

    In 2 years China will overtake France, the US in a decade.

  17. makati1 on Sat, 14th Sep 2019 7:17 pm 

    Some “renewables” reality:

    Myth 1. “Clean energy” is carbon neutral.
    Myth 2. “Clean energy” is inexhaustible because the sun will always shine and the wind will always blow.
    Myth 3. “Clean energy” does not produce toxins.
    Myth 4. “Clean energy” does not deplete or contaminate drinkable water.
    Myth 5. “Clean energy” does not require very much land usage.
    Myth 6. “Clean energy” has no effect on plant and animal life.
    Myth 7. “Clean energy” production has no effect on human health.
    Myth 8. People are happy to have “clean energy” harvested or its components mined where they live.
    Myth 9. No one is ever killed due to disputes over energy extraction or harvesting.
    Myth 10. One watt of “clean energy” will replace one watt from use of fossil fuels
    Myth 11. “Clean energy” is as efficient as fossil fuels in resource use.
    Myth 12. Improved efficiency can resolve problems of “clean energy.”
    Myth 13. Recycling “clean energy” machine components can resolve its problems.
    Myth 14. Whatever problems there are with “clean energy” will work themselves out.
    Myth 15. There Is No Alternative.

    “Every form of energy production has difficulties. “Clean, renewable energy” is neither clean nor renewable. There can be good lives for all people if we abandon the goal of infinite energy growth. Our guiding principle needs to be that the only form of truly clean energy is less energy.”

  18. Stephen Heins on Sat, 14th Sep 2019 7:31 pm 

    Look, Ma! Those stinking problems for renewables, wind and solar, have magically disappeared. We no longer have to worry about intermittency, storage, finance, technology, and distribution, thanks to DeSmog. Whew….

  19. DeFog DeSmogBlog on Sun, 15th Sep 2019 11:33 am 

    I stopped reading DeSmogBlog long ago; it’s just a forum for spreading green energy propaganda.

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