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Trouble Ahead for Natural Gas?

Flaring fracked gas. Photo: Battenbrook, Wikimedia Commons, http://bit.ly/WC-flaring)

George Harvey, Green Energy Times

Each month, I look forward to posts on energy that come from the Sun Day Campaign (SDC). These posts have chronicled a story of the rise of renewable energy, analyzing reports from the Federal Energy Regulatory Commission (FERC) on energy infrastructure in the U.S. The SDC examines the contents, which is very fortunate for those who are interested, because the Sun Day Campaign’s analysis is very readable for ordinary people.

The most recent of these SDC reports has some very informative content. (http://bit.ly/FERC-Aug-2019) Addressing the issue of changes in the capacity in the coming three years, it says that not only is our nuclear capacity declining, but the overall capacity of fossil fuels is not increasing. And meanwhile, we can expect to see huge increase in capacities of solar and wind power.

The SDC post is clear on the issue of fossil fuels not increasing. There is an expectation that new natural gas plants will come online in the coming three years, and the total capacity of new natural gas plants will greatly exceed the total capacity of old natural gas plants that are retiring. Nevertheless, the increases in natural gas capacity will be offset by declines in capacity in coal and oil generating capacity.

Once in a while, I get the idea that deeper issues tied to a story may be worth examining. The SDC post inspired me to poke around in the FERC databases to see what might be worth closer examination. What I found suggests to me that natural gas in the U.S. may be in considerably more trouble than most of us realize. (http://bit.ly/FERC-reports – See posts under the Energy Infrastructure tab.)

Back in August of 2017, FERC started including proposed capacity additions and retirements, by energy source or fuel type, in its monthly “Energy Infrastructure Update.” The capacity changes it posts are for changes over the coming three years. In August of 2017, proposals for additions for natural gas came to a total capacity of 93,290 megawatts (MW) over the period ending in August of 2020. In August of 2019, the amount of capacity proposed for natural gas generating plants was to 58,907 MW for the period to August of 2022. This is a reduction of 37%. During that time, proposed retirements actually increased very slightly, and the reduction in proposed net change of capacity was about 43.4%.

The figures for proposed new capacity indicates a decrease of new capacity of about 20% per year during a two-year period. Extrapolating the data suggests that proposed new additions could drop to the point that they no longer exceed proposed retirements by 2025. The big question, of course, is whether such an extrapolation, based on two years’ data, could produce a valid result. Could natural gas capacity go into decline in just five or six years?

The first thing to notice is that the FERC data shows an overall reduction that is at least more or less constant, or possibly accelerating. About one month in three has shown increases in proposed new capacity, where about two in three have been decreases. The reductions in proposed new capacity came to about 18% in the period of August, 2016 to August, 2017. By contrast, the reductions in the year that followed was 23%.

Another thing to note is that the nature of new natural gas plants has been changing for years. General Electric got into quite a lot of trouble by betting on big increases in demand for natural gas turbines that never materialized. (http://bit.ly/GE-gas-fails) Other manufacturers have said that turbine sales have dropped to nearly nothing. Those turbines were for peaking plants, which produce very expensive electricity and were in competition with solar power that was much cheaper.

So the question is whether natural gas can stop the downward slide in new plans. For an answer to this, we can look at the trends for wholesale power costs. Wholesale prices for power from natural gas, which had been falling slowly through the years have started to rise slowly. By contrast, prices for solar and windpower have been tumbling rapidly. This can be seen by comparing the data at Lazard’s LCOE report for 2016 (http://bit.ly/Lazard-LCOE-2016) with data at the 2018 report (http://bit.ly/Lazard-LCOE-2018).

But a new player has also entered the arena. Battery costs have fallen enormouslly over the last three years, to the point that solar power backed up with batteries is now a realistic competitor for natural gas. This is clearly seen at the CleanTechnica article “LA & 8Minute Solar Ink Lowest Cost Solar-Plus-Storage Deal In US History.” (http://bit.ly/CT-LA-solar-battery)

So returning to the question of whether we could realistically continue to see reductions in the capacities of planned new natural gas plants, to the point that total capacity might go into decline by 2025, I would have to it is possible. And it is hard to imagine what might make that not happen.

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