Sept 2019: (Wall Street Journal) Oil and Gas Bankruptcies Grow as Investors Lose Appetite for Shale Bankruptcies among U.S. oil and gas companies are rising as Wall Street continues disinvesting from the industry, the Wall Street Journal reports. Twenty-six oil-and-gas producers have filed for bankruptcy so far this year. That number is expected to rise as companies face mounting debt maturities.
Sept 8, 2019 (Bloomberg) — Natural gas-fired power plants, which have crushed the economics of coal, are on the path to being undercut themselves by renewable power and big batteries, a study found. By 2035, it will be more expensive to run 90% of gas plants being proposed in the U.S. than it will be to build new wind and solar farms equipped with storage systems, according to the report Monday from the Rocky Mountain Institute. It will happen so quickly that gas plants now on the drawing boards will become uneconomical before their owners finish paying for them, the study said.
The development would be a dramatic reversal of fortune for gas plants, which 20 years ago supplied less than 20% of electricity in the U.S. Today that share has jumped to 35% as hydraulic fracturing has made natural gas cheap and plentiful, forcing scores of coal plants to close nationwide. The authors of the study say they analyzed the costs of construction, fuel and anticipated operations for 68 gigawatts of gas plants proposed across the U.S. They compared those costs to building a combination of solar farms, wind plants and battery systems that, together with conservation efforts, could supply the same amount of electricity and keep the grid stable.
As gas plants lose their edge in power markets, the economics of pipelines will suffer, too, RMI said in a separate study Monday. Even lines now in the planning stages could soon be out of the money, the report found.
“Our story for gas plants is, if you build it, they won’t run — they won’t run at their expected capacity factors,” said Mark Dyson, who co-wrote both reports. “And that filters down to pipelines, too.”
RMI: Innovation, growing economies of scale, and attractive financing continued to drive the costs down for renewables in 2018. Power purchase agreements for wind and solar projects in states like Arizona, Nevada, Colorado, Kansas, New Mexico, Oklahoma and Texas have reportedly ranged between $20-$30 per megawatt-hour, well below the cost of natural gas generation—and the technologies are positioned for further cost reductions to continue to be low-cost options even as federal tax incentives change. It’s now possible to get solar or wind plus storage for 3 cents/kwh (or less, for wind). The energy storage components increase their value to the grid.
In 2018 Xcel Energy committed to completely carbon-free electricity supply across the eight states it operates in by 2050. The energy transition needs to move more quickly though. A growing number of utilities that are committing to phasing out their use of coal and transitioning to substantially lower carbon energy portfolios. This year, both Consumers Energy in Michigan and NIPSCO in northern Indiana announced plans to phase out coal generation and utility giant American Electric Power announced a goal of reducing its carbon emissions 80% by 2050. What’s especially exciting about these utility actions is that they are driven primarily by economics, clearly demonstrating the competitiveness of clean energy technologies.
Low renewable energy prices continue to attract major corporations looking to save money and achieve ambitious sustainability goals. As a result, direct corporate purchases of renewable energy have become a major driver of renewable energy deployment. In 2018, RMI reported that corporate renewable energy purchases—led by companies like Facebook, Walmart, ATT and Microsoft—reached more than 6.4 gigawatts (GW). The number of corporations investing in renewables expanded at a record pace this year as well, with nearly two-thirds of Fortune 100 and nearly half of Fortune 500 companies now having set ambitious renewable energy goals.
In 2018, the pipeline for new storage projects doubled to nearly 33 GW as more utilities are investing in the technology thanks largely rapidly falling prices and growing support from state policies. While California has led the nation in storage deployment to date, New York recently established the strongest storage requirement in the country at 3,000 MW by 2030. Earlier this year, New Jersey set an ambitious storage target of 2,000 MW by 2030 and Massachusetts significantly increased its storage requirement to 1,000 megawatt-hours by 2025. At the federal level, the Federal Energy Regulatory Commission issued Order 841, which directs regional grid operators to set market rules that allow energy storage to participate on a level playing field in the wholesale energy, capacity and ancillary services markets.
A notable regulatory decision in 2018 was the California Public Utility Commission’s approval of PG&E’s plan to use energy storage to replace retiring gas generators. One of the key barriers to fully transitioning to a carbon-free economy is replacing natural gas generation and the ancillary services they provide to the power grid. This decision, which marks the first time a utility will directly replace power plants with battery storage, should spur many more similar projects to move forward in California and across the country and open the door for integrating much higher levels of renewable energy onto the power grid.
On how out-moded natural gas investment is…
A key thing to recall is that any need for gas generation in the transition will be just 10-15% (say in the 2025-2035 or even longer). We already have that. Market bids tell us we can get to 89% renewable electricity in a Colorado Front Range city by 2024 (and 100% by 2030) at a savings from existing utilities.
Utility monopolies, fossil fuel interests, et al. see drawbacks with doing that. They would like to run their fossil fuel plants longer as well as advantage for existing monopolies. Such limitation of wider availability and sharing of renewable electricity — or pricing/valuing the medical costs and suffering — has been unhealthy on every level, for our economy and existing system, ethics, our children’s future, the viability of our state, and our physical and mental health http://bit.ly/2019AQhealthResearchUpdate (removing air pollution from fossil fuels is evidently one of the best ways to improve public health).
Fossil fuel EROI for electricity close to 3:1 Science Daily, July 2019: Researchers have calculated the EROI for fossil fuels over a 16 year period and found that at the finished fuel stage, the ratios are much closer to those of renewable energy sources — roughly 6:1, and potentially as low as 3:1 in the case of electricity. An evaluation of the global energy return on investment.
According to Lazard, a financial advisory firm, the levelized cost of energy (LCOE) for onshore wind and utility-scale solar, is lower than the cheapest natural gas in many cases, even without subsidies factored in.
Research has shown that incremental system costs from adding non-dispatchable renewable generation are minimal up to penetration rates of 80 percent or more. Renewable energy costs are expected to continue falling, while the cost of gas generation can be volatile since it is tethered to the commodity price of natural gas. In the last 10 years alone, natural gas hit a high of almost $7 per mmBtus and a low of $1.75. (It is currently at $2.65.) Renewable energy costs, on the other hand, are forecasted to get even cheaper in the coming years. Bloomberg New Energy Finance, in its New Energy Outlook 2019, reported that wind and solar are already cheapest across more than two-thirds of the world and rapidly approaching that in the remaining.
We already have more than the amount of gas plants needed the next decade and beyond. Any further investment in fossil fuels displaces investment in renewables in the load and capacity equation. In addition to concerns about methane leakage in natural gas production, building natural gas infrastructure—which has a relatively long lifespan—for the next three decades is beginning to be viewed as in tension with current climate goals. Limiting global warming to 1.5 degrees C (2.7 degrees F) above preindustrial levels. This means that much of the planned and existing oil and gas infrastructure will have to be abandoned before the end of its life or retrofitted to include carbon capture and storage. Thus it risks becoming what investors call a “stranded asset.” Even in Indiana: In April 2019, in the heart of coal country, Indiana regulators rejected a proposal by its electric and gas utility, Vectren, to replace baseload coal plants with a new $900 million, 850 megawatt (MW) natural gas-fired power plant. Regulators were concerned that with the dramatic decline in the cost of renewable energy, maturation of energy storage and rapidly changing customer demand, such a major gas plant investment could become a stranded, uneconomic asset in the future. Regulators are now pushing Vectren to consider more decentralized, lower-carbon resources such as wind, solar and storage that would offer greater resource diversity, flexibility and cost effectiveness. NIPSCO, says that it will reduce carbon emissions by “more than 90%” by 2028 from a 2005 baseline. The company told Indiana regulators that of all the pathways it analyzed, skipping gas in favor of renewable energy was the one with the lowest cost to consumers.
Gas plants risk becoming “stranded assets.” A report from the Rocky Mountain Institute https://rmi.org/insight/the-economics-of-clean-energy-portfolios/ echoes this concern. In comparing the cost of four proposed gas plants in different parts of the country with regionally appropriate aggregations of renewable energy resources, the 2018 analysis finds that, in three of the four cases, the clean energy portfolio would cost 8-60 percent less than the four proposed gas plants today. With further cost reductions in clean energy and/or a modest $7.50 per ton price on carbon emissions, renewables will be cheaper in all four cases. For years, natural gas was viewed as a “bridge fuel,’ while zero-emission options were developed. But with renewables quickly catching up to natural gas, could it be that we’re getting to the end of the natural gas bridge and approaching the other side? The report concludes- “US electricity generators may be committing their customers and investors to as much as $1 trillion in future investment and fuel costs through 2030 as they rush to build new gas-fired power plants. Yet advances in renewable energy and distributed energy resources (DERs) offer lower rates and emissions-free energy while delivering all the grid reliability services that new power plants can, according to RMI’s The Economics of Clean Energy Portfolios report.”
Regulators Beginning to Turning Their Backs on New Natural Gas Investments
Utility regulators from a range of states have begun to question continued investments in new natural gas generation, instead turning to low cost wind and solar. Here are five examples from U.S. states:
Arizona: Moratorium on new gas plants
Earlier this year, the Arizona Corporation Commission placed a moratorium on new gas plants 150 megawatts (MW) or larger through August 1 of this year. In the meantime, the state is considering an energy modernization plan for utilities to source 80% of their electricity from renewables and nuclear by 2050. The plan also involves deployment of 3,000 MW of energy storage by 2030, to help provide peak power as an alternative to gas plants that can provide extra power during peak demand periods. Last year Arizona regulators also declined to recognize the 15-year IRP filed by the state’s investor-owned utilities for their disproportionate reliance on massive gas plants, to the exclusion of more renewable energy.
California: New gas construction is becoming a rarity
Natural gas-fired power plants accounted for approximately half of California’s in-state power in 2016, but new gas construction is becoming a rarity as market and policy headwinds intensify. The state is pushing its utilities to replace natural gas power plants with renewables and other resources. Recently, Southern California Edison (SCE) selected a portfolio of battery plants totaling 195 MW, instead of a 262 MW gas “peaker” plant (plants that kick in with additional power when demand for energy is especially high) it had chosen previously. In addition, Los Angeles decided to shutter three gas-fired coastal power plants over the next decade; the city will instead invest in renewable energy. California is expecting to retire more gas plants in the coming years—1,380 MW of gas power plant capacity to be retired in 2019 and another 4,600 MW in 2020—and they are more likely to be replaced by renewables and storage.
Colorado: Xcel still purchasing gas but at least starting on more solar and storage – I have word there will be no more new gas plants from here out. Steering investment to old gas and coal plants is still an issue.
Colorado’s biggest utility, Xcel Energy, announced last year that it would replace 660 MW of coal-fired generation with the biggest package of renewable energy projects ever proposed in the country for an individual coal plant retirement—more than 1,800 MW of wind, solar and battery storage. Xcel estimates the transition will save ratepayers between $213 million and $374 million. While Xcel’s plan includes the purchase of existing gas plants, it proposes no new gas construction. Xcel has also announced plans to go entirely carbon-free by 2050.
In 2017, Xcel Energy’s all-source solicitation received a batch of bids whose medians were $18.10/MWh for a wind project, $21/MWh for wind plus storage, $29.50/MWh for solar, and $36/MWh for solar plus storage. While the cost of renewable and storage varies from market to market, these two examples show that the costs are dropping rapidly and the business case for using renewables in place of natural gas is becoming more compelling in many parts of the country.
Nevada: 6 major solar projects + storage. State seeking diversification and reduced reliance on gas
Nevada regulators granted NV Energy permission to construct six major solar projects which, combined with 100 MW in battery storage, would double the state’s solar capacity and renewable energy production by 2023. In their approval, Nevada’s Public Utilities Commission noted that this plan “best advances Nevada’s clean energy goals” by diversifying fuel sources and decreasing reliance on natural gas. Recent data on power purchase agreements show consistency with Lazard’s LCOE estimates. In June 2018, NV Energy set a new price record when it entered into a 300 MW power purchase agreement (PPA) with the Eagle Shadow Mountain solar project at $23.76/MWh for 25 years. The PPA was approved by Nevada regulators in December 2018.
Virginia: IOU rebuked for failing to take into account other electricity resources that would lower costs
In a sign that the transition to a clean energy future is taking place outside of its traditional borders, Virginia regulators rebuked Dominion Energy for overestimating projections of future electricity demand and failing to take into account a number of electricity resources that would lower costs for consumers or are mandated by law.For the first time ever, Dominion’s integrated resource plan (IRP)—an outline of a utility’s resource needs, filed with public utility commissions—was rejected for failing to consider the impacts of energy legislation passed last year. That legislation will significantly increase Virginia’s renewable capacity and mandates Dominion spend $870 million on energy efficiency. Regulators noted there was “considerable doubt regarding the accuracy and reasonableness of the Company’s load forecast,” which could lead to overinvestment in natural gas infrastructure.
Why Are Regulators Turning Away from Natural Gas? Economics.
What explains this growing shift where regulators and utilities look more toward solar, wind and battery storage than natural gas, as they phase out coal generation? Part of it is that state policymakers are adopting policies that support the build-out of renewable energy, such as through standards that require utilities to obtain a certain portion of their electricity from zero-emission sources (e.g. renewable portfolio standards) or standalone mandates requiring investor-owned utilities to procure significant amounts of storage. New York, for instance, has set an energy storage goal of 3,000 MW by 2030 and the New York Public Service Commission has called upon the state’s six investor-owned utilities to conduct competitive solicitations to have a total of 350 MW of energy storage resources in service by end of 2022. California, Massachusetts, and New Jersey are a few other states that have established energy storage targets. However, the new economics of renewables are a significant factor behind this trend—especially in states that are still heavily fossil fuel-dependent.
Batteries, Load flexibility. “Once utilities easily can take advantage of these huge batteries, they will not need as much new power-generation capacity to meet peak demand.” GreenBiz draws an analogy to a family purchasing a 14-passenger van to drive all year round in order to accommodate the relatives who visit once a year for 3 days. Building peaker plants to meet that extra 5% of demand during the few days a year when it is needed is very expensive. A new report entitled The National Potential for Load Flexibility published by the Brattle Group offers an alternative — managing the load on the utility grid using modern technology. The report suggests the United States could shave up to 20% off peak electricity needs by 2030. As after viewing the report, Vox said, “Already, there is a healthy US market for load flexibility. It mostly operates through something called demand response or DR. Dozens or hundreds of loads (power-consuming appliances or buildings) can be linked together into what is, effectively, a single aggregate unit. When a peak in demand arrives, instead of dispatching a power plant, grid operators can dispatch an aggregated unit of demand reduction, “shaving” the peak and reducing the amount of expensive peak power that must be produced.”
Demand Response: the Brattle report (6/19: brattlefiles.blob.core.windows.net/files/16639_national_potential_for_load_flexibility_-_final.pdf) says working smarter not harder could save utility companies 198 GW of electricity per year — 20% of current US supply — by 2030. How is that possible? Demand response strategies already account for about 60 GW. DR could be tweaked to find another 16 GW in avoided demand. Not spending money is just as important as reducing expenditures. Utilities can save a ton of money by not overbuilding generating capacity, not buying expensive power from peaker plants, and avoiding peak related transmission and distribution upgrades all these benefits are things load flexibility allows utilities not to do. It’s all savings.
If you need some further reasons…A UN report shows an estimated 2 billion people now face moderate or severe food insecurity as the planet heats. By Georgina Gustin, July 15, 2019, Inside Climate News The combined forces of climate change, conflict and economic stagnation are driving more people around the world into hunger, reversing earlier progress, the United Nations Food and Agriculture Organization reported on Monday. Although the numbers fluctuate as economies rise and fall, conflicts come and go, and climate emergencies intensify and recede, …
‘Completely Terrifying’: Study Warns Carbon-Saturated Oceans Headed Toward Tipping Point That Could Unleash Mass Extinction Event. July 09, 2019 by Julia Conley, staff writer, Common Dreams “Once we’re over the threshold…you’re dealing with how the Earth works, and it goes on its own ride.” The Atlantic coast near Galicia, Spain. A study by an MIT researcher warns that humans are pumping carbon into the world’s oceans at a rate that could trigger a mass extinction event. …
Managed decline of the fossil fuel industry. The 2020 climate candidate’s latest proposal calls for ending federal support for fossil fuels, ramping up prosecutions and putting a new spin on carbon pricing. By Alexander C. Kaufman, Huffington Post, https://www.huffpost.com/entry/jay-inslee-climate_n_5d103fece4b07ae90d9f72df June 2019 Democratic presidential candidate Jay Inslee already laid out plans to shut down all coal plants by 2030, spur a clean-energy construction boom and target climate change …
All the reasons why gas isn’t a good idea: More natural gas isn’t a “middle ground” — it’s a climate disaster. To tackle climate change, natural gas has got to go By David Roberts @vox.com May 30, 2019 SHARE A liquid natural gas (LNG) receiving terminal. Shutterstock Expert opinion on climate change policy has been evolving quickly. The opinion of policymakers has not always kept up. One area where this split is particularly notable is around the role of natural gas in a clean energy future. For …
The big energy companies plan to produce 21 percent more oil in 2025, but the IEA expects demand to increase only 10 percent. Houston Chronicle, May 2019 The world has already found all the oil it should ever burn Chris Tomlinson May 6, 2019
Colorado steps toward decarbonization in 2019, agenda for 2020. 15 years ago, Colorado’s two top electricity providers were determined to build large coal plants and continue to invest in fossil fuel generation, adding millions of tons of carbon dioxide to the atmosphere and oceans and standing in the way of using Colorado’s abundant wind, solar, water and other renewable resources. These corporate goals superseded citizen and ratepayer opposition
Breaking: Fossil Fuels Choke Denver With Air Quality 3 Times Worse Than Beijing. Kyle Clark, a 9 News anchor, reported that 30 to 40 percent of ozone levels — a related form of pollution that is not responsible for the brown cloud — result from the state’s oil and gas industry. Traffic generates similar levels, he tweeted.
$3.5 billion in direct fossil fuel subsidies handed out by US govt every year, not to mention billions in indirect subsidies, like allowing fossil fuel companies to freely pollute the world’s atmosphere and oceans, endangering life on Earth as we know it, without paying a dime