Natural gas plants not competitive with clean energy according to report

Sep 18

Most new or proposed natural gas power plants will not be cost-competitive with clean energy resources by 2035. A report comparing the financial viability of new gas resources with clean energy technologies was recently published by the Rocky Mountain Institute (RMI). The report finds that, thanks to a decline in clean energy costs, many proposed gas plants will not be cost-competitive by 2035.

You can find the report here: Charles Teplin, Mark Dyson, Alex Engel, and Grant Glazer. The Growing
Market for Clean Energy Portfolios: Economic Opportunities for a Shift
from New Gas-Fired Generation to Clean Energy Across the United States
Electricity Industry. Rocky Mountain Institute, 2019.

The report analyzes the economic viability of new natural gas-fired power plants as compared to wind, solar, and storage (WSS) technologies, as well as clean energy portfolios (CEPs)—which includes optimized combinations of WSS and demand-side management. The report states that:

due to dramatic price declines of wind, solar, and storage (WSS)
technologies, clean energy portfolios (CEPs)—optimized combinations of
WSS and demand-side management—are now similar in cost to new
gas-fired power plants.

Methodology: Comparing Natural Gas to Clean Energy Resources

The reports authors put CEPs and WSS through a rigorous test: CEPs and WSS had to provide the same grid services that natural gas-fired power plants did. The authors explain their approach in the report’s executive summary.

We systematically optimize least-cost combinations of region-specific WSS, efficiency, and demand flexibility to provide grid services equivalent to every proposed combined cycle
and combustion turbine gas project in the United States. Our approach requires each portfolio to provide the same (or more) monthly energy as the proposed gas plant, match or exceed the gas plant’s expected availability during the peak 50 demand hours (net of renewable generation), and provide the same level of grid flexibility.

The analysis ensures that CEPs have to compete with natural gas-fired power plants on a purely economic basis and do not rely on carbon pricing or assumptions about the value of distributed generation in order to level the playing field.

Summary of Findings

HISTORICAL AND PROJECTED EVOLUTION OF CEP COSTS (Teplin, Dyson, Engel, and Glazer. Rocky Mountain Institute, 2019)

The report presents 7 key findings resulting from this research. One of the most compelling findings is that “CEPs are lower cost than 90 percent of the proposed 68 gigawatts
(GW) of gas-fired power plant capacity”. Investment in CEPs would result in cost savings to customers:

We find that CEPs are lower cost than 90 percent of proposed gas-fired
generation at the proposed plant’s in-service date (Figure ES 1, see above). Investment in
CEPs instead of new gas capacity would save customers over $29 billion and
reduce CO2 emissions by 100 million tons (MT)/year—equivalent to ~5
percent of current annual emissions from the power sector.

Bottom line for customers: This report suggests that the year 2019 represents a tipping point for what has been known as a bridge fuel, natural gas. It is possible that clean energy portfolios could have the same impact on natural gas that natural gas power plants had on coal. The RMI analysis does not include the economics of installing natural gas-fired cogeneration facilities behind the meter at customer sites. Nevertheless, if 2019 is, indeed, a tipping point for grid-located natural gas plants, there may well be implications for the economic viability of cogen facilities as well. 

Charles Teplin, Mark Dyson, Alex Engel, and Grant Glazer. The Growing
Market for Clean Energy Portfolios: Economic Opportunities for a Shift
from New Gas-Fired Generation to Clean Energy Across the United States
Electricity Industry. Rocky Mountain Institute, 2019,
https://rmi.org/cep-reports.

The Growing Market for Clean Energy Portfolios + Prospects for Gas Pipelines in the Era of Clean Energy

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