Utilities across the United States are rapidly decarbonizing their generation fleets, but are diverging between two paths: Completely phasing out fossil fuels in favor of clean generation like Xcel Energy, or doubling down on new natural gas generation like Duke Energy. Stakes are high – our climate future and utilities’ economic future both depend on which path regulators allow utilities to choose.

These paths are not equal. Recent progress reducing electricity sector emissions, down 25% since 2005, stalled in 2018 due to a huge uptick in gas generation. And new natural gas rarely makes economic sense, even without considering externalities like greenhouse gas emissions. The math of recent solar-plus-storage projects, particularly Nevada’s June NV Energy procurement, signals that clean and dispatchable energy is available for less than the cost of new natural gas – a death-knell for new gas plants and harbinger of future economic concerns.

Now it’s up to regulators to sort through misinformation to protect customers and the environment by embracing new renewables and flexible zero-carbon resources instead of natural gas.

Math underpins economic demise of natural gas

Solar-plus-storage is now competitive with new natural gas-fired power plants on energy, capacity, and other grid services. Investment firm Lazard pegs the cost of new combined cycle natural gas generation at $41-74 per megawatt-hour (MWh). The same report finds unsubsidized solar costs at $36-46/MWh and wind costs at $29-56 (significantly lower with federal tax credits).

Natural gas proponents will claim this compares delicious, firm gas apples with rotten, variable renewable oranges. But those renewable energy oranges are much sweeter than regulators and utilities understand.

NV Energy’s recent procurement of 1,200 megawatts (MW) solar and 580 MW of four-hour battery storage trounces new natural gas on price. The public tranche of contracts paid $20/MWh for solar and $13/MWh for enough battery storage to shift 25% of daily energy, resulting in a total cost of $33/MWh per MWh delivered (including federal tax credits).

That $13/MWh is now a ceiling on the incremental cost of “reliability” services provided by new natural gas. We can now shift renewable energy to the highest-demand hours for less than the difference between the levelized cost of new natural gas and renewable generation.

Tacking $13/MWh onto solar or wind contracts approximates the adder utilities and consumers will have to pay for that generation to compete directly against new natural gas as a firm or dispatchable resource – such services may be available at a discount from flexible demand, transmission connectivity, or improved market operations. Combined with dirt-cheap solar and wind available throughout the U.S., customers save money with dispatchable 100% clean energy resources compared to natural gas.

Recent Vibrant Clean Energy modeling conducted with Energy Innovation showed existing coal can’t compete with new renewables, and those same economic forces are now an existential threat to the natural gas generation business. States and utilities doubling down on natural gas should quickly reassess their strategies because the climate and consumers both have a lot to lose.

Renewable and storage cost trends will keep strengthening

Renewable and storage costs are projected to continue falling in the coming years, more than offsetting the subsidies they now enjoy. Consider NextEra Energy, which owns more natural gas generation than renewables, but forecasts storage and solar costs will fall fast with a combined cost in the $29-39/MWh range by 2023. As a result, the utility predicts wind and solar will provide 39% of its power generation in 2030, while natural gas’ share will fall from 35% to 31%.

Falling costs mean numbers like Nevada’s procurement will spread to other parts of the U.S. The geographical ubiquity of cheap renewables, particularly solar, across the U.S. becomes striking. By 2025, Vibrant Clean Energy and Energy Innovation project unsubsidized utility scale solar power will be available for the vast majority of the U.S. at less than $40/MWh, in some cases closer to $20/MWh.

Wind also stays cheap in 2025, but the geographic limitations are more real.

In this context siting and transmission, not cost, become the leading policy constraints to new renewables as the cheapest firm generation available to utilities. Policymakers should see a huge opportunity in these maps to create economic growth for struggling rural American communities, especially those currently relying on coal plants or natural gas fracking. The economics are so compelling that redoubling efforts to reduce siting and transmission barriers can clear the way for emissions reductions and cost savings.

Significant uncertainty surrounds the rate and extent of cost reductions within the solar and storage industries, but credible analysts and industry experts like the National Renewable Energy Lab, Bloomberg New Energy Finance, and NextEra Energy are converging on significant cost declines for the entire U.S. market.

According to the Energy Information Administration’s (EIA) Annual Energy Outlook 2019, 23.5 gigawatts (GW) of natural gas additions are planned across the U.S., and the U.S. could add 300 GW by 2050 while corresponding infrastructure is projected to grow 4% annually through 2025, worth $1.5 trillion.

With trillions in natural gas investments at risk if renewable costs fall as anticipated, who will hold the bag for new infrastructure investments? Duke Energy plans to build 9,534 MW of gas capacity in the Carolinas alone, but will add only 3,671 MW of solar capacity to the region in the same timeline. With solar and wind plus storage contracts so far below the cost of new gas today, utilities like Duke can’t rightly say they didn’t see it coming.

Regulators must protect customers against the cost and impacts of new gas

If in 2019, regulators see renewable and storage costs as slightly higher than current natural gas costs, they must recall we live in an era of rapid disruption with significant risk natural gas will become uneconomic compared to rapidly falling clean energy costs.

Natural gas assets have a projected asset life of about 30 years, but falling renewables and storage costs may render them uneconomic within a few years. Meanwhile, natural gas price risk still looms large – exacerbated by climate extremes. Utility claims to the contrary, or which use outdated cost information, risk undercutting their own businesses in the long-run.

With potentially tens of billions in stranded assets already from uneconomic coal plants, regulators who approve massive investments in new gas plants could be facing a new wave of junk assets on utility books sooner rather than later. New natural gas is extremely risky in this context, and regulators would be wise to question its prudence.

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