Low-cost natural gas from fracking made us dial back our expectations about the growth of renewable energy. Energy storage technology could change that.
They said cheap gas meant curtains for the renewable energy revolution.
Bargain-priced natural gas is appealing to centralized power producers, considering public sentiment and the pressures of the Clean Power Plan. Gas proponents point out that gas is cleaner than coal, plants are quick to start up when demand spikes, and there’s no intermittency to worry about.
But they should be worried about grid connected storage.
I was in the middle of reading an EnergyBiz column about generation planning, when a new report from Rocky Mountain Institute arrived. Together they paint a bleak picture for centralized gas generation.
The rapid adoption of distributed energy and storage could put a few nails in the coffin of a gas revolution, by increasing the investment risk associated with switching generation to gas. Here’s what I mean.
Let’s say you own a few coal-fired power plants. Prognostications about the “death of coal” are not lost on you. What to do?
You could convert some of those plants to burn gas, or retire some coal plants and build gas plants to replace them.
It’s a big investment. Besides the cost of the plants, you have to extend gas pipelines to them from wherever the gas currently is. That’s why you’ve waited so long, despite the ongoing damage to your brand and the environment.
Earth Day is coming up. Your people run the numbers and now it makes financial sense to start switching from coal to gas. It will be a long time yet before renewables make dinosaur power obsolete. Natural gas is cheap fuel and, thanks to fracking, it’s likely to stay that way.
Oh, but wait – What’s going on with the price of coal? It’s been slipping since the summer of 2014, when the Clean Power Plan was proposed. Rule 111(d) is not the only factor. Industry, a big consumer of coal, has really felt the deep recession since 2007. China, once hell-bent to expand its coal fleet, has started combating widely publicized pollution in some regions, slowing down China’s coal imports.
Cheaper coal could change the economics of your decision to switch fuels. For the lowest cost energy, you would run your coal plants more and your gas plants less. It would take many more years to recover all that investment. Maybe you should wait a little longer, minimally comply with 111(d), and see how things play out.
Meanwhile, distributed renewable energy and storage continue to advance. Solar and wind power are already cheap and getting cheaper. Storage technologies at all scales, from residential batteries up to redox flow cells, are on a similar track toward higher efficiencies and lower cost despite some bumps.
Cheap renewable energy with storage is appealing. Renewables are cleaner than gas, storage is an instantly dispatchable resource, and there’s no more intermittency to worry about. Soon you might wish you were in that business.
Demand-side distributed generation has other advantages. Renewable energy gives consumers control over their energy costs. Add storage and they’ve taken a big step toward energy independence.
And as the owner of those coal-fired power plants, two little words give you a big headache: “grid defection.”
In the Northeast United States, utilities could lose as much as 50% of their residential electricity sales to grid defection by 2030, according to the aforementioned report released last week by Rocky Mountain Institute.
Commercial kWh sales could tumble, too, even if customers stay connected to the grid but use DG for peak shaving — call it peak load defection — although many utilities might welcome it. But outright grid defection could cost utilities as much as 60% of their commercial revenue in 15 years, RMI says.
Compile on that the continuous improvements in energy efficiency programs and measures. Market transformation efforts are quietly making every major energy consuming device we buy more efficient.
What if you invested in those new gas plants and pipelines, only to see your projected load growth turn into a load plateau, or worse? Suddenly, natural gas has lost its allure.
Maybe this is a good time for you to get out of the centralized generation business.
The solar industry is hiring.
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Energy Priorities 
I love the thesis. Following are some of my random thoughts how these realities could be structured for national/global good, while helping utilities transcend their inevitable disaggregation – without turning into a bail out situation like the banks.
1. Accept the utility model will disintegrate for many reasons with or without nat gas
2. The value of gas in export markets will likely always be higher than domestic prices
3. How about: Rights to export gas being tied to low domestic prices and at specific delivery volumes
4. Specifically: the lower the $/BTU/kw/carbon for electricity in a particular market provided by nat gas, that supplier increases their right to export more gas at much higher profits
5. Utilities and gas producers could collaborate closer to deliver the decreasing need for grid electricity and help manage the inevitable disaggregation of the utility model as a ‘patriotic duty’ in exchange for the right to export gas
6. ‘National Contribution’ value from gas producers helping utilities supply cheapest possible KW/KWH, in exchange for export rights, would reduce financial pressures of stranded utility assets
7. If people were convinced the national/envornmental value of supporting renewables with low cost nat gas surpassed the environmental risks of a Keystone Pipeline, we’d have tons of pipelines and LNG ports on and along every coast. This idea shares logic with the Pickens Plan, but updated to reflect gas cheaper than expected and renewables cheaper/faster than expected; with a patriotic structure that most people could unify behind.
8. My biggest fear – utilities that spontaneously implode across the country (like PG&E did for not too dissimilar reasons) without a national strategy in place to help manage the transition
9. Utilities won’t implode at the same time or at the rate the mortgage industry collapsed, and besides how consumers might be affected, the impact on fixed income retirement portfolios invested in utilities could be big.
10. Considering the disaggregation of so many industries in the last 40-30-20-10 years; selling the collapse of the electric industry should not be so hard.
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