Why the U.S. Does Not Need New Gas to Meet Rising Demand
Everyone working in the energy sector is asking themselves the same question today: How are we going to meet rising electricity demand while maintaining reliability and keeping costs reasonable? The good news is that there are a lot of great answers to that question. New gas is undeniably not one of them.
Let me repeat – we do not need new gas generation. Let’s walk through the reasons
1. We have enough gas.
Plenty, in fact! We have roughly 600 gigawatts of gas – that is nearly 50% of our peak load!. Why do we need more?
Back in 2020, we at GridLab were worried that the 100% clean energy narrative was focused on the wrong thing. It was focused on the last 10% of that goal and not on the critical first 90%. We did a national analysis where we looked at meeting 90% carbon free by 2035, a 15-year runway that has dwindled down to just 10 years. How did we meet 90%? We kept existing gas, nuclear and hydro, retired coal, and built a lot of wind, solar and storage. The future system in 2035 is roughly 70% wind and solar, 10% hydro, 10% nuclear, 10% gas. We ran this system through seven weather years in the energy modeling software Plexos, which was validated by studies and analysis from NREL and others. It works.
This isn’t theoretical. Texas has done precisely this over the past four years. The Lone Star state met incredible load growth of 36% by adding primarily wind, solar and storage, retired coal, and moved from 20% to 40% carbon free – all without any sweeping clean energy laws on the books! Texas also benefits from the lowest wholesale prices of any market in the country and a load queue that is up to 160 GW. Everyone wants to locate their load in Texas. Gas? Texas has tried to incentivize new gas through various out-of-market mechanisms, none of which have worked very well. Gas has remained stable at about 44% of Texas’s generation.
2. New large loads ≠ new gas
Our system is peaky. Most regions run about a 50% load factor meaning that most of the time we have lots of headroom. So even adding 24/7 load does not mean we need 24/7 generation. Even better, if that load can flex, which it can, then we can add a lot of new load without 24/7 generation. A recent study from Tyler Norris at Duke University showed that flexing large loads just a few hours per year allows the current system to support this new load. Google is leading the sector with an announcement that the company is doing just that for Indiana Michigan Power. Texas even has new legislation requiring large data centers to reduce power during critical grid hours. Large loads can flex if they need to.
3. Gas isn’t perfect
As we move to a winter peaking system, do we really want to rely on the resource that catastrophically failed Texas in winter storm Uri and the East Coast in winter storm Elliot? PJM gives gas a measly 60% reliability score measured through ELCC value. Gas requires pipeline infrastructure, gas and electric coordination, both of which are included in a whole host of thorny issues revealed as the grid ramped up reliance on gas as an electric generating source in the past couple decades. Gas was great to add when we only were running about 20% of the grid on it – now that it is 40%, its weaknesses show. A saturation of any single resource will reveal challenges. The amount of gas we currently have is the right amount for cultivating a grid portfolio with diverse resources.
4. Gas is expensive – and getting more expensive
There is a real opportunity cost to installing new gas, even just a few peaker plants. GridLab just published analysis that shows that a combined-cycle gas turbine plant is around $2,000/kW installed in 2030. If we add $1,500/kW levelized for the 20 year cost of fuel (conservative) and $500/kW for pipeline infrastructure – that is $4,500/kW. For that price, a utility could install twice the amount of solar plus storage.
Piled onto the increased capital costs of gas turbines is the increasing cost of the molecules too. Costs have been creeping up to $4/MMBTu (the thermal measurement for gas) over the past several months. As oil rig counts drop, associated gas supply will decrease. We are now the world’s largest exporter of liquid natural gas (LNG), and as we bring more LNG online, LNG becomes a global commodity like oil with global pricing. LNG pricing for delivery to Europe this winter? $12/MMBTu. Building a lot more gas also increased demand, which will soon meet reduced supply and lead to more expensive molecules.
Do you really want to spend $2,500/kW and then be locked into $10/MMBTu of fuel?
Storage changes the game
Markets, planners and operators have not yet fully digested the implications of battery storage on grid operations and its contribution to resource adequacy. More interregional transmission shortens the risk periods to a handful of hours, making storage a better solution. As more solar comes online, even with its limited capacity value, the system will become “peakier” thereby giving more value to storage. Storage is going to replace a lot of what we use gas for today – it can also replace what we think we need gas for tomorrow.
For example, in early August of this year CAISO had more than a quarter (28%) of its load being served by batteries. We often hear from operators that they have concerns operating the system with large shares of variable renewable energy, but we heard these same arguments 20 years ago when the share was very low. Markets such as SPP, MISO, CAISO and ERCOT have consistently run at very high shares of wind and solar for hours at a time. Experience from other countries is similar – other grids are able to successfully integrate large shares of variable renewable energy – and storage makes it much easier.
Clean firm not gas
There is an opportunity cost to deploying any technology – should we have taken the time and energy to focus on other choices? What about zero carbon firm resources? Enhanced geothermal. Small modular nuclear. If we build gas we will crowd out the need for these clean firm technologies, possibly limiting their deployment and development. Building gas today will make it harder to realize the innovative technologies of tomorrow.
There you have it! The case against new gas is clear. Texas and California are some of the country’s largest markets and both have low wholesale prices and high reliability -all with large percentages of zero- carbon resources.The utilities and markets that complain mightily about “intermittent” solar and wind are places like PJM where wind and solar are in the single digits. It’s time for those regions to get with the program and leave new gas behind.