It’s the No. 1 Power Source, but Natural Gas Faces Headwinds
As environmental concerns drive power companies away from using coal, natural gas has emerged as the nation’s No. 1 power source. Plentiful and relatively inexpensive as a result of the nation’s fracking boom, it has been portrayed as a bridge to an era in which alternative energy would take primacy.
But technology and economics have carved a different, shorter pathway that has bypassed the broad need for some fossil-fuel plants. And that has put proponents of natural gas on the defensive.
Some utility companies have scrapped plans for new natural-gas plants in favor of wind and solar sources that have become cheaper and easier to install. Existing gas plants are being shut because their economics are no longer attractive. And regulators are increasingly challenging the plans of companies determined to move forward with new natural-gas plants.
“It’s a very different world that we’re arriving at very quickly,” said Robert McCullough, an energy consultant in Portland, Ore. “That wind farm can literally be put on a train and brought online within a year. It is moving so fast that even critics of the old path like myself have been taken by surprise.”
The shifting dynamics are being seen in the Western states in particular — driven not only by economics, but by regulation and climate as well.
The Arizona Corporation Commission, which regulates the state’s investor-owned utilities, recently refused to endorse plans by three power companies that included more natural-gas facilities. Commissioners directed them to make greater use of energy storage and plants that produce zero emissions.
“It’s very erratic what we’re now doing with power,” said Andrew M. Tobin, an Arizona commissioner who led efforts to block new gas plants. “I am so nervous that we will end up building a lot of capital plant that doesn’t stand the test of time.”
Some feel the push to get beyond natural gas may be too much, too soon. Officials at Arizona Public Service, the largest utility in the state, said they needed to include new natural-gas development as part of an overall mix, partly because of the state’s round-the-clock air-conditioning demands.
“Our needs are different than other utilities,” said Greg Bernosky, the utility’s director of state regulation and compliance. “We need resources that can have a long duration when our load is high, well after the sun has set. Natural gas resources provide that flexibility.”
Nationwide, other utility executives, power producers and federal regulators have also argued that a healthy power grid requires consistent power, even when the sun doesn’t shine or the wind ceases to blow. The more solar and wind power that is added to the electric grid, they say, the greater the need for reliable backup sources like natural gas.
“Gas has got to be part of that equation,” Robert F. Powelson, a commissioner on the Federal Energy Regulatory Commission, recently told an energy conference. “The gas system has gotten extremely reliable.”
And he argued that even recent advances in storage did not justify an overreliance on alternative energy, however inexpensive. “Storage is great,” said Mr. Powelson, a nominee of President Trump and a former chairman of the Pennsylvania Public Utility Commission. “But that is not a reliable long-term solution to the energy markets.”
Natural gas isn’t likely to be unseated as the country’s primary source of electricity generation anytime soon. In fact, utility companies plan to add more natural-gas plants than any other source, including all alternative energy sources, like solar, wind and hydropower, combined.
But the calculus is rapidly shifting as the prices of wind and solar power continue to fall. According to the Department of Energy, power generated by natural gas declined 7.7 percent in 2017.
And the latest report by Lazard, the financial advisory and management firm, found that the cost of power from utility-scale solar farms was now on a par with natural-gas generation — and that wind farms were less expensive still.
Lazard calculated the unsubsidized cost of wind power at 3 cents a kilowatt-hour, while natural gas and solar energy were a little more than 4 cents. The typical American household pays 12.5 cents a kilowatt-hour for electricity, according to the United States Energy Information Administration. (The cost beyond generation reflects transmission, taxes, and other utility expenses and profits.)