Rethinking Future Investments in Natural Gas Infrastructure
Cities and utilities across the United States are starting to reject natural gas — and not just for environmental reasons. Increasingly, the compelling economics of clean energy alternatives play a major role in these decisions.
San Jose, the tenth largest city in the country, recently joined a string of cities banning gas utility connections for new homes and buildings. Cities in Massachusetts, Washington and Vermont could follow suit. Utilities in Florida and California recently made similar decisions to move away from gas in favor of renewable energy.
Even in Indiana, whose electricity generation is dominated by coal, utility regulators rejected a proposed new gas plant, citing “the potential risk that customers could sometime in the future be saddled with an uneconomic investment” if the plant were built. And in Minnesota, utility regulators denied a proposal for a utility to buy an existing gas plant, citing risk that economics would force the plant to close much earlier than expected.
Far from imposing an environmental agenda on resource investment decisions, regulators are in fact following the lead of utilities around the country. In states as diverse as Michigan, Colorado, Indiana, Oregon, North Carolina and more, utilities are finding that there are lower-cost and lower-risk investment strategies than continuing to rely on new gas plants.
This may seem like an abrupt change. After all, as recently as a few years ago, gas was widely touted as the “bridge” from a coal-powered past to a clean-energy future. It seemed like a safe bet. But things have changed dramatically in that time, triggering a need to urgently rethink any future investments in gas infrastructure.
Stunning declines in the cost of wind and solar power and grid-scale batteries are at the forefront of this seismic shift. New research from Rocky Mountain Institute, our organization, analyzed proposed gas plants across the U.S. and found that in 90 percent of cases, it would be cheaper and just as reliable to build new wind, solar and storage versus proceeding with gas.
The economic picture is similarly grim for interstate gas pipelines; as demand falls from power plants, so too will the utilization of pipelines across the country, leaving utility customers responsible for paying off unnecessary infrastructure costs for years to come.
Just as important, there is emerging evidence that in order to meet international climate targets, the U.S. cannot afford to lock in future carbon emissions by investing in gas or other fossil fuel infrastructure. Recent growth in carbon emissions from the electricity grid and buildings has been driven mainly by tens of billions of dollars in gas infrastructure investment over the past decade. We are currently heading in the wrong direction and need to reverse course.