Natural Gas is Big, but Future Increasingly Bleak

July 30, 2019

Above, Resource planner Jessica Woycehoski of Consumer’s Energy – Michigan’s biggest utility – on the future for Gas vs Renewables.
“The model really loved” efficiency and renewables.

Bridge fuel to nowhere.

OilPrice.com:

The outlook for natural gas producers is not great. They are getting clobbered by low prices today, amid a glut. But the medium- and long-term looks even worse, with renewable energy increasingly taking market share.

Even more shocking still is that the investment bank said that the market becomes more depressed as we move into 2021. “Our lofty 4.5 tcf inventory outlook for 2021 is quite bleak and drives our 2021 average price forecast of $2.4/MMbtu, which is $0.15/MMbtu below the current curve,” the bank said.

Beyond that, the queue of new LNG projects dries up, taking away a growing source of demand. The glut of LNG capacity over the last few years lead to a dearth of FIDs in new export facilities. As the list of projects currently under construction finishes up, there are few projects coming in behind them. “The real problem, in our opinion, is not the LNG export capacity growth over the next year, but is instead the lack of LNG capacity additions in 2021-2023,” Bank of America said. “During the lull in US LNG export growth, the US will likely have to rely on some combination of other sources of demand and a slowdown in production growth.”

But here is where it gets really tricky for the gas industry. Even amid the current down market, demand has also been growing quite a bit. Cheap gas has opened up new markets in petrochemicals, electric power and exports. But by the mid-2020s, renewable energy really starts to begin eating into the gas industry’s market share. To date, natural gas in the electric power sector has grown briskly, seizing market share from the mortally wounded coal industry. But in the 2020s, gas will have a tougher time, as it begins to fall prey to clean energy.

The writing is already on the wall. NextEra Energy Resources signed a deal in recent days that may offer a glimpse into the future. The deal with Oklahoma-based Western Farmers Electric Cooperative calls for a renewables combo – 250 megawatts of wind, 250 MW of solar, and 200 MW of battery storage. Integrated together, the project addresses intermittency concerns. The kicker? It’s cheaper than natural gas. “It’s actually cheaper, economically, than a gas peaker plant of similar size, particularly with the tax credits that are available right now,” Phillip Schaeffer, the principal resource planning engineer at Western Farmers, told Greentech Media. “Prices have fallen significantly over the last several years.”

As the deal shows, this is not an abstract far-off threat for gas. Gas is losing out to renewables today. “[R]enewable energy could provide headwinds for power sector natural gas demand,” Bank of America said. “Wind and solar projects, even without subsidies, are now competitive with new build natural gas generation, which is a depressing statistic for potential longer term natural gas bulls.”

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3 Responses to “Natural Gas is Big, but Future Increasingly Bleak”

  1. jfon Says:

    The battery storage is for four hours only, for 200 megawatts, which leaves a lot of room for gas. Oklahoma has over 8,000 megawatts capacity of windpower, and while it is a windy state, lulls can last a lot longer than that.

    • Brent Jensen-Schmidt Says:

      Getting the impression that weather systems are about half a continent wide, (full Western Europe wide) and last a couple of weeks on average?
      As always, gas beats coal on everything but supposedly CHG emissions. However, carbon dioxide is stripped from the raw gas as a first process and can be a very high percentage of the raw product. Combined with methane leaks from infrastructure and everywhere else, CHG from NG can actually be higher than from coal.


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