Peak Gas Coming Sooner than you Thought

March 23, 2021

I heard from some folks that the Texas Blackout was some kind of setback to decarbonization. That’s anything but the truth.
If anything, we’ll see an acceleration in big battery deployment, which is already happening. Within 10 days of the Blackout, an announcement came about a new 100 MWH Tesla battery 40 miles from Houston. Batteries, both behind and in front of the meter, will be big winners here, and the buildout in Texas will be so massive, that it will accelerate the battery cost and deployment curves the way Germany accelerated global solar 10-15 years ago.
Above, you see the ERCOT queue from August of 2020. If there’s any change post blackout, it will be that the battery bar gets a lot longer.
2 links below to articles written pre-blackout that I believe will still hold up.

Josh Rhodes in Forbes:

Texas has long been a leader in wind power, but is quickly catching up on solar. The ERCOT Interconnection Queue, which shows the latest list of projects that are trying to connect to the system is, in fact, dominated by solar projects. Almost 77,000 MW of solar projects are in some stage of connecting to the grid. For reference, the all-time high peak power demand in ERCOT is just shy of 75,000 MW. Not all projects in the interconnection queue will get built, but the amount of solar (76,961 MW), wind (25,886 MW), and energy storage (17,436 MW) vs. natural gas (7,042 MW) in the queue does give a snapshot of what types of projects that investors see as most worth looking at. A preliminary analysis of historical projects in the ERCOT queue indicated that roughly 70% of projects that made it to the latter stage of the queue ended up being completed – solar and wind each have roughly 13,500 MW worth of projects in that latter stage.

Bloomberg:

One of the largest utilities in the U.S. put $8 billion into a bet that natural gas would dominate American electricity much like coal had before. “We really consider this to be a growth play,” Tom Fanning, chief executive officer of Southern Co., said in an interview just five years ago, as his company set on its landmark acquisition: natural-gas distributor AGL Resources Inc.

Gas looked to be on the verge of generational dominance at the time. The American fracking boom had made the fuel superabundant and cheap, hastening coal’s rapid decline, while energy from wind and solar had higher costs and lower reliability. A giant utility like Southern would naturally see gas pipelines and storage as the key to a durable and lucrative future, meeting demand that would continue to grow.

Now those expansive time horizons are in deep doubt. In fact, there are flashing signs that the U.S. power sector is approaching peak gas, with demand topping out decades ahead of schedule. “The era of robust growth in the U.S. natural gas market is likely coming to a close,” says Devin McDermott, an analyst at Morgan Stanley. “It doesn’t mean the market falls apart. It doesn’t mean gas demand falls off of a cliff. It means that we need less new supply going forward.”

By the end of the decade, McDermott forecasts that gas will no longer be the largest producer of electricity in the U.S. And the pace of the gas decline could be accelerated if the presidential election goes to Joe Biden, who has campaigned on the goal to eliminate carbon emissions from America’s power grids by 2035.

Some in the industry are making moves that indicate the writing is on the wall. Dominion Energy Inc., one of America’s biggest power companies, this summer agreed to sell substantially all of its gas pipeline assets. “To state the obvious, permitting for investment in gas transmission and storage has become increasingly litigious, uncertain and costly,” said Tom Farrell, Dominion’s executive chairman, in July. “This trend, though deeply concerning for our country’s economic growth and energy security, is a new reality, which threatens the pace at which we intended to grow these assets.”

Natural gas emerged out of the 2008-2009 recession as the fuel best suited to reduce U.S. emissions from electricity. It’s cleaner and more efficient than coal, and fracking’s success ensured it would be cheap and plentiful. That helped unlock coal’s grip on electric grids and supercharged gas economies in Pennsylvania and on the Gulf Coast. The U.S. soon switched from being a gas importer to one of the world’s leading exporters.

Renewables, meanwhile, still carried the stigma of hippie-ish science experiments that depended on government support and couldn’t provide around-the-clock electricity as long as the sun set and the wind ebbed. But the arrival of big-storage batteries has meant that wind and solar power will slowly be less dependent on the whims of weather, calling into question assumptions that there would be plenty of need for new gas alongside renewables. Solar farms backed up by batteries are already beating out gas on costs in parts of the U.S. Southwest , thanks in part to sharply falling prices of lithium-ion systems.

8 Responses to “Peak Gas Coming Sooner than you Thought”

  1. kevinboyce Says:

    More solar in the queue than the peak consumption ever? Won’t it be hilarious if the reason Texas finally connects to surrounding grids, subjecting itself to FERC, is because they want to sell electricity?

  2. Brent Jensen-Schmidt Says:

    As noted before, solar in Sth Oz averaging 10% of requirements, is periodically hitting 100% of requirements. Goody! Sunday two weeks ago the regulator shut down several 10k of systems to stabilize the grid. They also have demanded the right to CHARGE PV owners for imputing electricity into the grid. These escalating difficulties will hurt the economics of renewables as they increase. As in, weather good, high output low price. Weather bad, good price, low output.
    J4Z, solar doesn’t stop because it is raining! You are out of your ever loving mind.


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