Carbon dioxide emissions rose in 2018, breaking a 3-year streak of year-on-year CO2 emission reductions. While many factors played a role in the emission increase, it was the country’s overreliance on natural gas-fired power plants that was the ultimate culprit for the uptick in 2018 electric sector emissions.
Looking forward, the latest data from a federal agency suggests that the electricity industry’s troubling trend to overbuild gas-fired power plants is only getting worse.
Annual energy outlook
The Energy Information Agency (EIA) is an independent government agency that’s nested within the US Department of Energy. The EIA makes projections of the electric sector based on various assumptions. Just last week, it released the Annual Energy Outlook (AEO) which projects (among other things) how much gas-fired capacity would be installed under a range of possible scenarios. There is a notable difference from last year’s results, can you spot it?
The net installed capacity of gas-fired combined cycle power (NGCC) under the range of sensitivities EIA models. The 2018 projection had the amount of gas capacity staying relatively flat; this year, the projection indicates gas capacity potentially doubling over 2017 levels.
Now, the good folks on #energytwitter would want me to point out that these projections are not “predictions.” And that’s true. What the AEO is showing us is what may happen, assuming no changes in policy. What that means is that AEO is showing us the dire consequences of inaction. Without additional actions and policies at the local and federal level, the US will not be able to decarbonize the economy.
In order to prevent the destruction of over 99% of coral reefs, the US needs to rapidly decarbonize the economy. Investing in carbon-emitting resources, like gas-fired power plants, diverts funds from cleaner sources of energy like efficiency, wind, and solar.
What this means for your utility bills
In 2015, UCS rang the alarm about how the US power sector was making a risky bet on natural gas. UCS found that utility overreliance on gas-fired power can expose customers to price spikes and could force some customers to pay for underused, idled, or even abandoned plants and pipelines.
The AEO shows that, some four years later, this problem is not improving.
Other studies have found that the overbuild in gas plants and infrastructure could lead to over $100 billion in abandoned, or “stranded,” assets. These stranded assets will either be recovered through mercurial investors or on the backs of captive customers forced to pay a utility’s increased rates.
How could you be forced to pay?
Broadly speaking, there are two types of companies investing in natural gas-fired power plants: merchant utilities and monopoly utilities. When merchant utility investments aren’t profitable, it’s the corporate stockholders, not customers, who must suffer the consequences for the failed investment. That’s how it is supposed to be.
Utility captive customers should not be on the hook for risky investments.
Unfortunately, monopoly utilities want to spend billions of dollars on gas-fired power plants in the next few years; and when monopoly utilities make risky investments, its consumers pay the price.
It isn’t just the utility consumer that suffers: When utility leadership chooses to overbuild gas, the climate suffers, too. Rhodium Group’s analysis of the preliminary 2018 US emissions data found gas-fired generation “three times the decline in coal generation and four times the combined growth of wind and solar.”
Based on the AEO, that trend is going to continue:
Graphic from “AEO 2019 Cliff Notes.” by Pat Knight of Synapse Energy Economics. One of the biggest differences between AEO 2018 and 2019 reference cases is coal generation is lower and gas generation is higher. Series from AEO 2018 are shown as dotted lines. Note from original author: “Renewables” includes all generation from wind and solar. Generation from hydro, geothermal, and biomass is excluded from this graphic.
In short, if the industry builds out gas infrastructure in a way that at all follows the trajectory EIA has projected, it will be virtually impossible to decarbonize the power sector and achieve a net-zero emissions economy by 2050.
When it comes to gas, the utility industry is repeating the same mistakes it made with coal: ignoring environmental costs, market trends, and lack of public support. Public support for gas-fired power plants is remarkably low – so low that Entergy recently had to pay actors to gain support for a gas plant in New Orleans. Mounting public opposition led Denton County in Texas, yes Texas, to ban fracking. State-wide fracking bans have been implemented in New York, Vermont, and Maryland, and Arizona has instituted a moratorium on building new gas plants specifically due to concerns of stranded assets.
How to fix the problem
The reason why utilities are becoming over-reliant on gas-fired power is that they aren’t properly evaluating the alternatives like energy efficiency, solar, wind, storage, and flexible demand. Utility leadership needs to fully consider alternative electricity generation sources. For example, a UCS analysis shows customers in Michigan would save $340 million if their utility invested in renewables and efficiency, rather than a gas plant.
The habitual undervaluing of energy efficiency by most utilities is why the Union of Concerned Scientists is partnering with local advocates in Minnesota like the Center for Energy and Environment to help improve Xcel Energy’s methods of evaluating energy efficiency. Xcel, as you may remember, committed to 100% clean energy by 2050. So properly valuing energy measures like efficiency and storage will be important to meet the company’s goals. UCS is also intervening in other utility long term plans, like DTE’s in Michigan, to raise awareness of the benefits of efficiency, renewables, and storage.
There’s good news. Almost every day I read a headline about how batteries will make gas-fired “peakers” obsolete. UCS recently concluded that 28 gas peakers in California could easily be replaced with storage. Independent analysis from consulting firms confirms that resources like storage can provide utilities with a litany of benefits.
The industry has been driving towards a cliff’s edge for some time now. Rather than drive off it, we must find a way to divert the billions of dollars currently slated for gas infrastructure and direct them to renewable energy, storage, and efficiency.