Here Come Natural Gas Price Increases

April 12, 2016
Mike Jacobs
Senior Energy Analyst

Gas pipelines are in the news these days, and it seems like bad news for everyone. The pipeline owners’ trade association, the Interstate Natural Gas Association of America (INGAA), has just released an update of their vision of the future. Due to lower wholesale prices for natural gas, INGAA has revised down the need for new pipelines. That’s bad news for them, and maybe good news for the rest of us. The Union of Concerned Scientists figures there is more to the story.

INGAA offers hope for the pipeline business with its forecast of an imminent rebound in gas prices. In plain language, INGAA says that hope for higher prices lies in the growth of gas exports.

INGAA projected gas cost increases from April 2016 report by ICF International.

INGAA projected gas cost increases from an April 2016 report by ICF International.

The promise (for them), or threat (to us), of higher natural gas prices is central to the question of risks of over-reliance on natural gas.  UCS has made this point in several analyses about Massachusetts, a scoring of each state, and America‘s risks. Instead of locking into long-term commitments to climate-damaging methane (the chemical name for natural gas, which creates carbon dioxide when burned and is worse for the climate if it leaks unburned), we should be accelerating the shift to wind and solar, which provide price stability and climate stability.

The news from the leaking gas storage field in Aliso Canyon, California isn’t getting better, either. The massive leak has been stopped after 4 months, but the operations are not returning to normal. A projection of gas requirements to meet peak demands in summer suggestions inadequate pipelines for the Los Angeles basin, and insufficient gas in storage.

Interestingly, the recommended actions  to address this shortage in summer are all good for reducing over-reliance on natural gas and fossil fuels generally. Renewable energy and energy efficiency are featured prominently in the “action plan” for mitigating the loss of Aliso Canyon capacity, and in most every plan for reducing CO2 emissions.

In the past, the INGAA report of pipeline costs provided a means to compare the costs of shifting to use more gas, or an even larger shift to adopt renewable wind and solar.   That comparison showed the gas pipeline option as the more expensive one, and the one with less reductions in climate-damaging pollution. The current INGAA report offers more fodder for comparison. In the gas boom of 2010-2015, pipeline spending has averaged $40-50 billion per year. The electric transmission needed for the US to be fueled by 80% renewable energy is less than $9 billion per year.

Now, the gas pipeline industry has toned down the expected capital spending for new pipelines. Instead of $640 billion over 22 years, INGAA projects a range with a midpoint of $546 billion over 20 years. Meanwhile, the costs of renewables are making real progress.

Let’s make this the news: we are learning how to build and use renewables faster and cheaper than ever.