By Andrew Shaw
With the recent surge in U.S. shale gas production, a common narrative has developed that cheaper natural gas will crowd out the power markets for renewable generation. Yet, both the Brattle Group and the Center for Climate Energy Solutions (“C2ES”) recently released studies suggesting that natural gas and renewables can actually help support one another.
Last week, the Brattle Group released a study entitled “Partnering Natural Gas and Renewables in ERCOT,” which highlights how lower natural gas prices can complement renewable generation. While the report is focused on Texas, several points made in the report are applicable throughout the U.S. First, renewable producers are unable to ramp up or down generation, and instead, they must “feed their electricity into the grid” irrespective of whether production exceeds demand. Energy storage technologies show promise for harnessing excess generation, but these technologies still face cost challenges. Natural gas plants, however, can quickly and cost-efficiently scale up or down their generation, offering a strong complement to renewables. In a related point, the Brattle Group report states that coal-fired plants face operational and cost challenges to quickly increasing or decreasing generation to support renewable production. Consequently, coal-fired plants, once up and running, must operate a “a certain number of hours or days before they can be turned off again,” resulting in additional operational and maintenance costs.
The C2ES study notes that energy sector GHG emissions are at their lowest levels since 1994 due partially to the “substitution of natural gas for coal in the power sector.” In addition, the C2ES report argues that “natural gas expansion should be leveraged to enable the expansion of renewable generation.” Consistent with the Brattle Group study, the C2ES study emphasizes that natural gas generation can quickly ramp up or down to complement intermittency of renewable generation. Moreover, the non-existent or negative fixed fuel prices of renewables offer utilities hedges to potential increases in natural gas prices.
These studies underscore the fact that natural gas and renewables can complement one another in the power sector, and provide the U.S. with the benefits of reduced CO2 emissions, competitive electricity prices, and enhanced reliability. With the Administration potentially releasing a suite of climate initiatives next month, policy makers should weigh ways to enhance natural gas-renewable partnerships in the power sector.