Natural gas electric plants are now less competitive than renewable energy
… Power companies mediated with billions in assets they can’t sell – The Bloomberg Report
“If you find someone willing to offer a good price for our gas works in Spain, then we’re ready to sell; we don’t find people… ”- Spain
Kaieteur News – Guyana is currently pursuing a land-based gas project to set up a gas power station but the initiative is being announced at a time when the cost of renewable energy has dropped dramatically over the last decade, making gas stations less competitive.
Point Lisas Natural Gas power plant.
Natural Gas’s electricity plants are now less competitive than renewable energy.
A recent Bloomberg report documents that Natural gas is rapidly falling out of favor with investors and utilities who are wary of emissions, at a faster pace than coal did – holding some power generators unconscious and possibly getting stuck have billions of dollars of assets they can’t make. sell.
Citigroup Inc. and JPMorgan Chase & Co. among the banks that strengthened their financing limits on thermal coal under pressure from shareholders who want to avoid the fuel, and the expectation is that gas is next. Executives of some companies in western Europe say they are already struggling to sell gas facilities.
“If you find someone who is willing to offer a good price for our gas works in Spain, then we are ready to sell,” said Jose Ignacio Sanchez Galan, CEO of Iberdrola SA in Spain. “We don’t find people.”
A reduction in the cost of renewable energy has resulted in gas stations becoming less competitive.
Gas phasing is only the first step in power generation. Cutting back fuel consumption in heating, transport and industry would wreck more potential damage. Europe wants to achieve net-zero emissions by 2050, contrary to plans to build a number of infrastructure projects, such as pipelines and terminals.
If these are built but are no longer needed, there is an 87 billion-euro ($ 104 billion) stuck asset risk, according to calculations by Global Energy Monitor.
In Italy, there are plans to build 14 gigawatts of new gas capacity primarily to replace coal, according to Carbon Tracker Initiative Ltd.
Europe’s largest utility, Enel SpA, is a global renewable supermajor. Still, about 40 percent of the company’s 88 gigawatts of installed capacity includes coal, oil and gas, but the Italian company plans to reduce coal production by 74 percent in 2022. Although the process of gas depletion also coming down a track, he has plans to build more capacity.
“The important thing is that the direction is clear, it won’t change,” said Salvatore Bernabei, head of global power generation at Enel, in an interview. “Everyone should understand that we cannot change the world in one day. ”
Faster than Coal
Coal has been slow and difficult to eradicate in countries where mining provides thousands of jobs. Gas will be faster because it doesn’t have the same tradition attached, and renewable energy is now a cost-effective alternative, according to Carbon Tracker.
“Gas will repeat coal but faster,” said Catharina Hillenbrand von der Neyen, head of company research at the London-based company. “When we look at power generation, you can see that going really, really fast.”
This is already happening in Britain, where it is unlikely that any further large-scale gas works will be built without technologies that cut emissions – such as carbon capture. SSE Plc, trading on the UK’s FTSE 100 Index, said it cannot see a future for new gas stations that do not incorporate carbon or hydrogen capture.
Electricite de France SA will no longer operate any fossil fuel power generation in Britain after announcing the sale of its last gas-fired power station to private equity firm EIG Global Energy Partners LLC. Private equity participation has historically been to squeeze the asset to get all the remaining value.
Investor Pressure
Investors pursuing the ESG agenda will add to the pressure on companies to come out of gas. BlackRock Inc. and Vanguard Group Inc. among 40-plus investment companies committing to cut net portfolios to zero by 2050.
Portugal’s largest utility, Energias de Portugal SA, said its strategy is to exit its two remaining coal factories by 2025, close down one and possibly sell the other.
“There is an increasing amount of funds that either don’t like it or can’t even invest in coal companies,” Miguel Stilwell de Andrade, EDP’s chief executive officer, said in an interview.
“We’re not going to wait until people tell us that gas is no longer going to be used. We’re going to make sure we’re going to go out there before. ”
There’s no point building assets now that will be of no use in a few years, said Frans Timmermans, executive vice president of the European Commission. Europe can skip the transition and go straight to clean assets by spending on the right projects now, he said.
“We need to make the investments to create sustainable societies,” he said. “That capital, not well spent, will soon become stuck assets, and we will put an unbearable financial burden on our children’s shoulders.”
Transition USA
In the United States, progress is likely to be slower as there is no federal mandate for the transition from fossil fuels to renewable power. Gas is superabundant and cheap, thanks to the country’s fracking boom, which has helped accelerate coal’s demise.
By 2016, gas was the country’s main source of power.
“Everyone talks about it in terms of transition, not cliff,” said Ryan Wobbrock, senior credit officer at Moody’s Investors Service. “At this point, it would be very difficult to completely dismantle that system. ”
But now there are signs that demand in the US is peaking decades ahead of schedule with cheaper renewable energy and net zero moving up the agenda for utilities.
Renewable energy could become major sources of power on U.S. grids by 2028, Morgan Stanley said last year.
President Joe Biden’s US $ 2.25 trillion infrastructure and energy plan includes incentives for renewable energy and the construction of a massive transmission grid that could accelerate the transition away from fossil fuels.
Advances in carbon capture technology could save gas, meaning that stations could be a backup when there is a shortage of solar, wind or hydropower. Some energy companies focus on ensuring gas can continue to operate, rather than exhausting their portfolios from the fuel.
“Having the flexibility to deal with the variability in renewable energy production is really difficult if you have no gas production,” said Benjamin Collie, head of commissioned projects at Aurora Energy Research Ltd. in Oxford.
European Gas demand is still expected to grow three percent this year, according to the International Energy Agency.
In the short term at least, the European Investment Bank, for one, will cease all funding for fossil fuels in December.
“To put it mildly, gas is over,” said EIB President Werner Hoyer during a January press conference. “Without ending fossil fuel consumption without discounting, we will not be able to meet the climate targets.” (An adapted version of the Bloomberg report: https://www.bloombergquint.com/technology/gas-is-the-new-coal-with-risk-of-100-billion-in-stranded-assets.)