Don’t Let Gas Provide False Sense of Climate Security
Part of NRDC's Year-End Series Reviewing 2019 Climate & Clean Energy Developments
In the midst of our climate crisis, and unprecedented calls for action, 2019 is turning out to be another record year for climate warming greenhouse gas pollution. And we are still not on track to meet our emissions-reduction goals. There is certainly cause for optimism with smarter energy use, renewable energy, and other clean technologies beating out fossil fuels on price, utilities making ambitious climate pledges, and coal use at record lows. But gas, still being promoted by some as a bridge fuel to a clean energy future, has quickly gone from being one of the drivers of emission reductions through its replacement of coal, to one of the biggest drivers of emissions growth both in the United States and globally. Future trends for expansion are worrying.
Gas, gas, everywhere—more than we really need
Gas development and infrastructure investments are expanding rapidly, incentivized by the influx of cheap fracked oil and gas. Gas production in the United States grew by 10 billion cubic feet per day in 2018, the largest year-over-year increase on record.
It has been reaching new record highs monthly throughout 2019.
For the first time in five years, more gas power plants were built in the United States than renewable energy facilities. But many relatively new gas plants are already getting pushed out of the market: Nearly one in seven newer (less than 20 years old) gas plants are rarely used, due to relatively flat electricity demand and rapidly falling prices for renewable energy. Despite this, at least 200 new gas plants are planned or in development across the nation, totaling nearly 70,200 megawatts (MW) of additional capacity—nearly equal to the total generation capacity in Texas.
Domestic gas supplies have grown faster than domestic demand, resulting in slumping prices for producers. This has sparked a flurry of liquid natural gas (LNG) export terminal proposals to increase exports of U.S. gas, prop up domestic gas prices, and support continued development.
There are currently six operating LNG export terminals in the U.S., 17 approved but not yet built, and 13 more that have been proposed. America became a net gas exporter in 2017 for the first time in nearly 60 years, and exports have been increasing since. However, there is currently a global glut of gas so large that it could soon cause U.S. gas exporters to curb their output by half. Yet, there seems to be an urgency on the part of some to increase the pace of approvals for these facilities.
And with more gas comes more pipelines to get the gas from where it is extracted to the power plants and LNG export terminals. But there, too, is a reason to pause. The U.S. has enough pipeline capacity to carry over 227 billion cubic feet of natural gas every day, but average daily U.S. consumption was just 106.8 billion cubic feet last year and the peak-day consumption record is 145.9 billion cubic feet a day, set during the January Polar Vortex this year. And due to a variety of incentive structures, including a guaranteed 14 percent return on equity for “new” pipeline companies (which many times are just existing companies, reconfigured), pipeline developers can still turn a profit even if there is never any market demand for the project.
This level of gas infrastructure investment threatens to undermine climate progress in the U.S. and the world by locking in the use of climate-warming fossil fuels. But just because we have the supply, does that mean that we really need it? And while we still have coal to displace (expected to contribute 25 percent of electricity in 2019), is gas really the best alternative with efficiency, wind and solar energy now cheaper than fossil fuel generation in most parts of the country? And who will end up paying for the infrastructure if the investments become “stranded” (no longer needed) due to the economics of cheaper efficiency and renewables or climate needs?
Customers may be left holding the bag
Approximately 90 percent of proposed gas power plants—and the pipelines that are being built to serve them—are likely to become uneconomic and unnecessary by 2035, as cheaper, cleaner energy alternatives outcompete them, according to the Rocky Mountain Institute (RMI). That’s about $120 billion worth. In addition, RMI estimates that the demand for gas-fired electricity generation will have plummeted by 70 to 100 percent across the five focus regions they studied as they are outcompeted by clean energy.
If these projects get built, either companies will abandon pipelines well before the end of their useful lives, having permanently taken and altered thousands of people’s private property; or, to salvage their gas investments, they may delay investing in clean energy to keep running dirtier and costlier plants, pushing us farther away from meeting necessary climate targets. In many cases, utility customers would be the ones stuck paying for these “stranded” assets. The uneconomic pipelines, particularly those owned by utilities, also pose a significant customer risk, as utility-owned pipelines often can roll the cost of construction and operation into their electricity rates, meaning that ordinary electricity customers will be paying to build and operate unneeded gas infrastructure.
Clean energy would be less expensive to build than 81 percent of the gas-fired power plants proposed in the five regions studied, saving customers an estimated $16 billion and preventing approximately 83 million tons of carbon dioxide (CO2) pollution each year.
Regulators must act to ensure only prudent investments are made
Federal, regional, state and city regulators all have a role to play to ensure we consider customer, community, economic development, and environmental interests in their gas infrastructure decision making. Some important actions include:
- The Federal Energy Regulatory Commission (FERC) must implement a more robust gas pipeline review process that seriously looks at the need for new pipelines and the full lifecycle greenhouse gas impacts (which includes methane). Currently, FERC does not adequately consider energy demand projections, the existence of other projects, community and landowner impacts, or climate change in its reviews. In fact, over the last 20 years, FERC has only rejected two gas infrastructure projects due to a lack of need, while approving over 450. FERC must also significantly reform its review of LNG facilities in a similar manner.
- The nation’s transmission system operators must change the capacity market rules that contribute to an over-reliance on gas instead of clean energy alternatives. For example, PJM's markets make it easier for gas to make money than cleaner low-cost resources like wind, solar, and energy efficiency. Not only is there no price on carbon; PJM has designed its “capacity market” (which pays power plants to be available to produce electricity) in ways that uniquely favor traditional power plants, like gas.
- State public utility commissions and customer-owned utility boards must require investment in cleaner, more efficient, and affordable alternatives—like energy efficiency, demand response, and renewable energy—to gas power plant investments whenever possible.
- State and local regulators should be evaluating the need for, and alternatives to, new investments in gas distribution infrastructure. They should require local gas distribution companies to take a different approach to system planning and consider clean, non-pipeline investments like efficiency, electric heating and cooling systems, and other cost-effective solutions that can help reduce the need to build new, or replace aging gas infrastructure.
Cause for optimism in 2020 and beyond
Five states—plus D.C. and Puerto Rico—have committed to 100 percent clean or renewable electricity. Another seven states have recently set (non-binding and/or non-legislated) goals to pursue 100 percent clean electricity.
Twelve large utilities also have voluntarily committed to 100 percent carbon-free electricity in the last year and a half. In total, state and utility 100 percent clean energy commitments cover over 44.5 million U.S. homes and businesses—equal to about a quarter of all U.S. households—and nearly 24 percent of all electricity consumed in the country. And more Eastern states are stepping up to limit greenhouse gas pollution from power plants.
Cities have joined too—more than 140 U.S. cities have adopted 100 percent clean electricity goals. And a wave of California cities are taking action to make good on their climate commitments by requiring all new residential and commercial buildings to be zero emissions.
Everybody agrees that getting to zero or net zero emissions by mid-century won’t be easy, but it will be either prohibitively expensive or impossible if we keep building the gas bridge instead of working to get off it. The good news is that because of our clean energy progress, we collectively have the means to do it, and in a way that protects workers and communities.